Docoh
Loading...

ATAX America First Multifamily Investors

Filed: 6 May 20, 8:47am

 

 

 

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 March 31, 2020 

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.)

 

 

 

14301 FNB Parkway, Suite 211, Omaha, Nebraska

 

68154

(Address of principal executive offices)

 

(Zip Code)

 

 

 

(402) 952-1235

(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 March 31, 2020, the registrant had 60,545,204 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 and contained in this report, and, accordingly, we cannot guarantee their accuracy or completeness. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries 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, 2019 and in this report.

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, student, senior citizen residential properties and commercial properties;

 

changes in business conditions and the general economy, including the current and future impact of the novel coronavirus (“COVID-19”) on business operations, employment and government-mandated relief and mitigation measures;

 

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 (“IRC”);

 

geographic concentration within the MRB portfolio held by the Partnership; 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.

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. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Report for additional details.

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,158,156

 

 

$

42,308,153

 

Restricted cash

 

 

600,646

 

 

 

877,828

 

Interest receivable, net

 

 

7,905,503

 

 

 

7,432,433

 

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

 

 

734,245,836

 

 

 

743,587,715

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

26,836,439

 

 

 

30,009,750

 

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

 

 

-

 

 

 

43,349,357

 

Real estate assets: (Note 8)

 

 

 

 

 

 

 

 

Land and improvements

 

 

4,900,465

 

 

 

4,906,130

 

Buildings and improvements

 

 

72,052,740

 

 

 

72,011,533

 

Real estate assets before accumulated depreciation

 

 

76,953,205

 

 

 

76,917,663

 

Accumulated depreciation

 

 

(16,064,714

)

 

 

(15,357,700

)

Net real estate assets

 

 

60,888,491

 

 

 

61,559,963

 

Investments in unconsolidated entities (Note 9)

 

 

98,643,727

 

 

 

86,981,864

 

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

 

 

7,999,094

 

 

 

7,999,094

 

Other assets (Note 12)

 

 

5,238,370

 

 

 

5,062,351

 

Total Assets

 

$

977,516,262

 

 

$

1,029,168,508

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

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

 

$

9,465,120

 

 

$

9,036,167

 

Distribution payable

 

 

7,604,401

 

 

 

7,607,984

 

Unsecured lines of credit (Note 14)

 

 

12,540,000

 

 

 

13,200,000

 

Debt financing, net (Note 15)

 

 

500,385,429

 

 

 

536,197,421

 

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

 

 

26,689,992

 

 

 

26,802,246

 

Total Liabilities

 

 

556,684,942

 

 

 

592,843,818

 

 

 

 

 

 

 

 

 

 

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)

 

 

94,395,439

 

 

 

94,386,427

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital:

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

601,172

 

 

 

735,128

 

Beneficial Unit Certificates ("BUCs," Note 1)

 

 

325,834,709

 

 

 

341,203,135

 

Total Partnersʼ Capital

 

 

326,435,881

 

 

 

341,938,263

 

Total Liabilities and Partnersʼ Capital

 

$

977,516,262

 

 

$

1,029,168,508

 

 

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 March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Investment income

 

$

11,543,423

 

 

$

12,407,876

 

Property revenues

 

 

1,952,247

 

 

 

1,993,629

 

Contingent interest income

 

 

12,043

 

 

 

3,012,102

 

Other interest income

 

 

228,422

 

 

 

222,238

 

Other income

 

 

-

 

 

 

28,753

 

Total revenues

 

 

13,736,135

 

 

 

17,664,598

 

Expenses:

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

1,175,374

 

 

 

1,176,818

 

Provision for credit loss (Note 6)

 

 

1,357,681

 

 

 

-

 

Depreciation and amortization

 

 

709,438

 

 

 

820,808

 

Interest expense

 

 

6,017,968

 

 

 

6,394,920

 

General and administrative

 

 

2,898,526

 

 

 

2,778,591

 

Total expenses

 

 

12,158,987

 

 

 

11,171,137

 

Other Income:

 

 

 

 

 

 

 

 

Gain on sale of securities

 

 

1,416,023

 

 

 

-

 

Income before income taxes

 

 

2,993,171

 

 

 

6,493,461

 

Income tax expense

 

 

11,414

 

 

 

41,648

 

Net income

 

 

2,981,757

 

 

 

6,451,813

 

Redeemable Series A Preferred Unit distributions and accretion

 

 

(717,763

)

 

 

(717,763

)

Net income available to Partners

 

$

2,263,994

 

 

$

5,734,050

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to Partners allocated to:

 

 

 

 

 

 

 

 

General Partner

 

$

(53,404

)

 

$

780,245

 

Limited Partners - BUCs

 

 

2,312,216

 

 

 

4,920,644

 

Limited Partners - Restricted units

 

 

5,182

 

 

 

33,161

 

 

 

$

2,263,994

 

 

$

5,734,050

 

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

 

$

0.04

 

 

$

0.08

 

Weighted average number of BUCs outstanding, basic

 

 

60,754,179

 

 

 

60,426,177

 

Weighted average number of BUCs outstanding, diluted

 

 

60,754,179

 

 

 

60,426,177

 

 

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 (LOSS)

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

2,981,757

 

 

$

6,451,813

 

Reversal of net unrealized gains on sale of securities

 

 

(1,408,804

)

 

 

-

 

Reversal of net unrealized loss on securities to

  provision for credit loss

 

 

372,169

 

 

 

-

 

Unrealized gain (loss) on securities

 

 

(7,057,736

)

 

 

8,143,927

 

Comprehensive income (loss)

 

$

(5,112,614

)

 

$

14,595,740

 

 

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, 2019

 

$

735,128

 

 

 

60,835,204

 

 

$

341,203,135

 

 

$

341,938,263

 

 

$

99,308,677

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(80,501

)

 

 

-

 

 

 

(7,969,618

)

 

 

(8,050,119

)

 

 

-

 

Distribution of Tier 2 loss (income) (Note 3)

 

 

80,501

 

 

 

-

 

 

 

365,218

 

 

 

445,719

 

 

 

-

 

Net income allocable to Partners

 

 

(53,404

)

 

 

-

 

 

 

2,317,398

 

 

 

2,263,994

 

 

 

-

 

Repurchase of BUCs

 

 

-

 

 

 

(290,000

)

 

 

(2,106,673

)

 

 

(2,106,673

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

290,000

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted unit compensation expense

 

 

391

 

 

 

-

 

 

 

38,677

 

 

 

39,068

 

 

 

-

 

Unrealized loss on securities

 

 

(70,577

)

 

 

-

 

 

 

(6,987,159

)

 

 

(7,057,736

)

 

 

(7,057,736

)

Reversal of net unrealized gains on

   sale of securities

 

 

(14,088

)

 

 

-

 

 

 

(1,394,716

)

 

 

(1,408,804

)

 

 

(1,408,804

)

Reversal of net unrealized loss on securities to

  provision for credit loss

 

 

3,722

 

 

 

-

 

 

 

368,447

 

 

 

372,169

 

 

 

372,169

 

Balance as of March 31, 2020

 

$

601,172

 

 

$

60,835,204

 

 

$

325,834,709

 

 

$

326,435,881

 

 

$

91,214,306

 

 

 

 

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 13)

 

 

(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

 

 

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

 

 

7


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

2,981,757

 

 

$

6,451,813

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

709,438

 

 

 

820,808

 

Gain on sale of investment in securities

 

 

(1,416,023

)

 

 

-

 

Provision for credit loss

 

 

1,357,681

 

 

 

-

 

Contingent interest realized on investing activities

 

 

(12,043

)

 

 

(3,012,102

)

(Gain) loss on derivatives, net of cash paid

 

 

(25,201

)

 

 

353,127

 

Restricted unit compensation expense

 

 

39,068

 

 

 

184,184

 

Bond premium/discount amortization

 

 

(27,923

)

 

 

(52,456

)

Debt premium amortization

 

 

(10,111

)

 

 

-

 

Amortization of deferred financing costs

 

 

358,908

 

 

 

361,305

 

Deferred income tax expense & income tax payable/receivable

 

 

6,914

 

 

 

310,496

 

Change in preferred return receivable from unconsolidated entities, net

 

 

(1,391,572

)

 

 

(1,556,390

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Increase in interest receivable

 

 

(473,070

)

 

 

(663,475

)

(Increase) decrease in other assets

 

 

(105,961

)

 

 

722,938

 

Increase (decrease) in accounts payable and accrued expenses

 

 

352,242

 

 

 

(354,666

)

Net cash provided by operating activities

 

 

2,344,104

 

 

 

3,565,582

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(86,209

)

 

 

(54,337

)

Acquisition of mortgage revenue bonds

 

 

-

 

 

 

(6,050,000

)

Contributions to unconsolidated entities

 

 

(10,270,291

)

 

 

(6,594,286

)

Principal payments received on mortgage revenue bonds

 

 

4,470,529

 

 

 

6,831,237

 

Principal payments received on taxable mortgage revenue bonds

 

 

2,138

 

 

 

1,954

 

Proceeds from sale of PHC Certificates

 

 

43,349,357

 

 

 

-

 

Principal payments received on PHC Certificates

 

 

-

 

 

 

2,767,166

 

Principal payments received on property loans and contingent interest

 

 

12,043

 

 

 

11,379,737

 

Net cash provided by investing activities

 

 

37,477,567

 

 

 

8,281,471

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Distributions paid

 

 

(8,316,733

)

 

 

(8,284,917

)

Repurchase of BUCs

 

 

(2,106,673

)

 

 

-

 

Proceeds from debt financing

 

 

-

 

 

 

5,263,500

 

Principal payments on debt financing

 

 

(36,013,217

)

 

 

(2,976,289

)

Principal payments on mortgages payable

 

 

(120,958

)

 

 

(104,685

)

Principal payments on unsecured lines of credit

 

 

(660,000

)

 

 

-

 

Decrease in security deposit liability related to restricted cash

 

 

(30,549

)

 

 

(10,455

)

Debt financing and other deferred costs

 

 

(720

)

 

 

-

 

Net cash used in financing activities

 

 

(47,248,850

)

 

 

(6,112,846

)

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

 

 

(7,427,179

)

 

 

5,734,207

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

43,185,981

 

 

 

33,268,611

 

Cash, cash equivalents and restricted cash at end of period

 

$

35,758,802

 

 

$

39,002,818

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

4,880,193

 

 

$

5,514,997

 

Cash paid during the period for income taxes

 

 

4,500

 

 

 

-

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Distributions declared but not paid for BUCs and General Partner

 

$

7,604,401

 

 

$

8,393,271

 

Distributions declared but not paid for Series A Preferred Units

 

 

708,750

 

 

 

708,750

 

Capital expenditures financed through accounts payable

 

 

3,959

 

 

 

850

 

Deferred financing costs financed through accounts payable

 

 

103,300

 

 

 

4,843

 

 

 

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

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Cash and cash equivalents

 

$

35,158,156

 

 

$

38,210,497

 

Restricted cash

 

 

600,646

 

 

 

792,321

 

Total cash, cash equivalents and restricted cash

 

$

35,758,802

 

 

$

39,002,818

 

 

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

 

 

8


 

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 have been issued to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. The Partnership expects and believes the interest earned on these MRBs is excludable from gross income for federal income tax purposes.  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, student and senior citizen 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 sole 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”), a wholly owned subsidiary of Greystone & Co., Inc. (collectively with its affiliates, “Greystone”).  

The Partnership has issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partner interests to investors (“BUC holders”). The Partnership has also issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) that represent limited interests in the Partnership under the Partnership’s First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as further amended (the “Partnership Agreement”). The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership pursuant to subscription agreements with five financial institutions (see Note 19). 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.  The consolidated subsidiaries of the Partnership for the periods presented 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, a real estate asset, and certain property loans; and

 

The Suites on Paseo MF Property, a real estate asset, is owned directly by the Partnership.

The Partnership also consolidates variable interest entities (“VIEs”) in which the Partnership is deemed to be the primary beneficiary.

9


 

Impairment of Mortgage Revenue Bonds

The Partnership periodically reviews its MRBs for impairment.  The Partnership evaluates whether unrealized losses are considered other-than-temporary impairments based on various factors including:

 

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;

 

Adverse conditions specifically related to the security, its collateral, or both;

 

Volatility of the fair value of the security;

 

The likelihood of the borrower being able to make payments;

 

Failure of the issuer to make scheduled interest or principal payments; and

 

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost.

If a MRB’s estimated fair value is below amortized cost, and the Partnership has the intent to sell or may be required to sell the MRB prior to the time that its value recovers or until maturity, the Partnership will record an other-than-temporary impairment through earnings equal to the difference between the MRB’s carrying value and its fair value, and will establish an allowance for credit loss. If the Partnership does not expect to sell an other-than-temporarily impaired MRB, only the portion of the other-than-temporary impairment related to credit losses is recognized through earnings as a provision for credit loss, with the remainder recognized as a component of other comprehensive income (loss).  In determining the provision for credit loss, the Partnership compares the present value of cash flows expected to be collected to the MRB’s amortized cost basis.

