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ATAX America First Multifamily Investors

Filed: 4 Aug 20, 8:46am
0001059142 atax:MortgageRevenueBondInvestmentsSegmentMember us-gaap:OperatingSegmentsMember 2020-06-30

 

 

 

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 June 30, 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 June 30, 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”) and governmental issuer loan (“GIL”);

 

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)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,143,639

 

 

$

42,308,153

 

Restricted cash

 

 

981,082

 

 

 

877,828

 

Interest receivable, net

 

 

7,536,789

 

 

 

7,432,433

 

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

 

 

744,663,143

 

 

 

743,587,715

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

42,961,828

 

 

 

30,009,750

 

Governmental issuer loan (Note 7)

 

 

40,000,000

 

 

 

-

 

Public housing capital fund trust certificates, at fair value (Note 8)

 

 

-

 

 

 

43,349,357

 

Real estate assets: (Note 9)

 

 

 

 

 

 

 

 

Land and improvements

 

 

4,875,265

 

 

 

4,906,130

 

Buildings and improvements

 

 

72,060,565

 

 

 

72,011,533

 

Real estate assets before accumulated depreciation

 

 

76,935,830

 

 

 

76,917,663

 

Accumulated depreciation

 

 

(16,773,436

)

 

 

(15,357,700

)

Net real estate assets

 

 

60,162,394

 

 

 

61,559,963

 

Investments in unconsolidated entities (Note 10)

 

 

91,643,668

 

 

 

86,981,864

 

Property loans, net of loan loss allowance (Note 11)

 

 

9,666,870

 

 

 

7,999,094

 

Other assets (Note 13)

 

 

4,730,055

 

 

 

5,062,351

 

Total Assets

 

$

1,038,489,468

 

 

$

1,029,168,508

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities (Note 14)

 

$

8,475,675

 

 

$

9,036,167

 

Distribution payable

 

 

3,686,982

 

 

 

7,607,984

 

Unsecured lines of credit (Note 15)

 

 

18,695,000

 

 

 

13,200,000

 

Debt financing, net (Note 16)

 

 

538,948,049

 

 

 

536,197,421

 

Mortgages payable and other secured financing, net (Note 17)

 

 

26,391,908

 

 

 

26,802,246

 

Total Liabilities

 

 

596,197,614

 

 

 

592,843,818

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 19)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

   issued and outstanding, net (Note 20)

 

 

94,404,452

 

 

 

94,386,427

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital:

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

815,686

 

 

 

735,128

 

Beneficial Unit Certificates ("BUCs," Note 1)

 

 

347,071,716

 

 

 

341,203,135

 

Total Partnersʼ Capital

 

 

347,887,402

 

 

 

341,938,263

 

Total Liabilities and Partnersʼ Capital

 

$

1,038,489,468

 

 

$

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 June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

$

12,401,819

 

 

$

12,074,669

 

 

$

23,945,242

 

 

$

24,482,545

 

Property revenues

 

 

1,856,954

 

 

 

2,034,796

 

 

 

3,809,201

 

 

 

4,028,425

 

Contingent interest income

 

 

-

 

 

 

30,000

 

 

 

12,043

 

 

 

3,042,102

 

Other interest income

 

 

219,646

 

 

 

206,869

 

 

 

448,068

 

 

 

429,107

 

Other income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

28,753

 

Total revenues

 

 

14,478,419

 

 

 

14,346,334

 

 

 

28,214,554

 

 

 

32,010,932

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

854,424

 

 

 

919,256

 

 

 

2,029,798

 

 

 

2,096,074

 

Provision for credit loss (Note 6)

 

 

464,675

 

 

 

-

 

 

 

1,822,356

 

 

 

-

 

Impairment charge on real estate assets

 

 

25,200

 

 

 

-

 

 

 

25,200

 

 

 

-

 

Depreciation and amortization

 

 

712,081

 

 

 

819,804

 

 

 

1,421,519

 

 

 

1,640,612

 

Interest expense

 

 

4,889,316

 

 

 

6,206,935

 

 

 

10,907,284

 

 

 

12,601,855

 

General and administrative

 

 

2,846,371

 

 

 

2,496,798

 

 

 

5,744,897

 

 

 

5,275,389

 

Total expenses

 

 

9,792,067

 

 

 

10,442,793

 

 

 

21,951,054

 

 

 

21,613,930

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of securities

 

 

-

 

 

 

-

 

 

 

1,416,023

 

 

 

-

 

Income before income taxes

 

 

4,686,352

 

 

 

3,903,541

 

 

 

7,679,523

 

 

 

10,397,002

 

Income tax expense

 

 

98,004

 

 

 

17,351

 

 

 

109,418

 

 

 

58,999

 

Net income

 

 

4,588,348

 

 

 

3,886,190

 

 

 

7,570,105

 

 

 

10,338,003

 

Redeemable Series A Preferred Unit distributions and accretion

 

 

(717,762

)

 

 

(717,763

)

 

 

(1,435,525

)

 

 

(1,435,526

)

Net income available to Partners

 

$

3,870,586

 

 

$

3,168,427

 

 

$

6,134,580

 

 

$

8,902,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to Partners allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

38,706

 

 

$

31,684

 

 

$

(14,698

)

 

$

811,929

 

Limited Partners - BUCs

 

 

3,806,395

 

 

 

3,103,581

 

 

 

6,118,611

 

 

 

8,024,225

 

Limited Partners - Restricted units

 

 

25,485

 

 

 

33,162

 

 

 

30,667

 

 

 

66,323

 

 

 

$

3,870,586

 

 

$

3,168,427

 

 

$

6,134,580

 

 

$

8,902,477

 

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

 

$

0.06

 

 

$

0.05

 

 

$

0.10

 

 

$

0.13

 

Weighted average number of BUCs outstanding, basic

 

 

60,545,204

 

 

 

60,426,177

 

 

 

60,649,692

 

 

 

60,426,177

 

Weighted average number of BUCs outstanding, diluted

 

 

60,545,204

 

 

 

60,426,177

 

 

 

60,649,692

 

 

 

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 June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

4,588,348

 

 

$

3,886,190

 

 

$

7,570,105

 

 

$

10,338,003

 

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 on securities

 

 

20,971,649

 

 

 

14,920,081

 

 

 

13,913,913

 

 

 

23,064,008

 

Comprehensive income

 

$

25,559,997

 

 

$

18,806,271

 

 

$

20,447,383

 

 

$

33,402,011

 

 

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 (Note 3)

 

 

80,501

 

 

 

-

 

 

 

365,218

 

 

 

445,719

 

 

 

-

 

Net income (loss) 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

 

Distributions paid or accrued ($0.06 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(36,870

)

 

 

-

 

 

 

(3,650,112

)

 

 

(3,686,982

)

 

 

-

 

Net income allocable to Partners

 

 

38,706

 

 

 

-

 

 

 

3,831,880

 

 

 

3,870,586

 

 

 

-

 

Restricted unit compensation expense

 

 

2,962

 

 

 

-

 

 

 

293,306

 

 

 

296,268

 

 

 

-

 

Unrealized gain on securities

 

 

209,716

 

 

 

-

 

 

 

20,761,933

 

 

 

20,971,649

 

 

 

20,971,649

 

Balance as of June 30, 2020

 

$

815,686

 

 

$

60,835,204

 

 

$

347,071,716

 

 

$

347,887,402

 

 

$

112,185,955

 

 

 

 

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 14)

 

 

(2

)

 

 

-

 

 

 

(210

)

 

 

(212

)

 

 

-

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(53,812

)

 

 

-

 

 

 

(5,327,357

)

 

 

(5,381,169

)

 

 

-

 

Distribution of Tier 2 income (Note 3)

 

 

(753,025

)

 

 

-

 

 

 

(2,259,077

)

 

 

(3,012,102

)

 

 

-

 

Net income allocable to Partners

 

 

780,245

 

 

 

-

 

 

 

4,953,805

 

 

 

5,734,050

 

 

 

-

 

Restricted unit compensation expense

 

 

1,842

 

 

 

-

 

 

 

182,342

 

 

 

184,184

 

 

 

-

 

Unrealized gain on securities

 

 

81,439

 

 

 

-

 

 

 

8,062,488

 

 

 

8,143,927

 

 

 

8,143,927

 

Balance as of March 31, 2019

 

 

401,277

 

 

 

60,691,467

 

 

 

309,733,142

 

 

 

310,134,419

 

 

 

67,121,969

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(76,631

)

 

 

-

 

 

 

(7,586,433

)

 

 

(7,663,064

)

 

 

-

 

Net income allocable to Partners

 

 

31,684

 

 

 

-

 

 

 

3,136,743

 

 

 

3,168,427

 

 

 

-

 

Restricted unit compensation expense

 

 

1,862

 

 

 

-

 

 

 

184,368

 

 

 

186,230

 

 

 

-

 

Unrealized gain on securities

 

 

149,201

 

 

 

-

 

 

 

14,770,880

 

 

 

14,920,081

 

 

 

14,920,081

 

Balance as of June 30, 2019

 

