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Greystone Housing Impact Investors LP - Quarter Report: 2019 March (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 March 31, 2019

OR

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

For the transition period from            to            

Commission File Number:  000-24843

 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-0810385

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1004 Farnam Street, Suite 400, Omaha, Nebraska

 

68102

(Address of principal executive offices)

 

(Zip Code)

 

 

 

(402) 444-1630

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non- accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

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

As of March 31, 2019, the registrant had 60,426,177 Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P. outstanding.

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

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

 

ATAX

 

The NASDAQ Stock Market, LLC

 

 

 


 

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

 

7

Item 2

 

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

 

33

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

47

Item 4

 

Controls and Procedures

 

49

 

 

 

 

 

PART II – OTHER INFORMATION

Item 1A

 

Risk Factors

 

50

Item 6

 

Exhibits

 

50

 

 

 

 

 

SIGNATURES

 

 

 

51

 

 

 


 

Forward-Looking Statements

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

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

 

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

 

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

 

the competitive environment in which we operate;

 

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

 

changes in interest rates;

 

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

 

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

 

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

 

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

 

geographic concentration within the MRB portfolio held by the Partnership;

 

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

 

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

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

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

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,210,497

 

 

$

32,001,925

 

Restricted cash

 

 

792,321

 

 

 

1,266,686

 

Interest receivable, net

 

 

7,675,314

 

 

 

7,011,839

 

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

 

 

656,062,961

 

 

 

645,258,873

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

82,984,880

 

 

 

86,894,562

 

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

 

 

46,406,868

 

 

 

48,672,086

 

Real estate assets: (Note 8)

 

 

 

 

 

 

 

 

Land and improvements

 

 

4,971,665

 

 

 

4,971,665

 

Buildings and improvements

 

 

71,949,453

 

 

 

71,897,070

 

Real estate assets before accumulated depreciation

 

 

76,921,118

 

 

 

76,868,735

 

Accumulated depreciation

 

 

(13,088,741

)

 

 

(12,272,387

)

Net real estate assets

 

 

63,832,377

 

 

 

64,596,348

 

Investments in unconsolidated entities (Note 9)

 

 

84,684,982

 

 

 

76,534,306

 

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

 

 

7,593,377

 

 

 

15,961,012

 

Other assets (Note 12)

 

 

4,954,602

 

 

 

4,515,609

 

Total Assets

 

$

993,198,179

 

 

$

982,713,246

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

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

 

$

9,030,207

 

 

$

7,543,822

 

Distribution payable

 

 

8,393,271

 

 

 

7,576,167

 

Unsecured lines of credit (Note 14)

 

 

35,659,200

 

 

 

35,659,200

 

Debt financing, net (Note 15)

 

 

508,248,469

 

 

 

505,663,565

 

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

 

 

27,373,224

 

 

 

27,454,375

 

Total Liabilities

 

 

588,704,371

 

 

 

583,897,129

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

   issued and outstanding, net (Note 19)

 

 

94,359,389

 

 

 

94,350,376

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital:

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

401,277

 

 

 

344,590

 

Beneficial Unit Certificates ("BUCs," Note 1)

 

 

309,733,142

 

 

 

304,121,151

 

Total Partnersʼ Capital

 

 

310,134,419

 

 

 

304,465,741

 

Total Liabilities and Partnersʼ Capital

 

$

993,198,179

 

 

$

982,713,246

 

 

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 March 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

Property revenues

 

$

1,993,629

 

 

$

2,336,512

 

Investment income

 

 

12,407,876

 

 

 

13,378,486

 

Contingent interest income

 

 

3,012,102

 

 

 

-

 

Other interest income

 

 

222,238

 

 

 

743,036

 

Other income

 

 

28,753

 

 

 

-

 

Total revenues

 

 

17,664,598

 

 

 

16,458,034

 

Expenses:

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

1,176,818

 

 

 

1,395,493

 

Depreciation and amortization

 

 

820,808

 

 

 

906,315

 

Interest expense (Note 2)

 

 

6,394,920

 

 

 

5,347,077

 

General and administrative

 

 

2,778,591

 

 

 

2,811,845

 

Total expenses

 

 

11,171,137

 

 

 

10,460,730

 

Income before income taxes

 

 

6,493,461

 

 

 

5,997,304

 

Income tax expense (benefit)

 

 

41,648

 

 

 

(7,000

)

Net income

 

 

6,451,813

 

 

 

6,004,304

 

Redeemable Series A Preferred Unit distributions and accretion

 

 

(717,763

)

 

 

(717,763

)

Net income available to Partners

 

$

5,734,050

 

 

$

5,286,541

 

 

 

 

 

 

 

 

 

 

Net income available to Partners allocated to:

 

 

 

 

 

 

 

 

General Partner

 

$

780,245

 

 

$

52,865

 

Limited Partners - BUCs

 

 

4,920,644

 

 

 

5,199,401

 

Limited Partners - Restricted units

 

 

33,161

 

 

 

34,275

 

 

 

$

5,734,050

 

 

$

5,286,541

 

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

 

$

0.08

 

 

$

0.09

 

Weighted average number of BUCs outstanding, basic

 

 

60,426,177

 

 

 

60,124,333

 

Weighted average number of BUCs outstanding, diluted

 

 

60,426,177

 

 

 

60,124,333

 

 

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 March 31,

 

 

 

2019

 

 

2018

 

Net income

 

$

6,451,813

 

 

$

6,004,304

 

Unrealized gain (loss) on securities

 

 

8,143,927

 

 

 

(21,874,876

)

Unrealized loss on bond purchase commitments

 

 

-

 

 

 

(975,067

)

Comprehensive income (loss)

 

 

14,595,740

 

 

 

(16,845,639

)

 

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 THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(UNAUDITED)

 

 

 

General Partner

 

 

# of BUCs -

Restricted and

Unrestricted

 

 

BUCs

- Restricted and

Unrestricted

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance as of December 31, 2018

 

$

344,590

 

 

 

60,691,467

 

 

$

304,121,151

 

 

$

304,465,741

 

 

$

58,978,042

 

Cumulative effect of accounting change

   (Note 2)

 

 

(2

)

 

 

-

 

 

 

(210

)

 

 

(212

)

 

 

-

 

Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(53,812

)

 

 

-

 

 

 

(5,327,357

)

 

 

(5,381,169

)

 

 

-

 

Distribution of Tier 2 income (Note 3)

 

 

(753,025

)

 

 

-

 

 

 

(2,259,077

)

 

 

(3,012,102

)

 

 

-

 

Net income allocable to Partners

 

 

780,245

 

 

 

-

 

 

 

4,953,805

 

 

 

5,734,050

 

 

 

-

 

Restricted unit compensation expense

 

 

1,842

 

 

 

-

 

 

 

182,342

 

 

 

184,184

 

 

 

-

 

Unrealized gain on securities

 

 

81,439

 

 

 

-

 

 

 

8,062,488

 

 

 

8,143,927

 

 

 

8,143,927

 

Balance as of March 31, 2019

 

$

401,277

 

 

 

60,691,467

 

 

$

309,733,142

 

 

$

310,134,419

 

 

$

67,121,969

 

 

 

 

General Partner

 

 

# of BUCs -

Restricted and

Unrestricted

 

 

BUCs

- Restricted and

Unrestricted

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance as of December 31, 2017

 

$

437,256

 

 

 

60,373,674

 

 

$

313,403,014

 

 

$

313,840,270

 

 

$

75,623,830

 

   Cumulative effect of accounting change

 

 

(2,169

)

 

 

-

 

 

 

(214,779

)

 

 

(216,948

)

 

 

-

 

   Distributions paid or accrued ($0.125 per BUC):

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

      Regular distribution

 

 

(76,329

)

 

 

-

 

 

 

(7,556,616

)

 

 

(7,632,945

)

 

 

-

 

   Net income allocable to Partners

 

 

52,865

 

 

 

-

 

 

 

5,233,676

 

 

 

5,286,541

 

 

 

-

 

   Sale of BUCs, net of issuance costs

 

 

-

 

 

 

38,617

 

 

 

192,310

 

 

 

192,310

 

 

 

-

 

   Repurchase of BUCs

 

 

-

 

 

 

(198,465

)

 

 

(1,256,654

)

 

 

(1,256,654

)

 

 

-

 

   Restricted units awarded

 

 

-

 

 

 

239,102

 

 

 

-

 

 

 

-

 

 

 

-

 

   Restricted units compensation expense

 

 

2,066

 

 

 

-

 

 

 

204,570

 

 

 

206,636

 

 

 

-

 

   Unrealized loss on securities

 

 

(218,749

)

 

 

-

 

 

 

(21,656,127

)

 

 

(21,874,876

)

 

 

(21,874,876

)

   Unrealized loss on bond

      purchase commitments

 

 

(9,751

)

 

 

-

 

 

 

(965,316

)

 

 

(975,067

)

 

 

(975,067

)

Balance as of March 31, 2018

 

$

185,189

 

 

 

60,452,928

 

 

$

287,384,078

 

 

$

287,569,267

 

 

$

52,773,887

 

 

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 Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

6,451,813

 

 

$

6,004,304

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

820,808

 

 

 

906,315

 

Contingent interest realized on investing activities

 

 

(3,012,102

)

 

 

-

 

Loss (gain) on derivatives, net of cash paid

 

 

353,127

 

 

 

(1,082,333

)

Restricted unit compensation expense

 

 

184,184

 

 

 

206,636

 

Bond premium/discount amortization

 

 

(52,456

)

 

 

(17,041

)

Amortization of deferred financing costs

 

 

361,305

 

 

 

464,772

 

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

 

 

310,496

 

 

 

2,754

 

Change in preferred return receivable from unconsolidated entities, net

 

 

(1,556,390

)

 

 

(877,995

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Increase in interest receivable

 

 

(663,475

)

 

 

(1,656,144

)

(Increase) decrease in other assets

 

 

722,938

 

 

 

(255,901

)

Decrease in accounts payable and accrued expenses

 

 

(354,666

)

 

 

(824,082

)

Net cash provided by operating activities

 

 

3,565,582

 

 

 

2,871,285

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(54,337

)

 

 

(150,460

)

Acquisition of mortgage revenue bonds

 

 

(6,050,000

)

 

 

-

 

Contributions to unconsolidated entities

 

 

(6,594,286

)

 

 

(9,725,034

)

Principal payments received on mortgage revenue bonds

 

 

6,831,237

 

 

 

11,301,939

 

Principal payments received on taxable mortgage revenue bonds

 

 

1,954

 

 

 

2,732

 

Principal payments received on PHC Certificates

 

 

2,767,166

 

 

 

226,714

 

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

 

 

-

 

 

 

(2,560,244

)

Advances on property loans

 

 

-

 

 

 

(66,651

)

Principal payments received on property loans and contingent interest

 

 

11,379,737

 

 

 

150,000

 

Net cash provided by (used in) investing activities

 

 

8,281,471

 

 

 

(821,004

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Distributions paid

 

 

(8,284,917

)

 

 

(9,116,720

)

Repurchase of BUCs

 

 

-

 

 

 

(1,256,654

)

Proceeds from the sale of BUCs

 

 

-

 

 

 

233,633

 

Payment of offering costs related to the sale of BUCs

 

 

-

 

 

 

(4,678

)

Proceeds from debt financing

 

 

5,263,500

 

 

 

-

 

Principal payments on debt financing

 

 

(2,976,289

)

 

 

(8,303,677

)

Principal payments on mortgages payable

 

 

(104,685

)

 

 

(113,308

)

Increase (decrease) in security deposit liability related to restricted cash

 

 

(10,455

)

 

 

3,449

 

Net cash used in financing activities

 

 

(6,112,846

)

 

 

(18,557,955

)

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

 

 

5,734,207

 

 

 

(16,507,674

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

33,268,611

 

 

 

71,583,329

 

Cash, cash equivalents and restricted cash at end of period

 

$

39,002,818

 

 

$

55,075,655

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

5,514,997

 

 

$

5,617,890

 

Cash paid during the period for income taxes

 

 

-

 

 

 

14,859

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Distributions declared but not paid for BUCs and General Partner

 

$

8,393,271

 

 

$

7,632,945

 

Distributions declared but not paid for Series A Preferred Units

 

 

708,750

 

 

 

708,750

 

Land contributed as investment in an unconsolidated entity

 

 

-

 

 

 

2,597,784

 

Capital expenditures financed through accounts payable

 

 

850

 

 

 

54,581

 

Deferred financing costs financed through accounts payable

 

 

4,843

 

 

 

6,222

 

 

 

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

 

 

 

March 31, 2019

 

 

March 31, 2018

 

Cash and cash equivalents

 

$

38,210,497

 

 

$

53,959,775

 

Restricted cash

 

 

792,321

 

 

 

1,115,880

 

Total cash, cash equivalents and restricted cash

 

$

39,002,818

 

 

$

55,075,655

 

 

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

 

 

6


 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

1. Basis of Presentation

General

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

The Partnership’s general partner 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 (“BUC holders”). The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) that represent limited partnership interests in the Partnership under the Partnership’s First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as further amended (the “Amended and Restated LP Agreement”). The holders of the BUCs and Series A Preferred Units are referred to herein as “Unitholders.”     

 

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P., its consolidated subsidiaries and consolidated variable interest entities (Note 5). All intercompany transactions are eliminated.  As of March 31, 2019, the consolidated subsidiaries of the Partnership consist of:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

7


 

Lease Accounting

 

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

 

Lessee Operating Leases  

 

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

 

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

 

Lessor Operating Leases

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

Reclassification

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

 

In the three months ended March 31, 2019, the Partnership reported amortization of deferred financing costs within interest expense in the Partnership’s condensed consolidated statements of operations.  Previously, “Amortization of deferred financing costs expense” had been reflected as a separate line item in the Partnership’s condensed consolidated statement of operations.  Accordingly, for the three months ended March 31, 2018, the Partnership has included amortization of deferred financing costs expense within interest expense in conformity with the current reporting period presented herein. This reclassification has no effect on the Partnership’s reported net income or partners’ capital in the Partnership’s condensed consolidated financial statements for the periods presented.

Estimates and assumptions

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

 

8


 

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

 

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The ASU enhances the methodology of measuring expected credit losses for financial assets, to include the use of reasonable and supportable forward-looking information to better estimate credit losses. The ASU potentially impacts the Partnership’s accounting for receivables, property loans, financial guarantees and commitments. The ASU also makes changes to the impairment model for available-for-sale debt securities. These changes will potentially impact the Partnership’s impairment analysis for MRBs, PHC Certificates, taxable MRBs and bond purchase commitments.  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 evaluating the Partnership’s classes of financial instruments within the scope of the ASU and evaluating the impact of the ASU to such classes on the Partnership’s condensed consolidated financial statements.    

 

3. Partnership Income, Expenses and Cash Distributions  

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

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

 

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

 

4. Net income per BUC

The Partnership has disclosed basic and diluted net income per BUC on the Partnership’s condensed consolidated statements of operations. The unvested Restricted Unit Awards (“RUAs”) issued under the Partnership’s 2015 Equity Incentive Plan (the “Plan”) are considered participating securities. There were no dilutive BUCs for the three months ended March 31, 2019 and 2018.

