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ATAX America First Multifamily Investors

Filed: 1 Nov 19, 8:32am

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number:  000-24843

 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-0810385

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1004 Farnam Street, Suite 400, Omaha, Nebraska

 

68102

(Address of principal executive offices)

 

(Zip Code)

 

 

 

(402) 444-1630

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P.

ATAX

The NASDAQ Stock Market, LLC

 

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non- accelerated filer

 

Smaller reporting company

Emerging growth 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 13(a) of the Exchange Act.  

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

As of September 30, 2019, the registrant had 60,835,204 Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P. outstanding.

 

 


 

INDEX

PART I – FINANCIAL INFORMATION

 

 

 

 


 

Forward-Looking Statements

This report (including, but not limited to, the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) contains forward-looking statements.  All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.  When used, statements which are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements.  We have based forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations.  This report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data.  This data involves several assumptions and limitations, and you are cautioned not to give undue weight to such estimates.  We have not independently verified the statistical and other industry data generated by independent parties which are contained in this report and, accordingly, we cannot guarantee their accuracy or completeness.

These forward-looking statements are subject, but not limited, to various risks and uncertainties, including those relating to:

 

current maturities of our financing arrangements and our ability to renew or refinance such financing arrangements;

 

defaults on the mortgage loans securing our mortgage revenue bonds (“MRBs”);

 

the competitive environment in which we operate;

 

risks associated with investing in multifamily and student residential properties and commercial properties, including changes in business conditions and the general economy;

 

changes in interest rates;

 

our ability to use borrowings or obtain capital to finance our assets;

 

local, regional, national and international economic and credit market conditions;

 

recapture of previously issued Low Income Housing Tax Credits (“LIHTCs”) in accordance with Section 42 of the Internal Revenue Code;

 

changes in the United States Department of Housing and Urban Development’s (“HUD”) Capital Fund Program;

 

geographic concentration within the MRB portfolio held by the Partnership;

 

appropriations risk related to the funding of federal housing programs, including HUD Section 8; and

 

changes in the U.S. corporate tax code and other government regulations affecting our business.

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “Risk Factors” in Item 1A of America First Multifamily Investors, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2018.

All references to “we,” “us,” “our” and the “Partnership” in this document mean America First Multifamily Investors, L.P. (“ATAX”), its wholly-owned subsidiaries and its consolidated variable interest entities.

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,782,506

 

 

$

32,001,925

 

Restricted cash

 

 

570,990

 

 

 

1,266,686

 

Interest receivable, net

 

 

7,927,509

 

 

 

7,011,839

 

Mortgage revenue bonds held in trust, at fair value (Note 6)

 

 

747,157,387

 

 

 

645,258,873

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

30,125,333

 

 

 

86,894,562

 

Public housing capital fund trust certificates, at fair value (Note 7)

 

 

44,684,506

 

 

 

48,672,086

 

Real estate assets: (Note 8)

 

 

 

 

 

 

 

 

Land and improvements

 

 

4,900,465

 

 

 

4,971,665

 

Buildings and improvements

 

 

72,003,079

 

 

 

71,897,070

 

Real estate assets before accumulated depreciation

 

 

76,903,544

 

 

 

76,868,735

 

Accumulated depreciation

 

 

(14,650,397

)

 

 

(12,272,387

)

Net real estate assets

 

 

62,253,147

 

 

 

64,596,348

 

Investments in unconsolidated entities (Note 9)

 

 

87,059,995

 

 

 

76,534,306

 

Property loans, net of loan loss allowance (Note 10)

 

 

7,999,094

 

 

 

15,961,012

 

Other assets (Note 12)

 

 

4,940,703

 

 

 

4,515,609

 

Total Assets

 

$

1,033,501,170

 

 

$

982,713,246

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities (Note 13)

 

$

9,592,950

 

 

$

7,543,822

 

Distribution payable

 

 

8,869,350

 

 

 

7,576,167

 

Unsecured lines of credit (Note 14)

 

 

13,200,000

 

 

 

35,659,200

 

Debt financing, net (Note 15)

 

 

538,812,130

 

 

 

505,663,565

 

Mortgages payable and other secured financing, net (Note 16)

 

 

27,049,871

 

 

 

27,454,375

 

Total Liabilities

 

 

597,524,301

 

 

 

583,897,129

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Series A Preferred Units, approximately $94.5 million redemption value, 9.5 million

   issued and outstanding, net (Note 19)

 

 

94,377,414

 

 

 

94,350,376

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital:

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

731,741

 

 

 

344,590

 

Beneficial Unit Certificates ("BUCs," Note 1)

 

 

340,867,714

 

 

 

304,121,151

 

Total Partnersʼ Capital

 

 

341,599,455

 

 

 

304,465,741

 

Total Liabilities and Partnersʼ Capital

 

$

1,033,501,170

 

 

$

982,713,246

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

4


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

1,974,546

 

 

$

2,285,736

 

 

$

6,002,971

 

 

$

7,025,390

 

Investment income

 

 

12,589,743

 

 

 

12,733,013

 

 

 

37,072,288

 

 

 

38,360,534

 

Contingent interest income

 

 

3,360

 

 

 

4,246,094

 

 

 

3,045,462

 

 

 

4,246,094

 

Other interest income

 

 

206,625

 

 

 

5,217,741

 

 

 

635,732

 

 

 

7,019,465

 

Other income

 

 

91,428

 

 

 

1,518,531

 

 

 

120,181

 

 

 

1,592,831

 

Total revenues

 

 

14,865,702

 

 

 

26,001,115

 

 

 

46,876,634

 

 

 

58,244,314

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

1,381,909

 

 

 

1,606,765

 

 

 

3,477,983

 

 

 

4,292,745

 

Impairment of securities

 

 

-

 

 

 

309,958

 

 

 

-

 

 

 

1,141,020

 

Impairment charge on real estate assets

 

 

75,000

 

 

 

150,000

 

 

 

75,000

 

 

 

150,000

 

Depreciation and amortization

 

 

743,503

 

 

 

864,600

 

 

 

2,384,115

 

 

 

2,692,731

 

Interest expense (Note 2)

 

 

6,509,021

 

 

 

6,394,683

 

 

 

19,110,876

 

 

 

18,091,314

 

General and administrative

 

 

6,992,528

 

 

 

3,653,288

 

 

 

12,267,917

 

 

 

9,506,258

 

Total expenses

 

 

15,701,961

 

 

 

12,979,294

 

 

 

37,315,891

 

 

 

35,874,068

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales of real estate assets, net

 

 

-

 

 

 

4,051,429

 

 

 

-

 

 

 

4,051,429

 

Gain on sale of investment in an unconsolidated entity

 

 

10,475,927

 

 

 

-

 

 

 

10,475,927

 

 

 

-

 

Income before income taxes

 

 

9,639,668

 

 

 

17,073,250

 

 

 

20,036,670

 

 

 

26,421,675

 

Income tax benefit

 

 

(68,235

)

 

 

(809,805

)

 

 

(9,236

)

 

 

(803,805

)

Net income

 

 

9,707,903

 

 

 

17,883,055

 

 

 

20,045,906

 

 

 

27,225,480

 

Redeemable Series A Preferred Unit distributions and accretion

 

 

(717,762

)

 

 

(717,763

)

 

 

(2,153,288

)

 

 

(2,153,288

)

Net income available to Partners

 

$

8,990,141

 

 

$

17,165,292

 

 

$

17,892,618

 

 

$

25,072,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Partners allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

1,266,157

 

 

$

2,163,058

 

 

$

2,078,086

 

 

$

2,242,127

 

Limited Partners - BUCs

 

 

7,695,468

 

 

 

14,933,260

 

 

 

15,719,693

 

 

 

22,662,993

 

Limited Partners - Restricted units

 

 

28,516

 

 

 

68,974

 

 

 

94,839

 

 

 

167,072

 

 

 

$

8,990,141

 

 

$

17,165,292

 

 

$

17,892,618

 

��

$

25,072,192

 

BUC holders' interest in net income per BUC, basic and diluted

 

$

0.13

 

 

$

0.25

 

 

$

0.26

 

 

$

0.38

 

Weighted average number of BUCs outstanding, basic

 

 

60,519,542

 

 

 

59,907,123

 

 

 

60,457,299

 

 

 

59,989,585

 

Weighted average number of BUCs outstanding, diluted

 

 

60,519,542

 

 

 

59,907,123

 

 

 

60,457,299

 

 

 

59,989,585

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

5


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  

(UNAUDITED)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

9,707,903

 

 

$

17,883,055

 

 

$

20,045,906

 

 

$

27,225,480

 

Reversal of net unrealized losses on securities with

   other-than-temporary impairment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

525,446

 

Unrealized gain (loss) on securities

 

 

19,048,316

 

 

 

(6,744,509

)

 

 

42,112,324

 

 

 

(24,097,818

)

Unrealized gain (loss) on bond purchase commitments

 

 

-

 

 

 

51,760

 

 

 

-

 

 

 

(1,956,095

)

Comprehensive income

 

 

28,756,219

 

 

 

11,190,306

 

 

 

62,158,230

 

 

 

1,697,013

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

6


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(UNAUDITED)

 

 

 

General Partner

 

 

# of BUCs -

Restricted and

Unrestricted

 

 

BUCs

- Restricted and

Unrestricted

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance as of December 31, 2018

 

$

344,590

 

 

 

60,691,467

 

 

$

304,121,151

 

 

$

304,465,741

 

 

$

58,978,042

 

Cumulative effect of accounting change (Note 2)

 

 

(2

)

 

 

-

 

 

 

(210

)

 

 

(212

)

 

 

-

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(53,812

)

 

 

-

 

 

 

(5,327,357

)

 

 

(5,381,169

)

 

 

-

 

Distribution of Tier 2 income (Note 3)

 

 

(753,025

)

 

 

-

 

 

 

(2,259,077

)

 

 

(3,012,102

)

 

 

-

 

Net income allocable to Partners

 

 

780,245

 

 

 

-

 

 

 

4,953,805

 

 

 

5,734,050

 

 

 

-

 

Restricted unit compensation expense

 

 

1,842

 

 

 

-

 

 

 

182,342

 

 

 

184,184

 

 

 

-

 

Unrealized gain on securities

 

 

81,439

 

 

 

-

 

 

 

8,062,488

 

 

 

8,143,927

 

 

 

8,143,927

 

Balance as of March 31, 2019

 

 

401,277

 

 

 

60,691,467

 

 

 

309,733,142

 

 

 

310,134,419

 

 

 

67,121,969

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(76,631

)

 

 

-

 

 

 

(7,586,433

)

 

 

(7,663,064

)

 

 

-

 

Net income allocable to Partners

 

 

31,684

 

 

 

-

 

 

 

3,136,743

 

 

 

3,168,427

 

 

 

-

 

Restricted unit compensation expense

 

 

1,862

 

 

 

-

 

 

 

184,368

 

 

 

186,230

 

 

 

-

 

Unrealized gain on securities

 

 

149,201

 

 

 

-

 

 

 

14,770,880

 

 

 

14,920,081

 

 

 

14,920,081

 

Balance as of June 30, 2019

 

 

507,393

 

 

 

60,691,467

 

 

 

320,238,700

 

 

 

320,746,093

 

 

 

82,042,050

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution of Tier 2 income (Note 3)

 

 

(1,264,949

)

 

 

-

 

 

 

(3,794,847

)

 

 

(5,059,796

)

 

 

-

 

Distribution of Tier 3 income (Note 3)

 

 

-

 

 

 

-

 

 

 

(3,809,553

)

 

 

(3,809,553

)

 

 

-

 

Net income allocable to Partners

 

 

1,266,157

 

 

 

-

 

 

 

7,723,984

 

 

 

8,990,141

 

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

353,197

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted unit compensation expense

 

 

32,657

 

 

 

-

 

 

 

3,233,020

 

 

 

3,265,677

 

 

 

-

 

BUCs surrendered to pay tax withholding

   on vested restricted units

 

 

-

 

 

 

(209,460

)

 

 

(1,581,423

)

 

 

(1,581,423

)

 

 

-

 

Unrealized gain on securities

 

 

190,483

 

 

 

-

 

 

 

18,857,833

 

 

 

19,048,316

 

 

 

19,048,316

 

Balance as of September 30, 2019

 

$

731,741

 

 

 

60,835,204

 

 

$

340,867,714

 

 

$

341,599,455

 

 

$

101,090,366

 

7


 

 

 

 

General Partner

 

 

# of BUCs -

Restricted and

Unrestricted

 

 

BUCs

- Restricted and

Unrestricted

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance as of December 31, 2017

 

$

437,256

 

 

 

60,373,674

 

 

$

313,403,014

 

 

$

313,840,270

 

 

$

75,623,830

 

Cumulative effect of accounting change

 

 

(2,169

)

 

 

-

 

 

 

(214,779

)

 

 

(216,948

)

 

 

-

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(76,329

)

 

 

-

 

 

 

(7,556,616

)

 

 

(7,632,945

)

 

 

-

 

Net income allocable to Partners

 

 

52,865

 

 

 

-

 

 

 

5,233,676

 

 

 

5,286,541

 

 

 

-

 

Sale of BUCs, net of issuance costs

 

 

-

 

 

 

38,617

 

 

 

192,310

 

 

 

192,310

 

 

 

-

 

Repurchase of BUCs

 

 

-

 

 

 

(198,465

)

 

 

(1,256,654

)

 

 

(1,256,654

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

239,102

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation expense

 

 

2,066

 

 

 

-

 

 

 

204,570

 

 

 

206,636

 

 

 

-

 

Unrealized loss on securities

 

 

(218,749

)

 

 

-

 

 

 

(21,656,127

)

 

 

(21,874,876

)

 

 

(21,874,876

)

Unrealized loss on bond purchase commitments

 

 

(9,751

)

 

 

-

 

 

 

(965,316

)

 

 

(975,067

)

 

 

(975,067

)

Balance as of March 31, 2018

 

 

185,189

 

 

 

60,452,928

 

 

 

287,384,078

 

 

 

287,569,267

 

 

 

52,773,887

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(76,330

)

 

 

-

 

 

 

(7,556,616

)

 

 

(7,632,946

)

 

 

-

 

Net income allocable to Partners

 

 

26,204

 

 

 

-

 

 

 

2,594,155

 

 

 

2,620,359

 

 

 

-

 

Repurchase of BUCs

 

 

-

 

 

 

(70,110

)

 

 

(440,959

)

 

 

(440,959

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

70,110

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation expense

 

 

5,436

 

 

 

-

 

 

 

538,085

 

 

 

543,521

 

 

 

-

 

Unrealized gain on securities

 

 

45,216

 

 

 

-

 

 

 

4,476,351

 

 

 

4,521,567

 

 

 

4,065,221

 

Unrealized loss on bond purchase commitments

 

 

(10,328

)

 

 

-

 

 

 

(1,022,460

)

 

 

(1,032,788

)

 

 

(1,032,788

)

Reversal of net unrealized loss on securities

   with other-than-temporary impairment

 

 

5,254

 

 

 

-

 

 

 

520,192

 

 

 

525,446

 

 

 

981,792

 

Balance as of June 30, 2018

 

 

180,641

 

 

 

60,452,928

 

 

 

286,492,826

 

 

 

286,673,467

 

 

 

56,788,112

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(13,554

)

 

 

-

 

 

 

(1,341,891

)

 

 

(1,355,445

)

 

 

-

 

Distribution of Tier 2 income (Note 3)

 

 

(2,074,381

)

 

 

 

 

 

 

(6,223,142

)

 

 

(8,297,523

)

 

 

 

 

Net income allocable to Partners

 

 

2,163,058

 

 

 

-

 

 

 

15,002,234

 

 

 

17,165,292

 

 

 

-

 

Sale of BUCs, net of issuance costs

 

 

-

 

 

 

67,333

 

 

 

383,990

 

 

 