$

507,393

 

 

 

60,691,467

 

 

$

320,238,700

 

 

$

320,746,093

 

 

$

82,042,050

 

 

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 Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

7,570,105

 

 

$

10,338,003

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,421,519

 

 

 

1,640,612

 

Gain on sale of investment in securities

 

 

(1,416,023

)

 

 

-

 

Provision for credit loss

 

 

1,822,356

 

 

 

-

 

Contingent interest realized on investing activities

 

 

(12,043

)

 

 

(3,042,102

)

Impairment charge on real estate assets

 

 

25,200

 

 

 

-

 

(Gain) loss on derivatives, net of cash paid

 

 

(18,915

)

 

 

508,354

 

Restricted unit compensation expense

 

 

335,336

 

 

 

370,414

 

Bond premium/discount amortization

 

 

(48,021

)

 

 

(67,657

)

Debt premium amortization

 

 

(20,229

)

 

 

-

 

Amortization of deferred financing costs

 

 

791,026

 

 

 

731,006

 

Deferred income tax expense & income tax payable/receivable

 

 

90,927

 

 

 

172,965

 

Change in preferred return receivable from unconsolidated entities, net

 

 

(1,260,261

)

 

 

(3,005,017

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Increase in interest receivable

 

 

(104,356

)

 

 

(207,986

)

Decrease in other assets

 

 

362,468

 

 

 

734,903

 

Decrease in accounts payable and accrued expenses

 

 

(597,859

)

 

 

(1,051,467

)

Net cash provided by operating activities

 

 

8,941,230

 

 

 

7,122,028

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(116,887

)

 

 

(58,247

)

Acquisition of mortgage revenue bonds

 

 

(7,489,950

)

 

 

(19,250,000

)

Advances on governmental issuer loan

 

 

(40,000,000

)

 

 

-

 

Contributions to unconsolidated entities

 

 

(11,163,709

)

 

 

(17,285,950

)

Advances on property loans

 

 

(1,667,776

)

 

 

-

 

Principal payments received on mortgage revenue bonds

 

 

5,904,044

 

 

 

14,341,785

 

Proceeds from sale of PHC Certificates

 

 

43,349,357

 

 

 

-

 

Principal payments received on PHC Certificates

 

 

-

 

 

 

2,767,166

 

Proceeds from sale of investment in an unconsolidated entity

 

 

7,762,166

 

 

 

-

 

Principal payments received on taxable mortgage revenue bonds

 

 

4,324

 

 

 

23,953

 

Principal payments received on property loans and contingent interest

 

 

12,043

 

 

 

11,409,737

 

Net cash used in investing activities

 

 

(3,406,388

)

 

 

(8,051,556

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Distributions paid

 

 

(16,629,884

)

 

 

(17,386,938

)

Repurchase of BUCs

 

 

(2,106,673

)

 

 

-

 

Proceeds from debt financing

 

 

91,386,000

 

 

 

18,430,500

 

Principal payments on debt financing

 

 

(88,985,375

)

 

 

(5,271,169

)

Principal payments on mortgages payable

 

 

(419,128

)

 

 

(373,843

)

Principal borrowing on unsecured lines of credit

 

 

7,475,000

 

 

 

23,200,000

 

Principal payments on unsecured lines of credit

 

 

(1,980,000

)

 

 

(35,659,200

)

Decrease in security deposit liability related to restricted cash

 

 

(50,617

)

 

 

(26,397

)

Debt financing and other deferred costs

 

 

(285,425

)

 

 

(105,457

)

Net cash used in financing activities

 

 

(11,596,102

)

 

 

(17,192,504

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(6,061,260

)

 

 

(18,122,032

)

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

 

$

37,124,721

 

 

$

15,146,579

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

10,226,352

 

 

$

11,297,205

 

Cash paid during the period for income taxes

 

 

18,491

 

 

 

155,000

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Distributions declared but not paid for BUCs and General Partner

 

$

3,686,982

 

 

$

7,663,064

 

Distributions declared but not paid for Series A Preferred Units

 

 

708,750

 

 

 

708,750

 

Capital expenditures financed through accounts payable

 

 

-

 

 

 

360

 

Deferred financing costs financed through accounts payable

 

 

55,557

 

 

 

35,969

 

 

 

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:

 

 

 

June 30, 2020

 

 

June 30, 2019

 

Cash and cash equivalents

 

$

36,143,639

 

 

$

13,821,980

 

Restricted cash

 

 

981,082

 

 

 

1,324,599

 

Total cash, cash equivalents and restricted cash

 

$

37,124,721

 

 

$

15,146,579

 

 

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”), an affiliate 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 20). 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 (see 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;

 

NaN 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 scheduled interest or principal 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. 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 six months ended June 30, 2020, there was a provision for credit loss reported by the Partnership related to one MRB (see Note 6).  There were 0 other-than-temporary impairment charges or provision for credit loss reported during the six months ended June 30, 2019.

Investment in Governmental Issuer Loan

The Partnership accounts for its investment in a governmental issuer loan (“GIL”) under the accounting guidance for certain investments in debt and equity securities.  The Partnership’s investment in this instrument is classified as a held-to-maturity debt security and is reported at amortized cost.

The Partnership periodically reviews its GIL 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;

 

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 scheduled interest or principal payments;

 

The failure of the borrower 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 the GIL’s estimated fair value is below amortized cost, and the Partnership does not expect to recover its entire amortized cost, 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).  

10


 

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 value of its GIL, 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 and six months ended June 30, 2020, there was not a provision for credit loss or other-than-temporary impairment charges reported by the Partnership related to its GIL.

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 June 30, 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.

 

The business and economic uncertainty resulting from the COVID-19 pandemic has made estimates and assumptions more difficult to calculate. 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 and the GIL, tenants at the MF Properties and operations of the Partnership’s investments in unconsolidated entities. In addition, market volatility may cause fluctuations in the valuation of the Partnership’s MRBs, taxable MRBs, GIL, MF Properties and investments in unconsolidated entities. The extent to which COVID-19 will impact the Partnership’s financial condition or results of operations in the future is uncertain and actual results and outcomes could differ from current estimates.

 

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 completed an initial assessment and determined that its property loans, receivables reported within other assets, financial guarantees and commitments 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 condensed consolidated financial statements.

 

 

11


 

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 0 dilutive BUCs for the three and six months ended June 30, 2020 and 2019.

 

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 (see Note 16). 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. 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 8).

Non-Consolidated VIEs

The Partnership has variable interests in various entities in the form of MRBs, a GIL, 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.

12


 

The Partnership held variable interests in 18 and 17 non-consolidated VIEs as of June 30, 2020 and December 31, 2019, respectively. The following table summarizes the Partnership’s variable interests in these entities as of June 30, 2020 and December 31, 2019:

 

 

 

Maximum Exposure to Loss

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Mortgage revenue bonds

 

$

32,096,000

 

 

$

30,455,000

 

Governmental issuer loan

 

 

40,000,000

 

 

 

-

 

Property loans

 

 

1,667,776

 

 

 

-

 

Investment in unconsolidated entities

 

 

91,643,668

 

 

 

86,981,864

 

 

 

$

165,407,444

 

 

$

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 the GIL, property loans and investments in unconsolidated entities is equal to the Partnership’s carrying value.

 

13


 

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 (see Note 16). All MRBs are current on contractual debt service as of June 30, 2020. The Partnership had the following investments in MRBs as of June 30, 2020 and December 31, 2019:

 

 

 

June 30, 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 (4)

 

CA

 

$

10,104,963

 

 

$

1,828,130

 

 

$

-

 

 

$

11,933,093

 

Glenview Apartments - Series A (3)

 

CA

 

 

4,508,920

 

 

 

848,201

 

 

 

-

 

 

 

5,357,121

 

Harmony Court Bakersfield - Series A (4)

 

CA

 

 

3,684,410

 

 

 

632,035

 

 

 

-

 

 

 

4,316,445

 

Harmony Terrace - Series A (4)

 

CA

 

 

6,820,517

 

 

 

1,274,532

 

 

 

-

 

 

 

8,095,049

 

Harden Ranch - Series A (2)

 

CA

 

 

6,661,912

 

 

 

1,313,138

 

 

 

-

 

 

 

7,975,050

 

Las Palmas II - Series A (4)

 

CA

 

 

1,671,884

 

 

 

322,393

 

 

 

-

 

 

 

1,994,277

 

Montclair Apartments - Series A (3)

 

CA

 

 

2,442,734

 

 

 

511,677

 

 

 

-

 

 

 

2,954,411

 

Montecito at Williams Ranch Apartments - Series A (6)

 

CA

 

 

7,654,093

 

 

 

1,873,968

 

 

 

-

 

 

 

9,528,061

 

San Vicente - Series A (4)

 

CA

 

 

3,447,335

 

 

 

632,272

 

 

 

-

 

 

 

4,079,607

 

Santa Fe Apartments - Series A (3)

 

CA

 

 

2,959,281

 

 

 

609,255

 

 

 

-

 

 

 

3,568,536

 