 

5. Variable Interest Entities

Consolidated VIEs

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

9


 

As the primary beneficiary, the Partnership reports the TOB, Term TOB, Term A/B and TEBS Financings on a consolidated basis. The Partnership reports the senior floating-rate participation interests (“SPEARS”) related to the TOB Trusts and the Class A Certificates for the Term A/B Trusts and TEBS Financings as secured debt financings on the Partnership’s condensed consolidated balance sheets (see Note 15). The MRBs secured by the TOB, Term TOB, Term A/B and TEBS Financings are reported as assets on the Partnership’s condensed consolidated balance sheets (see Note 6).

Non-Consolidated VIEs

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

The Partnership held variable interests in 15 and 17 non-consolidated VIEs as of March 31, 2019 and December 31, 2018, respectively. The following table summarizes the Partnership’s variable interests in these entities as of March 31, 2019 and December 31, 2018:

 

 

 

Maximum Exposure to Loss

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Mortgage revenue bonds

 

$

33,781,805

 

 

$

51,791,000

 

Property loans

 

 

-

 

 

 

8,367,635

 

Investment in unconsolidated entities

 

 

84,684,982

 

 

 

76,534,306

 

 

 

$

118,466,787

 

 

$

136,692,941

 

 

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

 

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

 

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

 

10


 

6. Investments in Mortgage Revenue Bonds

MRBs owned by the Partnership 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 15). The Partnership had the following investments in MRBs as of March 31, 2019 and December 31, 2018:

 

 

 

March 31, 2019

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A (5)

 

CA

 

$

10,209,805

 

 

$

1,025,161

 

 

$

-

 

 

$

11,234,966

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,570,194

 

 

 

620,788

 

 

 

-

 

 

 

5,190,982

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,722,637

 

 

 

338,911

 

 

 

-

 

 

 

4,061,548

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,890,938

 

 

 

728,422

 

 

 

-

 

 

 

7,619,360

 

Harden Ranch - Series A (3)

 

CA

 

 

6,757,247

 

 

 

1,043,156

 

 

 

-

 

 

 

7,800,403

 

Las Palmas II - Series A (5)

 

CA

 

 

1,689,400

 

 

 

160,770

 

 

 

-

 

 

 

1,850,170

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,475,929

 

 

 

317,695

 

 

 

-

 

 

 

2,793,624

 

Montecito at Williams Ranch Apartments - Series A (2)

 

CA

 

 

7,690,000

 

 

 

1,090,812

 

 

 

-

 

 

 

8,780,812

 

San Vicente - Series A (5)

 

CA

 

 

3,483,453

 

 

 

331,499

 

 

 

-

 

 

 

3,814,952

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

2,999,495

 

 

 

453,089

 

 

 

-

 

 

 

3,452,584

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,315,002

 

 

 

744,437

 

 

 

-

 

 

 

5,059,439

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,340,347

 

 

 

741,070

 

 

 

-

 

 

 

8,081,417

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,358,748

 

 

 

1,247,720

 

 

 

-

 

 

 

13,606,468

 

Summerhill - Series A (5)

 

CA

 

 

6,410,320

 

 

 

583,599

 

 

 

-

 

 

 

6,993,919

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,588,448

 

 

 

412,937

 

 

 

-

 

 

 

4,001,385

 

The Village at Madera - Series A (5)

 

CA

 

 

3,078,910

 

 

 

280,306

 

 

 

-

 

 

 

3,359,216

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,887,277

 

 

 

741,620

 

 

 

-

 

 

 

6,628,897

 

Vineyard Gardens - Series A (2)

 

CA

 

 

3,995,000

 

 

 

576,050

 

 

 

-

 

 

 

4,571,050

 

Westside Village Market - Series A (3)

 

CA

 

 

3,847,324

 

 

 

506,360

 

 

 

-

 

 

 

4,353,684

 

Brookstone (1)

 

IL

 

 

7,426,398

 

 

 

2,012,819

 

 

 

-

 

 

 

9,439,217

 

Copper Gate Apartments (3)

 

IN

 

 

5,055,000

 

 

 

668,044

 

 

 

-

 

 

 

5,723,044

 

Renaissance - Series A (4)

 

LA

 

 

11,093,792

 

 

 

689,399

 

 

 

-

 

 

 

11,783,191

 

Live 929 Apartments (2)

 

MD

 

 

40,178,782

 

 

 

2,117,538

 

 

 

-

 

 

 

42,296,320

 

Woodlynn Village (1)

 

MN

 

 

4,221,000

 

 

 

9,297

 

 

 

-

 

 

 

4,230,297

 

Gateway Village (2)

 

NC

 

 

2,600,000

 

 

 

314,632

 

 

 

-

 

 

 

2,914,632

 

Greens Property - Series A (3)

 

NC

 

 

8,008,000

 

 

 

849,812

 

 

 

-

 

 

 

8,857,812

 

Lynnhaven Apartments (2)

 

NC

 

 

3,450,000

 

 

 

345,712

 

 

 

-

 

 

 

3,795,712

 

Silver Moon - Series A (4)

 

NM

 

 

7,807,824

 

 

 

1,052,122

 

 

 

-

 

 

 

8,859,946

 

Ohio Properties - Series A (1)

 

OH

 

 

13,956,000

 

 

 

126,387

 

 

 

-

 

 

 

14,082,387

 

Bridle Ridge (1)

 

SC

 

 

7,355,000

 

 

 

46,949

 

 

 

-

 

 

 

7,401,949

 

Columbia Gardens (5)

 

SC

 

 

13,183,739

 

 

 

1,679,485

 

 

 

-

 

 

 

14,863,224

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,266,464

 

 

 

1,217,491

 

 

 

-

 

 

 

12,483,955

 

Cross Creek (1)

 

SC

 

 

6,144,636

 

 

 

2,555,884

 

 

 

-

 

 

 

8,700,520

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

18,994,280

 

 

 

2,237,230

 

 

 

-

 

 

 

21,231,510

 

Village at River's Edge (5)

 

SC

 

 

9,921,985

 

 

 

1,617,627

 

 

 

-

 

 

 

11,539,612

 

Willow Run (5)

 

SC

 

 

13,002,302

 

 

 

1,654,309

 

 

 

-

 

 

 

14,656,611

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,160,966

 

 

 

1,522,332

 

 

 

-

 

 

 

12,683,298

 

Pro Nova 2014-1 (2), (6)

 

TN

 

 

10,026,148

 

 

 

-

 

 

 

(414,148

)

 

 

9,612,000

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

10,000,000

 

 

 

712,262

 

 

 

-

 

 

 

10,712,262

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,331,681

 

 

 

1,161,915

 

 

 

-

 

 

 

10,493,596

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,538,088

 

 

 

819,089

 

 

 

-

 

 

 

8,357,177

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,083,475

 

 

 

1,518,227

 

 

 

-

 

 

 

14,601,702

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

3,775,000

 

 

 

267,279

 

 

 

-

 

 

 

4,042,279

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

31,850,000

 

 

 

2,143,030

 

 

 

-

 

 

 

33,993,030

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,508,847

 

 

 

594,904

 

 

 

-

 

 

 

7,103,751

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,897,526

 

 

 

1,842,731

 

 

 

-

 

 

 

17,740,257

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,208,048

 

 

 

611,523

 

 

 

-

 

 

 

5,819,571

 

Bruton Apartments (5)

 

TX

 

 

17,902,767

 

 

 

2,405,944

 

 

 

-

 

 

 

20,308,711

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

19,103,188

 

 

 

2,714,505

 

 

 

-

 

 

 

21,817,693

 

Concord at Little York - Series A (5)

 

TX

 

 

13,382,687

 

 

 

1,962,505

 

 

 

-

 

 

 

15,345,192

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,731,216

 

 

 

2,945,843

 

 

 

-

 

 

 

23,677,059

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,457,776

 

 

 

700,690

 

 

 

-

 

 

 

8,158,466

 

Decatur Angle (5)

 

TX

 

 

22,587,594

 

 

 

2,411,568

 

 

 

-

 

 

 

24,999,162

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,455,730

 

 

 

2,803,114

 

 

 

-

 

 

 

22,258,844

 

Heights at 515 - Series A (5)

 

TX

 

 

6,827,722

 

 

 

813,408

 

 

 

-

 

 

 

7,641,130

 

Heritage Square - Series A (4)

 

TX

 

 

10,777,579

 

 

 

1,100,192

 

 

 

-

 

 

 

11,877,771

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,313,807

 

 

 

839,250

 

 

 

-

 

 

 

13,153,057

 

Runnymede (1)

 

TX

 

 

10,040,000

 

 

 

135,058

 

 

 

-

 

 

 

10,175,058

 

Southpark (1)

 

TX

 

 

11,642,321

 

 

 

2,436,045

 

 

 

-

 

 

 

14,078,366

 

15 West Apartments (5)

 

WA

 

 

9,721,717

 

 

 

1,576,997

 

 

 

-

 

 

 

11,298,714

 

Mortgage revenue bonds held in trust

 

 

 

$

591,299,559

 

 

$

65,177,550

 

 

$

(414,148

)

 

$

656,062,961

 

 

(1)

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

(2)

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

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(3)

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

(4)

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

(5)

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

(6)

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

 

 

 

March 31, 2019

 

Description of Mortgage Revenue Bonds held

by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series B

 

CA

 

$

6,228,000

 

 

$

251

 

 

$

-

 

 

$

6,228,251

 

Solano Vista - Series A & B

 

CA

 

 

5,768,000

 

 

 

479,646

 

 

 

-

 

 

 

6,247,646

 

Greens Property - Series B

 

NC

 

 

932,993

 

 

 

150,665

 

 

 

-

 

 

 

1,083,658

 

Village at Avalon - Series A

 

NM

 

 

16,382,573

 

 

 

1,957,176

 

 

 

-

 

 

 

18,339,749

 

Ohio Properties - Series B

 

OH

 

 

3,516,859

 

 

 

27,245

 

 

 

-

 

 

 

3,544,104

 

Rosewood Townhomes - Series A & B (1)

 

SC

 

 

9,750,000

 

 

 

-

 

 

 

(450,424

)

 

 

9,299,576

 

South Pointe Apartments - Series A & B (1)

 

SC

 

 

22,700,000

 

 

 

-

 

 

 

(957,758

)

 

 

21,742,242

 

Avistar at Copperfield - Series B

 

TX

 

 

4,000,000

 

 

 

14,008

 

 

 

-

 

 

 

4,014,008

 

Avistar at the Crest - Series B

 

TX

 

 

744,275

 

 

 

60,221

 

 

 

-

 

 

 

804,496

 

Avistar at the Oaks - Series B

 

TX

 

 

544,560

 

 

 

34,073

 

 

 

-

 

 

 

578,633

 

Avistar at the Parkway - Series B

 

TX

 

 

124,529

 

 

 

34,613

 

 

 

-

 

 

 

159,142

 

Avistar at Wilcrest - Series B

 

TX

 

 

1,550,000

 

 

 

5,292

 

 

 

-

 

 

 

1,555,292

 

Avistar at Wood Hollow - Series B

 

TX

 

 

8,410,000

 

 

 

30,947

 

 

 

-

 

 

 

8,440,947

 

Avistar in 09 - Series B

 

TX

 

 

449,213

 

 

 

23,152

 

 

 

-

 

 

 

472,365

 

Avistar on the Boulevard - Series B

 

TX

 

 

442,250

 

 

 

32,521

 

 

 

-

 

 

 

474,771

 

Mortgage revenue bonds held by the

   Partnership

 

 

 

$

81,543,252

 

 

$

2,849,810

 

 

$

(1,408,182

)

 

$

82,984,880

 

 

(1)

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

12


 

 

 

 

December 31, 2018

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A (5)

 

CA

 

$

10,230,000

 

 

$

954,573

 

 

$

-

 

 

$

11,184,573

 

Glenview Apartments - Series A (4)

 

CA

 

 

4,581,930

 

 

 

524,024

 

 

 

-

 

 

 

5,105,954

 

Harmony Court Bakersfield - Series A (5)

 

CA

 

 

3,730,000

 

 

 

312,844

 

 

 

-

 

 

 

4,042,844

 

Harmony Terrace - Series A (5)

 

CA

 

 

6,900,000

 

 

 

647,686

 

 

 

-

 

 

 

7,547,686

 

Harden Ranch - Series A (3)

 

CA

 

 

6,775,508

 

 

 

1,007,557

 

 

 

-

 

 

 

7,783,065

 

Las Palmas II - Series A (5)

 

CA

 

 

1,692,774

 

 

 

141,187

 

 

 

-

 

 

 

1,833,961

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,482,288

 

 

 

246,752

 

 

 

-

 

 

 

2,729,040

 

Montecito at Williams Ranch Apartments - Series A (2)

 

CA

 

 

7,690,000

 

 

 

973,133

 

 

 

-

 

 

 

8,663,133

 

San Vicente - Series A (5)

 

CA

 

 

3,490,410

 

 

 

291,121

 

 

 

-

 

 

 

3,781,531

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

3,007,198

 

 

 

401,203

 

 

 

-

 

 

 

3,408,401

 

Seasons at Simi Valley - Series A (5)

 

CA

 

 

4,325,536

 

 

 

655,326

 

 

 

-

 

 

 

4,980,862

 

Seasons Lakewood - Series A (5)

 

CA

 

 

7,350,000

 

 

 

654,929

 

 

 

-

 

 

 

8,004,929

 

Seasons San Juan Capistrano - Series A (5)

 

CA

 

 

12,375,000

 

 

 

1,102,687

 

 

 

-

 

 

 

13,477,687

 

Summerhill - Series A (5)

 

CA

 

 

6,423,000

 

 

 

508,639

 

 

 

-

 

 

 

6,931,639

 

Sycamore Walk - Series A (5)

 

CA

 

 

3,598,006

 

 

 

363,405

 

 

 

-

 

 

 

3,961,411

 

The Village at Madera - Series A (5)

 

CA

 

 

3,085,000

 

 

 

229,934

 

 

 

-

 

 

 

3,314,934

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

5,903,368

 

 

 

731,073

 

 

 

-

 

 

 

6,634,441

 

Vineyard Gardens - Series A (2)

 

CA

 

 

3,995,000

 

 

 

534,351

 

 

 

-

 

 

 

4,529,351

 

Westside Village Market - Series A (3)

 

CA

 

 

3,857,839

 

 

 

483,436

 

 

 

-

 

 

 

4,341,275

 

Brookstone (1)

 

IL

 

 

7,432,076

 

 

 

1,956,010

 

 

 

-

 

 

 

9,388,086

 

Copper Gate Apartments (3)

 

IN

 

 

5,055,000

 

 

 

643,012

 

 

 

-

 

 

 

5,698,012

 

Renaissance - Series A (4)

 

LA

 

 

11,123,800

 

 

 

1,383,680

 

 

 

-

 

 

 

12,507,480

 

Live 929 Apartments (2)

 

MD

 

 

40,240,405

 

 

 

2,873,978

 

 

 

-

 

 

 

43,114,383

 

Woodlynn Village (1)