383,990

 

 

 

-

 

Restricted units compensation expense

 

 

6,222

 

 

 

-

 

 

 

616,005

 

 

 

622,227

 

 

 

-

 

Unrealized loss on securities

 

 

(67,445

)

 

 

-

 

 

 

(6,677,064

)

 

 

(6,744,509

)

 

 

(6,288,163

)

Unrealized gain on bond purchase commitments

 

 

518

 

 

 

-

 

 

 

51,242

 

 

 

51,760

 

 

 

51,760

 

Reversal of net unrealized loss on securities

   with other-than-temporary impairment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(456,346

)

Balance as of September 30, 2018

 

$

195,059

 

 

 

60,520,261

 

 

$

288,304,200

 

 

$

288,499,259

 

 

$

50,095,363

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

8


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

20,045,906

 

 

$

27,225,480

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

2,384,115

 

 

 

2,692,731

 

Gain on sale of real estate assets, net

 

 

-

 

 

 

(4,051,429

)

Gain on sale of investment in an unconsolidated entity

 

 

(10,475,927

)

 

 

-

 

Contingent interest realized on investing activities

 

 

(3,045,462

)

 

 

(4,246,094

)

Impairment of securities

 

 

-

 

 

 

1,141,020

 

Impairment charge on real estate assets

 

 

75,000

 

 

 

150,000

 

Loss (gain) on derivatives, net of cash paid

 

 

574,028

 

 

 

(1,266,808

)

Restricted unit compensation expense

 

 

3,636,091

 

 

 

1,372,384

 

Bond premium/discount amortization

 

 

(106,114

)

 

 

(50,839

)

Debt premium amortization

 

 

(8,410

)

 

 

-

 

Amortization of deferred financing costs

 

 

1,476,463

 

 

 

1,304,879

 

Deferred income tax expense (benefit) & income tax payable/receivable

 

 

100,804

 

 

 

(840,871

)

Change in preferred return receivable from unconsolidated entities, net

 

 

(1,935,286

)

 

 

(2,642,634

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Increase in interest receivable

 

 

(915,670

)

 

 

(1,395,660

)

(Increase) decrease in other assets

 

 

694,925

 

 

 

(921,756

)

Increase (decrease) in accounts payable and accrued expenses

 

 

327,188

 

 

 

(473,415

)

Net cash provided by operating activities

 

 

12,827,651

 

 

 

17,996,988

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(88,110

)

 

 

(496,336

)

Proceeds from sale of MF Properties

 

 

-

 

 

 

13,450,000

 

Proceeds from sale of investment in an unconsolidated entity

 

 

20,189,663

 

 

 

-

 

Acquisition of mortgage revenue bonds

 

 

(19,250,000

)

 

 

(19,540,000

)

Contributions to unconsolidated entities

 

 

(18,304,139

)

 

 

(35,153,613

)

Principal payments received on mortgage revenue bonds and contingent interest

 

 

15,508,192

 

 

 

46,001,893

 

Principal payments received on taxable mortgage revenue bonds

 

 

25,997

 

 

 

33,384

 

Principal payments received on PHC Certificates

 

 

4,775,103

 

 

 

226,714

 

Cash paid for land held for development and deposits on potential purchases

 

 

-

 

 

 

(2,764,403

)

Advances on property loans

 

 

(405,717

)

 

 

(66,652

)

Principal payments received on property loans and contingent interest

 

 

11,413,098

 

 

 

5,762,536

 

Net cash provided by investing activities

 

 

13,864,087

 

 

 

7,453,523

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Distributions paid

 

 

(25,758,751

)

 

 

(25,800,111

)

Repurchase of BUCs

 

 

-

 

 

 

(1,697,613

)

Proceeds from the sale of BUCs

 

 

-

 

 

 

626,033

 

Payment of offering costs related to the sale of BUCs

 

 

-

 

 

 

(12,531

)

Payment of tax withholding related to restricted unit awards

 

 

(1,581,423

)

 

 

-

 

Proceeds from debt financing

 

 

122,921,712

 

 

 

238,920,000

 

Principal payments on debt financing

 

 

(90,025,780

)

 

 

(253,250,185

)

Principal payments on mortgages payable

 

 

(474,391

)

 

 

(7,963,815

)

Principal borrowing on unsecured lines of credit

 

 

23,200,000

 

 

 

30,540,000

 

Principal payments on unsecured lines of credit

 

 

(45,659,200

)

 

 

(52,074,400

)

Decrease in security deposit liability related to restricted cash

 

 

(51,324

)

 

 

(23,243

)

Debt financing and other deferred costs

 

 

(1,177,696

)

 

 

(625,706

)

Net cash used in financing activities

 

 

(18,606,853

)

 

 

(71,361,571

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

8,084,885

 

 

 

(45,911,060

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

33,268,611

 

 

 

71,583,329

 

Cash, cash equivalents and restricted cash at end of period

 

$

41,353,496

 

 

$

25,672,269

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

16,874,341

 

 

$

17,571,617

 

Cash paid during the period for income taxes

 

 

155,000

 

 

 

178,564

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Distributions declared but not paid for BUCs and General Partner

 

$

8,869,350

 

 

$

9,652,968

 

Distributions declared but not paid for Series A Preferred Units

 

 

708,750

 

 

 

708,750

 

Land contributed as investment in an unconsolidated entity

 

 

-

 

 

 

2,879,473

 

Capital expenditures financed through accounts payable

 

 

24,504

 

 

 

5,898

 

Deferred financing costs financed through accounts payable

 

 

15,000

 

 

 

12,836

 

 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown in the condensed consolidated statements of cash flows:

 

 

 

September 30, 2019

 

 

September 30, 2018

 

Cash and cash equivalents

 

$

40,782,506

 

 

$

24,969,157

 

Restricted cash

 

 

570,990

 

 

 

703,112

 

Total cash, cash equivalents and restricted cash

 

$

41,353,496

 

 

$

25,672,269

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

9


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Basis of Presentation

America First Multifamily Investors, L.P. (the “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring, holding, selling and otherwise dealing with a portfolio of mortgage revenue bonds (“MRBs”) that provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make property loans to multifamily residential properties which may or may not be financed by MRBs held by the Partnership.   The Partnership may acquire real estate securing its MRBs or property loans through foreclosure in the event of a default or through the receipt of a fee simple deed in lieu of foreclosure.  In addition, the Partnership may acquire interests in multifamily and student residential properties (“MF Properties”) in order to position itself for future investments in MRBs that finance these properties or to operate the MF Properties until their “highest and best use” can be determined by management.

The Partnership’s general partner is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”).  The general partner of AFCA 2 is Greystone AF Manager LLC (“Greystone Manager”). The Partnership has previously issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partnership interests to investors (“BUC holders”). The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) that represent limited partnership interests in the Partnership under the Partnership’s First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as further amended (the “Amended and Restated LP Agreement”). The holders of the BUCs and Series A Preferred Units are referred to herein as “Unitholders.”     

 

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P., its consolidated subsidiaries and consolidated variable interest entities (Note 5). All intercompany transactions are eliminated.  As of September 30, 2019, the consolidated subsidiaries of the Partnership consist of:

 

ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M24 Tax Exempt Bond Securitization (“TEBS”) Financing with the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

 

ATAX TEBS II, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M31 TEBS Financing with Freddie Mac.

 

ATAX TEBS III, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M33 TEBS Financing with Freddie Mac.

 

ATAX TEBS IV, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M45 TEBS Financing with Freddie Mac.

 

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, which is committed to loan money or provide equity for the development of multifamily properties.

 

One wholly-owned corporation (“the Greens Hold Co”).  The Greens Hold Co owns 100% of The 50/50 MF Property and certain property loans.

The Partnership also consolidates variable interest entities (“VIEs”) for which it is deemed to be the primary beneficiary.  See Note 5 for information regarding the Partnership’s consolidated VIEs.

 

10


 

Lease Accounting

 

On January 1, 2019, the Partnership adopted the lease guidance in Accounting Standards Codification (“ASC”) 842.  The Partnership adopted ASC 842 at the required adoption date of January 1, 2019, using the transition method that allowed the Partnership to initially apply ASC 842 as of January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of partners’ capital in the period of adoption. No changes have been made to the condensed consolidated financial statements dated prior to the effective date related to the adoption of ASC 842.

 

Lessee Operating Leases  

 

The Partnership’s only material lessee lease is a ground lease at The 50/50 MF Property. Upon adoption of ASC 842, the Partnership elected the package of practical expedients in Accounting Standards Update (“ASU”) 2016-11, elected not to apply ASC 842 to short-term leases and elected to combine lease and non-lease components when accounting for these lease arrangements.  On the date of adoption of ASC 842, the Partnership recognized operating lease right-of-use (“ROU”) assets of $1.7 million, operating lease liabilities of $2.2 million, and an immaterial cumulative adjustment to partners’ capital.  The Partnership used a discount rate of 6.6% to calculate the ROU asset and lease liability related to the ground lease.  The discount rate is based on the Partnership’s estimated incremental borrowing rate to borrow, on a fully collateralized basis, over a similar term for the amount of contractual lease payments. The incremental borrowing rate was estimated using market transactions adjusted for differences in the term and security.

 

The Partnership’s lessee ROU assets are reflected in other assets on the Partnership’s condensed consolidated balance sheet (see Note 12).  The Partnership’s lessee operating lease liabilities are reflected in accounts payable, accrued expenses and other liabilities on the Partnership’s condensed consolidated balance sheet (see Note 13).  See Note 13 for additional information on the Partnership’s ground lease.

 

Lessor Operating Leases

The Partnership’s lessor leases consist of tenant leases related to real estate assets, specifically at the MF Properties. Tenant leases also contain terms for non-lease revenues related to operations at the MF Properties, such as parking and food service revenues. The Partnership has elected to combine the lease and non-lease components when accounting for lessor leases. The unit lease component of the tenant lease is considered the predominant component, so all components of the tenant lease are accounted for under ASC 842. Tenant leases are typically for terms of 12 months or less and do not include extension options.  Lease revenue is recognized monthly and is reported within property revenues on the Partnership’s condensed consolidated statements of operations.  ASC 842 did not have a material impact on the Partnership’s accounting for its lessor arrangements with tenants at the MF Properties.

PHC Certificate Impairment

The Partnership periodically reviews the PHC Certificates for impairment. The Partnership evaluates whether declines in the fair value of the investments below amortized cost are other-than temporary. Factors considered include:

 

The duration and severity of the decline in fair value,

 

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

 

Potential changes in HUD appropriations to local housing authorities,

 

Downgrade in the security’s rating by Standard & Poor’s, and

 

Volatility of the fair value of the security.

 

Real Estate Assets Impairment

The Partnership reviews real estate assets for impairment at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of a real estate asset may not be recoverable, the Partnership compares the carrying amount of the real estate asset to the undiscounted net cash flows expected to be generated from the use of the asset. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

11


 

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation.

 

In the three and nine months ended September 30, 2019, the Partnership reported amortization of deferred financing costs within interest expense in the Partnership’s condensed consolidated statements of operations.  Previously, “Amortization of deferred financing costs expense” had been reported as a separate line item in the Partnership’s condensed consolidated statement of operations.  Accordingly, for the three and nine months ended September 30, 2018, the Partnership has included amortization of deferred financing costs expense within interest expense in conformity with the current reporting period presented herein. This reclassification has no effect on the Partnership’s reported net income or partners’ capital in the Partnership’s condensed consolidated financial statements for the periods presented.

Estimates and assumptions

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such SEC rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

 

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018. These condensed consolidated financial statements and notes have been prepared consistently with the 2018 Form 10-K, with the exception of new accounting standards that were adopted and reclassifications that are discussed herein. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the Partnership’s financial position as of September 30, 2019, and the results of operations for the interim periods presented, have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated balance sheet as of December 31, 2018 was derived from the audited annual consolidated financial statements but does not contain all the footnote disclosures from the annual consolidated financial statements.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The ASU enhances the methodology of measuring expected credit losses for financial assets, to include the use of reasonable and supportable forward-looking information to better estimate credit losses. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2019 and is to be applied using a modified-retrospective approach. In October 2019, the FASB approved a delay in the effective date of this ASU for smaller reporting companies, such as the Partnership, and other non-SEC reporting entities.  The FASB expects to issue two final ASUs relating to this matter in mid-November 2019. The new ASUs will delay the effective date for such entities to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods.  As the Partnership is a smaller reporting company, it may elect to delay its effective date. The Partnership has completed an assessment of the items that are within the scope of the new ASU. The items include property loans, receivables reported within other assets, financial guarantees and commitments. Also within the scope of the ASU are changes to the impairment model for available-for-sale debt securities, which includes the Partnership’s MRBs, PHC Certificates, and taxable MRBs.  The Partnership is currently developing data collection processes, assessment procedures and internal controls required to implement the ASU for such items in the Partnership’s condensed consolidated financial statements. The Partnership is continuing to evaluate whether to defer their implementation date of the ASU and will make a final determination in the fourth quarter of 2019.

 

In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections” which amends the SEC Rules, Regulations and Interpretations section of various topics within the FASB Accounting Standards Codification.  The amendments were made as the result of the SEC’s Final Rule Releases No. 33-10532, “Disclosure Update and Simplification”, No. 33-10231, “Investment Company Reporting Modernization”, and No. 33-10442, “Miscellaneous Update”.  The Partnership’s condensed consolidated financial statements and notes to condensed consolidated financial statements are in compliance with the relevant Codification updates. There were no significant changes to the Partnership’s condensed consolidated financial statements as a result of the ASU.

 

 

12


 

3. Partnership Income, Expenses and Cash Distributions  

The Amended and Restated LP Agreement of the Partnership contains provisions for the distribution of Net Interest Income, Net Residual Proceeds and Liquidation Proceeds; for the allocation of income or loss from operations; and for the allocation of income and loss arising from a repayment, sale, or liquidation of investments.  Income and losses will be allocated to each Unitholder on a periodic basis, as determined by the General Partner, based on the number of Series A Preferred Units and BUCs held by each Unitholder as of the last day of the period for which such allocation is to be made. Distributions of Net Interest Income and Net Residual Proceeds will be made to each Unitholder of record on the last day of each distribution period based on the number of Series A Preferred Units and BUCs held by each Unitholder on that date. Cash distributions are currently made on a quarterly basis.  

The holders of the Series A Preferred Units are entitled to distributions at a fixed rate of 3.0% per annum prior to payment of distributions to other Unitholders.

 

Net Interest Income (Tier 1) is allocated 99% to the limited partners and BUC holders as a class and 1% to the General Partner. Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2) are allocated 75% to the limited partners and BUC holders as a class and 25% to the General Partner.  Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2) in excess of the maximum allowable amount as set forth in the Amended and Restated LP Agreement are considered Net Interest Income (Tier 3) and Net Residual Proceeds (Tier 3) and are allocated 100% to the limited partners and BUC holders as a class.

 

4. Net income per BUC

The Partnership has disclosed basic and diluted net income per BUC on the Partnership’s condensed consolidated statements of operations. The unvested Restricted Unit Awards (“RUAs”) issued under the Partnership’s 2015 Equity Incentive Plan (the “Plan”) are considered participating securities. There were no dilutive BUCs for the three and nine months ended September 30, 2019 and 2018.

 

5. Variable Interest Entities

Consolidated VIEs

The Partnership has determined the Tender Option Bond (“TOB”), Term TOB, Term A/B and TEBS Financings are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of each VIE, the Partnership considered which party has the power to control the activities of the VIE which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE.  The executed agreements related to the TOB, Term TOB, Term A/B and TEBS Financings stipulate the Partnership has the sole right to cause the trusts to sell the underlying assets. If underlying assets were sold, the extent to which the VIEs will be exposed to gains or losses would result from decisions made by the Partnership.

