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Greystone Housing Impact Investors LP - Quarter Report: 2018 September (Form 10-Q)

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2018

OR

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

For the transition period from            to            

Commission File Number:  000-24843

 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-0810385

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1004 Farnam Street, Suite 400

 

Omaha, Nebraska 68102

(Address of principal executive offices)

 

(Zip Code)

 

 

 

(402) 444-1630

(Registrant’s telephone number, including area code)

 

N/A

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

 

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 

 


 

INDEX

PART I – FINANCIAL INFORMATION

 

Item 1

 

Financial Statements (Unaudited)

 

2

 

 

Condensed Consolidated Balance Sheets

 

2

 

 

Condensed Consolidated Statements of Operations

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

4

 

 

Condensed Consolidated Statements of Partners’ Capital

 

5

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

Notes to Condensed Consolidated Financial Statements

 

8

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

40

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

56

Item 4

 

Controls and Procedures

 

58

 

 

 

 

 

PART II – OTHER INFORMATION

Item 1A

 

Risk Factors

 

59

Item 6

 

Exhibits

 

59

 

 

 

 

 

SIGNATURES

 

 

 

60

 

 

 


 

Forward-Looking Statements

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

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

 

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

 

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

 

the competitive environment in which we operate;

 

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

 

changes in interest rates;

 

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

 

continued performance by counterparties to our interest rate derivative agreements;

 

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

 

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

 

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

 

geographic concentration with the MRB portfolio held by the Partnership;

 

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

 

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

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “Risk Factors” in Item 1A of America First Multifamily Investors, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2017.

All references to “we,” “us,” and the “Partnership” in this document mean America First Multifamily Investors, L.P. and its consolidated subsidiaries.

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,969,157

 

 

$

69,597,699

 

Restricted cash

 

 

703,112

 

 

 

1,985,630

 

Interest receivable, net

 

 

7,936,792

 

 

 

6,541,132

 

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

 

 

678,700,712

 

 

 

710,867,447

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

63,765,212

 

 

 

77,971,208

 

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

 

 

48,741,478

 

 

 

49,641,588

 

Real estate assets: (Note 8)

 

 

 

 

 

 

 

 

Land and improvements

 

 

4,974,417

 

 

 

7,319,235

 

Buildings and improvements

 

 

71,819,902

 

 

 

78,953,488

 

Real estate assets before accumulated depreciation

 

 

76,794,319

 

 

 

86,272,723

 

Accumulated depreciation

 

 

(11,457,254

)

 

 

(9,580,531

)

Net real estate assets

 

 

65,337,065

 

 

 

76,692,192

 

Investment in unconsolidated entities (Note 9)

 

 

80,294,647

 

 

 

39,608,927

 

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

 

 

23,817,990

 

 

 

29,513,874

 

Other assets (Note 12)

 

 

6,950,752

 

 

 

7,348,302

 

Total Assets

 

$

1,001,216,917

 

 

$

1,069,767,999

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

7,831,188

 

 

$

8,494,227

 

Distribution payable

 

 

9,652,968

 

 

 

8,423,803

 

Unsecured lines of credit (Note 13)

 

 

28,465,600

 

 

 

50,000,000

 

Debt financing, net (Note 14)

 

 

544,718,144

 

 

 

558,328,347

 

Mortgages payable and other secured financing, net (Note 15)

 

 

27,681,596

 

 

 

35,540,174

 

Derivative swaps, at fair value (Note 16)

 

 

26,798

 

 

 

826,852

 

Total Liabilities

 

 

618,376,294

 

 

 

661,613,403

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Series A preferred units, approximately $94.5 million redemption value,

   10.0 million authorized, 9.5 million issued and outstanding, net (Note 18)

 

 

94,341,364

 

 

 

94,314,326

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

195,059

 

 

 

437,256

 

Beneficial Unit Certificate holders (Note 1)

 

 

288,304,200

 

 

 

313,403,014

 

Total Partnersʼ Capital

 

 

288,499,259

 

 

 

313,840,270

 

Total Liabilities and Partnersʼ Capital

 

$

1,001,216,917

 

 

$

1,069,767,999

 

 

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

2


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

2,285,736

 

 

$

3,244,440

 

 

$

7,025,390

 

 

$

10,280,940

 

Investment income

 

 

12,733,013

 

 

 

12,242,533

 

 

 

38,360,534

 

 

 

35,886,934

 

Contingent interest income

 

 

4,246,094

 

 

 

-

 

 

 

4,246,094

 

 

 

219,217

 

Other interest income

 

 

5,217,741

 

 

 

735,123

 

 

 

7,019,465

 

 

 

2,047,056

 

Other income

 

 

1,518,531

 

 

 

12,734

 

 

 

1,592,831

 

 

 

75,371

 

Total revenues

 

 

26,001,115

 

 

 

16,234,830

 

 

 

58,244,314

 

 

 

48,509,518

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

1,606,765

 

 

 

2,225,845

 

 

 

4,292,745

 

 

 

6,331,145

 

Impairment of securities

 

 

309,958

 

 

 

-

 

 

 

1,141,020

 

 

 

-

 

Impairment charge on real estate assets

 

 

150,000

 

 

 

-

 

 

 

150,000

 

 

 

-

 

Depreciation and amortization

 

 

864,600

 

 

 

1,259,055

 

 

 

2,692,731

 

 

 

4,122,260

 

Amortization of deferred financing costs

 

 

409,420

 

 

 

577,413

 

 

 

1,304,879

 

 

 

1,880,236

 

Interest expense

 

 

5,985,263

 

 

 

5,714,181

 

 

 

16,786,435

 

 

 

16,997,761

 

General and administrative

 

 

3,653,288

 

 

 

3,197,853

 

 

 

9,506,258

 

 

 

9,205,183

 

Total expenses

 

 

12,979,294

 

 

 

12,974,347

 

 

 

35,874,068

 

 

 

38,536,585

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate assets, net

 

 

4,051,429

 

 

 

-

 

 

 

4,051,429

 

 

 

7,152,512

 

Income before income taxes

 

 

17,073,250

 

 

 

3,260,483

 

 

 

26,421,675

 

 

 

17,125,445

 

Income tax expense (benefit)

 

 

(809,805

)

 

 

(285,000

)

 

 

(803,805

)

 

 

2,110,047

 

Net income

 

 

17,883,055

 

 

 

3,545,483

 

 

 

27,225,480

 

 

 

15,015,398

 

Net income attributable to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,653

 

Partnership net income

 

 

17,883,055

 

 

 

3,545,483

 

 

 

27,225,480

 

 

 

14,943,745

 

Redeemable Series A preferred unit distributions and accretion

 

 

(717,763

)

 

 

(523,682

)

 

 

(2,153,288

)

 

 

(1,280,874

)

Net income available to Partners

 

$

17,165,292

 

 

$

3,021,801

 

 

$

25,072,192

 

 

$

13,662,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Partners and noncontrolling interest allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

2,163,058

 

 

$

30,218

 

 

$

2,242,127

 

 

$

1,212,429

 

Limited Partners - Unitholders

 

 

14,933,260

 

 

 

2,936,408

 

 

 

22,662,993

 

 

 

12,325,639

 

Limited Partners - Restricted Unitholders

 

 

68,974

 

 

 

55,175

 

 

 

167,072

 

 

 

124,803

 

Noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,653

 

 

 

$

17,165,292

 

 

$

3,021,801

 

 

$

25,072,192

 

 

$

13,734,524

 

Unitholders' interest in net income per Unit, basic and diluted

 

$

0.25

 

 

$

0.05

 

 

$

0.38

 

 

$

0.21

 

Distributions declared, per Unit

 

$

0.125

 

 

$

0.125

 

 

$

0.375

 

 

$

0.375

 

Weighted average number of Units outstanding, basic

 

 

59,907,123

 

 

 

59,811,578

 

 

 

59,989,585

 

 

 

59,904,078

 

Weighted average number of Units outstanding, diluted

 

 

59,907,123

 

 

 

59,811,578

 

 

 

59,989,585

 

 

 

59,904,078

 

 

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

 

3


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  

(UNAUDITED)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income

 

$

17,883,055

 

 

$

3,545,483

 

 

$

27,225,480

 

 

$

15,015,398

 

Reversal of net unrealized losses on securities with

   other-than-temporary impairment

 

 

-

 

 

 

-

 

 

 

525,446

 

 

 

-

 

Unrealized gain (loss) on securities

 

 

(6,744,509

)

 

 

1,813,314

 

 

 

(24,097,818

)

 

 

31,020,368

 

Unrealized gain (loss) on bond purchase commitments

 

 

51,760

 

 

 

189,875

 

 

 

(1,956,095

)

 

 

955,598

 

Comprehensive income (loss)

 

 

11,190,306

 

 

 

5,548,672

 

 

 

1,697,013

 

 

 

46,991,364

 

Comprehensive income allocated to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,653

 

Partnership comprehensive income (loss)

 

$

11,190,306

 

 

$

5,548,672

 

 

$

1,697,013

 

 

$

46,919,711

 

 

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

 

 

4


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

 

 

General Partner

 

 

# of Units -

Restricted and

Unrestricted

 

 

Beneficial Unit

Certificate Holders

- Restricted and

Unrestricted

 

 

Non-controlling

Interest

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance at December 31, 2017

 

$

437,256

 

 

 

60,373,674

 

 

$

313,403,014

 

 

$

-

 

 

$

313,840,270

 

 

$

75,623,830

 

Cumulative effect of accounting change

   (Note 2)

 

 

(2,169

)

 

 

 

 

 

 

(214,779

)

 

 

-

 

 

 

(216,948

)

 

 

-

 

Distributions paid or accrued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(166,213

)

 

 

 

 

 

 

(16,455,123

)

 

 

-

 

 

 

(16,621,336

)

 

 

-

 

Distribution of Tier 2

  income (Note 3)

 

 

(2,074,381

)

 

 

 

 

 

 

(6,223,142

)

 

 

-

 

 

 

(8,297,523

)

 

 

-

 

Net income allocable to Partners

 

 

2,242,127

 

 

 

 

 

 

 

22,830,065

 

 

 

-

 

 

 

25,072,192

 

 

 

-

 

Sale of Beneficial Unit Certificates, net

   of issuance costs

 

 

-

 

 

 

105,950

 

 

 

576,300

 

 

 

-

 

 

 

576,300

 

 

 

-

 

Repurchase of Beneficial Unit

   Certificates

 

 

-

 

 

 

(268,575

)

 

 

(1,697,613

)

 

 

-

 

 

 

(1,697,613

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

309,212

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

13,724

 

 

 

 

 

 

 

1,358,660

 

 

 

-

 

 

 

1,372,384

 

 

 

-

 

Unrealized loss on securities

 

 

(240,978

)

 

 

 

 

 

 

(23,856,840

)

 

 

-

 

 

 

(24,097,818

)

 

 

(24,097,818

)

Unrealized loss on bond

   purchase commitments

 

 

(19,561

)

 

 

 

 

 

 

(1,936,534

)

 

 

-

 

 

 

(1,956,095

)

 

 

(1,956,095

)

Reversal of net unrealized loss on

   securities with other-than-temporary

   impairment

 

 

5,254

 

 

 

 

 

 

 

520,192

 

 

 

 

 

 

 

525,446

 

 

 

525,446

 

Balance at September 30, 2018

 

$

195,059

 

 

 

60,520,261

 

 

$

288,304,200

 

 

$

-

 

 

$

288,499,259

 

 

$

50,095,363

 

 

 

 

General Partner

 

 

# of Units -

Restricted and

Unrestricted

 

 

Beneficial Unit

Certificate Holders

- Restricted and

Unrestricted

 

 

Non-controlling

Interest

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance at December 31, 2016

 

$

102,536

 

 

 

60,224,538

 

 

$

280,026,669

 

 

$

4,663

 

 

$

280,133,868

 

 

$

38,895,484

 

Distribution to noncontrolling

   interest

 

-

 

 

-

 

 

-

 

 

 

(76,316

)

 

 

(76,316

)

 

 

 

 

Distributions paid or accrued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(194,272

)

 

-

 

 

 

(19,232,974

)

 

-

 

 

 

(19,427,246

)

 

-

 

Distribution of Tier 2

   income (Note 3)

 

 

(1,120,625

)

 

-

 

 

 

(3,361,875

)

 

-

 

 

 

(4,482,500

)

 

-

 

Net income allocable to

   Partners

 

 

1,212,429

 

 

-

 

 

 

12,450,442

 

 

 

71,653

 

 

 

13,734,524

 

 

-

 

Repurchase of Beneficial Unit

   Certificates

 

-

 

 

 

(254,656

)

 

 

(1,466,222

)

 

-

 

 

 

(1,466,222

)

 

-

 

Restricted units awarded

 

-

 

 

 

283,046

 

 

-

 

 

-

 

 

-

 

 

-

 

Restricted units compensation

   expense

 

 

11,601

 

 

-

 

 

 

1,148,522

 

 

-

 

 

 

1,160,123

 

 

-

 

Unrealized gain on securities

 

 

310,204

 

 

-

 

 

 

30,710,164

 

 

-

 

 

 

31,020,368

 

 

 

31,020,368

 

Unrealized gain on bond

   purchase commitments

 

 

9,556

 

 

-

 

 

 

946,042

 

 

-

 

 

 

955,598

 

 

 

955,598

 

Balance at September 30, 2017

 

$

331,429

 

 

 

60,252,928

 

 

$

301,220,768

 

 

$                           -

 

 

$

301,552,197

 

 

$

70,871,450

 

 

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

 

 

5


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

27,225,480

 

 

$

15,015,398

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

2,692,731

 

 

 

4,122,260

 

Provision for loan loss

 

 

-

 

 

 

(55,000

)

Gain on sale of real estate assets, net

 

 

(4,051,429

)

 

 

(7,152,512

)

Contingent interest realized on investing activities

 

 

(4,246,094

)

 

 

-

 

Impairment of securities

 

 

1,141,020

 

 

 

-

 

Impairment charge on real estate assets

 

 

150,000

 

 

 

-

 

Loss (gain) on derivatives, net of cash paid

 

 

(1,266,808

)

 

 

369,686

 

Restricted unit compensation expense

 

 

1,372,384

 

 

 

1,160,123

 

Bond premium/discount amortization

 

 

(50,839

)

 

 

(113,861

)

Amortization of deferred financing costs

 

 

1,304,879

 

 

 

1,880,236

 

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

 

 

(840,871

)

 

 

(374,000

)

Change in preferred return receivable from unconsolidated entities

 

 

(2,642,634

)

 

 

(2,176,131

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Increase in interest receivable

 

 

(1,395,660

)

 

 

(336,710

)

Increase in other assets

 

 

(921,756

)

 

 

(231,498

)

Increase (decrease) in accounts payable and accrued expenses

 

 

(473,415

)

 

 

1,058,638

 

Net cash provided by operating activities

 

 

17,996,988

 

 

 

13,166,629

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(496,336

)

 

 

(290,042

)

Proceeds from sale of MF Properties

 

 

13,450,000

 

 

 

13,750,000

 

Proceeds from sale of land held for development

 

 

-

 

 

 

3,000,000

 

Acquisition of mortgage revenue bonds

 

 

(19,540,000

)

 

 

(72,056,000

)

Contributions to unconsolidated entities

 

 

(35,153,613

)

 

 

(9,569,227

)

Principal payments received on mortgage revenue bonds and contingent interest

 

 

46,001,893

 

 

 

4,844,328

 

Principal payments received on taxable mortgage revenue bonds

 

 

33,384

 

 

 

31,930

 

Principal payments received on PHC Certificates

 

 

226,714

 

 

 

1,610,302

 

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

 

 

(2,764,403

)

 

 

(168,693

)

Advances on property loans

 

 

(66,652

)

 

 

(2,376,370

)

Principal payments received on property loans

 

 

5,762,536

 

 

 

1,000,000

 

Net cash provided by (used in) investing activities

 

 

7,453,523

 

 

 

(60,223,772

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Distributions paid

 

 

(25,800,111

)

 

 

(25,339,844

)

Proceeds from the sale of redeemable Series A Preferred Units

 

 

-

 

 

 

36,131,000

 

Payment of offering costs related to the sale of redeemable Series A Preferred Units

 

 

-

 

 

 

(668

)

Acquisition of interest rate derivatives

 

 

-

 

 

 

(556,017

)

Repurchase of Beneficial Unit Certificates

 

 

(1,697,613

)

 

 

(1,466,222

)

Proceeds from the sale of Beneficial Unit Certificates

 

 

626,033

 

 

 

-

 

Payment of offering costs related to the sale of Beneficial Unit Certificates

 

 

(12,531

)

 

 

-

 

Payment of tax withholding related to restricted unit awards

 

 

-

 

 

 

(153,306

)

Distribution to noncontrolling interest

 

 

-

 

 

 

(76,316

)

Proceeds from debt financing

 

 

238,920,000

 

 

 

135,100,000

 

Principal payments on debt financing

 

 

(253,250,185

)

 

 

(36,093,863

)

Principal payments on mortgages payable

 

 

(7,963,815

)

 

 

(884,826

)

Principal borrowing on unsecured lines of credit

 

 

30,540,000

 

 

 

43,031,000

 

Principal payments on unsecured and secured lines of credit

 

 

(52,074,400

)

 

 

(90,560,000

)

Decrease in security deposit liability related to restricted cash

 

 

(23,243

)

 

 

(105,320

)

Debt financing and other deferred costs

 

 

(625,706

)

 

 

(1,469,234

)

Net cash provided by (used in) financing activities

 

 

(71,361,571

)

 

 

57,556,384

 

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

 

 

(45,911,060

)

 

 

10,499,241

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

71,583,329

 

 

 

27,506,220

 

Cash, cash equivalents and restricted cash at end of period

 

$

25,672,269

 

 

$

38,005,461

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

17,571,617

 

 

$

16,158,444

 

Cash paid during the period for income taxes

 

$

178,564

 

 

$

3,007,000

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Distributions declared but not paid for Beneficial Unit Certificates and general partner

 

$

9,652,968

 

 

$

7,607,693

 

Distributions declared but not paid for Series A Preferred Units

 

$

708,750

 

 

$

517,500

 

Land contributed as investment in an unconsolidated entity

 

$

2,879,473

 

 

$

3,091,023

 

Capital expenditures financed through accounts payable

 

$

5,898

 

 

$

76,064

 

Deferred financing costs financed through accounts payable

 

$

12,836

 

 

$

1,887

 

 

 

6


 

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

 

 

 

September 30, 2018

 

 

September 30, 2017

 

Cash and cash equivalents

 

$

24,969,157

 

 

$

35,556,115

 

Restricted cash

 

 

703,112

 

 

 

2,449,346

 

Total cash, cash equivalents and restricted cash

 

$

25,672,269

 

 

$

38,005,461

 

 

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

 

 

7


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

1. Basis of Presentation

General

America First Multifamily Investors, L.P. 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”) which have been issued to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. 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 issued to finance these properties or to operate the MF Properties until the “highest and best use” can be determined by management.

The general partner of the Partnership is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”).  The general partner of AFCA 2 is Burlington Capital LLC (“Burlington”). The Partnership has issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partner interests to investors (“Unitholders”). The Partnership has also issued non-cumulative, non-voting and non-convertible Redeemable Series A Preferred Units which represent limited partnership interests in the Partnership.      

 

 

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P., its consolidated subsidiaries and consolidated variable interest entities (Note 5). All intercompany transactions are eliminated.  At September 30, 2018, the consolidated subsidiaries of the Partnership (the “Consolidated Subsidiaries”) consist of:

 

ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the Tax Exempt Bond Securitization (“TEBS”) Financing (“M24 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 second TEBS Financing, (“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 third TEBS Financing (“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 fourth TEBS Financing (“M45 TEBS Financing”), with Freddie Mac.

 

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

 

The 50/50, an MF Property, is owned by a wholly-owned corporation (“the Greens Hold Co”).

 

Suites on Paseo, an MF Property, is owned directly by America First Multifamily Investors, L.P. 

Restricted Cash

Restricted cash is legally restricted to use and is comprised of resident security deposits and escrowed funds.  In addition, the Partnership is required to maintain restricted cash balances related to the TEBS Financing facilities and the Partnership’s interest rate derivatives. Restricted cash is presented with cash and cash equivalents on the condensed consolidated statements of cash flows in accordance with the adoption of Accounting Standards Update (“ASU”) 2016-18, effective for the Partnership as of January 1, 2018, with retrospective application required.

8


 

Investments in Mortgage Revenue Bonds, Taxable Mortgage Revenue Bonds

The Partnership owns certain MRBs that were purchased at a discount or premium. The Partnership adopted the provisions of ASU 2017-08 relating to premiums on purchased callable debt securities effective January 1, 2018. Upon adoption of this ASU, premiums on callable MRB investments are amortized as a yield adjustment to the earliest call date. Prior to January 1, 2018, the Partnership amortized premiums on callable debt securities as a yield adjustment to the stated maturity date. On January 1, 2018, the Partnership recorded a cumulative adjustment to partners’ capital of approximately $217,000. Results for periods prior to January 1, 2018 were not adjusted. The impact of the adoption of the ASU to net income for the three and nine months ended September 30, 2018 was a decrease in investment income of approximately $17,000 and $51,000, respectively, as compared to the previous accounting policy. Discounts on MRB investments continue to be amortized as a yield adjustment to the stated maturity date. Amortization of premiums and discounts is recognized as investment income on the condensed consolidated statements of operations.

PHC Certificate Impairment

The Partnership periodically reviews the Public Housing Capital Fund Trust (“PHC”) Certificates for impairment. The Partnership evaluates whether a decline in the fair value of the investments that is below its amortized cost is other-than-temporary. Factors considered are:

 

The duration and severity of the decline in fair value of the security,

 

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

 

Any downgrade in the security’s rating by S&P, and

 

The volatility of the fair value of the security.

 

Income Taxes

No provision has been made for income taxes of the Partnership because the Unitholders are required to report their share of the Partnership’s taxable income for federal and state income tax purposes, except for certain entities described below.  The Partnership recognizes franchise margin tax expense on revenues in certain jurisdictions relating to MF Properties and Investments in unconsolidated entities.

The Greens Hold Co, a wholly-owned subsidiary of the Partnership, is a corporation subject to federal and state income taxes.  The Partnership recognizes income tax expense or benefit for the federal and state income taxes incurred by the Greens Hold Co on the Partnership’s condensed consolidated financial statements.  