 

MN

 

 

4,221,000

 

 

 

34,155

 

 

 

-

 

 

 

4,255,155

 

Greens Property - Series A (3)

 

NC

 

 

8,032,000

 

 

 

818,686

 

 

 

-

 

 

 

8,850,686

 

Silver Moon - Series A (4)

 

NM

 

 

7,822,610

 

 

 

778,940

 

 

 

-

 

 

 

8,601,550

 

Ohio Properties - Series A (1)

 

OH

 

 

13,989,000

 

 

 

241,675

 

 

 

-

 

 

 

14,230,675

 

Bridle Ridge (1)

 

SC

 

 

7,395,000

 

 

 

90,349

 

 

 

-

 

 

 

7,485,349

 

Columbia Gardens (5)

 

SC

 

 

13,222,480

 

 

 

1,396,828

 

 

 

-

 

 

 

14,619,308

 

Companion at Thornhill Apartments (5)

 

SC

 

 

11,294,928

 

 

 

1,148,219

 

 

 

-

 

 

 

12,443,147

 

Cross Creek (1)

 

SC

 

 

6,143,919

 

 

 

2,540,949

 

 

 

-

 

 

 

8,684,868

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

19,044,617

 

 

 

2,194,791

 

 

 

-

 

 

 

21,239,408

 

Village at River's Edge (5)

 

SC

 

 

9,938,059

 

 

 

1,421,114

 

 

 

-

 

 

 

11,359,173

 

Willow Run (5)

 

SC

 

 

13,040,029

 

 

 

1,375,542

 

 

 

-

 

 

 

14,415,571

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,194,690

 

 

 

1,399,461

 

 

 

-

 

 

 

12,594,151

 

Pro Nova 2014-1 (2)

 

TN

 

 

10,027,413

 

 

 

19,710

 

 

 

-

 

 

 

10,047,123

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

10,000,000

 

 

 

589,196

 

 

 

-

 

 

 

10,589,196

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,357,374

 

 

 

1,036,288

 

 

 

-

 

 

 

10,393,662

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,558,240

 

 

 

706,970

 

 

 

-

 

 

 

8,265,210

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,114,418

 

 

 

1,232,292

 

 

 

-

 

 

 

14,346,710

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

3,775,000

 

 

 

206,263

 

 

 

-

 

 

 

3,981,263

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

31,850,000

 

 

 

1,624,687

 

 

 

-

 

 

 

33,474,687

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,526,247

 

 

 

525,939

 

 

 

-

 

 

 

7,052,186

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

15,941,296

 

 

 

1,628,269

 

 

 

-

 

 

 

17,569,565

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,221,971

 

 

 

557,084

 

 

 

-

 

 

 

5,779,055

 

Bruton Apartments (5)

 

TX

 

 

17,933,482

 

 

 

2,046,056

 

 

 

-

 

 

 

19,979,538

 

Concord at Gulfgate - Series A (5)

 

TX

 

 

19,144,400

 

 

 

2,222,555

 

 

 

-

 

 

 

21,366,955

 

Concord at Little York - Series A (5)

 

TX

 

 

13,411,558

 

 

 

1,617,217

 

 

 

-

 

 

 

15,028,775

 

Concord at Williamcrest - Series A (5)

 

TX

 

 

20,775,940

 

 

 

2,505,243

 

 

 

-

 

 

 

23,281,183

 

Crossing at 1415 - Series A (5)

 

TX

 

 

7,474,716

 

 

 

600,738

 

 

 

-

 

 

 

8,075,454

 

Decatur Angle (5)

 

TX

 

 

22,630,276

 

 

 

1,945,516

 

 

 

-

 

 

 

24,575,792

 

Esperanza at Palo Alto (5)

 

TX

 

 

19,487,713

 

 

 

2,350,453

 

 

 

-

 

 

 

21,838,166

 

Heights at 515 - Series A (5)

 

TX

 

 

6,843,232

 

 

 

722,522

 

 

 

-

 

 

 

7,565,754

 

Heritage Square - Series A (4)

 

TX

 

 

10,958,661

 

 

 

893,881

 

 

 

-

 

 

 

11,852,542

 

Oaks at Georgetown - Series A (5)

 

TX

 

 

12,330,000

 

 

 

693,579

 

 

 

-

 

 

 

13,023,579

 

Runnymede (1)

 

TX

 

 

10,040,000

 

 

 

64,280

 

 

 

-

 

 

 

10,104,280

 

Southpark (1)

 

TX

 

 

11,623,649

 

 

 

2,482,923

 

 

 

-

 

 

 

14,106,572

 

15 West Apartments (5)

 

WA

 

 

9,737,418

 

 

 

1,480,489

 

 

 

-

 

 

 

11,217,907

 

Mortgage revenue bonds held in trust

 

 

 

$

586,445,474

 

 

$

58,813,399

 

 

$

-

 

 

$

645,258,873

 

 

(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

 

13


 

 

 

 

December 31, 2018

 

Description of Mortgage Revenue Bonds held

by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series B

 

CA

 

$

6,228,000

 

 

$

2,450

 

 

$

-

 

 

$

6,230,450

 

Seasons San Juan Capistrano - Series B (1)

 

CA

 

 

5,574,000

 

 

 

-

 

 

 

(1,078

)

 

 

5,572,922

 

Solano Vista - Series A & B

 

CA

 

 

5,768,000

 

 

 

-

 

 

 

-

 

 

 

5,768,000

 

Greens Property - Series B

 

NC

 

 

933,928

 

 

 

149,789

 

 

 

-

 

 

 

1,083,717

 

Village at Avalon - Series A

 

NM

 

 

16,400,000

 

 

 

1,408,802

 

 

 

-

 

 

 

17,808,802

 

Ohio Properties - Series B

 

OH

 

 

3,520,900

 

 

 

51,334

 

 

 

-

 

 

 

3,572,234

 

Rosewood Townhomes - Series A & B (1)

 

SC

 

 

9,750,000

 

 

 

-

 

 

 

(644,962

)

 

 

9,105,038

 

South Pointe Apartments - Series A & B (1)

 

SC

 

 

22,700,000

 

 

 

-

 

 

 

(1,411,986

)

 

 

21,288,014

 

Avistar at Copperfield - Series B

 

TX

 

 

4,000,000

 

 

 

11,730

 

 

 

-

 

 

 

4,011,730

 

Avistar at the Crest - Series B

 

TX

 

 

745,358

 

 

 

50,965

 

 

 

-

 

 

 

796,323

 

Avistar at the Oaks - Series B

 

TX

 

 

545,321

 

 

 

28,738

 

 

 

-

 

 

 

574,059

 

Avistar at the Parkway - Series B

 

TX

 

 

124,600

 

 

 

32,220

 

 

 

-

 

 

 

156,820

 

Avistar at Wilcrest - Series B

 

TX

 

 

1,550,000

 

 

 

4,013

 

 

 

-

 

 

 

1,554,013

 

Avistar at Wood Hollow - Series B

 

TX

 

 

8,410,000

 

 

 

23,940

 

 

 

-

 

 

 

8,433,940

 

Avistar in 09 - Series B

 

TX

 

 

449,841

 

 

 

18,742

 

 

 

-

 

 

 

468,583

 

Avistar on the Boulevard - Series B

 

TX

 

 

442,894

 

 

 

27,023

 

 

 

-

 

 

 

469,917

 

Mortgage revenue bonds held by the

   Partnership

 

 

 

$

87,142,842

 

 

$

1,809,746

 

 

$

(2,058,026

)

 

$

86,894,562

 

 

(1)

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

 

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

 

Cumulative unrealized loss positions on MRBs are not indicative of the amount of credit loss that would be recognized as of March 31, 2019.  The cumulative unrealized losses are primarily related to operating results at the underlying properties during renovation and rehabilitation, which are expected to be temporary.

MRB Activity in the First Three Months of 2019

Acquisitions:

The following MRBs were acquired during the three months ended March 31, 2019:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Gateway Village

 

February

 

Durham, NC

 

64

 

4/1/2032

 

 

6.10

%

 

$

2,600,000

 

Lynnhaven Apartments

 

February

 

Durham, NC

 

75

 

4/1/2032

 

 

6.10

%

 

 

3,450,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

6,050,000

 

 

 

Redemptions:

 

The following MRB was redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the three months ended March 31, 2019:

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Seasons San Juan Capistrano - Series B

 

January

 

San Juan Capistrano,

   CA

 

 

112

 

 

1/1/2019

 

 

8.00

%

 

$

5,574,000

 

 

 

14


 

MRB Activity in the First Three Months of 2018

 

Acquisitions:

 

There were no MRBs acquired during the three months ended March 31, 2018.

 

Redemptions:

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

10,447,000

 

 

 

 

7. PHC Certificates

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

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

 

 

 

March 31, 2019

 

Description of PHC Certificates

 

Weighted

Average Lives

(Years)

 

 

Investment

Rating

 

Weighted

Average Interest

Rate Over Life

 

 

Cost Adjusted for

Paydowns and Impairment

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair

Value

 

PHC Certificate Trust I

 

 

6.24

 

 

AA-

 

5.38%

 

 

$

24,575,777

 

 

$

291,121

 

 

$

-

 

 

$

24,866,898

 

PHC Certificate Trust II

 

 

3.37

 

 

A+

 

4.35%

 

 

 

6,346,788

 

 

 

329,477

 

 

 

-

 

 

 

6,676,265

 

PHC Certificate Trust III

 

 

6.51

 

 

BBB

 

5.30%

 

 

 

14,574,299

 

 

 

289,406

 

 

 

-

 

 

 

14,863,705

 

 

 

 

 

 

 

 

 

 

 

 

 

$

45,496,864

 

 

$

910,004

 

 

$

-

 

 

$

46,406,868

 

 

 

 

December 31, 2018

 

Description of PHC Certificates

 

Weighted

Average Lives

(Years)

 

Investment

Rating

 

Weighted

Average Interest

Rate Over Life

 

 

Cost Adjusted for

Paydowns and Impairment

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair

Value

 

PHC Certificate Trust I

 

6.49

 

AA-

 

5.33%

 

 

$

24,608,543

 

 

$

285,984

 

 

$

-

 

 

$

24,894,527

 

PHC Certificate Trust II

 

5.56

 

A+

 

4.35%

 

 

 

9,071,785

 

 

 

44,768

 

 

 

-

 

 

 

9,116,553

 

PHC Certificate Trust III

 

6.76

 

BBB

 

5.30%

 

 

 

14,566,975

 

 

 

94,031

 

 

 

-

 

 

 

14,661,006

 

 

 

 

 

 

 

 

 

 

 

$

48,247,303

 

 

$

424,783

 

 

$

-

 

 

$

48,672,086

 

 

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

 

15


 

8. Real Estate Assets

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

 

Real Estate Assets as of March 31, 2019

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value

 

Suites on Paseo

 

San Diego, CA

 

 

384

 

 

$

3,195,468

 

 

$

39,012,096

 

 

$

42,207,564

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,937,357

 

 

 

32,937,357

 

Land held for development

 

(1)

 

(1)

 

 

 

1,776,197

 

 

 

-

 

 

 

1,776,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,921,118

 

Less accumulated depreciation

 

 

 

(13,088,741

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

63,832,377

 

 

(1)

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

 

Real Estate Assets as of December 31, 2018

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value

 

Suites on Paseo

 

San Diego, CA

 

 

384

 

 

$

3,195,468

 

 

$

38,961,163

 

 

$

42,156,631

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,935,907

 

 

 

32,935,907

 

Land held for development

 

(2)

 

(2)

 

 

 

1,776,197

 

 

 

-

 

 

 

1,776,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,868,735

 

Less accumulated depreciation

 

 

 

(12,272,387

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

64,596,348

 

 

(2)

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

Activity in the First Three Months of 2019

As of March 31, 2019, the land held for development in Omaha, NE and Gardner, KS were listed for sale. These parcels of land were originally listed for sale in May and October 2018, respectively.

Activity in the First Three Months of 2018

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

 

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

 

9. Investments in Unconsolidated Entities

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has equity investment commitments and has made equity investments in unconsolidated entities on the Partnership’s condensed consolidated balance sheets. The carrying value of the equity 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 through the second anniversary of construction completion. The return on these investments earned by the Partnership is reported as investment income on the Partnership’s condensed consolidated statements of operations.

 

16


 

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

 

Property Name

 

Location

 

Units

 

 

Month

Commitment

Executed

 

Construction

Completion

Date

 

Carrying Value as of March 31, 2019

 

 

Carrying Value as of December 31, 2018

 

 

Maximum

Remaining

Equity Commitment as of March 31, 2019

 

Vantage at Boerne

 

Boerne, TX

 

 

288

 

 

August 2016

 

December 2017

 

$

8,830,000

 

 

$

8,830,000

 

 

$

1,475,936

 

Vantage at Waco

 

Waco, TX

 

 

288

 

 

August 2016

 

January 2018

 

 

9,337,166

 

 

 

9,337,166

 

 

 

1,592,039

 

Vantage at Panama City

   Beach

 

Panama City Beach, FL

 

 

288

 

 

March 2017

 

June 2018

 

 

11,695,722

 

 

 

11,408,135

 

 

 

1,996,500

 

Vantage at Powdersville

 

Powdersville, SC

 

 

288

 

 

November 2017

 

N/A

 

 

11,826,703

 

 

 

11,535,895

 

 

 

-

 

Vantage at Stone Creek

 

Omaha, NE

 

 

294

 

 

March 2018

 

N/A

 

 

7,763,469

 

 

 

7,572,819

 

 

 

-

 

Vantage at Bulverde

 

Bulverde, TX

 

 

288

 

 

March 2018

 

N/A

 

 

9,414,003

 

 

 

9,182,522

 

 

 

-

 

Vantage at Germantown

 

Germantown, TN

 

 

288

 

 

June 2018

 

N/A

 

 

10,899,878

 

 

 

7,033,398

 

 

 

-

 

Vantage at Murfreesboro

 

Murfreesboro, TN

 

 

288

 

 

September 2018

 

N/A

 

 

8,562,082

 

 

 

6,254,104

 

 

 

4,016,131

 

Vantage at Coventry

 

Omaha, NE

 

 

288

 

 

September 2018

 

N/A

 

 

6,355,959

 

 

 

5,380,267

 

 

 

2,062,156

 

 

 

 

 

 

2,598

 

 

 

 

 

 

$

84,684,982

 

 

$

76,534,306

 

 

$

11,142,762

 

 

Activity in the First Three Months of 2019:

There was no significant activity during the three months ended March 31, 2019.