Seasons at Simi Valley - Series A (4)

 

CA

 

 

4,260,003

 

 

 

994,172

 

 

 

-

 

 

 

5,254,175

 

Seasons Lakewood - Series A (4)

 

CA

 

 

7,265,333

 

 

 

1,357,653

 

 

 

-

 

 

 

8,622,986

 

Seasons San Juan Capistrano - Series A (4)

 

CA

 

 

12,232,449

 

 

 

2,169,826

 

 

 

-

 

 

 

14,402,275

 

Summerhill - Series A (4)

 

CA

 

 

6,344,494

 

 

 

1,088,354

 

 

 

-

 

 

 

7,432,848

 

Sycamore Walk - Series A (4)

 

CA

 

 

3,538,734

 

 

 

664,864

 

 

 

-

 

 

 

4,203,598

 

The Village at Madera - Series A (4)

 

CA

 

 

3,047,293

 

 

 

536,986

 

 

 

-

 

 

 

3,584,279

 

Tyler Park Townhomes - Series A (2)

 

CA

 

 

5,803,267

 

 

 

835,563

 

 

 

-

 

 

 

6,638,830

 

Vineyard Gardens - Series A (6)

 

CA

 

 

3,983,421

 

 

 

900,633

 

 

 

-

 

 

 

4,884,054

 

Westside Village Market - Series A (2)

 

CA

 

 

3,792,423

 

 

 

724,447

 

 

 

-

 

 

 

4,516,870

 

Brookstone (1)

 

IL

 

 

7,391,425

 

 

 

2,226,656

 

 

 

-

 

 

 

9,618,081

 

Copper Gate Apartments (2)

 

IN

 

 

5,005,000

 

 

 

677,901

 

 

 

-

 

 

 

5,682,901

 

Renaissance - Series A (3)

 

LA

 

 

10,936,829

 

 

 

1,863,478

 

 

 

-

 

 

 

12,800,307

 

Live 929 Apartments (6), (7)

 

MD

 

 

39,830,967

 

 

 

-

 

 

 

(477,260

)

 

 

39,353,707

 

Woodlynn Village (1)

 

MN

 

 

4,146,000

 

 

 

53,964

 

 

 

-

 

 

 

4,199,964

 

Gateway Village (6)

 

NC

 

 

2,600,000

 

 

 

153,039

 

 

 

-

 

 

 

2,753,039

 

Greens Property - Series A (2)

 

NC

 

 

7,883,000

 

 

 

789,730

 

 

 

-

 

 

 

8,672,730

 

Lynnhaven Apartments (6)

 

NC

 

 

3,450,000

 

 

 

203,071

 

 

 

-

 

 

 

3,653,071

 

Silver Moon - Series A (3)

 

NM

 

 

7,730,484

 

 

 

1,696,898

 

 

 

-

 

 

 

9,427,382

 

Village at Avalon - Series A (5)

 

NM

 

 

16,246,373

 

 

 

3,688,529

 

 

 

-

 

 

 

19,934,902

 

Ohio Properties - Series A (1)

 

OH

 

 

13,791,000

 

 

 

60,063

 

 

 

-

 

 

 

13,851,063

 

Bridle Ridge (1)

 

SC

 

 

7,275,000

 

 

 

144,792

 

 

 

-

 

 

 

7,419,792

 

Columbia Gardens (4)

 

SC

 

 

12,983,220

 

 

 

2,304,405

 

 

 

-

 

 

 

15,287,625

 

Companion at Thornhill Apartments (4)

 

SC

 

 

11,117,797

 

 

 

1,782,671

 

 

 

-

 

 

 

12,900,468

 

Cross Creek (1)

 

SC

 

 

6,141,120

 

 

 

2,439,945

 

 

 

-

 

 

 

8,581,065

 

Rosewood Townhomes - Series A (6)

 

SC

 

 

9,280,000

 

 

 

1,653,451

 

 

 

-

 

 

 

10,933,451

 

South Pointe Apartments - Series A (6)

 

SC

 

 

21,600,000

 

 

 

4,071,774

 

 

 

-

 

 

 

25,671,774

 

The Palms at Premier Park Apartments (2)

 

SC

 

 

18,730,489

 

 

 

2,713,107

 

 

 

-

 

 

 

21,443,596

 

Village at River's Edge (4)

 

SC

 

 

9,837,910

 

 

 

2,068,508

 

 

 

-

 

 

 

11,906,418

 

Willow Run (4)

 

SC

 

 

12,802,849

 

 

 

2,091,951

 

 

 

-

 

 

 

14,894,800

 

Arbors at Hickory Ridge (2)

 

TN

 

 

10,984,840

 

 

 

1,952,655

 

 

 

-

 

 

 

12,937,495

 

Avistar at Copperfield - Series A (6)

 

TX

 

 

13,881,681

 

 

 

2,506,209

 

 

 

-

 

 

 

16,387,890

 

Avistar at the Crest - Series A (2)

 

TX

 

 

9,197,291

 

 

 

1,960,964

 

 

 

-

 

 

 

11,158,255

 

Avistar at the Oaks - Series A (2)

 

TX

 

 

7,432,683

 

 

 

1,573,517

 

 

 

-

 

 

 

9,006,200

 

Avistar at the Parkway - Series A (3)

 

TX

 

 

12,788,522

 

 

 

2,343,298

 

 

 

-

 

 

 

15,131,820

 

Avistar at Wilcrest - Series A (6)

 

TX

 

 

5,260,876

 

 

 

845,705

 

 

 

-

 

 

 

6,106,581

 

Avistar at Wood Hollow - Series A (6)

 

TX

 

 

39,945,710

 

 

 

6,893,766

 

 

 

-

 

 

 

46,839,476

 

Avistar in 09 - Series A (2)

 

TX

 

 

6,417,834

 

 

 

1,358,671

 

 

 

-

 

 

 

7,776,505

 

Avistar on the Boulevard - Series A (2)

 

TX

 

 

15,668,577

 

 

 

3,071,059

 

 

 

-

 

 

 

18,739,636

 

Avistar on the Hills - Series A (2)

 

TX

 

 

5,088,582

 

 

 

1,100,068

 

 

 

-

 

 

 

6,188,650

 

Bruton Apartments (4)

 

TX

 

 

17,741,983

 

 

 

3,729,856

 

 

 

-

 

 

 

21,471,839

 

Concord at Gulfgate - Series A (4)

 

TX

 

 

18,887,619

 

 

 

4,174,496

 

 

 

-

 

 

 

23,062,115

 

Concord at Little York - Series A (4)

 

TX

 

 

13,231,671

 

 

 

3,044,416

 

 

 

-

 

 

 

16,276,087

 

Concord at Williamcrest - Series A (4)

 

TX

 

 

20,497,275

 

 

 

4,622,985

 

 

 

-

 

 

 

25,120,260

 

Crossing at 1415 - Series A (4)

 

TX

 

 

7,369,164

 

 

 

1,473,173

 

 

 

-

 

 

 

8,842,337

 

Decatur Angle (4)

 

TX

 

 

22,364,588

 

 

 

4,471,786

 

 

 

-

 

 

 

26,836,374

 

Esperanza at Palo Alto (4)

 

TX

 

 

19,288,690

 

 

 

4,738,934

 

 

 

-

 

 

 

24,027,624

 

Heights at 515 - Series A (4)

 

TX

 

 

6,746,597

 

 

 

1,377,255

 

 

 

-

 

 

 

8,123,852

 

Heritage Square - Series A (3)

 

TX

 

 

10,637,915

 

 

 

1,699,021

 

 

 

-

 

 

 

12,336,936

 

Oaks at Georgetown - Series A (4)

 

TX

 

 

12,187,967

 

 

 

1,810,989

 

 

 

-

 

 

 

13,998,956

 

Runnymede (1)

 

TX

 

 

9,865,000

 

 

 

100,289

 

 

 

-

 

 

 

9,965,289

 

Southpark (1)

 

TX

 

 

11,585,255

 

 

 

2,191,903

 

 

 

-

 

 

 

13,777,158

 

15 West Apartments (4)

 

WA

 

 

9,639,432

 

 

 

2,584,675

 

 

 

-

 

 

 

12,224,107

 

Mortgage revenue bonds held in trust

 

 

 

$

635,712,681

 

 

$

109,427,722

 

 

$

(477,260

)

 

$

744,663,143

 

 

(1)

MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 16

(2)

MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 16

(3)

MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 16

(4)

MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 16

14


 

(5)

MRB held by Morgan Stanley in a secured financing transaction, Note 16

(6)

MRBs held by Mizuho Capital Markets, LLC in a secured financing transaction, Note 16

(7)

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

 

 

 

June 30, 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

 

 

$

1,885,539

 

 

$

-

 

 

$

15,085,539

 

Solano Vista - Series A

 

CA

 

 

2,665,000

 

 

 

719,622

 

 

 

-

 

 

 

3,384,622

 

Greens Property - Series B

 

NC

 

 

927,877

 

 

 

129,272

 

 

 

-

 

 

 

1,057,149

 

Arby Road Apartments - Series A

 