The recognition of other-than-temporary impairment, provision for credit loss, and the potential impairment analysis are subject to a considerable degree of judgment, the results of which, when applied under different conditions or assumptions, could have a material impact on the Partnership’s condensed consolidated financial statements. If the Partnership experiences deterioration in the values of its MRB portfolio, the Partnership may incur other-than-temporary impairments or provision for credit losses that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings. During the three months ended March 31, 2020, there was a provision for credit loss reported by the Partnership related to one MRB (see Note 6).  There were no other-than-temporary impairment charges or provision for credit loss reported during the three months ended March 31, 2019.

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 Partnership’s 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, 2019. These condensed consolidated financial statements and notes have been prepared consistently with the 2019 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the Partnership’s financial position as of March 31, 2020, 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, 2019 was derived from the audited annual consolidated financial statements but does not contain all the footnote disclosures from the annual consolidated financial statements.

 

10


 

A novel strain of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China in December 2019, and has since spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 outbreak is disrupting supply chains and affecting production, sales and employment across a range of industries. The extent of the impact of COVID-19 on the Partnership’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the impact on the underlying borrowers of MRBs, tenants at the MF Properties and operations of the Partnership’s investments in unconsolidated entities, all of which are uncertain and cannot be predicted at this time. In addition, market volatility may cause fluctuations in the valuation of the Partnerships’ MRBs, taxable MRBs, MF Properties and investments in unconsolidated entities. The extent to which COVID-19 will impact the Partnership’s financial condition or results of operations is uncertain.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326).”  ASU 2016-13 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.  ASU 2016-13 also includes changes to the impairment model for available-for-sale debt securities, such as the Partnership’s MRBs and taxable MRBs.  In November 2019, the FASB issued ASU 2019-10 which amended the mandatory effective dates of certain ASUs, including ASU 2016-13, based on an entity’s filing status.  As a smaller reporting company, the Partnership’s mandatory effective date for ASU 2016-13 is now January 1, 2023, and the Partnership has elected to defer adoption until that date.  The delay in implementing ASU 2016-13 will allow the Partnership to take advantage of any additional guidance that may come out from the FASB on implementing ASU 2016-13. The effective date may be sooner if the Partnership becomes an accelerated filer in the future. Prior to the issuance of ASU 2019-10, the Partnership had completed an initial assessment of the items that are within the scope of ASU 2016-13. Furthermore, the Partnership began developing data collection processes, assessment procedures and internal controls required to implement ASU 2016-13. The Partnership will continue to develop data collection processes, assessment procedures and internal controls that will be required when it does implement ASU 2016-13, and to evaluate the impact on the Partnership’s consolidated financial statements.

 

 

3. Partnership Income, Expenses and Cash Distributions  

The Partnership Agreement 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.

For purposes of the Partnership Agreement, income and cash received by the Partnership from its investments in MF Properties, investments in unconsolidated entities, and property loans will be included in the Partnership’s Net Interest Income, and cash distributions received by the Partnership from the sale or redemption of such investments will be included in the Partnership’s Net Residual Proceeds.  

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 Partnership 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 “2015 Plan”) are considered participating securities. There were no dilutive BUCs for the three months ended March 31, 2020 and 2019.

 

11


 

5. Variable Interest Entities

Consolidated Variable Interest Entities (“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 its 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 the 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 related to the TOB Financings, and the Class A Certificates related to the Term TOB, Term A/B 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, and the PHCs secured by the TOB 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 17 non-consolidated VIEs as of March 31, 2020 and December 31, 2019. The following table summarizes the Partnership’s variable interests in these entities as of March 31, 2020 and December 31, 2019:

 

 

 

Maximum Exposure to Loss

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Mortgage revenue bonds

 

$

24,647,000

 

 

$

30,455,000

 

Investment in unconsolidated entities

 

 

98,643,727

 

 

 

86,981,864

 

 

 

$

123,290,727

 

 

$

117,436,864

 

 

The maximum exposure to loss for the MRBs 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 for investments in unconsolidated entities is equal to the Partnership’s carrying value.

 

12


 

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 March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns and

Allowances

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A (5)

 

CA

 

$

10,126,458

 

 

$

1,428,563

 

 

$

-

 

 

$

11,555,021

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,521,529

 

 

 

687,871

 

 

 

-

 

 

 

5,209,400

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,692,247

 

 

 

487,054

 

 

 

-

 

 

 

4,179,301

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,834,955

 

 

 

1,002,038

 

 

 

-

 

 

 

7,836,993

 

Harden Ranch - Series A (3)

 

CA

 

 

6,681,530

 

 

 

1,094,025

 

 

 

-

 

 

 

7,775,555

 

Las Palmas II - Series A (5)

 

CA

 

 

1,675,475

 

 

 

234,810

 

 

 

-

 

 

 

1,910,285

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,449,565

 

 

 

415,776

 

 

 

-

 

 

 

2,865,341

 

Montecito at Williams Ranch Apartments - Series A (7)

 

CA

 

 

7,667,712

 

 

 

1,457,424

 

 

 

-

 

 

 

9,125,136

 

San Vicente - Series A (5)

 

CA

 

 

3,454,740

 

 

 

452,745

 

 

 

-

 

 

 

3,907,485

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

2,967,556

 

 

 

503,697

 

 

 

-

 

 

 

3,471,253

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,271,321

 

 

 

818,274

 

 

 

-

 

 

 

5,089,595

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,280,713

 

 

 

999,919

 

 

 

-

 

 

 

8,280,632

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,258,343

 

 

 

1,683,537

 

 

 

-

 

 

 

13,941,880

 

Summerhill - Series A (5)

 

CA

 

 

6,357,990

 

 

 

809,791

 

 

 

-

 

 

 

7,167,781

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,548,939

 

 

 

527,404

 

 

 

-

 

 

 

4,076,343

 

The Village at Madera - Series A (5)

 

CA

 

 

3,053,775

 

 

 

402,832

 

 

 

-

 

 

 

3,456,607

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,820,554

 

 

 

685,637

 

 

 

-

 

 

 

6,506,191

 

Vineyard Gardens - Series A (7)

 

CA

 

 

3,990,400

 

 

 

751,127

 

 

 

-

 

 

 

4,741,527

 

Westside Village Market - Series A (3)

 

CA

 

 

3,803,721

 

 

 

590,032

 

 

 

-

 

 

 

4,393,753

 

Brookstone (1)

 

IL

 

 

7,399,317

 

 

 

1,923,740

 

 

 

-

 

 

 

9,323,057

 

Copper Gate Apartments (3)

 

IN

 

 

5,005,000

 

 

 

565,018

 

 

 

-

 

 

 

5,570,018

 

Renaissance - Series A (4)

 

LA

 

 

10,969,168

 

 

 

1,774,107

 

 

 

-

 

 

 

12,743,275

 

Live 929 Apartments (7), (8)

 

MD

 

 

39,907,484

 

 

 

-

 

 

 

(403,464

)

 

 

39,504,020

 

Woodlynn Village (1)

 

MN

 

 

4,172,000

 

 

 

10,156

 

 

 

-

 

 

 

4,182,156

 

Gateway Village (2)

 

NC

 

 

2,600,000

 

 

 

431,554

 

 

 

-

 

 

 

3,031,554

 

Greens Property - Series A (3)

 

NC

 

 

7,910,000

 

 

 

702,514

 

 

 

-

 

 

 

8,612,514

 

Lynnhaven Apartments (2)

 

NC

 

 

3,450,000

 

 

 

462,437

 

 

 

-

 

 

 

3,912,437

 

Silver Moon - Series A (4)

 

NM

 

 

7,746,418

 

 

 

1,311,816

 

 

 

-

 

 

 

9,058,234

 

Village at Avalon - Series A (6)

 

NM

 

 

16,274,407

 

 

 

3,132,378

 

 

 

-

 

 

 

19,406,785

 

Ohio Properties - Series A (1)

 

OH

 

 

13,823,998

 

 

 

46,555

 

 

 

-

 

 

 

13,870,553

 

Bridle Ridge (1)

 

SC

 

 

7,275,000

 

 

 

54,595

 

 

 

-

 

 

 

7,329,595

 

Columbia Gardens (5)

 

SC

 

 

13,023,898

 

 

 

1,930,568

 

 

 

-

 

 

 

14,954,466

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,148,397

 

 

 

1,421,140

 

 

 

-

 

 

 

12,569,537

 

Cross Creek (1)

 

SC

 

 

6,142,795

 

 

 

2,367,804

 

 

 

-

 

 

 

8,510,599

 

Rosewood Townhomes - Series A (7)

 

SC

 

 

9,280,000

 

 

 

936,317

 

 

 

-

 

 

 

10,216,317

 

South Pointe Apartments - Series A (7)

 

SC

 

 

21,600,000

 

 

 

2,076,089

 

 

 

-

 

 

 

23,676,089

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

18,784,904

 

 

 

2,222,099

 

 

 

-

 

 

 

21,007,003

 

Village at River's Edge (5)

 

SC

 

 

9,855,232

 

 

 

2,001,464

 

 

 

-

 

 

 

11,856,696

 

Willow Run (5)

 

SC

 

 

12,843,514

 

 

 

1,812,321

 

 

 

-

 

 

 

14,655,835

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,021,094

 

 

 

1,708,507

 

 

 

-

 

 

 

12,729,601

 

Pro Nova 2014-1 (2)

 

TN

 

 

8,663,406

 

 

 

-

 

 

 

-

 

 

 

8,663,406

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

13,913,910

 

 

 

2,010,421

 

 

 

-

 

 

 

15,924,331

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,224,980

 

 

 

1,605,894

 

 

 

-

 

 

 

10,830,874

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,454,400

 

 

 

1,275,316

 

 

 

-

 

 

 

8,729,716

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

12,821,526

 

 

 

1,870,208

 

 

 

-

 

 

 

14,691,734

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

5,273,090

 

 

 

679,531

 

 

 

-

 

 

 

5,952,621

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

40,038,454

 

 

 

5,315,077

 

 

 

-

 

 

 

45,353,531

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,436,585

 

 

 

1,101,186

 

 

 

-

 

 

 

7,537,771

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,715,747

 

 

 

2,470,949

 

 

 

-

 

 

 

18,186,696

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,103,450

 

 

 

895,447

 

 

 

-

 

 

 

5,998,897

 

Bruton Apartments (5)

 

TX

 

 

17,775,126

 

 

 

3,083,030

 

 

 

-

 

 

 

20,858,156

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

18,932,033

 

 

 

3,412,592

 

 

 

-

 

 

 

22,344,625

 

Concord at Little York - Series A (5)

 

TX

 

 

13,262,784

 

 

 

2,508,285

 

 

 

-

 

 

 

15,771,069

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,545,474

 

 

 

3,794,305

 

 

 

-

 

 

 

24,339,779

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,387,421

 

 

 

1,146,538

 

 

 

-

 

 

 

8,533,959

 

Decatur Angle (5)

 

TX

 

 

22,410,500

 

 

 

3,592,948

 

 

 

-

 

 

 

26,003,448

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,323,071

 

 

 

4,046,705

 

 

 

-

 

 

 

23,369,776

 

Heights at 515 - Series A (5)

 

TX

 

 

6,763,311

 

 

 

1,077,559

 

 

 

-

 

 

 

7,840,870

 

Heritage Square - Series A (4)

 

TX

 

 

10,666,690

 

 

 

1,327,878

 

 

 

-

 

 

 

11,994,568

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,213,767

 

 

 

1,337,957

 

 

 

-

 

 

 

13,551,724

 

Runnymede (1)

 

TX

 

 

9,925,000

 

 

 

157,344

 

 

 

-

 

 

 

10,082,344

 

Southpark (1)

 

TX

 

 

11,566,796

 

 

 

2,124,260

 

 

 

-

 

 

 

13,691,056

 

15 West Apartments (5)

 

WA

 

 

9,656,406

 

 

 

2,128,059

 

 

 

-

 

 

 

11,784,465

 

Mortgage revenue bonds held in trust

 

 

 

$

645,764,076

 

 

$

88,885,224

 

 

$

(403,464

)

 

$

734,245,836

 

 

(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

13


 

(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

(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.

 

 

 

March 31, 2020

 

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

 

 

$

1,629,097

 

 

$

-

 

 

$

14,829,097

 

Solano Vista - Series A

 

CA

 

 

2,665,000

 

 

 

624,588

 

 

 

-

 

 

 

3,289,588

 

Greens Property - Series B

 

NC

 

 

928,962

 

 

 

122,356

 

 

 

-

 

 

 

1,051,318

 

Ohio Properties - Series B

 

OH

 

 

3,499,720

 

 

 

9,812

 

 

 

-

 

 

 

3,509,532

 

Rosewood Townhomes - Series B

 

SC

 

 

470,000

 

 

 

1,935

 

 

 

-

 

 

 

471,935

 

South Pointe Apartments - Series B

 

SC

 

 

1,100,000

 

 

 

3,962

 

 

 

-

 

 

 

1,103,962

 

Avistar at the Crest - Series B

 

TX

 

 

739,691

 

 

 

90,911

 

 

 

-

 

 

 

830,602

 

Avistar at the Oaks - Series B

 

TX

 

 

541,337

 

 

 

62,305

 

 

 

-

 

 

 

603,642

 

Avistar at the Parkway - Series B

 

TX

 

 

124,225

 

 

 

35,847

 

 

 

-

 

 

 

160,072

 

Avistar in 09 - Series B

 

TX

 

 

446,554

 

 

 

51,396

 

 

 

-

 

 

 

497,950

 

Avistar on the Boulevard - Series B

 

TX

 

 

439,527

 

 

 

49,214

 

 

 

-

 

 

 

488,741

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

24,155,016

 

 

$

2,681,423

 

 

$

-

 

 

$

26,836,439

 

 

14


 

 

 

 

December 31, 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

 

$

10,147,686

 

 

$

1,602,534

 

 

$

-

 

 

$

11,750,220

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,533,958

 

 

 

757,900

 

 

 

-

 

 

 

5,291,858

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,699,987

 

 

 

549,211

 

 

 

-

 

 

 

4,249,198

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,849,214

 

 

 

1,121,262

 

 

 

-

 

 

 

7,970,476

 

Harden Ranch - Series A (3)

 

CA

 

 

6,700,868

 

 

 

1,281,980

 

 

 

-

 

 

 

7,982,848

 

Las Palmas II - Series A (5)

 

CA

 

 

1,679,022

 

 

 

263,441

 

 

 

-

 

 

 

1,942,463

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,456,298

 

 

 

446,558

 

 

 

-

 

 

 

2,902,856

 

Montecito at Williams Ranch Apartments - Series A (7)

 

CA

 

 

7,681,146

 

 

 

1,580,303

 

 

 

-

 

 

 

9,261,449

 

San Vicente - Series A (5)

 

CA

 

 

3,462,053

 

 

 

510,593

 

 

 

-

 

 

 

3,972,646

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

2,975,713

 

 

 

540,988

 

 

 

-

 

 

 

3,516,701

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,282,477

 

 

 

860,856

 

 

 

-

 

 

 

5,143,333

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,295,901

 

 

 

1,124,372

 

 

 

-

 

 

 

8,420,273

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,283,916

 

 

 

1,893,075

 

 

 

-

 

 

 

14,176,991

 

Summerhill - Series A (5)

 

CA

 

 

6,371,318

 

 

 

797,228

 

 

 

-

 

 

 

7,168,546

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,559,011

 

 

 

567,713

 

 

 

-

 

 

 

4,126,724

 

The Village at Madera - Series A (5)

 

CA

 

 

3,060,177

 

 

 

454,240

 

 

 

-

 

 

 

3,514,417

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,837,595

 

 

 

864,894

 

 

 

-

 

 

 

6,702,489

 

Vineyard Gardens - Series A (7)

 

CA

 

 

3,995,000

 

 

 

815,213

 

 

 

-

 

 

 

4,810,213

 

Westside Village Market - Series A (3)

 

CA

 

 

3,814,857

 

 

 

594,361

 

 

 

-

 

 

 

4,409,218

 

Brookstone (1)

 

IL

 

 

7,406,755

 

 

 

2,194,994

 

 

 

-

 

 

 

9,601,749

 

Copper Gate Apartments (3)

 

IN

 

 

5,005,000

 

 

 

682,497

 

 

 

-

 

 

 

5,687,497

 

Renaissance - Series A (4)

 

LA

 

 

11,001,027

 

 

 

1,775,086

 

 

 

-

 

 

 

12,776,113

 

Live 929 Apartments (7), (8)

 

MD

 

 

39,984,026

 

 

 

-

 

 

 

(280,711

)

 

 

39,703,315

 

Woodlynn Village (1)

 

MN

 

 

4,172,000

 

 

 

44,510

 

 

 

-

 

 

 

4,216,510

 

Gateway Village (2)

 

NC

 

 

2,600,000

 

 

 

509,901

 

 

 

-

 

 

 

3,109,901

 

Greens Property - Series A (3)

 

NC

 

 

7,936,000

 

 

 

845,678

 

 

 

-

 

 

 

8,781,678

 

Lynnhaven Apartments (2)

 

NC

 

 

3,450,000

 

 

 

393,686

 

 

 

-

 

 

 

3,843,686

 

Silver Moon - Series A (4)

 

NM

 

 

7,762,116

 

 

 

1,166,748

 

 

 

-

 

 

 

8,928,864

 

Village at Avalon - Series A (6)

 

NM

 

 

16,302,038

 

 

 

3,131,843

 

 

 

-

 

 

 

19,433,881

 

Ohio Properties - Series A (1)

 

OH

 

 

13,857,000

 

 

 

48,813

 

 

 

-

 

 

 

13,905,813

 

Bridle Ridge (1)

 

SC

 

 

7,315,000

 

 

 

113,469

 

 

 

-

 

 

 

7,428,469

 

Columbia Gardens (5)

 

SC

 

 

13,064,589

 

 

 

2,179,744

 

 

 

-

 

 

 

15,244,333

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,178,557

 

 

 

1,709,040

 

 

 

-

 

 

 

12,887,597

 

Cross Creek (1)

 

SC

 

 

6,143,976

 

 

 

2,507,072

 

 

 

-

 

 

 

8,651,048

 

Rosewood Townhomes - Series A (7)

 

SC

 

 

9,280,000

 

 

 

316,916

 

 

 

-

 

 

 

9,596,916

 

South Pointe Apartments - Series A (7)

 

SC

 

 

21,600,000

 

 

 

835,005

 

 

 

-

 

 

 

22,435,005

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

18,838,478

 

 

 

2,799,411

 

 

 

-

 

 

 

21,637,889

 

Village at River's Edge (5)

 

SC

 

 

9,872,297

 

 

 

2,236,259

 

 

 

-

 

 

 

12,108,556

 

Willow Run (5)

 

SC

 

 

12,884,191

 

 

 

2,100,598

 

 

 

-

 

 

 

14,984,789

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,056,825

 

 

 

1,934,146

 

 

 

-

 

 

 

12,990,971

 

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

 

TN

 

 

10,022,352

 

 

 

-

 

 

 

(372,169

)

 

 

9,650,183

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

13,945,681

 

 

 

2,356,231

 

 

 

-

 

 

 

16,301,912

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,252,257

 

 

 

1,715,456

 

 

 

-

 

 

 

10,967,713

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,475,794

 

 

 

1,336,580

 

 

 

-

 

 

 

8,812,374

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

12,854,039

 

 

 

2,065,468

 

 

 

-

 

 

 

14,919,507

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

5,285,131

 

 

 

806,523

 

 

 

-

 

 

 

6,091,654

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

40,129,878

 

 

 

6,450,704

 

 

 

-

 

 

 

46,580,582

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,455,058

 

 

 

1,125,239

 

 

 

-

 

 

 

7,580,297

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,762,217

 

 

 

2,648,781

 

 

 

-

 

 

 

18,410,998

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,118,097

 

 

 

938,032

 

 

 

-

 

 

 

6,056,129

 

Bruton Apartments (5)

 

TX

 

 

17,807,768

 

 

 

3,534,702

 

 

 

-

 

 

 

21,342,470

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

18,975,786

 

 

 

3,572,995

 

 

 

-

 

 

 

22,548,781

 

Concord at Little York - Series A (5)

 

TX

 

 

13,293,436

 

 

 

2,624,054

 

 

 

-

 

 

 

15,917,490

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,592,957

 

 

 

3,971,001

 

 

 

-

 

 

 

24,563,958

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,405,406

 

 

 

1,229,438

 

 

 

-

 

 

 

8,634,844

 

Decatur Angle (5)

 

TX

 

 

22,455,747

 

 

 

4,198,200

 

 

 

-

 

 

 

26,653,947

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,356,959

 

 

 

4,111,518

 

 

 

-

 

 

 

23,468,477

 

Heights at 515 - Series A (5)

 

TX

 

 

6,779,777

 

 

 

1,154,387

 

 

 

-

 

 

 

7,934,164

 

Heritage Square - Series A (4)

 

TX

 

 

10,695,037

 

 

 

1,455,672

 

 

 

-

 

 

 

12,150,709

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,239,247

 

 

 

1,645,817

 

 

 

-

 

 

 

13,885,064

 

Runnymede (1)

 

TX

 

 

9,925,000

 

 

 

80,343

 

 

 

-

 

 

 

10,005,343

 

Southpark (1)

 

TX

 

 

11,548,337

 

 

 

2,334,262

 

 

 

-

 

 

 

13,882,599

 

15 West Apartments (5)

 

WA

 

 

9,673,117

 

 

 

2,287,904

 

 

 

-

 

 

 

11,961,021

 

Mortgage revenue bonds held in trust

 

 

 

$

648,445,150

 

 

$

95,795,445

 

 

$

(652,880

)

 

$

743,587,715

 

 

(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, see Note 15

(7)

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

(8)

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

 

 

 

 

 

December 31, 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

 

 

$

1,654,870

 

 

$

-

 

 

$

14,854,870

 

Solano Vista - Series A & B

 

CA

 

 

5,768,000

 

 

 

625,235

 

 

 

-

 

 

 

6,393,235

 

Greens Property - Series B

 

NC

 

 

930,016

 

 

 

142,265

 

 

 

-

 

 

 

1,072,281

 

Ohio Properties - Series B

 

OH

 

 

3,504,171

 

 

 

10,363

 

 

 

-

 

 

 

3,514,534

 

Rosewood Townhomes - Series B

 

SC

 

 

470,000

 

 

 

1,685

 

 

 

-

 

 

 

471,685

 

South Pointe Apartments - Series B

 

SC

 

 

1,100,000

 

 

 

2,952

 

 

 

-

 

 

 

1,102,952

 

Avistar at the Crest - Series B

 

TX

 

 

740,876

 

 

 

94,819

 

 

 

-

 

 

 

835,695

 

Avistar at the Oaks - Series B

 

TX

 

 

542,170

 

 

 

65,455

 

 

 

-

 

 

 

607,625

 

Avistar at the Parkway - Series B

 

TX

 

 

124,305

 

 

 

38,045

 

 

 

-

 

 

 

162,350

 

Avistar in 09 - Series B

 

TX

 

 

447,241

 

 

 

53,995

 

 

 

-

 

 

 

501,236

 

Avistar on the Boulevard - Series B

 

TX

 

 

440,231

 

 

 

53,056

 

 

 

-

 

 

 

493,287

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

27,267,010

 

 

$

2,742,740

 

 

$

-

 

 

$

30,009,750

 

 

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.

 

During the three months ended March 31, 2020, the Partnership recognized a $1.4 million provision for credit loss related to the Pro Nova 2014-1 MRB in its condensed consolidated statements of operations. See Note 2 for information considered in the Partnership’s evaluation of other-than-temporary impairment and credit loss of the MRBs. The credit loss related to the Pro Nova 2014-1 MRB was primarily driven by debt service shortfalls by the underlying commercial property. The Partnership’s total allowance for credit loss on MRBs was $1.4 million and zero as of March 31, 2020 and December 31, 2019, respectively.   

 

The cumulative unrealized loss for the Live 929 Apartments MRB as of March 31, 2020, is due to recent operational results and a decline in debt service coverage. The Partnership has evaluated the operational results and loan-to-collateral value ratio for the property underlying this MRB and believes that the cumulative unrealized loss is temporary.

MRB Activity in the First Three Months of 2020

 

Acquisitions:

 

There were no MRBs acquired during the three months ended March 31, 2020.

 

Redemptions:

 

The following MRB was redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the three months ended March 31, 2020:

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Solano Vista - Series B

 

January

 

Vallejo, CA

 

 

96

 

 

1/1/2021

 

 

5.85

%

 

$

3,103,000

 

 

 

 

16


 

MRB Activity in the First Three Months of 2019

 

Acquisitions:

 

The following MRBs were acquired during the three months ended March 31, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

6,050,000

 

 

Redemptions:

 

The following MRB was redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the three months ended March 31, 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

 

 

 

 

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

The Partnership’s PHC Certificates represented beneficial interests in three PHC Trusts that consisted of custodial receipts evidencing loans made to numerous local public housing authorities.  Principal and interest on these loans were 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”).  

On January 30, 2020, the Partnership sold its PHC Certificates to an unrelated party for approximately $43.3 million, plus accrued interest, recognizing a gain on sale of securities of approximately $1.4 million.  The PHC Certificates were held in trust at Mizuho Capital Markets, LLC (“Mizuho”) in secured TOB Trust financing transactions, which upon sale, were collapsed and all principal and interest were paid off in full (see Note 15).

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

 

 

 

 

December 31, 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

 

5.47

 

AA-

 

5.33%

 

 

$

24,477,478

 

 

$

435,659

 

 

$

-

 

 

$

24,913,137

 

PHC Certificate Trust II

 

4.58

 

AA-

 

4.41%

 

 

 

4,375,296

 

 

 

386,433

 

 

 

-

 

 

 

4,761,729

 

PHC Certificate Trust III

 

5.43

 

BBB

 

5.12%

 

 

 

13,087,779

 

 

 

586,712

 

 

 

-

 

 

 

13,674,491

 

 

 

 

 

 

 

 

 

 

 

$

41,940,553

 

 

$

1,408,804

 

 

$

-

 

 

$

43,349,357

 

 

See Note 22 for a description of the methodology and significant assumptions that were used for determining the fair value of the PHC Certificates. Unrealized gains or losses on the PHC Certificates were 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.

 

17


 

8. Real Estate Assets

The following tables summarize information regarding the Partnership’s real estate assets as of March 31, 2020 and December 31, 2019:

 

Real Estate Assets as of March 31, 2020

 

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

 

 

$

39,113,918

 

 

$

42,313,186

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,938,822

 

 

 

32,938,822

 

Land held for development

 

 

 

(1)

 

 

 

1,701,197

 

 

 

-

 

 

 

1,701,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,953,205

 

Less accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,064,714

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

60,888,491

 

 

(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, 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

 

 

$

39,073,728

 

 

$

42,272,996

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,937,805

 

 

 

32,937,805

 

Land held for development

 

 

 

(2)

 

 

 

1,706,862

 

 

 

-

 

 

 

1,706,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,917,663

 

Less accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,357,700

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

61,559,963

 

 

(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 Three Months of 2020

As of March 31, 2020, the land held for development in Gardner, KS was listed for sale.

 

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 for a period of time ranging from two to three years after 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.

 

18


 

The following table provides the details of the investments in unconsolidated entities as of March 31, 2020 and December 31, 2019 and remaining equity commitment amounts as of March 31, 2020:

 

Property Name

 

Location

 

Units

 

 

Month

Commitment

Executed

 

Construction

Completion

Date

 

Carrying Value as of March 31, 2020

 

 

Carrying Value as of December 31, 2019

 

 

Maximum

Remaining

Equity Commitment as of March 31, 2020

 

Vantage at Waco

 

Waco, TX

 

 

288

 

 

August 2016

 

May 2018

 

$

9,337,166

 

 

$

9,337,166

 

 

$

1,592,039

 

Vantage at Powdersville

 

Powdersville, SC

 

 

288

 

 

November 2017

 

February 2020

 

 

12,295,801

 

 

 

12,295,801

 

 

 

-

 

Vantage at Stone Creek

 

Omaha, NE

 

 

294

 

 

March 2018

 

N/A

 

 

7,840,500

 

 

 

7,840,500

 

 

 

-

 

Vantage at Bulverde

 

Bulverde, TX

 

 

288

 

 

March 2018

 

August 2019

 

 

10,399,773

 

 

 

10,144,052

 

 

 

-

 

Vantage at Germantown

 

Germantown, TN

 

 

288

 

 

June 2018

 

March 2020

 

 

12,041,237

 

 

 

11,745,155

 

 

 

-

 

Vantage at Murfreesboro

 

Murfreesboro, TN

 

 

288

 

 

September 2018

 

N/A

 

 

13,857,159

 

 

 

13,516,425

 

 

 

-

 

Vantage at Coventry

 

Omaha, NE

 

 

288

 

 

September 2018

 

N/A

 

 

9,007,435

 

 

 

9,007,435

 

 

 

-

 

Vantage at Conroe

 

Conroe, TX

 

 

288

 

 

April 2019

 

N/A

 

 

9,657,930

 

 

 

8,078,519

 

 

 

-

 

Vantage at O'Connor

 

San Antonio, TX

 

 

288

 

 

October 2019

 

N/A

 

 

7,652,449

 

 

 

5,016,811

 

 

 

-

 

Vantage at Westover Hills

 

San Antonio, TX

 

 

288

 

 

January 2020

 

N/A

 

 

6,554,277

 

 

 

-

 

 

 

893,417

 

 

 

 

 

 

2,886

 

 

 

 

 

 

$

98,643,727

 

 

$

86,981,864

 

 

$

2,485,456

 

 

Activity in the First Three Months of 2020

In January 2020, the Partnership executed a $7.3 million equity commitment to fund construction of the Vantage at Westover Hills multifamily property.

 

The following table provides combined summary financial information for the Partnership’s investments in unconsolidated entities for the three months ended March 31, 2020 and 2019:

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Property Revenues

 

$

2,483,605

 

 

$

2,717,268

 

Net loss

 

$

(2,519,165

)

 

$

(117,063

)

 

10. Property Loans, Net of Loan Loss Allowances

The following tables summarize the Partnership’s property loans, net of loan loss allowances, as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

 

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

 

Live 929 Apartments

 

 

405,717

 

 

 

-

 

 

 

405,717

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Total

 

$

15,392,908

 

 

$

(7,393,814

)

 

$

7,999,094

 

19


 

 

 

 

December 31, 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

 

Live 929 Apartments

 

 

405,717

 

 

 

-

 

 

 

405,717

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Total

 

$

15,392,908

 

 

$

(7,393,814

)

 

$

7,999,094

 

 

 

During the three months ended March 31, 2020 and 2019, 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 months ended March 31, 2020 and 2019, interest to be earned on approximately $983,000 of property loan principal for the Ohio Properties was in nonaccrual status as, in management’s opinion, the interest was not considered collectible. For the three months ended March 31, 2020, the outstanding property loan balance for Live 929 was in nonaccrual status as, in management’s opinion, the interest was not considered collectible.

 

Activity in the First Three Months of 2019

 

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 reported within “Contingent interest income” 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).

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 months ended March 31, 2020 and 2019:

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Current income tax expense

 

$

42,335

 

 

$

82,340

 

Deferred income tax benefit

 

 

(30,921

)

 

 

(40,692

)

Total income tax expense

 

$

11,414

 

 

$

41,648

 

 

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 March 31, 2020 and December 31, 2019.

 

12. Other Assets

The following table summarizes the other assets as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Deferred financing costs, net

 

$

319,014

 

 

$

353,862

 

Fair value of derivative instruments (Note 17)

 

 

36,112

 

 

 

10,911

 

Taxable mortgage revenue bonds, at fair value

 

 

1,417,654

 

 

 

1,383,237

 

Operating lease right-of-use assets, net

 

 

1,665,257

 

 

 

1,673,242

 

Other assets

 

 

1,800,333

 

 

 

1,641,099

 

Total other assets

 

$

5,238,370

 

 

$

5,062,351

 

 

As of March 31, 2020 and December 31, 2019, the operating lease right-of-use assets consisted primarily of a ground lease at the 50/50 MF Property (see Note 13).  

20


 

 

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 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 assets.

 

13. Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the accounts payable, accrued expenses and other liabilities as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Accounts payable

 

$

322,788

 

 

$

93,834

 

Accrued expenses

 

 

1,917,172

 

 

 

2,529,982

 

Accrued interest expense

 

 

3,494,144

 

 

 

2,690,076

 

Operating lease liabilities

 

 

2,150,827

 

 

 

2,138,783

 

Other liabilities

 

 

1,580,189

 

 

 

1,583,492

 

Total accounts payable, accrued expenses and other liabilities

 

$

9,465,120

 

 

$

9,036,167

 

 

 

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 Partnership’s condensed consolidated financial statements dated prior to the effective date related to the adoption of ASC 842.

 

The 50/50 MF Property has a ground lease with the University of Nebraska-Lincoln with an initial lease term expiring in March 2048. 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 March 31, 2020, 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 for the three months ended March 31, 2020 and 2019 and are reported 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 as of March 31, 2020:

 

Remainder of 2020

 

$

112,686

 

2021

 

 

136,366

 

2022

 

 

139,091

 

2023

 

 

141,871

 

2024

 

 

144,706

 

Thereafter

 

 

4,517,274

 

Total

 

 

5,191,994

 

Less:  Amount representing interest

 

 

(3,041,167

)

Total operating lease liabilities

 

$

2,150,827

 

 

14. Unsecured Lines of Credit

The following tables summarize the unsecured lines of credit (“LOC”) as of March 31, 2020 and December 31, 2019:

 

Unsecured Lines of Credit

 

Outstanding as of March 31, 2020

 

 

Total

Commitment

 

 

Commitment

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

12,540,000

 

 

$

50,000,000

 

 

June 2021

 

Variable (1)

 

Monthly

 

 

3.86

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2021

 

Variable (1)

 

Monthly

 

 

4.61

%

Total unsecured lines of credit

 

$

12,540,000

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

21


 

 

(1)

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

 

Unsecured Lines of Credit

 

Outstanding as of December 31, 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 (2)

 

Monthly

 

 

4.19

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2021

 

Variable (2)

 

Monthly

 

 

4.94

%

Total unsecured lines of credit

 

$

13,200,000

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(2)

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

 

The principal amount of each acquisition advance is due on the 270th day following the advance date and may be extended for up to three additional 90-day periods by making partial repayments in accordance with the Credit Agreement. The outstanding balance of the non-operating LOC as of March 31, 2020 is due in June 2020, though the Partnership can extend final repayment of the amount due to December 2020 by making partial repayments. The Partnership was in compliance with all covenants in the Credit Agreement as of March 31, 2020.

 

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 second quarter of 2020 repayment obligation as it maintained a zero balance in the operating LOC for fifteen consecutive days during April 2020.

 

 

15. Debt Financing

 

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of March 31, 2020 and December 31, 2019:

 

 

 

Outstanding Debt

Financings as of March 31, 2020, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated

Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - M24

 

$

40,388,799

 

 

$

4,000

 

 

2010

 

May 2027

 

N/A

 

N/A

 

 

N/A

 

 

3.05%

 

Variable - M31 (1)

 

 

79,216,186

 

 

 

4,999

 

 

2014

 

July 2024

 

Weekly

 

4.25%

 

 

1.32%

 

 

5.57%

 

Fixed - M33

 

 

31,227,464

 

 

 

2,606

 

 

2015

 

September 2030

 

N/A

 

N/A

 

 

N/A

 

 

3.24%

 

Fixed - M45 (2)

 

 

217,168,730

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOB & Term A/B Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deutsche Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB (3)

 

 

8,010,000

 

 

 

-

 

 

2014

 

May 2020

 

N/A

 

N/A

 

 

N/A

 

 

4.01%

 

Fixed - Term A/B (3)

 

 

5,263,500

 

 

 

-

 

 

2019

 

February 2021

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B (3)

 

 

38,194,706

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Mizuho Capital Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB (4)

 

 

25,714,955

 

 

 

-

 

 

2019

 

July 2020

 

Weekly

 

4.86%

 

 

1.17%

 

 

6.03%

 

Variable - TOB (5)

 

 

42,153,205

 

 

 

-

 

 

2019

 

August 2020

 

Weekly

 

3.45% - 4.86%

 

 

1.17% - 1.66%

 

 

4.62% - 6.52%

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

 

13,047,884

 

 

 

-

 

 

2019

 

May 2022

 

N/A

 

N/A

 

 

N/A

 

 

3.53%

 

Total Debt Financings

 

$

500,385,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees have a variable component.

(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.

(3)

In April 2020, these debt financings were terminated. See Note 24 for additional information.

(4)

In April 2020, the stated maturity of the TOB Trusts were extended to June 2021. See Note 24.

(5)

In April 2020, the stated maturity of the TOB Trusts were extended to July 2021. See Note 24.

22


 

 

 

 

Outstanding Debt

Financings as of

December 31, 2019, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - M24

 

$

40,495,442

 

 

$

204,000

 

 

2010

 

May 2027

 

N/A

 

N/A

 

 

N/A

 

 

3.05%

 

Variable - M31 (1)

 

 

79,505,180

 

 

 

4,999

 

 

2014

 

July 2024

 

Weekly

 

1.64%

 

 

1.54%

 

 

3.18%

 

Fixed - M33

 

 

31,367,147

 

 

 

2,606

 

 

2015

 

September 2030

 

N/A

 

N/A

 

 

N/A

 

 

3.24%

 

Fixed - M45 (2)

 

 

217,603,233

 

 

 

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

 

January 2020

 

N/A

 

N/A

 

 

N/A

 

 

4.01%

 

Fixed - Term A/B

 

 

5,260,756

 

 

 

-

 

 

2019

 

February 2020

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

38,300,456

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Mizuho Capital Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB

 

 

25,680,070

 

 

 

-

 

 

2019

 

July 2020

 

Weekly

 

1.79%

 

 

1.17%

 

 

2.96%

 

Variable - TOB

 

 

42,207,784

 

 

 

-

 

 

2019

 

August 2020

 

Weekly

 

1.79%

 

 

1.17% - 1.66%

 

 

2.96% - 3.45%

 

Variable - TOB

 

 

34,703,935

 

 

 

-

 

 

2019

 

September 2020

 

Weekly

 

2.08%

 

 

1.12%

 

 

3.20%

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

 

13,063,418

 

 

 

-

 

 

2019

 

May 2022

 

N/A

 

N/A

 

 

N/A

 

 

3.53%

 

Total Debt Financings

 

$

536,197,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees have a variable component.

(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.

 

The TOB, Term TOB, Term A/B and TEBS Financing arrangements are consolidated VIE’s to the Partnership (Note 5). The Partnership is the primary beneficiary due to its rights to the underlying assets. Accordingly, the Partnership consolidates the TOB, Term TOB, Term A/B and TEBS Financings in the Partnership’s condensed consolidated financial statements. See Note 6 for information regarding the MRBs securitized within each TOB, Term TOB, Term A/B and TEBS Financing. 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 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.

 

As of March 31, 2020 and December 31, 2019, the Partnership posted restricted cash as contractually required under the terms of the four TEBS Financings. The Partnership may also be required to post collateral, typically in cash, related to the TOB Trusts with Mizuho. The amount of collateral posting required is dependent on the valuation of the underlying MRBs in relation to thresholds set by Mizuho. There was no requirement to post collateral for the TOB Trusts with Mizuho as of March 31, 2020 and December 31, 2019.

 

The Partnership has entered in interest rate cap agreements to mitigate its exposure to interest rate fluctuations on the variable-rate M31 TEBS Financing and other variable rate TOB Trust financings (Note 17).

 

The Partnership has entered into a Master Trust Agreement with Deutsche Bank that contains liquidity, leverage and debt service coverage covenants with which the Partnership was required to comply. The Partnership was in compliance with these covenants as of March 31, 2020. In April 2020, the Master Trust Agreement was terminated. See Note 24 for additional information.

 

23


 

The Partnership has entered into various TOB Trust financings with Mizuho secured by MRBs. The Mizuho TOB Trusts require that the Partnership’s residual interest in the TOB Trusts maintain a certain value in relation to the total assets in each Trust.  In addition, the Master Trust Agreement with Mizuho requires the Partnership’s partners’ capital, as defined, to maintain a certain threshold and that it remains listed on the NASDAQ.  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 March 31, 2020.

 

The Term TOB Trust with Morgan Stanley is subject to a Trust Agreement and other related agreements that contain covenants with which the Partnership or the underlying MRB are required to comply.  The underlying property must maintain certain occupancy and debt service covenants. A termination event will occur if the Partnership’s net assets, as defined, decrease by 25% in one quarter or 35% over one year. If the underlying property or the Partnership, as applicable, 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 Partnership was in compliance with these covenants as of March 31, 2020.

 

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.

 

Activity in the First Three Months of 2020

 

In January 2020, the Partnership extended the maturity date of the Term TOB Trust financing related to Pro Nova 2014-1 from January 2020 to May 2020.  See Note 24 for additional information.

 

In January 2020, the variable rate TOB Trust financings associated with the PHC Certificates were collapsed and all principal and interest were paid in full in conjunction with the Partnership’s sale of the PHC Certificates to an unrelated party (see Note 7).  

 

In February 2020, the Partnership extended the maturity dates of the Term A/B Trust financings related to Gateway Village and Lynnhaven Apartments from February 2020 to February 2021.

 

Activity in the First Three Months of 2019

 

In February 2019, the Partnership entered into two Term A/B Trusts financings 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

 

 

 

 

 

 

 

 

Future Maturities

 

The Partnership’s contractual maturities of borrowings as of March 31, 2020 for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

Remainder of 2020

 

$

79,840,784

 

2021

 

 

10,590,361

 

2022

 

 

18,496,986

 

2023

 

 

5,896,946

 

2024

 

 

15,472,867

 

Thereafter

 

 

372,276,818

 

Total

 

 

502,574,762

 

Unamortized deferred financing costs and debt premium

 

 

(2,189,333

)

Total debt financing, net

 

$

500,385,429

 

 

24


 

As of March 31, 2020, certain Term TOB Trusts and Term A/B Trusts mature in the next twelve months. The Term TOB Trust related to the Pro Nova 2014-1 MRB was terminated and repaid in full in April 2020. The Term A/B Trusts were terminated and replacement debt financings were closed with Mizuho in April 2020. In addition, the Partnership extended the maturity dates for its existing TOB Trusts in April 2020. See Note 24 for additional information.

 

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 March 31, 2020 and December 31, 2019:

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

March 31, 2020, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Period End

Rate

 

The 50/50 MF Property--TIF Loan

 

$

2,858,201

 

 

2020

 

March 2025

 

Fixed

 

 

4.40

%

The 50/50 MF Property--Mortgage

 

 

23,831,791

 

 

2020

 

April 2027

 

Fixed

 

 

4.35

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

26,689,992

 

 

 

 

 

 

 

 

 

4.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

December 31, 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

 

$

2,859,390

 

 

2014

 

March 2020

 

Fixed

 

N/A

 

N/A

 

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

23,942,856

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

4.75

%

(1)

 

4.75

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

26,802,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.74

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

Activity in the First Three Months of 2020

 

In February 2020, the Partnership refinanced The 50/50 MF Property Mortgage loan with its existing lender.  The Mortgage loan maturity date was extended seven years to April 2027, and the interest rate decreased to a fixed interest rate of 4.35%.

 

In February 2020, the Partnership refinanced The 50/50 MF Property TIF loan with its existing lender. The TIF loan maturity date was extended by five years to March 2025, and the interest rate decreased to 4.40%.

Future Maturities

 

The Partnership’s contractual maturities of borrowings as of March 31, 2020 for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

Remainder of 2020

 

$

657,117

 

2021

 

 

818,425

 

2022

 

 

855,101

 

2023

 

 

893,421

 

2024

 

 

930,740

 

Thereafter

 

 

22,537,088

 

Total

 

 

26,691,892

 

Unamortized deferred financing costs

 

 

(1,900

)

Total mortgages payable and other secured financings, net

 

$

26,689,992

 

 

25


 

17. Interest Rate Derivatives

The following tables summarize the Partnership’s interest rate derivatives as of March 31, 2020 and December 31, 2019:

 

Purchase Date

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of March 31, 2020

 

July 2015

 

 

26,949,233

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Wells Fargo Bank

 

$

-

 

July 2015

 

 

26,949,233

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Royal Bank of Canada

 

 

-

 

July 2015

 

 

26,949,233

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

SMBC Capital Markets, Inc

 

 

-

 

June 2017

 

 

80,847,700

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

TOB Trusts

 

Barclays Bank PLC

 

 

-

 

Sept 2017

 

 

57,918,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

TOB Trusts

 

Barclays Bank PLC

 

 

-

 

Aug 2019

 

 

79,014,909

 

 

Aug 2024

 

 

4.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

36,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

36,112

 

 

(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, 2019

 

July 2015

 

 

27,033,788

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Wells Fargo Bank

 

$

-

 

July 2015

 

 

27,033,788

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Royal Bank of Canada

 

 

-

 

July 2015

 

 

27,033,788

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

SMBC Capital Markets, Inc

 

 

-

 

June 2017

 

 

81,101,364

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

TOB Trusts

 

Barclays Bank PLC

 

 

4,090

 

Sept 2017

 

 

58,090,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

TOB Trusts

 

Barclays Bank PLC

 

 

-

 

Aug 2019

 

 

79,333,280

 

 

Aug 2024

 

 

4.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

6,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

10,911

 

 

(2)

See Note 22 for additional details.

 

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 Partnership’s 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 Partnership’s 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.

Investment Commitments

ATAX Vantage Holdings, LLC has outstanding commitments to contribute equity to unconsolidated entities. See Note 9 for additional information.

26


 

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 construction loans 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 March 31, 2020:

 

Borrower

 

Year the Guarantee

was Executed

 

Maximum Balance

Available on

Construction Loan

 

 

Construction Loan

Balance as of March 31, 2020

 

 

Partnership's Maximum Exposure

as of March 31, 2020

 

 

Guarantee

Terms

Vantage at Stone Creek

 

2018

 

$

30,824,000

 

 

$

28,264,790

 

 

$

14,132,395

 

 

(1)

Vantage at Coventry

 

2018

 

 

31,500,000

 

 

 

18,169,459

 

 

 

18,169,459

 

 

(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 LIHTC 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 March 31, 2020:

 

Limited Partnership(s)

 

Year the Guarantee

was Executed

 

End of Guarantee

Period

 

Partnership's

Maximum Exposure

as of March 31, 2020

 

Ohio Properties

 

2011

 

2026

 

$

3,361,979

 

Greens of Pine Glen, LP

 

2012

 

2027

 

 

2,237,843

 

 

 

 

19. Redeemable Series A Preferred Units

 

The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units via a private placement to five financial institutions. The Series A Preferred Units represent limited partnership interests of the Partnership.  The Series A Preferred Units have no stated maturity, are not subject to any sinking fund requirements, and will remain outstanding indefinitely unless redeemed by the Partnership or by the holder. Upon the sixth anniversary of the closing of the sale of Series A Preferred Units to a subscriber, and upon each annual anniversary thereafter, the Partnership and each holder of Series A Preferred Units have the right to redeem, in whole or in part, the Series A Preferred Units held by such holder at a per unit redemption price equal to $10.00 per unit plus an amount equal to all declared and unpaid distributions through the date of the redemption.

 

In the event of any liquidation, dissolution, or winding up of the Partnership, the holders of the Series A Preferred Units are entitled to a liquidation preference in connection with their investments.  With respect to anticipated quarterly distributions and rights upon liquidation, dissolution, or the winding-up of the Partnership’s affairs, the Series A Preferred Units will rank: (a) senior to the Partnership’s BUCs and to any other class or series of Partnership interests or securities expressly designated as ranking junior to the Series A Preferred Units; (b) junior to all of the Partnership’s existing indebtedness (including indebtedness outstanding under the Partnership’s senior bank credit facility) and other liabilities with respect to assets available to satisfy claims against the Partnership; and (c) junior to any other class or series of Partnership interests or securities expressly designated as ranking senior to the Series A Preferred Units.

 

27


 

The following table summarizes the outstanding Series A Preferred Units as of March 31, 2020 and December 31, 2019:  

 

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 March 31, 2020 and

   December 31, 2019

 

 

9,450,000

 

 

$

94,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

20. Restricted Unit Awards

The Partnership’s 2015 Plan 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 have historically been granted with vesting conditions ranging from three months to up to three years. Unvested RUAs are typically entitled to receive distributions during the restriction period. The Plan provides for accelerated vesting of the RUAs if there is a change in control related to the Partnership, the General Partner, or the general partner of the General Partner, or upon death or disability of the Plan participant.

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 $39,000 and $184,000 for the three months ended March 31, 2020 and 2019, respectively. Compensation expense is reported within “General and administrative expenses” on the Partnership’s condensed consolidated statements of operations.

The following table summarizes the RUA activity as of and for the three months ended March 31, 2020 and the year ended December 31, 2019:

 

 

 

Restricted Units

Awarded

 

 

Weighted-average

Grant-date

Fair Value

 

Nonvested as of January 1, 2019

 

 

265,290

 

 

$

6.14

 

Granted

 

 

353,197

 

 

 

7.74

 

Vested

 

 

(618,487

)

 

 

7.05

 

Nonvested as of December 31, 2019

 

 

-

 

 

$

-

 

Granted

 

 

290,000

 

 

 

4.98

 

Nonvested as of March 31, 2020

 

 

290,000

 

 

$

4.98

 

 

The unrecognized compensation expense related to nonvested RUAs granted under the Plan was $1.4 million as of March 31, 2020. The remaining compensation expense is expected to be recognized over a weighted-average period of 1.6 years.  The total intrinsic value of unvested RUAs was approximately $1.5 million as of March 31, 2020.

 

21. Transactions with Related Parties

 

Effective September 10, 2019, Greystone acquired all the issued and outstanding partnership interests of AFCA 2 from Burlington Capital LLC and an affiliate, at which time Burlington Capital LLC and its affiliates (collectively, “Burlington”) ceased to be related parties of the Partnership.  

 

28


 

The Partnership incurs costs for services and makes contractual payments to AFCA 2, AFCA 2’s general partner, 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 months ended March 31, 2020 and 2019:  

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Partnership administrative fees paid to AFCA 2 (1)

 

$

865,000

 

 

$

898,000

 

Property management fees paid to an affiliate (2)

 

 

-

 

 

 

35,000

 

Reimbursable franchise margin taxes incurred on behalf of

   unconsolidated entities (3)

 

 

8,000

 

 

 

16,000

 

 

 

(1)

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.

(2)

A former 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” on 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. Since the Partnership is reimbursed for the franchise margin taxes paid on behalf of the unconsolidated entities, these taxes are not reported on the Partnership’s condensed consolidated statements of operations.

 

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 transactions. These fees were paid by the borrowers and are not reported on the Partnership’s condensed consolidated financial statements. The following table summarizes transactions between borrowers of the Partnership’s MRBs and affiliates for the three months ended March 31, 2020 and 2019:

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

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

 

$

9,000

 

 

$

9,000

 

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

 

 

542,000

 

 

 

91,000

 

 

(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.  

 

 

Properties Management provides services to seven of the properties collateralizing MRBs of the Partnership. In addition, Properties Management provides services to one of our 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.

The Partnership reported receivables due from unconsolidated entities of approximately $125,000 and $116,000 as of March 31, 2020 and December 31, 2019, 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 $347,000 and $301,000 as of March 31, 2020 and December 31, 2019, 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

29


 

 

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.

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

The following is a description of the valuation methodologies used for the Partnership’s assets and liabilities measured at fair value.

Investments in MRBs and Taxable MRBs

The fair value of the Partnership’s investments in MRBs and taxable MRBs, as of March 31, 2020 and December 31, 2019, is based upon prices obtained from a third-party pricing service, which are estimates 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, illiquidity, legal structure of the borrower, collateral, seniority 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 requires 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 March 31, 2020, the range of effective yields on the individual MRBs was 2.8% to 7.9% per annum, with a weighted average effective yield of 3.9% 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 8.4% to 8.5% per annum, with a weighted average effective yield of 8.4% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.  As of December 31, 2019, the range of effective yields on the individual MRBs was 2.4 % to 8.5% 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 8.7 % to 8.9% per annum, with a weighted average effective yield of 8.8% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.

Investments in PHC Certificates  

The Partnership sold its investments in the PHC Certificates in January 2020. The fair value of the Partnership’s investment in PHC Certificates as of December 31, 2019 was based upon prices obtained from a third-party pricing service, which were estimates of market prices. There was no active trading market for the PHC Certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporated commonly used market pricing methods. It considered the underlying characteristics of each PHC Certificate as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, illiquidity, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs.

30


 

The Partnership reviewed the inputs used by the primary third-party pricing service by reviewing source information and reviewed the methodology for reasonableness. The Partnership also engaged 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 encompassed the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates was categorized as a Level 3 input. As of December 31, 2019, the range of effective yields on the PHC Certificates was 4.4% to 5.3% per annum, with a weighted average effective yield of 5.2% 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 of 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.

Assets measured at fair value on a recurring basis as of March 31, 2020 are summarized as follows:

 

 

 

Fair Value Measurements as of March 31, 2020

 

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

 

$

734,245,836

 

 

$

-

 

 

$

-

 

 

$

734,245,836

 

Mortgage revenue bonds

 

 

26,836,439

 

 

 

-

 

 

 

-

 

 

 

26,836,439

 

Taxable mortgage revenue bonds (reported within other assets)

 

 

1,417,654

 

 

 

-

 

 

 

-

 

 

 

1,417,654

 

Derivative instruments (reported within other assets)

 

 

36,112

 

 

 

-

 

 

 

-

 

 

 

36,112

 

Total Assets at Fair Value, net

 

$

762,536,041

 

 

$

-

 

 

$

-

 

 

$

762,536,041

 

 

The following table summarizes the activity related to Level 3 assets for the three months ended March 31, 2020:

 

 

 

For the Three Months Ended March 31, 2020

 

 

 

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, 2020

 

$

773,597,465

 

 

$

43,349,357

 

 

$

1,383,237

 

 

$

10,911

 

 

$

818,340,970

 

Total gains (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest income and

   interest expense)

 

 

35,142

 

 

 

(7,219

)

 

 

-

 

 

 

25,201

 

 

 

53,124

 

Included in earnings (impairment of

   securities and provision for credit loss)

 

 

(1,357,681

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,357,681

)

Included in earnings (gain on sale of

   securities)

 

 

-

 

 

 

1,416,023

 

 

 

-

 

 

 

-

 

 

 

1,416,023

 

Included in other comprehensive (loss)

   income

 

 

(6,722,122

)

 

 

(1,408,804

)

 

 

36,555

 

 

 

-

 

 

 

(8,094,371

)

Sale of securities

 

 

-

 

 

 

(43,349,357

)

 

 

-

 

 

 

-

 

 

 

(43,349,357

)

Settlements

 

 

(4,470,529

)

 

 

-

 

 

 

(2,138

)

 

 

-

 

 

 

(4,472,667

)

Ending Balance March 31, 2020

 

$

761,082,275

 

 

$

-

 

 

$

1,417,654

 

 

$

36,112

 

 

$

762,536,041

 

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 March 31, 2020

 

$

(1,357,681

)

 

$

-

 

 

$

-

 

 

$

25,201

 

 

$

(1,332,480

)

 

(1)

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

31


 

 

 

Assets measured at fair value on a recurring basis as of December 31, 2019 are summarized as follows:

 

 

 

Fair Value Measurements as of December 31, 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

 

$

743,587,715

 

 

$

-

 

 

$

-

 

 

$

743,587,715

 

Mortgage revenue bonds

 

 

30,009,750

 

 

 

-

 

 

 

-

 

 

 

30,009,750

 

PHC Certificates

 

 

43,349,357

 

 

 

-

 

 

 

-

 

 

 

43,349,357

 

Taxable mortgage revenue bonds (reported within other assets)

 

 

1,383,237

 

 

 

-

 

 

 

-

 

 

 

1,383,237

 

Derivative instruments (reported within other assets)

 

 

10,911

 

 

 

-

 

 

 

-

 

 

 

10,911

 

Total Assets at Fair Value, net

 

$

818,340,970

 

 

$

-

 

 

$

-

 

 

$

818,340,970

 

 

The following table summarizes the activity related to Level 3 assets and liabilities for the three months ended March 31, 2019:

 

 

 

For the Three Months Ended March 31, 2019

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

PHC Certificates

 

 

Taxable 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)

 

 

35,730

 

 

 

16,726

 

 

 

-

 

 

 

(306,591

)

 

 

(254,135

)

Included in other

   comprehensive (loss) income

 

 

7,639,913

 

 

 

485,222

 

 

 

18,792

 

 

 

-

 

 

 

8,143,927

 

Purchases

 

 

6,050,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,050,000

 

Settlements

 

 

(6,831,237

)

 

 

(2,767,166

)

 

 

(1,954

)

 

 

(46,536

)

 

 

(9,646,893

)

Ending Balance March 31, 2019

 

$

739,047,841

 

 

$

46,406,868

 

 

$

1,426,733

 

 

$

273,506

 

 

$

787,154,948

 

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 March 31, 2019

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(306,591

)

 

$

(306,591

)

 

(1)

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

 

 

Total gains and loss included in earnings for the interest rate derivatives are reported within “Interest expense” on the Partnership’s condensed consolidated statements of operations.

As of March 31, 2020 and December 31, 2019, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s financial liabilities, which are estimates 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 liability values are then estimated using a discounted cash flow and yield to maturity or call analysis.

32


 

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 TOB Trust financings are credit enhanced by either Deutsche Bank or Mizuho. The table below summarizes the fair value of the Partnership’s financial liabilities as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt financing and lines of credit

 

$

512,925,429

 

 

$

529,632,997

 

 

$

549,397,421

 

 

$

568,193,494

 

Mortgages payable and other secured financing

 

 

26,689,992

 

 

 

26,691,893

 

 

 

26,802,246

 

 

 

26,812,851

 

 

23. Segments

 

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

The Partnership 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 Partnership Agreement also allows the Partnership to invest in other securities whose interest may be taxable for federal income tax purposes. Total tax-exempt and other investments cannot exceed 25% of the Partnership’s total assets at the time of acquisition as required under the Partnership Agreement.  Tax-exempt and other investments consist of the PHC Certificates, taxable MRBs, real estate assets and investments in unconsolidated entities. 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.

 

Mortgage Revenue Bond Investments Segment

The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of MRBs and related property loans that 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 allowances, are reported as such on the Partnership’s condensed consolidated balance sheets.  As of March 31, 2020, the Partnership held 75 MRBs. The Residential Properties financed by MRBs contain a total of 10,867 rental units. In addition, one MRB (Pro Nova 2014-1) is collateralized by commercial real estate. All “General and administrative expenses” on the Partnership’s condensed consolidated statements of operations are reported within this segment.

 

MF Properties Segment

The MF Properties segment consists of multifamily and student housing residential properties held by the Partnership (see Note 8). 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 March 31, 2020, the Partnership owned two MF Properties containing 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 TOB Trust financings. In January 2020, the Partnership sold the PHC Certificates to an unrelated party, and the related TOB Trust financings were collapsed and all principal and interest was paid in full.  As a result, the Public Housing Capital Fund Trust segment has no activity after January 2020.

 

Other Investments Segment

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

 

33


 

The following tables detail certain key financial information for the Partnership’s reportable segments for the three months ended March 31, 2020 and 2019:

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Total revenues

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

10,205,803

 

 

$

10,443,413

 

MF Properties

 

 

1,952,247

 

 

 

1,993,629

 

Public Housing Capital Fund Trusts

 

 

174,470

 

 

 

638,146

 

Other Investments

 

 

1,403,615

 

 

 

4,589,410

 

Total revenues

 

$

13,736,135

 

 

$

17,664,598

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

5,498,199

 

 

$

5,648,568

 

MF Properties

 

 

321,776

 

 

 

364,389

 

Public Housing Capital Fund Trusts

 

 

197,993

 

 

 

381,963

 

Other Investments

 

 

-

 

 

 

-

 

Total interest expense

 

$

6,017,968

 

 

$

6,394,920

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

2,424

 

 

$

-

 

MF Properties

 

 

707,014

 

 

 

819,158

 

Public Housing Capital Fund Trusts

 

 

-

 

 

 

-

 

Other Investments

 

 

-

 

 

 

-

 

Total depreciation expense

 

$

709,438

 

 

$

819,158

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

440,336

 

 

$

2,043,354

 

MF Properties

 

 

(252,730

)

 

 

(437,134

)

Public Housing Capital Fund Trusts

 

 

1,390,999

 

 

 

256,183

 

Other Investments

 

 

1,403,152

 

 

 

4,589,410

 

Net income

 

$

2,981,757

 

 

$

6,451,813

 

 

The following table details total assets for the Partnership’s reportable segments as of March 31, 2020 and December 31, 2019:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Total assets

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

912,120,645

 

 

$

918,301,172

 

MF Properties

 

 

69,592,219

 

 

 

70,569,646

 

Public Housing Capital Fund Trusts

 

 

101,848

 

 

 

43,591,048

 

Other Investments

 

 

98,768,258

 

 

 

87,098,315

 

Consolidation/eliminations

 

 

(103,066,708

)

 

 

(90,391,673

)

Total assets

 

$

977,516,262

 

 

$

1,029,168,508

 

 

24. Subsequent Events

 

In April 2020, the Term TOB Trust financings related to the Pro Nova 2014-1 MRB was collapsed and all outstanding principal and interest balances were repaid in full.

 

34


 

In April 2020, the Partnership terminated its Master Trust Agreement and collapsed all Term A/B Trust financings with Deutsche Bank. As of the termination, the Partnership is no longer subject to the debt covenants in the Master Trust Agreement. All outstanding principal and interest related to the Term A/B Trust financings was paid off in full. The MRBs associated with the collapsed Term A/B Trusts were securitized into new variable rate TOB Trusts with Mizuho. The following table summarizes the gross principal and initial terms of the TOB Trusts at closing:

 

TOB Trusts Securitization

 

Outstanding TOB

Trust Financing

 

 

Stated Maturity

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Initial

Interest Rate

 

Avistar at Copperfield - Series A

 

$

11,818,000

 

 

May 2021

 

Weekly

 

0.42%

 

 

1.66%

 

 

2.08%

 

Avistar at Wilcrest - Series A

 

 

4,479,000

 

 

May 2021

 

Weekly

 

0.42%

 

 

1.66%

 

 

2.08%

 

Avistar at Wood Hollow - Series A

 

 

34,007,000

 

 

May 2021

 

Weekly

 

0.42%

 

 

1.66%

 

 

2.08%

 

Gateway Village

 

 

2,184,000

 

 

May 2021

 

Weekly

 

0.42%

 

 

1.66%

 

 

2.08%

 

Lynnhaven

 

 

2,898,000

 

 

May 2021

 

Weekly

 

0.42%

 

 

1.66%

 

 

2.08%

 

Total TOB Trust Financing

 

$

55,386,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In April 2020, the Partnership extended the maturity dates of TOB Trust financings associated with the Rosewood Townhomes – Series A and South Pointe Apartments – Series A MRBs to June 2021.  The Partnership also extended the maturity dates of TOB Trust financings associated with the Montecito at William Ranch Apartments – Series A, Vineyard Gardens – Series A and Live 929 Apartments MRBs to July 2021.

 

 

 

35


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In this Management’s Discussion and Analysis, all references to “we,” “us,” and the “Partnership” refer to America First Multifamily Investors, L.P., its consolidated subsidiaries, and consolidated VIEs for all periods presented. See Note 2 and Note 5 to the Partnership’s condensed consolidated financial statements for further disclosure.

Critical Accounting Policies

The Partnership’s critical accounting policies are the same as those described in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2019.  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 the disclosure of contingent assets and liabilities as of the date of the Partnership’s condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

 

Executive Summary

The Partnership was formed for the primary purpose of acquiring a portfolio of mortgage revenue bonds (“MRBs”) that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily and student housing (collectively “Residential Properties”), and commercial properties in their market areas. We expect and believe the interest received on these bonds is excludable from gross income for federal income tax purposes. We may also invest in other types of securities and investments that may or may not be secured by real estate, to the extent allowed by the Partnership Agreement.

The Partnership includes the assets, liabilities, and results of operations of the Partnership, our wholly-owned subsidiaries and consolidated VIEs. All significant transactions and accounts between us and the consolidated VIEs have been eliminated in consolidation. See Note 2 to the Partnership’s condensed consolidated financial statements for additional details.

As of March 31, 2020, we have four reportable segments: (1) Mortgage Revenue Bond Investments, (2) Public Housing Capital Fund Trusts, (3) MF Properties, and (4) Other Investments. The Partnership separately reports its consolidation and elimination information because it does not allocate certain items to the segments.  See Notes 2 and 23 to the Partnership’s condensed consolidated financial statements for additional details.

Recent Investment Activity

The following table presents information regarding the investment activity of the Partnership for the three months ended March 31, 2020 and 2019:

 

Investment Activity

 

#

 

Amount

(in 000's)

 

 

Retired Debt

or Note

(in 000's)

 

 

Tier 2 income

distributable to the

General Partner

(in 000's) (1)

 

 

Notes to the

Partnership's

condensed

consolidated

financial

statements

For the Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond redemption

 

1

 

$

3,103

 

 

N/A

 

 

N/A

 

 

6

PHC Certificates sold

 

3

 

 

43,349

 

 

$

34,809

 

 

N/A

 

 

7, 15

Investments in unconsolidated entities

 

3

 

 

10,270

 

 

N/A

 

 

N/A

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

2

 

$

6,050

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond redemption

 

1

 

 

5,574

 

 

N/A

 

 

N/A

 

 

6

Investments in unconsolidated entities

 

3

 

 

6,594

 

 

N/A

 

 

N/A

 

 

9

Property loan redemption

 

1

 

 

8,368

 

 

N/A

 

 

$

753

 

 

10

 

(1)

See “Cash Available for Distribution” in this Item 2 below.

36


 

Recent Financing Activity

The following table presents information regarding the debt financing, derivatives, Series A Preferred Units and partners’ capital activities of the Partnership for the three months ended March 31, 2020 and 2019, exclusive of retired debt amounts listed in the investment activity table above: 

 

Financing, Derivative and Capital Activity

 

#

 

Amount

(in 000's)

 

 

Secured

 

Maximum

SIFMA Cap

Rate (1)

 

Notes to the

Partnership's

condensed

consolidated

financial

statements

For the Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Net repayment on unsecured LOCs

 

1

 

$

660

 

 

No

 

N/A

 

14

Refinancing of The 50/50 Mortgage and TIF loans

 

2

 

 

-

 

 

Yes

 

N/A

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from new Term A/B Financings with Deutsche Bank

 

2

 

$

5,264

 

 

Yes

 

N/A

 

15

 

(1)

See "Quantitative and Qualitative Disclosures About Market Risk" in Item 3 below.

 

 

COVID-19 Update

The current outbreak of the novel coronavirus (“COVID-19”) is currently disrupting supply chains and affecting production, sales and employment across a range of industries. The Partnership is continually assessing the impact of COVID-19 on its business operation, liquidity, and investment performance. The extent of the impact of COVID-19 on the Partnership’s financial condition and results of operations will depend on certain developments, including, but not limited to:

 

the scope, severity and duration of the outbreak;

 

the actions taken by various parties to contain the outbreak or mitigate its impact;

 

the impact of financial relief measures instituted by the U.S. government and the Federal Reserve; and

 

the direct and indirect economic effects of the outbreak and containment measures.

These developments are uncertain and cannot be predicted. See the “Liquidity and Capital Resources” section in this Item 2 for information regarding our uses and potential sources of liquidity for the next twelve months.

 

The decline in U.S. economic activity as a result of the COVID-19 outbreak has negatively impacted employment and earnings for individuals that utilize affordable housing, such as the Residential Properties securing our MRB investments. The U.S. government has instituted various relief measures intended to provide economic assistance to business and individuals, but it is uncertain if such relief measures will be sufficient to prevent increasing rental delinquencies. The Partnership continually communicates with the property owners and property management service providers associated with the Residential Properties securing our MRB investments regarding operations and rental collections. Based on reports from these parties, the average overall rental collection rate for the Residential Properties was 94% for April 2020 rental charges. However, property owners and property managers have cautioned that April collection data should not be used as a predictor for rent collections in future months due to the uncertainty of developments related to COVID-19. If the Residential Properties experience a significant increase in delinquent rents in future months, our borrowers may be unable to make contractual principal and interest payments required by the MRBs, negatively impacting the Partnership’s cash flows and leading to potential MRB defaults. As of the date of this report, no borrowers associated with the Residential Properties have made a request for forbearance or other relief related to contractual debt service payments on the Partnership’s MRBs. MRB defaults could cause defaults on our financing arrangements, triggering either a termination and repayment of the related debt or a sale of the underlying MRB. The Partnership may choose to provide support to Residential Properties through supplemental taxable property loans in order to prevent MRB defaults. We are continually monitoring rent collections and financial results of the Residential Properties for signs of stress and will proactively work with borrowers on a case-by-case basis. COVID-19 may negatively impact the performance of the commercial property associated with the Pro Nova 2014-1 MRB in the form of lower patient volume and revenues.

 

37


 

Our investments in unconsolidated entities are related to the development of market-rate multifamily properties. Many of these properties are in construction and have, to date, not experienced any material supply chain disruptions for either materials or labor. However, it is uncertain if such supply chain disruptions will occur in the future. The shelter-in-place and social distancing measures imposed as a result of the COVID-19 outbreak have created challenges for the leasing of units at projects that have completed construction. If such challenges persist for an extended period of time, it will negatively impact our returns and cash flows from these investments and may cause impairment losses in future periods.    

 

The MF Properties are adjacent to universities and serve primarily university students. During March 2020, both universities adjacent to our MF Properties, the University of Nebraska-Lincoln and San Diego State University, suspended on-campus classes for the remainder of the 2019-2020 school year in response to the COVID-19 outbreak and began releasing on-campus students from their housing contracts. We continue to enforce the terms of our lease contracts with tenants and will work with tenants experiencing financial difficulties on a case-by-case basis. We are continually monitoring rent collections but are uncertain what impact the university closures will have on such collections through the terms of the leases, which typically run through July of each year.  If the COVID-19 outbreak and related mitigation strategies extend into the fall of 2020, the universities may not offer on-campus classes, which would adversely impact occupancy and operating results of the MF Properties for the 2020-2021 school year.  

 

Mortgage Revenue Bond Investments Segment

 

The Partnership’s primary purpose is to acquire and hold as investments a portfolio of MRBs which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.

 

The following table compares operating results for the Mortgage Revenue Bond Investments segment for the periods indicated (dollar amounts in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

Mortgage Revenue Bond Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

10,206

 

 

$

10,443

 

 

$

(237

)

 

 

-2.3

%

Interest expense

 

 

5,498

 

 

 

5,649

 

 

 

(151

)

 

 

-2.7

%

Segment net income

 

 

440

 

 

 

2,043

 

 

 

(1,603

)

 

 

-78.5

%

 

The following tables summarize the segment’s net interest income, average balances, and related yields earned on interest-earning assets and incurred on interest-bearing liabilities, as well as other income included in total revenues for the three months ended March 31, 2020 and 2019. The net of interest income from interest-earning assets and interest expense for interest-bearing liabilities is the segment’s net interest income. The average balances are based primarily on monthly averages during the respective periods. All dollar amounts are in thousands.

38


 

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

 

Average

Balance

 

 

Interest

Income/

Expense

 

 

Average

Rates

Earned/

Paid

 

 

Average

Balance

 

 

Interest

Income/

Expense

 

 

Average

Rates

Earned/

Paid

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds

 

$

672,710

 

 

$

9,990

 

 

 

5.9

%

 

$

671,860

 

 

$

10,213

 

 

 

6.1

%

Property loans

 

 

7,999

 

 

 

156

 

 

 

7.8

%

 

 

7,593

 

 

 

141

 

 

 

7.4

%

Other investments

 

 

1,724

 

 

 

46

 

 

 

10.7

%

 

 

1,783

 

 

 

47

 

 

 

10.5

%

Total interest-earning assets

 

$

682,433

 

 

$

10,192

 

 

 

6.0

%

 

$

681,236

 

 

$

10,401

 

 

 

6.1

%

MRB redemption income

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

Non-investment income

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

Total revenues

 

 

 

 

 

$

10,206

 

 

 

 

 

 

 

 

 

 

$

10,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured lines of credit

 

$

13,035

 

 

$

186

 

 

 

5.7

%

 

$

35,659

 

 

$

487

 

 

 

5.5

%

Fixed TEBS financing

 

 

291,308

 

 

 

2,884

 

 

 

4.0

%

 

 

220,909

 

 

 

2,327

 

 

 

4.2

%

Variable TEBS financing

 

 

79,361

 

 

 

625

 

 

 

3.2

%

 

 

153,931

 

 

 

1,438

 

 

 

3.7

%

Fixed Term A/B & TOB financing

 

 

64,918

 

 

 

1,128

 

 

 

7.0

%

(1)

 

98,588

 

 

 

1,090

 

 

 

4.4

%

Variable TOB financing

 

 

67,993

 

 

 

700

 

 

 

4.1

%

 

N/A

 

 

N/A

 

 

N/A

 

Derivative fair value adjustments

 

N/A

 

 

 

(25

)

 

N/A

 

 

N/A

 

 

 

307

 

 

N/A

 

Total interest-bearing liabilities

 

$

516,615

 

 

$

5,498

 

 

 

4.3

%

 

$

509,087

 

 

$

5,649

 

 

 

4.4

%

Net interest income

 

 

 

 

 

$

4,694

 

 

 

2.8

%

 

 

 

 

 

$

4,752

 

 

 

2.8

%

 

(1)

The increase in the average interest rate was due primarily to approximately $425,000 of additional interest expense accrued as of March 31, 2020 related to the anticipated termination of the Term A/B Trusts and Master Trust Agreement with Deutsche Bank in April 2020.

 

 

The following tables summarize the changes in interest income and interest expense between the three months ended March 31, 2020 and 2019, and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, or 2) changes in the interest rates of the interest-earning assets and interest-bearing liabilities. All dollar amounts are in thousands.

 

 

 

For the Three Months Ended March 31,2020 vs. 2019

 

 

 

 

Total

Change

 

 

Volume

$ Change

 

 

Rate

$ Change

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds

 

$

(223

)

 

$

13

 

 

$

(236

)

 

Property loans

 

 

15

 

 

 

8

 

 

 

7

 

 

Other investments

 

 

(1

)

 

 

(2

)

 

 

1

 

 

Total interest-earning assets

 

$

(209

)

 

$

19

 

 

$

(228

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured & secured lines of credit

 

$

(301

)

 

$

(309

)

 

$

8

 

 

Fixed TEBS financing

 

 

557

 

 

 

742

 

 

 

(185

)

 

Variable TEBS financing

 

 

(813

)

 

 

(697

)

 

 

(116

)

 

Fixed Term A/B & TOB financing

 

 

38

 

 

 

(372

)

 

 

410

 

 

Variable TOB financing

 

 

700

 

 

 

700

 

 

 

-

 

 

Derivative fair value adjustments

 

 

(332

)

 

N/A

 

 

 

(332

)

 

Total interest-bearing liabilities

 

$

(151

)

 

$

64

 

 

$

(215

)

 

Net interest income

 

$

(58

)

 

$

(45

)

 

$

(13

)

 

 

 

Comparison of the three months ended March 31, 2020 and 2019

 

The decreases in total revenues and total interest expense for the three months ended March 31, 2020 as compared to the same period in 2019 was due to the rate and volume changes detailed in the tables above.