As the primary beneficiary, the Partnership reports the TOB, Term TOB, Term A/B and TEBS Financings on a consolidated basis. The Partnership reports the senior Floater Certificates for the TOB Trusts and the Class A Certificates for the Term TOB, Term A/B Trusts and TEBS Financings as secured debt financings on the Partnership’s condensed consolidated balance sheets (see Note 15). The MRBs secured by the TOB, Term TOB, Term A/B and TEBS Financings are reported as assets on the Partnership’s condensed consolidated balance sheets (see Notes 6 and 7).

Non-Consolidated VIEs

The Partnership has variable interests in various entities in the form of MRBs, property loans and investments in unconsolidated entities. These variable interests do not allow the Partnership to direct the activities that most significantly impact the economic performance of such VIEs. As a result, the Partnership is not considered the primary beneficiary and does not consolidate the financial statements of these VIEs in the Partnership’s condensed consolidated financial statements.

The Partnership held variable interests in 16 and 17 non-consolidated VIEs as of September 30, 2019 and December 31, 2018, respectively. The following table summarizes the Partnership’s variable interests in these entities as of September 30, 2019 and December 31, 2018:

 

 

 

Maximum Exposure to Loss

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Mortgage revenue bonds

 

$

30,480,000

 

 

$

51,791,000

 

Property loans

 

 

-

 

 

 

8,367,635

 

Investment in unconsolidated entities

 

 

87,059,995

 

 

 

76,534,306

 

 

 

$

117,539,995

 

 

$

136,692,941

 

 

13


 

The maximum exposure to loss for the MRBs as of September 30, 2019 and December 31, 2018 is equal to the cost adjusted for paydowns. The difference between an MRB’s carrying value on the Partnership’s condensed consolidated balance sheets and the maximum exposure to loss is a function of the unrealized gains or losses on the MRB. 

 

The maximum exposure to loss on the property loans as of September 30, 2019 and December 31, 2018 is equal to the unpaid principal balance plus accrued interest. The difference between a property loan’s carrying value and the maximum exposure is the value of loan loss allowances, if any, that have been previously recorded against the property loan.

 

The maximum exposure to loss for investments in unconsolidated entities as of September 30, 2019 and December 31, 2018 is equal to the Partnership’s carrying value.

 

14


 

6. Investments in Mortgage Revenue Bonds

MRBs owned by the Partnership provide construction and/or permanent financing for Residential Properties and a commercial property.  MRBs are either held directly by the Partnership or are held in trusts created in connection with debt financing transactions (Note 15). The Partnership had the following investments in MRBs as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A (5)

 

CA

 

$

10,168,651

 

 

$

1,696,441

 

 

$

-

 

 

$

11,865,092

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,546,210

 

 

 

767,387

 

 

 

-

 

 

 

5,313,597

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,707,631

 

 

 

582,453

 

 

 

-

 

 

 

4,290,084

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,863,296

 

 

 

1,185,795

 

 

 

-

 

 

 

8,049,091

 

Harden Ranch - Series A (3)

 

CA

 

 

6,719,931

 

 

 

1,207,559

 

 

 

-

 

 

 

7,927,490

 

Las Palmas II - Series A (5)

 

CA

 

 

1,682,524

 

 

 

278,924

 

 

 

-

 

 

 

1,961,448

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,462,936

 

 

 

415,737

 

 

 

-

 

 

 

2,878,673

 

Montecito at Williams Ranch Apartments - Series A (7)

 

CA

 

 

7,690,000

 

 

 

1,651,838

 

 

 

-

 

 

 

9,341,838

 

San Vicente - Series A (5)

 

CA

 

 

3,469,276

 

 

 

558,315

 

 

 

-

 

 

 

4,027,591

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

2,983,755

 

 

 

548,485

 

 

 

-

 

 

 

3,532,240

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,293,474

 

 

 

912,975

 

 

 

-

 

 

 

5,206,449

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,310,902

 

 

 

1,191,125

 

 

 

-

 

 

 

8,502,027

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,309,171

 

 

 

2,005,465

 

 

 

-

 

 

 

14,314,636

 

Summerhill - Series A (5)

 

CA

 

 

6,384,482

 

 

 

972,132

 

 

 

-

 

 

 

7,356,614

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,568,952

 

 

 

590,916

 

 

 

-

 

 

 

4,159,868

 

The Village at Madera - Series A (5)

 

CA

 

 

3,066,499

 

 

 

481,734

 

 

 

-

 

 

 

3,548,233

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,854,394

 

 

 

859,781

 

 

 

-

 

 

 

6,714,175

 

Vineyard Gardens - Series A (7)

 

CA

 

 

3,995,000

 

 

 

852,151

 

 

 

-

 

 

 

4,847,151

 

Westside Village Market - Series A (3)

 

CA

 

 

3,825,835

 

 

 

601,208

 

 

 

-

 

 

 

4,427,043

 

Brookstone (1)

 

IL

 

 

7,413,743

 

 

 

2,191,618

 

 

 

-

 

 

 

9,605,361

 

Copper Gate Apartments (3)

 

IN

 

 

5,055,000

 

 

 

710,986

 

 

 

-

 

 

 

5,765,986

 

Renaissance - Series A (4)

 

LA

 

 

11,032,412

 

 

 

1,899,144

 

 

 

-

 

 

 

12,931,556

 

Live 929 Apartments (7), (8)

 

MD

 

 

40,055,592

 

 

 

-

 

 

 

(149,095

)

 

 

39,906,497

 

Woodlynn Village (1)

 

MN

 

 

4,197,000

 

 

 

10,509

 

 

 

-

 

 

 

4,207,509

 

Gateway Village (2)

 

NC

 

 

2,600,000

 

 

 

289,170

 

 

 

-

 

 

 

2,889,170

 

Greens Property - Series A (3)

 

NC

 

 

7,960,000

 

 

 

844,249

 

 

 

-

 

 

 

8,804,249

 

Lynnhaven Apartments (2)

 

NC

 

 

3,450,000

 

 

 

383,707

 

 

 

-

 

 

 

3,833,707

 

Silver Moon - Series A (4)

 

NM

 

 

7,777,580

 

 

 

1,447,981

 

 

 

-

 

 

 

9,225,561

 

Village at Avalon - Series A (6)

 

NM

 

 

16,329,272

 

 

 

3,275,151

 

 

 

-

 

 

 

19,604,423

 

Ohio Properties - Series A (1)

 

OH

 

 

13,890,001

 

 

 

48,160

 

 

 

-

 

 

 

13,938,161

 

Bridle Ridge (1)

 

SC

 

 

7,315,000

 

 

 

54,050

 

 

 

-

 

 

 

7,369,050

 

Columbia Gardens (5)

 

SC

 

 

13,105,293

 

 

 

2,157,828

 

 

 

-

 

 

 

15,263,121

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,208,284

 

 

 

1,729,367

 

 

 

-

 

 

 

12,937,651

 

Cross Creek (1)

 

SC

 

 

6,144,672

 

 

 

2,520,743

 

 

 

-

 

 

 

8,665,415

 

Rosewood Townhomes - Series A (7)

 

SC

 

 

9,280,000

 

 

 

114,365

 

 

 

-

 

 

 

9,394,365

 

South Pointe Apartments - Series A (7)

 

SC

 

 

21,600,000

 

 

 

362,290

 

 

 

-

 

 

 

21,962,290

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

18,891,224

 

 

 

2,779,140

 

 

 

-

 

 

 

21,670,364

 

Village at River's Edge (5)

 

SC

 

 

9,889,108

 

 

 

2,330,806

 

 

 

-

 

 

 

12,219,914

 

Willow Run (5)

 

SC

 

 

12,923,882

 

 

 

2,126,087

 

 

 

-

 

 

 

15,049,969

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,092,043

 

 

 

2,021,048

 

 

 

-

 

 

 

13,113,091

 

Pro Nova 2014-1 (2), (8)

 

TN

 

 

10,023,617

 

 

 

-

 

 

 

(347,124

)

 

 

9,676,493

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

13,977,000

 

 

 

2,333,591

 

 

 

-

 

 

 

16,310,591

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,279,129

 

 

 

1,772,133

 

 

 

-

 

 

 

11,051,262

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,496,870

 

 

 

1,407,554

 

 

 

-

 

 

 

8,904,424

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,020,181

 

 

 

2,117,134

 

 

 

-

 

 

 

15,137,315

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

5,297,000

 

 

 

818,097

 

 

 

-

 

 

 

6,115,097

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

40,220,000

 

 

 

6,546,613

 

 

 

-

 

 

 

46,766,613

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,473,257

 

 

 

1,068,331

 

 

 

-

 

 

 

7,541,588

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,807,997

 

 

 

2,738,122

 

 

 

-

 

 

 

18,546,119

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,179,570

 

 

 

996,345

 

 

 

-

 

 

 

6,175,915

 

Bruton Apartments (5)

 

TX

 

 

17,839,917

 

 

 

3,637,297

 

 

 

-

 

 

 

21,477,214

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

19,018,891

 

 

 

3,758,251

 

 

 

-

 

 

 

22,777,142

 

Concord at Little York - Series A (5)

 

TX

 

 

13,323,633

 

 

 

2,757,400

 

 

 

-

 

 

 

16,081,033

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,639,734

 

 

 

4,174,795

 

 

 

-

 

 

 

24,814,529

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,423,125

 

 

 

1,149,904

 

 

 

-

 

 

 

8,573,029

 

Decatur Angle (5)

 

TX

 

 

22,500,338

 

 

 

3,869,765

 

 

 

-

 

 

 

26,370,103

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,390,360

 

 

 

4,290,792

 

 

 

-

 

 

 

23,681,152

 

Heights at 515 - Series A (5)

 

TX

 

 

6,795,999

 

 

 

1,229,217

 

 

 

-

 

 

 

8,025,216

 

Heritage Square - Series A (4)

 

TX

 

 

10,722,964

 

 

 

1,471,450

 

 

 

-

 

 

 

12,194,414

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,264,411

 

 

 

1,750,507

 

 

 

-

 

 

 

14,014,918

 

Runnymede (1)

 

TX

 

 

9,985,000

 

 

 

154,466

 

 

 

-

 

 

 

10,139,466

 

Southpark (1)

 

TX

 

 

11,679,665

 

 

 

2,411,352

 

 

 

-

 

 

 

14,091,017

 

15 West Apartments (5)

 

WA

 

 

9,689,570

 

 

 

2,382,417

 

 

 

-

 

 

 

12,071,987

 

Mortgage revenue bonds held in trust

 

 

 

$

650,161,253

 

 

$

97,492,353

 

 

$

(496,219

)

 

$

747,157,387

 

 

(1)

MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 15

(2)

MRBs held by Deutsche Bank in a secured financing transaction, Note 15

(3)

MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 15

15


 

(4)

MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 15

(5)

MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 15

(6)

MRB held by Morgan Stanley in a secured financing transaction, Note 15

(7)

MRBs held by Mizuho Capital Markets, LLC in a secured financing transaction, Note 15

(8)

As of the date presented, the MRB had been in a cumulative unrealized loss for less than 12 consecutive months.

 

 

 

September 30, 2019

 

Description of Mortgage Revenue Bonds held by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Montevista - Series A & B

 

CA

 

$

13,200,000

 

 

$

1,722,484

 

 

$

-

 

 

$

14,922,484

 

Solano Vista - Series A & B

 

CA

 

 

5,768,000

 

 

 

650,549

 

 

 

-

 

 

 

6,418,549

 

Greens Property - Series B

 

NC

 

 

931,038

 

 

 

145,428

 

 

 

-

 

 

 

1,076,466

 

Ohio Properties - Series B

 

OH

 

 

3,508,510

 

 

 

10,480

 

 

 

-

 

 

 

3,518,990

 

Rosewood Townhomes - Series B

 

SC

 

 

470,000

 

 

 

1,563

 

 

 

-

 

 

 

471,563

 

South Pointe Apartments - Series B

 

SC

 

 

1,100,000

 

 

 

3,139

 

 

 

-

 

 

 

1,103,139

 

Avistar at the Crest - Series B

 

TX

 

 

742,034

 

 

 

97,848

 

 

 

-

 

 

 

839,882

 

Avistar at the Oaks - Series B

 

TX

 

 

542,984

 

 

 

69,234

 

 

 

-

 

 

 

612,218

 

Avistar at the Parkway - Series B

 

TX

 

 

124,382

 

 

 

38,672

 

 

 

-

 

 

 

163,054

 

Avistar in 09 - Series B

 

TX

 

 

447,913

 

 

 

55,370

 

 

 

-

 

 

 

503,283

 

Avistar on the Boulevard - Series B

 

TX

 

 

440,919

 

 

 

54,786

 

 

 

-

 

 

 

495,705

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

27,275,780

 

 

$

2,849,553

 

 

$

-

 

 

$

30,125,333

 

 

16


 

 

 

 

December 31, 2018

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A (5)

 

CA

 

$

10,230,000

 

 

$

954,573

 

 

$

-

 

 

$

11,184,573

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,581,930

 

 

 

524,024

 

 

 

-

 

 

 

5,105,954

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,730,000

 

 

 

312,844

 

 

 

-

 

 

 

4,042,844

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,900,000

 

 

 

647,686

 

 

 

-

 

 

 

7,547,686

 

Harden Ranch - Series A (3)

 

CA

 

 

6,775,508

 

 

 

1,007,557

 

 

 

-

 

 

 

7,783,065

 

Las Palmas II - Series A (5)

 

CA

 

 

1,692,774

 

 

 

141,187

 

 

 

-

 

 

 

1,833,961

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,482,288

 

 

 

246,752

 

 

 

-

 

 

 

2,729,040

 

Montecito at Williams Ranch Apartments - Series A (2)

 

CA

 

 

7,690,000

 

 

 

973,133

 

 

 

-

 

 

 

8,663,133

 

San Vicente - Series A (5)

 

CA

 

 

3,490,410

 

 

 

291,121

 

 

 

-

 

 

 

3,781,531

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

3,007,198

 

 

 

401,203

 

 

 

-

 

 

 

3,408,401

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,325,536

 

 

 

655,326

 

 

 

-

 

 

 

4,980,862

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,350,000

 

 

 

654,929

 

 

 

-

 

 

 

8,004,929

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,375,000

 

 

 

1,102,687

 

 

 

-

 

 

 

13,477,687

 

Summerhill - Series A (5)

 

CA

 

 

6,423,000

 

 

 

508,639

 

 

 

-

 

 

 

6,931,639

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,598,006

 

 

 

363,405

 

 

 

-

 

 

 

3,961,411

 

The Village at Madera - Series A (5)

 

CA

 

 

3,085,000

 

 

 

229,934

 

 

 

-

 

 

 

3,314,934

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,903,368

 

 

 

731,073

 

 

 

-

 

 

 

6,634,441

 

Vineyard Gardens - Series A (2)

 

CA

 

 

3,995,000

 

 

 

534,351

 

 

 

-

 

 

 

4,529,351

 

Westside Village Market - Series A (3)

 

CA

 

 

3,857,839

 

 

 

483,436

 

 

 

-

 

 

 

4,341,275

 

Brookstone (1)

 

IL

 

 

7,432,076

 

 

 

1,956,010

 

 

 

-

 

 

 

9,388,086

 

Copper Gate Apartments (3)

 

IN

 

 

5,055,000

 

 

 

643,012

 

 

 

-

 

 

 

5,698,012

 

Renaissance - Series A (4)

 

LA

 

 

11,123,800

 

 

 

1,383,680

 

 

 

-

 

 

 

12,507,480

 

Live 929 Apartments (2)

 

MD

 

 

40,240,405

 

 

 

2,873,978

 

 

 

-

 

 

 

43,114,383

 

Woodlynn Village (1)

 

MN

 

 

4,221,000

 

 

 

34,155

 

 

 

-

 

 

 

4,255,155

 

Greens Property - Series A (3)

 

NC

 

 

8,032,000

 

 

 

818,686

 

 

 

-

 

 

 

8,850,686

 