NV

 

 

7,475,000

 

 

 

15,415

 

 

 

-

 

 

 

7,490,415

 

Ohio Properties - Series B

 

OH

 

 

3,495,160

 

 

 

13,533

 

 

 

-

 

 

 

3,508,693

 

Rosewood Townhomes - Series B

 

SC

 

 

470,000

 

 

 

2,606

 

 

 

-

 

 

 

472,606

 

South Pointe Apartments - Series B

 

SC

 

 

1,100,000

 

 

 

6,099

 

 

 

-

 

 

 

1,106,099

 

Pro Nova 2014-1

 

TN

 

 

8,197,465

 

 

 

-

 

 

 

-

 

 

 

8,197,465

 

Avistar at the Crest - Series B

 

TX

 

 

738,480

 

 

 

116,511

 

 

 

-

 

 

 

854,991

 

Avistar at the Oaks - Series B

 

TX

 

 

540,485

 

 

 

81,576

 

 

 

-

 

 

 

622,061

 

Avistar at the Parkway - Series B

 

TX

 

 

124,144

 

 

 

40,059

 

 

 

-

 

 

 

164,203

 

Avistar in 09 - Series B

 

TX

 

 

445,851

 

 

 

69,002

 

 

 

-

 

 

 

514,853

 

Avistar on the Boulevard - Series B

 

TX

 

 

438,807

 

 

 

64,325

 

 

 

-

 

 

 

503,132

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

39,818,269

 

 

$

3,143,559

 

 

$

-

 

 

$

42,961,828

 

 

15


 

 

 

 

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 16

(2)

MRBs held by Deutsche Bank in a secured financing transaction, Note 16

(3)

MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 16

16


 

(4)

MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 16

(5)

MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 16

(6)

MRB held by Morgan Stanley in a secured financing transaction, see Note 16

(7)

MRB held by Mizuho Capital Markets, LLC in a secured financing transaction, see Note 16

(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 23 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 and six months ended June 30, 2020, the Partnership recognized a provision for credit loss of approximately $465,000 and $1.8 million, respectively, 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 borrower’s request for forbearance, and the general creditworthiness of proton therapy centers in the United States, including the impact on them of the COVID-19 pandemic.

 

The cumulative unrealized loss for the Live 929 Apartments MRB as of June 30, 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 Six Months of 2020

 

Acquisitions:

 

The following MRBs were acquired at prices that approximated the principal outstanding plus accrued interest during the six months ended June 30, 2020:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Arby Road Apartments - Series A (1)

 

June

 

Las Vegas, NV

 

180

 

10/1/2027

 

 

5.35

%

 

$

1,690,000

 

Arby Road Apartments - Series A (1)

 

June

 

Las Vegas, NV

 

180

 

4/1/2041

 

 

5.50

%

 

 

5,785,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

7,475,000

 

(1)

Both MRBs are part of the same series but have different interest rates and maturity dates.

17


 

Redemptions:

 

The following MRB was redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the six months ended June 30, 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

 

 

 

 

MRB Activity in the First Six Months of 2019

 

Acquisitions:

 

The following MRBs were acquired at prices that approximated the principal outstanding during the six months ended June 30, 2019:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Gateway Village

 

February

 

Durham, NC

 

 

64

 

 

4/1/2032

 

 

6.10

%

 

$

2,600,000

 

Lynnhaven Apartments

 

February

 

Durham, NC

 

 

75

 

 

4/1/2032

 

 

6.10

%

 

 

3,450,000

 

Montevista - Series A

 

June

 

San Pablo, CA

 

 

82

 

 

7/1/2036

 

 

5.75

%

 

 

6,720,000

 

Montevista - Series B

 

June

 

San Pablo, CA

 

 

82

 

 

7/1/2021

 

 

5.75

%

 

 

6,480,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

19,250,000

 

 

Redemptions:

 

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

 

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Seasons San Juan Capistrano - Series B

 

January

 

San Juan Capistrano, CA

 

 

112

 

 

1/1/2019

 

 

8.00

%

 

$

5,574,000

 

Courtyard - Series B

 

April

 

Fullerton, CA

 

 

108

 

 

6/1/2019

 

 

8.00

%

 

 

6,228,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

11,802,000

 

 

 

 

Restructurings:

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

 

 

Property Name

 

Month

Restructured

 

Property Location

 

Units

 

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Restructuring

 

Avistar at Copperfield - Series B

 

May

 

Houston, TX

 

 

192

 

 

6/1/2054

 

 

12.00

%

 

$

4,000,000

 

Avistar at Wilcrest - Series B

 

May

 

Houston, TX

 

 

88

 

 

6/1/2054

 

 

12.00

%

 

 

1,550,000

 

Avistar at Wood Hollow - Series B

 

May

 

Austin, TX

 

 

409

 

 

6/1/2054

 

 

12.00

%

 

 

8,410,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,960,000

 

 

 

 

7. Governmental Issuer Loan

 

The Partnership owns a governmental issuer loan (“GIL”) that was issued by a state governmental authority to provide construction financing for an affordable multifamily property. The Partnership expects and believes the interest earned on the GIL is excludable from gross income for federal income tax purposes. The GIL does not constitute an obligation of any state government, agency or authority and no state government, agency or authority is liable on it, nor is the taxing power of any state government pledged to the payment of principal or interest on the GIL. The GIL is secured by the borrower’s non-recourse obligation evidenced by a mortgage

18


 

on all real and personal property associated with the underlying property. The sole source of the funds to pay principal and interest on the GIL is the net cash flow or the sale or refinancing proceeds from the property. The GIL shares a first mortgage lien position with a property loan also owned by the Partnership (see Note 11). The GIL is held in trust in connection with a TOB Trust financing (see Note 16). The terms of the Partnership’s GIL as of June 30, 2020 are as follows:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Variable Interest Rate

 

Amortized Cost

 

Scharbauer Flats Apartments

 

June

 

Midland, TX

 

300

 

1/1/2023 (1)

 

SIFMA + 3.10%

 

$

40,000,000

 

 

(1)

The borrower may automatically extend the maturity to July 2023 and may further extend the maturity to January 2024 upon payment of a non-refundable extension fee.

 

An affiliate of the Partnership has forward committed to purchase the GIL at maturity, if the property has reached stabilization and other conditions are met. See Note 22 for further information. Affiliates of the borrower have guaranteed payment of principal and accrued interest on the GIL of 100% at origination, decreasing to 50% upon receipt of the certificate of occupancy, and decreasing to 25% upon achievement of 90% occupancy for 30 consecutive days.

 

 

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

The Partnership’s PHC Certificates represented beneficial interests in 3 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 16).

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 23 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.

 

9. Real Estate Assets

The following tables summarize information regarding the Partnership’s real estate assets as of June 30, 2020 and December 31, 2019:

 

Real Estate Assets as of June 30, 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

 

 

$

39,121,743

 

 

$

42,321,011

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,938,822

 

 

 

32,938,822

 

Land held for development

 

 

 

(1)

 

 

 

1,675,997

 

 

 

-

 

 

 

1,675,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,935,830

 

Less accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,773,436

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

60,162,394

 

 

(1)

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

19


 

 

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 Six Months of 2020

As of June 30, 2020, the land held for development in Gardner, KS was under contract for sale.  

 

In June 2020, the Partnership determined that the land held for development in Gardner, Kansas was impaired.  The Partnership recorded an impairment charge of $25,200 in the second quarter of 2020, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.

 

10. 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.

 

The following table provides the details of the investments in unconsolidated entities as of June 30, 2020 and December 31, 2019 and remaining equity commitment amounts as of June 30, 2020:

 

Property Name

 

Location

 

Units

 

 

Month

Commitment

Executed

 

Construction

Completion

Date

 

Carrying Value as of June 30, 2020

 

 

Carrying Value as of December 31, 2019

 

 

Maximum

Remaining

Equity Commitment as of June 30, 2020

 

Vantage at Waco

 

Waco, TX

 

 

288

 

 

August 2016

 

May 2018

 

$

-

 

 

$

9,337,166

 

 

$

-

 

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

 

April 2020

 

 

7,840,500

 

 

 

7,840,500

 

 

 

-

 

Vantage at Bulverde

 

Bulverde, TX

 

 

288

 

 

March 2018

 

August 2019

 

 

10,570,000

 

 

 

10,144,052

 

 

 

-

 

Vantage at Germantown

 

Germantown, TN

 

 

288

 

 

June 2018

 

March 2020

 

 

12,344,784

 

 

 

11,745,155

 

 

 

-

 

Vantage at Murfreesboro

 

Murfreesboro, TN

 

 

288

 

 

September 2018

 

N/A

 

 

14,206,483

 

 

 

13,516,425

 

 

 

-

 

Vantage at Coventry

 

Omaha, NE

 

 

294

 

 

September 2018

 

N/A

 

 

9,007,435

 

 

 

9,007,435

 

 

 

-

 

Vantage at Conroe

 

Conroe, TX

 

 

288

 

 

April 2019

 

N/A

 

 

9,901,396

 

 

 

8,078,519

 

 

 

-

 

Vantage at O'Connor

 

San Antonio, TX

 

 

288

 

 

October 2019

 

N/A

 

 

7,845,359

 

 

 

5,016,811

 

 

 

-

 

Vantage at Westover Hills

 

San Antonio, TX

 

 

288

 

 

January 2020

 

N/A

 

 

7,631,910

 

 

 

-

 

 

 

-

 

 

 

 

 

 

2,892

 

 

 

 

 

 

$

91,643,668

 

 

$

86,981,864

 

 

$

-

 

 

Activity in the First Six 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.