Activity in the First Three Months of 2018:

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

 

The following table provides combined summary financial information for the Partnership’s investments in unconsolidated entities for three months ended March 31, 2019 and 2018:

 

 

 

2019

 

 

2018

 

Property Revenues

 

$

2,717,268

 

 

$

1,093,810

 

Net loss

 

$

(117,063

)

 

$

(1,154,694

)

 

10. Property Loans, Net of Loan Loss Allowances

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

 

 

 

March 31, 2019

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowance

 

 

Property Loan Principal,

net of allowance

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

-

 

 

$

191,264

 

Avistar (February 2013 portfolio)

 

 

201,972

 

 

 

-

 

 

 

201,972

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

-

 

 

 

251,622

 

Cross Creek

 

 

11,101,887

 

 

 

(7,393,814

)

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

-

 

 

 

850,000

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Total

 

$

14,987,191

 

 

$

(7,393,814

)

 

$

7,593,377

 

17


 

 

 

 

December 31, 2018

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowance

 

 

Property Loan Principal,

net of allowance

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

-

 

 

$

191,264

 

Avistar (February 2013 portfolio)

 

 

201,972

 

 

 

-

 

 

 

201,972

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

-

 

 

 

251,622

 

Cross Creek

 

 

11,101,887

 

 

 

(7,393,814

)

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

-

 

 

 

850,000

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Vantage at Brooks, LLC

 

 

8,367,635

 

 

 

-

 

 

 

8,367,635

 

Total

 

$

23,354,826

 

 

$

(7,393,814

)

 

$

15,961,012

 

 

 

During the three months ended March 31, 2019 and 2018, the interest to be earned on the Cross Creek property loans was in nonaccrual status.  The discounted cash flow method used by management to establish the net realizable value of these property loans determined the collection of the interest earned since inception was not probable.  In addition, for the three months ended March 31, 2019 and 2018, 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.

 

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

 

11. Income Tax Provision

 

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by the Greens Hold Co, which owns The 50/50 MF Property and certain property loans. The following table summarizes income tax expense (benefit) for the three months ended March 31, 2019 and 2018:

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Current income tax expense (benefit)

 

$

82,340

 

 

$

(41,000

)

Deferred income tax expense (benefit)

 

 

(40,692

)

 

 

34,000

 

Total income tax expense (benefit)

 

$

41,648

 

 

$

(7,000

)

 

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

 

12. Other Assets

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

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Deferred financing costs, net

 

$

280,552

 

 

$

397,823

 

Fair value of derivative instruments (Note 17)

 

 

273,506

 

 

 

626,633

 

Taxable mortgage revenue bonds, at fair value

 

 

1,426,733

 

 

 

1,409,895

 

Operating lease right-of-use assets, net

 

 

1,697,275

 

 

 

-

 

Other assets

 

 

1,276,536

 

 

 

2,081,258

 

Total other assets

 

$

4,954,602

 

 

$

4,515,609

 

 

See Note 2 for a discussion of the operating lease right-of-use lease assets, net, recorded pursuant to the adoption of ASC 842 effective January 1, 2019.  See Note 22 for a description of the methodology and significant assumptions for determining the fair value of derivative instruments and taxable MRBs. Unrealized gains or losses on these assets are recorded in the condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the assets.

 

18


 

13. Accounts Payable, Accrued Expenses and Other Liabilities

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

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Accounts payable

 

$

333,403

 

 

$

230,631

 

Accrued expenses

 

 

2,189,697

 

 

 

2,956,368

 

Accrued interest expense

 

 

2,482,375

 

 

 

2,270,348

 

Operating lease liabilities

 

 

2,189,209

 

 

 

-

 

Other liabilities

 

 

1,835,523

 

 

 

2,086,475

 

Total accounts payable, accrued expenses and other liabilities

 

$

9,030,207

 

 

$

7,543,822

 

 

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

 

The 50/50 MF Property has a ground lease with the University of Nebraska-Lincoln with an initial lease term expiring in March 2038. The Partnership has an option to extend the lease for an additional five-year period, which has not been factored into the calculation of the ROU asset and lease liability.  Annual lease payments are $100 per year. The Partnership is also required to make monthly payments, when cash is available at The 50/50 MF Property, to the University of Nebraska-Lincoln. Payment amounts are based on The 50/50 MF Property’s revenues, subject to an annual guaranteed minimum amount.  As of March 31, 2019, the minimum aggregate annual payment due under the agreement is approximately $130,000. The minimum aggregate annual payment increases 2% annually until July 31, 2034 and increases of 3% annually thereafter.  The 50/50 MF Property will be required to make additional payments under the agreement if its gross revenues exceed certain thresholds.  The Partnership recognized expenses related to the ground lease of approximately $42,000 for the three months ended March 31, 2019 and 2018 and are included within real estate operating expenses on the condensed consolidated statements of operations.  

 

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

 

Remainder of 2019

 

$

101,730

 

2020

 

 

135,812

 

2021

 

 

136,366

 

2022

 

 

139,091

 

2023

 

 

141,871

 

Thereafter

 

 

4,716,101

 

Total

 

 

5,370,971

 

Less:  Amount representing interest

 

 

(3,181,762

)

Total operating lease liabilities

 

$

2,189,209

 

 

14. Unsecured Lines of Credit

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

 

Unsecured Lines of Credit

 

Outstanding as of March 31, 2019

 

 

Total

Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

35,659,200

 

 

$

50,000,000

 

 

June 2020

 

Variable (1)

 

Monthly

 

 

4.98

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2020

 

Variable (1)

 

Monthly

 

 

5.73

%

Total unsecured lines of credit

 

$

35,659,200

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

19


 

 

Unsecured Lines of Credit

 

Outstanding as of December 31, 2018

 

 

Total

Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust non-operating

 

$

35,659,200

 

 

$

50,000,000

 

 

June 2020

 

Variable (2)

 

Monthly

 

 

5.38

%

Bankers Trust operating

 

 

-

 

 

 

10,000,000

 

 

June 2020

 

Variable (2)

 

Monthly

 

 

5.63

%

Total unsecured lines of credit

 

$

35,659,200

 

 

$

60,000,000

 

 

 

 

 

 

 

 

 

 

 

 

(2)

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

 

Of the outstanding balance of the non-operating LOC as of March 31, 2019, approximately $19.3 million is due in June 2019 and approximately $16.4 million is due in September 2019. The Partnership can extend final repayment of the amount due in September 2019 to June 2020 by making partial repayments in accordance with the Credit Agreement. The Partnership is in compliance with all covenants in the Credit Agreement as of March 31, 2019.

 

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

 

 

15. Debt Financing

 

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

 

 

 

Outstanding Debt

Financings as of March 31, 2019, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - M24

 

$

41,354,000

 

 

$

76,750

 

 

2010

 

September 2020

 

Weekly

 

1.55%

 

 

1.85%

 

 

3.40%

 

Variable - M31 (1)

 

 

80,272,760

 

 

 

136,627

 

 

2014

 

July 2019 (2)

 

Weekly

 

1.53%

 

 

1.47%

 

 

3.00%

 

Variable - M33 (1)

 

 

31,253,900

 

 

 

59,137

 

 

2015

 

July 2020 (3)

 

Weekly

 

1.53%

 

 

1.24%

 

 

2.77%

 

Fixed - M45 (4)

 

 

218,865,197

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOB & Term A/B Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB

 

 

35,630,000

 

 

 

-

 

 

2012

 

May 2019

 

Weekly

 

2.00%

 

 

1.67%

 

 

3.67%

 

Fixed - Term TOB

 

 

46,633,408

 

 

 

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

10,516,000

 

 

 

-

 

 

2018

 

May 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

5,259,162

 

 

 

-

 

 

2019

 

February 2020

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

38,464,042

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Total Debt Financings

 

$

508,248,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees are variable.

(2)

The Partnership may unilaterally elect to extend the financing for an additional five-year period through July 2024.

(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 informed the Partnership it will not 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.

20


 

 

 

 

Outstanding Debt

Financings as of

December 31, 2018, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - M24

 

$

41,466,000

 

 

$

432,998

 

 

2010

 

September 2020

 

Weekly

 

1.76%

 

 

1.85%

 

 

3.61%

 

Variable - M31 (1)

 

 

80,418,505

 

 

 

181,626

 

 

2014

 

July 2019 (2)

 

Weekly

 

1.74%

 

 

1.49%

 

 

3.23%

 

Variable - M33 (1)

 

 

31,262,039

 

 

 

58,002

 

 

2015

 

July 2020 (3)

 

Weekly

 

1.74%

 

 

1.26%

 

 

3.00%

 

Fixed - M45 (4)

 

 

219,250,387

 

 

 

5,000

 

 

2018

 

July 2034

 

N/A

 

N/A

 

 

N/A

 

 

3.82%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOB & Term A/B Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TOB

 

 

37,620,000

 

 

 

-

 

 

2012

 

May 2019

 

Weekly

 

2.21%

 

 

1.67%

 

 

3.88%

 

Fixed - Term TOB

 

 

46,675,413

 

 

 

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

10,516,000

 

 

 

 

 

 

2018

 

May 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.53%

 

Fixed - Term A/B

 

 

38,455,221

 

 

 

-

 

 

2017

 

February 2027

 

N/A

 

N/A

 

 

N/A

 

 

4.46%

 

Total Debt Financings

 

$

505,663,565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees are variable.

(2)

The Partnership may unilaterally elect to extend the financing for an additional five-year period through July 2024.

(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.

(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.

 

As of March 31, 2019 and December 31, 2018, the Partnership had posted restricted cash 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 17).

 

The TOB, Term TOB 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 was in compliance with these covenants as of March 31, 2019.

 

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

 

Debt Financing Activity in the First Three Months of 2019

 

New Debt Financings:

 

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

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Gateway Village

 

$

2,262,000

 

 

2019

 

February 2020

 

 

4.53

%

Lynnhaven Apartments

 

 

3,001,500

 

 

2019

 

February 2020

 

 

4.53

%

Total Term A/B Trust Financing

 

$

5,263,500

 

 

 

 

 

 

 

 

 

 

21


 

Debt Financing Activity in the First Three Months of 2018

Redemptions:

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

 

Debt Financing

 

Debt Facility

 

Month

 

Paydown Applied

 

Seasons Lakewood - Series B

 

Term A/B Trust

 

March 2018

 

$

4,475,000

 

Summerhill - Series B

 

Term A/B Trust

 

March 2018

 

 

2,870,000

 

 

 

 

 

 

 

 

7,345,000

 

 

Future Maturities

 

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

 

Remainder of 2019

 

$

175,674,806

 

2020

 

 

79,862,600

 

2021

 

 

2,456,696

 

2022

 

 

2,600,981

 

2023

 

 

2,751,089

 

Thereafter

 

 

247,854,364

 

Total

 

 

511,200,536

 

Deferred financing costs

 

 

(2,952,067

)

Total debt financing, net

 

$

508,248,469

 

 

16. Mortgages Payable and Other Secured Financing

 

The following tables summarize the Partnerships’ mortgages payable and other secured financing, net of deferred financing costs, as of March 31, 2019 and December 31, 2018:

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

March 31, 2019, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Reset

Frequency

 

Variable

Based Rate

 

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

3,133,875

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

24,239,349

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

5.00

%

(1)

 

5.00

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

27,373,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable as of

December 31, 2018, net

 

 

Year

Acquired

or

Refinanced

 

Stated Maturity

 

Variable

/ Fixed

 

Reset

Frequency

 

Variable

Based Rate

 

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

3,118,478

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

 

4.65

%

The 50/50 MF Property--Mortgage

 

 

24,335,897

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

5.00

%

(2)

 

5.00

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

27,454,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

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

22


 

Future Maturities

 

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

 

Remainder of 2019

 

$

3,503,323

 

2020

 

 

23,944,740

 

2021

 

 

-

 

2022

 

 

-

 

2023

 

 

-

 

Thereafter

 

 

-

 

Total

 

 

27,448,063

 

Deferred financing costs

 

 

(74,839

)

Total mortgages payable and other secured financings, net

 

$

27,373,224

 

 

17. Interest Rate Derivative Agreements

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

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of March 31, 2019

 

July 2014

 

$

30,152,644

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

-

 

July 2014

 

 

30,152,644

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

-

 

July 2014

 

 

30,152,644

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

-

 

July 2015

 

 

27,280,025

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

12

 

July 2015

 

 

27,280,025

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

12

 

July 2015

 

 

27,280,025

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

12

 

June 2017

 

 

90,457,933

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

47,303

 

June 2017

 

 

81,840,074

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

226,164

 

Sept 2017

 

 

58,878,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

273,506

 

 

(1)

See Note 22 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, 2018

 

July 2014

 

$

30,252,409

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

-

 

July 2014

 

 

30,252,409

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

-

 

July 2014

 

 

30,252,409

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

-

 

July 2015

 

 

27,359,689

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

536

 

July 2015

 

 

27,359,689

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

536

 

July 2015

 

 

27,359,689

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

536

 

June 2017

 

 

90,757,226

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

158,989

 

June 2017

 

 

82,079,066

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

465,983

 

Sept 2017

 

 

59,038,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

626,633

 

 

(2)

See Note 22 for additional details.

 

During the three months ended March 31, 2018, the Partnership was a party to two interest rate swaps with Deutsche Bank, which were designated to mitigate interest rate risk for the variable-rate TOB Trusts secured by the Partnership’s PHC Certificates. The two interest rate swaps were terminated in September 2018 and October 2018.

 

23


 

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

 

18. Commitments and Contingencies

Legal Proceedings

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

Construction Loan Guarantees

The Partnership entered into guaranty agreements for construction loans related to certain investments in unconsolidated entities. The Partnership will only have to perform on the guarantees if a default by the borrower were to occur.  All guarantees were initially for the entire amount of the respective construction loan and decrease based on the achievement of certain events or financial ratios, as defined by the respective construction loan agreement.  The Partnership has not accrued any amount for these contingent liabilities because the likelihood of guarantee claims is remote. The following table summarizes the Partnership’s maximum exposure under these guarantee agreements as of March 31, 2019:

 

Borrower

 

Year the Guarantee

was Executed

 

Maximum Balance

Available on

Construction Loan

 

 

Construction Loan

Balance as of March 31, 2019

 

 

Partnership's Maximum Exposure

as of March 31, 2019

 

 

Guarantee

Terms

Vantage at Panama City Beach

 

2017

 

$

25,600,000

 

 

$

23,659,040

 

 

$

5,914,760

 

 

(1)

Vantage at Stone Creek

 

2018

 

 

30,824,000

 

 

 

14,155,000

 

 

 

14,155,000

 

 

(2)

Vantage at Coventry

 

2018

 

 

31,500,000

 

 

 

-

 

 

 

-

 

 

(2)

(1)

The Partnership’s maximum exposure is 25% of the construction loan balance as of March 31, 2019. If the borrower’s debt service coverage ratio drops below a specific level, the Partnership’s maximum exposure will increase to 50% of the construction loan balance. The Partnership is also required to maintain minimum cash and net worth requirements, which were met as of March 31, 2019.

(2)

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

Other Guarantees

The Partnership has entered into guarantee agreements with unaffiliated entities under which the Partnership has guaranteed certain obligations of the general partners of certain limited partnerships upon the occurrence of a “repurchase event.” Potential repurchase events include the delivery of LIHTCs, tax credit recapture and foreclosure. The Partnership’s maximum exposure is limited to 75% of the equity contributed by the limited partner to each limited partnership. No amount has been accrued for these guarantees because the likelihood of repurchase events is remote. The following table summarizes the Partnership’s maximum exposure under these guarantee agreements as of March 31, 2019:

 

Limited Partnership(s)

 

Year the Guarantee was

Executed

 

End of Guarantee

Period

 

Partnership's

Maximum Exposure as of March 31, 2019

 

Ohio Properties

 

2011

 

2026

 

$

3,712,436

 

Greens of Pine Glen, LP

 

2012

 

2027

 

 

2,429,658

 

 

24


 

19. Redeemable Series A Preferred Units

 

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

 

Month Issued

 

Units

 

 

Purchase Price

 

 

Distribution

Rate

 

 

Redemption

Price per Unit

 

 

Earliest Redemption

Date

March 2016

 

 

1,000,000

 

 

$

10,000,000

 

 

 

3.00

%

 

$

10.00

 

 

March 2022

May 2016

 

 

1,386,900

 

 

 

13,869,000

 

 

 

3.00

%

 

 

10.00

 

 

May 2022

September 2016

 

 

1,000,000

 

 

 

10,000,000

 

 

 

3.00

%

 

 

10.00

 

 

September 2022

December 2016

 

 

700,000

 

 

 

7,000,000

 

 

 

3.00

%

 

 

10.00

 

 

December 2022

March 2017

 

 

1,613,100

 

 

 

16,131,000

 

 

 

3.00

%

 

 

10.00

 

 

March 2023

August 2017

 

 

2,000,000

 

 

 

20,000,000

 

 

 

3.00

%

 

 

10.00

 

 

August 2023

October 2017

 

 

1,750,000

 

 

 

17,500,000

 

 

 

3.00

%

 

 

10.00

 

 

October 2023

Series A Preferred Units outstanding

   as of March 31, 2019 and

   December 31, 2018

 

 

9,450,000

 

 

$

94,500,000

 

 

 

 

 

 

 

 

 

 

 

 

20. Restricted Unit Awards (“RUAs”)

The Plan, as approved by the BUC holders, permits the grant of RUAs and other awards to the employees of 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. Unvested RUAs are entitled to receive distributions during the restriction period. The RUAs provide for accelerated vesting if there is a change in control related to the Partnership, the General Partner, or Burlington, 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 $184,000 and $207,000 for the three months ended March 31, 2019 and 2018, respectively.

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

 

 

 

Restricted Units

Awarded

 

 

Weighted-average

Grant-date

Fair Value

 

Nonvested as of January 1, 2018

 

 

242,069

 

 

$

5.83

 

Granted

 

 

309,212

 

 

 

6.31

 

Vested

 

 

(279,034

)

 

 

6.06

 

Forfeited

 

 

(6,957

)

 

 

6.31

 

Nonvested as of December 31, 2018

 

 

265,290

 

 

$

6.14

 

Granted

 

 

-

 

 

 

-

 

Vested

 

 

-

 

 

 

-

 

Nonvested as of March 31, 2019

 

 

265,290

 

 

$

6.14

 

 

There was approximately $718,000 of total unrecognized compensation expense related to nonvested RUAs granted under the Plan as of March 31, 2019.  The remaining expense is expected to be recognized over a weighted-average period of 1.0 years. The total intrinsic value of nonvested RUAs was approximately $1.8 million as of March 31, 2019.

 

25


 

21. Transactions with Related Parties

 

The Partnership incurs costs for services and makes contractual payments to AFCA 2, Burlington and their affiliates. The costs are reported either as expenses or capitalized costs depending on the nature of each item. The following table summarizes transactions with related parties that are reflected in the Partnership’s condensed consolidated financial statements for the three months ended March 31, 2019 and 2018:

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Partnership administrative fees paid to AFCA 2 (1)

 

$

898,000

 

 

$

922,000

 

Property management fees paid to an affiliate (2)

 

 

35,000

 

 

 

50,000

 

Reimbursement of franchise margin taxes paid on behalf of unconsolidated entities (3)

 

 

16,000

 

 

 

-

 

 

 

(1)

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

(2)

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

(3)

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

 

AFCA 2, Burlington and their affiliates receive fees from the borrowers of the Partnership’s MRBs for services provided to the borrower and based on the occurrence of certain investment and debt financing transactions. These fees were paid by the borrowers and are not reflected in the Partnership’s condensed consolidated financial statements. The following table summarizes transactions between borrowers of the Partnership’s MRBs and affiliates for the three months ended March 31, 2019 and 2018:

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

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

 

$

9,000

 

 

$

25,000

 

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

 

 

91,000

 

 

 

1,068,000

 

 

 

(1)

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

 

(2)

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

 

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

The Partnership reported receivables due from unconsolidated entities of approximately $93,000 and $77,000 as of March 31, 2019 and December 31, 2018, respectively. These amounts are reported within other assets on the Partnership’s condensed consolidated balance sheets. The Partnership had outstanding liabilities due to related parties totaling approximately $571,000 and $330,000 as of March 31, 2019 and December 31, 2018, respectively. These amounts are reported within accounts payable, accrued expenses and other liabilities on the Partnership’s condensed consolidated balance sheets.

 

22. Fair Value of Financial Instruments

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

 

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

 

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

26


 

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

 

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

 

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

 

Level 3 inputs are unobservable inputs for asset or liabilities.

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

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

The Partnership evaluates pricing data received from the third-party pricing service by evaluating consistency with information from either the third-party pricing service or public sources. The fair value estimates of the MRBs are based largely on unobservable inputs believed to be used by market participants and require the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s investments in MRBs and bond purchase commitments are categorized as a Level 3 input. As of March 31, 2019, the range of effective yields on the individual MRBs was 3.1% to 9.1% per annum, with a weighted average effective yield of 4.5% when weighted by the principal outstanding of MRBs as of the reporting date. As of December 31, 2018, the range of effective yields on the individual MRBs and bond purchase commitments was 3.3% to 9.1% per annum, with a weighted average effective yield of 4.6% when weighted by the principal outstanding of MRBs as of the reporting date.

Investments in PHC Certificates  

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

The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness.  The Partnership also engages a second third-party pricing service to confirm the values developed by the primary third-party pricing service. The valuation methodologies used by the third-party pricing services encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input. As of March 31, 2019, the range of effective yields on the PHC Certificates was 4.8% to 5.7% per annum, with a weighted average effective yield of 5.4% when weighted by the principal outstanding of PHC Certificates as of the reporting date. As of December 31, 2018, the range of effective yields on the PHC Certificates was 5.3% to 6.0% per annum, with a weighted average effective yield of 5.5% when weighted by the principal outstanding of PHC Certificates as of the reporting date.

27


 

Taxable MRBs

The fair value of the Partnership’s taxable MRBs as of March 31, 2019 and December 31, 2018 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the 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 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 require 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. As of March 31, 2019, the range of effective yields on the individual taxable MRBs was 8.1% to 9.1% per annum, with a weighted average effective yield of 8.9% when weighted by the principal outstanding of taxable MRBs as of the reporting date. As of December 31, 2018, the range of effective yields on the individual taxable MRBs was 8.3% to 9.3% per annum, with a weighted average effective yield of 9.1% when weighted by the principal outstanding of taxable MRBs as of the reporting date.

Interest Rate Derivatives.  

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

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

 

 

 

Fair Value Measurements as of March 31, 2019

 

Description

 

Assets at

Fair Value

 

 

Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds, held in trust

 

$

656,062,961

 

 

$

-

 

 

$

-

 

 

$

656,062,961

 

Mortgage revenue bonds

 

 

82,984,880

 

 

 

-

 

 

 

-

 

 

 

82,984,880

 

PHC Certificates

 

 

46,406,868

 

 

 

-

 

 

 

-

 

 

 

46,406,868

 

Taxable mortgage revenue bonds

   (reported within other assets)

 

 

1,426,733

 

 

 

-

 

 

 

-

 

 

 

1,426,733

 

Derivative instruments (reported within

   other assets)

 

 

273,506

 

 

 

-

 

 

 

-

 

 

 

273,506

 

Total Assets at Fair Value, net

 

$

787,154,948

 

 

$

-

 

 

$

-

 

 

$

787,154,948

 

 

28


 

The following tables summarize the activity related to Level 3 assets for the three months ended March 31, 2019:

 

 

 

For the Three Months Ended March 31, 2019

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase

Commitments

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate

Derivatives (2)

 

 

Total

 

Beginning Balance January 1, 2019

 

$

732,153,435

 

 

$

-

 

 

$

48,672,086

 

 

$

1,409,895

 

 

$

626,633

 

 

$

782,862,049

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   income and interest expense)

 

 

35,730

 

 

 

-

 

 

 

16,726

 

 

 

-

 

 

 

(306,591

)

 

 

(254,135

)

Included in other

   comprehensive (loss) income

 

 

7,639,913

 

 

 

-

 

 

 

485,222

 

 

 

18,792

 

 

 

-

 

 

 

8,143,927

 

Purchases

 

 

6,050,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,050,000

 

Settlements

 

 

(6,831,237

)

 

 

-

 

 

 

(2,767,166

)

 

 

(1,954

)

 

 

(46,536

)

 

 

(9,646,893

)

Ending Balance March 31, 2019

 

$

739,047,841

 

 

$

-

 

 

$

46,406,868

 

 

$

1,426,733

 

 

$

273,506

 

 

$

787,154,948

 

Total amount of gains (losses) for the period

   included in earnings attributable to

   the change in unrealized gains

   (losses) relating to assets or liabilities

   held on March 31, 2019

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(306,591

)

 

$

(306,591

)

 

(1)

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

 

 

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

 

 

 

Fair Value Measurements as of December 31, 2018

 

Description

 

Assets

at Fair Value

 

 

Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds, held in trust

 

$

645,258,873

 

 

$

-

 

 

$

-

 

 

$

645,258,873

 

Mortgage revenue bonds

 

 

86,894,562

 

 

 

-

 

 

 

-

 

 

 

86,894,562

 

PHC Certificates

 

 

48,672,086

 

 

 

-

 

 

 

-

 

 

 

48,672,086

 

Taxable mortgage revenue bonds

   (reported within other assets)

 

 

1,409,895

 

 

 

-

 

 

 

-

 

 

 

1,409,895

 

Derivative instruments (reported within

   other assets)

 

 

626,633

 

 

 

-

 

 

 

-

 

 

 

626,633

 

Total Assets at Fair Value, net

 

$

782,862,049

 

 

$

-

 

 

$

-

 

 

$

782,862,049

 

 

29


 

The following tables summarize the activity related to Level 3 assets and liabilities for the three months ended March 31, 2018:

 

 

 

For the Three Months Ended March 31, 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 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)

 

 

36,314

 

 

 

-

 

 

 

(19,274

)

 

 

-

 

 

 

989,995

 

 

 

1,007,035

 

Included in other

   comprehensive (loss) income

 

 

(21,396,628

)

 

 

(975,067

)

 

 

(456,346

)

 

 

(21,902

)

 

 

-

 

 

 

(22,849,943

)

Purchases

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Settlements

 

 

(11,301,939

)

 

 

-

 

 

 

(226,714

)

 

 

(2,732

)

 

 

92,338

 

 

 

(11,439,047

)

Ending Balance March 31, 2018

 

$

755,959,454

 

 

$

2,027,473

 

 

$

48,939,254

 

 

$

2,397,825

 

 

$

852,702

 

 

$

810,176,708

 

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 March 31, 2018

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

989,995

 

 

$

989,995

 

 

(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.

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

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

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt financing and LOCs

 

$

543,907,669

 

 

$

559,147,356

 

 

$

541,322,765

 

 

$

550,766,809

 

Mortgages payable and other secured financing

 

 

27,373,224

 

 

 

27,448,063

 

 

 

27,454,375

 

 

 

27,552,748

 

 

23. Segments

 

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

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

 

30


 

Mortgage Revenue Bond Investments Segment

The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of MRBs and related property loans which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.  Such MRBs are held as investments and the related property loans, net of loan loss allowance, are reported as such on the Partnership’s condensed consolidated balance sheets.  As of March 31, 2019, the Partnership held 78 MRBs. The Residential Properties financed by MRBs contain a total of 10,789 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.

 

MF Properties Segment

The MF Properties segment consists of multifamily and student housing residential properties held by the Partnership. During the time the Partnership holds an interest in an MF Property, any net rental income generated by the MF Properties in excess of debt service will be available for distribution to the Partnership.  As of March 31, 2019, the segment includes two MF Properties comprised of a total of 859 rental units. Income tax expense for the Greens Hold Co is reported within this segment.

 

Public Housing Capital Fund Trusts Segment

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

 

Other Investments Segment

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

 

The following tables detail certain key financial information for the Partnership’s reportable segments for the three months ended March 31, 2019 and 2018:

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Total revenues

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

10,443,413

 

 

$

12,070,556

 

MF Properties

 

 

1,993,629

 

 

 

2,336,512

 

Public Housing Capital Fund Trusts

 

 

638,146

 

 

 

620,106

 

Other Investments

 

 

4,589,410

 

 

 

1,430,860

 

Total revenues

 

$

17,664,598

 

 

$

16,458,034

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

5,648,568

 

 

$

4,955,695

 

MF Properties

 

 

364,389

 

 

 

417,398

 

Public Housing Capital Fund Trusts

 

 

381,963

 

 

 

(26,016

)

Other Investments

 

 

-

 

 

 

-

 

Total interest expense

 

$

6,394,920

 

 

$

5,347,077

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

-

 

 

$

-

 

MF Properties

 

 

819,158

 

 

 

903,953

 

Public Housing Capital Fund Trusts

 

 

-

 

 

 

-

 

Other Investments

 

 

-

 

 

 

-

 

Total depreciation expense

 

$

819,158

 

 

$

903,953

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

2,043,354

 

 

$

4,299,595

 

MF Properties

 

 

(437,134

)

 

 

(362,730

)

Public Housing Capital Fund Trusts

 

 

256,183

 

 

 

646,122

 

Other Investments

 

 

4,589,410

 

 

 

1,421,317

 

Net income

 

$

6,451,813

 

 

$

6,004,304

 

 

31


 

The following table details total assets for the Partnership’s reportable segments as of March 31, 2019 and December 31, 2018:

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Total assets

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

876,784,459

 

 

$

864,311,647

 

MF Properties

 

 

71,770,308

 

 

 

71,120,280

 

Public Housing Capital Fund Trusts

 

 

46,749,321

 

 

 

48,942,334

 

Other Investments

 

 

84,778,149

 

 

 

85,048,514

 

Consolidation/eliminations

 

 

(86,884,058

)

 

 

(86,709,529

)

Total assets

 

$

993,198,179

 

 

$

982,713,246

 

 

24. Subsequent Events

In April 2019, the Courtyard Series B MRB was redeemed at a price equal to the Partnership’s carrying value plus accrued interest.

In April 2019, the Partnership executed an $9.0 million equity investment commitment to the Vantage at Conroe multifamily property. The Partnership made an equity contribution of approximately $4.1 million at execution.

In April 2019, the Partnership extended the maturity date of the variable rate TOB Trusts to April 2020.

 

32


 

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

In this Management’s Discussion and Analysis, all references to “we,” “us,” and the “Partnership” refer to America First Multifamily Investors, L.P., its consolidated subsidiaries, and consolidated VIEs as of March 31, 2019. 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, 2018.  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 (collectively “Residential Properties”), and commercial properties in their market areas. We expect and believe the interest received on these bonds is excludable from gross income for federal income tax purposes. We may also invest in other types of securities and investments that may or may not be secured by real estate, to the extent allowed by the Partnership’s Amended and Restated LP Agreement.