Silver Moon - Series A (4)

 

NM

 

 

7,822,610

 

 

 

778,940

 

 

 

-

 

 

 

8,601,550

 

Ohio Properties - Series A (1)

 

OH

 

 

13,989,000

 

 

 

241,675

 

 

 

-

 

 

 

14,230,675

 

Bridle Ridge (1)

 

SC

 

 

7,395,000

 

 

 

90,349

 

 

 

-

 

 

 

7,485,349

 

Columbia Gardens (5)

 

SC

 

 

13,222,480

 

 

 

1,396,828

 

 

 

-

 

 

 

14,619,308

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,294,928

 

 

 

1,148,219

 

 

 

-

 

 

 

12,443,147

 

Cross Creek (1)

 

SC

 

 

6,143,919

 

 

 

2,540,949

 

 

 

-

 

 

 

8,684,868

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

19,044,617

 

 

 

2,194,791

 

 

 

-

 

 

 

21,239,408

 

Village at River's Edge (5)

 

SC

 

 

9,938,059

 

 

 

1,421,114

 

 

 

-

 

 

 

11,359,173

 

Willow Run (5)

 

SC

 

 

13,040,029

 

 

 

1,375,542

 

 

 

-

 

 

 

14,415,571

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,194,690

 

 

 

1,399,461

 

 

 

-

 

 

 

12,594,151

 

Pro Nova 2014-1 (2)

 

TN

 

 

10,027,413

 

 

 

19,710

 

 

 

-

 

 

 

10,047,123

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

10,000,000

 

 

 

589,196

 

 

 

-

 

 

 

10,589,196

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,357,374

 

 

 

1,036,288

 

 

 

-

 

 

 

10,393,662

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,558,240

 

 

 

706,970

 

 

 

-

 

 

 

8,265,210

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,114,418

 

 

 

1,232,292

 

 

 

-

 

 

 

14,346,710

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

3,775,000

 

 

 

206,263

 

 

 

-

 

 

 

3,981,263

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

31,850,000

 

 

 

1,624,687

 

 

 

-

 

 

 

33,474,687

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,526,247

 

 

 

525,939

 

 

 

-

 

 

 

7,052,186

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,941,296

 

 

 

1,628,269

 

 

 

-

 

 

 

17,569,565

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,221,971

 

 

 

557,084

 

 

 

-

 

 

 

5,779,055

 

Bruton Apartments (5)

 

TX

 

 

17,933,482

 

 

 

2,046,056

 

 

 

-

 

 

 

19,979,538

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

19,144,400

 

 

 

2,222,555

 

 

 

-

 

 

 

21,366,955

 

Concord at Little York - Series A (5)

 

TX

 

 

13,411,558

 

 

 

1,617,217

 

 

 

-

 

 

 

15,028,775

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,775,940

 

 

 

2,505,243

 

 

 

-

 

 

 

23,281,183

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,474,716

 

 

 

600,738

 

 

 

-

 

 

 

8,075,454

 

Decatur Angle (5)

 

TX

 

 

22,630,276

 

 

 

1,945,516

 

 

 

-

 

 

 

24,575,792

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,487,713

 

 

 

2,350,453

 

 

 

-

 

 

 

21,838,166

 

Heights at 515 - Series A (5)

 

TX

 

 

6,843,232

 

 

 

722,522

 

 

 

-

 

 

 

7,565,754

 

Heritage Square - Series A (4)

 

TX

 

 

10,958,661

 

 

 

893,881

 

 

 

-

 

 

 

11,852,542

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,330,000

 

 

 

693,579

 

 

 

-

 

 

 

13,023,579

 

Runnymede (1)

 

TX

 

 

10,040,000

 

 

 

64,280

 

 

 

-

 

 

 

10,104,280

 

Southpark (1)

 

TX

 

 

11,623,649

 

 

 

2,482,923

 

 

 

-

 

 

 

14,106,572

 

15 West Apartments (5)

 

WA

 

 

9,737,418

 

 

 

1,480,489

 

 

 

-

 

 

 

11,217,907

 

Mortgage revenue bonds held in trust

 

 

 

$

586,445,474

 

 

$

58,813,399

 

 

$

-

 

 

$

645,258,873

 

 

(1)

MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 15

(2)

MRBs held by Deutsche Bank in a secured financing transaction, Note 15

(3)

MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 15

(4)

MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 15

(5)

MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 15

 

17


 

 

 

 

December 31, 2018

 

Description of Mortgage Revenue Bonds held by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series B

 

CA

 

$

6,228,000

 

 

$

2,450

 

 

$

-

 

 

$

6,230,450

 

Seasons San Juan Capistrano - Series B (1)

 

CA

 

 

5,574,000

 

 

 

-

 

 

 

(1,078

)

 

 

5,572,922

 

Solano Vista - Series A & B

 

CA

 

 

5,768,000

 

 

 

-

 

 

 

-

 

 

 

5,768,000

 

Greens Property - Series B

 

NC

 

 

933,928

 

 

 

149,789

 

 

 

-

 

 

 

1,083,717

 

Village at Avalon - Series A

 

NM

 

 

16,400,000

 

 

 

1,408,802

 

 

 

-

 

 

 

17,808,802

 

Ohio Properties - Series B

 

OH

 

 

3,520,900

 

 

 

51,334

 

 

 

-

 

 

 

3,572,234

 

Rosewood Townhomes - Series A & B (1)

 

SC

 

 

9,750,000

 

 

 

-

 

 

 

(644,962

)

 

 

9,105,038

 

South Pointe Apartments - Series A & B (1)

 

SC

 

 

22,700,000

 

 

 

-

 

 

 

(1,411,986

)

 

 

21,288,014

 

Avistar at Copperfield - Series B

 

TX

 

 

4,000,000

 

 

 

11,730

 

 

 

-

 

 

 

4,011,730

 

Avistar at the Crest - Series B

 

TX

 

 

745,358

 

 

 

50,965

 

 

 

-

 

 

 

796,323

 

Avistar at the Oaks - Series B

 

TX

 

 

545,321

 

 

 

28,738

 

 

 

-

 

 

 

574,059

 

Avistar at the Parkway - Series B

 

TX

 

 

124,600

 

 

 

32,220

 

 

 

-

 

 

 

156,820

 

Avistar at Wilcrest - Series B

 

TX

 

 

1,550,000

 

 

 

4,013

 

 

 

-

 

 

 

1,554,013

 

Avistar at Wood Hollow - Series B

 

TX

 

 

8,410,000

 

 

 

23,940

 

 

 

-

 

 

 

8,433,940

 

Avistar in 09 - Series B

 

TX

 

 

449,841

 

 

 

18,742

 

 

 

-

 

 

 

468,583

 

Avistar on the Boulevard - Series B

 

TX

 

 

442,894

 

 

 

27,023

 

 

 

-

 

 

 

469,917

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

87,142,842

 

 

$

1,809,746

 

 

$

(2,058,026

)

 

$

86,894,562

 

 

(1)

As of the date presented, the MRB had been in a cumulative unrealized loss position for less than 12 consecutive months.

 

See Note 22 for a description of the methodology and significant assumptions used in determining the fair value of the MRBs. Unrealized gains or losses on the MRBs are recorded in the Partnership’s condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the MRBs.

 

Cumulative unrealized loss positions on MRBs are not considered credit losses as of September 30, 2019.  The cumulative unrealized loss for the Pro Nova 2014-1 MRB, related to a commercial property, as of September 30, 2019, is a result of fluctuations in market interest rates and comparable trades of MRBs for similar commercial properties. Due to the historical volatility of the fair value of this MRB, the cumulative unrealized loss is considered temporary. The cumulative unrealized loss for the Live 929 Apartments MRB as of September 30, 2019, is due to recent operational results and debt service coverage declines. The Partnership has evaluated the operational results and loan-to-collateral value ratio for the property underlying this MRB and has determined that the cumulative unrealized loss is temporary.

MRB Activity in the First Nine Months of 2019

Acquisitions:

The following MRBs were acquired during the nine months ended September 30, 2019:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Gateway Village

 

February

 

Durham, NC

 

64

 

4/1/2032

 

 

6.10

%

 

$

2,600,000

 

Lynnhaven Apartments

 

February

 

Durham, NC

 

75

 

4/1/2032

 

 

6.10

%

 

 

3,450,000

 

Montevista - Series A

 

June

 

San Pablo, CA

 

82

 

7/1/2036

 

 

5.75

%

 

 

6,720,000

 

Montevista - Series B

 

June

 

San Pablo, CA

 

82

 

7/1/2021

 

 

5.75

%

 

 

6,480,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

19,250,000

 

 

 

18


 

Redemptions:

 

The following MRBs were redeemed at prices that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2019:

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Seasons San Juan Capistrano - Series B

 

January

 

San Juan Capistrano, CA

 

 

112

 

 

1/1/2019

 

 

8.00

%

 

$

5,574,000

 

Courtyard Apartments - Series B

 

April

 

Fullerton, CA

 

 

108

 

 

6/1/2019

 

 

8.00

%

 

 

6,228,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

11,802,000

 

 

Restructurings:

The following MRBs were restructured during the nine months ended September 30, 2019.  The principal outstanding on the Series B MRBs were collapsed into the principal outstanding on the associated Series A MRBs and the Series B MRBs were eliminated.  No cash was paid or received on restructuring. The terms of the Series B MRBs that were eliminated are as follows:

 

Property Name

 

Month

Restructured

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Restructuring

 

Avistar at Copperfield - Series B

 

May

 

Houston, TX

 

 

192

 

 

6/1/2054

 

 

12.00

%

 

$

4,000,000

 

Avistar at Wilcrest - Series B

 

May

 

Houston, TX

 

 

88

 

 

6/1/2054

 

 

12.00

%

 

 

1,550,000

 

Avistar at Wood Hollow - Series B

 

May

 

Austin, TX

 

 

409

 

 

6/1/2054

 

 

12.00

%

 

 

8,410,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,960,000

 

 

 

MRB Activity in the First Nine Months of 2018

 

Acquisitions:

 

The following MRB was acquired during the nine months ended September 30, 2018:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Esperanza at Palo Alto (1)

 

May

 

San Antonio, TX

 

 

322

 

 

7/1/2058

 

 

5.80

%

 

$

19,540,000

 

 

(1)

Previously reported bond purchase commitment that converted to an MRB in May 2018.

 

Redemptions:

 

The following MRBs were redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2018:

 

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Sycamore Walk - Series B

 

January

 

Bakersfield, CA

 

 

112

 

 

1/1/2018

 

 

8.00

%

 

$

1,815,000

 

Seasons Lakewood - Series B

 

March

 

Lakewood, CA

 

 

85

 

 

1/1/2019

 

 

8.00

%

 

 

5,260,000

 

Summerhill - Series B

 

March

 

Bakersfield, CA

 

 

128

 

 

12/1/2018

 

 

8.00

%

 

 

3,372,000

 

Oaks at Georgetown - Series B

 

April

 

Georgetown, TX

 

 

192

 

 

1/1/2019

 

 

8.00

%

 

 

5,512,000

 

Seasons at Simi Valley - Series B

 

April

 

Simi Valley, CA

 

 

69

 

 

9/1/2018

 

 

8.00

%

 

 

1,944,000

 

San Vicente - Series B

 

May

 

Soledad, CA

 

 

50

 

 

11/1/2018

 

 

8.00

%

 

 

1,825,000

 

The Village at Madera - Series B

 

May

 

Madera, CA

 

 

75

 

 

12/1/2018

 

 

8.00

%

 

 

1,719,000

 

Las Palmas - Series B

 

July

 

Coachella, CA

 

 

81

 

 

11/1/2018

 

 

8.00

%

 

 

1,770,000

 

Harmony Terrace - Series B

 

August

 

Simi Valley, CA

 

 

136

 

 

1/1/2019

 

 

8.00

%

 

 

7,400,000

 

Lake Forest

 

September

 

Daytona Beach, FL

 

 

240

 

 

12/1/2031

 

 

6.25

%

 

 

8,397,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

39,014,000

 

 

19


 

Upon redemption of the Lake Forest MRB, the Partnership realized contingent interest income of approximately $4.2 million. The Partnership also realized additional income due to the early redemption of the MRB of approximately $1.5 million. The additional income is reported within other income on the condensed consolidated statements of operations.

 

 

7. Public Housing Capital Fund Trust (“PHC”) Certificates

The Partnership’s PHC Certificates represent beneficial interests in three PHC Trusts. The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to numerous local public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities under the Department of Housing and Urban Development’s (“HUD”) Capital Fund Program established under the Quality Housing and Work Responsibility Act of 1998 (the “Capital Fund Program”).  The PHC Trusts have a first lien on these annual Capital Fund Program payments to secure the public housing authorities’ respective obligations to pay principal and interest on their loans.  The loans payable by the public housing authorities are not debts of, or guaranteed by, the United States of America or HUD.  Interest payable on the public housing authority debt held by the PHC Trusts is exempt from federal income taxes.  The PHC Certificates issued by each of the PHC Trusts have been rated investment grade by Standard & Poor’s. The PHC Certificates are held in trust at Mizuho Capital Markets, LLC (“Mizuho”) in secured financing transactions as of September 30, 2019 (see Note 15).

The Partnership had the following investments in the PHC Certificates as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

Description of PHC Certificates

 

Weighted

Average Lives

(Years)

 

 

Investment

Rating

 

Weighted

Average Interest

Rate Over Life

 

 

Cost Adjusted for

Paydowns and Impairment

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair

Value

 

PHC Certificate Trust I

 

 

5.73

 

 

AA-

 

5.37%

 

 

$

24,510,244

 

 

$

483,113

 

 

$

-

 

 

$

24,993,357

 

PHC Certificate Trust II

 

 

4.09

 

 

AA-

 

4.38%

 

 

 

4,372,215

 

 

 

362,710

 

 

 

-

 

 

 

4,734,925

 

PHC Certificate Trust III

 

 

6.08

 

 

BBB

 

5.12%

 

 

 

14,588,947

 

 

 

367,277

 

 

 

-

 

 

 

14,956,224

 

 

 

 

 

 

 

 

 

 

 

 

 

$

43,471,406

 

 

$

1,213,100

 

 

$

-

 

 

$

44,684,506

 

 

 

 

December 31, 2018

 

Description of PHC Certificates

 

Weighted

Average Lives

(Years)

 

Investment

Rating

 

Weighted

Average Interest

Rate Over Life

 

 

Cost Adjusted for

Paydowns and Impairment

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair

Value

 

PHC Certificate Trust I

 

6.49

 

AA-

 

5.33%

 

 

$

24,608,543

 

 

$

285,984

 

 

$

-

 

 

$

24,894,527

 

PHC Certificate Trust II

 

5.56

 

A+

 

4.35%

 

 

 

9,071,785

 

 

 

44,768

 

 

 

-

 

 

 

9,116,553

 

PHC Certificate Trust III

 

6.76

 

BBB

 

5.30%

 

 

 

14,566,975

 

 

 

94,031

 

 

 

-

 

 

 

14,661,006

 

 

 

 

 

 

 

 

 

 

 

$

48,247,303

 

 

$

424,783

 

 

$

-

 

 

$

48,672,086

 

 

See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the PHC Certificates. Unrealized gains or losses on the PHC Certificates are recorded in the Partnership’s condensed consolidated statements of comprehensive income to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the PHC Certificates.

 

The Partnership recognized an impairment charge on the three PHC Certificates of approximately $310,000 and $1.1 million during the three and nine months ended September 30, 2018, respectively. See Note 2 for information considered in the Partnership’s evaluation of impairment of the PHC Certificates.