 

20


 

In June 2020, Vantage at Waco sold substantially all assets to an unrelated third party and ceased operations. The Partnership received cash of approximately $10.3 million upon sale. The Partnership recognized approximately $931,000 of “Investment Income” associated with the sale.  The Partnership may also be entitled to up to $586,000 of additional proceeds in 2020 if certain gain contingencies are satisfied.  

 

Activity in the First Six Months of 2019:

 

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

 

The following table provides combined summary financial information for the Partnership’s investments in unconsolidated entities for the three and six months ended June 30, 2020 and 2019:

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Property Revenues

 

$

2,987,106

 

 

$

3,103,876

 

 

$

5,470,711

 

 

$

5,821,144

 

Gain on sale of property

 

$

6,262,992

 

 

$

-

 

 

$

6,262,992

 

 

$

-

 

Net income (loss)

 

$

4,356,453

 

 

$

(571,382

)

 

$

1,837,288

 

 

$

(688,445

)

 

11. Property Loans, Net of Loan Loss Allowances

The following tables summarize the Partnership’s property loans, net of loan loss allowances, as of June 30, 2020 and December 31, 2019:

 

 

 

June 30, 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

 

Scharbauer Flats Apartments

 

 

1,667,776

 

 

 

-

 

 

 

1,667,776

 

Total

 

$

17,060,684

 

 

$

(7,393,814

)

 

$

9,666,870

 

 

 

 

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 and six months ended June 30, 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 and six months ended June 30, 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 and six months ended June 30, 2020, the outstanding property loan balance for Live 929 was in nonaccrual status as, in management’s opinion, the interest was not considered collectible.

 

21


 

Activity in the First Six Months of 2020

 

In June 2020, in addition to its acquisition of the Partnership’s GIL, the Partnership committed to loan up to $24.2 million to fund construction of Scharbauer Flats Apartments in Midland, Texas.  As of June 30, 2020, approximately $1.7 million of funds had been advanced under the property loan, with the remaining commitment to be advanced in future periods. The Scharbauer Flats Apartments property loan and  GIL (see Note 7) are on parity and share a first mortgage lien position. Affiliates of the borrower have guaranteed payment of principal and accrued interest on the GIL of 100% at origination, decreasing to 50% upon receipt of the certificate of occupancy, and decreasing to 25% upon achievement of 90% occupancy for 30 consecutive days. The property loan has a stated repayment date of January 1, 2023, with two six-month extension options, and bears interest at a variable rate.  The Partnership classified the property loan as a “loan held for sale.”

 

Activity in the First Six 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).

12. Income Tax Provision

 

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by the Greens Hold Co, which owns The 50/50 MF Property and certain property loans. The following table summarizes income tax expense (benefit) for the three and six months ended June 30, 2020 and 2019:

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Current income tax expense

 

$

98,964

 

 

$

32,823

 

 

$

141,299

 

 

$

115,163

 

Deferred income tax benefit

 

 

(960

)

 

 

(15,472

)

 

 

(31,881

)

 

 

(56,164

)

Total income tax expense

 

$

98,004

 

 

$

17,351

 

 

$

109,418

 

 

$

58,999

 

 

The Partnership evaluated whether it is more likely than not that its deferred income tax assets will be realizable. There was 0 valuation allowance recorded as of June 30, 2020 and December 31, 2019.

 

13. Other Assets

The following table summarizes the other assets as of June 30, 2020 and December 31, 2019:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Deferred financing costs, net

 

$

282,840

 

 

$

353,862

 

Fair value of derivative instruments (Note 18)

 

 

29,826

 

 

 

10,911

 

Taxable mortgage revenue bonds, at fair value

 

 

1,456,279

 

 

 

1,383,237

 

Operating lease right-of-use assets, net

 

 

1,657,904

 

 

 

1,673,242

 

Other assets

 

 

1,303,206

 

 

 

1,641,099

 

Total other assets

 

$

4,730,055

 

 

$

5,062,351

 

 

As of June 30, 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 14).  

 

See Note 23 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.

 

22


 

14. Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the accounts payable, accrued expenses and other liabilities as of June 30, 2020 and December 31, 2019:

 

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Accounts payable

 

$

307,830

 

 

$

93,834

 

Accrued expenses

 

 

1,904,974

 

 

 

2,529,982

 

Accrued interest expense

 

 

2,698,830

 

 

 

2,690,076

 

Operating lease liabilities

 

 

2,141,312

 

 

 

2,138,783

 

Other liabilities

 

 

1,422,729

 

 

 

1,583,492

 

Total accounts payable, accrued expenses and other liabilities

 

$

8,475,675

 

 

$

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 June 30, 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 and $84,000 for the three and six months ended June 30, 2020 and 2019, respectively, 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 June 30, 2020:

 

Remainder of 2020

 

$

67,993

 

2021

 

 

136,366

 

2022

 

 

139,091

 

2023

 

 

141,871

 

2024

 

 

144,706

 

Thereafter

 

 

4,517,274

 

Total

 

 

5,147,301

 

Less:  Amount representing interest

 

 

(3,005,989

)

Total operating lease liabilities

 

$

2,141,312

 

 

15. Unsecured Lines of Credit

The following tables summarize the unsecured lines of credit (“LOC”) as of June 30, 2020 and December 31, 2019:

 

Unsecured Lines of Credit

 

Outstanding as of June 30, 2020

 

 

Total

Commitment

 

 

Commitment

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

18,695,000

 

 

$

50,000,000

 

 

June 2021

 

Variable (1)

 

Monthly

 

 

2.68

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2021

 

Variable (1)

 

Monthly

 

 

3.43

%

Total unsecured lines of credit

 

$

18,695,000

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

23


 

 

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 balances of the non-operating LOC as of June 30, 2020 are due in September 2020 and March 2021, though the Partnership can extend final repayment of the amounts due to December 2020 and June 2021, respectively, by making partial repayments. The non-operating LOC contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed 75% of the market value of the Partnership’s assets, as defined in the Credit Agreement. The Partnership was in compliance with all covenants in the Credit Agreement as of June 30, 2020.

 

The Partnership is required to make principal payments to reduce the operating LOC to 0 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 third quarter of 2020 repayment obligation as it maintained a 0 balance in the operating LOC for fifteen consecutive days during July 2020.  

 

 

16. Debt Financing

 

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of June 30, 2020 and December 31, 2019:

 

 

 

Outstanding Debt

Financings as of June 30, 2020, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated

Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - M24

 

$

40,241,181

 

 

$

204,000

 

 

2010

 

May 2027

 

N/A

 

N/A

 

 

N/A

 

 

3.05%

 

Variable - M31 (1)

 

 

78,922,200

 

 

 

4,999

 

 

2014

 

July 2024

 

Weekly

 

0.16%

 

 

1.47%

 

 

1.63%

 

Fixed - M33

 

 

31,085,748

 

 

 

2,606

 

 

2015

 

September 2030

 

N/A

 

N/A

 

 

N/A

 

 

3.24%

 

Fixed - M45 (2)

 

 

216,728,152

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOB Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mizuho Capital Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB (3)

 

 

55,219,902

 

 

 

-

 

 

2020

 

May 2021

 

Weekly

 

0.73%

 

 

1.67%

 

 

2.40%

 

Variable - TOB (3)

 

 

25,722,461

 

 

 

-

 

 

2019

 

June 2021

 

Weekly

 

0.33% - 0.73%

 

 

1.17%

 

 

1.50% - 1.90%

 

Variable - TOB (3)

 

 

42,121,543

 

 

 

-

 

 

2019

 

July 2021

 

Weekly

 

0.35% - 0.43%

 

 

1.17% - 1.66%

 

 

1.60% - 2.01%

 

Variable - TOB

 

 

35,874,471

 

 

 

-

 

 

2020

 

July 2023

 

Weekly

 

0.63%

 

 

0.89%

 

 

1.52%

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

 

13,032,391

 

 

 

-

 

 

2019

 

May 2022

 

N/A

 

N/A

 

 

N/A

 

 

3.53%

 

Total Debt Financings

 

$

538,948,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 July 2020, the stated maturity of the TOB Trusts were extended to July 2023. There were no additional changes to terms or fees associated with the amendment.

24


 

 

 

 

 

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 (see 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, and Note 7 for information regarding the GIL securitized within a TOB Trust 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 June 30, 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 and GIL in relation to thresholds set by Mizuho. There was no requirement to post collateral for the TOB Trusts with Mizuho as of June 30, 2020 and December 31, 2019.

 

The Partnership has entered into 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 (see Note 18).

 

 

The Partnership has entered into various TOB Trust financings with Mizuho secured by MRBs and a GIL. 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 June 30, 2020.

 

25


 

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 June 30, 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 Six Months of 2020

 

 

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 8).  

 

In April 2020, the Partnership extended the maturity dates of the Mizuho Term TOB Trust financings related to Rosewood Townhouses and South Point Apartments from July 1, 2020 to June 1, 2021 and related to Montecito at Williams Ranch, Vineyard Gardens and Live 929 from August 1, 2020 to July 1, 2021.

 

In April 2020, the Partnership terminated its Master Trust Agreement and collapsed its Term TOB Trust and 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 were paid off in full, and the Partnership paid a one-time fee of approximately $454,000 to terminate the trusts.  

 

The following is a summary of the Deutsche Bank Term A/B Trust and TOB Trust financings that were collapsed and paid off in April 2020:

 

Debt Financing

 

Debt Facility

 

Month

 

Paydown Applied

 

Avistar at Copperfield - Series A

 

Term A/B Trust

 

April 2020

 

$

8,417,739

 

Avistar at Wilcrest - Series A

 

Term A/B Trust

 

April 2020

 

 

3,162,435

 

Avistar at Wood Hollow - Series A

 

Term A/B Trust

 

April 2020

 

 

26,860,536

 

Gateway Village

 

Term A/B Trust

 

April 2020

 

 

2,262,000

 

Lynnhaven

 

Term A/B Trust

 

April 2020

 

 

3,001,500

 

Pro Nova 2014-1

 

Term TOB

 

April 2020

 

 

8,010,000

 

 

 

 

 

 

 

$

51,714,210

 

 

The following is a summary of the Mizuho TOB Trust financings that were entered into during the first six months of 2020:

 

TOB Trusts Securitization

 

Outstanding TOB

Trust Financing

 

 

Stated Maturity

 

Reset

Frequency

 

Variable Rate Index

 

Facility Fees

 

Avistar at Copperfield - Series A

 

$

11,818,000

 

 

May 2021

 

Weekly

 

SIFMA

 

1.67%

 

Avistar at Wilcrest - Series A

 

 

4,479,000

 

 

May 2021

 

Weekly

 

SIFMA

 

1.67%

 

Avistar at Wood Hollow - Series A

 

 

34,007,000

 

 

May 2021

 

Weekly

 

SIFMA

 

1.67%

 

Gateway Village

 

 

2,184,000

 

 

May 2021

 

Weekly

 

SIFMA

 

1.67%

 

Lynnhaven

 

 

2,898,000

 

 

May 2021

 

Weekly

 

SIFMA

 

1.67%

 

Scharbauer Flats Apartments

 

 

36,000,000

 

 

July 2023

 

Weekly

 

SIFMA

 

0.89%

 

Total TOB Trust Financing

 

$

91,386,000

 

 

 

 

 

 

 

 

 

 

 

 

Activity in the First Six Months of 2019

 

In February 2019, the Partnership entered into 2 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

 

 

 

 

 

 

 

 

26


 

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

 

Term TOB Trusts Securitization

 

Outstanding Term TOB

Trust Financing

 

 

Stated Maturity

 

Fixed Interest

Rate

 

Village at Avalon

 

$

13,167,000

 

 

May 2022

 

 

3.53

%

Total Term TOB Trust Financing

 

$

13,167,000

 

 

 

 

 

 

 

 

Future Maturities

 

The Partnership’s contractual maturities of borrowings as of June 30, 2020 for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

Remainder of 2020

 

$

2,836,611

 

2021

 

 

127,635,262

 

2022

 

 

17,970,010

 

2023

 

 

41,338,857

 

2024

 

 

87,405,308

 

Thereafter

 

 

263,802,556

 

Total

 

 

540,988,604

 

Unamortized deferred financing costs and debt premium

 

 

(2,040,555

)

Total debt financing, net

 

$

538,948,049

 

 

As of June 30, 2020, certain TOB Trusts mature in the next twelve months. The Partnership has extended the maturity dates for its existing TOB Trusts with maturities in 2021 to July 2023. See Note 25 for additional information.

 

17. 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 June 30, 2020 and December 31, 2019:

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

June 30, 2020, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Period End

Rate

 

The 50/50 MF Property--TIF Loan

 

$

2,680,578

 

 

2020

 

March 2025

 

Fixed

 

 

4.40

%

The 50/50 MF Property--Mortgage

 

 

23,711,330

 

 

2020

 

April 2027

 

Fixed

 

 

4.35

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

26,391,908

 

 

 

 

 

 

 

 

 

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%.

27


 

Activity in the First Six 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 June 30, 2020 for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

Remainder of 2020

 

$

403,959

 

2021

 

 

832,035

 

2022

 

 

869,317

 

2023

 

 

908,269

 

2024

 

 

946,250

 

Thereafter

 

 

22,433,892

 

Total

 

 

26,393,722

 

Unamortized deferred financing costs

 

 

(1,814

)

Total mortgages payable and other secured financings, net

 

$

26,391,908

 

 

18. Interest Rate Derivatives

The following tables summarize the Partnership’s interest rate derivatives as of June 30, 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

June 30, 2020

 

July 2015

 

 

26,863,410

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Wells Fargo Bank

 

$

-

 

July 2015

 

 

26,863,410

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

Royal Bank of Canada

 

 

-

 

July 2015

 

 

26,863,410

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

TOB Trusts

 

SMBC Capital Markets, Inc

 

 

-

 

June 2017

 

 

80,590,229

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

TOB Trusts

 

Barclays Bank PLC

 

 

-

 

Sept 2017

 

 

57,628,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

TOB Trusts

 

Barclays Bank PLC

 

 

-

 

Aug 2019

 

 

78,691,104

 

 

Aug 2024

 

 

4.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

29,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

29,826

 

 

(1)

See Note 23 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 23 for additional details.

 

28


 

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 23 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.  

 

19. 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.

Property Loan Commitment

The Partnership has committed to loan approximately $24.2 million to the owner of Scharbauer Flats in Midland, TX. The Partnership’s remaining maximum commitment totaled approximately $22.5 million as of June 30, 2020. See Note 11 for disclosures related to this property loan.

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 June 30, 2020:

 

Borrower

 

Year the Guarantee

was Executed

 

Maximum Balance

Available on

Construction Loan

 

 

Construction Loan

Balance as of June 30, 2020

 

 

Partnership's Maximum Exposure

as of June 30, 2020

 

 

Guarantee

Terms

Vantage at Stone Creek

 

2018

 

$

30,824,000

 

 

$

30,501,955

 

 

$

15,250,978

 

 

(1)

Vantage at Coventry

 

2018

 

 

31,500,000

 

 

 

23,637,802

 

 

 

23,637,802

 

 

(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 June 30, 2020:

 

Limited Partnership(s)

 

Year the Guarantee

was Executed

 

End of Guarantee

Period

 

Partnership's Maximum Exposure

as of June 30, 2020

 

Ohio Properties

 

2011

 

2026

 

$

3,361,979

 

Greens of Pine Glen, LP

 

2012

 

2027

 

 

2,237,843

 

 

 

 

29


 

20. 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.

 

The following table summarizes the outstanding Series A Preferred Units as of June 30, 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 June 30, 2020 and

   December 31, 2019

 

 

9,450,000

 

 

$

94,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

21. 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 $296,000 and $186,000 for the three months ended June 30, 2020 and 2019, respectively. The compensation expense for RUAs totaled approximately $335,000 and $370,000 for the six months ended June 30, 2020 and 2019, respectively.  Compensation expense is reported within “General and administrative expenses” on the Partnership’s condensed consolidated statements of operations.

30


 

The following table summarizes the RUA activity as of and for the six months ended June 30, 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 June 30, 2020

 

 

290,000

 

 

$

4.98

 

 

The unrecognized compensation expense related to nonvested RUAs granted under the Plan was $1.1 million as of June 30, 2020. The remaining compensation expense is expected to be recognized over a weighted average period of 1.4 years.  The total intrinsic value of unvested RUAs was approximately $1.2 million as of June 30, 2020.

 

22. 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.  

 

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 and six months ended June 30, 2020 and 2019:  

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Partnership administrative fees paid to AFCA 2 (1)

 

$

866,000

 

 

$

902,000

 

 

$

1,731,000

 

 

$

1,800,000

 

Property management fees paid to an affiliate (2)

 

 

-

 

 

 

38,000

 

 

 

-

 

 

 

73,000

 

Reimbursable franchise margin taxes incurred on behalf of

   unconsolidated entities (3)

 

 

33,000

 

 

 

16,000

 

 

 

41,000

 

 

 

32,000

 

 

 

(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, provides property management, administrative and marketing services for the MF Properties (excluding Suites on Paseo). Burlington Capital Properties, LLC ceased to be a related party of the Partnership effective September 10, 2019. The disclosed amounts are only for property management fees earned during the periods that Burlington Capital Properties, LLC was considered a related party of the Partnership. 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 and six months ended June 30, 2020 and 2019:

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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

 

 

9,000

 

 

 

9,000

 

 

$

18,000

 

 

$

18,000

 

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

 

 

321,000

 

 

 

731,000

 

 

 

863,000

 

 

 

822,000

 

 

(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, the GIL and investments in unconsolidated entities.  