The Partnership evaluates its tax positions taken in its condensed consolidated financial statements under the interpretation for accounting for uncertainty in income taxes. As such, the Partnership may recognize a tax benefit from an uncertain tax position only if the Partnership believes it is more likely than not that the tax position will be sustained on examination by taxing authorities. The Partnership accrues interest and penalties as incurred within income tax expense.

Deferred income tax expense, or benefit, is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes, such as depreciation, amortization of deferred financing costs, etc.) and the utilization of tax net operating losses (“NOLs”) generated in prior years that had been previously recognized as deferred income tax assets. The Partnership records a valuation allowance for deferred income tax assets if it believes all, or some portion, of the deferred income tax assets may not be realized. Any changes in the valuation allowance that result from a change in circumstances that causes a change in the estimated ability to realize the related deferred income tax assets are included in deferred income tax expense.

Revenue Recognition on Investments in Real Estate

The Partnership’s MF Properties are lessors of multifamily, student housing, and senior citizen rental units under leases with terms of one year or less. Rental revenue is recognized, net of rental concessions, on a straight-line method over the related lease term. The Partnership also recognizes other non-lease revenues related to other operations at the MF Properties such as parking and food service revenues at student housing properties. Such revenues are recognized over time as services are provided. Such non-lease revenue streams are within the scope of Accounting Standards Codification (“ASC”) 606, which was effective for the Partnership as of January 1, 2018. The adoption of ASC 606 did not have a material impact on the Partnership’s condensed consolidated financial statements.

 

9


 

Restricted Unit Awards (“RUAs”)

 

The Partnership’s 2015 Equity Incentive Plan (the “Plan”) permits the grant of Restricted Units and other awards to the employees of Burlington, the Partnership, or any affiliate of either, and members of Burlington’s Board of Managers for up to 3.0 million BUCs.  RUAs are generally granted with vesting conditions ranging from three months to three years. The RUAs currently provide for the payment of quarterly distributions during the vesting period. The RUAs provide for accelerated vesting if there is a change in control or upon death or disability of the participant. The Partnership accounts for forfeitures as they occur.  

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 Partnership will account for modifications to RUAs as they occur if the fair value of the RUAs change, there are changes to vesting conditions or the awards no longer qualify for equity classification.

Estimates and assumptions

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

 

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017. These condensed consolidated financial statements and notes have been prepared consistently with the 2017 Form 10-K, with the exception of new accounting standards that were adopted and are discussed herein. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the financial position at September 30, 2018, and the results of operations for the interim periods presented have been made. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet at December 31, 2017, was derived from the audited annual consolidated financial statements, but does not contain all the footnote disclosures from the annual consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)” that requires lessees to recognize the right-to-use assets and related lease liabilities on the balance sheet and disclose key information about leasing arrangements.  Lessees will classify the leases as financing leases or operating leases, with the classification affecting the pattern and classification of expense recognition in the statement of operations.  The ASU requires lessors to classify leases as sales-type leases, direct financing leases, or operating leases.  In July 2018, the FASB issued ASUs 2018-10 and 2018-11 containing further implementation guidance. ASU 2018-11 allows the Partnership to apply the new lease requirements as of the effective date, January 1, 2019 and not apply the guidance retrospectively to comparative periods. The Partnership will adopt this adoption method and will continue to report comparative periods prior to adoption using the old lease accounting guidance. Furthermore, the Partnership anticipates adopting the “package” of practical expedients, electing to not apply new guidance to short-term leases, and electing to combine lease and non-lease components for lessor and lessee leases.

The Partnership has performed a preliminary assessment of its lessor and lessee leasing arrangements. The accounting for lessor arrangements with tenants at the MF Properties, which have been determined to be operating leases, is not expected to be materially impacted by the new guidance. For the Partnership’s lessee leases, the Partnership has identified only operating leases for office equipment and the ground lease at The 50/50 MF Property. The Partnership estimates the right-of-use assets and lease liabilities for current leases will range between approximately $1.1 million and $2.6 million and expects the cumulative adjustment to partners’ capital on January 1, 2019 to be immaterial. The amounts and elections above are subject to change as the Partnership finalizes its assessment during the fourth quarter of 2018.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The ASU enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better inform credit loss estimates. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2019 and is to be applied using a modified retrospective approach. The Partnership is currently assessing the impact of the adoption of this pronouncement on its condensed consolidated financial statements.    

10


 

 

 

3. Partnership Income, Expenses and Cash Distributions

The Partnership’s Amended and Restated Agreement of Limited Partnership (the “Amended and Restated LP 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 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 BUCs held by each Unitholder on that date. For purposes of the Amended and Restated LP Agreement, cash distributions, if any, received by the Partnership from its investment in MF Properties will be included in the Partnership’s Net Interest Income and cash distributions received by the Partnership from the sale of such properties will be included in the Partnership’s Net Residual Proceeds. The holders of the Partnership’s Series A Preferred Units are entitled to distributions at a fixed rate prior to payment of distributions to other Unitholders.

 

Cash distributions are currently made on a quarterly basis. AFCA 2 can elect to make distributions on a monthly or semi-annual basis. On each distribution date, Net Interest Income (Tier 1) is distributed 99% to the limited partners and Unitholders as a class and 1% to AFCA 2. Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2) representing contingent interest up to 0.9% per annum of the principal amount of the MRBs on a cumulative basis are distributed 75% to the limited partners and Unitholders as a class and 25% to AFCA 2. Net Interest Income (Tier 3) and Net Residual Proceeds (Tier 3) received by the Partnership in excess of any contingent interest included in Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2) are distributed 100% to the limited partners and Unitholders as a class.

 

 

4. Net income per BUC

The Partnership has disclosed basic and diluted net income per BUC on the condensed consolidated statements of operations. The unvested RUAs issued under the Plan are considered participating securities. There were no dilutive Units for the three and nine months ended September 30, 2018 and 2017.

 

 

5. Variable Interest Entities

Consolidated Variable Interest Entities (“VIEs”)

The Partnership has determined the TOB Trusts, Term A/B Trusts and TEBS Financings are VIEs and the Partnership is the primary beneficiary.  As such, the Partnership reports the TOB Trusts, Term A/B Trusts and TEBS Financings on a consolidated basis. The Partnership reports the senior floating-rate participation interests (“SPEARS”) related to the TOB Trusts and the Class A Certificates for both the Term A/B Trusts and TEBS Financings as secured debt financings on the condensed consolidated balance sheets. The MRBs and PHCs secured by the TOB Trusts, Term A/B Trusts and TEBS Financings are reported as assets on the condensed consolidated balance sheets. In determining the primary beneficiary of these specific VIEs, the Partnership considered: (i) which party has the power to control the activities of the VIEs which most significantly impact their financial performance, (ii) the risks that the entity was designed to create, and (iii) how each risk affects the VIE.  The executed agreements related to the TOB Trusts, Term A/B Trusts and TEBS Financings stipulate the Partnership has the sole right to cause the sale of the securitized assets. If they were sold, the extent to which the VIEs will be exposed to gains or losses would result from decisions made by the Partnership.

Non-Consolidated VIEs

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

11


 

The Partnership held variable interests in 19 and 23 non-consolidated VIEs at September 30, 2018 and December 31, 2017, respectively. The following table summarizes the Partnerships variable interests in these entities at September 30, 2018 and December 31, 2017:

 

 

 

Maximum Exposure to Loss

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Mortgage revenue bonds

 

$

66,358,000

 

 

$

146,344,195

 

Property loans

 

 

15,524,613

 

 

 

15,824,613

 

Investment in unconsolidated entities

 

 

80,294,647

 

 

 

39,608,927

 

 

 

$

162,177,260

 

 

$

201,777,735

 

 

The maximum exposure to loss for the MRBs is equal to the cost adjusted for paydowns at September 30, 2018 and December 31, 2017. The difference between an MRB’s carrying value on the condensed consolidated balance sheets and the maximum exposure to loss is a function of the unrealized gains or losses on the MRB. 

 

The maximum exposure to loss on the property loans at September 30, 2018 and December 31, 2017 is equal to the unpaid principal balance and accrued interest. The difference between a property loan’s carrying value and the maximum exposure is the value of loan loss allowance, if any, that has been previously recorded against the property loan.

 

 

12


 

6. Investments in Mortgage Revenue Bonds (“MRBs”)

MRBs owned by the Partnership have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties.  MRBs are either held directly by the Partnership or are held in trusts created in connection with debt financing transactions (Note 14). The Partnership had the following investments in MRBs at September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A (5)

 

CA

 

$

10,230,000

 

 

$

767,954

 

 

$

-

 

 

$

10,997,954

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,593,499

 

 

 

415,667

 

 

 

-

 

 

 

5,009,166

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,730,000

 

 

 

244,930

 

 

 

-

 

 

 

3,974,930

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,900,000

 

 

 

520,937

 

 

 

-

 

 

 

7,420,937

 

Harden Ranch - Series A (3)

 

CA

 

 

6,793,508

 

 

 

816,778

 

 

 

-

 

 

 

7,610,286

 

Las Palmas II - Series A (5)

 

CA

 

 

1,695,000

 

 

 

110,566

 

 

 

-

 

 

 

1,805,566

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,488,555

 

 

 

281,929

 

 

 

-

 

 

 

2,770,484

 

Montecito at Williams Ranch Apartments - Series A & B (2)

 

CA

 

 

12,471,000

 

 

 

782,663

 

 

 

-

 

 

 

13,253,663

 

San Vicente - Series A (5)

 

CA

 

 

3,495,000

 

 

 

211,792

 

 

 

-

 

 

 

3,706,792

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

3,014,791

 

 

 

353,169

 

 

 

-

 

 

 

3,367,960

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,335,920

 

 

 

558,219

 

 

 

-

 

 

 

4,894,139

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,350,000

 

 

 

520,052

 

 

 

-

 

 

 

7,870,052

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,375,000

 

 

 

875,598

 

 

 

-

 

 

 

13,250,598

 

Summerhill - Series A (5)

 

CA

 

 

6,423,000

 

 

 

391,809

 

 

 

-

 

 

 

6,814,809

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,607,439

 

 

 

294,702

 

 

 

-

 

 

 

3,902,141

 

The Village at Madera - Series A (5)

 

CA

 

 

3,085,000

 

 

 

202,576

 

 

 

-

 

 

 

3,287,576

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,919,230

 

 

 

669,130

 

 

 

-

 

 

 

6,588,360

 

Vineyard Gardens - Series A & B (2)

 

CA

 

 

6,841,000

 

 

 

456,388

 

 

 

-

 

 

 

7,297,388

 

Westside Village Market - Series A (3)

 

CA

 

 

3,868,205

 

 

 

392,487

 

 

 

-

 

 

 

4,260,692

 

Brookstone (1)

 

IL

 

 

7,437,328

 

 

 

1,872,124

 

 

 

-

 

 

 

9,309,452

 

Copper Gate Apartments (3)

 

IN

 

 

5,100,000

 

 

 

607,810

 

 

 

-

 

 

 

5,707,810

 

Renaissance - Series A (4)

 

LA

 

 

11,153,363

 

 

 

700,482

 

 

 

-

 

 

 

11,853,845

 

Live 929 Apartments (2)

 

MD

 

 

40,287,043

 

 

 

2,642,087

 

 

 

-

 

 

 

42,929,130

 

Woodlynn Village (1)

 

MN

 

 

4,244,000

 

 

 

9,283

 

 

 

-

 

 

 

4,253,283

 

Greens Property - Series A (3)

 

NC

 

 

8,056,000

 

 

 

811,822

 

 

 

-

 

 

 

8,867,822

 

Silver Moon - Series A (4)

 

NM

 

 

7,837,176

 

 

 

647,038

 

 

 

-

 

 

 

8,484,214

 

Ohio Properties - Series A (1)

 

OH

 

 

14,022,004

 

 

 

363,198

 

 

 

-

 

 

 

14,385,202

 

Bridle Ridge (1)

 

SC

 

 

7,395,000

 

 

 

44,052

 

 

 

-

 

 

 

7,439,052

 

Columbia Gardens (5)

 

SC

 

 

13,261,234

 

 

 

1,281,313

 

 

 

-

 

 

 

14,542,547

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,322,984

 

 

 

967,595

 

 

 

-

 

 

 

12,290,579

 

Cross Creek (1)

 

SC

 

 

6,142,746

 

 

 

2,519,386

 

 

 

-

 

 

 

8,662,132

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

19,094,174

 

 

 

1,989,068

 

 

 

-

 

 

 

21,083,242

 

Village at River's Edge (5)

 

SC

 

 

9,953,893

 

 

 

1,134,923

 

 

 

-

 

 

 

11,088,816

 

Willow Run (5)

 

SC

 

 

13,077,771

 

 

 

1,211,709

 

 

 

-

 

 

 

14,289,480

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,227,931

 

 

 

1,221,790

 

 

 

-

 

 

 

12,449,721

 

Pro Nova 2014-1 (2)

 

TN

 

 

10,028,678

 

 

 

-

 

 

 

(136,577

)

 

 

9,892,101

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

10,000,000

 

 

 

292,102

 

 

 

-

 

 

 

10,292,102

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,382,685

 

 

 

782,054

 

 

 

-

 

 

 

10,164,739

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,578,091

 

 

 

582,108

 

 

 

-

 

 

 

8,160,199

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,144,902

 

 

 

1,033,223

 

 

 

-

 

 

 

14,178,125

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

3,775,000

 

 

 

51,458

 

 

 

-

 

 

 

3,826,458

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

31,850,000

 

 

 

436,575

 

 

 

-

 

 

 

32,286,575

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,543,388

 

 

 

502,628

 

 

 

-

 

 

 

7,046,016

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,984,416

 

 

 

1,196,940

 

 

 

-

 

 

 

17,181,356

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,235,687

 

 

 

470,687

 

 

 

-

 

 

 

5,706,374

 

Bella Vista (1)

 

TX

 

 

6,225,000

 

 

 

-

 

 

 

-

 

 

 

6,225,000

 

Bruton Apartments (5)

 

TX

 

 

17,963,733

 

 

 

1,567,441

 

 

 

-

 

 

 

19,531,174

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

19,185,000

 

 

 

1,903,863

 

 

 

-

 

 

 

21,088,863

 

Concord at Little York - Series A (5)

 

TX

 

 

13,440,000

 

 

 

1,393,865

 

 

 

-

 

 

 

14,833,865

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,820,000

 

 

 

2,159,246

 

 

 

-

 

 

 

22,979,246

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,491,405

 

 

 

557,093

 

 

 

-

 

 

 

8,048,498

 

Decatur Angle (5)

 

TX

 

 

22,672,339

 

 

 

1,564,822

 

 

 

-

 

 

 

24,237,161

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,519,236

 

 

 

1,966,425

 

 

 

-

 

 

 

21,485,661

 

Heights at 515 - Series A (5)

 

TX

 

 

6,858,511

 

 

 

596,685

 

 

 

-

 

 

 

7,455,196

 

Heritage Square - Series A (4)

 

TX

 

 

10,985,341

 

 

 

723,148

 

 

 

-

 

 

 

11,708,489

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,330,000

 

 

 

469,808

 

 

 

-

 

 

 

12,799,808

 

Runnymede (1)

 

TX

 

 

10,095,000

 

 

 

126,871

 

 

 

-

 

 

 

10,221,871

 

Southpark (1)

 

TX

 

 

11,749,771

 

 

 

2,511,470

 

 

 

-

 

 

 

14,261,241

 

Vantage at Judson -Series B (4)

 

TX

 

 

25,966,084

 

 

 

2,345,328

 

 

 

-

 

 

 

28,311,412

 

15 West Apartments (5)

 

WA

 

 

9,752,876

 

 

 

1,306,486

 

 

 

-

 

 

 

11,059,362

 

Mortgage revenue bonds held in trust

 

 

 

$

627,405,937

 

 

$

51,431,352

 

 

$

(136,577

)

 

$

678,700,712

 

13


 

 

(1)

MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 14

(2)

MRBs held by Deutsche Bank in a secured financing transaction, Note 14

(3)

MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 14

(4)

MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 14

(5)

MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 14

 

 

 

September 30, 2018

 

Description of Mortgage Revenue Bonds held by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series B

 

CA

 

$

6,228,000

 

 

$

-

 

 

$

(10,898

)

 

$

6,217,102

 

Seasons San Juan Capistrano - Series B

 

CA

 

 

6,574,000

 

 

 

-

 

 

 

(8,214

)

 

 

6,565,786

 

Greens Property - Series B

 

NC

 

 

934,834

 

 

 

152,008

 

 

 

-

 

 

 

1,086,842

 

Ohio Properties - Series B

 

OH

 

 

3,524,830

 

 

 

77,201

 

 

 

-

 

 

 

3,602,031

 

Rosewood Townhomes - Series A & B

 

SC

 

 

9,750,000

 

 

 

-

 

 

 

(805,122

)

 

 

8,944,878

 

South Pointe Apartments - Series A & B

 

SC

 

 

22,700,000

 

 

 

-

 

 

 

(1,785,864

)

 

 

20,914,136

 

Avistar at Copperfield - Series B

 

TX

 

 

4,000,000

 

 

 

13,018

 

 

 

-

 

 

 

4,013,018

 

Avistar at the Crest - Series B

 

TX

 

 

746,417

 

 

 

33,193

 

 

 

-

 

 

 

779,610

 

Avistar at the Oaks - Series B

 

TX

 

 

546,066

 

 

 

20,764

 

 

 

-

 

 

 

566,830

 

Avistar at the Parkway - Series B

 

TX

 

 

124,668

 

 

 

30,701

 

 

 

-

 

 

 

155,369

 

Avistar at Wilcrest - Series B

 

TX

 

 

1,550,000

 

 

 

4,620

 

 

 

-

 

 

 

1,554,620

 

Avistar at Wood Hollow - Series B

 

TX

 

 

8,410,000

 

 

 

27,370

 

 

 

-

 

 

 

8,437,370

 

Avistar in 09 - Series B

 

TX

 

 

450,455

 

 

 

17,128

 

 

 

-

 

 

 

467,583

 

Avistar on the Boulevard - Series B

 

TX

 

 

443,523

 

 

 

16,514

 

 

 

-

 

 

 

460,037

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

65,982,793

 

 

$

392,517

 

 

$

(2,610,098

)

 

$

63,765,212

 

 

14


 

 

 

December 31, 2017

 

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 & B (2)

 

CA

 

$

16,458,000

 

 

$

1,226,192

 

 

$

-

 

 

$

17,684,192

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,627,228

 

 

 

523,464

 

 

 

-

 

 

 

5,150,692

 

Harmony Court Bakersfield - Series A (2)

 

CA

 

 

3,730,000

 

 

 

430,637

 

 

 

-

 

 

 

4,160,637

 

Harmony Terrace - Series A & B (2)

 

CA

 

 

14,300,000

 

 

 

871,221

 

 

 

-

 

 

 

15,171,221

 

Harden Ranch - Series A (3)

 

CA

 

 

6,845,985

 

 

 

1,182,914

 

 

 

-

 

 

 

8,028,899

 

Las Palmas II - Series A & B (2)

 

CA

 

 

3,465,000

 

 

 

193,418

 

 

 

-

 

 

 

3,658,418

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,506,828

 

 

 

398,840

 

 

 

-

 

 

 

2,905,668

 

San Vicente - Series A & B (2)

 

CA

 

 

5,320,000

 

 

 

309,038

 

 

 

-

 

 

 

5,629,038

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

3,036,928

 

 

 

535,673

 

 

 

-

 

 

 

3,572,601

 

Seasons at Simi Valley - Series A (2)

 

CA

 

 

4,366,195

 

 

 

807,864

 

 

 

-

 

 

 

5,174,059

 

Seasons Lakewood - Series A & B (2)

 

CA

 

 

12,610,000

 

 

 

884,537

 

 

 

-

 

 

 

13,494,537

 

Seasons San Juan Capistrano - Series A & B (2)

 

CA

 

 

18,949,000

 

 

 

1,233,570

 

 

 

-

 

 

 

20,182,570

 

Summerhill - Series A & B (2)

 

CA

 

 

9,795,000

 

 

 

738,806

 

 

 

-

 

 

 

10,533,806

 

Sycamore Walk - Series A (2)

 

CA

 

 

3,632,000

 

 

 

490,314

 

 

 

-

 

 

 

4,122,314

 

The Village at Madera - Series A & B (2)

 

CA

 

 

4,804,000

 

 

 

355,303

 

 

 

-

 

 

 

5,159,303

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,965,475

 

 

 

807,688

 

 

 

-

 

 

 

6,773,163

 

Westside Village Market - Series A (3)

 

CA

 

 

3,898,427

 

 

 

568,423

 

 

 

-

 

 

 

4,466,850

 

Lake Forest (1)

 

FL

 

 

8,505,000

 

 

 

1,579,885

 

 

 

-

 

 

 

10,084,885

 

Brookstone (1)

 

IL

 

 

7,450,595

 

 

 

2,017,019

 

 

 

-

 

 

 

9,467,614

 

Copper Gate Apartments (3)

 

IN

 

 

5,100,000

 

 

 

778,339

 

 

 

-

 

 

 

5,878,339

 

Renaissance - Series A (4)

 

LA

 

 

11,239,441

 

 

 

2,096,328

 

 

 

-

 

 

 

13,335,769

 

Live 929 Apartments (2)

 

MD

 

 

40,573,347

 

 

 

3,710,942

 

 

 

-

 

 

 

44,284,289

 

Woodlynn Village (1)

 

MN

 

 

4,267,000

 

 

 

44,428

 

 

 

-

 

 

 

4,311,428

 

Greens Property - Series A (3)

 

NC

 

 

8,126,000

 

 

 

1,113,852

 

 

 

-

 

 

 

9,239,852

 

Silver Moon - Series A (4)

 

NM

 

 

7,879,590

 

 

 

1,140,448

 

 

 

-

 

 

 

9,020,038

 

Ohio Properties - Series A (1)

 

OH

 

 

14,113,000

 

 

 

788,199

 

 

 

-

 

 

 

14,901,199

 

Bridle Ridge (1)

 

SC

 

 

7,465,000

 

 

 

1,199

 

 

 

-

 

 

 

7,466,199

 

Columbia Gardens (2)

 

SC

 

 

13,396,856

 

 

 

1,413,831

 

 

 

-

 

 

 

14,810,687

 

Companion at Thornhill Apartments (2)

 

SC

 

 

11,404,758

 

 

 

1,284,441

 

 

 

-

 

 

 

12,689,199

 

Cross Creek (1)

 

SC

 

 

6,136,553

 

 

 

2,850,344

 

 

 

-

 

 

 

8,986,897

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

19,238,297

 

 

 

2,712,429

 

 

 

-

 

 

 

21,950,726

 