 

20


 

8. Real Estate Assets

The following tables summarize information regarding the Partnership’s real estate assets as of September 30, 2019 and December 31, 2018:

 

Real Estate Assets as of September 30, 2019

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value

 

Suites on Paseo

 

San Diego, CA

 

 

384

 

 

$

3,199,268

 

 

$

39,065,722

 

 

$

42,264,990

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,937,357

 

 

 

32,937,357

 

Land held for development

 

(1)

 

(1)

 

 

 

1,701,197

 

 

 

-

 

 

 

1,701,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,903,544

 

Less accumulated depreciation

 

 

 

(14,650,397

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

62,253,147

 

 

(1)

Land held for development consists of land and development costs for parcels in Gardner, KS; Richland County, SC and Omaha, NE.

 

Real Estate Assets as of December 31, 2018

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value

 

Suites on Paseo

 

San Diego, CA

 

 

384

 

 

$

3,195,468

 

 

$

38,961,163

 

 

$

42,156,631

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,935,907

 

 

 

32,935,907

 

Land held for development

 

(2)

 

(2)

 

 

 

1,776,197

 

 

 

-

 

 

 

1,776,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,868,735

 

Less accumulated depreciation

 

 

 

(12,272,387

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

64,596,348

 

 

(2)

Land held for development consists of land and development costs for parcels in Gardner, KS; Richland County, SC and Omaha, NE.

Activity in the First Nine Months of 2019

As of September 30, 2019, the land held for development in Omaha, NE and Gardner, KS were listed for sale. These parcels of land were originally listed for sale in May 2018 and October 2018, respectively.

In September 2019, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded an impairment charge of $75,000 in the third quarter of 2019, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.

Activity in the First Nine Months of 2018

In February 2018, the Partnership acquired two contiguous tracts of land in Omaha, NE. The total purchase price was approximately $2.7 million. In March 2018, a portion of the land acquired was contributed to Vantage at Stone Creek, LLC in exchange for an ownership interest in the entity (Note 9). The remaining land was classified as “Land held for development.”  

 

In February 2018, the Partnership executed a Purchase Agreement to acquire a tract of land in Omaha, NE. The Purchase Agreement was assigned to Vantage at Coventry in September 2018 (Note 9).

 

In September 2018, the Partnership sold the Jade Park MF Property to an unrelated third party. The table below summarizes information related to the sale. The gain on sale is considered Tier 2 income (Note 3). The Partnership determined the sale did not meet the criteria for discontinued operations.

 

Property Name

 

Month Sold

 

Property Location

 

Units

 

Gross Proceeds

 

 

Gain on Sale

before Income

Taxes

 

Jade Park

 

September

 

Daytona, FL

 

144

 

$

13,450,000

 

 

$

4,051,429

 

 

In September 2018, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded an impairment charge of $150,000 in the third quarter of 2018, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.

21


 

 

9. Investments in Unconsolidated Entities

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has equity investment commitments and has made equity investments in unconsolidated entities. The carrying value of the equity investments represents the Partnership’s maximum exposure to loss. ATAX Vantage Holdings, LLC is the only limited equity investor in the unconsolidated entities. An affiliate of the unconsolidated entities guarantees ATAX Vantage Holdings, LLC’s return on its investments through the second anniversary of construction completion. The return on these investments earned by the Partnership is reported as investment income on the Partnership’s condensed consolidated statements of operations.

 

The following table provides the details of the investments in unconsolidated entities as of September 30, 2019 and December 31, 2018 and remaining equity investment commitment amounts as of September 30, 2019:

 

Property Name

 

Location

 

Units

 

 

Month

Commitment

Executed

 

Construction

Completion

Date

 

Carrying Value as of September 30, 2019

 

 

Carrying Value as of December 31, 2018

 

 

Maximum

Remaining

Equity Commitment as of September 30, 2019

 

Vantage at Boerne

 

Boerne, TX

 

 

288

 

 

August 2016

 

April 2018

 

$

8,363,500

 

 

$

8,830,000

 

 

$

1,475,936

 

Vantage at Waco

 

Waco, TX

 

 

288

 

 

August 2016

 

May 2018

 

 

9,337,166

 

 

 

9,337,166

 

 

 

1,592,039

 

Vantage at Panama City

   Beach

 

Panama City Beach, FL

 

 

288

 

 

March 2017

 

July 2018

 

 

-

 

 

 

11,408,135

 

 

 

-

 

Vantage at Powdersville

 

Powdersville, SC

 

 

288

 

 

November 2017

 

N/A

 

 

12,295,801

 

 

 

11,535,895

 

 

 

-

 

Vantage at Stone Creek

 

Omaha, NE

 

 

294

 

 

March 2018

 

N/A

 

 

7,840,500

 

 

 

7,572,819

 

 

 

-

 

Vantage at Bulverde

 

Bulverde, TX

 

 

288

 

 

March 2018

 

August 2019

 

 

9,894,619

 

 

 

9,182,522

 

 

 

-

 

Vantage at Germantown

 

Germantown, TN

 

 

288

 

 

June 2018

 

N/A

 

 

11,456,353

 

 

 

7,033,398

 

 

 

-

 

Vantage at Murfreesboro

 

Murfreesboro, TN

 

 

288

 

 

September 2018

 

N/A

 

 

13,184,069

 

 

 

6,254,104

 

 

 

-

 

Vantage at Coventry

 

Omaha, NE

 

 

288

 

 

September 2018

 

N/A

 

 

8,825,914

 

 

 

5,380,267

 

 

 

-

 

Vantage at Conroe

 

Conroe, TX

 

 

288

 

 

April 2019

 

N/A

 

 

5,862,073

 

 

 

-

 

 

 

3,393,059

 

 

 

 

 

 

2,886

 

 

 

 

 

 

$

87,059,995

 

 

$

76,534,306

 

 

$

6,461,034

 

 

Activity in the First Nine Months of 2019

In September 2019, the membership interests of Vantage at Panama City Beach were sold to an unrelated third party. The Partnership received cash of approximately $22.7 million upon sale. The Partnership recognized approximately $547,000 of investment income and approximately $10.5 million of gain on sale of investment in an unconsolidated entity associated with the sale. The Partnership may also be entitled to receive up to $325,000 of additional proceeds in the third quarter of 2020 if certain gain contingencies are satisfied.

In April 2019, the Partnership executed a $9.0 million equity commitment to fund construction of the Vantage at Conroe multifamily property.

Activity in the First Nine Months of 2018

In March 2018, the Partnership committed to make equity investments in the Vantage at Stone Creek and Vantage at Bulverde multifamily properties of approximately $7.1 million and $8.6 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Stone Creek (Note 18).

In June 2018, the Partnership executed a $10.4 million equity commitment to fund construction of the Vantage at Germantown multifamily property.

In September 2018, the Partnership executed equity commitments to fund construction of the Vantage at Coventry and Vantage at Murfreesboro multifamily properties of approximately $8.1 million and $12.2 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Coventry (Note 18).

 

22


 

The following table provides combined summary financial information for the Partnership’s investments in unconsolidated entities for three and nine months ended September 30, 2019 and 2018:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Property Revenues

 

$

3,713,106

 

 

$

2,824,019

 

 

$

9,534,250

 

 

$

5,687,214

 

Gain on sale of property

 

$

22,556,694

 

 

$

-

 

 

$

22,556,694

 

 

$

-

 

Net income (loss)

 

$

21,606,621

 

 

$

(353,067

)

 

$

20,918,176

 

 

$

(2,688,985

)

 

10. Property Loans, Net of Loan Loss Allowances

The following tables summarize the Partnership’s property loans, net of loan loss allowances, as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowance

 

 

Property Loan Principal,

net of allowance

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

-

 

 

$

191,264

 

Avistar (February 2013 portfolio)

 

 

201,972

 

 

 

-

 

 

 

201,972

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

-

 

 

 

251,622

 

Cross Creek

 

 

11,101,887

 

 

 

(7,393,814

)

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

-

 

 

 

850,000

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Live 929 Apartments

 

 

405,717

 

 

 

-

 

 

 

405,717

 

Total

 

$

15,392,908

 

 

$

(7,393,814

)

 

$

7,999,094

 

 

 

 

December 31, 2018

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowance

 

 

Property Loan Principal,

net of allowance

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

-

 

 

$

191,264

 

Avistar (February 2013 portfolio)

 

 

201,972

 

 

 

-

 

 

 

201,972

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

-

 

 

 

251,622

 

Cross Creek

 

 

11,101,887

 

 

 

(7,393,814

)

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

-

 

 

 

850,000

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Vantage at Brooks, LLC

 

 

8,367,635

 

 

 

-

 

 

 

8,367,635

 

Total

 

$

23,354,826

 

 

$

(7,393,814

)

 

$

15,961,012

 

 

 

During the three and nine months ended September 30, 2019 and 2018, the interest to be earned on the Cross Creek property loans was in nonaccrual status.  The discounted cash flow method used by management to establish the net realizable value of these property loans determined the collection of the interest earned since inception was not probable.  In addition, for the three and nine months ended September 30, 2019 and 2018, interest to be earned on approximately $983,000 of property loan principal for the Ohio Properties and all principal for Live 929 Apartments was in nonaccrual status as, in management’s opinion, the interest was not considered collectible.

 

Activity in the First Nine Months of 2019

 

In August 2019, the Partnership entered into a secured property loan with Live 929 Apartments. The property may request additional advances for the sole purpose of funding monthly operating shortfalls up to a total loan amount of $1.0 million. The property loan is subordinate to the MRBs associated with the property and has a stated maturity date of July 31, 2049.

 

In January 2019, the Vantage at Brooks property was sold by its owner. Upon sale, the Partnership received all outstanding principal and accrued interest on the Vantage at Brooks, LLC property loan. The Partnership received additional proceeds of approximately $3.0 million, which is recorded as contingent interest on the Partnership’s condensed consolidated statements of operations. The contingent interest recognized is considered Tier 2 income for purposes of distributions to the General Partner and BUC holders (see Note 3).

 

23


 

Activity in the First Nine Months of 2018

 

In September 2018, the Lake Forest property was sold by its owner.  Upon the sale, the Partnership received all outstanding principal and accrued interest on the Lake Forest property loans. The Partnership received approximately $5.1 million of principal and approximately $4.6 million of interest on the property loans at sale. The interest received was not previously recognized as income as the property loans were on nonaccrual status. The interest realized is reported within other interest income on the condensed consolidated statements of operations for the three and nine months ended September 30, 2018.

 

11. Income Tax Provision

 

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by the Greens Hold Co, which owns The 50/50 MF Property and certain property loans. The following table summarizes income tax expense (benefit) for the three and nine months ended September 30, 2019 and 2018:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Current income tax expense (benefit)

 

$

13,932

 

 

$

(809,805

)

 

$

129,095

 

 

$

(837,805

)

Deferred income tax expense (benefit)

 

 

(82,167

)

 

 

-

 

 

 

(138,331

)

 

 

34,000

 

Total income tax benefit

 

$

(68,235

)

 

$

(809,805

)

 

$

(9,236

)

 

$

(803,805

)

 

The Partnership evaluated whether it is more likely than not that its deferred income tax assets will be realizable. There was no valuation allowance recorded as of September 30, 2019 and December 31, 2018.

 

12. Other Assets

The following table summarizes the other assets as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Deferred financing costs, net

 

$

333,004

 

 

$

397,823

 

Fair value of derivative instruments (Note 17)

 

 

52,605

 

 

 

626,633

 

Taxable mortgage revenue bonds, at fair value

 

 

1,427,336

 

 

 

1,409,895

 

Operating lease right-of-use assets, net

 

 

1,681,238

 

 

 

-

 

Other assets

 

 

1,446,520

 

 

 

2,081,258

 

Total other assets

 

$

4,940,703

 

 

$

4,515,609

 

 

See Note 2 for a discussion of the operating lease right-of-use lease assets, net, recorded pursuant to the adoption of ASC 842 effective January 1, 2019.  

 

See Note 22 for a description of the methodology and significant assumptions for determining the fair value of derivative instruments and taxable MRBs. Unrealized gains or losses on these assets are recorded in the condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the assets.

 

13. Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the accounts payable, accrued expenses and other liabilities as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Accounts payable

 

$

182,099

 

 

$

230,631

 

Accrued expenses

 

 

3,023,629

 

 

 

2,956,368

 

Accrued interest expense

 

 

2,572,279

 

 

 

2,270,348

 

Operating lease liabilities

 

 

2,137,792

 

 

 

-

 

Other liabilities

 

 

1,677,151

 

 

 

2,086,475

 

Total accounts payable, accrued expenses and other liabilities

 

$

9,592,950

 

 

$

7,543,822

 

 

See Note 2 for discussion of the adoption of ASC 842 effective January 1, 2019.

24


 

 

The 50/50 MF Property has a ground lease with the University of Nebraska-Lincoln with an initial lease term expiring in March 2038. The Partnership has an option to extend the lease for an additional five-year period, which has not been factored into the calculation of the ROU asset and lease liability.  Annual lease payments are $100 per year. The Partnership is also required to make monthly payments, when cash is available at The 50/50 MF Property, to the University of Nebraska-Lincoln. Payment amounts are based on The 50/50 MF Property’s revenues, subject to an annual guaranteed minimum amount.  As of September 30, 2019, the minimum aggregate annual payment due under the agreement is approximately $132,000. The minimum aggregate annual payment increases 2% annually until July 31, 2034 and increases 3% annually thereafter.  The 50/50 MF Property will be required to make additional payments under the agreement if its gross revenues exceed certain thresholds.  The Partnership recognized expenses related to the ground lease of approximately $42,000 and $126,000 for the three and nine months ended September 30, 2019 and 2018 and are included within real estate operating expenses on the Partnership’s condensed consolidated statements of operations.  

 

The following table summarizes future contractual payments for the Partnership’s operating leases and a reconciliation to the carrying value of operating lease liabilities:

 

Remainder of 2019

 

$

34,165

 

2020

 

 

135,812

 

2021

 

 

136,366

 

2022

 

 

139,091

 

2023

 

 

141,871

 

Thereafter

 

 

4,661,979

 

Total

 

 

5,249,284

 

Less:  Amount representing interest

 

 

(3,111,492

)

Total operating lease liabilities

 

$

2,137,792

 

 

14. Unsecured Lines of Credit

The following tables summarize the unsecured lines of credit (“LOC”) as of September 30, 2019 and December 31, 2018:

 

Unsecured Lines of Credit

 

Outstanding as of September 30, 2019

 

 

Total

Commitment

 

 

Commitment

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

13,200,000

 

 

$

50,000,000

 

 

June 2021

 

Variable (1)

 

Monthly

 

 

4.58

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2021

 

Variable (1)

 

Monthly

 

 

5.33

%

Total unsecured lines of credit

 

$

13,200,000

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The variable rate is indexed to LIBOR plus an applicable margin.

 

Unsecured Lines of Credit

 

Outstanding as of December 31, 2018

 

 

Total

Commitment

 

 

Commitment

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

35,659,200

 

 

$

50,000,000

 

 

June 2020

 

Variable (2)

 

Monthly

 

 

5.38

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2020

 

Variable (2)

 

Monthly

 

 

5.63

%

Total unsecured lines of credit

 

$

35,659,200

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(2)

The variable rate is indexed to LIBOR plus an applicable margin.

 

The outstanding balance of the non-operating LOC as of September 30, 2019 is due in March 2020. The Partnership can extend final repayment of the amount due by making partial repayments in accordance with the Credit Agreement to December 2020. The Partnership was in compliance with all covenants in the Credit Agreement as of September 30, 2019.

 

The Partnership is required to make principal payments to reduce the operating LOC to zero for fifteen consecutive calendar days during each calendar quarter.  The Partnership has fulfilled its prepayment obligation for all periods presented.   In addition, the Partnership has fulfilled its fourth quarter of 2019 repayment obligation as it maintained a zero balance in the operating LOC for fifteen consecutive days during October 2019.