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

As of March 31, 2019, we have four reportable segments: (1) Mortgage Revenue Bond Investments, (2) Public Housing Capital Fund Trusts, (3) MF Properties, and (4) Other Investments. The Partnership separately reports its consolidation and elimination information because it does not allocate certain items to the segments.  See Notes 2 and 23 to the Partnership’s condensed consolidated financial statements for additional details.

Recent Investment Activity

The following table presents information regarding the investment activity of the Partnership for the three months ended March 31, 2019 and 2018:

 

Investment Activity

 

#

 

Amount

(in 000's)

 

 

Retired Debt

or Note

(in 000's)

 

 

Tier 2 income

distributable to the

General Partner

(in 000's) (1)

 

 

Notes to the

Partnership's

condensed

consolidated financial

statements

For the Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

2

 

$

6,050

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond redemptions

 

1

 

 

5,574

 

 

N/A

 

 

N/A

 

 

6

Investments in unconsolidated entities

 

3

 

 

6,594

 

 

N/A

 

 

N/A

 

 

9

Property loan redemptions

 

1

 

 

8,368

 

 

N/A

 

 

$

753

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond redemptions

 

3

 

$

10,447

 

 

$

7,345

 

 

N/A

 

 

6, 15

Investments in unconsolidated entities

 

3

 

 

12,323

 

 

N/A

 

 

N/A

 

 

9

 

(1)

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

33


 

Recent Financing Activity

The following table presents information regarding the debt financing, derivatives, Series A Preferred Units and partners’ capital activities of the Partnership for the three months ended March 31, 2019 and 2018, exclusive of retired debt amounts listed in the investment activity table above: 

 

Financing, Derivative and Capital Activity

 

#

 

Amount

(in 000's)

 

 

Secured

 

Maximum

SIFMA Cap

Rate (1)

 

Notes to the

Partnership's

condensed

consolidated financial

statements

For the Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from new Term A/B Financings with

   Deutsche Bank ("DB")

 

2

 

$

5,264

 

 

Yes

 

N/A

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds on issuance of BUCs, net of issuance costs

 

1

 

$

192

 

 

N/A

 

N/A

 

N/A

 

(1)

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

 

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

$ Change

 

 

% Change

 

Mortgage Revenue Bond Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

10,443

 

 

$

12,071

 

 

$

(1,628

)

 

 

-13.5

%

Interest expense

 

 

5,649

 

 

 

4,956

 

 

 

693

 

 

 

14.0

%

Segment net income

 

 

2,043

 

 

 

4,300

 

 

 

(2,257

)

 

 

-52.5

%

 

The following table summarizes the segment’s net interest income, average balances, and related yields earned on interest-earning assets and incurred on interest-bearing liabilities, as well as other income included in total revenues. The net of interest income from interest-earning assets and interest expense for interest-bearing liabilities is the segment’s net interest income. The average balances are based primarily on monthly averages during the respective periods. All amounts are in thousands.

 

 

34


 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

 

Average

Balance

 

 

Interest

Income/

Expense

 

 

Average

Rates

Earned/

Paid

 

 

Average

Balance

 

 

Interest

Income/

Expense

 

 

Average

Rates

Earned/

Paid

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds

 

$

671,860

 

 

$

10,213

 

 

 

6.1

%

 

$

711,619

 

 

$

11,722

 

(1)

 

6.6

%

Property loans

 

 

7,593

 

 

 

141

 

 

 

7.4

%

 

 

13,739

 

 

 

141

 

 

 

4.1

%

Other investments

 

 

1,783

 

 

 

47

 

 

 

10.5

%

 

 

2,768

 

 

 

58

 

 

 

8.4

%

Total interest-earning assets

 

$

681,236

 

 

$

10,401

 

 

 

6.1

%

 

$

728,126

 

 

$

11,921

 

 

 

6.5

%

Early MRB redemption income

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

Non-investment income

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

150

 

 

 

 

 

Total revenues

 

 

 

 

 

$

10,443

 

 

 

 

 

 

 

 

 

 

$

12,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured & secured lines of

   credit

 

$

35,659

 

 

$

487

 

 

 

5.5

%

 

$

50,000

 

 

$

613

 

 

 

4.9

%

Fixed TEBS financing

 

 

220,909

 

 

 

2,327

 

 

 

4.2

%

 

N/A

 

 

N/A

 

 

N/A

 

Variable TEBS financing

 

 

153,931

 

 

 

1,438

 

 

 

3.7

%

 

 

195,631

 

 

 

1,591

 

 

 

3.3

%

Fixed Term A/B & TOB

   financing

 

 

98,588

 

 

 

1,090

 

 

 

4.4

%

 

 

326,594

 

 

 

3,349

 

 

 

4.1

%

Derivative fair value

   adjustments

 

N/A

 

 

 

307

 

 

N/A

 

 

N/A

 

 

 

(597

)

 

N/A

 

Total interest-bearing liabilities

 

$

509,087

 

 

$

5,649

 

 

 

4.4

%

 

$

572,225

 

 

$

4,956

 

 

 

3.5

%

Net interest income

 

 

 

 

 

$

4,752

 

 

 

2.8

%

 

 

 

 

 

$

6,965

 

 

 

3.8

%

 

(1)

Interest income includes approximately $687,000 of additional interest income that is non-recurring for the three months ended March 31, 2018.

 

The following table summarizes the changes in interest income and interest expense between the first quarters of 2019 and 2018 and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, or 2) changes in the interest rates of the assets and liabilities. All amounts are in thousands.

 

 

 

2019 vs. 2018

 

 

 

Total

Change

 

 

Volume

$ Change

 

 

Rate

$ Change

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bonds

 

$

(1,509

)

 

$

(655

)

(1)

$

(854

)

Property loans

 

 

-

 

 

 

(63

)

 

 

63

 

Other investments

 

 

(11

)

 

 

(21

)

 

 

10

 

Total interest-earning assets

 

$

(1,520

)

 

$

(739

)

 

$

(781

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured & secured lines of credit

 

$

(126

)

 

$

(176

)

 

$

50

 

Fixed TEBS financing

 

 

2,327

 

 

 

2,327

 

(2)

 

-

 

Variable TEBS financing

 

 

(153

)

 

 

(339

)

 

 

186

 

Fixed Term A/B & TOB financing

 

 

(2,259

)

 

 

(2,338

)

(2)

 

79

 

Derivative fair value adjustments

 

 

904

 

 

N/A

 

 

 

904

 

Total interest-bearing liabilities

 

$

693

 

 

$

(526

)

 

$

1,219

 

Net interest income

 

$

(2,213

)

 

$

(213

)

 

$

(2,000

)

(1)

The decrease in volume is due primarily to the redemption of the Vantage at Judson Series B MRB in December 2018 and the scheduled redemption of various subordinate bonds during 2018.

(2)

The fixed-rate M45 TEBS Financing closed in August 2018 through the securitization of 25 MRBs. Of the 25 MRBs included in the financing, 24 MRBs were in Term A/B Trusts that were collapsed prior to the closing of the M45 TEBS Financing.  

 

The decrease in total revenues and increase in total interest expense for the three months ended March 31, 2019 as compared to the same period in 2018 was due to the rate and volume changes noted in the tables above. The net increase in interest expense is predominantly due to the change in the Partnership’s derivative fair value adjustments. Such adjustments are based on anticipated movements of market interest rates in future periods and do not materially impact the Partnership’s cash flows in the current period.

 

35


 

The decrease in segment net income for the three months ended March 31, 2019 as compared to the same period in 2018 was due to the decrease in total revenues and increase in interest expense detailed in the tables above.  

 

Public Housing Capital Fund Trusts Segment

 

The PHC Certificates within this segment consist of custodial receipts evidencing loans made to public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.

 

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

$ Change

 

 

% Change

 

Public Housing Capital Fund Trusts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

638

 

 

$

620

 

 

$

18

 

 

 

2.9

%

Interest expense

 

 

382

 

 

 

(26

)

 

 

408

 

 

 

1569.2

%

Segment net income

 

 

256

 

 

 

646

 

 

 

(390

)

 

 

-60.4

%

 

Total revenues were consistent for the three months ended March 31, 2019 as compared to the same period in 2018.

 

The increase in interest expense for the three months ended March 31, 2019 as compared to the same period in 2018 was due primarily to fair value adjustments for interest rate swaps that increased interest expense by approximately $393,000.

 

The decrease in segment net income for the three months ended March 31, 2019 as compared to the same period in 2018 was due to the revenue and interest expense changes noted above.

 

MF Properties Segment

 

The Partnership’s strategy has been to acquire ownership positions in MF Properties while assessing the viability of restructuring the property ownership through a sale of the MF Properties. As of March 31, 2019 and 2018, the Partnership and its consolidated subsidiaries owned two and three MF Properties, respectively, which contain a total of 859 and 1,012 rental units, respectively.

 

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

$ Change

 

 

% Change

 

MF Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,994

 

 

$

2,337

 

 

$

(343

)

 

 

-14.7

%

Interest expense

 

 

364

 

 

 

417

 

 

 

(53

)

 

 

-12.7

%

Segment net income

 

 

(437

)

 

 

(363

)

 

 

(74

)

 

 

-20.4

%

 

The decrease in total revenues for the three months ended March 31, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $393,000 from the sale of the Jade Park MF Property in September 2018.

 

The decrease in interest expense for the three months ended March 31, 2019 as compared to the same period in 2018 was due primarily to a decrease in the average principal outstanding of approximately $8.1 million, which reduced interest expense by approximately $89,000. This resulted primarily from the repayment of the Jade Park mortgage payable upon the sale of the property in September 2018.

 

The decrease in segment net income for the three months ended March 31, 2019 as compared to the same period in 2018 was due primarily to the changes in revenues and interest expense described above. In addition, there were decreases in real estate operating expenses of approximately $189,000 and depreciation expense of approximately $114,000 due to the Jade Park MF Property sale in September 2018.

36


 

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 issues property loans due from other multifamily projects.

 

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

$ Change

 

 

% Change

 

Other Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

4,589

 

 

$

1,431

 

 

$

3,158

 

 

 

220.7

%

Segment net income

 

 

4,589

 

 

 

1,421

 

 

 

3,168

 

 

 

222.9

%

 

The increase in total revenues and segment net income for the three months ended March 31, 2019 as compared to the same period in 2018 was due to approximately $3.0 million of contingent interest income recognized upon redemption of the Vantage at Brooks, LLC property loan in January 2019. No such transaction occurred during the three months ended March 31, 2018.

 

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

 

The following tables outline information regarding the Residential Properties for which we hold MRBs as investments. The tables also contain information about the MF Properties. The narrative discussion that follows provides a brief operating analysis of each category for the three months ended March 31, 2019 and 2018.   

37


 

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) as of March 31, 2019.  Debt service on the Partnership’s bonds for the non-consolidated stabilized properties was current as of March 31, 2019.  The amounts presented below were obtained from records provided by the property owners and their related property management service providers. 

 

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

 

of Units as of

March 31,

 

 

Physical Occupancy (1)

as of March 31,

 

 

Economic Occupancy (2)

for the Three Months Ended March 31,

 

Property Name

 

State

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Non-Consolidated Properties-Stabilized (3)

 

Courtyard Apartments

 

CA

 

 

108

 

 

 

98

%

 

 

99

%

 

 

97

%

 

 

102

%

Glenview Apartments

 

CA

 

 

88

 

 

 

94

%

 

 

97

%

 

 

95

%

 

 

96

%

Harden Ranch

 

CA

 

 

100

 

 

 

97

%

 

 

97

%

 

 

95

%

 

 

97

%

Harmony Court Bakersfield

 

CA

 

 

96

 

 

 

98

%

 

 

97

%

 

 

95

%

 

 

95

%

Harmony Terrace

 

CA

 

 

136

 

 

 

99

%

 

 

98

%

 

 

127

%

 

 

127

%

Las Palmas

 

CA

 

 

81

 

 

 

100

%

 

 

100

%

 

 

99

%

 

 

101

%

Montclair Apartments

 

CA

 

 

80

 

 

 

100

%

 

 

100

%

 

 

103

%

 

 

97

%

Montecito at Williams Ranch

 

CA

 

 

132

 

 

 

95

%

 

 

95

%

 

 

100

%

 

 

91

%

San Vicente

 

CA

 

 

50

 

 

 

98

%

 

 

98

%

 

 

99

%

 

 

95

%

Santa Fe Apartments

 

CA

 

 

89

 

 

 

100

%

 

 

100

%

 

 

96

%

 

 

100

%

Seasons at Simi Valley

 

CA

 

 

69

 

 

 

100

%

 

 

100

%

 

 

118

%

 

 

124

%

Seasons Lakewood

 

CA

 

 

85

 

 

 

100

%

 

 

99

%

 

 

102

%

 

 

106

%

Seasons San Juan Capistrano

 

CA

 

 

112

 

 

 

98

%

 

 

97

%

 

 

103

%

 

 

100

%

Summerhill

 

CA

 

 

128

 

 

 

96

%

 

 

97

%

 

 

98

%

 

 

94

%

Sycamore Walk

 

CA

 

 

112

 

 

 

98

%

 

 

99

%

 

 

98

%

 

 

98

%

The Village at Madera

 

CA

 

 

75

 

 

 

100

%

 

 

97

%

 

 

97

%

 

 

97

%

Tyler Park Townhomes

 

CA

 

 

88

 

 

 

100

%

 

 

95

%

 

 

98

%

 

 

96

%

Vineyard Gardens

 

CA

 

 

62

 

 

 

100

%

 

 

100

%

 

 

100

%

 

 

104

%

Westside Village Market

 

CA

 

 

81

 

 

 

100

%

 

 

100

%

 

 

100

%

 

 

99

%

Lake Forest Apartments (5)

 

FL

 

n/a

 

 

n/a

 

 

 

93

%

 

n/a

 

 

 

91

%

Brookstone Apartments

 

IL

 

 

168

 

 

 

97

%

 

 

98

%

 

 

100

%

 

 

93

%

Copper Gate

 

IN

 

 

128

 

 

 

99

%

 

 

98

%

 

 

100

%

 

 

95

%

Renaissance Gateway

 

LA

 

 

208

 

 

 

98

%

 

 

95

%

 

 

72

%

 

 

102

%

Live 929 Apartments

 

MD

 

 

572

 

 

 

86

%

 

 

91

%

 

 

86

%

 

 

87

%

Woodlynn Village

 

MN

 

 

59

 

 

 

98

%

 

 

98

%

 

 

97

%

 

 

99

%

Greens of Pine Glen Apartments

 

NC

 

 

168

 

 

 

98

%

 

 

99

%

 

 

91

%

 

 

93

%

Silver Moon

 

NM

 

 

151

 

 

 

90

%

 

 

88

%

 

 

89

%

 

 

83

%

Village at Avalon (6)

 

NM

 

 

240

 

 

 