31


 

 

 

Burlington Capital Properties, LLC provided services to seven of the properties collateralizing MRBs and one of the Partnership’s investments in unconsolidated entities for the six months ended June 30, 2019. These property management fees were 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.

 

Greystone Servicing Company LLC, an affiliate of the Partnership, has forward committed to purchase the GIL secured by Scharbauer Flats Apartments (see Note 7), once certain conditions are met, at a price equal to the outstanding principal plus accrued interest. Greystone Servicing Company LLC is committed to then immediately sell the GIL to Freddie Mac pursuant to a financing commitment between Greystone Servicing Company LLC and Freddie Mac.

The Partnership reported receivables due from unconsolidated entities of approximately $40,000 and $116,000 as of June 30, 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 $412,000 and $301,000 as of June 30, 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.

 

23. Fair Value of Financial Instruments

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

 

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

 

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

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

 

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

 

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

 

Level 3 inputs are unobservable inputs for asset or liabilities.

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 on a recurring basis.

Investments in MRBs and Taxable MRBs

The fair value of the Partnership’s investments in MRBs and taxable MRBs, as of June 30, 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.

32


 

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 June 30, 2020, the range of effective yields on the individual MRBs was 1.8% to 8.8% per annum, with a weighted average effective yield of 3.4% 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 7.9% to 8.0% per annum, with a weighted average effective yield of 8.0% 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.

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 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 June 30, 2020 are summarized as follows:

 

 

 

Fair Value Measurements as of June 30, 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

 

$

744,663,143

 

 

$

-

 

 

$

-

 

 

$

744,663,143

 

Mortgage revenue bonds

 

 

42,961,828

 

 

 

-

 

 

 

-

 

 

 

42,961,828

 

Taxable mortgage revenue bonds (reported within other assets)

 

 

1,456,279

 

 

 

-

 

 

 

-

 

 

 

1,456,279

 

Derivative instruments (reported within other assets)

 

 

29,826

 

 

 

-

 

 

 

-

 

 

 

29,826

 

Total Assets at Fair Value, net

 

$

789,111,076

 

 

$

-

 

 

$

-

 

 

$

789,111,076

 

 

33


 

The following table summarizes the activity related to Level 3 assets for the three and six months ended June 30, 2020:

 

 

 

For the Three Months Ended June 30, 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 April 1, 2020

 

$

761,082,275

 

 

$

-

 

 

$

1,417,654

 

 

$

36,112

 

 

$

762,536,041

 

Total gains (losses) (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest income and

   interest expense)

 

 

20,098

 

 

 

-

 

 

 

-

 

 

 

93,647

 

 

 

113,745

 

Included in earnings (impairment of

   securities and provision for credit loss)

 

 

(464,675

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(464,675

)

Included in other comprehensive (loss)

   income

 

 

20,930,838

 

 

 

-

 

 

 

40,811

 

 

 

-

 

 

 

20,971,649

 

Purchases

 

 

7,489,950

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,489,950

 

Settlements

 

 

(1,433,515

)

 

 

-

 

 

 

(2,186

)

 

 

(99,933

)

 

 

(1,535,634

)

Ending Balance June 30, 2020

 

$

787,624,971

 

 

$

-

 

 

$

1,456,279

 

 

$

29,826

 

 

$

789,111,076

 

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 June 30, 2020

 

$

(464,675

)

 

$

-

 

 

$

-

 

 

$

93,647

 

 

$

(371,028

)

 

(1)

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

 

 

 

For the Six Months Ended June 30, 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)

 

 

55,240

 

 

 

(7,219

)

 

 

-

 

 

 

118,848

 

 

 

166,869

 

Included in earnings (impairment of

   securities and provision for credit loss)

 

 

(1,822,356

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,822,356

)

Included in earnings (gain on sale of

   securities)

 

 

-

 

 

 

1,416,023

 

 

 

-

 

 

 

-

 

 

 

1,416,023

 

Included in other comprehensive income

 

 

14,208,716

 

 

 

(1,408,804

)

 

 

77,366

 

 

 

-

 

 

 

12,877,278

 

Purchases

 

 

7,489,950

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,489,950

 

Sale of securities

 

 

-

 

 

 

(43,349,357

)

 

 

-

 

 

 

-

 

 

 

(43,349,357

)

Settlements

 

 

(5,904,044

)

 

 

-

 

 

 

(4,324

)

 

 

(99,933

)

 

 

(6,008,301

)

Ending Balance June 30, 2020

 

$

787,624,971

 

 

$

-

 

 

$

1,456,279

 

 

$

29,826

 

 

$

789,111,076

 

Total amount of losses for the

   period included in earnings attributable

   to the change in unrealized losses relating to assets or

   liabilities held on June 30, 2020

 

$

(1,822,356

)

 

$

-

 

 

$

-

 

 

$

118,848

 

 

$

(1,703,508

)

 

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

34


 

 

 

 

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 and six months ended June 30, 2019:

 

 

 

For the Three Months Ended June 30, 2019

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate

Derivatives

 

 

Total

 

Beginning Balance April 1, 2019

 

$

739,047,841

 

 

$

46,406,868

 

 

$

1,426,733

 

 

$

273,506

 

 

$

787,154,948

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

35,637

 

 

 

(20,436

)

 

 

-

 

 

 

(83,217

)

 

 

(68,016

)

Included in other

   comprehensive income

 

 

14,753,777

 

 

 

129,722

 

 

 

36,582

 

 

 

-

 

 

 

14,920,081

 

Purchases

 

 

13,200,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,200,000

 

Settlements

 

 

(7,510,548

)

 

 

-

 

 

 

(21,999

)

 

 

(72,010

)

 

 

(7,604,557

)

Ending Balance June 30, 2019

 

$

759,526,707

 

 

$

46,516,154

 

 

$

1,441,316

 

 

$

118,279

 

 

$

807,602,456

 

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 June 30, 2019

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(83,217

)

 

$

(83,217

)

 

(1)

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

 

 

 

For the Six Months Ended June 30, 2019

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

PHC Certificates

 

 

Taxable Mortgage

Revenue Bonds

 

 

Interest Rate

Derivatives

 

 

Total

 

Beginning Balance January 1, 2019

 

$

732,153,435

 

 

$

48,672,086

 

 

$

1,409,895

 

 

$

626,633

 

 

$

782,862,049

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

71,367

 

 

 

(3,710

)

 

 

-

 

 

 

(389,808

)

 

 

(322,151

)

Included in other comprehensive income

 

 

22,393,690

 

 

 

614,944

 

 

 

55,374

 

 

 

-

 

 

 

23,064,008

 

Purchases

 

 

19,250,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,250,000

 

Settlements

 

 

(14,341,785

)

 

 

(2,767,166

)

 

 

(23,953

)

 

 

(118,546

)

 

 

(17,251,450

)

Ending Balance June 30, 2019

 

$

759,526,707

 

 

$

46,516,154

 

 

$

1,441,316

 

 

$

118,279

 

 

$

807,602,456

 

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 June 30, 2019

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(389,808

)

 

$

(389,808

)

 

 

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.

35


 

As of June 30, 2020, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s GIL, which is an estimate of the market price. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of the GIL as well as other quantitative and qualitative characteristics including, but not limited to, the progress of construction and operations of the underlying property, the financial capacity of guarantors, and the probability that conditions to Greystone Servicing Company LLC’s commitment to purchase the GIL will be met. Due to the judgments involved, the fair value measurement of the Partnership’s GIL is categorized as a Level 3 input. The fair value approximates amortized cost as of June 30, 2020.

As of June 30, 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.

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 Mizuho. The table below summarizes the fair value of the Partnership’s financial liabilities as of June 30, 2020 and December 31, 2019:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt financing and lines of credit

 

$

557,643,049

 

 

$

586,074,485

 

 

$

549,397,421

 

 

$

568,193,494

 

Mortgages payable and other secured financing

 

 

26,391,908

 

 

 

26,393,723

 

 

 

26,802,246

 

 

 

26,812,851

 

 

24. Segments

 

The Partnership has 4 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 1 of the 4 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, a GIL and related property loans that have been issued to provide construction and/or permanent financing for Residential Properties, multifamily properties and commercial properties in their market areas.  Such MRBs and the GIL 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 June 30, 2020, the Partnership held 77 MRBs and 1 GIL. The Residential Properties financed by MRBs and the GIL contain a total of 11,047 and 300 rental units, respectively. In addition, 1 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.

 

36


 

MF Properties Segment

The MF Properties segment consists of multifamily and student housing residential properties held by the Partnership (see Note 9). 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 June 30, 2020, the Partnership owned 2 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 (see Note 8) 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 Trusts 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 (see Note 10) and property loans to certain multifamily housing properties (see Note 11).

 

The following tables detail certain key financial information for the Partnership’s reportable segments for the three and six months ended June 30, 2020 and 2019:

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Total revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

10,247,228

 

 

$

10,247,302

 

 

$

20,453,031

 

 

$

20,690,715

 

MF Properties

 

 

1,856,954

 

 

 

2,034,796

 

 

 

3,809,201

 

 

 

4,028,425

 

Public Housing Capital Fund Trusts

 

 

-

 

 

 

585,609

 

 

 

174,470

 

 

 

1,223,755

 

Other Investments

 

 

2,374,237

 

 

 

1,478,627

 

 

 

3,777,852

 

 

 

6,068,037

 

Total revenues

 

$

14,478,419

 

 

$

14,346,334

 

 

$

28,214,554

 

 

$

32,010,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

4,597,328

 

 

$

5,456,801

 

 

$

10,095,527

 

 

$

11,105,369

 

MF Properties

 

 

291,988

 

 

 

365,632

 

 

 

613,764

 

 

 

730,021

 

Public Housing Capital Fund Trusts

 

 

-

 

 

 

384,502

 

 

 

197,993

 

 

 

766,465

 

Other Investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total interest expense

 

$

4,889,316

 

 

$

6,206,935

 

 

$

10,907,284

 

 

$

12,601,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

3,359

 

 

$

-

 

 

$

5,783

 

 

$

-

 

MF Properties

 

 

708,722

 

 

 

818,154

 

 

 

1,415,736

 

 

 

1,637,312

 

Public Housing Capital Fund Trusts

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Other Investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation expense

 

$

712,081

 

 

$

818,154

 

 

$

1,421,519

 

 

$

1,637,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

2,301,494

 

 

$

2,285,485

 

 

$

2,741,830

 

 

$

4,328,839

 

MF Properties

 

 

(85,583

)

 

 

(74,997

)

 

 

(338,313

)

 

 

(512,131

)

Public Housing Capital Fund Trusts

 

 

-

 

 

 

201,107

 

 

 

1,390,999

 

 

 

457,290

 

Other Investments

 

 

2,372,437

 

 

 

1,474,595

 

 

 

3,775,589

 

 

 

6,064,005

 

Net income

 

$

4,588,348

 

 

$

3,886,190

 

 

$

7,570,105

 

 

$

10,338,003

 

 

37


 

The following table details total assets for the Partnership’s reportable segments as of June 30, 2020 and December 31, 2019:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Total assets

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

973,941,784

 

 

$

918,301,172

 

MF Properties

 

 

69,044,411

 

 

 

70,569,646

 

Public Housing Capital Fund Trusts

 

 

-

 

 

 

43,591,048

 

Other Investments

 

 

91,683,948

 

 

 

87,098,315

 

Consolidation/eliminations

 

 

(96,180,675

)

 

 

(90,391,673

)

Total assets

 

$

1,038,489,468

 

 

$

1,029,168,508

 

 

25. Subsequent Events

 

In July 2020, the Partnership extended the maturity date of all Mizuho TOB Trust financings with stated maturities in 2021 to July 2023. There were no additional changes to terms or fees associated with the amendment.

 

In July 2020, the Partnership extended the maturity of the unsecured operating and non-operating lines of credit to June 2022.

 

In July 2020, the Partnership committed to fund a GIL and a property loan for the construction of an affordable multifamily property. At closing, the Partnership advanced approximately $11.6 million of the GIL commitment and 0 funds were advanced for the property loan, with the remaining commitments to be funded as construction progresses. Both the GIL and the property loan share a first mortgage lien position on the property. The following table summarizes the terms of the Partnership’s GIL and property loan commitments:

 

Commitment

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Variable Interest

Rate

 

Maximum

Commitment

 

Oasis at Twin Lakes - GIL

 

July

 

Roseville, MN

 

228

 

8/1/2023 (1)

 

SIFMA + 3.25% (2)

 

$

34,000,000

 

Oasis at Twin Lakes - Property Loan

 

July

 

Roseville, MN

 

228

 

8/1/2023 (1)

 

LIBOR + 2.50% (3)

 

 

27,704,180

 

 

(1)

The borrower has the option to extend the maturity up to six months.

(2)

The SIFMA-based component has a floor of 50 basis points. In addition, the spread decreases from 3.25% to 2.25% upon construction completion.

(3)

The LIBOR-based component has a floor of 50 basis points.

 

In July 2020, the Partnership committed to fund an MRB and a taxable MRB for the construction and permanent financing of an affordable multifamily property. At closing, the Partnership advanced $300,000 of the MRB commitment and 0 funds under the taxable MRB commitment. The remaining commitments will be advanced as construction progresses.  The following table summarizes the terms of the Partnership’s MRB and taxable MRB commitments:

 

Commitment

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Variable Interest

Rate

 

Maximum

Commitment (1)

 

Ocotillo Springs - MRB

 

July

 

Brawley, CA

 

75

 

8/1/2037

 

LIBOR + 3.25% (2)

 

$

15,000,000

 

Ocotillo Springs - taxable MRB

 

July

 

Brawley, CA

 

75

 

8/1/2022

 

LIBOR + 3.55% (3)

 

 

7,000,000

 

 

(1)

Upon stabilization of the property, the MRB will be partially repaid and the taxable MRB will be redeemed in full. The maximum balance of the MRB after stabilization is approximately $3.5 million.

(2)

The variable interest rate is subject to a floor of 4.55% during construction and stabilization. After stabilization, the MRB will convert to a fixed interest rate of 4.35%.

(3)

The variable interest rate is subject to a floor of 4.91%.

 

In July 2020, the Partnership executed a forward bond purchase commitment for an MRB to be issued and secured by a senior housing property under rehabilitation. The following table summarizes the terms of the forward bond purchase commitment:

 

Bond Purchase Commitment

 

Commitment Date

 

Property Location

 

Units

 

Interest Rate

 

 

Estimated Closing

Date

 

Maximum

Commitment

 

CCBA Senior Garden Apartments

 

July 2020

 

San Diego, CA

 

45

 

4.50%

 

 

Q3 2022

 

$

3,807,000

 

38


 

 

In July 2020, the Partnership entered into TOB Trust financings with Mizuho to securitize the Oasis at Twin Lakes GIL and Ocotillo Springs MRB discussed above. The TOB Trust financings allow for additional borrowings as the Partnership makes additional advances on the Oasis at Twin Lakes GIL and Ocotillo Springs MRB funding commitments. The following table summarizes the initial terms of the TOB Trust financings:

 

TOB Trusts Securitization

 

Initial TOB

Trust Financing

 

 

Stated Maturity

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Initial

Interest Rate

 

Oasis at Twin Lakes - GIL

 

$

10,440,000

 

 

July 2023

 

Weekly

 

0.59%

 

 

0.89%

 

 

1.48%

 

Ocotillo Springs - MRB

 

 

100,000

 

 

July 2022

 

Weekly

 

0.68%

 

 

0.89%

 

 

1.57%

 

 

39


 

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 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.

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, except for certain policies regarding the governmental issuer loan as follows:

Governmental Issuer Loan Impairment

The Partnership accounts for its investment in a governmental issuer loan (“GIL”) under the accounting guidance for certain investments in debt and equity securities.  The Partnership’s investment in this instrument is classified as a held-to-maturity debt security and is reported at amortized cost.

The Partnership periodically reviews its GIL 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;

 

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 scheduled interest or principal payments;

 

The failure of the borrower 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 the GIL’s estimated fair value is below amortized cost, and the Partnership does not expect to recover its entire amortized cost, 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).  

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 value of its GIL, 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.  

 

 

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.

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As of June 30, 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 24 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 six months ended June 30, 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 June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

2

 

$

7,475

 

 

N/A

 

 

N/A

 

 

6

Governmental issuer loan advance

 

1

 

 

40,000

 

 

N/A

 

 

N/A

 

 

7

Investments in unconsolidated entities

 

1

 

 

893

 

 

N/A

 

 

N/A

 

 

10

Return of investment in unconsolidated entity upon sale

 

1

 

 

7,762

 

 

N/A

 

 

N/A

 

 

10

Property loan advance

 

1

 

 

1,668

 

 

N/A

 

 

N/A

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

8, 16

Investments in unconsolidated entities

 

3

 

 

10,270

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

2

 

$

13,200

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond redemption

 

1

 

 

6,228

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bonds restructured

 

3

 

 

13,960

 

 

N/A

 

 

N/A

 

 

6

Investments in unconsolidated entities

 

3

 

 

10,692

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

10

Property loan redemption

 

1

 

 

8,368

 

 

N/A

 

 

$

753

 

 

11

 

(1)

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

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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 six months ended June 30, 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 June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

1

 

$

6,155

 

 

No

 

N/A

 

15

Proceeds from new TOB Financings with Mizuho

 

6

 

 

91,386

 

 

Yes

 

N/A

 

16

Repayment of Term TOB & Term A/B Financings with Deutsche Bank

 

6

 

 

51,714

 

 

Yes

 

N/A

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2020