 

 

15. Debt Financing

 

25


 

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of September 30, 2019 and December 31, 2018:

 

 

 

Outstanding Debt

Financings as of September 30, 2019, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - M24

 

$

40,792,062

 

 

$

98,007

 

 

2010

 

May 2027

 

N/A

 

N/A

 

 

N/A

 

 

3.05%

 

Variable - M31 (1)

 

 

79,885,290

 

 

 

4,999

 

 

2014

 

July 2024

 

Weekly

 

1.61%

 

 

1.42%

 

 

3.03%

 

Fixed - M33

 

 

31,638,938

 

 

 

2,606

 

 

2015

 

September 2030

 

N/A

 

N/A

 

 

N/A

 

 

3.24%

 

Fixed - M45 (2)

 

 

218,030,897

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOB & Term A/B Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deutsche Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

 

8,010,000

 

 

 

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01%

 

Fixed - Term A/B

 

 

5,256,054

 

 

 

-

 

 

2019

 

February 2020

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

38,404,644

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Mizuho Capital Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB

 

 

25,645,347

 

 

 

-

 

 

2019

 

July 2020

 

Weekly

 

1.68%

 

 

1.17%

 

 

2.85%

 

Variable - TOB

 

 

42,228,417

 

 

 

-

 

 

2019

 

August 2020

 

Weekly

 

1.68%

 

 

1.17% - 1.66%

 

 

2.85% - 3.34%

 

Variable - TOB

 

 

35,841,489

 

 

 

-

 

 

2019

 

September 2020

 

Weekly

 

2.03%

 

 

1.12%

 

 

3.15%

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

 

13,078,992

 

 

 

-

 

 

2019

 

May 2022

 

N/A

 

N/A

 

 

N/A

 

 

3.53%

 

Total Debt Financings

 

$

538,812,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees are variable.

(2)

The M45 TEBS has an initial interest rate of 3.82% through July 31, 2023. From August 1, 2023 through the stated maturity date, the interest rate is 4.39%. These rates are inclusive of credit enhancement fees payable to Freddie Mac.

 

 

 

Outstanding Debt

Financings as of

December 31, 2018, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - M24 (1)

 

$

41,466,000

 

 

$

432,998

 

 

2010

 

September 2020

 

Weekly

 

1.76%

 

 

1.85%

 

 

3.61%

 

Variable - M31 (2)

 

 

80,418,505

 

 

 

181,626

 

 

2014

 

July 2019

 

Weekly

 

1.74%

 

 

1.49%

 

 

3.23%

 

Variable - M33 (3)

 

 

31,262,039

 

 

 

58,002

 

 

2015

 

July 2020

 

Weekly

 

1.74%

 

 

1.26%

 

 

3.00%

 

Fixed - M45 (4)

 

 

219,250,387

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOB & Term A/B Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deutsche Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB

 

 

37,620,000

 

 

 

-

 

 

2012

 

May 2019

 

Weekly

 

2.21%

 

 

1.67%

 

 

3.88%

 

Fixed - Term TOB

 

 

46,675,413

 

 

 

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

10,516,000

 

 

 

 

 

 

2018

 

May 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

38,455,221

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Total Debt Financings

 

$

505,663,565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

In July 2019, the Partnership refinanced the M24 TEBS Financing with Freddie Mac. After refinancing, the M24 TEBS Financing has a fixed interest rate of 3.05% and a stated maturity of  May 2027.

(2)

In June 2019, the Partnership exercised its unilateral right to extend the financing for an additional five-year period through July 2024. Facility fees are variable.

(3)

In July 2019, the Partnership refinanced the M33 TEBS Financing with Freddie Mac. After refinancing, the M33 TEBS Financing has a fixed interest rate of 3.24% and a stated maturity of  September 2030.

(4)

The M45 TEBS has an initial interest rate of 3.82% through July 31, 2023. From August 1, 2023 through the stated maturity date, the interest rate is 4.39%. These rates are inclusive of credit enhancement fees payable to Freddie Mac.

 

26


 

The TOB, Term TOB and Term A/B Trusts with Deutsche Bank are subject to a Master Trust Agreement that contains covenants with which the Partnership is required to comply. If the Partnership were to be out of compliance with any of these covenants, a termination event of the financing facilities would be triggered which would require the Partnership to purchase a portion or all of the senior SPEARS or Class A Certificates held by Deutsche Bank. The most restrictive covenant within the Master Trust Agreement states that cash available to distribute plus interest expense for the trailing twelve months must be at least twice the trailing twelve-month interest expense. The Partnership was in compliance with these covenants as of September 30, 2019.

 

The TOB Trusts with Mizuho require that the Partnership’s residual interest in the TOB Trusts maintain a certain value in relation to the total assets in each Trust.  If the Partnership is not in compliance with any of these covenants, a termination event of the financing facility would be triggered which would require the Partnership to purchase a portion or all of the senior interests issued by each TOB Trust. The Partnership was in compliance with these covenants as of September 30, 2019.

 

The Term TOB Trust with Morgan Stanley Bank, N.A. (“Morgan Stanley”) is subject to a Trust Agreement and other related agreements that contains covenants with which the Partnership is required to comply.  If the Partnership is out of compliance with any of these covenants, a termination event of the financing facility would be triggered which would require the Partnership to purchase a portion or all of the Class A Certificates held by Morgan Stanley.  The most restrictive covenant within the Trust Agreement and related agreements requires the maintenance of a debt service coverage ratio above a specified threshold and the Partnership’s net assets cannot decline by more than specific percentages over designated periods of time.  The Partnership was in compliance with these covenants as of September 30, 2019.

 

The Partnership’s variable rate debt financing arrangements include maximum interest rate provisions that prevent the debt service on the debt financings from exceeding the cash flows from the underlying securitized asset.

 

As of September 30, 2019 and December 31, 2018, the Partnership had posted restricted cash as contractually required under the terms of the four TEBS Financings. In addition, the Partnership has entered in interest rate cap agreements to mitigate its exposure to interest rate fluctuations on the variable-rate debt financings (Note 17).

 

The TOB, Term TOB, Term A/B and TEBS Financing arrangements are consolidated VIE’s to the Partnership (Note 5). As the residual interest holder, the Partnership may be required to make certain payments or contribute certain assets to the VIEs if certain events occur. Such events include, but are not limited to, a downgrade in the investment rating of PHCs or of the senior securities issued by the VIEs, a ratings downgrade of the liquidity provider for the VIEs, increases in short term interest rates beyond pre-set maximums, an inability to re-market the senior securities or an inability to obtain liquidity for the senior securities. If such an event occurs in an individual VIE, the underlying collateral may be sold and, if the proceeds are not sufficient to pay the principal amount of the senior securities plus accrued interest and other trust expenses, the Partnership will be required to fund any such shortfall. If the Partnership does not fund the shortfall, the default and liquidation provisions will be invoked against the Partnership. The Partnership has never been, and does not expect in the future, to be required to reimburse the VIEs for any shortfall.

 

Debt Financing Activity in the First Nine Months of 2019

 

New Debt Financings:

 

In July 2019, the Partnership refinanced the M24 TEBS Financing with Freddie Mac. The M24 TEBS Financing was converted to a fixed interest rate of 3.05%, which is inclusive of credit enhancement and servicing fees, and the stated maturity was extended to May 2027. The refinancing was treated as an extinguishment for accounting purposes and the Partnership capitalized approximately $307,000 as deferred financing costs related to the refinancing.

 

In July 2019, the Partnership refinanced the M33 TEBS Financing with Freddie Mac. The M33 TEBS Financing converted to a fixed interest rate of 3.24%, which is inclusive of credit enhancement and servicing fees, and the stated maturity was extended to September 2030. The refinancing was treated as an extinguishment for accounting purposes and the Partnership expensed approximately $496,000 of previously unamortized deferred financing costs associated with the M33 TEBS Financing. The Partnership capitalized approximately $265,000 as deferred financing costs related to the refinancing. The Partnership received premium proceeds upon refinancing of approximately $435,000, which will be amortized using the effective interest method through the term of the agreement.

 

27


 

During the third quarter of 2019, The Partnership entered into various TOB Trust financings with Mizuho secured by MRBs and PHC Certificates. Under each TOB Trust structure, the trustee issues senior Floater Certificates and Residual Certificates that represent beneficial interests in the securitized asset held by the TOB Trusts. The Floater Certificates are sold to unaffiliated investors and entitle the holder to cash flows from the securitized assets at a stated interest rate. The Floater Certificates are credit enhanced by Mizuho such that Mizuho will cover any shortfall if the cash flows from the securitized assets are less than the contractual principal and interest due to the Floater Certificate holders. The Partnership would then be required to reimburse Mizuho for any credit enhancement payments. The Residual Certificates are retained by the Partnership and grant the Partnership rights to certain cash flows from the securitized assets after payment to the Floater Certificates and related trust fees, as well as certain other rights to the securitized assets. The TOB Trusts are considered VIEs (Note 5) because the Partnership’s rights are such that the Partnership is the primary beneficiary and the Partnership consolidates the TOB Trusts in its condensed consolidated financial statements. The following table summarizes the gross principal and terms of the TOB Trusts:

 

TOB Trusts Securitization

 

Outstanding TOB

Trust Financing

 

 

Stated Maturity

 

Reset

Frequency

 

Variable Rate Index

 

Facility Fees

 

Rosewood Townhomes

 

$

7,715,000

 

 

July 2020

 

Weekly

 

SIFMA

 

1.17%

 

South Pointe Apartments

 

 

18,035,000

 

 

July 2020

 

Weekly

 

SIFMA

 

1.17%

 

Live 929 Apartments

 

 

31,800,000

 

 

August 2020

 

Weekly

 

SIFMA

 

1.66%

 

Montecito at Williams Ranch

 

 

6,925,000

 

 

August 2020

 

Weekly

 

SIFMA

 

1.17%

 

Vineyard Gardens

 

 

3,595,000

 

 

August 2020

 

Weekly

 

SIFMA

 

1.17%

 

PHC Trust I

 

 

20,121,000

 

 

September 2020

 

Weekly

 

SIFMA

 

1.12%

 

PHC Trust II

 

 

3,803,000

 

 

September 2020

 

Weekly

 

SIFMA

 

1.12%

 

PHC Trust III

 

 

12,062,000

 

 

September 2020

 

Weekly

 

SIFMA

 

1.12%

 

Total Term TOB Trust Financing

 

$

104,056,000

 

 

 

 

 

 

 

 

 

 

 

 

In May 2019, the Partnership entered into a Term TOB Trust financing with Morgan Stanley secured by an MRB. The following table summarizes the gross principal and terms of the Term TOB Trust:

 

Term TOB Trusts Securitization

 

Outstanding Term TOB

Trust Financing

 

 

Stated Maturity

 

Fixed Interest

Rate

 

Village at Avalon

 

$

13,167,000

 

 

May 2022

 

 

3.53

%

Total Term TOB Trust Financing

 

$

13,167,000

 

 

 

 

 

 

 

 

 

In February 2019, the Partnership entered into two Term A/B Trusts financings with Deutsche Bank secured by MRBs. The following table summarizes the gross principal and terms of the Term A/B Trusts:

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Stated Maturity

 

Fixed Interest

Rate

 

Gateway Village

 

$

2,262,000

 

 

February 2020

 

 

4.53

%

Lynnhaven Apartments

 

 

3,001,500

 

 

February 2020

 

 

4.53

%

Total Term A/B Trust Financing

 

$

5,263,500

 

 

 

 

 

 

 

 

Redemptions:

The following debt financing facilities were collapsed and redeemed in full at prices that approximated the Partnership’s carrying value plus accrued interest:

 

Debt Financing

 

Debt Facility

 

Month

 

Paydown

Applied

 

Live 929 Apartments

 

Term TOB Trust

 

August 2019

 

$

37,553,300

 

Montecito at Williams Ranch

 

Term A/B Trust

 

August 2019

 

 

6,921,000

 

Vineyard Gardens

 

Term A/B Trust

 

August 2019

 

 

3,595,000

 

PHC Trust I

 

TOB Trust

 

September 2019

 

 

19,755,000

 

PHC Trust II

 

TOB Trust

 

September 2019

 

 

3,430,000

 

PHC Trust III

 

TOB Trust

 

September 2019

 

 

11,000,000

 

 

 

 

 

 

 

$

82,254,300

 

 

28


 

Debt Financing Activity in the First Nine Months of 2018

 

New Debt Financings:

 

In August 2018, the Partnership and its newly created consolidated subsidiary, ATAX TEBS IV, LLC (the “2018 Sponsor”), entered into a long-term debt financing facility provided through the securitization of 25 MRBs, with an initial par value of approximately $260.6 million owned by the 2018 Sponsor pursuant to the M45 TEBS Financing. The M45 TEBS financing facility provides the Partnership with a long-term fixed-rate facility. Of the 25 MRBs securitized in the M45 TEBS Financings, 24 MRBs were in Term A/B Trusts that were collapsed prior to the closing of the M45 TEBS Financing. The collapse of the Term A/B Trusts and subsequent closing of the M45 TEBS Financing resulted in a debt modification for accounting purposes and the Partnership capitalized approximately $371,000 as deferred financing costs.

 

In August 2018, the Partnership entered into four Term A/B Trusts financings secured by various MRBs. The following table summarizes the gross principal and terms of the Term A/B Trusts:

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Stated Maturity

 

Fixed Interest

Rate

 

Montecito at Williams Ranch - Series A

 

$

6,921,000

 

 

November 2018

 

 

4.53

%

Montecito at Williams Ranch - Series B

 

 

4,303,000

 

 

November 2018

 

 

4.53

%

Vineyard Gardens - Series A

 

 

3,595,000

 

 

November 2018

 

 

4.53

%

Vineyard Gardens - Series B

 

 

2,561,000

 

 

November 2018

 

 

4.53

%

Total Term A/B Trust Financing

 

$

17,380,000

 

 

 

 

 

 

 

 

29


 

Redemptions:

The following Term A/B Trusts were collapsed and redeemed in full at prices that approximated the Partnership’s carrying value plus accrued interest:

 

Debt Financing

 

Debt Facility

 

Month

 

Paydown Applied

 

Seasons Lakewood - Series B

 

Term A/B Trust

 

March 2018

 

$

4,475,000

 

Summerhill - Series B

 

Term A/B Trust

 

March 2018

 

 

2,870,000

 

Oaks at Georgetown - Series B

 

Term A/B Trust

 

April 2018

 

 

4,690,000

 

San Vicente - Series B

 

Term A/B Trust

 

May 2018

 

 

1,555,000

 

The Village at Madera - Series B

 

Term A/B Trust

 

May 2018

 

 

1,465,000

 

Las Palmas II - Series B

 

Term A/B Trust

 

July 2018

 

 

1,505,000

 

15 West Apartments (1)

 

Term A/B Trust

 

August 2018

 

 

8,300,012

 

Bruton Apartments (1)

 

Term A/B Trust

 

August 2018

 

 

15,279,403

 

Columbia Gardens (1)

 

Term A/B Trust

 

August 2018

 

 

10,222,680

 

Companion at Thornhill Apartments (1)

 

Term A/B Trust

 

August 2018

 

 

9,642,587

 

Concord at Gulfgate - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

16,310,000

 

Concord at Little York - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

11,425,000

 

Concord at Williamcrest - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

17,695,000

 

Courtyard - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

9,210,000

 

Courtyard - Series B

 

Term A/B Trust

 

August 2018

 

 

5,295,000

 

Crossing at 1415 - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

6,370,877

 

Decatur Angle (1)

 

Term A/B Trust

 

August 2018

 

 

21,362,472

 

Harmony Court Bakersfield - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,360,000

 

Harmony Terrace - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

6,210,000

 

Harmony Terrace - Series B

 

Term A/B Trust

 

August 2018

 

 

6,290,000

 

Heights at 515 - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

5,402,307

 

Las Palmas II - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

1,530,000

 

Oaks at Georgetown - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

11,100,000

 

San Vicente - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,150,000

 

Seasons at Simi Valley - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,688,843

 

Seasons Lakewood - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

6,615,000

 

Seasons San Juan Capistrano - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

11,140,000

 

Seasons San Juan Capistrano - Series B

 

Term A/B Trust

 

August 2018

 

 

5,590,000

 

Summerhill - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

5,785,000

 

Sycamore Walk - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,066,769

 

The Village at Madera - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

2,780,000

 

Village at River's Edge (1)

 

Term A/B Trust

 

August 2018

 

 

8,963,207

 

Willow Run (1)

 

Term A/B Trust

 

August 2018

 

 

10,079,940

 

 

 

 

 

 

 

$

242,424,098

 

 

(1)

In August 2018, the MRB was transferred to the M45 TEBS Financing upon collapsing of the Term A/B Trust.