96

%

 

n/a

 

 

 

94

%

 

n/a

 

Ohio Properties (4)

 

OH

 

 

362

 

 

 

98

%

 

 

98

%

 

 

94

%

 

 

95

%

Bridle Ridge Apartments

 

SC

 

 

152

 

 

 

99

%

 

 

97

%

 

 

90

%

 

 

97

%

Columbia Gardens

 

SC

 

 

188

 

 

 

96

%

 

 

97

%

 

 

93

%

 

 

96

%

Companion at Thornhill Apartments

 

SC

 

 

179

 

 

 

99

%

 

 

99

%

 

 

92

%

 

 

87

%

Cross Creek Apartments

 

SC

 

 

144

 

 

 

95

%

 

 

99

%

 

 

88

%

 

 

93

%

Palms at Premier Park

 

SC

 

 

240

 

 

 

97

%

 

 

94

%

 

 

89

%

 

 

91

%

Village at River's Edge

 

SC

 

 

124

 

 

 

99

%

 

 

99

%

 

 

98

%

 

 

99

%

Willow Run

 

SC

 

 

200

 

 

 

92

%

 

 

93

%

 

 

90

%

 

 

88

%

Arbors at Hickory Ridge

 

TN

 

 

348

 

 

 

91

%

 

 

93

%

 

 

85

%

 

 

84

%

Avistar at the Crest

 

TX

 

 

200

 

 

 

91

%

 

 

92

%

 

 

70

%

 

 

73

%

Avistar at the Oaks

 

TX

 

 

156

 

 

 

95

%

 

 

90

%

 

 

87

%

 

 

82

%

Avistar at the Parkway

 

TX

 

 

236

 

 

 

86

%

 

 

90

%

 

 

77

%

 

 

78

%

Avistar in 09

 

TX

 

 

133

 

 

 

95

%

 

 

97

%

 

 

88

%

 

 

88

%

Avistar on the Boulevard

 

TX

 

 

344

 

 

 

91

%

 

 

92

%

 

 

83

%

 

 

79

%

Avistar on the Hills

 

TX

 

 

129

 

 

 

95

%

 

 

97

%

 

 

83

%

 

 

88

%

Bella Vista Apartments (5)

 

TX

 

n/a

 

 

n/a

 

 

 

90

%

 

n/a

 

 

 

87

%

Bruton Apartments

 

TX

 

 

264

 

 

 

96

%

 

 

95

%

 

 

90

%

 

 

89

%

Concord at Gulfgate

 

TX

 

 

288

 

 

 

94

%

 

 

97

%

 

 

80

%

 

 

87

%

Concord at Little York

 

TX

 

 

276

 

 

 

92

%

 

 

98

%

 

 

87

%

 

 

91

%

Concord at Williamcrest

 

TX

 

 

288

 

 

 

99

%

 

 

99

%

 

 

92

%

 

 

93

%

Crossing at 1415

 

TX

 

 

112

 

 

 

91

%

 

 

93

%

 

 

80

%

 

 

83

%

Decatur Angle

 

TX

 

 

302

 

 

 

92

%

 

 

91

%

 

 

81

%

 

 

83

%

Esperanza at Palo Alto (6)

 

TX

 

 

322

 

 

 

91

%

 

n/a

 

 

 

82

%

 

n/a

 

Heights at 515

 

TX

 

 

96

 

 

 

99

%

 

 

96

%

 

 

90

%

 

 

89

%

Heritage Square Apartments

 

TX

 

 

204

 

 

 

83

%

 

 

90

%

 

 

68

%

 

 

78

%

Oaks at Georgetown

 

TX

 

 

192

 

 

 

95

%

 

 

96

%

 

 

92

%

 

 

90

%

Runnymede Apartments

 

TX

 

 

252

 

 

 

99

%

 

 

99

%

 

 

97

%

 

 

97

%

South Park Ranch Apartments

 

TX

 

 

192

 

 

 

98

%

 

 

99

%

 

 

94

%

 

 

95

%

Vantage at Judson (5)

 

TX

 

n/a

 

 

n/a

 

 

 

96

%

 

n/a

 

 

 

86

%

15 West Apartments

 

WA

 

 

120

 

 

 

98

%

 

 

98

%

 

 

96

%

 

 

96

%

 

 

 

 

 

9,509

 

 

 

95

%

 

 

95

%

 

 

90

%

 

 

91

%

 

(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 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 measurement 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.

38


 

(3)

A property is considered stabilized once it reaches 90% physical 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)

We hold approximately $17.5 million of MRBs secured by the Ohio Properties. The Ohio Properties are: Crescent Village, located in Cincinnati, Ohio, Willow Bend, located in Columbus (Hilliard), Ohio and Postwoods, located in Reynoldsburg, Ohio.

(5)

The MRB associated with the property was redeemed during 2018, so the number of units and occupancy are not applicable as of and for the three months ended March 31, 2019.

(6)

The property relates to a forward bond purchase commitment that was executed after March 31, 2018. The property was considered stabilized when the MRB was acquired.

 

Physical and economic occupancy as of and for the three months ended March 31, 2019 were consistent with the same period in 2018.

 

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) as of March 31, 2019. Debt service on the Partnership’s MRBs for the non-consolidated non-stabilized properties was current as of March 31, 2019.  The amounts presented below were obtained from records provided by the property owners and their related property management service providers. 

 

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

 

of Units as of

March 31,

 

 

Physical Occupancy (1)

as of March 31,

 

 

Economic Occupancy (2)

for the Three Months Ended

March 31,

 

Property Name

 

State

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Non-Consolidated Properties-Non

   Stabilized (3)

 

Solano Vista (4)

 

CA

 

 

96

 

 

 

98

%

 

n/a

 

 

 

106

%

 

n/a

 

Gateway Village (4)

 

NC

 

 

64

 

 

 

98

%

 

n/a

 

 

 

99

%

 

n/a

 

Lynnhaven Apartments (4)

 

NC

 

 

75

 

 

 

99

%

 

n/a

 

 

 

98

%

 

n/a

 

Rosewood Townhomes

 

SC

 

 

100

 

 

 

92

%

 

 

90

%

 

 

75

%

 

 

87

%

South Pointe Apartments

 

SC

 

 

256

 

 

 

83

%

 

 

91

%

 

 

69

%

 

 

89

%

Avistar at Copperfield

 

TX

 

 

192

 

 

 

93

%

 

 

88

%

 

 

87

%

 

 

79

%

Avistar at Wilcrest

 

TX

 

 

88

 

 

 

95

%

 

 

90

%

 

 

83

%

 

 

73

%

Avistar at Wood Hollow

 

TX

 

 

409

 

 

 

98

%

 

 

77

%

 

 

91

%

 

 

68

%

 

 

 

 

 

1,280

 

 

 

94

%

 

 

85

%

 

 

85

%

 

 

77

%

 

(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 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 measurement 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. A property is considered stabilized once it reaches 90% physical 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 acquired after March 31, 2018.

 

Physical and economic occupancy for the non-stabilized Residential Properties increased for the three months ended March 31, 2019 as compared to the same period in 2018 due to increased occupancy at Avistar at Copperfield, Avistar at Wilcrest, and Avistar at Wood Hollow, which are nearing the completion of rehabilitation projects begun in 2017 and 2018. The increase was also due to the addition of Solano Vista, Gateway Village and Lynnhaven Apartments which have higher occupancy results as rehabilitation projects have yet to begin. The increases in overall physical and economic occupancy were somewhat offset by temporary declines in occupancy at Rosewood Townhomes and South Pointe Apartments as the properties go through rehabilitation.  

39


 

MF Properties

As of March 31, 2019, we owned two MF Properties. We report the assets, liabilities, and results of operations of these properties on a consolidated basis.  For the three months ended March 31, 2019, both MF Properties met the stabilization criteria (see footnote 3 below the table). The MF properties are encumbered by mortgage loans with an aggregate principal balance of $27.4 million as of March 31, 2019.  Debt service on our mortgage payables was current as of March 31, 2019.

 

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

 

of Units as of

March 31,

 

 

Physical Occupancy (1)

as of March 31,

 

 

Economic Occupancy (2)

for the Three Months Ended

March 31,

 

Property Name

 

State

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

MF Properties-Stabilized (3)

 

Suites on Paseo

 

CA

 

 

384

 

 

 

92

%

 

 

90

%

 

 

87

%

 

 

90

%

Jade Park (4)

 

FL

 

n/a

 

 

n/a

 

 

 

93

%

 

n/a

 

 

 

91

%

The 50/50

 

NE

 

 

475

 

 

 

98

%

 

 

96

%

 

 

90

%

 

 

82

%

 

 

 

 

 

859

 

 

 

95

%

 

 

93

%

 

 

88

%

 

 

87

%

 

(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 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 measurement 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% physical 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 and The 50/50 MF Property are student housing residential properties.

(4)

The property was sold in September 2018, so unit and occupancy amounts are not applicable as of and for the three months ended March 31, 2019.

 

The physical and economic occupancy increased slightly as of and for the three months ended March 31, 2019 as compared to the same period in 2018. The increases are due primarily to improving operations at The 50/50 MF Property as a result of a strong fall of 2018 lease-up.  

Results of Operations

 

The tables and following discussions of the Partnership’s change in operating results for the three months ended March 31, 2019 and 2018 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, 2018.

 

The table below compares revenue and other income for the Partnership for the periods presented (amounts in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

$ Change

 

 

% Change

 

Revenues and Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

1,994

 

 

$

2,337

 

 

$

(343

)

 

 

-14.7

%

Investment income

 

 

12,408

 

 

 

13,378

 

 

 

(970

)

 

 

-7.3

%

Contingent interest income

 

 

3,012

 

 

 

-

 

 

 

3,012

 

 

 

100.0

%

Other interest income

 

 

222

 

 

 

743

 

 

 

(521

)

 

 

-70.1

%

Other income

 

 

29

 

 

 

-

 

 

 

29

 

 

 

100.0

%

Total Revenues and Other

   Income

 

$

17,665

 

 

$

16,458

 

 

$

1,207

 

 

 

7.3

%

 

40


 

Discussion of the Total Revenues and Other Income for the Three Months Ended March 31, 2019 and 2018

 

Property revenues.  The decrease in property revenues for the three months ended March 31, 2019 as compared to the same period in 2018 is due primarily to a decrease of approximately $393,000 from the sale of the Jade Park MF Property in September 2018.

Investment income.    The decrease in investment income for the three months ended March 31, 2019 as compared to the same period in 2018 was due to the following factors:

 

Decreases of approximately $739,000 and $781,000 in investment income related to decreasing MRB volume and interest rates, respectively. See discussion of volume and interest rate changes in the Mortgage Revenue Bond Investments segment previously included in Item 2; and

 

An increase of approximately $520,000 in investment interest income related to additional investments in unconsolidated entities during 2019 and 2018. We made investments in unconsolidated entities totaling approximately $6.6 million and $41.5 million in 2019 and 2018, respectively.

 

Contingent interest income. The contingent interest income received for the three months ended March 31, 2019 was realized upon redemption of the Vantage at Brooks, LLC property loan in January 2019. There was no contingent interest income for the three months ended March 31, 2018.

 

Other interest income. Other interest income is comprised primarily of interest income on property loans held by us. The decrease in other interest income for the three months ended March 31, 2019 as compared to the same period in 2018 was primarily due to a decrease of approximately $374,000 related to redemptions of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively. The remaining decrease was due to lower interest recognized on cash balances during the three months ended March 31, 2019.

 

Other income. Other income recognized for the three months ended March 31, 2019 consisted of residual income received during the quarter related to the previous redemption of the Lake Forest MRB. There was no other income reported for the three months ended March 31, 2018.

The table below compares expenses for the Partnership for the periods presented (amounts in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

$ Change

 

 

% Change

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating

   (exclusive of items shown

   below)

 

$

1,177

 

 

$

1,395

 

 

$

(218

)

 

 

-15.6

%

Depreciation and amortization

 

 

821

 

 

 

906

 

 

 

(85

)

 

 

-9.4

%

Interest expense

 

 

6,395

 

 

 

5,348

 

 

 

1,047

 

 

 

19.6

%

General and administrative

 

 

2,778

 

 

 

2,812

 

 

 

(34

)

 

 

-1.2

%

Total Expenses

 

$

11,171

 

 

$

10,461

 

 

$

710

 

 

 

6.8

%

 

Discussion of the Total Expenses for the Three Months Ended March 31, 2019 and 2018

Real estate operating expenses.  Real estate operating expenses are related to 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 March 31, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $189,000 related to the sale of the Jade Park MF Property in September 2018.

 

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 March 31, 2019 as compared to the same period in 2018 was due primarily to a decrease in depreciation expense of approximately $114,000 related to the sale of the Jade Park MF Property in September 2018.

 

41


 

Interest expense. The increase in interest expense for the three months ended March 31, 2019 as compared to the same period in 2018 was due to the following factors:

 

An increase of approximately $399,000 due to an increase in effective interest rates on variable-rate financings;

 

A decrease of approximately $648,000 due to lower average principal outstanding; and

 

An increase of approximately $1.3 million related to fair value adjustments to interest rate derivatives, net of cash paid.

 

General and administrative expenses.  General and administrative expenses for the three months ended March 31, 2019 were consistent with the same period in 2018. The Partnership had a decrease of approximately $162,000 in professional fees, which was offset by an increase of approximately $168,000 in salaries, benefits and RUA expense.

Discussion of the Income Tax Expense for the Three Months Ended March 31, 2019 and 2018

 

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 Greens Hold Co generated minimal taxable income for the three months ended March 31, 2019 and 2018.

 

Liquidity and Capital Resources

Our short-term liquidity requirements over the next 12 months will be primarily for distribution payments, operational expenses, debt servicing (principal and/or interest payments) and maturities of debt financings and mortgages payable. We expect to meet these liquidity requirements primarily using cash on hand and operating cash flows from our investments and MF Properties. We expect to refinance our debt financings and mortgages payable maturing within the next 12 months with the same or similar lenders prior to maturity.

Our long-term liquidity requirements will be primarily for maturities of debt financings and mortgages payable and additional investments in MRBs and unconsolidated entities. We expect to meet these liquidity requirements primarily through refinancing of maturing debt financings with the same or similar lenders, principal and interest proceeds from investments in MRBs and PHCs, proceeds from asset sales and redemptions, and the issuance of additional BUCs and Series A Preferred Units.  

Sources of Liquidity

The Partnership’s principal sources of liquidity consist of:

 

Operating cash flows from investments in MRBs, PHCs, property loans and investments in unconsolidated entities;

 

Net operating cash flows from MF Properties;

 

Unsecured lines of credit;

 

Issuances of BUCs and Series A Preferred Units; and

 

Proceeds from the sale of assets.

Operating Cash Flows from Investments

Cash flows from operations are primarily comprised of regular interest payments received on our MRBs, PHC Certificates and property loans that provide consistent cash receipts throughout the year.  The Partnership also receives distributions from investments in unconsolidated entities if, and when, cash is available for distribution to the underlying investees. Receipt of cash from our investments in MRBs, property loans and investments in unconsolidated entities is dependent upon the generation of net cash flows at multifamily properties that underlie our investments. These underlying properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses. Receipt of cash from our PHC Certificates is payable from annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program. There is risk that annual appropriations will be reduced, delayed or eliminated, which may make the PHC Certificates unable to pay principal and interest.

42


 

Net Operating Cash Flows from MF Properties

Cash flows generated by MF Properties, net of operating and mortgage service payments, are considered to be unrestricted for use by the Partnership. The MF properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses.  

Unsecured Lines of Credit

We maintain two unsecured lines of credit with a financial institution. Our unsecured 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 repayments of the 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 quarter ended March 31, 2019.  In addition, we have fulfilled this requirement for the second quarter of 2019. We had $10.0 million available on the operating line of credit as of March 31, 2019.

Our unsecured non-operating line of credit allows for the advance of up to $50.0 million and may be utilized for the purchase of multifamily real estate and taxable or tax-exempt MRBs. Advances on the unsecured non-operating line of credit are due on the 270th day following the advance date, but may be extended for up to an additional 270 days by making certain payments. The unsecured non-operating line of credit contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed a specified percentage of the market value of the Partnership’s assets, as defined in the Credit Agreement. The Partnership was in compliance with all covenants as of March 31, 2019. We anticipate paying off the balances on our unsecured non-operating line of credit by entering into fixed-rate debt financing arrangements, to be secured with the previously acquired MRBs or multifamily real estate. We had approximately $14.3 million available on the unsecured non-operating line of credit as of March 31, 2019.

Issuances of BUCs and Series A Preferred Units

As of March 31, 2019, we had an effective Registration Statement on file with the SEC to sell up to $225.0 million of BUCs. From time to time, we may issue BUCs under this Registration Statement to raise funds to invest in additional MRBs and unconsolidated entities, fund the repayment of debt financing maturities or for other general purposes. The Partnership had approximately $222.0 million of BUCs available to be issued under the Registration Statement as of March 31, 2019.  This Registration Statement expires in November 2019, and the Partnership expects to file a new shelf registration statement with the SEC prior to the expiration of the current Registration Statement, which will allow the Partnership to issue BUCs thereunder for an additional three-year period.

The Partnership is authorized to issue Series A Preferred Units under the Amended and Restated LP Agreement. As of March 31, 2019, we had issued 9,450,000 Series A Preferred Units for gross proceeds of approximately $94.5 million to five financial institutions. The Series A Preferred Units were issued in a private placement that was terminated as of October 25, 2017.  The Partnership did not issue any Series A Preferred Units during the three months ended March 31, 2019 or the year ended December 31, 2018. The Partnership may conduct additional private offerings of Series A Preferred Units in the future to supplement its cash flow needs.

Proceeds from the Sale of Assets

We may, from time to time, sell our investments in MRBs, PHCs, investments in unconsolidated entities and MF Properties on a basis consistent with the Partnership’s strategic plans. Our ability to sell such investments on favorable terms is dependent upon a number of factors including (but not limited to) the availability of credit to potential buyers to purchase these investments at prices we consider acceptable. In addition, potential adverse changes to general market and economic conditions could negatively impact our future ability to sell our investments.

Uses of Liquidity

Our principal uses of liquidity consist of:

 

General, administrative and operating expenses;

 

Distributions paid to holders of Series A Preferred Units and BUCs;

 

Investments in additional MRBs, tax-exempt investments, other investments and unconsolidated entities;

 

Debt service on debt financing and mortgages payable; and

 

Other contractual obligations of the Partnership.

43


 

General, Administrative and Operating Expenses

We use cash for general and administrative expenses of the Partnership’s operations.  For additional details, see Item 1A, “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018, and the section captioned “Cash Flows from Operating Activities” in the Partnership’s condensed consolidated statements of cash flows set forth in Item 1 of this Quarterly Report on Form 10-Q.

Distributions Paid to Holders of Series A Preferred Units and BUCs

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

We have paid total annual distributions of $0.50 per BUC, payable quarterly at $0.125 per BUC, during the year ended December 31, 2018 and for the three months ended March 31, 2019. Distributions to the BUC holders may increase or decrease at the determination of the General Partner based on its determination of cash available for distribution and other factors deemed relevant by the General Partner.

Investments in Additional MRBs, Tax Exempt Investments, Other Investments and Unconsolidated Entities

Our overall strategy is to continue to increase our investment in multifamily projects through either the acquisition of MRBs, tax exempt investments, other investments or equity investments in both existing and new markets. We evaluate investment opportunities based on (but not limited to) our market outlook, including general economic conditions, development opportunities and long-term growth potential. Our ability to make future investments is dependent upon identifying suitable acquisition and development opportunities, access to long-term liquidity sources, and the availability of investment capital.

Debt Service on Debt Financing and Mortgages Payable

Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of MRBs and PHC Certificates. The financing arrangements generally involve the securitization of MRBs and PHC Certificates into trusts whereby we retain beneficial interests in the trusts that provide certain rights to the underlying investment assets. The senior beneficial interests are sold to unaffiliated parties with the residual interests retained by the Partnership. The senior beneficial interests require periodic interest payments that may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments. The Partnership is required to fund any shortfall in principal and interest payable to the senior beneficial interests. We anticipate that cash flows from the securitized assets will fund normal, recurring principal and interest payments to the senior beneficial interests.

Our mortgages payable and other secured financing arrangements are used to leverage our MF Properties. The mortgages and other secured financings are entered into with financial institutions and are secured by security interests in the MF Properties. The mortgages and other secured financings bear interest that may be fixed or variable, depending on the terms of the arrangement, and include scheduled principal payments. We anticipate that cash flows from the secured MF properties will be sufficient to pay all normal, recurring principal and interest payments.

We anticipate refinancing all debt financing and mortgage payable arrangements maturing in the next twelve months with similar arrangements of terms greater than one year. We typically refinance arrangements with existing lenders, assuming the terms are acceptable to the Partnership. We may also explore other financing options with Freddie Mac, Fannie Mae, other investment banks or other lending institutions.  

Other Contractual Obligations

We are subject to various guarantee obligations in the normal course of business, and, in most cases, do not anticipate these obligations to result in significant cash payments.

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 leverage constraint, established by the Board of Managers (the “Board”) of Burlington, which is the general partner of the Partnership’s general partner. The leverage utilized is dependent upon several factors, including, but not limited to, 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, property loans, taxable MRBs, initial finance costs, and the MF Properties at cost. As of March 31, 2019, our overall leverage ratio was approximately 60%.  

44


 

Cash Flows

 

For the three months ended March 31, 2019, we generated additional cash of $5.7 million, which was the net result of $3.6 million provided by operating activities, $8.3 million provided by investing activities, and $6.1 million used in financing activities.

 

Cash provided by operating activities totaled $3.6 million for the three months ended March 31, 2019, as compared to $2.9 million generated for the three months ended March 31, 2018. The change was due primarily to a decrease in other assets of $723,000 during the three months ended March 31, 2019, as compared to an increase in operating assets of $256,000 for the same period in 2018.

 

Cash provided by investing activities totaled $8.3 million for the three months ended March 31, 2019, as compared to cash used of $821,000 for the three months ended March 31, 2018. The change was predominantly due to an increase in principal payments received on property loans and contingent interest of $11.2 million. The principal payments and contingent interest related entirely to the redemption of the Vantage at Brooks, LLC property loan.

 

Cash used in financing activities totaled $6.1 million for the three months ended March 31, 2019, as compared to cash used of $18.6 million for the three months ended March 31, 2018. The change was predominantly due to proceeds from debt financing (net of principal payments) of $2.3 million for the three months ended March 31, 2019 as compared to principal payments of $8.3 million for the three months ended March 31, 2018.

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.

 

Cash Available for Distribution

 

The Partnership believes that Cash Available for Distribution (“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 RUA compensation expense, to the Partnership’s net income as computed in accordance with GAAP. The Partnership also deducts Tier 2 income (see 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 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.

 

45


 

The following table shows the calculation of CAD (and a reconciliation of the Partnership’s net income as determined in accordance with GAAP to CAD) for the three months ended March 31, 2019 and 2018.  

 

 

 

For the Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Net income

 

$

6,451,813

 

 

$

6,004,304

 

Change in fair value of derivatives and interest rate

   derivative amortization

 

 

306,591

 

 

 

(989,995

)

Depreciation and amortization expense

 

 

820,808

 

 

 

906,315

 

Amortization of deferred financing costs

 

 

361,305

 

 

 

464,772

 

RUA compensation expense

 

 

184,184

 

 

 

206,636

 

Deferred income taxes

 

 

(40,692

)

 

 

34,000

 

Redeemable Series A Preferred Unit distribution and

   accretion

 

 

(717,763

)

 

 

(717,763

)

Tier 2 Income distributable to the General Partner (1)

 

 

(753,025

)

 

 

-

 

Bond purchase premium (discount) amortization

   (accretion), net of cash received

 

 

(38,952

)

 

 

(4,098

)

Total CAD

 

$

6,574,269

 

 

$

5,904,171

 

 

 

 

 

 

 

 

 

 

Weighted average number of BUCs outstanding, basic

 

 

60,426,177

 

 

 

60,124,333

 

Net income per BUC, basic

 

$

0.08

 

 

$

0.09

 

Total CAD per BUC, basic

 

$

0.11

 

 

$

0.10

 

Distributions declared, per BUC

 

$

0.125

 

 

$

0.125

 

 

(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 BUC holders, 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 March 31, 2019, the Partnership’s Tier 2 income consisted of $3.0 million of contingent interest realized on redemption of the Vantage at Brooks, LLC property loan. For the three months ended March 31, 2018, the Partnership did not report any Tier 2 income.

 

There was no non-recurring CAD per BUC earned by the Partnership during the three months ended March 31, 2019 and 2018.

Off Balance Sheet Arrangements

As of March 31, 2019 and December 31, 2018 we held MRBs that are collateralized by Residential Properties and one commercial property.  The Residential Properties and commercial property are owned by entities that are not controlled by us.  We have no equity interest in these entities and do not guarantee any obligations of these entities.  

The Partnership has entered into various commitments and guarantees. For additional discussions related to commitments and guarantees, see Note 18 to the Partnership’s condensed consolidated financial statements.

We do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

We do not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with us or our related parties, other than what is disclosed in Note 21 to the Partnership’s condensed consolidated financial statements.

Contractual Obligations

 

As discussed herein and in our Annual Report on Form 10-K for the year ended December 31, 2018, the debt obligation amounts maturing in 2019 consist of the principal paid on lines of credit, the TEBS Financings with Freddie Mac, various TOB, Term TOB and Term A/B debt financings with DB, and payments on the MF Property mortgages payable and other secured financing.  Our strategic objective is to leverage our MRB portfolio utilizing long-term securitization financings either with Freddie Mac through its TEBS program or with other lenders with trust securitizations similar to the Term A/B Trust program with DB.  This strategy allows us to better match the duration of our assets and liabilities and to better manage the spread between our assets and liabilities.

 

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, 2018, which is incorporated by reference herein, have only changed pursuant to the executed contracts during the three months ended March 31, 2019 as disclosed herein.

46


 

 

Recently Issued Accounting Pronouncements

 

For a discussion of recently issued accounting pronouncements that will be adopted in future periods, 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 our Annual Report on Form 10-K for the year ended December 31, 2018.

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 analysis 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 the 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 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 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 as of March 31, 2019:

 

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

 

$

739,048

 

 

 

3.1

%

-9.1%

 

 

3.4

%

-10.0%

 

$

22,084

 

PHC Certificates

 

 

46,407

 

 

 

4.8

%

-5.7%

 

 

5.3

%

-6.3%

 

 

1,256

 

 

 

Geographic Risk

The properties securing our 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:

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Texas

 

 

43

%

 

 

43

%

California

 

 

17

%

 

 

18

%

South Carolina

 

 

17

%

 

 

17

%

 

After a review of the economic performance of properties located in Texas, California and South Carolina, as compared to general 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

As of March 31, 2019, the total costs of borrowing by investment type were as follows:

 

The unsecured LOCs have variable interest rates ranging between 5.0% and 5.7%;

 

The M24, M31, and M33 TEBS facilities have variable interest rates that range between 2.8% and 3.4%;

 

The M45 TEBS facility has a fixed interest rate of 3.82% through July 31, 2023 and 4.39% thereafter;

47


 

 

The Term TOB Trusts securitized by MRBs have fixed interest rates that range between 4.0% and 4.4%;

 

The Term A/B Trusts securitized by MRBs have fixed interest rates of 4.5%;

 

The TOB Trusts securitized by PHC Certificates have variable interest rates of 3.7%; and

 

The mortgages payable have fixed and variable interest rates that 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 as of March 31, 2019:

 

Purchase Date

 

Notional

Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of March 31, 2019

 

July 2014

 

$

30,152,644

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

-

 

July 2014

 

 

30,152,644

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

-

 

July 2014

 

 

30,152,644

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

-

 

July 2015

 

 

27,280,025

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

12

 

July 2015

 

 

27,280,025

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

12

 

July 2015

 

 

27,280,025

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

12

 

June 2017

 

 

90,457,933

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

47,303

 

June 2017

 

 

81,840,074

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

226,164

 

Sept 2017

 

 

58,878,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

273,506

 

 

(1)

For additional details, see Note 22 to the Partnership's condensed consolidated financial statements.

Interest Rate Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s net interest income assuming a change in interest rates as of March 31, 2019:

 

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

48,081

 

 

$

(94,959

)

 

$

(189,988

)

 

$

(285,099

)

 

$

(380,178

)

TEBS Debt Financings

 

 

156,271

 

 

 

(145,351

)

 

 

(286,397

)

 

 

(427,743

)

 

 

(569,093

)

Other Investment Financings

 

 

67,619

 

 

 

(135,165

)

 

 

(270,234

)

 

 

(405,206

)

 

 

(540,082

)

Total

 

$

271,971

 

 

$

(375,475

)

 

$

(746,619

)

 

$

(1,118,048

)

 

$

(1,489,353

)

 

The interest rate sensitivity table (“Table”) represents the change in interest income from investments, net of interest on debt and settlement payments on interest rate derivatives over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve, a shift in the SIMFA yield curve based on its average historical relationship to the 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 will not occur that will 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 March 31, 2019, 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.

 

48


 

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.

 

 

49


 

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, 2018, which is incorporated by reference herein. There have been no material changes from these previously disclosed risk factors for the three months ended March 31, 2019.

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:

 

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 March 31, 2019 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets on March 31, 2019 and December 31, 2018, (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and 2018, (iv) the Condensed Consolidated Statements of Partners’ Capital for the three months ended March 31, 2019 and 2018, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018, and (vi) Notes to Condensed Consolidated Financial Statements. Such materials are presented with detailed tagging of notes and financial statement schedules.

 

50


 

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: May 3, 2019

 

By:

 

/s/ Chad L. Daffer

 

 

 

 

Chad L. Daffer

 

 

 

 

Chief Executive Officer

 

Date: May 3, 2019

 

By:

 

/s/ Craig S. Allen

 

 

 

 

Craig S. Allen

 

 

 

 

Chief Financial Officer

 

 

51