Village at River's Edge (2)

 

SC

 

 

10,000,000

 

 

 

1,182,706

 

 

 

-

 

 

 

11,182,706

 

Willow Run (2)

 

SC

 

 

13,212,587

 

 

 

1,391,536

 

 

 

-

 

 

 

14,604,123

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,342,234

 

 

 

1,693,626

 

 

 

-

 

 

 

13,035,860

 

Pro Nova 2014-1 (2)

 

TN

 

 

10,038,889

 

 

 

133,878

 

 

 

-

 

 

 

10,172,767

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

10,000,000

 

 

 

628,644

 

 

 

-

 

 

 

10,628,644

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,456,384

 

 

 

1,187,142

 

 

 

-

 

 

 

10,643,526

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,635,895

 

 

 

938,465

 

 

 

-

 

 

 

8,574,360

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,233,665

 

 

 

932,753

 

 

 

-

 

 

 

14,166,418

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

3,775,000

 

 

 

125,170

 

 

 

-

 

 

 

3,900,170

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

31,850,000

 

 

 

1,865,826

 

 

 

-

 

 

 

33,715,826

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,593,300

 

 

 

716,944

 

 

 

-

 

 

 

7,310,244

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

16,109,972

 

 

 

1,947,465

 

 

 

-

 

 

 

18,057,437

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,275,623

 

 

 

648,383

 

 

 

-

 

 

 

5,924,006

 

Bella Vista (1)

 

TX

 

 

6,295,000

 

 

 

42,718

 

 

 

-

 

 

 

6,337,718

 

Bruton Apartments (2)

 

TX

 

 

18,051,775

 

 

 

3,042,939

 

 

 

-

 

 

 

21,094,714

 

Concord at Gulfgate - Series A (2)

 

TX

 

 

19,185,000

 

 

 

2,759,654

 

 

 

-

 

 

 

21,944,654

 

Concord at Little York - Series A (2)

 

TX

 

 

13,440,000

 

 

 

1,999,572

 

 

 

-

 

 

 

15,439,572

 

Concord at Williamcrest - Series A (2)

 

TX

 

 

20,820,000

 

 

 

2,994,839

 

 

 

-

 

 

 

23,814,839

 

Crossing at 1415 - Series A (2)

 

TX

 

 

7,540,000

 

 

 

634,091

 

 

 

-

 

 

 

8,174,091

 

Decatur Angle (2)

 

TX

 

 

22,794,912

 

 

 

2,985,955

 

 

 

-

 

 

 

25,780,867

 

Heights at 515 - Series A (2)

 

TX

 

 

6,903,000

 

 

 

580,522

 

 

 

-

 

 

 

7,483,522

 

Heritage Square - Series A (4)

 

TX

 

 

11,063,027

 

 

 

993,609

 

 

 

-

 

 

 

12,056,636

 

Oaks at Georgetown - Series A & B (2)

 

TX

 

 

17,842,000

 

 

 

915,705

 

 

 

-

 

 

 

18,757,705

 

Runnymede (1)

 

TX

 

 

10,150,000

 

 

 

79,514

 

 

 

-

 

 

 

10,229,514

 

Southpark (1)

 

TX

 

 

11,693,138

 

 

 

2,960,294

 

 

 

-

 

 

 

14,653,432

 

Vantage at Judson -Series B (4)

 

TX

 

 

26,133,557

 

 

 

3,117,969

 

 

 

-

 

 

 

29,251,526

 

15 West Apartments (2)

 

WA

 

 

9,797,833

 

 

 

1,839,648

 

 

 

-

 

 

 

11,637,481

 

Mortgage revenue bonds held in trust

 

 

 

$

639,438,294

 

 

$

71,429,153

 

 

$

-

 

 

$

710,867,447

 

 

(1)

MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 14

(2)

MRBs held by Deutsche Bank in a secured financing transaction, Note 14

(3)

MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 14

(4)

MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 14

15


 

 

 

 

December 31, 2017

 

Description of Mortgage Revenue Bonds held by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Montecito at Williams Ranch Apartments - Series A & B

 

CA

 

$

12,471,000

 

 

$

1,111,807

 

 

$

-

 

 

$

13,582,807

 

Seasons at Simi Valley - Series B

 

CA

 

 

1,944,000

 

 

 

-

 

 

 

(466

)

 

 

1,943,534

 

Sycamore Walk - Series B

 

CA

 

 

1,815,000

 

 

 

-

 

 

 

(151

)

 

 

1,814,849

 

Vineyard Gardens - Series A & B

 

CA

 

 

6,841,000

 

 

 

-

 

 

 

-

 

 

 

6,841,000

 

Greens Property - Series B

 

NC

 

 

937,399

 

 

 

193,991

 

 

 

-

 

 

 

1,131,390

 

Ohio Properties - Series B

 

OH

 

 

3,536,060

 

 

 

149,630

 

 

 

-

 

 

 

3,685,690

 

Rosewood Townhomes - Series A & B

 

SC

 

 

9,750,000

 

 

 

-

 

 

 

-

 

 

 

9,750,000

 

South Pointe Apartments - Series A & B

 

SC

 

 

22,700,000

 

 

 

-

 

 

 

-

 

 

 

22,700,000

 

Avistar at Copperfield - Series B

 

TX

 

 

4,000,000

 

 

 

13,514

 

 

 

-

 

 

 

4,013,514

 

Avistar at the Crest - Series B

 

TX

 

 

749,455

 

 

 

58,871

 

 

 

-

 

 

 

808,326

 

Avistar at the Oaks - Series B

 

TX

 

 

548,202

 

 

 

41,286

 

 

 

-

 

 

 

589,488

 

Avistar at the Parkway - Series B

 

TX

 

 

124,861

 

 

 

30,715

 

 

 

-

 

 

 

155,576

 

Avistar at Wilcrest - Series B

 

TX

 

 

1,550,000

 

 

 

5,306

 

 

 

-

 

 

 

1,555,306

 

Avistar at Wood Hollow - Series B

 

TX

 

 

8,410,000

 

 

 

30,276

 

 

 

-

 

 

 

8,440,276

 

Avistar in 09 - Series B

 

TX

 

 

452,217

 

 

 

28,675

 

 

 

-

 

 

 

480,892

 

Avistar on the Boulevard - Series B

 

TX

 

 

445,328

 

 

 

33,232

 

 

 

-

 

 

 

478,560

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

76,274,522

 

 

$

1,697,303

 

 

$

(617

)

 

$

77,971,208

 

 

See Note 21 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 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.

Bond Activity in the First Nine Months of 2018

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

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Esperanza at Palo Alto (1)

 

May

 

San Antonio, TX

 

322

 

7/1/2058

 

 

5.80

%

 

 

19,540,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

19,540,000

 

 

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

 

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

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Sycamore Walk - Series B

 

January

 

Bakersfield, CA

 

 

112

 

 

1/1/2018

 

 

8.00

%

 

$

1,815,000

 

Seasons Lakewood - Series B

 

March

 

Lakewood, CA

 

 

85

 

 

1/1/2019

 

 

8.00

%

 

 

5,260,000

 

Summerhill - Series B

 

March

 

Bakersfield, CA

 

 

128

 

 

12/1/2018

 

 

8.00

%

 

 

3,372,000

 

Oaks at Georgetown - Series B

 

April

 

Georgetown, TX

 

 

192

 

 

1/1/2019

 

 

8.00

%

 

 

5,512,000

 

Seasons at Simi Valley - Series B

 

April

 

Simi Valley, CA

 

 

69

 

 

9/1/2018

 

 

8.00

%

 

 

1,944,000

 

San Vicente - Series B

 

May

 

Soledad, CA

 

 

50

 

 

11/1/2018

 

 

8.00

%

 

 

1,825,000

 

The Village at Madera - Series B

 

May

 

Madera, CA

 

 

75

 

 

12/1/2018

 

 

8.00

%

 

 

1,719,000

 

Las Palmas - Series B

 

July

 

Coachella, CA

 

 

81

 

 

11/1/2018

 

 

8.00

%

 

 

1,770,000

 

Harmony Terrace - Series B

 

August

 

Simi Valley, CA

 

 

136

 

 

1/1/2019

 

 

8.00

%

 

 

7,400,000

 

Lake Forest

 

September

 

Daytona Beach, FL

 

 

240

 

 

12/1/2031

 

 

6.25

%

 

 

8,397,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

39,014,000

 

 

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

16


 

 

Bond Activity in the First Nine Months of 2017

 

The following MRBs were acquired during the nine months ended September 30, 2017:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Avistar at Copperfield - Series A

 

February

 

Houston, TX

 

 

192

 

 

5/1/2054

 

 

5.75

%

 

$

10,000,000

 

Avistar at Copperfield - Series B

 

February

 

Houston, TX

 

192

 

 

6/1/2054

 

 

12.00

%

 

 

4,000,000

 

Avistar at Wilcrest - Series A

 

February

 

Houston, TX

 

88

 

 

5/1/2054

 

 

5.75

%

 

 

3,775,000

 

Avistar at Wilcrest - Series B

 

February

 

Houston, TX

 

88

 

 

6/1/2054

 

 

12.00

%

 

 

1,550,000

 

Avistar at Wood Hollow - Series A

 

February

 

Austin, TX

 

409

 

 

5/1/2054

 

 

5.75

%

 

 

31,850,000

 

Avistar at Wood Hollow - Series B

 

February

 

Austin, TX

 

409

 

 

6/1/2054

 

 

12.00

%

 

 

8,410,000

 

Montecito at Williams Ranch Apartments - Series A

 

September

 

Salinas, CA

 

132

 

 

10/1/2034

 

 

5.50

%

 

 

7,690,000

 

Montecito at Williams Ranch Apartments - Series B

 

September

 

Salinas, CA

 

132

 

 

10/1/2019

 

 

5.50

%

 

 

4,781,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

72,056,000

 

 

The following MRB was redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2017:

 

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Harmony Court Bakersfield - Series B

 

August

 

Bakersfield, CA

 

 

96

 

 

12/1/2018

 

 

5.50

%

 

$

1,997,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,997,000

 

 

 

7. PHC Certificates

The Partnership owned 100% of the Residual Participation Receipts (“LIFERs”) in three tender option bond trusts (“PHC Trusts”) that contain the PHC Certificates. The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to numerous local public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities under the Department of Housing and Urban Development’s (“HUD”) Capital Fund Program established under the Quality Housing and Work Responsibility Act of 1998 (the “Capital Fund Program”).  The PHC Trusts have a first lien on these annual Capital Fund Program payments to secure the public housing authorities’ respective obligations to pay principal and interest on their loans.  The loans payable by the public housing authorities are not debts of, or guaranteed by, the United States of America or HUD.  Interest payable on the public housing authority debt held by the PHC Trusts is exempt from federal income taxes.  The PHC Certificates issued by each of the PHC Trusts have been rated investment grade by Standard & Poor’s.

The Partnership had the following investments in the PHC Certificates at September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

Description of PHC Certificates

 

Weighted

Average Lives (Years)

 

 

Investment

Rating

 

Weighted

Average Interest

Rate Over Life

 

 

Cost Adjusted for

Paydowns and Impairment

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair

Value

 

PHC Certificate Trust I

 

 

6.75

 

 

AA-

 

5.33%

 

 

$

24,641,310

 

 

$

-

 

 

$

-

 

 

$

24,641,310

 

PHC Certificate Trust II

 

 

5.82

 

 

A+

 

4.34%

 

 

 

9,065,617

 

 

 

-

 

 

 

-

 

 

 

9,065,617

 

PHC Certificate Trust III

 

 

7.06

 

 

BBB

 

5.29%

 

 

 

15,034,551

 

 

 

-

 

 

 

-

 

 

 

15,034,551

 

 

 

 

 

 

 

 

 

 

 

 

 

$

48,741,478

 

 

$

-

 

 

$

-

 

 

$

48,741,478

 

17


 

 

 

 

December 31, 2017

 

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

 

7.31

 

AA-

 

5.39%

 

 

$

25,109,305

 

 

$

-

 

 

$

-

 

 

$

25,109,305

 

PHC Certificate Trust II

 

6.37

 

A+

 

4.32%

 

 

 

9,606,480

 

 

 

-

 

 

 

(248,189

)

 

 

9,358,291

 

PHC Certificate Trust III

 

7.61

 

BBB

 

5.23%

 

 

 

15,451,249

 

 

 

-

 

 

 

(277,257

)

 

 

15,173,992

 

 

 

 

 

 

 

 

 

 

 

$

50,167,034

 

 

$

-

 

 

$

(525,446

)

 

$

49,641,588

 

 

See Note 21 for a description of the methodology and significant assumptions used in determining the fair value of the PHC Certificates. Unrealized gains or losses on the PHC Certificates are recorded in the condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the PHC Certificates.

 

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

 

8. Real Estate Assets

The following tables summarize information regarding the Partnership’s real estate assets at September 30, 2018 and December 31, 2017:

 

Real Estate Assets at September 30, 2018

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value on

September 30, 2018

 

Suites on Paseo

 

San Diego, CA

 

 

384

 

 

$

3,195,468

 

 

$

38,886,126

 

 

$

42,081,594

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,933,776

 

 

 

32,933,776

 

Land held for development

 

(1)

 

(1)

 

 

 

1,778,949

 

 

 

-

 

 

 

1,778,949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,794,319

 

Less accumulated depreciation

 

 

 

(11,457,254

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

65,337,065

 

 

(1) Land held for development consists of parcels of land in Gardner, KS and Richland County, SC and land development costs for one site in Omaha, NE.

 

Real Estate Assets at December 31, 2017

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value on

December 31, 2017

 

Suites on Paseo

 

San Diego, CA

 

 

394

 

 

$

3,166,463

 

 

$

38,454,894

 

 

$

41,621,357

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,932,981

 

 

 

32,932,981

 

Jade Park

 

Daytona, FL

 

 

144

 

 

 

2,292,035

 

 

 

7,565,613

 

 

 

9,857,648

 

Land held for development

 

(2)

 

(2)

 

 

 

1,860,737

 

 

 

-

 

 

 

1,860,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

86,272,723

 

Less accumulated depreciation

 

 

 

(9,580,531

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,692,192

 

 

(2) Land held for development consists of parcels of land in Gardner, KS and Richland County, SC and land development costs for one site in Omaha, NE.

Activity in the First Nine Months of 2018

In February 2018, the Partnership acquired two contiguous tracts of land in Omaha, NE. The total purchase price was approximately $2.7 million. In March 2018, a portion of the land acquired was contributed to Vantage at Stone Creek, LLC in exchange for an ownership interest in the entity (Note 9). The remaining land is classified as “Land held for development” at September 30, 2018. In May 2018, the Partnership listed the remaining land for sale.

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

18


 

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

 

Property Name

 

Month Sold

 

Property Location

 

Units

 

Gross Proceeds

 

 

Gain on Sale

 

Jade Park

 

September

 

Daytona, FL

 

144

 

$

13,450,000

 

 

$

4,051,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Activity in the First Nine Months of 2017

In March 2017, the Partnership sold its 99% limited partner interest in the Northern View MF Property. The table below summarizes information related to the sale. The gain on sale, net of income taxes, is considered Tier 2 income (Note 3). The Partnership determined the sale did not meet the criteria for discontinued operations.

 

Property Name

 

Month Sold

 

Property Location

 

Units

 

Gross Proceeds

 

 

Gain on Sale

before Income

Taxes

 

Northern View

 

March

 

Highland Heights, KY

 

294

 

$

13,750,000

 

 

$

7,174,183

 

 

In May 2017, the Partnership closed on the sale of a parcel of land in St. Petersburg, Florida. The Partnership recognized a loss on sale of approximately $22,000, attributable to direct selling expenses.

 

Net income (loss), exclusive of the gains on sale, related to the Northern View MF Property (sold in March 2017); the Eagle Village, Residences of DeCordova and Residences of Weatherford MF Properties (sold in November 2017); and the Jade Park MF Property (sold in September 2018) for the three and nine months ended September 30, 2018 and 2017 are as follows:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income (loss)

 

$

172,367

 

 

$

(660,824

)

 

$

161,864

 

 

$

(813,867

)

 

 

9. Investment in Unconsolidated Entities

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has equity commitments and reported equity contributions within investment in unconsolidated entities on the condensed consolidated balance sheets. The investments represent 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, up to a maximum amount, through the second anniversary of construction completion. The return on these investments earned by the Partnership is reported as investment income on the condensed consolidated statements of operations.

19


 

The following table provides the details of the investments in unconsolidated entities at September 30, 2018 and December 31, 2017:

 

Property Name

 

Location

 

Units

 

Month

Commitment

Executed

 

Construction

Completion

Date

 

Carrying Value at September 30, 2018

 

 

Carrying Value at December 31, 2017

 

 

Maximum

Remaining

Equity Commitment at September 30, 2018

 

Vantage at Corpus Christi

 

Corpus Christi, TX

 

288

 

March 2016

 

August 2017

 

$

8,610,674

 

 

$

9,178,139

 

 

$

1,550,000

 

Vantage at Boerne

 

Boerne, TX

 

288

 

August 2016

 

December 2017

 

 

8,830,000

 

 

 

8,272,810

 

 

 

1,475,936

 

Vantage at Waco

 

Waco, TX

 

288

 

August 2016

 

January 2018

 

 

9,337,166

 

 

 

8,748,091

 

 

 

1,592,039

 

Vantage at Panama City Beach

 

Panama City Beach, FL

 

288

 

March 2017

 

June 2018

 

 

11,152,005

 

 

 

10,349,416

 

 

 

1,996,500

 

Vantage at Powdersville

 

Powdersville, SC

 

288

 

November 2017

 

N/A

 

 

11,252,239

 

 

 

3,060,471

 

 

 

-

 

Vantage at Stone Creek

 

Omaha, NE

 

294

 

March 2018

 

N/A

 

 

7,386,856

 

 

 

-

 

 

 

-

 

Vantage at Bulverde

 

Bulverde, TX

 

288

 

March 2018

 

N/A

 

 

8,956,732

 

 

 

-

 

 

 

-

 

Vantage at Germantown

 

Germantown, TN

 

288

 

June 2018

 

N/A

 

 

4,402,208

 

 

 

-

 

 

 

6,119,505

 

Vantage at Murfreesboro

 

Murfreesboro, TN

 

288

 

September 2018

 

N/A

 

 

5,499,398

 

 

 

-

 

 

 

6,755,836

 

Vantage at Coventry

 

Omaha, NE

 

288

 

September 2018

 

N/A

 

 

4,867,369

 

 

 

-

 

 

 

3,279,944

 

 

 

 

 

 

 

 

 

 

 

$

80,294,647

 

 

$

39,608,927

 

 

$

22,769,760

 

 

Activity in the First Nine Months of 2018

In March 2018, the Partnership executed equity commitments to fund construction of the Vantage at Stone Creek and Vantage at Bulverde multifamily properties of approximately $7.1 million and $8.6 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Stone Creek (Note 17).

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

In September 2018, the Partnership executed equity commitments to fund construction of the Vantage at Coventry and Vantage at Murfreesboro multifamily properties of approximately $8.1 million and $12.2 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Coventry (Note 17).

 

Activity in the First Nine Months of 2017

In March 2017, the Partnership executed an $11.7 million equity commitment to fund construction of the Vantage at Panama City Beach multifamily property. The Partnership also entered into a guarantee agreement related to the property’s construction loan (Note 17).

 

 

20


 

10. Property Loans, Net of Loan Loss Allowance

The following tables summarize the Partnership’s property loans, net of loan loss allowance, at September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowance

 

 

Property Loan Principal,

net of allowance

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

-

 

 

$

191,264

 

Avistar (February 2013 portfolio)

 

 

201,972

 

 

 

-

 

 

 

201,972

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

-

 

 

 

251,622

 

Cross Creek

 

 

11,101,887

 

 

 

(7,393,814

)

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

-

 

 

 

850,000

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Vantage at Brooks, LLC

 

 

8,367,635

 

 

 

-

 

 

 

8,367,635

 

Vantage at New Braunfels, LLC

 

 

7,156,978

 

 

 

-

 

 

 

7,156,978

 

Winston Group, Inc

 

 

700,000

 

 

 

-

 

 

 

700,000

 

Total

 

$

31,211,804

 

 

$

(7,393,814

)

 

$

23,817,990

 

 

 

 

December 31, 2017

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowance

 

 

Net Taxable

Property Loans

 

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

 

Lake Forest

 

 

4,995,884

 

 

 

-

 

 

 

4,995,884

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Vantage at Brooks, LLC

 

 

8,417,635

 

 

 

-

 

 

 

8,417,635

 

Vantage at New Braunfels, LLC

 

 

7,406,978

 

 

 

-

 

 

 

7,406,978

 

Winston Group, Inc

 

 

1,100,000

 

 

 

-

 

 

 

1,100,000

 

Total

 

$

36,907,688

 

 

$

(7,393,814

)

 

$

29,513,874

 

 

 

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

 

During the three and nine months ended September 30, 2018, the interest to be earned on the Cross Creek property loans was in nonaccrual status. During the three and nine months ended September 30, 2017, the interest to be earned on the Ashley Square (sold in November 2017), Cross Creek, and the Lake Forest (sold in September 2018) property loans was in nonaccrual status. The discounted cash flow method used by management to establish the net realizable value of these property loans determined the collection of the interest earned since inception was not probable.  In addition, for the three and nine months ended September 30, 2018 and 2017, 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.

 

 

11. Income Tax Provision

 

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by our taxable subsidiary, the Greens Hold Co, which owns all the MF Properties except the Suites on Paseo and Jade Park. The Partnership’s income tax expense fluctuates from period to period based on the timing of the taxable income. Deferred income tax expense is generally a function of the period’s temporary differences (i.e. depreciation, amortization of deferred finance costs, etc.), and the utilization of net operating losses generated in prior years. The Partnership’s deferred tax assets and liabilities are valued based on enacted tax rates as of the reporting date, including consideration of the Jobs and Tax Cuts Act of 2017.

 

21


 

The following represents income tax expense for the Greens Hold Co for the three and nine months ended September 30, 2018 and 2017:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Current income tax expense (benefit)

 

$

(809,805

)

 

$

(276,000

)

 

$

(837,805

)

 

$

2,484,047

 

Deferred income tax expense (benefit)

 

 

-

 

 

 

(9,000

)

 

 

34,000

 

 

 

(374,000

)

Total income tax expense (benefit)

 

$

(809,805

)

 

$

(285,000

)

 

$

(803,805

)

 

$

2,110,047

 

 

The Partnership evaluated whether it is more likely than not that its deferred income tax assets will be realizable and recorded a valuation allowance of approximately $221,000 against its deferred income tax assets as of September 30, 2018. There was no valuation allowance recorded as of December 31, 2017.