 

Future Maturities

 

The Partnership’s contractual maturities of borrowings for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

Remainder of 2019

 

$

9,445,353

 

2020

 

 

114,279,468

 

2021

 

 

5,328,914

 

2022

 

 

18,499,166

 

2023

 

 

5,899,262

 

Thereafter

 

 

387,921,886

 

Total

 

 

541,374,049

 

Unamortized deferred financing costs and debt premium

 

 

(2,561,919

)

Total debt financing, net

 

$

538,812,130

 

 

30


 

16. Mortgages Payable and Other Secured Financing

 

The following tables summarize the Partnership’s mortgages payable and other secured financing, net of deferred financing costs, as of September 30, 2019 and December 31, 2018:

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

September 30, 2019, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Reset

Frequency

 

Variable

Based Rate

 

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

2,988,989

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

24,060,882

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

5.00

%

(1)

 

5.00

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

27,049,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Variable rate is based on the Wall Street Journal Prime Rate, but not to exceed 5.0%.

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

December 31, 2018, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Reset

Frequency

 

Variable

Based Rate

 

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

3,118,478

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

24,335,897

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

5.00

%

(2)

 

5.00

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

27,454,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

Variable rate is based on the Wall Street Journal Prime Rate, but not to exceed 5.0%.

In September 2018, the Partnership sold the Jade Park MF Property. At the closing of the sale, the Partnership paid all outstanding principal and accrued interest on the related mortgage payable.

Future Maturities

 

The Partnership’s contractual maturities of borrowings for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

Remainder of 2019

 

$

3,133,103

 

2020

 

 

23,945,254

 

2021

 

 

-

 

2022

 

 

-

 

2023

 

 

-

 

Thereafter

 

 

-

 

Total

 

 

27,078,357

 

Unamortized deferred financing costs

 

 

(28,486

)

Total mortgages payable and other secured financings, net

 

$

27,049,871

 

 

31


 

17. Interest Rate Derivative Agreements

The following tables summarize the Partnership’s interest rate derivatives as of September 30, 2019 and December 31, 2018:

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of September 30, 2019

 

July 2015

 

 

27,117,092

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Wells Fargo Bank

 

 

2

 

July 2015

 

 

27,117,092

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Royal Bank of Canada

 

 

2

 

July 2015

 

 

27,117,092

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

SMBC Capital Markets, Inc

 

 

2

 

June 2017

 

 

81,351,277

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

45,274

 

Sept 2017

 

 

58,447,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

-

 

Aug 2019

 

 

79,695,286

 

 

Aug 2024

 

 

4.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

7,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

52,605

 

 

(1)

See Note 22 for additional details.

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (2)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (2)

 

Counterparty

 

Fair Value as of December 31, 2018

 

July 2014

 

$

30,252,409

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

-

 

July 2014

 

 

30,252,409

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

-

 

July 2014

 

 

30,252,409

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

-

 

July 2015

 

 

27,359,689

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

536

 

July 2015

 

 

27,359,689

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

536

 

July 2015

 

 

27,359,689

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

536

 

June 2017

 

 

90,757,226

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

158,989

 

June 2017

 

 

82,079,066

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

465,983

 

Sept 2017

 

 

59,038,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

626,633

 

 

(2)

See Note 22 for additional details.

 

In August 2019, the Partnership purchased an interest rate derivative intended to cap the variable interest rate component of the M31 TEBS Financing at 4.5%. The Partnership paid approximately $30,000 for the interest rate derivative.

 

During the nine months ended September 30, 2018, the Partnership was a party to two interest rate swaps with Deutsche Bank, which were designated to mitigate interest rate risk for the variable-rate TOB Trusts secured by the Partnership’s PHC Certificates. The interest rate swaps were terminated in September 2018 and October 2018.

 

The Partnership’s interest rate derivatives are not designated as hedging instruments and are recorded at fair value. Changes in fair value are included in current period earnings as interest expense on the condensed consolidated statements of operations. See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives. The interest rate derivatives are presented within other assets on the condensed consolidated balance sheets.  

 

18. Commitments and Contingencies

Legal Proceedings

The Partnership, from time to time, may be subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are frequently covered by insurance. If it has been determined that a loss is probable to occur, the estimated amount of the loss is accrued in the Partnership’s condensed consolidated financial statements. While the resolution of these matters cannot be predicted with certainty, the Partnership believes the outcome of such matters will not have a material effect on the Partnership’s condensed consolidated financial statements.

32


 

Construction Loan Guarantees

The Partnership entered into guaranty agreements for construction loans related to certain investments in unconsolidated entities. The Partnership will only have to perform on the guarantees if a default by the borrower were to occur.  All guarantees were initially for the entire amount of the respective construction loan and decrease based on the achievement of certain events or financial ratios, as defined by the respective construction loan agreement.  The Partnership has not accrued any amount for these contingent liabilities because the likelihood of guarantee claims is remote. The following table summarizes the Partnership’s maximum exposure under these guarantee agreements as of September 30, 2019:

 

Borrower

 

Year the Guarantee

was Executed

 

Maximum Balance

Available on

Construction Loan

 

 

Construction Loan

Balance as of September 30, 2019

 

 

Partnership's Maximum Exposure

as of September 30, 2019

 

 

Guarantee

Terms

Vantage at Stone Creek

 

2018

 

$

30,824,000

 

 

$

24,826,510

 

 

$

24,826,510

 

 

(1)

Vantage at Coventry

 

2018

 

 

31,500,000

 

 

 

5,275,651

 

 

 

5,275,651

 

 

(1)

 

(1)

The Partnership’s maximum exposure will decrease to 50% of the construction loan balance upon receipt of the certificate of occupancy and to 25% of the construction loan balance when certain debt service coverage levels are achieved by the borrower.

Other Guarantees and Commitments

The Partnership has entered into guarantee agreements with unaffiliated entities under which the Partnership has guaranteed certain obligations of the general partners of certain limited partnerships upon the occurrence of a “repurchase event.” Potential repurchase events include the delivery of LIHTCs, tax credit recapture and foreclosure. The Partnership’s maximum exposure is limited to 75% of the equity contributed by the limited partner to each limited partnership. No amount has been accrued for these guarantees because the likelihood of repurchase events is remote. The following table summarizes the Partnership’s maximum exposure under these guarantee agreements as of September 30, 2019:

 

Limited Partnership(s)

 

Year the Guarantee was

Executed

 

End of Guarantee

Period

 

Partnership's

Maximum Exposure as of September 30, 2019

 

Ohio Properties

 

2011

 

2026

 

$

3,712,436

 

Greens of Pine Glen, LP

 

2012

 

2027

 

 

2,429,658

 

 

 

The Partnership has agreed, in limited instances, to indemnify certain parties to the TOB Trusts related to the PHC Certificates for claims by the Floater Certificates holders related to the calculation of interest and principal payments. The maximum exposure for such claims is up to the total value of the Floater Certificates plus accrued interest. The Partnership has not accrued any amount for this commitment as of September 30, 2019 because the likelihood of a claim is remote. The maximum exposure was approximately $36.0 million as of September 30, 2019.

 

19. Redeemable Series A Preferred Units

 

The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units via private placements to five financial institutions. The Series A Preferred Units represent limited partnership interests in the Partnership and are redeemable in the future. The balance of Series A Preferred Units on the condensed consolidated balance sheet is presented net of issuance costs. The following table summarizes the outstanding Series A Preferred Units as of September 30, 2019 and December 31, 2018:  

 

Month Issued

 

Units

 

 

Purchase Price

 

 

Distribution

Rate

 

 

Redemption

Price per Unit

 

 

Earliest Redemption

Date

March 2016

 

 

1,000,000

 

 

$

10,000,000

 

 

 

3.00

%

 

$

10.00

 

 

March 2022

May 2016

 

 

1,386,900

 

 

 

13,869,000

 

 

 

3.00

%

 

 

10.00

 

 

May 2022

September 2016

 

 

1,000,000

 

 

 

10,000,000

 

 

 

3.00

%

 

 

10.00

 

 

September 2022

December 2016

 

 

700,000

 

 

 

7,000,000

 

 

 

3.00

%

 

 

10.00

 

 

December 2022

March 2017

 

 

1,613,100

 

 

 

16,131,000

 

 

 

3.00

%

 

 

10.00

 

 

March 2023

August 2017

 

 

2,000,000

 

 

 

20,000,000

 

 

 

3.00

%

 

 

10.00

 

 

August 2023

October 2017

 

 

1,750,000

 

 

 

17,500,000

 

 

 

3.00

%

 

 

10.00

 

 

October 2023

Series A Preferred Units outstanding

   as of September 30, 2019 and

   December 31, 2018

 

 

9,450,000

 

 

$

94,500,000

 

 

 

 

 

 

 

 

 

 

 

 

33


 

20. Restricted Unit Awards (“RUAs”)

The Plan, as approved by the BUC holders, permits the grant of RUAs and other awards to the employees of Greystone Manager, the Partnership, or any affiliate of either, and members of the Board of Managers of Greystone Manager for up to 3.0 million BUCs. RUAs are generally granted with vesting conditions ranging from three months to approximately three years. Unvested RUAs are entitled to receive distributions during the restriction period. The RUAs provide for accelerated vesting if there is a change in control related to the Partnership, the General Partner, or Greystone Manager; or death or disability of the participant. All of the restrictions applicable to the previously unvested RUAs lapsed and all such RUAs became immediately vested and nonforfeitable upon the closing of the previously disclosed acquisition of all of the issued and outstanding partnership interests in the General Partner from Burlington Capital LLC (“Burlington”) by Greystone Manager and Greystone AF Holdings, LLC (“Greystone Holdings,” and collectively with Greystone Manager, “Greystone”), which occurred on September 10, 2019.

The fair value of each RUA is estimated on the grant date based on the Partnership’s exchange-listed closing price of the BUCs. The Partnership recognizes compensation expense for the RUAs on a straight-line basis over the requisite vesting period. The compensation expense for RUAs totaled approximately $3,266,000 and $622,000 for the three months ended September 30, 2019 and 2018, respectively.  The compensation expense for RUAs totaled approximately $3,636,000 and $1,372,000 for the nine months ended September 30, 2019 and 2018, respectively. Compensation expense is reported within general and administrative expenses in the Partnership’s condensed consolidated statements of operations.

The following table summarizes the RUA activity as of and for the nine months ended September 30, 2019 and the year ended December 31, 2018:

 

 

 

Restricted Units

Awarded

 

 

Weighted-average

Grant-date

Fair Value

 

Nonvested as of January 1, 2018

 

 

242,069

 

 

$

5.83

 

Granted

 

 

309,212

 

 

 

6.31

 

Vested

 

 

(279,034

)

 

 

6.06

 

Forfeited

 

 

(6,957

)

 

 

6.31

 

Nonvested as of December 31, 2018

 

 

265,290

 

 

$

6.14

 

Granted

 

 

353,197

 

 

 

7.74

 

Vested

 

 

(618,487

)

 

 

7.05

 

Nonvested as of September 30, 2019

 

 

-

 

 

$

-

 

 

There was no unrecognized compensation expense related to nonvested RUAs granted under the Plan as of September 30, 2019.

 

21. Transactions with Related Parties

 

Effective September 10, 2019, Greystone acquired all of the issued and outstanding partnership interests of AFCA 2, at which time Burlington and its affiliates ceased to be related parties of the Partnership. The disclosures herein related to Burlington and its affiliates only reflect transactions that occurred through September 9, 2019.  

 

The Partnership incurs costs for services and makes contractual payments to AFCA 2, the general partner of AFCA 2, and their affiliates. The costs are reported either as expenses or capitalized costs depending on the nature of each item. The following table summarizes transactions with related parties that are reflected in the Partnership’s condensed consolidated financial statements for the three and nine months ended September 30, 2019 and 2018:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Partnership administrative fees paid to AFCA 2 (1)

 

$

914,000

 

 

$

940,000

 

 

$

2,714,000

 

 

$

2,789,000

 

Property management fees paid to an affiliate (2)

 

 

28,000

 

 

 

49,000

 

 

 

101,000

 

 

 

147,000

 

Reimbursable franchise margin taxes incurred on behalf of

   unconsolidated entities (3)

 

 

12,000

 

 

 

-

 

 

 

44,000

 

 

 

-

 

 

 

(1)

The General Partner of the Partnership, AFCA 2, is entitled to receive an administrative fee from the Partnership equal to 0.45% per annum of the outstanding principal balance of any of its MRBs, property loans collateralized by real property, and other investments for which the owner of the financed property or other third party is not obligated to pay such administrative fee directly to AFCA 2. The disclosed amounts represent administrative fees paid or accrued during the periods specified and are reported within general and administrative expenses on the Partnership’s condensed consolidated statements of operations.

34


 

(2)

An affiliate of AFCA 2, Burlington Capital Properties, LLC (“Properties Management”), provides property management, administrative and marketing services for the MF Properties (excluding Suites on Paseo). The property management fees are reported within real estate operating expenses in the Partnership’s condensed consolidated statements of operations.

(3)

The Partnership pays franchise margin taxes on revenues in Texas related to its investments in unconsolidated entities. Such taxes are paid by the Partnership as the unconsolidated entities are required by tax regulations to be included in the Partnership’s group tax return. The Partnership is then reimbursed for franchise margin taxes paid on behalf of the unconsolidated entities.

 

AFCA 2 receives fees from the borrowers of the Partnership’s MRBs for services provided to the borrower and based on the occurrence of certain investment and debt financing transactions. These fees were paid by the borrowers and are not reflected in the Partnership’s condensed consolidated financial statements. The following table summarizes transactions between borrowers of the Partnership’s MRBs and affiliates for the three and nine months ended September 30, 2019 and 2018:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Non-Partnership property administrative fees received by AFCA 2 (1)

 

 

9,000

 

 

 

17,000

 

 

$

27,000

 

 

$

60,000

 

Investment/mortgage placement fees received by AFCA 2 (2)

 

 

-

 

 

 

1,189,000

 

 

 

822,000

 

 

 

2,787,000

 

MRB redemption administrative fee received by AFCA 2 (3)

 

 

-

 

 

 

114,000

 

 

 

-

 

 

 

114,000

 

 

(1)

AFCA 2 received administrative fees directly from the owners of certain properties financed by certain MRBs held by the Partnership.  These administrative fees equal 0.45% per annum of the outstanding principal balance of the MRBs. These amounts represent administrative fees received by AFCA 2 during the periods specified.

(2)

AFCA 2 received placement fees in connection with the acquisition of certain MRBs and investments in unconsolidated entities.  

(3)

AFCA 2 received a one-time administrative fee related to early redemption of the Lake Forest MRB from the property in September 2018.

 

In addition, Properties Management provided services to seven of the properties collateralizing MRBs of the Partnership and one of the Partnership’s investments in unconsolidated entities. These property management fees are paid out of the revenues generated by the respective property prior to the payment of debt service on the Partnership's MRBs and property loans, as applicable, and the construction loan for the unconsolidated entity. Properties Management ceased to be a related party effective September 10, 2019.