 

39


 

Segment net income for the three months ended March 31, 2020 decreased as compared to the same period in 2019 as a result of the net decreases in total revenues and interest expense detailed in the tables above, and a $1.4 million provision for credit loss related to the impairment of the Pro Nova 2014-1 MRB.

 

Public Housing Capital Fund Trusts Segment

 

The PHC Certificates within this segment consisted of custodial receipts evidencing loans made to 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 by HUD under HUD’s Capital Fund Program. In January 2020, we sold all of our PHC Certificates to an unrelated third party and collapsed the related debt financing.  

 

The following table compares operating results for the Public Housing Capital Fund Trusts segment for the periods indicated (dollar amounts in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

Public Housing Capital Fund

   Trusts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

174

 

 

$

638

 

 

$

(464

)

 

 

-72.7

%

Interest expense

 

 

198

 

 

 

382

 

 

 

(184

)

 

 

-48.2

%

Segment net income

 

 

1,391

 

 

 

256

 

 

 

1,135

 

 

 

443.4

%

 

Comparison of the three months ended March 31, 2020 and 2019

 

Total revenues and interest expense were down for the three months ended March 31, 2020 as compared to the same period in 2019 due to the sale of the PHC Certificates in January 2020 and the collapse and payment in full of all principal and interest due on the TOB Trust financings secured by the PHC Certificates.

 

Segment net income increase for the three months ended March 31, 2020 as compared to the same period in 2019 is a result of a gain of approximately $1.4 million realized upon sale of the PHC Certificates, net of the decreases in total revenue and interest expense noted above.

 

MF Properties Segment

 

The Partnership’s strategy has been to acquire ownership positions in MF Properties while assessing the viability of restructuring the property ownership through a sale of the MF Properties. As of March 31, 2020 and 2019, the Partnership and its consolidated subsidiaries owned two MF Properties which contained a total of 859 rental units.

 

The following table compares operating results for the MF Properties segment for the periods indicated (dollar amounts in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

MF Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,952

 

 

$

1,994

 

 

$

(42

)

 

 

-2.1

%

Interest expense

 

 

322

 

 

 

364

 

 

 

(42

)

 

 

-11.5

%

Segment net loss

 

 

(253

)

 

 

(437

)

 

 

184

 

 

 

42.1

%

 

Comparison of the three months ended March 31, 2020 and 2019

 

The decrease in total revenues for the three months ended March 31, 2020 as compared to the same period in 2019 is due primarily to slightly lower occupancy at the Suites on Paseo.

 

The decrease in interest expense for the three months ended March 31, 2020 as compared to the same period in 2019 was due to the refinancing of The 50/50 Mortgage and TIF loans to lower interest rates in February 2020.

 

40


 

The decrease in segment net loss for the three months ended March 31, 2020 as compared to the same period in 2019 was due to the changes in total revenues and interest expense described above, and a decrease in depreciation expense of approximately $114,000 at The 50/50 MF Property due to real estate assets that became fully depreciated in mid-2019.

Other Investments Segment

 

The Other Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which holds noncontrolling equity investments in certain multifamily properties and issues property loans due from other multifamily properties.

 

The following table compares operating results for the Other Investments segment for the periods indicated (dollar amounts in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

Other Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,404

 

 

$

4,589

 

 

$

(3,185

)

 

 

-69.4

%

Segment net income

 

 

1,403

 

 

 

4,589

 

 

 

(3,186

)

 

 

-69.4

%

 

Comparison of the three months ended March 31, 2020 and 2019

 

The decrease in total revenues for the three months ended March 31, 2020 as compared to the same period in 2019 was primarily due to approximately $3.0 million of contingent interest income recognized upon redemption of the Vantage at Brooks, LLC property loan in January 2019 that did not recur.

 

The change in segment net income for the three months ended March 31, 2020 as compared to the same period in 2019 was due to the change in total revenues and gain on sale of an unconsolidated entity discussed above.

Discussion of the Residential Properties Securing our Mortgage Revenue Bonds and MF Properties

 

The following tables outline information regarding the Residential Properties for which we hold MRBs as investments. The tables also contain information about the MF Properties. The narrative discussion that follows provides a brief operating analysis of each category as of and for the three months ended March 31, 2020 and 2019.   

41


 

Non-Consolidated Residential Properties - Stabilized

The owners of the following Residential Properties either do not meet the definition of a VIE or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE.  As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis.  These Residential Properties have met the stabilization criteria (see footnote 3 below the table) as of March 31, 2020.  Debt service on the Partnership’s bonds for the non-consolidated stabilized properties was current as of March 31, 2020.  The amounts presented below were obtained from records provided by the property owners and their related property management service providers. 

 

 

 

 

 

Number

of Units as of

March 31,

 

 

Physical Occupancy (1)

as of March 31,

 

 

Economic Occupancy (2)

for the Three Months Ended March 31,

 

Property Name

 

State

 

2020

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Non-Consolidated Properties-Stabilized (3)

 

Courtyard

 

CA

 

 

108

 

 

 

98

%

 

 

98

%

 

 

95

%

 

 

97

%

Glenview Apartments

 

CA

 

 

88

 

 

 

98

%

 

 

94

%

 

 

96

%

 

 

95

%

Harden Ranch

 

CA

 

 

100

 

 

 

97

%

 

 

97

%

 

 

96

%

 

 

95

%

Harmony Court Bakersfield

 

CA

 

 

96

 

 

 

98

%

 

 

98

%

 

 

98

%

 

 

95

%

Harmony Terrace

 

CA

 

 

136

 

 

 

98

%

 

 

99

%

 

 

128

%

 

 

127

%

Las Palmas

 

CA

 

 

81

 

 

 

99

%

 

 

100

%

 

 

99

%

 

 

99

%

Montclair Apartments

 

CA

 

 

80

 

 

 

100

%

 

 

100

%

 

 

103

%

 

 

103

%

Montecito at Williams Ranch Apartments

 

CA

 

 

132

 

 

 

96

%

 

 

95

%

 

 

107

%

 

 

100

%

San Vicente

 

CA

 

 

50

 

 

 

100

%

 

 

98

%

 

 

104

%

 

 

99

%

Santa Fe Apartments

 

CA

 

 

89

 

 

 

96

%

 

 

100

%

 

 

92

%

 

 

96

%

Seasons at Simi Valley

 

CA

 

 

69

 

 

 

99

%

 

 

100

%

 

 

120

%

 

 

118

%

Seasons Lakewood

 

CA

 

 

85

 

 

 

100

%

 

 

100

%

 

 

107

%

 

 

102

%

Seasons San Juan Capistrano

 

CA

 

 

112

 

 

 

96

%

 

 

98

%

 

 

103

%

 

 

103

%

Solano Vista

 

CA

 

 

96

 

 

 

98

%

 

 

98

%

 

 

106

%

 

 

106

%

Summerhill

 

CA

 

 

128

 

 

 

98

%

 

 

96

%

 

 

102

%

 

 

98

%

Sycamore Walk

 

CA

 

 

112

 

 

 

98

%

 

 

98

%

 

 

86

%

 

 

98

%

The Village at Madera

 

CA

 

 

75

 

 

 

100

%

 

 

100

%

 

 

98

%

 

 

97

%

Tyler Park Townhomes

 

CA

 

 

88

 

 

 

99

%

 

 

100

%

 

 

97

%

 

 

98

%

Vineyard Gardens

 

CA

 

 

62

 

 

 

100

%

 

 

100

%

 

 

102

%

 

 

100

%

Westside Village Market

 

CA

 

 

81

 

 

 

99

%

 

 

100

%

 

 

95

%

 

 

100

%

Brookstone

 

IL

 

 

168

 

 

 

93

%

 

 

97

%

 

 

104

%

 

 

100

%

Copper Gate Apartments

 

IN

 

 

128

 

 

 

98

%

 

 

99

%

 

 

95

%

 

 

100

%

Renaissance (5)

 

LA

 

 

208

 

 

 

95

%

 

 

98

%

 

 

89

%

 

 

72

%

Live 929 Apartments

 

MD

 

 

568

 

 

 

93

%

 

 

86

%

 

 

94

%

 

 

86

%

Woodlynn Village

 

MN

 

 

59

 

 

 

98

%

 

 

98

%

 

 

98

%

 

 

97

%

Gateway Village

 

NC

 

 

64

 

 

 

97

%

 

 

98

%

 

 

85

%

 

 

99

%

Greens Property

 

NC

 

 

168

 

 

 

98

%

 

 

98

%

 

 

92

%

 

 

91

%

Lynnhaven Apartments

 

NC

 

 

75

 

 

 

93

%

 

 

99

%

 

 

86

%

 

 

98

%

Silver Moon

 

NM

 

 

151

 

 

 

92

%

 

 

90

%

 

 

92

%

 

 

89

%

Village at Avalon

 

NM

 

 

240

 

 

 

98

%

 

 

96

%

 

 

96

%

 

 

94

%

Ohio Properties (4)

 

OH

 

 

362

 

 

 

96

%

 

 

98

%

 

 

95

%

 

 

94

%

Bridle Ridge

 

SC

 

 

152

 

 

 

100

%

 

 

99

%

 

 

96

%

 

 

90

%

Columbia Gardens

 

SC

 

 

188

 

 

 

91

%

 

 

96

%

 

 

91

%

 

 

93

%

Companion at Thornhill Apartments

 

SC

 

 

179

 

 

 

99

%

 

 

99

%

 

 

90

%

 

 

92

%

Cross Creek

 

SC

 

 

144

 

 

 

97

%

 

 

95

%

 

 

92

%

 

 

88

%

Rosewood Townhomes

 

SC

 

 

100

 

 

 

99

%

 

 

92

%

 

 

90

%

 

 

75

%

South Pointe Apartments

 

SC

 

 

256

 

 

 

98

%

 

 

83

%

 

 

95

%

 

 

69

%

The Palms at Premier Park Apartments

 

SC

 

 

240

 

 

 

99

%

 

 

97

%

 

 

91

%

 

 

89

%

Village at River's Edge

 

SC

 

 

124

 

 

 

96

%

 

 

99

%

 

 

80

%

 

 

98

%

Willow Run

 

SC

 

 

200

 

 

 

85

%

 

 

92

%

 

 

85

%

 

 

90

%

Arbors at Hickory Ridge (5)

 

TN

 

 

348

 

 

 

90

%

 

 

91

%

 

 

76

%

 

 

85

%

Avistar at Copperfield

 

TX

 

 

192

 

 

 

94

%

 

 

93

%

 

 

87

%

 

 

87

%

Avistar at the Crest

 

TX

 

 

200

 

 

 

92

%

 

 

91

%

 

 

81

%

 

 

70

%

Avistar at the Oaks

 

TX

 

 

156

 

 

 

97

%

 

 

95

%

 

 

89

%

 

 

87

%

Avistar at the Parkway

 

TX

 

 

236

 

 

 

91

%

 

 

86

%

 

 

82

%

 

 

77

%

Avistar at Wilcrest

 

TX

 

 

88

 

 

 

93

%

 

 

95

%

 

 

81

%

 

 

83

%

Avistar at Wood Hollow

 

TX

 

 

409

 

 

 

97

%

 

 

98

%

 

 

93

%

 

 

91

%

Avistar in 09

 

TX

 

 

133

 

 

 

100

%

 

 

95

%

 

 

93

%

 

 

88

%

Avistar on the Boulevard

 

TX

 

 

344

 

 

 

94

%

 

 

91

%

 

 

80

%

 

 

83

%

Avistar on the Hills

 

TX

 

 

129

 

 

 

95

%

 

 

95

%

 

 

87

%

 

 

83

%

Bruton Apartments

 

TX

 

 

264

 

 

 

92

%

 

 

96

%

 

 

81

%

 

 

90

%

Concord at Gulfgate

 

TX

 

 

288

 

 

 

93

%

 

 

94

%

 

 

85

%

 

 

80

%

Concord at Little York

 

TX

 

 

276

 

 

 

94

%

 

 

92

%

 

 

85

%

 

 

87

%

Concord at Williamcrest

 

TX

 

 

288

 

 

 

97

%

 

 

99

%

 

 

89

%

 

 

92

%

Crossing at 1415

 

TX

 

 

112

 

 

 

97

%

 

 

91

%

 

 

90

%

 

 

80

%

Decatur Angle

 

TX

 

 

302

 

 

 

91

%

 

 

92

%

 

 

78

%

 

 

81

%

Esperanza at Palo Alto

 

TX

 

 

322

 

 

 

89

%

 

 

91

%

 

 

83

%

 

 

82

%

Heights at 515

 

TX

 

 

96

 

 

 

96

%

 

 

99

%

 

 

92

%

 

 

90

%

Heritage Square

 

TX

 

 

204

 

 

 

92

%