 

 

12. Other Assets

The following represents the other assets at September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Deferred financing costs, net

 

$

484,144

 

 

$

383,133

 

Fair value of derivative instruments (Note 16)

 

 

1,063,975

 

 

 

597,221

 

Taxable mortgage revenue bonds, at fair market value

 

 

2,339,902

 

 

 

2,422,459

 

Bond purchase commitments, at fair market value (Note 17)

 

 

1,046,445

 

 

 

3,002,540

 

Other assets

 

 

2,016,286

 

 

 

942,949

 

Total other assets

 

$

6,950,752

 

 

$

7,348,302

 

 

See Note 21 for a description of the methodology and significant assumptions for determining the fair value of derivative instruments, taxable MRBs and bond purchase commitments. Unrealized gains or losses on these assets are recorded in the condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the assets.

 

 

13. Unsecured Lines of Credit

The following tables summarize the unsecured lines of credit (“LOC”) at September 30, 2018 and December 31, 2017:

 

Unsecured Lines of Credit

 

Outstanding on September 30, 2018

 

 

Total

Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

28,465,600

 

 

$

50,000,000

 

 

June 2020

 

Variable (1)

 

Monthly

 

 

5.12

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2020

 

Variable (1)

 

Monthly

 

 

5.37

%

Total unsecured lines of credit

 

$

28,465,600

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

Unsecured Lines of Credit

 

Outstanding on December 31, 2017

 

 

Total

Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

50,000,000

 

 

$

50,000,000

 

 

May 2019

 

Variable (2)

 

Monthly

 

 

4.38

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

May 2019

 

Variable (2)

 

Monthly

 

 

4.62

%

Total unsecured lines of credit

 

$

50,000,000

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(2)

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

 

The outstanding balance on the non-operating LOC is due in December 2018, before consideration of the Partnership’s extension payment options. If all extension options are utilized, the balance is due in June 2019.

 

22


 

The Partnership is required to make principal payments to reduce the operating LOC to zero for fifteen consecutive calendar days during each calendar quarter.  The Partnership has fulfilled its prepayment obligation for all periods presented.   In addition, the Partnership has fulfilled its fourth quarter of 2018 repayment obligation as it maintained a zero balance in the operating LOC for the first fifteen days of October 2018. The Partnership is in compliance with all covenants at September 30, 2018.

 

 

14. Debt Financing

 

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, at September 30, 2018 and December 31, 2017:

 

 

 

Outstanding Debt

Financings on

September 30, 2018, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TOB & Term A/B

   Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

$

46,703,319

 

 

$

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

17,380,000

 

 

 

-

 

 

2018

 

November 2018

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

38,446,498

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Variable - TOB

 

 

37,965,000

 

 

 

23,422

 

 

2012

 

May 2019

 

Weekly

 

2.09 - 2.14%

 

 

1.67%

 

 

3.76 - 3.81%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - M24

 

 

46,833,000

 

 

 

53,123

 

 

2010

 

September 2020

 

Weekly

 

1.61%

 

 

1.85%

 

 

3.46%

 

Variable - M31 (1)

 

 

80,605,069

 

 

 

136,626

 

 

2014

 

July 2019 (2)

 

Weekly

 

1.59%

 

 

1.46%

 

 

3.05%

 

Variable - M33 (1)

 

 

57,234,019

 

 

 

56,867

 

 

2015

 

July 2020 (3)

 

Weekly

 

1.59%

 

 

1.23%

 

 

2.82%

 

Fixed - M45 (4)

 

 

219,551,239

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

Total Debt Financings

 

$

544,718,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees are variable

(2)

The Partnership may unilaterally elect to extend the financing for an additional five-year period through July 2024. If the Partnership exercises its extension option, Freddie Mac has the option to adjust components of the Facility Fees.

(3)

The Partnership may unilaterally elect to extend the financing for an additional five-year period through July 2025If the Partnership exercises its extension option, Freddie Mac has the option to adjust components of the Facility Fees.

(4)

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

 

 

 

Outstanding Debt

Financings on

December 31, 2017, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TOB & Term A/B

   Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

$

46,787,036

 

 

$

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

33,612,154

 

 

 

-

 

 

2017

 

June 2018 - August 2018

 

N/A

 

N/A

 

 

N/A

 

 

3.76%

 

Fixed - Term A/B

 

 

60,441,915

 

 

 

-

 

 

2017

 

February 2022 - March 2022

 

N/A

 

N/A

 

 

N/A

 

 

3.89%

 

Fixed - Term A/B

 

 

138,065,482

 

 

 

-

 

 

2016

 

September 2026 - December 2026

 

N/A

 

N/A

 

 

N/A

 

 

3.64%

 

Fixed - Term A/B

 

 

47,414,014

 

 

 

-

 

 

2017

 

February 2027 - November 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46% - 4.52%

 

Variable - TOB

 

 

38,130,000

 

 

 

850,327

 

 

2012

 

May 2018

 

Weekly

 

2.24 - 2.29%

 

 

1.67%

 

 

3.91 - 3.96%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - M24

 

 

55,468,000

 

 

 

372,222

 

 

2010

 

September 2020

 

Weekly

 

1.79%

 

 

1.85%

 

 

3.64%

 

Variable - M31 (1)

 

 

81,003,688

 

 

 

176,685

 

 

2014

 

July 2019 (2)

 

Weekly

 

1.77%

 

 

1.39%

 

 

3.16%

 

Variable - M33 (1)

 

 

57,406,058

 

 

 

57,364

 

 

2015

 

July 2020 (3)

 

Weekly

 

1.77%

 

 

1.16%

 

 

2.93%

 

Total Debt Financings

 

$

558,328,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees are variable

(2)

The Partnership may unilaterally elect to extend the financing for an additional five-year period through July 2024. If the Partnership exercises its extension option, Freddie Mac has the option to adjust components of the Facility Fees.

(3)

The Partnership may unilaterally elect to extend the financing for an additional five-year period through July 2025. If the Partnership exercises its extension option, Freddie Mac has the option to adjust components of the Facility Fees.

 

23


 

The TOB Trusts and Term A/B Trusts are subject to a Master Trust Agreement with Deutsche Bank that contains covenants with which the Partnership is required to comply. If the Partnership were to be out of compliance with any of these covenants, a termination event of the financing facilities would be triggered. The most restrictive covenant within the Master Trust Agreement states that cash available to distribute plus interest expense for the trailing twelve months must be at least twice the trailing twelve-month interest expense. The Partnership is in compliance with these covenants as of September 30, 2018.

 

At September 30, 2018 and December 31, 2017, the Partnership posted cash collateral (i.e. restricted cash) related to the interest rate swaps associated with specific debt financings. The Partnership has also posted cash collateral as contractually required under the terms of the four TEBS Financings. In addition, to mitigate its exposure to interest rate fluctuations on the variable rate TEBS Financings, the Partnership also entered into interest rate cap agreements (Note 16).

 

Debt Financing Activity in the First Nine Months of 2018

The following Term A/B Trusts were collapsed and paid off in full at prices that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2018:

 

Mortgage Revenue Bond

 

Debt Facility

 

Month

 

Paydown Applied

 

Seasons Lakewood - Series B

 

Term A/B Trust

 

March 2018

 

$

4,475,000

 

Summerhill - Series B

 

Term A/B Trust

 

March 2018

 

 

2,870,000

 

Oaks at Georgetown - Series B

 

Term A/B Trust

 

April 2018

 

 

4,690,000

 

San Vicente - Series B

 

Term A/B Trust

 

May 2018

 

 

1,555,000

 

The Village at Madera - Series B

 

Term A/B Trust

 

May 2018

 

 

1,465,000

 

Las Palmas II - Series B

 

Term A/B Trust

 

July 2018

 

 

1,505,000

 

15 West Apartments (1)

 

Term A/B Trust

 

August 2018

 

 

8,300,012

 

Bruton Apartments (1)

 

Term A/B Trust

 

August 2018

 

 

15,279,403

 

Columbia Gardens (1)

 

Term A/B Trust

 

August 2018

 

 

10,222,680

 

Companion at Thornhill Apartments (1)

 

Term A/B Trust

 

August 2018

 

 

9,642,587

 

Concord at Gulfgate - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

16,310,000

 

Concord at Little York - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

11,425,000

 

Concord at Williamcrest - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

17,695,000

 

Courtyard - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

9,210,000

 

Courtyard - Series B

 

Term A/B Trust

 

August 2018

 

 

5,295,000

 

Crossing at 1415 - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

6,370,877

 

Decatur Angle (1)

 

Term A/B Trust

 

August 2018

 

 

21,362,472

 

Harmony Court Bakersfield - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,360,000

 

Harmony Terrace - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

6,210,000

 

Harmony Terrace - Series B

 

Term A/B Trust

 

August 2018

 

 

6,290,000

 

Heights at 515 - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

5,402,307

 

Las Palmas II - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

1,530,000

 

Oaks at Georgetown - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

11,100,000

 

San Vicente - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,150,000

 

Seasons at Simi Valley - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,688,843

 

Seasons Lakewood - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

6,615,000

 

Seasons San Juan Capistrano - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

11,140,000

 

Seasons San Juan Capistrano - Series B

 

Term A/B Trust

 

August 2018

 

 

5,590,000

 

Summerhill - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

5,785,000

 

Sycamore Walk - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

3,066,769

 

The Village at Madera - Series A (1)

 

Term A/B Trust

 

August 2018

 

 

2,780,000

 

Village at River's Edge (1)

 

Term A/B Trust

 

August 2018

 

 

8,963,207

 

Willow Run (1)

 

Term A/B Trust

 

August 2018

 

 

10,079,940

 

 

 

 

 

 

 

 

242,424,098

 

 

(1)

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

 

In April 2018, the maturity date of the Partnership’s variable TOB Trusts was extended to May 2019.

 

24


 

In August 2018, the Partnership and its newly created consolidated subsidiary, ATAX TEBS IV, LLC (the “2018 Sponsor”), entered into a long-term debt financing facility provided through the securitization of 25 MRBs, with an initial par value of approximately $260.6 million owned by the 2018 Sponsor pursuant to the M45 TEBS Financing. The M45 TEBS financing facility provides the Partnership with a long-term fixed-rate facility.

 

The M45 TEBS Financing is structured such that the Partnership transferred ownership of the 25 MRBs to Freddie Mac to be securitized into a TEBS Trust. Freddie Mac then issues Class A and Class B Freddie Mac Multifamily Fixed Rate Certificates (collectively, the “TEBS Certificates”), which represent beneficial interests in the securitized assets. The Class A TEBS Certificates were sold to an unaffiliated investor and have an aggregate initial par value of approximately $221.5 million. The Class A TEBS Certificates entitle the holder to cash flows from the securitized assets at a stated interest rate. The Class A TEBS Certificates are credit enhanced by Freddie Mac such that Freddie Mac will cover any shortfall if the cash flows from the securitized assets are less than the contractual principal and interest due to the Class A TEBS Certificate holders. The 2018 Sponsor or Partnership would then be required to reimburse Freddie Mac for any credit enhancement payments. The Class B TEBS Certificates are retained by the Sponsors and grant the Partnership rights to certain cash flows from the securitized assets after payment to the Class A TEBS Certificates and related trust fees, as well as certain other rights to the securitized assets. The M45 TEBS Financing is considered a VIE (Note 5) because the Partnership’s rights are such that the Partnership is the primary beneficiary and the Partnership consolidates the M45 TEBS Financings in the condensed consolidated financial statements.

 

Of the 25 MRBs securitized in the M45 TEBS Financings, 24 MRBs were in Term A/B Trusts that were collapsed prior to the closing of the M45 TEBS Financing. The collapse of the Term A/B Trusts and subsequent closing of the M45 TEBS Financing resulted in a debt modification for accounting purposes and the Partnership capitalized transaction costs totaling approximately $371,000 as deferred financing costs.

 

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

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Montecito at Williams Ranch - Series A

 

$

6,921,000

 

 

2018

 

November 2018

 

 

4.53

%

Montecito at Williams Ranch - Series B

 

 

4,303,000

 

 

2018

 

November 2018

 

 

4.53

%

Vineyard Gardens - Series A

 

 

3,595,000

 

 

2018

 

November 2018

 

 

4.53

%

Vineyard Gardens - Series B

 

 

2,561,000

 

 

2018

 

November 2018

 

 

4.53

%

Total Term A/B Trust Financing

 

$

17,380,000

 

 

 

 

 

 

 

 

 

 

25


 

Debt Financing Activity in the First Nine Months of 2017

In February 2017, the Partnership entered into 19 new Term A/B Trust financings secured by various MRBs. The Partnership capitalized transaction costs totaling approximately $1.2 million as deferred financing costs, of which approximately $921,000 were paid to a related party (Note 20). The following table summarizes the terms of the new Term A/B Trusts:

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

San Vicente - Series A

 

$

3,150,000

 

 

2017

 

February 2022

 

 

3.89

%

San Vicente - Series B

 

 

1,555,000

 

 

2017

 

June 2018

 

 

3.76

%

Las Palmas - Series A

 

 

1,530,000

 

 

2017

 

February 2022

 

 

3.89

%

Las Palmas - Series B

 

 

1,505,000

 

 

2017

 

June 2018

 

 

3.76

%

The Village at Madera - Series A

 

 

2,780,000

 

 

2017

 

February 2022

 

 

3.89

%

The Village at Madera - Series B

 

 

1,465,000

 

 

2017

 

July 2018

 

 

3.76

%

Harmony Court Bakersfield - Series A

 

 

3,360,000

 

 

2017

 

February 2022

 

 

3.89

%

Harmony Court Bakersfield - Series B (1)

 

 

1,700,000

 

 

2017

 

July 2018

 

 

3.76

%

Summerhill - Series A

 

 

5,785,000

 

 

2017

 

February 2022

 

 

3.89

%

Summerhill - Series B

 

 

2,870,000

 

 

2017

 

July 2018

 

 

3.76

%

Courtyard - Series A

 

 

9,210,000

 

 

2017

 

February 2022

 

 

3.89

%

Courtyard - Series B

 

 

5,295,000

 

 

2017

 

July 2018

 

 

3.76

%

Seasons Lakewood - Series A

 

 

6,615,000

 

 

2017

 

February 2022

 

 

3.89

%

Seasons Lakewood - Series B

 

 

4,475,000

 

 

2017

 

August 2018

 

 

3.76

%

Seasons San Juan Capistrano - Series A

 

 

11,140,000

 

 

2017

 

February 2022

 

 

3.89

%

Seasons San Juan Capistrano - Series B

 

 

5,590,000

 

 

2017

 

August 2018

 

 

3.76

%

Avistar at Wood Hollow - Series A

 

 

27,075,000

 

 

2017

 

February 2027

 

 

4.46

%

Avistar at Wilcrest - Series A

 

 

3,210,000

 

 

2017

 

February 2027

 

 

4.46

%

Avistar at Copperfield - Series A

 

 

8,500,000

 

 

2017

 

February 2027

 

 

4.46

%

Total Term A/B Trust Financing

 

$

106,810,000

 

 

 

 

 

 

 

 

 

 

(1)

In August 2017, the Term A/B Trust financing for the Harmony Court Bakersfield – Series B MRB was collapsed and paid off in full. The Partnership paid approximately $1.7 million at settlement, which approximated the outstanding principal plus accrued interest.

In March 2017, the Partnership refinanced four Term A/B Trusts into new Term A/B Trusts with longer stated terms. Based on the terms of the new and old Term A/B Trusts, the refinancing was accounted for as a debt modification, with approximately $47,000 capitalized as deferred financing costs. The following table summarizes the terms of the new Term A/B Trusts:

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Oaks at Georgetown - Series A

 

$

11,100,000

 

 

2017

 

March 2022

 

 

3.89

%

Oaks at Georgetown - Series B

 

 

4,690,000

 

 

2017

 

August 2018

 

 

3.76

%

Harmony Terrace - Series A

 

 

6,210,000

 

 

2017

 

March 2022

 

 

3.89

%

Harmony Terrace - Series B

 

 

6,290,000

 

 

2017

 

August 2018

 

 

3.76

%

Total Term A/B Trust Financing

 

$

28,290,000

 

 

 

 

 

 

 

 

 

 

In June 2017, the maturity date of the Partnership’s variable TOB Trusts was extended until May 2018.

In September 2017, ATAX TEBS I, LLC, a wholly-owned subsidiary of the Partnership, exercised its option to extend the maturity date of the M24 TEBS Financing to September 15, 2020.

26


 

Future Maturities

 

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

 

Remainder of 2018

 

$

18,538,094

 

2019

 

 

168,792,140

 

2020

 

 

105,271,622

 

2021

 

 

2,456,696

 

2022

 

 

2,600,981

 

Thereafter

 

 

250,605,454

 

Total

 

 

548,264,987

 

Deferred financing costs

 

 

(3,546,843

)

Total debt financing, net

 

$

544,718,144

 

 

 

15. Mortgages Payable and Other Secured Financing

 

The following tables summarize the Partnerships’ Mortgages payable and other secured financing, net of deferred financing costs, at September 30, 2018 and December 31, 2017:

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable at

September 30, 2018, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Reset

Frequency

 

Variable

Based Rate

 

 

Facility Fees

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

3,243,620

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

24,437,976

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

5.00

%

(1)

N/A

 

 

5.00

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

27,681,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable at

December 31, 2017, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Reset

Frequency

 

Variable

Based Rate

 

 

Facility Fees

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

3,358,370

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

24,713,256

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

4.25

%

(2)

N/A

 

 

4.25

%

Jade Park

 

 

7,468,548

 

 

2016

 

October 2021

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

3.85

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

35,540,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

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

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

27


 

Future Maturities

 

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

 

Remainder of 2018

 

$

250,817

 

2019

 

 

3,608,890

 

2020

 

 

23,944,402

 

2021

 

 

-

 

2022

 

 

-

 

Thereafter

 

 

-

 

Total

 

 

27,804,109

 

Deferred financing costs

 

 

(122,513

)

Total mortgages payable and other secured financings, net

 

$

27,681,596

 

 

 

16. Interest Rate Derivative Agreements

The following tables summarize the interest rate derivatives, excluding interest rate swaps, at September 30, 2018 and December 31, 2017:

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of September 30, 2018

 

July 2014

 

$

30,365,801

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

2

 

July 2014

 

 

30,365,801

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

2

 

July 2014

 

 

30,365,801

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

2

 

July 2015

 

 

27,438,175

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

4,033

 

July 2015

 

 

27,438,175

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

4,033

 

July 2015

 

 

27,438,175

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

4,033

 

June 2017

 

 

91,097,404

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

248,476

 

June 2017

 

 

82,314,524

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

803,283

 

Sept 2017

 

 

59,377,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,063,975

 

 

(1)

See Note 21 for additional details.

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (2)

 

Counterparty

 

Fair Value as of December 31, 2017

 

July 2014

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

 

(2)

See Note 21 for additional details.

 

28


 

The Partnership previously contracted for two interest rate swaps with Deutsche Bank. On a quarterly basis, the Partnership reassesses its interest rate swap positions. The Partnership has determined the interest rate swaps are intended to mitigate interest rate risk for the variable rate PHC TOB Trusts. One of the interest rate swaps was terminated in September 2018. The swap was net settled and no cash was exchanged between the Partnership and Deutsche Bank. The following table summarizes the terms of the interest rate swaps at September 30, 2018 and December 31, 2017:

 

Purchase Date

 

Notional

Amount

 

 

Effective

Date

 

Termination Date

 

Fixed Rate

Paid

 

 

Period End

Variable

Rate

Received

 

 

Variable Rate &

Index

 

Counterparty

 

September 30, 2018 - Fair Value of Liability

 

Sept 2014

 

 

17,963,733

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.46

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(26,798

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(26,798

)

 

Purchase Date

 

Notional

Amount

 

 

Effective

Date

 

Termination Date

 

Fixed Rate

Paid

 

 

Period End

Variable

Rate

Received

 

 

Variable Rate &

Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

 

The Partnership is required to fund a cash collateral account at Deutsche Bank for an amount that approximates the fair value of the interest rate swaps. Such cash balances were approximately $23,000 and $850,000 at September 30, 2018 and December 31, 2017, respectively, and are reported within restricted cash on the condensed consolidated balance sheets.

 

The Partnership’s interest rate derivatives and interest rate swaps are not designated as hedging instruments and are recorded at fair value. Changes in fair value are included in current period earnings as interest expense on the condensed consolidated statements of operations. See Note 21 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements. The interest rate derivatives are presented within other assets and the interest rate swap arrangements are reported as a derivative swap liability on the condensed consolidated balance sheets.  

 

 

17. Commitments and Contingencies

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 the Partnership has determined that a loss is probable, the estimated amount of the loss is accrued in the condensed consolidated financial statements. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material effect on the Partnership’s condensed consolidated financial statements.

Bond Purchase Commitments

As part of the Partnership’s strategy of acquiring MRBs, it will enter into bond purchase commitments related to MRBs to be issued and secured by properties under construction.  Upon satisfaction of the terms of the bond purchase commitments, the proceeds from the MRBs issued will be used to pay off the construction-related debt of the underlying collateral of the MRB to be issued. The Partnership bears no construction or stabilization risk during the commitment period. The Partnership accounts for bond purchase commitments as available-for-sale securities and reports the asset or liability at fair value. Changes in the fair value of bond purchase commitments are recorded in the condensed consolidated statements of comprehensive income (loss).

29


 

The following table represents the bond purchase commitments at September 30, 2018 and December 31, 2017:

 

Bond Purchase Commitments

 

Commitment Date

 

Maximum

Committed

Amounts for

2018

 

 

Rate

 

 

Closing

Date (1)

 

Fair Value at

September 30, 2018

 

 

Fair Value at

December 31, 2017

 

Esperanza at Palo Alto

 

July 2015

 

$

-

 

 

 

5.80

%

 

May 2018

 

$

-

 

 

$

1,616,143

 

Village at Avalon

 

November 2015

 

 

16,400,000

 

 

 

5.80

%

 

Q4 2018

 

 

1,046,445

 

 

 

1,386,397

 

Total

 

 

 

$

16,400,000

 

 

 

 

 

 

 

 

$

1,046,445

 

 

$

3,002,540

 

 

(1)

The closing date for Esperanza at Palo Alto is actual and the closing date for Village at Avalon is estimated.

Property Loan Commitments

 

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has committed to loan approximately $17.0 million to unrelated third parties to build two new multifamily residential properties, Vantage at Brooks, LLC and Vantage at New Braunfels, LLC, both located in Texas. The Partnership’s remaining maximum commitments totaled approximately $1.2 million at September 30, 2018. See Note 10 for disclosures related to these property loans.

Other Guarantees & Commitments

In September 2018, the Partnership entered into a guaranty agreement whereby the Partnership has guaranteed payment of the construction loan of Vantage at Coventry, LLC. The Partnership will only have to perform on the guarantee upon a default by Vantage at Coventry, LLC. The guarantee is initially for the entire amount of the construction loan and decreases to 50% when the project receives a certificate of occupancy and 25% upon achievement of a specified debt service coverage ratio obtained by the borrower. The construction loan has a maximum available balance of $31.5 million. There was no outstanding balance on the construction loan and the Partnership had no exposure under the guarantee at September 30, 2018.

In March 2018, the Partnership entered into a guaranty agreement whereby the Partnership has guaranteed payment of the construction loan of Vantage at Stone Creek, LLC. The Partnership will only have to perform on the guarantee upon a default by Vantage at Stone Creek, LLC. The guarantee is initially for the entire amount of the construction loan and decreases to 50% when the project receives a certificate of occupancy and 25% upon achievement of a specified debt service coverage ratio obtained by the borrower. The construction loan has a maximum available balance of $30.8 million. The outstanding balance on the construction loan was approximately $1.6 million at September 30, 2018, which is the Partnership’s current exposure under the guarantee. No amount has been accrued for this contingent liability because the likelihood of a guarantee claim is remote.

In March 2017, the Partnership entered into a guaranty agreement whereby the Partnership has guaranteed payment of the construction loan of Vantage at Panama City Beach, LLC. The Partnership will only have to perform on the guarantee upon a default by Vantage at Panama City Beach, LLC. The guarantee is initially for the entire amount of the construction loan and decreases to 50% and 25% as certain debt service coverage levels are obtained by the borrower. The construction loan has a maximum available balance of $25.6 million. The outstanding balance on the construction loan was approximately $23.7 million at September 30, 2018, which is the Partnership’s current exposure under the guarantee. No amount has been accrued for this contingent liability because the likelihood of a guarantee claim is remote. The Partnership is also required to maintain minimum cash and net worth requirements, which were met as of September 30, 2018.

Pursuant to the sale of the Greens Property in 2012, the Partnership entered into guarantee agreements with an unaffiliated entity under which the Partnership has guaranteed certain obligations of the general partner of the Greens of Pine Glen limited partnership, including an obligation to repurchase the interests of BC Partners if certain “repurchase events” occur.  Remaining potential repurchase events relate primarily to the delivery of LIHTCs, or tax credit recapture and foreclosure.  No amount has been accrued for this contingent liability because the likelihood of a repurchase event is remote.  The maximum exposure to the Partnership under the guarantee provision of the repurchase clause is approximately $2.6 million at September 30, 2018 and represents 75% of the equity contributed by BC Partners. The term of the guarantee agreement ends in 2027.

30


 

Pursuant to the Ohio Properties transaction in 2011, the Partnership entered into guarantee agreements with an unaffiliated entity under which the Partnership has guaranteed certain obligations of the general partner of these limited partnerships, including an obligation to repurchase the interests of BC Partners if certain “repurchase events” occur.  Remaining potential repurchase events relate primarily to the delivery of LIHTCs, or tax credit recapture and foreclosure.  No amount has been accrued for this contingent liability because the likelihood of a repurchase event is remote.  The maximum exposure to the Partnership under the guarantee provision of the repurchase clause is approximately $4.1 million at September 30, 2018 and represents 75% of the equity contributed by BC Partners. The term of the guarantee agreement ends in 2026.

The 50/50 MF Property has a ground lease with the University of Nebraska-Lincoln with an initial lease term expiring in March 2038. There is also an option to extend the lease for an additional five-year period.  Annual lease payments are $100 per year. In conjunction with the ground lease, The 50/50 MF Property has entered into an agreement whereby it is required to make monthly payments, when cash is available at the property, to the University of Nebraska-Lincoln based on its revenues.  The minimum aggregate annual payment due under the agreement is approximately $130,000 at September 30, 2018. The minimum aggregate annual expense increases 2% annually until July 31, 2034 and increases 3% annually thereafter.  The 50/50 MF Property may be required to make additional payments under the agreement if its gross revenues exceed certain thresholds. The agreement will terminate upon termination of the ground lease. The Partnership reported accounts payable related to this agreement of approximately $106,000 and $125,000 at September 30, 2018 and December 31, 2017, respectively. The Partnership reported expenses related to the agreement of approximately $42,000 for the three months ended September 30, 2018 and 2017. The Partnership reported expenses related to the agreement of approximately $126,000 for the nine months ended September 30, 2018 and 2017.

As the holder of residual interests issued in its TOB Trust, Term A/B Trust and TEBS Financing arrangements, the Partnership is required to guarantee certain losses that can be incurred by the trusts created in connection with these financings.  These guarantees may result from: (i) a downgrade in the investment rating of PHC Certificates held by the trust or of the senior securities issued by the trust, (ii) a ratings downgrade of the liquidity provider for the trust, (iii) increases in short term interest rates beyond pre-set maximums, (iv) an inability to re-market the senior securities or (v) an inability to obtain liquidity for the trust. In the case of the TEBS Financings, Freddie Mac will step in first on an immediate basis and the Partnership will have 10 to 14 days to remedy. If the Partnership does not remedy, the trust will be collapsed.  If such an event occurs, the trust 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 pursuant to its guarantee. If the Partnership does not fund the shortfall, the default and liquidation provisions will be invoked against the Partnership. In the event of a shortfall, the maximum exposure to loss would be approximately $548.3 million prior to the consideration of the proceeds from the sale of the trust collateral. The Partnership has never been, and does not expect in the future, to be required to reimburse the financing facilities for any shortfall.

 

 

18. Redeemable Series A Preferred Units

 

The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units via private placements to five financial institutions. The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership. The balance of Series A Preferred Units on the condensed consolidated balance sheet is presented net of issuance costs. The following table summarizes the outstanding Series A Preferred Units at September 30, 2018 and December 31, 2017:  

 

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

Preferred Units at September 30, 2018 and December 31, 2017

 

 

9,450,000

 

 

$

94,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

31


 

19. Restricted Unit Awards (“RUAs”)

The Plan, as approved by the Unitholders, permits the grant of RUAs and other awards to the employees of Burlington, the Partnership, or any affiliate of either, and members of Burlington’s Board of Managers for up to 3.0 million BUCs. RUAs are generally granted with vesting conditions ranging from three months to approximately three years. RUAs currently provide for the payment of quarterly distributions during the vesting period and provide for accelerated vesting if there is a change in control or death or disability of the 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 $622,000 and $550,000 for the three months ended September 30, 2018 and 2017, respectively. The compensation expense for RUAs totaled approximately $1.4 million and $1.2 million for the nine months ended September 30, 2018 and 2017, respectively.

The following table represents nonvested RUAs at and for the nine months ended September 30, 2018 and the year ended December 31, 2017:

 

 

 

Restricted Units

Awarded

 

 

Weighted-average Grant-

date Fair Value

 

Nonvested at January 1, 2017

 

 

158,304

 

 

$

6.03

 

Granted

 

 

283,046

 

 

 

5.74

 

Vested

 

 

(199,281

)

 

 

5.85

 

Nonvested at December 31, 2017

 

 

242,069

 

 

$

5.83

 

Granted

 

 

309,212

 

 

 

6.31

 

Nonvested at September 30, 2018

 

 

551,281

 

 

$

6.10

 

 

There was approximately $1.4 million of total unrecognized compensation expense related to nonvested RUAs granted under the Plan at September 30, 2018.  The remaining expense is expected to be recognized over a weighted-average period of 0.8 years. The total intrinsic value of nonvested RUAs was approximately $3.1 million at September 30, 2018.

 

 

20. Transactions with Related Parties

The following table summarizes transactions with related parties for the three and nine months ended September 30, 2018 and 2017:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Partnership administrative fees to General Partner (1)

 

$

940,000

 

 

$

909,000

 

 

$

2,789,000

 

 

$

2,679,000

 

MRB property administrative fees to General Partner (2)

 

 

17,000

 

 

 

22,000

 

 

 

60,000

 

 

 

74,000

 

Placement fees to General Partner (3)

 

 

1,189,000

 

 

 

125,000

 

 

 

2,787,000

 

 

 

1,063,000

 

Property management fees to an affiliate (4)

 

 

49,000

 

 

 

94,000

 

 

 

147,000

 

 

 

299,000

 

Origination fees to an affiliate (5)

 

 

-

 

 

 

62,000

 

 

 

-

 

 

 

331,000

 

Consulting fees to an affiliate (6)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

921,000

 

Construction fees paid to an affiliate (7)

 

 

-

 

 

 

6,000

 

 

 

-

 

 

 

6,000

 

MRB redemption administrative fee to General Partner (8)

 

 

114,000

 

 

 

-

 

 

 

114,000

 

 

 

-

 

 

(1)

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

 

(2)

AFCA 2 receives administrative fees directly from the owners of 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. The disclosed amounts represent administrative fees paid during the periods specified. The administrative fees are not Partnership expenses.

 

(3)

AFCA 2 earns placement fees in connection with the acquisition of certain MRBs, equity investments in unconsolidated entities and certain property loans.  These placement fees were paid by the owners of the respective properties and, accordingly, have not been reflected in the accompanying condensed consolidated financial statements because these properties are not considered consolidated VIEs.

 

32


 

(4)

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

 

Properties Management also provides services to eight of the properties collateralizing MRBs of the Partnership. The property management fees are paid by the owners of the respective properties, are not Partnership expenses, and are not reflected in the table above. These property management fees are paid out of the revenues generated by the respective property prior to the payment of debt service on the Partnership's MRBs and property loans, as applicable.

 

(5)

An affiliate of AFCA 2, Farnam Capital Advisors, LLC (“Farnam Cap”), acts as an origination advisor to the borrowers when MRBs, investments in unconsolidated entities, certain property loans, and financing facilities are acquired by the Partnership. These origination fees were paid by the borrower and are not Partnership expenses, so they have not been reflected in the accompanying condensed consolidated financial statements.

 

(6)

Fees are paid to Farnam Cap related to consulting services when certain debt financing facilities are acquired by the Partnership. These fees were capitalized as deferred financing costs on the condensed consolidated balance sheets.

 

(7)

An affiliate of AFCA 2, Burlington Capital Construction Services, LLC, is the general contractor for certain rehabilitation services for the Jade Park MF Property. The Partnership paid approximately $6,000 for services under the contract during the three and nine months ended September 30, 2017.

 

(8)

AFCA 2 received a one-time administrative fee related to early redemption of the Lake Forest MRB from the property in September 2018. This administrative fee is not a Partnership expense.

 

 

21. 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 Partnership early adopted ASU 2018-13, “Fair Value Measurement (Topic 820),” that modified required disclosures related to fair value measurements effective September 30, 2018. The modified disclosures are incorporated in the disclosures within this note.

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

Investments in MRBs and Bond Purchase Commitments  

The fair value of the Partnership’s investments in MRBs and bond purchase commitments at September 30, 2018 and December 31, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the MRBs and price quotes for the MRBs are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, collateral, seniority to other obligations, operating results of the underlying property, geographic location, and property quality. These characteristics are used to estimate an estimated 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.

33


 

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 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 bond purchase commitments are categorized as a Level 3 input. At September 30, 2018, the range of effective yields on the individual MRBs was 3.5% to 9.3% per annum, with a weighted average effective yield of 4.9% when weighted by the principal outstanding of MRBs as of the reporting date. At December 31, 2017, the range of effective yields on the individual MRBs and bond purchase commitments was 2.9% to 8.8% per annum.

Investments in Public Housing Capital Fund Trust Certificates  

The fair value of the Partnership’s investment in PHC Certificates at September 30, 2018 and December 31, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Certificate as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs.

The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness.  The Partnership also engages a second third-party pricing service to confirm the values developed by the primary third-party pricing service. The valuation methodologies used by the third-party pricing services encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input.

Taxable MRBs

The fair value of the Partnership’s taxable MRBs at September 30, 2018 and December 31, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the taxable MRBs and price quotes 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 taxable MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, collateral, subordination to other obligations, operating results of the underlying property, geographic location, and property quality. These characteristics are used to estimate an estimated effective yield for each MRB. The taxable MRB fair value is estimated using a discounted cash flow and yield to maturity or call analysis by applying the effective yield to contractual cash flows. Significant increases (decreases) in the effective yield would have resulted in a significantly lower (higher) fair value estimate. Changes in fair value due to an increase or decrease in the effective yield do not impact the Partnership’s cash flows.

The Partnership evaluates pricing data received from the third-party pricing service by evaluating consistency with information from either the third-party pricing service or public sources. The fair value estimates of the 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 management. Due to the judgments involved, the fair value measurement of the Partnership’s investments in taxable MRBs is categorized as a Level 3 input. At September 30, 2018, the range of effective yields on the individual taxable MRBs was 8.3% to 9.5% per annum, with a weighted average effective yield of 9.1% when weighted by the principal outstanding of taxable MRBs as of the reporting date. At December 31, 2017, the range of effective yields on the individual taxable MRBs was 7.9% to 9.2% per annum.

Interest Rate Derivatives.  

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

34


 

Assets and liabilities measured at fair value on a recurring basis at September 30, 2018 are summarized as follows:

 

 

 

Fair Value Measurements at September 30, 2018

 

Description

 

Assets (Liabilities) at Fair Value

 

 

Quoted Prices in

Active Markets for

Identical Assets (Liabilities)

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs (Level 3)

 

Assets and Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds, held in trust

 

$

678,700,712

 

 

$

-

 

 

$

-

 

 

$

678,700,712

 

Mortgage revenue bonds

 

 

63,765,212

 

 

 

-

 

 

 

-

 

 

 

63,765,212

 

Bond purchase commitments (reported within

   other assets)

 

 

1,046,445

 

 

 

-

 

 

 

-

 

 

 

1,046,445

 

PHC Certificates

 

 

48,741,478

 

 

 

-

 

 

 

-

 

 

 

48,741,478

 

Taxable mortgage revenue bonds

   (reported within other assets)

 

 

2,339,902

 

 

 

-

 

 

 

-

 

 

 

2,339,902

 

Derivative instruments (reported within

   other assets)

 

 

1,063,975

 

 

 

-

 

 

 

-

 

 

 

1,063,975

 

Derivative swap liability

 

 

(26,798

)

 

 

-

 

 

 

-

 

 

 

(26,798

)

Total Assets and Liabilities at Fair Value, net

 

$

795,630,926

 

 

$

-

 

 

$

-

 

 

$

795,630,926

 

 

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

 

 

 

For the Three Months Ended September 30, 2018

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase

Commitments

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate

Derivatives (2)

 

 

Total

 

Beginning Balance July 1, 2018

 

$

767,629,337

 

 

$

994,685

 

 

$

49,070,710

 

 

$

2,357,952

 

 

$

897,958

 

 

$

820,950,642

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

36,126

 

 

 

-

 

 

 

(19,274

)

 

 

-

 

 

 

91,679

 

 

 

108,531

 

Included in earnings (impairment

   of securities)

 

 

-

 

 

 

-

 

 

 

(309,958

)

 

 

-

 

 

 

-

 

 

 

(309,958

)

Included in other

   comprehensive (loss) income

 

 

(6,729,317

)

 

 

51,760

 

 

 

-

 

 

 

(15,192

)

 

 

-

 

 

 

(6,692,749

)

Purchases

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Settlements

 

 

(18,470,222

)

 

 

-

 

 

 

-

 

 

 

(2,858

)

 

 

47,540

 

 

 

(18,425,540

)

Ending Balance September 30, 2018

 

$

742,465,924

 

 

$

1,046,445

 

 

$

48,741,478

 

 

$

2,339,902

 

 

$

1,037,177

 

 

$

795,630,926

 

Total amount of gains (losses) for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2018

 

$

-

 

 

$

-

 

 

$

(309,958

)

 

$

-

 

 

$

91,679

 

 

$

(218,279

)

 

(1)

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

(2)

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

35


 

 

 

 

For the Nine Months Ended September 30, 2018

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase Commitments

 

 

PHC Certificates

 

 

Taxable Mortgage Revenue Bonds

 

 

Interest Rate Derivatives (2)

 

 

Total

 

Beginning Balance January 1, 2018

 

$

788,621,707

 

 

$

3,002,540

 

 

$

49,641,588

 

 

$

2,422,459

 

 

$

(229,631

)

 

$

843,458,663

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

108,661

 

 

 

-

 

 

 

(57,822

)

 

 

-

 

 

 

1,088,060

 

 

 

1,138,899

 

Included in earnings (impairment

   of securities)

 

 

-

 

 

 

-

 

 

 

(1,141,020

)

 

 

-

 

 

 

-

 

 

 

(1,141,020

)

Included in other

   comprehensive (loss) income

 

 

(24,048,645

)

 

 

(1,956,095

)

 

 

525,446

 

 

 

(49,173

)

 

 

-

 

 

 

(25,528,467

)

Purchases

 

 

19,540,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,540,000

 

Settlements

 

 

(41,755,799

)

 

 

-

 

 

 

(226,714

)

 

 

(33,384

)

 

 

178,748

 

 

 

(41,837,149

)

Ending Balance September 30, 2018

 

$

742,465,924

 

 

$

1,046,445

 

 

$

48,741,478

 

 

$

2,339,902

 

 

$

1,037,177

 

 

$

795,630,926

 

Total amount of gains (losses) for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2018

 

$

-

 

 

$

-

 

 

$

(1,141,020

)

 

$

-

 

 

$

1,088,060

 

 

$

(52,960

)

 

(1)

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

(2)

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

 

Assets and liabilities measured at fair value on a recurring basis at December 31, 2017 are summarized as follows:

 

 

 

Fair Value Measurements at December 31, 2017

 

Description

 

Assets (Liabilities) at Fair Value

 

 

Quoted Prices in

Active Markets for

Identical Assets (Liabilities)

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Assets and Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds, held in trust

 

$

710,867,447

 

 

$

-

 

 

$

-

 

 

$

710,867,447

 

Mortgage revenue bonds

 

 

77,971,208

 

 

 

-

 

 

 

-

 

 

 

77,971,208

 

Bond purchase commitments (reported within

   other assets)

 

 

3,002,540

 

 

 

-

 

 

 

-

 

 

 

3,002,540

 

PHC Certificates

 

 

49,641,588

 

 

 

-

 

 

 

-

 

 

 

49,641,588

 

Taxable mortgage revenue bonds

   (reported within other assets)

 

 

2,422,459

 

 

 

-

 

 

 

-

 

 

 

2,422,459

 

Derivative instruments (reported within

   other assets)

 

 

597,221

 

 

 

-

 

 

 

-

 

 

 

597,221

 

Derivative swap liability

 

 

(826,852

)

 

 

-

 

 

 

-

 

 

 

(826,852

)

Total Assets and Liabilities at Fair Value, net

 

$

843,675,611

 

 

$

-

 

 

$

-

 

 

$

843,675,611

 

 

36


 

The following tables summarize the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2017:

 

 

 

For the Three Months Ended September 30, 2017

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase

Commitments

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate

Derivatives (2)

 

 

Total

 

Beginning Balance July 1, 2017

 

$

768,129,658

 

 

$

3,165,172

 

 

$

55,791,371

 

 

$

3,931,471

 

 

$

(761,648

)

 

$

830,256,024

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

53,117

 

 

-

 

 

 

(14,129

)

 

-

 

 

 

(66,917

)

 

 

(27,929

)

Included in other

   comprehensive (loss) income

 

 

1,501,150

 

 

 

189,875

 

 

 

309,808

 

 

 

2,356

 

 

-

 

 

 

2,003,189

 

Purchases

 

 

12,471,000

 

 

-

 

 

-

 

 

-

 

 

 

59,217

 

 

 

12,530,217

 

Settlements

 

 

(2,841,047

)

 

-

 

 

 

(1,173,302

)

 

 

(4,066

)

 

-

 

 

 

(4,018,415

)

Ending Balance September 30, 2017

 

$

779,313,878

 

 

$

3,355,047

 

 

$

54,913,748

 

 

$

3,929,761

 

 

$

(769,348

)

 

$

840,743,086

 

Total amount of losses for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2017

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(66,917

)

 

$

(66,917

)

 

(1)

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

(2)

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

 

 

 

For the Nine Months Ended September 30, 2017

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase

Commitments

 

 

PHC Certificates

 

 

Taxable Mortgage

Revenue Bonds

 

 

Interest Rate

Derivatives (2)

 

 

Total

 

Beginning Balance January 1, 2017

 

$

680,211,051

 

 

$

2,399,449

 

 

$

57,158,068

 

 

$

4,084,599

 

 

$

(955,679

)

 

$

742,897,488

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

159,707

 

 

-

 

 

 

(45,846

)

 

-

 

 

 

(369,686

)

 

 

(255,825

)

Included in other

   comprehensive (loss) income

 

 

31,731,448

 

 

 

955,598

 

 

 

(588,172

)

 

 

(122,908

)

 

-

 

 

 

31,975,966

 

Purchases

 

 

72,056,000

 

 

-

 

 

-

 

 

-

 

 

 

556,017

 

 

 

72,612,017

 

Settlements

 

 

(4,844,328

)

 

-

 

 

 

(1,610,302

)

 

 

(31,930

)

 

-

 

 

 

(6,486,560

)

Ending Balance September 30, 2017

 

$

779,313,878

 

 

$

3,355,047

 

 

$

54,913,748

 

 

$

3,929,761

 

 

$

(769,348

)

 

$

840,743,086

 

Total amount of losses for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on September 30, 2017

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(369,686

)

 

$

(369,686

)

 

(1)

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

(2)

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

 

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

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

37


 

At September 30, 2018 and December 31, 2017, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s financial liabilities, which are indicative of market prices. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each financial liability as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure, seniority to other obligations, operating results of the underlying assets, and asset quality. The financial liabilities values are then estimated using a discounted cash flow and yield to maturity or call analysis.

The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these financial liabilities are based largely on unobservable inputs believed to be used by market participants and 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 financial liabilities are categorized as a Level 3 input. The TEBS and variable-rate TOB debt financings are credit enhanced by Freddie Mac and Deutsche Bank, respectively. The table below summarizes the fair value of the financial liabilities at September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt financing and LOCs

 

$

573,183,744

 

 

$

578,207,938

 

 

$

608,328,347

 

 

$

618,412,150

 

Mortgages payable and other secured financing

 

 

27,681,596

 

 

 

27,804,110

 

 

 

35,540,174

 

 

 

35,767,924

 

 

 

22. Segments

 

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

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

 

Mortgage Revenue Bond Investments Segment

The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of MRBs and related property loans which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.  Such MRBs are held as investments and the related property loans, net of loan loss allowance, are reported as such on the Partnership’s condensed consolidated balance sheets.  At September 30, 2018, the Partnership held 78 MRBs. The Residential Properties financed by MRBs contain a total of 10,746 rental units. In addition, one MRB (Pro Nova 2014-1) is collateralized by commercial real estate. All general and administrative expenses on the condensed consolidated statements of operations are reported within this segment.

 

Public Housing Capital Fund Trust Segment

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

 

MF Properties Segment

The MF Properties segment consists of multifamily, student housing, and senior citizen residential properties held by the Partnership. During the time the Partnership holds an interest in an MF Property, any net rental income generated by the MF Properties in excess of debt service will be available for distribution to the Partnership in accordance with its ownership interest in the MF Property.  At September 30, 2018, the segment includes two MF Properties comprised of a total of 859 rental units. Income tax expense for the Greens Hold Co is reported within this segment.

 

Other Investments Segment

The Other investments segment consists of the operations of ATAX Vantage Holdings, LLC, which invests in unconsolidated entities (Note 9) and property loans due from Vantage at Brooks, LLC and Vantage at New Braunfels, LLC (Note 10).

38


 

 

The following tables detail certain key financial information for the Partnership’s reportable segments for the three and nine months ended September 30, 2018 and 2017:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Total revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

21,440,970

 

 

$

11,035,530

 

 

$

44,609,666

 

 

$

32,683,968

 

MF Properties

 

 

2,285,736

 

 

 

3,257,174

 

 

 

7,099,690

 

 

 

10,356,311

 

Public Housing Capital Fund Trust

 

 

617,661

 

 

 

711,823

 

 

 

1,860,728

 

 

 

2,139,791

 

Other Investments

 

 

1,656,748

 

 

 

1,230,303

 

 

 

4,674,230

 

 

 

3,329,448

 

Total revenues

 

$

26,001,115

 

 

$

16,234,830

 

 

$

58,244,314

 

 

$

48,509,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

5,225,938

 

 

$

4,786,151

 

 

$

15,008,698

 

 

$

14,295,635

 

MF Properties

 

 

420,950

 

 

 

556,200

 

 

 

1,219,782

 

 

 

1,616,032

 

Public Housing Capital Fund Trust

 

 

338,375

 

 

 

371,830

 

 

 

557,955

 

 

 

1,086,094

 

Other Investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total interest expense

 

$

5,985,263

 

 

$

5,714,181

 

 

$

16,786,435

 

 

$

16,997,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

MF Properties

 

 

849,516

 

 

 

1,256,202

 

 

 

2,672,925

 

 

 

3,876,768

 

Public Housing Capital Fund Trust

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Other Investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation expense

 

$

849,516

 

 

$

1,256,202

 

 

$

2,672,925

 

 

$

3,876,768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partnership net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

12,039,700

 

 

$

2,604,989

 

 

$

18,647,585

 

 

$

7,426,810

 

MF Properties

 

 

4,228,494

 

 

 

(626,827

)

 

 

3,770,339

 

 

 

3,136,765

 

Public Housing Capital Fund Trust

 

 

(30,672

)

 

 

339,993

 

 

 

161,753

 

 

 

1,053,697

 

Other Investments

 

 

1,645,533

 

 

 

1,227,328

 

 

 

4,645,803

 

 

 

3,326,473

 

Partnership net income

 

$

17,883,055

 

 

$

3,545,483

 

 

$

27,225,480

 

 

$

14,943,745

 

 

The following table details total assets for the Partnership’s reportable segments at September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Total assets

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

882,106,195

 

 

$

937,565,390

 

MF Properties

 

 

71,664,933

 

 

 

83,514,758

 

Public Housing Capital Fund Trust Certificates

 

 

49,099,991

 

 

 

49,918,434

 

Other Investments

 

 

95,948,632

 

 

 

55,573,834

 

Consolidation/eliminations

 

 

(97,602,834

)

 

 

(56,804,417

)

Total assets

 

$

1,001,216,917

 

 

$

1,069,767,999

 

 

 

23. Subsequent Events

In October 2018, the Bella Vista MRB was redeemed by the borrower at a price of approximately $6.2 million, which is equal to the Partnership’s carrying value plus accrued interest. Approximately $5.1 million of the redemption proceeds were used to pay down the principal outstanding on the M24 TEBS Financing.

In October 2018, the Partnership terminated its remaining interest rate swap with Deutsche Bank. The Partnership received approximately $7,000 upon settlement.

In October 2018, the Partnership listed the land held for development in Gardner, KS for sale (Note 8).

 

39


 

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

In Management’s Discussion and Analysis, the “Partnership” refers to America First Multifamily Investors, L.P. and its Consolidated Subsidiaries at September 30, 2018. See Note 2 and Note 5 to the Partnership’s condensed consolidated financial statements for further disclosure.

Critical Accounting Policies

The Partnership’s critical accounting policies are the same as those described in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017.  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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

 

Executive Summary

The Partnership was formed for the primary purpose of acquiring a portfolio of MRBs that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties in their market areas. We expect and believe the interest received on these MRBs is excludable from gross income for federal income tax purposes. We may also invest in other types of securities that may or may not be secured by real estate to the extent allowed by the Partnership’s Amended and Restated LP Agreement. We may acquire interests in MF Properties to position ourselves for future investments in MRBs issued to finance these properties and which we expect and believe will generate tax-exempt interest.

At September 30, 2018, the Partnership has four reportable segments: (1) Mortgage Revenue Bond Investments, (2) MF Properties, (3) Public Housing Capital Fund Trusts, and (4) Other Investments. In addition to the reportable segments, the Partnership also separately reports its consolidation and elimination information because it does not allocate certain items to the segments.  See Notes 2 and 22 to the Partnership’s condensed consolidated financial statements for additional details.

40


 

Recent Investment Activity

The following table presents information regarding the investment activity of the Partnership for the first, second and third quarters of 2018 and 2017:

 

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 September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond redemptions

 

3

 

$

17,567

 

 

$

15,917

 

 

$

1,062

 

 

6, 14

MF Property sold

 

1

 

 

13,450

 

 

 

7,500

 

 

 

1,013

 

 

8, 15

Investments in unconsolidated entities

 

6

 

 

18,946

 

 

N/A

 

 

N/A

 

 

9

Property loan redemptions

 

2

 

 

5,113

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisition

 

1

 

$

19,540

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond redemptions

 

4

 

 

11,000

 

 

$

7,710

 

 

N/A

 

 

6, 14

Investments in unconsolidated entities

 

4

 

 

6,764

 

 

N/A

 

 

N/A

 

 

9

Property loan redemptions

 

3

 

 

500

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond redemptions

 

3

 

$

10,447

 

 

$

7,345

 

 

N/A

 

 

6, 14

Investments in unconsolidated entities

 

3

 

 

12,323

 

 

N/A

 

 

N/A

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

2

 

$

12,471

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond redemption

 

1

 

 

1,997

 

 

$

1,700

 

 

N/A

 

 

6

Investment in unconsolidated entities

 

1

 

 

1,552

 

 

N/A

 

 

N/A

 

 

9

Property loan advance

 

1

 

 

36

 

 

N/A

 

 

N/A

 

 

10

Property loan redemption

 

1

 

 

500

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land held for development sold

 

1

 

$

3,000

 

 

N/A

 

 

$

(5

)

 

8

Investments in unconsolidated entities

 

2

 

 

1,605

 

 

N/A

 

 

N/A

 

 

9

Property loan advances

 

2

 

 

639

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

6

 

$

59,585

 

 

N/A

 

 

N/A

 

 

6

MF Property sold

 

1

 

 

13,750

 

 

N/A

 

 

$

1,071

 

 

8

Investments in unconsolidated entities

 

3

 

 

9,503

 

 

N/A

 

 

N/A

 

 

9

Property loan advances

 

3

 

 

1,705

 

 

N/A

 

 

N/A

 

 

10

Property loan redemption

 

1

 

 

500

 

 

N/A

 

 

N/A

 

 

10

 

(1)

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

41


 

Recent Financing Activity

The following table presents information regarding the debt financing, derivative, Series A Preferred Units, and partners; capital activity of the Partnership for first, second and third quarters of 2018 and 2017, 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 September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayments on unsecured LOCs

 

2

 

$

21,074

 

 

No

 

N/A

 

 

13

Proceeds from M45 TEBS Financings

 

1

 

 

221,540

 

 

Yes

 

N/A

 

 

14

Proceeds from new Term A/B Financings with DB

 

4

 

 

17,380

 

 

Yes

 

N/A

 

 

14

Term A/B Trusts repayments related to M45 TEBS

 

24

 

 

208,689

 

 

Yes

 

N/A

 

 

14

Repayment of Term A/B Financings with DB

 

2

 

 

10,885

 

 

Yes

 

N/A

 

 

14

Interest rate swap terminated

 

1

 

 

-

 

 

N/A

 

N/A

 

 

16

Proceeds on issuance of Beneficial Unit Certificates, net

   of issuance costs

 

1

 

 

384

 

 

N/A

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayment on unsecured LOCs

 

1

 

$

460

 

 

No

 

N/A

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds on issuance of Beneficial Unit Certificates, net

   of issuance costs

 

1

 

$

192

 

 

N/A

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

1

 

$

12,471

 

 

No

 

N/A

 

 

13

Interest rate derivative purchased

 

1

 

 

52

 

 

N/A

 

4.0%

 

 

16

Redeemable Series A preferred unit issuance

 

1

 

 

20,000

 

 

N/A

 

N/A

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate derivatives purchased

 

2

 

$

497

 

 

N/A

 

1.5%

 

 

16

Refinance of Mortgages Payables

 

2

 

 

-

 

 

Yes

 

N/A

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayments on unsecured LOCs

 

2

 

$

40,000

 

 

No

 

N/A

 

 

13

Repayment on secured LOC

 

1

 

 

20,000

 

 

Yes

 

N/A

 

 

N/A

Proceeds from new Term A/B Financings with DB

 

19

 

 

106,810

 

 

Yes

 

N/A

 

 

14

Net repayments on refinance of Term A/B Financings

   with DB

 

4

 

 

2,245

 

 

Yes

 

N/A

 

 

14

Proceeds from Redeemable Series A preferred unit

   issuances

 

2

 

 

16,131

 

 

N/A

 

N/A

 

 

18

 

(1)

See "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A below.

Mortgage Revenue Bond Investments Segment

 

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

 

42


 

The table below compares operating results for the Mortgage Revenue Bond Investments segment for the periods indicated (dollars in 000’s):

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Mortgage Revenue Bond

   Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

21,441

 

 

$

11,036

 

 

$

10,405

 

 

 

94.3

%

 

$

44,610

 

 

$

32,684

 

 

$

11,926

 

 

 

36.5

%

Total interest expense

 

$

5,226

 

 

$

4,786

 

 

$

440

 

 

 

9.2

%

 

$

15,009

 

 

$

14,296

 

 

$

713

 

 

 

5.0

%

Net income

 

$

12,040

 

 

$

2,605

 

 

$

9,435

 

 

 

362.2

%

 

$

18,648

 

 

$

7,427

 

 

$

11,221

 

 

 

151.1

%

 

Total revenues for the three months ended September 30, 2018 increased from the same period in 2017 due to offsetting factors. The Partnership recognized an increase of approximately $1.2 million in recurring investment income from MRBs purchased during 2017 and 2018, offset by a decrease of approximately $988,000 in recurring investment income due to MRB redemptions and scheduled principal payments received during 2017 and 2018. The Partnership also recognized approximately $10.3 million of additional contingent interest, other interest income and other income related to investments in Lake Forest in the third quarter of 2018 as compared to 2017. The increase in total revenues for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to an increase of approximately $3.6 million in recurring investment income from MRBs purchased during 2017 and 2018, additional interest income of approximately $790,000, offset by a decrease of approximately $3.0 million in recurring investment income due to MRB redemptions and scheduled principal payments received during 2017 and 2018. The Partnership also recognized approximately $10.1 million of additional contingent interest, other interest income and other income related to investments in Lake Forest in the third quarter of 2018 as compared to 2017.

 

The increase in interest expense for the three months ended September 30, 2018 compared to the same period in 2017 is due to a $798,000 increase in expense from an increase of approximately 59 basis points in the average interest rate. The rise in the average interest rate is primarily a result of generally rising interest rates in the U.S. credit markets. The increase is partially offset by a decrease of approximately $227,000 related to fair value adjustments for interest rate derivatives. The increase in interest expense for the nine months ended September 30, 2018 as compared to the same period in 2017 is attributable to various factors. Interest expense increased by approximately $1.5 million due to an increase of approximately 37 basis points in the average interest rate. Interest expense increased by approximately $339,000 due to an increase of approximately $13.4 million in average principal outstanding. These increases are offset by a decrease in expense of approximately $1.2 million related to fair value adjustments for interest rate derivatives.

 

The increase in net income for the three months ended September 30, 2018 as compared to the same period in 2017 is due to the changes in total revenues and interest expense described above, an increase in salaries and restricted unit compensation expense of approximately $1.1 million, and a decrease in professional fees of approximately $665,000. The increase in net income for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to the changes in total revenues and interest expense described above, an increase in salaries and restricted unit compensation costs of approximately $934,000, a decrease in professional fees of approximately $721,000, and a decrease of approximately $596,000 in amortization of deferred financing costs.

 

Public Housing Capital Fund Trusts Segment

 

The PHC Certificates consist of custodial receipts evidencing loans made to several public housing authorities.

 

The table below compares operating results for the Public Housing Capital Fund Trust segment for the periods indicated (dollars in 000’s):

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

PHC Trusts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

618

 

 

$

712

 

 

$

(94

)

 

 

-13.2

%

 

$

1,861

 

 

$

2,140

 

 

$

(279

)

 

 

-13.0

%

Total interest expense

 

$

338

 

 

$

372

 

 

$

(34

)

 

 

-9.1

%

 

$

558

 

 

$

1,086

 

 

$

(528

)

 

 

-48.6

%

Net income (loss)

 

$

(31

)

 

$

340

 

 

$

(371

)

 

 

-109.1

%

 

$

162

 

 

$

1,054

 

 

$

(892

)

 

 

-84.6

%

 

The decrease in total revenues for the three and nine months ended September 30, 2018 compared to the same periods in 2017 is the result of principal reductions of the PHC Certificates during 2017 of approximately $6.0 million.

 

43


 

The decrease in total interest expense for the three and nine months ended September 30, 2018 compared to the same periods in 2017 is due to fair value adjustments for interest rate swaps that reduced expenses by approximately $48,000 and approximately $588,000, respectively.

 

The decreases in net income for the three and nine months ended September 30, 2018 compared to the same periods in 2017 is a due to the revenue and interest expense changes noted above and impairment charges of approximately $310,000 and approximately $1.1 million during the three and nine months ended September 30, 2018, respectively.

 

MF Properties Segment

 

The Partnership’s strategy has been to acquire ownership positions in MF Properties while assessing the viability of restructuring the property ownership through a sale of the MF Properties. At September 30, 2018 and 2017, the Partnership and its Consolidated Subsidiaries owned two and six MF Properties, respectively, which contain a total of 859 and 1,710 rental units, respectively.

 

The table below compares operating results for the MF Properties segment for the periods indicated (dollars in 000’s):

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

MF Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

2,286

 

 

$

3,257

 

 

$

(971

)

 

 

-29.8

%

 

$

7,100

 

 

$

10,356

 

 

$

(3,256

)

 

 

-31.4

%

Gain on sale of real estate assets, net

 

$

4,051

 

 

$

-

 

 

$

4,051

 

 

N/A

 

 

$

4,051

 

 

$

7,153

 

 

$

(3,102

)

 

 

-43.4

%

Total interest expense

 

$

421

 

 

$

556

 

 

$

(135

)

 

 

-24.3

%

 

$

1,220

 

 

$

1,616

 

 

$

(396

)

 

 

-24.5

%

Net income (loss)

 

$

4,228

 

 

$

(627

)

 

$

4,855

 

 

 

774.3

%

 

$

3,770

 

 

$

3,137

 

 

$

633

 

 

 

20.2

%

 

The decrease in total revenues for the three months ended September 30, 2018 as compared to the same period in 2017 is due to a decrease of approximately $1.1 million in total from the sale of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017. The decrease in total revenues for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to a decrease of approximately $3.6 million in total from the sale of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017, offset by an increase of approximately $272,000 from increased occupancy at The 50/50 (see the discussion of occupancy later in this section).

 

The gain on sale of real estate assets for the three and nine months ended September 30, 2018 consists a $4.1 million gain on sale of Jade Park in September 2018. The gain on sale of real estate assets for the nine months ended September 30, 2017 consists primarily of a $7.2 million gain on sale of Northern View in March 2017.

 

The decrease in interest expense for the three and nine months ended September 30, 2018 as compared to the same periods in 2017 is due primarily to a decrease in the average principal outstanding of approximately $15.5 million and $15.6 million, respectively, primarily from the settlement of mortgages payable on MF Properties sold in November 2017.

 

The increase in net income for the three months ended September 30, 2018 as compared to the same period in 2017 is due primarily to the changes in revenues, gain on sale of real estate assets, and interest expense described above, in addition to a decrease in real estate operating and depreciation expenses related to MF Property sales in 2017 of approximately $981,000 and an increase in income tax benefit of approximately $525,000. The increase in net income for the nine months ended September 30, 2018 as compared to the same period in 2017 is due primarily to the changes in revenues, gain on sale of real estate assets, and interest expense described above, in addition to a net decrease in income tax expense of $2.9 million related to gains on sale, a decrease in real estate operating and depreciation expenses totaling approximately $3.1 million related to MF Property sales in 2017, and a decrease in amortization expense of approximately $232,000 for in-place lease amortization at Jade Park in the first quarter of 2017 that did not occur in 2018. The remaining variance is due to various decreases in real estate operating expenses.

Other Investments Segment

 

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

 

44


 

The table below compares operating results for the Other Investments segment for the periods indicated (dollars in 000’s):

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Other Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,657

 

 

$

1,230

 

 

$

427

 

 

 

34.7

%

 

$

4,674

 

 

$

3,329

 

 

$

1,345

 

 

 

40.4

%

Net income

 

$

1,646

 

 

$

1,227

 

 

$

419

 

 

 

34.1

%

 

$

4,646

 

 

$

3,326

 

 

$

1,320

 

 

 

39.7

%

 

The increase in total revenues and net income for the three months ended September 30, 2018 as compared to same period in 2017 is due to an increase of approximately  $488,000 in income from additional equity contributions to unconsolidated entities in 2018 totaling approximately $38.0 million. The increase in total revenues and net income for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to an increase of approximately $553,000 in income from additional equity contributions to unconsolidated entities during 2017 totaling approximately $17.2 million and an increase of approximately $772,000 in income from additional equity contributions to unconsolidated entities during 2018 totaling approximately $38.0 million.

 

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

 

The following tables outline certain information regarding the Residential Properties collateralizing the Partnership’s MRBs and the MF Properties.   

45


 

Non-Consolidated Properties - Stabilized

The owners of the following properties either do not meet the definition of a VIE and/or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE.  As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis.  These Residential Properties have met the stabilization criteria (see footnote 3 below the table) at September 30, 2018. Debt service on the Partnership’s bonds for the non-consolidated stabilized properties was current at September 30, 2018. 

 

 

 

 

 

Number

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

 

of Units at

September 30,

 

 

Physical Occupancy (1)

at September 30,

 

 

For the Nine Months Ended September 30,

 

Property Name

 

State

 

2018

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Non-Consolidated Properties-Stabilized (3)

 

Glenview Apartments

 

CA

 

 

88

 

 

 

93

%

 

 

97

%

 

 

97

%

 

 

97

%

Harden Ranch

 

CA

 

 

100

 

 

 

99

%

 

 

100

%

 

 

96

%

 

 

98

%

Harmony Court Bakersfield

 

CA

 

 

96

 

 

 

96

%

 

 

97

%

 

 

96

%

 

 

93

%

Harmony Terrace

 

CA

 

 

136

 

 

 

99

%

 

 

100

%

 

 

126

%

 

 

133

%

Las Palmas

 

CA

 

 

81

 

 

 

100

%

 

 

99

%

 

 

98

%

 

 

95

%

Montclair Apartments

 

CA

 

 

80

 

 

 

96

%

 

 

100

%

 

 

99

%

 

 

99

%

San Vicente

 

CA

 

 

50

 

 

 

100

%

 

 

98

%

 

 

95

%

 

 

97

%

Santa Fe Apartments

 

CA

 

 

89

 

 

 

97

%

 

 

100

%

 

 

96

%

 

 

103

%

Seasons at Simi Valley

 

CA

 

 

69

 

 

 

100

%

 

 

100

%

 

 

119

%

 

 

126

%

Seasons Lakewood

 

CA

 

 

85

 

 

 

98

%

 

 

100

%

 

 

102

%

 

 

107

%

Summerhill

 

CA

 

 

128

 

 

 

98

%

 

 

97

%

 

 

97

%

 

 

97

%

Sycamore Walk

 

CA

 

 

112

 

 

 

99

%

 

 

98

%

 

 

98

%

 

 

98

%

The Village at Madera

 

CA

 

 

75

 

 

 

100

%

 

 

99

%

 

 

97

%

 

 

96

%

Tyler Park Townhomes

 

CA

 

 

88

 

 

 

100

%

 

 

97

%

 

 

97

%

 

 

97

%

Westside Village Market

 

CA

 

 

81

 

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Lake Forest Apartments (7)

 

FL

 

n/a

 

 

n/a

 

 

 

83

%

 

n/a

 

 

 

86

%

Ashley Square Apartments (6)

 

IA

 

n/a

 

 

n/a

 

 

 

97

%

 

n/a

 

 

 

85

%

Brookstone Apartments

 

IL

 

 

168

 

 

 

97

%

 

 

100

%

 

 

96

%

 

 

96

%

Copper Gate

 

IN

 

 

128

 

 

 

98

%

 

 

96

%

 

 

96

%

 

 

95

%

Renaissance Gateway (8)

 

LA

 

 

208

 

 

 

95

%

 

 

98

%

 

 

102

%

 

 

106

%

Live 929 Apartments

 

MD

 

 

572

 

 

 

84

%

 

 

87

%

 

 

85

%

 

 

84

%

Woodlynn Village

 

MN

 

 

59

 

 

 

100

%

 

 

98

%

 

 

97

%

 

 

97

%

Greens of Pine Glen Apartments

 

NC

 

 

168

 

 

 

96

%

 

 

98

%

 

 

91

%

 

 

89

%

Silver Moon

 

NM

 

 

151

 

 

 

97

%

 

 

86

%

 

 

89

%

 

 

87

%

Ohio Properties (4)

 

OH

 

 

362

 

 

 

98

%

 

 

98

%

 

 

94

%

 

 

94

%

Bridle Ridge Apartments

 

SC

 

 

152

 

 

 

99

%

 

 

99

%

 

 

97

%

 

 

96

%

Columbia Gardens

 

SC

 

 

188

 

 

 

95

%

 

 

98

%

 

 

95

%

 

 

80

%

Companion at Thornhill Apartments

 

SC

 

 

179

 

 

 

97

%

 

 

99

%

 

 

87

%

 

 

87

%

Cross Creek Apartments

 

SC

 

 

144

 

 

 

95

%

 

 

94

%

 

 

91

%

 

 

94

%

Palms at Premier Park

 

SC

 

 

240

 

 

 

93

%

 

 

95

%

 

 

89

%

 

 

88

%

Village at River's Edge (5)

 

SC

 

 

124

 

 

 

100

%

 

n/a

 

 

 

98

%

 

n/a

 

Willow Run

 

SC

 

 

200

 

 

 

94

%

 

 

99

%

 

 

90

%

 

 

81

%

Arbors of Hickory Ridge

 

TN

 

 

348

 

 

 

90

%

 

 

92

%

 

 

84

%

 

 

82

%

Avistar at Chase Hill (6)

 

TX

 

n/a

 

 

n/a

 

 

 

88

%

 

n/a

 

 

 

70

%

Avistar at the Crest

 

TX

 

 

200

 

 

 

94

%

 

 

94

%

 

 

76

%

 

 

80

%

Avistar at the Oaks

 

TX

 

 

156

 

 

 

97

%

 

 

94

%

 

 

85

%

 

 

86

%

Avistar at the Parkway

 

TX

 

 

236

 

 

 

86

%

 

 

86

%

 

 

78

%

 

 

74

%

Avistar in 09

 

TX

 

 

133

 

 

 

97

%

 

 

96

%

 

 

88

%

 

 

85

%

Avistar on the Boulevard

 

TX

 

 

344

 

 

 

94

%

 

 

91

%

 

 

81

%

 

 

79

%

Avistar on the Hills

 

TX

 

 

129

 

 

 

98

%

 

 

99

%

 

 

89

%

 

 

87

%

Bella Vista Apartments

 

TX

 

 

144

 

 

 

95

%

 

 

92

%

 

 

87

%

 

 

92

%

Bruton Apartments

 

TX

 

 

264

 

 

 

94

%

 

 

84

%

 

 

87

%

 

 

87

%

Concord at Gulfgate

 

TX

 

 

288

 

 

 

94

%

 

 

95

%

 

 

86

%

 

 

88

%

Concord at Little York

 

TX

 

 

276

 

 

 

96

%

 

 

98

%

 

 

89

%

 

 

88

%

Concord at Williamcrest

 

TX

 

 

288

 

 

 

96

%

 

 

95

%

 

 

90

%

 

 

87

%

Crossing at 1415

 

TX

 

 

112

 

 

 

90

%

 

 

91

%

 

 

83

%

 

 

64

%

Decatur Angle

 

TX

 

 

302

 

 

 

89

%

 

 

91

%

 

 

80

%

 

 

86

%

Esperanza at Palo Alto (5)

 

TX

 

 

322

 

 

 

96

%

 

n/a

 

 

 

87

%

 

n/a

 

Heights at 515

 

TX

 

 

96

 

 

 

97

%

 

 

98

%

 

 

89

%

 

 

76

%

Heritage Square Apartments

 

TX

 

 

204

 

 

 

88

%

 

 

87

%

 

 

75

%

 

 

80

%

Oaks at Georgetown

 

TX

 

 

192

 

 

 

92

%

 

 

96

%

 

 

92

%

 

 

85

%

Runnymede Apartments

 

TX

 

 

252

 

 

 

100

%

 

 

100

%

 

 

95

%

 

 

96

%

South Park Ranch Apartments

 

TX

 

 

192

 

 

 

99

%

 

 

98

%

 

 

93

%

 

 

97

%

Vantage at Harlingen (6)

 

TX

 

n/a

 

 

n/a

 

 

 

92

%

 

n/a

 

 

 

74

%

Vantage at Judson

 

TX

 

 

288

 

 

 

94

%

 

 

96

%

 

 

83

%

 

 

86

%

15 West Apartments

 

WA

 

 

120

 

 

 

97

%

 

 

98

%

 

 

96

%

 

 

96

%

 

 

 

 

 

9,287

 

 

 

95

%

 

 

94

%

 

 

90

%

 

 

88

%

 

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

46


 

(2)

Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income expected based on market conditions to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measure while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3)

A property is considered stabilized once it reaches 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for a period after construction completion or completion of the rehabilitation.

(4)

The Partnership has approximately $17.5 million of MRB principal secured by Crescent Village, Willow Bend and Postwoods (the Ohio Properties, collectively).  Crescent Village is located in Cincinnati, Ohio, Willow Bend is located in Columbus, Ohio and Postwoods is located in Reynoldsburg, Ohio.

(5)

The property relates to an executed bond purchase commitment. The property was considered stabilized when the MRB was acquired.

(6)

The MRB associated with the property was redeemed in the fourth quarter of 2017, so the number of units and occupancy are not applicable as of and for the quarter ended September 30, 2018.

(7)

The MRB associated with the property was redeemed in the third quarter of 2018, so the number of units and occupancy are not applicable as of and for the quarter ended September 30, 2018.

(8)

The physical and economic occupancy amounts are based on the latest available financial information, which is as of June 30, 2018.

 

Physical and economic occupancy increased slightly for the stabilized Residential Properties for 2018 as compared to 2017. The increase is due primarily to the addition of Village at Rivers Edge with higher than average occupancy and the sales of Avistar at Chase Hill, Vantage at Harlingen and Lake Forest with lower than average occupancy.

 

Non-Consolidated Properties - Not Stabilized

The owners of the following properties do not meet the definition of a VIE and/or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE.  As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis.  These Residential Properties have not met the stabilization criteria (see footnote 3 below the table) at September 30, 2018. Debt service on the Partnership’s bonds for the non-consolidated non-stabilized properties was current at September 30, 2018

 

 

 

 

 

Number

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

 

of Units at

September 30,

 

 

Physical Occupancy (1) at

September 30,

 

 

For the Nine Months Ended September 30,

 

Property Name

 

State

 

2018

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Non-Consolidated Properties-Non Stabilized (3)

 

Courtyard Apartments

 

CA

 

 

108

 

 

 

99

%

 

 

100

%

 

 

99

%

 

 

100

%

Montecito at Williams Ranch

 

CA

 

 

132

 

 

 

97

%

 

 

98

%

 

 

92

%

 

 

96

%

Seasons San Juan Capistrano

 

CA

 

 

112

 

 

 

99

%

 

 

96

%

 

 

99

%

 

 

98

%

Vineyard Gardens (4)

 

CA

 

 

62

 

 

 

98

%

 

n/a

 

 

 

102

%

 

n/a

 

Rosewood Townhomes (4)

 

SC

 

 

100

 

 

 

70

%

 

n/a

 

 

 

73

%

 

n/a

 

South Pointe Apartments (4)

 

SC

 

 

256

 

 

 

67

%

 

n/a

 

 

 

77

%

 

n/a

 

Avistar at Copperfield

 

TX

 

 

192

 

 

 

95

%

 

 

70

%

 

 

84

%

 

 

64

%

Avistar at Wilcrest

 

TX

 

 

88

 

 

 

92

%

 

 

53

%

 

 

79

%

 

 

69

%

Avistar at Wood Hollow

 

TX

 

 

409

 

 

 

97

%

 

 

70

%

 

 

81

%

 

 

71

%

 

 

 

 

 

1,459

 

 

 

90

%

 

 

78

%

 

 

85

%

 

 

81

%

 

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income expected based on market conditions to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measure while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3)

These properties were under construction or renovation.  As such, these properties are not considered stabilized as they have not met the criteria for stabilization. Stabilization is generally defined as 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for a period after construction completion or completion of the rehabilitation.

(4)

Previous period occupancy numbers are not available as these are new investments after the third quarter of 2017.

 

Physical and economic occupancy for the non-stabilized Residential Properties increased in 2018 as compared to 2017 due to increased occupancy at Avistar at Copperfield, Avistar at Wilcrest and Avistar at Wood Hollow as these properties are nearing the completion of rehabilitation projects begun in early 2017 and are nearing stabilization. The increase is also due to the addition of Vineyard Gardens and Montecito at Williams Ranch which have higher than average occupancy for rehabilitation properties. These increases are slightly offset by the addition of South Pointe Apartments and Rosewood Townhomes that have lower than average occupancy as they are in the middle of major rehabilitation projects.  

 

47


 

MF Properties

The MF Properties are owned by the Partnership and the Greens Hold Co. We own two MF Properties directly and the remaining MF Properties are wholly-owned by the Greens Hold Co.  The properties are encumbered by mortgage loans and other secured financing with an aggregate net principal balance of $27.7 million at September 30, 2018.  We report the assets, liabilities, and results of operations of these properties on a consolidated basis.  All the MF Properties have met the stabilization criteria (see footnote 3 below the table) at September 30, 2018. Debt service on our mortgages payable and other secured financing was current at September 30, 2018.

 

 

 

 

 

Number

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

 

of Units at

September 30,

 

 

Physical Occupancy (1) at

September 30,

 

 

For the Nine Months Ended September 30,

 

Property Name

 

State

 

2018

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

MF Properties-Stabilized (3)

 

Suites on Paseo

 

CA

 

 

384

 

 

 

92

%

 

 

89

%

 

 

90

%

 

 

94

%

Jade Park (5)

 

FL

 

n/a

 

 

n/a

 

 

 

94

%

 

n/a

 

 

 

78

%

Eagle Village (4)

 

IN

 

n/a

 

 

n/a

 

 

 

93

%

 

n/a

 

 

 

82

%

The 50/50

 

NE

 

 

475

 

 

 

99

%

 

 

97

%

 

 

80

%

 

 

71

%

Residences of DeCordova (4)

 

TX

 

n/a

 

 

n/a

 

 

 

100

%

 

n/a

 

 

 

93

%

Residences of Weatherford (4)

 

TX

 

n/a

 

 

n/a

 

 

 

100

%

 

n/a

 

 

 

97

%

 

 

 

 

 

859

 

 

 

96

%

 

 

94

%

 

 

86

%

 

 

84

%

 

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income expected based on market conditions to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measure while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3)

A property is considered stabilized once it reaches 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for all MF Properties that are not student housing residential properties. Suites on Paseo, Eagle Village and the 50/50 MF Property are student housing residential properties.

(4)

The property was sold during the fourth quarter of 2017, so unit and occupancy amounts are not applicable as of and for the nine ended September 30, 2018.

(5)

The property was sold during the third quarter of 2018, so unit and occupancy amounts are not applicable as of and for the nine ended September 30, 2018.

 

The physical and economic occupancy increased slightly for 2018 as compared to 2017. The increase is the net result of sales of MF Properties beginning in the fourth quarter of 2017.  The increase at The 50/50 is due to marketing and pricing changes implemented by the Partnership and the property manager for fall 2017 lease-up.

Results of Operations

 

The tables and following discussions of the Partnership’s change in total revenues, other income and total expenses for the three and nine months ended September 30, 2018 and 2017 should be read in conjunction with the Partnership’s condensed consolidated financial statements and Notes thereto included in Item 1 of this report, as well as the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

The table below compares revenues and other income for the Partnership for the periods presented:

Change in Total Revenues and Other Income (in 000’s)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Revenues and Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

2,286

 

 

$

3,244

 

 

$

(958

)

 

 

-29.5

%

 

$

7,025

 

 

$

10,281

 

 

$

(3,256

)

 

 

-31.7

%

Investment income

 

 

12,733

 

 

 

12,243

 

 

 

490

 

 

 

4.0

%

 

 

38,361

 

 

 

35,887

 

 

 

2,474

 

 

 

6.9

%

Contingent interest income

 

 

4,246

 

 

 

-

 

 

 

4,246

 

 

N/A

 

 

 

4,246

 

 

 

219

 

 

 

4,027

 

 

 

1838.8

%

Other interest income

 

 

5,218

 

 

 

735

 

 

 

4,483

 

 

 

609.9

%

 

 

7,020

 

 

 

2,047

 

 

 

4,973

 

 

 

242.9

%

Other income

 

 

1,519

 

 

 

13

 

 

 

1,506

 

 

 

11584.6

%

 

 

1,593

 

 

 

75

 

 

 

1,518

 

 

 

2024.0

%

Gain on sale of real

   estate assets, net

 

 

4,051

 

 

 

-

 

 

 

4,051

 

 

N/A

 

 

 

4,051

 

 

 

7,153

 

 

 

(3,102

)

 

 

-43.4

%

Total Revenues and Other

   Income

 

$

30,053

 

 

$

16,235

 

 

$

13,818

 

 

 

85.1

%

 

$

62,296

 

 

$

55,662

 

 

$

6,634

 

 

 

11.9

%

 

48


 

Discussion of the Total Revenues and Other Income for the Three Months Ended September 30, 2018 and 2017

 

Property revenues.  The decrease in property revenues for the three months ended September 30, 2018 as compared to the same period in 2017 is due to a decrease of approximately $1.1 million in total from the sale of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017.

 

Investment income.   Investment income includes interest earned on MRBs, PHC Certificates and other equity investments.  The increase in investment income for the three months ended September 30, 2018 as compared to the same period in 2017 is due to the following factors:

 

An increase of approximately $1.2 million in recurring investment income from approximately $121.3 million of MRBs purchased during 2017; and

 

A decrease of approximately $988,000 in recurring investment income due to MRB principal payments received and redemptions during 2017 and 2018 totaling approximately $53.0 million and $46.0 million, respectively.

 

Contingent interest income. The contingent interest income received for the three months ended September 30, 2018 was realized upon redemption of the Lake Forest MRB and sale of the underlying property. There was no contingent interest income for the three months ended September 30, 2017.

 

Other interest income. Other interest income is comprised primarily of interest income on property loans, taxable MRBs and cash equivalents. The increase in other interest income for the three months ended September 30, 2018 as compared to the same period in 2017 was primarily due to an increase of approximately $4.5 million of interest income realized on redemption of the Lake Forest property loans. The interest on the Lake Forest property loans was on nonaccrual status prior to redemption.

 

Other income. Other income recognized for the three months ended September 30, 2018 consists of approximately $1.5 million additional income realized upon early redemption of the Lake Forest MRB. No significant other income was generated in the three months ended September 30, 2017.

 

Gain on sale of real estate assets.  The gain on sale for the three months ended September 30, 2018 relates to the sale of Jade Park in September 2018. There was no gain on sale reported for the three months ended September 30, 2017.

 

Discussion of the Total Revenues and Other Income for the Nine Months Ended September 30, 2018 and 2017

 

Property revenues.  The decrease in property revenues for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to a decrease of approximately $3.6 million in total from the sale of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017. This is offset by an increase of approximately $272,000 from increased occupancy at The 50/50 (see the discussion of occupancy previously provided in this section).

 

Investment income.   Investment income includes interest earned on MRBs, PHC Certificates and other equity investments.  The increase in investment income for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to the following factors:

 

An increase of approximately $3.6 million in recurring investment income from MRBs purchased during 2017 and 2018 totaling approximately $121.3 million and $19.5 million, respectively;

 

An increase of approximately $1.3 million of income on additional equity contributions to unconsolidated entities made during 2017 and 2018 totaling approximately $17.2 million and $38.0 million, respectively;

 

An increase of approximately $384,000 of additional interest income recognized in 2018; and

 

A decrease of approximately $2.9 million in recurring investment income due to MRB principal payments received and redemptions during 2017 and 2018 totaling approximately $53.0 million and $46.0 million, respectively.

 

Contingent interest income. The contingent interest income received for the nine months ended September 30, 2018 was realized upon redemption of the Lake Forest MRB and sale of the underlying property. The contingent interest income for the nine months ended September 30, 2017 was received from available excess cash at Lake Forest.

 

49


 

Other interest income. Other interest income is comprised primarily of interest income on property loans, taxable MRBs and cash equivalents. The increase in other interest income for the nine months ended September 30, 2018 as compared to the same period in 2017 was due to an increase of approximately $4.5 million of interest income realized on redemption of the Lake Forest property loans, and an increase of approximately $406,000 in additional interest income recognized in 2018.

 

Other income. Other income recognized for the nine months ended September 30, 2018 consists of approximately $1.5 million additional income realized upon early redemption of the Lake Forest MRB. No significant other income was generated in the nine months ended September 30, 2017.

Gain on sale of real estate assets.  The gain on sale for the nine months ended September 30, 2018 relates to the sale of Jade Park in September 2018. The gain reported for the nine months ended September 30, 2017 relates primarily to the sale of Northern View in March 2017.

The table below compares expenses for the Partnership for the periods presented:

Change in Total Expenses (in 000’s)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating

   (exclusive of items shown

   below)

 

$

1,607

 

 

$

2,226

 

 

$

(619

)

 

 

-27.8

%

 

$

4,293

 

 

$

6,331

 

 

$

(2,038

)

 

 

-32.2

%

Impairment of securities

 

 

310

 

 

 

-

 

 

 

310

 

 

N/A

 

 

 

1,141

 

 

 

-

 

 

 

1,141

 

 

N/A

 

Impairment charge on real estate assets

 

 

150

 

 

 

-

 

 

 

150

 

 

N/A

 

 

 

150

 

 

 

-

 

 

 

150

 

 

N/A

 

Depreciation and amortization

 

 

865

 

 

 

1,259

 

 

 

(394

)

 

 

-31.3

%

 

 

2,693

 

 

 

4,122

 

 

 

(1,429

)

 

 

-34.7

%

Amortization of deferred

   financing costs

 

 

409

 

 

 

577

 

 

 

(168

)

 

 

-29.1

%

 

 

1,305

 

 

 

1,880

 

 

 

(575

)

 

 

-30.6

%

Interest expense

 

 

5,985

 

 

 

5,714

 

 

 

271

 

 

 

4.7

%

 

 

16,786

 

 

 

16,998

 

 

 

(212

)

 

 

-1.2

%

General and administrative

 

 

3,653

 

 

 

3,198

 

 

 

455

 

 

 

14.2

%

 

 

9,506

 

 

 

9,206

 

 

 

300

 

 

 

3.3

%

Total Expenses

 

$

12,979

 

 

$

12,974

 

 

$

5

 

 

 

0.0

%

 

$

35,874

 

 

$

38,537

 

 

$

(2,663

)

 

 

-6.9

%

 

Discussion of the Total Expenses for the Three Months Ended September 30, 2018 and 2017

Real estate operating expenses.  Real estate operating expenses are associated with the MF Properties and are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. The decrease in real estate operating expenses for the three months ended September 30, 2018 as compared to the same period in 2017 is due a decrease of approximately $624,000 related to the sales of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017.

 

Impairment of securities.  The impairment of securities for the three months ended September 30, 2018 relates to the PHC Certificates. There were no such impairment charges in the same period in 2017.

 

Impairment charge on real estate assets.  The impairment charge on real estate assets for the three months ended September 30, 2018 relates to the land held for development in Gardner, KS. There were no such impairment charges in the same period in 2017.

 

Depreciation and amortization expense.  Depreciation relates entirely to the MF Properties.  Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting for the acquisition of MF Properties.  The decrease in depreciation and amortization for the three months ended September 30, 2018 as compared to the same period in 2017 is due to a decrease of approximately $357,000 in depreciation related to the sales of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017.

 

Amortization of deferred financing costs.  Deferred financing costs are amortized using the effective interest method over the life of the related debt financing, mortgage payable or other secured financing. The decrease in amortization of deferred financing costs for the three months ended September 30, 2018 as compared to the same period in 2017 is attributable primarily to a decrease of approximately $115,000 in amortization expense related to the TEBS I debt financing. All deferred financing costs related to TEBS I were amortized over the original term and prior to extension of the facility in September 2017.

50


 

 

Interest expense. The increase in interest expense for the three months ended September 30, 2018 as compared to the same period in 2017 is attributable to the following factors:

 

An increase of approximately $881,000 due to an increase of approximately 55 basis points in the average interest rate. The rise in the average interest rate is primarily a result of generally rising interest rates in the U.S. credit markets.;

 

A decrease of approximately $335,000 due to a decrease of approximately $35.3 million in average principal outstanding; and

 

A decrease of approximately $275,000 related to fair value adjustments for interest rate derivatives and swaps.

 

General and administrative expenses.  The increase in general and administrative expenses for the three months ended September 30, 2018 as compared to the same period in 2017 is due to an increase of approximately $1.1 million in salaries, benefits and restricted units compensation expense related to bonuses on significant third quarter 2018 transactions, offset by a decrease of approximately $665,000 in professional fees.

 

Discussion of the Total Expenses for the Nine Months Ended September 30, 2018 and 2017

Real estate operating expenses.  Real estate operating expenses are associated with the MF Properties and are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. The decrease in real estate operating expenses for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to the following factors:

 

A decrease of approximately $1.9 million related to the sales of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017; and

 

 

A decrease of approximately $169,000 related to rehabilitation costs incurred at Jade Park in 2017 that did not recur in 2018.

 

Impairment of securities.  The impairment of securities for the nine months ended September 30, 2018 relates to the PHC Certificates. There were no such impairment charges in the same period in 2017.

 

Impairment charge on real estate assets.  The impairment charge on real estate assets for the nine months ended September 30, 2018 relates to the land held for development in Gardner, KS. There were no such impairment charges in the same period in 2017.

 

Depreciation and amortization expense.  Depreciation relates entirely to the MF Properties.  Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting for the acquisition of MF Properties.  The decrease in depreciation and amortization for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to the following factors:

 

A decrease of approximately $1.2 million in depreciation related to the sales of Northern View in March 2017 and the sales of Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017; and

 

A decrease of approximately $232,000 in in-place lease amortization at Jade Park in the first quarter of 2017 that did not occur in 2018.

 

Amortization of deferred financing costs.  Deferred financing costs are amortized using the effective interest method over the life of the related debt financing, mortgage payable or other secured financing. The decrease in amortization of deferred financing costs for the nine months ended September 30, 2018 as compared to the same period in 2017 is attributable to the following factors:

 

A decrease of approximately $203,000 in amortization related to a secured line of credit that matured in March 2017 and was not renewed; and

 

A decrease of approximately $346,000 in amortization related to the TEBS I debt financing. All deferred financing costs related to TEBS I were amortized over the original term and prior to extension of the facility in September 2017.

 

51


 

Interest expense. The decrease in interest expense for the nine months ended September 30, 2018 as compared to the same period in 2017 is attributable to the following factors:

 

An increase of approximately $1.8 million due to an increase of approximately 36 basis points in the average interest rate;

 

A decrease of approximately $255,000 due to a decrease of approximately $6.0 million in average principal outstanding; and

 

A decrease of approximately $1.8 million related to fair value adjustments for interest rate derivatives and swaps.

General and administrative expenses.  The increase in general and administrative expenses for the nine months ended September 30, 2018 as compared to the same period in 2017 is due to a net increase of approximately $934,000 in salaries, benefits and restricted units compensation expense, offset by a decrease of approximately $721,000 in professional fees.

Discussion of the Income Tax Expense for the Three and Nine Months Ended September 30, 2018 and 2017

 

A wholly-owned subsidiary of the Partnership, the Greens Hold Co, is a corporation subject to federal and state income tax. The Greens Hold Co owns controlling equity interests in certain MF Properties. The gain on sale of the Northern View MF Property in March 2017 and normal operating income of the remaining MF Properties were subject to federal and state income taxes and the Partnership recorded income tax expense of approximately $2.1 million for the nine months ended September 30, 2017. The Greens Hold Co generated minimal taxable income for the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018. The gain on sale of the Jade Park MF Property in September 2018 did not generate taxable income as it was not owned by the Greens Hold Co.

 

Cash Available for Distribution (“CAD”)

 

The Partnership believes that CAD provides relevant information about the Partnership’s operations and is necessary, along with net income, for understanding its operating results.  To calculate CAD, the Partnership begins with net income and adds back non-cash expenses consisting of depreciation expense, amortization expense related to deferred financing costs, amortization of premiums and discounts, non-cash interest rate derivative expense or income, provision for loan losses, impairments on MRBs, PHC Certificates, real estate assets and property loans, deferred income taxes and restricted units compensation expense, to the Partnership’s net income (loss) as computed in accordance with GAAP. The Partnership also deducts Tier 2 income (Note 3 to the Partnership’s condensed consolidated financial statements) distributable to the General Partner as defined in the Amended and Restated LP Agreement and Redeemable Series A Preferred Unit distributions and accretion.  Net income is the GAAP measure most comparable to CAD. There is no generally accepted methodology for computing CAD, and the Partnership’s computation of CAD may not be comparable to CAD reported by other companies.  Although the Partnership considers CAD to be a useful measure of the Partnership’s operating performance, CAD is a non-GAAP measure that should not be considered as an alternative to net income that is calculated in accordance with GAAP, or any other measures of financial performance presented in accordance with GAAP.

 

52


 

The table below shows the calculation of CAD (and a reconciliation of the Partnership’s GAAP net income to CAD) for the three and nine months ended September 30, 2018 and 2017:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Partnership net income

 

$

17,883,055

 

 

$

3,545,483

 

 

$

27,225,480

 

 

$

14,943,745

 

Change in fair value of derivatives and interest rate

   derivative amortization

 

 

(91,679

)

 

 

66,917

 

 

 

(1,088,060

)

 

 

369,686

 

Depreciation and amortization expense

 

 

864,600

 

 

 

1,259,055

 

 

 

2,692,731

 

 

 

4,122,260

 

Impairment of securities

 

 

309,958

 

 

 

-

 

 

 

1,141,020

 

 

 

-

 

Impairment charge on real estate assets

 

 

150,000

 

 

 

-

 

 

 

150,000

 

 

 

-

 

Amortization of deferred financing costs

 

 

409,420

 

 

 

577,413

 

 

 

1,304,879

 

 

 

1,880,236

 

Restricted units compensation

   expense

 

 

622,227

 

 

 

550,390

 

 

 

1,372,384

 

 

 

1,160,123

 

Deferred income taxes

 

 

-

 

 

 

(9,000

)

 

 

34,000

 

 

 

(374,000

)

Redeemable Series A Preferred Unit distribution and

   accretion

 

 

(717,763

)

 

 

(523,682

)

 

 

(2,153,288

)

 

 

(1,280,874

)

Tier 2 Income distributable to the General Partner (1)

 

 

(2,074,381

)

 

-

 

 

 

(2,074,381

)

 

 

(1,120,625

)

Bond purchase premium (discount) amortization

   (accretion), net of cash received

 

 

(3,513

)

 

 

(26,270

)

 

 

(11,419

)

 

 

(76,518

)

Total CAD

 

$

17,351,924

 

 

$

5,440,306

 

 

$

28,593,346

 

 

$

19,624,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding, basic

 

 

59,907,123

 

 

 

59,811,578

 

 

 

59,989,585

 

 

 

59,904,078

 

Net income per Unit, basic

 

$

0.25

 

 

$

0.05

 

 

$

0.38

 

 

$

0.21

 

Total CAD per Unit, basic

 

$

0.29

 

 

$

0.09

 

 

$

0.48

 

 

$

0.33

 

Distributions per Unit

 

$

0.125

 

 

$

0.125

 

 

$

0.375

 

 

$

0.375

 

 

(1)

As described in Note 3 to the Partnership’s condensed consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the limited partners and Unitholders as a class and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner.  

 

For the three months ended September 30, 2018, the Partnership’s Tier 2 income consisted of $4.2 million of contingent interest from Lake Forest and a $4.1 million gain on sale of the Jade Park MF Property. For the three months ended September 30, 2017, Partnership did not report any Tier 2 income.

 

For the nine months ended September 30, 2018, the Partnership’s Tier 2 income consisted of $4.2 million of contingent interest from Lake Forest and a $4.1 million gain on sale of the Jade Park MF Property. For the nine months ended September 30, 2017, the Partnership’ Tier 2 income consisted of a $4.3 million gain on the sale of the Northern View MF Property and $219,000 from contingent interest received from Lake Forest, offset by a loss of $22,000 on the sale of land in St. Petersburg, FL.

 

There was no non-recurring CAD per Unit earned by the Partnership during the three and nine months ended September 30, 2018 and 2017.

 

Liquidity and Capital Resources

The Partnership’s principal source of cash flow includes:

 

Interest income earned on MRBs;

 

Interest income earned on the PHC Certificates;

 

Excess cash flow generated by the MF Properties;

 

Excess proceeds from the sale of assets; and

 

Cash flow, net of expenses, from general Partnership operations.

Additional sources of cash flow may include:

 

Interest payments received from property loans; and

 

Contingent interest received from investments in MRBs or property loans.

53


 

Interest income is primarily comprised of fixed rate base interest payments received on our MRBs and PHC Certificates that provide consistent cash receipts throughout the year.  Certain MRBs may also generate payments of contingent interest to us from time to time when the underlying Residential Properties generate excess net cash flow from operations, excess proceeds from refinancing or from the sale of the property. For additional details, see the Partnership’s condensed consolidated statements of cash flows.

Similarly, the economic performance of MF Properties will affect the amount of cash distributions, if any, received by the Partnership from ownership of these properties.  The economic performance of the MF Properties depends on the rental and occupancy rates of the property and on the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market where the property is located.  This, in turn, is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes.  In addition, factors such as government regulation (such as zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of an MF property.  For discussion related to economic risk see Item 1A, “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017.

Other sources of cash available to the Partnership include:

 

Operating line of credit;

 

Secured and unsecured lines of credit;

 

Debt financing;

 

Mortgages payable and other secured financings;

 

Sale of Series A Preferred Units; and

 

Sale of additional BUCs.

The Partnership’s outstanding borrowings at September 30, 2018 consist of:

 

Unsecured lines of credit - $28.5 million;

 

Debt financing, net - $544.7 million; and

 

Mortgages payable and other secured financing, net - $27.7 million.

In December 2017, the Partnership initiated an “at the market offering” to sell up to $75 million of BUCs at prevailing market prices on the date of sale. The Partnership sold 38,617 BUCs under the program for net proceeds of approximately $192,000, net of issuance costs, during 2018. The “at the market offering” was terminated effective as of March 16, 2018.

In August 2018, the Partnership initiated a new “at the market offering” to sell up to $75 million of BUCs at prevailing market prices on the date of sale. The Partnership sold 67,333 BUCs under the program for net proceeds of approximately $384,000, net of issuance costs, during the three months ended September 30, 2018.

Our principal uses of cash are (i) general, administrative and operating expenses, (ii) interest and principal payable on the unsecured and secured lines of credit, (iii) interest and principal payable on the debt financing and mortgages payable and other secured financing, and (iv) payment of distributions to Series A Preferred Unitholders and BUC holders.  We also use cash to acquire additional investments.

 

(i)

Payment of general, administrative, and operating expenses  

The MF Properties’ primary uses of cash were for operating expenses.  We also use cash for general and administrative Partnership expenses. For additional details, see the Partnership’s condensed consolidated statement of cash flows in this Form 10-Q.

 

(ii)

Payment of interest and principal on unsecured and secured lines of credit  

We maintain two unsecured lines of credit: an operating and a revolving line of credit. Our operating line of credit allows for the advance of up to $10.0 million to be used for general operations. We are required to make payments of principal to reduce the outstanding principal balance on the operating line to zero for fifteen consecutive days during each calendar quarter. We fulfilled this requirement during the three and nine months ended September 30, 2018. In addition, we have fulfilled this requirement for the fourth quarter of 2018. Our $50.0 million revolving non-operating line of credit may be utilized for the purchase of multifamily real estate and taxable or tax-exempt MRBs. Advances on this line of credit are due on the 270th day following the advance date but may be extended by making certain payments for up to an additional 270 days. In July 2018, the maturity of the two unsecured lines of credit was extended by one year to June 2020.

54


 

 

(iii)

Payment of interest and principal on debt and mortgages payable and other secured financing

Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of MRBs and other investments. The financing arrangements generally involve the securitization of MRBs and other investments into trusts whereby we retain beneficial interests in the trusts that provide certain rights to the underlying investment assets. The remaining beneficial interests are sold to unaffiliated parties with the proceeds being received by the Partnership. The beneficial interests held by unaffiliated parties require periodic interest payments, which may be fixed or variable depending on the terms of the arrangement, and scheduled principal payments.

Our mortgages payable and other secured financing arrangements are used to leverage our MF Properties. The mortgages and other secured financing are entered into with financial institutions and are secured by security interests in the MF Properties. The mortgages and other secured financing bear interest, which may be fixed or variable depending on the terms of the arrangement, and scheduled principal payments.

We anticipate refinancing all debt financing arrangements that will mature during the next twelve months with similar arrangements of terms greater than one year.  

 

(iv)

Payment of distributions to the Unitholders – Series A Preferred Unit and BUC holders

Distributions to the Series A Preferred Unitholders, if declared by the General Partner, are paid at a fixed rate of 3.0% annually.  The Series A Preferred Units are non-cumulative, non-voting, and non-convertible.  

Distributions to the BUC holders may increase or decrease at the determination of the General Partner.  The per Unit cash available for distribution primarily depends on the amount of interest and other cash received by us from our portfolio of MRBs and other investments, the amount of our outstanding debt and the effective interest rates paid by us on this debt, the level of operating and other cash expenses incurred by us, and the number of Units outstanding.

Leverage Ratio

We utilize leverage to enhance rates of return to our Unitholders. We use target ratios for each type of financing obligation utilized by us to manage an overall 75% leverage constraint, as established by the Board of Managers (the “Board”) of Burlington, which is the general partner of the Partnership’s general partner. The amount of leverage utilized is dependent upon several factors, including the assets being leveraged, the leverage program utilized, constraints of market collateral calls and the liquidity and marketability of the underlying collateral of the asset being leveraged. We define our leverage ratio as total outstanding debt divided by total assets using the carrying value of the MRBs, PHC Certificates, initial finance costs and the MF Properties at cost. Our overall leverage ratio was approximately 62% at September 30, 2018.  

Cash Flows

 

During the nine months ended September 30, 2018, we used $45.9 million of cash, which was the net result of $18.0 million provided by operating activities, $7.5 million provided by investing activities, and $71.4 million used in financing activities.

 

Cash provided by operating activities totaled $18.0 million for the nine months ended September 30, 2018, as compared to cash provided by operating activities of $13.2 million for the nine months ended September 30, 2017. The increase is primarily due to $4.6 million of additional interest income from the Lake Forest property loans recognized in the third quarter of 2018.

 

Cash provided by investing activities totaled $7.5 million for the nine months ended September 30, 2018, as compared to cash used in investing activities of $60.2 million for the nine months ended September 30, 2017. The change is due primarily to $52.5 million less cash used to acquire MRBs and an increase in MRB principal payments received of $41.2 million. These were offset by an increase in contributions to unconsolidated entities of $25.6 million.  

 

Cash used in financing activities totaled $71.4 million for the nine months ended September 30, 2018, as compared to cash provided by financing activities of $57.6 million for the nine months ended September 30, 2017. The change is due to various factors. Net proceeds from debt financing and lines of credit activity were $51.5 million during 2017, as compared to a net repayment of $35.9 million during 2018. Principal payments on mortgages payable in 2018 increased $7.1 million as compared to 2017, primarily due to full repayment of the Jade Park mortgage payable in September 2018. Lastly, the Partnership received $36.1 million from issuances of Series A Preferred Units in 2017 whereas the Partnership has not issued any Series A Preferred Units in 2018.      

 

55


 

We believe our cash balance and cash provided by the sources discussed herein will be sufficient to pay, or refinance, our debt obligations and to meet our liquidity needs over the next 12 months.

 

Contractual Obligations

 

As discussed herein and in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017, the debt and mortgage obligations of the Partnership consist of scheduled principal payments on the TOB Trust and Term A/B Trust financing facilities with Deutsche Bank, the TEBS credit facilities with Freddie Mac, payments on the MF Property mortgages payable and other secured financing, payments related to operating leases, and bond purchase commitments.

 

The Partnership’s contractual obligations presented in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017, which is incorporated by reference herein, have only changed pursuant to the executed contracts during the nine months ended September 30, 2018 as disclosed herein.

 

Recently Issued Accounting Pronouncements

 

For a discussion on recently issued accounting pronouncements that will be adopted in future periods, please see Note 2 to the Partnership’s condensed consolidated financial statements.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in market risk, except as discussed below, from the information provided under “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

A third-party pricing service is used to value our MRBs. The pricing service uses a discounted cash flow and yield to maturity or call analyses which encompasses judgment in its application.  The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRBs.  The effective yield analysis for each MRB considers the current market yield on similar MRBs, specific terms of the MRB, and various characteristics of underlying property serving as collateral for the MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We value the PHC Certificates based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates. The valuation methodology of our third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Trust as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs. The fair value estimate by the third-party pricing service encompasses the use of judgment in its application.

We completed a sensitivity analysis which is hypothetical and is as of a specific point in time.  The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. 

The table below summarizes the sensitivity analysis metrics related to the investments in the MRBs and PHC Certificates at September 30, 2018:

 

Description

 

Estimated Fair

Value in 000's

 

 

Range of Effective Yields

used in Valuation

 

Range of Effective Yields

if 10% Adverse Applied

 

Additional

Unrealized Losses

with 10% Adverse

Change in 000's

 

Mortgage Revenue Bonds

 

$

742,466

 

 

 

3.5

%

-  9.3%

 

 

3.9

%

-    10.2%

 

$

23,414

 

PHC Certificates

 

 

48,741

 

 

 

5.4

%

-  6.0%

 

 

5.9

%

-    6.6%

 

 

1,522

 

 

 

56


 

Geographic Risk

The properties securing the MRBs are geographically dispersed throughout the United States with significant concentrations (geographic risk) in Texas, California, and South Carolina.  The table below summarizes the geographic concentrations in these states as a percentage of the total MRB principal outstanding:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Texas

 

 

47

%

 

 

44

%

California

 

 

17

%

 

 

20

%

South Carolina

 

 

16

%

 

 

16

%

 

After review of the properties’ economic performance in Texas, California and South Carolina as compared to general market conditions in these markets, we do not believe we are exposed to adverse risk in these markets.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

The total costs of borrowing by investment type at September 30, 2018 were as follows:

 

The unsecured LOCs range between 5.1% and 5.4%;

 

The M24, M31, M33 and M45 TEBS facilities range between 2.8% and 3.8%;

 

The Term TOB Trusts securitized by MRBs range between 4.0% and 4.4%;

 

The Term A/B Trusts securitized by MRBs range between 4.5% and 4.5%;

 

The TOB Trusts securitized by PHC Certificates are approximately 3.8%; and

 

The mortgages payable and other secured financings range between 4.7% and 5.0%.

 

We enter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on variable rate financing facilities. The following table sets forth certain information regarding the Partnership’s interest rate cap agreements at September 30, 2018:

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of September 30, 2018

 

July 2014

 

$

30,365,801

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

2

 

July 2014

 

 

30,365,801

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

2

 

July 2014

 

 

30,365,801

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

2

 

July 2015

 

 

27,438,175

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

4,033

 

July 2015

 

 

27,438,175

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

4,033

 

July 2015

 

 

27,438,175

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

4,033

 

June 2017

 

 

91,097,404

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

248,476

 

June 2017

 

 

82,314,524

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

803,283

 

Sept 2017

 

 

59,377,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,063,975

 

 

(1)

For additional details, see Note 21 to the Partnership's condensed consolidated financial statements.

The Partnership contracted for two interest rate swaps with DB. On a quarterly basis, the Partnership reassesses its interest rate swap positions. The Partnership has determined that the interest rate swaps are intended to mitigate interest rate risk for the variable rate PHC TOB Trusts. One of the interest rate swaps was terminated in September 2018. The following table summarizes the terms of the remaining interest rate swap at September 30, 2018:

 

Purchase Date

 

Notional

Amount

 

 

Effective

Date

 

Termination Date

 

Fixed Rate

Paid

 

 

Period End

Variable

Rate

Received

 

 

Variable Rate &

Index

 

Counterparty

 

September 30, 2018 - Fair Value of Liability

 

Sept 2014

 

 

17,963,733

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.46

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(26,798

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(26,798

)

57


 

 

Interest Rates Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s income assuming a change in interest rates:

 

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

29,909

 

 

$

(64,169

)

 

$

(135,365

)

 

$

(199,692

)

 

$

(263,410

)

TEBS Debt Financings

 

 

60,974

 

 

 

(133,733

)

 

 

(249,296

)

 

 

(390,078

)

 

 

(531,210

)

Other Investment Financings

 

 

49,287

 

 

 

(100,009

)

 

 

(203,399

)

 

 

(303,670

)

 

 

(403,038

)

Total

 

$

140,170

 

 

$

(297,911

)

 

$

(588,060

)

 

$

(893,440

)

 

$

(1,197,658

)

 

The interest rate sensitivity table (“Table”) represents the change in interest income from investments net of interest on debt and interest rate derivative expenses over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve and the resulting implied forward rates are realized as a component of this shift in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events would not occur that would affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.  

As the above information incorporates only those material positions or exposures that existed as of September 30, 2018, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigating strategies at that time and the overall business and economic environment.

 

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures.  The Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the  Chief Financial Officer have concluded that, as of the end of such period, the Partnership’s current disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Partnership’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.  The Chief Executive Officer and Chief Financial Officer have determined that there were no changes in the Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Partnership’s most recent fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

 

58


 

PART II - OTHER INFORMATION

Item 1A. Risk Factors.

The risk factors affecting the Partnership are described in Item 1A “Risk Factors” in the Partnership’s Annual Report on Form 10‑K for the year ended December 31, 2017, which is incorporated by reference herein. There have been no material changes from these previously disclosed risk factors for the three and nine months ended September 30, 2018.

Item 6. Exhibits.

The following exhibits are filed as required by Item 601 of Regulation S-K.  Exhibit numbers refer to the paragraph numbers under Item 601 of Regulation S-K:

 

10.1

 

Fifth Amendment to Credit Agreement dated July 19, 2018 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed with the SEC on July 20, 2018).

 

 

 

10.2

 

Capital on DemandTM Sales Agreement dated August 1, 2018 by and between America First Multifamily Investors, L.P. and JonesTrading Institutional Services (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed with the SEC on August 1, 2018).

 

 

 

10.3

 

Sale, Contribution and Assignment Agreement dated August 8, 2018 between America First Multifamily Investors, L.P. and ATAX TEBS IV, LLC (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed with the SEC on August 9, 2018).

 

 

 

10.4

 

Subordinate Bonds Custody Agreement dated August 1, 2018 by and among U.S. Bank, National Association, as custodian for the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS IV, LLC (incorporated by reference to Exhibit 10.2 of the registrant’s Current Report on Form 8-K filed with the SEC on August 9, 2018).

 

 

 

10.5

 

Bond Exchange, Reimbursement, Pledge and Security Agreement dated August 1, 2018 between the Federal Home Loan Mortgage Corporation and ATAX TEBS IV, LLC (incorporated by reference to Exhibit 10.3 of the registrant’s Current Report on Form 8-K filed with the SEC on August 9, 2018).

 

 

 

10.6

 

Series Certificate Agreement dated August 1, 2018 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator (incorporated by reference to Exhibit 10.4 of the registrant’s Current Report on Form 8-K filed with the SEC on August 9, 2018).

 

 

 

10.7

 

Limited Support Agreement dated August 1, 2018 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation (incorporated by reference to Exhibit 10.5 of the registrant’s Current Report on Form 8-K filed with the SEC on August 9, 2018).

 

 

 

31.1

 

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101

 

The following materials from the Partnership’s Quarterly Report on Form 10-Q for the three months ended September 30, 2018 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets on September 30, 2018 and December 31, 2017, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017, (iv) the Condensed Consolidated Statements of Partners’ Capital for the nine months ended September 30, 2018 and 2017, (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017, and (vi) Notes to Condensed Consolidated Financial Statements. Such materials are presented with detailed tagging of notes and financial statement schedules.

 

59


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

 

Date: November 5, 2018

 

By:

 

/s/ Chad L. Daffer

 

 

 

 

Chad L. Daffer

 

 

 

 

Chief Executive Officer

 

Date: November 5, 2018

 

By:

 

/s/ Craig S. Allen

 

 

 

 

Craig S. Allen

 

 

 

 

Chief Financial Officer

 

 

60