The Partnership reported receivables due from unconsolidated entities and affiliates totaling approximately $29,000 and $77,000 as of September 30, 2019 and December 31, 2018, respectively. These amounts are reported within other assets on the Partnership’s condensed consolidated balance sheets. The Partnership had outstanding liabilities due to related parties totaling approximately $599,000 and $330,000 as of September 30, 2019 and December 31, 2018, respectively. These amounts are reported within accounts payable, accrued expenses and other liabilities on the Partnership’s condensed consolidated balance sheets.

 

22. Fair Value of Financial Instruments

Current accounting guidance on fair value measurements establishes a framework for measuring fair value and provides for expanded disclosures about fair value measurements.  The guidance:

 

Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and

 

Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.  To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The three levels of the hierarchy are defined as follows:

 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 inputs are unobservable inputs for asset or liabilities.

35


 

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following are descriptions of the valuation methodologies used for the Partnership’s assets and liabilities measured at fair value.

Investments in MRBs

The fair value of the Partnership’s investments in MRBs and taxable MRBs, as of September 30, 2019 and December 31, 2018, is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the MRBs and price quotes for the MRBs are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, collateral, seniority or subordination to other obligations, operating results of the underlying property, geographic location, and property quality. These characteristics are used to estimate an effective yield for each MRB. The MRB fair value is estimated using a discounted cash flow and yield to maturity or call analysis by applying the effective yield to contractual cash flows. Significant increases (decreases) in the effective yield would have resulted in a significantly lower (higher) fair value estimate. Changes in fair value due to an increase or decrease in the effective yield do not impact the Partnership’s cash flows.

The Partnership evaluates pricing data received from the third-party pricing service by evaluating consistency with information from either the third-party pricing service or public sources. The fair value estimates of the MRBs and taxable MRBs are based largely on unobservable inputs believed to be used by market participants and require the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s investments in MRBs and taxable MRBs are categorized as a Level 3 input. As of September 30, 2019, the range of effective yields on the individual MRBs was 2.6% to 8.7% per annum, with a weighted average effective yield of 3.8% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.1% to 8.8% per annum, with a weighted average effective yield of 8.6% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.  As of December 31, 2018, the range of effective yields on the individual MRBs was 3.3% to 9.1% per annum, with a weighted average effective yield of 4.6% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.3% to 9.3% per annum, with a weighted average effective yield of 9.1% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.

Investments in PHC Certificates  

The fair value of the Partnership’s investment in PHC Certificates as of September 30, 2019 and December 31, 2018 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Certificate as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs.

The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness.  The Partnership also engages a second third-party pricing service to confirm the values developed by the primary third-party pricing service. The valuation methodologies used by the third-party pricing services encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input. As of September 30, 2019, the range of effective yields on the PHC Certificates was 4.5% to 5.4% per annum, with a weighted average effective yield of 5.3% when weighted by the principal outstanding of all PHC Certificates as of the reporting date. As of December 31, 2018, the range of effective yields on the PHC Certificates was 5.3% to 6.0% per annum, with a weighted average effective yield of 5.5% when weighted by the principal outstanding of all PHC Certificates as of the reporting date.

Interest Rate Derivatives.  

The effect of the Partnership’s interest rate derivatives is to set a cap, or upper limit, subject to performance by the counterparty, on the base rate of interest paid on the Partnership’s variable rate debt financings equal to the notional amount of the derivative agreement.   The effect of the Partnership’s interest rate swaps is to change a variable-rate debt obligation to a fixed rate for that portion of the debt equal to the notional amount of the derivative agreement.  The fair value of the interest rate derivatives is based on a model whose inputs are not observable and therefore is categorized as a Level 3 input.  The inputs in the valuation model include three-month LIBOR rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.

36


 

Assets measured at fair value on a recurring basis as of September 30, 2019 are summarized as follows:

 

 

 

Fair Value Measurements as of September 30, 2019

 

Description

 

Assets at

Fair Value

 

 

Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds, held in trust

 

$

747,157,387

 

 

$

-

 

 

$

-

 

 

$

747,157,387

 

Mortgage revenue bonds

 

 

30,125,333

 

 

 

-

 

 

 

-

 

 

 

30,125,333

 

PHC Certificates

 

 

44,684,506

 

 

 

-

 

 

 

-

 

 

 

44,684,506

 

Taxable mortgage revenue bonds (reported within other assets)

 

 

1,427,336

 

 

 

-

 

 

 

-

 

 

 

1,427,336

 

Derivative instruments (reported within other assets)

 

 

52,605

 

 

 

-

 

 

 

-

 

 

 

52,605

 

Total Assets at Fair Value, net

 

$

823,447,167

 

 

$

-

 

 

$

-

 

 

$

823,447,167

 

 

The following tables summarize the activity related to Level 3 assets for the three and nine months ended September 30, 2019:

 

 

 

For the Three Months Ended September 30, 2019

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue

Bonds (1)

 

 

PHC

Certificates

 

 

Taxable Bonds

 

 

Interest Rate

Derivatives

 

 

Total

 

Beginning Balance April 1, 2019

 

$

759,526,707

 

 

$

46,516,154

 

 

$

1,441,316

 

 

$

118,279

 

 

$

807,602,456

 

Total gains (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest income and

   interest expense)

 

 

35,542

 

 

 

2,915

 

 

 

-

 

 

 

(68,333

)

 

 

(29,876

)

Included in other comprehensive (loss)

   income

 

 

18,886,878

 

 

 

173,374

 

 

 

(11,936

)

 

 

-

 

 

 

19,048,316

 

Purchases

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,527

 

 

 

29,527

 

Settlements

 

 

(1,166,407

)

 

 

(2,007,937

)

 

 

(2,044

)

 

 

(26,868

)

 

 

(3,203,256

)

Ending Balance September 30, 2019

 

$

777,282,720

 

 

$

44,684,506

 

 

$

1,427,336

 

 

$

52,605

 

 

$

823,447,167

 

Total amount of gains (losses) for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2019

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(68,333

)

 

$

(68,333

)

 

(1)

Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.

 

 

 

 

For the Nine Months Ended September 30, 2019

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue

Bonds (1)

 

 

PHC

Certificates

 

 

Taxable

Mortgage

Revenue

Bonds

 

 

Interest Rate

Derivatives

 

 

Total

 

Beginning Balance January 1, 2019

 

$

732,153,435

 

 

$

48,672,086

 

 

$

1,409,895

 

 

$

626,633

 

 

$

782,862,049

 

Total gains (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest income and

   interest expense)

 

 

106,909

 

 

 

(795

)

 

 

-

 

 

 

(458,141

)

 

 

(352,027

)

Included in other comprehensive income

 

 

41,280,568

 

 

 

788,318

 

 

 

43,438

 

 

 

-

 

 

 

42,112,324

 

Purchases

 

 

19,250,000

 

 

 

-

 

 

 

-

 

 

 

29,527

 

 

 

19,279,527

 

Settlements

 

 

(15,508,192

)

 

 

(4,775,103

)

 

 

(25,997

)

 

 

(145,414

)

 

 

(20,454,706

)

Ending Balance September 30, 2019

 

$

777,282,720

 

 

$

44,684,506

 

 

$

1,427,336

 

 

$

52,605

 

 

$

823,447,167

 

Total amount of gains (losses) for the

   period included in earnings attributable

   to the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2019

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(458,141

)

 

$

(458,141

)

 

(1)

Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.

37


 

 

Assets measured at fair value on a recurring basis as of December 31, 2018 are summarized as follows:

 

 

 

Fair Value Measurements as of December 31, 2018

 

Description

 

Assets

at Fair Value

 

 

Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds, held in trust

 

$

645,258,873

 

 

$

-

 

 

$

-

 

 

$

645,258,873

 

Mortgage revenue bonds

 

 

86,894,562

 

 

 

-

 

 

 

-

 

 

 

86,894,562

 

PHC Certificates

 

 

48,672,086

 

 

 

-

 

 

 

-

 

 

 

48,672,086

 

Taxable mortgage revenue bonds (reported within other assets)

 

 

1,409,895

 

 

 

-

 

 

 

-

 

 

 

1,409,895

 

Derivative instruments (reported within other assets)

 

 

626,633

 

 

 

-

 

 

 

-

 

 

 

626,633

 

Total Assets at Fair Value, net

 

$

782,862,049

 

 

$

-

 

 

$

-

 

 

$

782,862,049

 

 

The following tables summarize the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2018:

 

 

 

For the Three Months Ended September 30, 2018

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase

Commitments

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate

Derivatives (2)

 

 

Total

 

Beginning Balance July 1, 2018

 

$

767,629,337

 

 

$

994,685

 

 

$

49,070,710

 

 

$

2,357,952

 

 

$

897,958

 

 

$

820,950,642

 

Total gains (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest income and interest

   expense)

 

 

36,126

 

 

 

-

 

 

 

(19,274

)

 

 

-

 

 

 

91,679

 

 

 

108,531

 

Included in earnings (impairment of securities)

 

 

-

 

 

 

-

 

 

 

(309,958

)

 

 

-

 

 

 

-

 

 

 

(309,958

)

Included in other comprehensive (loss) income

 

 

(6,729,317

)

 

 

51,760

 

 

 

-

 

 

 

(15,192

)

 

 

-

 

 

 

(6,692,749

)

Purchases

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Settlements

 

 

(18,470,222

)

 

 

-

 

 

 

-

 

 

 

(2,858

)

 

 

47,540

 

 

 

(18,425,540

)

Ending Balance September 30, 2018

 

$

742,465,924

 

 

$

1,046,445

 

 

$

48,741,478

 

 

$

2,339,902

 

 

$

1,037,177

 

 

$

795,630,926

 

Total amount of gains (losses) for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2018

 

$

-

 

 

$

-

 

 

$

(309,958

)

 

$

-

 

 

$

91,679

 

 

$

(218,279

)

 

(1)

Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.

(2)

Interest rate derivatives include derivative instruments reported in other assets as well as derivative swap liabilities.

 

 

 

For the Nine Months Ended September 30, 2018

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase

Commitments

 

 

PHC Certificates

 

 

Taxable Mortgage

Revenue Bonds

 

 

Interest Rate

Derivatives (2)

 

 

Total

 

Beginning Balance January 1, 2018

 

$

788,621,707

 

 

$

3,002,540

 

 

$

49,641,588

 

 

$

2,422,459

 

 

$

(229,631

)

 

$

843,458,663

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest income and interest

   expense)

 

 

108,661

 

 

 

-

 

 

 

(57,822

)

 

 

-

 

 

 

1,088,060

 

 

 

1,138,899

 

Included in earnings (impairment of securities)

 

 

-

 

 

 

-

 

 

 

(1,141,020

)

 

 

-

 

 

 

-

 

 

 

(1,141,020

)

Included in other comprehensive (loss) income

 

 

(24,048,645

)

 

 

(1,956,095

)

 

 

525,446

 

 

 

(49,173

)

 

 

-

 

 

 

(25,528,467

)

Purchases

 

 

19,540,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,540,000

 

Settlements

 

 

(41,755,799

)

 

 

-

 

 

 

(226,714

)

 

 

(33,384

)

 

 

178,748

 

 

 

(41,837,149

)

Ending Balance September 30, 2018

 

$

742,465,924

 

 

$

1,046,445

 

 

$

48,741,478

 

 

$

2,339,902

 

 

$

1,037,177

 

 

$

795,630,926

 

Total amount of gains (losses) for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2018

 

$

-

 

 

$

-

 

 

$

(1,141,020

)

 

$

-

 

 

$

1,088,060

 

 

$

(52,960

)

38


 

 

(1)

Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership. The beginning balance also includes the cumulative effect of accounting change related to the adoption of ASU 2017-08 effective January 1, 2018.

(2)

Interest rate derivatives include derivative instruments reported in other assets as well as derivative swap liabilities.

 

Total gains and loss included in earnings for the interest rate derivatives are reported as interest expense in the condensed consolidated statements of operations.

In September 2019 and 2018, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded impairment charges of $75,000 and $150,000 in the third quarter of 2019 and 2018, respectively. The impairment charges represent the difference between the Partnership’s carrying value and the estimated fair value of the land.

As of September 30, 2019 and December 31, 2018, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s financial liabilities, which are indicative of market prices. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each financial liability as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure, seniority to other obligations, operating results of the underlying assets, and asset quality. The financial liabilities values are then estimated using a discounted cash flow and yield to maturity or call analysis.

The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these financial liabilities are based largely on unobservable inputs believed to be used by market participants and require the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s financial liabilities are categorized as a Level 3 input. The TEBS Financings are credit enhanced by Freddie Mac. The variable-rate TOB Trust financings are credit enhanced by either Deutsche Bank or Mizuho. The table below summarizes the fair value of the financial liabilities as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt financing and LOCs

 

$

552,012,130

 

 

$

572,810,140

 

 

$

541,322,765

 

 

$

550,766,809

 

Mortgages payable and other secured financing

 

 

27,049,871

 

 

 

27,078,357

 

 

 

27,454,375

 

 

 

27,552,748

 

 

23. Segments

 

The Partnership has four reportable segments - Mortgage Revenue Bond Investments, MF Properties, Public Housing Capital Fund Trusts, and Other Investments.  In addition to the four reportable segments, the Partnership also separately reports its consolidation and elimination information because it does not allocate certain items to the segments.

The Amended and Restated LP Agreement authorizes the Partnership to make investments in tax-exempt securities other than MRBs provided that the tax-exempt investments are rated in one of the four highest rating categories by a national securities rating agency. The Amended and Restated LP Agreement also allows the Partnership to invest in other securities whose interest may be taxable for federal income tax purposes. Total tax-exempt securities, other than MRBs and other investments, cannot exceed 25% of the Partnership’s total assets at the time of acquisition as required under the Amended and Restated LP Agreement.  In addition, the amount of other investments is limited based on the conditions to the exemption from registration under the Investment Company Act of 1940.  The Partnership’s tax-exempt securities, other than MRBs and other investments, include PHC Certificates and Other Investments, which are reported as separate segments.

 

Mortgage Revenue Bond Investments Segment

The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of MRBs and related property loans which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.  Such MRBs are held as investments and the related property loans, net of loan loss allowance, are reported as such on the Partnership’s condensed consolidated balance sheets.  As of September 30, 2019, the Partnership held 76 MRBs. The Residential Properties financed by MRBs contain a total of 10,871 rental units. In addition, one MRB (Pro Nova 2014-1) is collateralized by commercial real estate. All general and administrative expenses on the condensed consolidated statements of operations are reported within this segment.

 

39


 

MF Properties Segment

The MF Properties segment consists of multifamily and student housing residential properties held by the Partnership. During the time the Partnership holds an interest in an MF Property, any net rental income generated by the MF Properties in excess of debt service will be available for distribution to the Partnership.  As of September 30, 2019, the segment includes two MF Properties comprised of a total of 859 rental units. Income tax expense for the Greens Hold Co is reported within this segment.

 

Public Housing Capital Fund Trusts Segment

The Public Housing Capital Fund Trusts segment consists of the assets, liabilities, and related income and expenses of the Partnership’s PHC Certificates (Note 7) and the related debt financings.

 

Other Investments Segment

The Other Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which invests in unconsolidated entities (Note 9) and made property loans to certain multifamily housing properties (Note 10).

 

The following tables detail certain key financial information for the Partnership’s reportable segments for the three and nine months ended September 30, 2019 and 2018:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

10,383,867

 

 

$

21,440,970

 

 

$

31,074,582

 

 

$

44,609,666

 

MF Properties

 

 

1,974,546

 

 

 

2,285,736

 

 

 

6,002,971

 

 

 

7,099,690

 

Public Housing Capital Fund Trusts

 

 

589,024

 

 

 

617,661

 

 

 

1,812,779

 

 

 

1,860,728

 

Other Investments

 

 

1,918,265

 

 

 

1,656,748

 

 

 

7,986,302

 

 

 

4,674,230

 

Total revenues

 

$

14,865,702

 

 

$

26,001,115

 

 

$

46,876,634

 

 

$

58,244,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense