GHI 10-Q Quarter ended March 31, 2017

☒

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

☐

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

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)

Large accelerated filer

☐

Accelerated filer

☒

Non- accelerated filer

☐

(do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

Item 1

Financial Statements (Unaudited)

2

Condensed Consolidated Balance Sheets

2

Condensed Consolidated Statements of Operations

3

Condensed Consolidated Statements of Comprehensive Income

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

32

Item 3

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4

Controls and Procedures

46

PART II – OTHER INFORMATION

Item 1A

Risk Factors

47

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 6

Exhibits

47

SIGNATURES

48

•

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

•

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

•

the competitive environment in which we operate;

•

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

•

the general level of interest rates;

•

our ability to use borrowings 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 Capital Fund Program (“HUD”);

•

appropriations risk related to 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.

March 31, 2017

December 31, 2016

Unaudited

Assets

Cash and cash equivalents

$

22,778,461

$

20,748,521

Restricted cash

5,911,527

6,757,699

Interest receivable, net

7,273,689

6,983,203

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

731,091,380

590,194,179

Mortgage revenue bonds, at fair value (Note 6)

27,814,516

90,016,872

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

55,851,799

57,158,068

Real estate assets: (Note 8)

Land and improvements

13,626,868

17,354,587

Buildings and improvements

105,088,950

113,089,041

Real estate assets before accumulated depreciation

118,715,818

130,443,628

Accumulated depreciation

(15,101,930

)

(16,217,028

)

Net real estate assets

103,613,888

114,226,600

Investment in unconsolidated entities (Note 9)

29,584,325

19,470,006

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

30,964,833

29,763,334

Other assets (Note 12)

8,647,287

8,795,192

Total Assets

$

1,023,531,705

$

944,113,674

Liabilities

Accounts payable, accrued expenses and other liabilities

$

7,871,698

$

7,255,327

Income taxes payable

2,600,047

-

Distribution payable

8,678,628

8,017,950

Unsecured lines of credit (Note 13)

-

40,000,000

Secured line of credit, net (Note 14)

-

19,816,667

Debt financing, net (Note 15)

598,123,706

495,383,033

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

51,175,060

51,379,512

Derivative swaps, at fair value (Note 17)

1,228,758

1,339,283

Total Liabilities

669,677,897

623,191,772

Commitments and Contingencies (Note 18)

Redeemable Series A preferred units, approximately $57.0 and $40.9 million redemption value,

10.0 million authorized, 5.7 million and 4.1 million issued and outstanding, respectively (Note 19)

56,890,218

40,788,034

Partnersʼ Capital

General Partner (Note 1)

296,318

102,536

Beneficial Unit Certificate holders

296,667,272

280,026,669

Total Partnersʼ Capital

296,963,590

280,129,205

Noncontrolling interest

-

4,663

Total Capital

296,963,590

280,133,868

Total Liabilities and Partnersʼ Capital

$

1,023,531,705

$

944,113,674

For the Three Months Ended March 31,

2017

2016

Revenues:

Property revenues

$

3,729,778

$

5,074,104

Investment income

11,470,186

9,157,234

Contingent interest income

132,650

174,396

Other interest income

645,137

514,125

Other income

62,637

-

Total revenues

16,040,388

14,919,859

Expenses:

Real estate operating (exclusive of items shown below)

2,484,216

2,636,677

Depreciation and amortization

1,592,826

2,124,898

Amortization of deferred financing costs

740,238

532,187

Interest expense

5,442,253

4,770,135

General and administrative

3,130,880

2,332,371

Total expenses

13,390,413

12,396,268

Other Income:

Gain on sale of MF Properties

7,168,587

-

Gain on sale of securities

-

8,097

Income before income taxes

9,818,562

2,531,688

Income tax expense

2,458,047

-

Net income

7,360,515

2,531,688

Net income (loss) attributable to noncontrolling interest

71,653

(12

)

Partnership net income

7,288,862

2,531,700

Redeemable Series A preferred unit distributions and accretion

(324,642

)

(1,684

)

Net income available to Partners

$

6,964,220

$

2,530,016

Net income (loss) available to Partners and noncontrolling interest allocated to:

General Partner

$

1,147,072

$

67,155

Limited Partners - Unitholders

5,794,702

2,462,861

Limited Partners - Restricted Unitholders

22,446

-

Noncontrolling interest

71,653

(12

)

$

7,035,873

$

2,530,004

Unitholdersʼ interest in net income per unit (basic and diluted):

Net income per unit, basic and diluted

$

0.10

$

0.04

Distributions declared, per unit

$

0.125

$

0.125

Weighted average number of units outstanding, basic

60,037,687

60,252,928

Weighted average number of units outstanding, diluted

60,037,687

60,252,928

For the Three Months Ended March 31,

2017

2016

Net income

$

7,360,515

$

2,531,688

Reversal of net unrealized gain on sale of securities

-

(236,439

)

Unrealized gain on securities

18,980,366

12,337,427

Unrealized gain on bond purchase commitments

220,944

1,587,813

Comprehensive income

26,561,825

16,220,489

Comprehensive income (loss) allocated to noncontrolling interest

71,653

(12

)

Partnership comprehensive income

$

26,490,172

$

16,220,501

General Partner

# of Units - Restricted and Unrestricted

Beneficial Unit

Certificate Holders - Restricted and Unrestricted

Non-controlling

Interest

Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2016

$

102,536

60,224,538

$

280,026,669

$

4,663

$

280,133,868

$

38,895,484

Distribution to noncontrolling

interest

-

-

(76,316

)

(76,316

)

Distributions paid or accrued

Regular distribution

(42,610

)

(4,218,413

)

-

(4,261,023

)

-

Distribution of Tier 2

earnings (Note 3)

(1,104,401

)

(3,313,203

)

-

(4,417,604

)

-

Net income (loss) allocable to

Partners

1,147,072

5,817,148

71,653

7,035,873

-

Repurchase of Beneficial Unit

Certificates

-

(144,748

)

(823,358

)

-

(823,358

)

-

Restricted units awarded

-

173,138

-

-

-

-

Restricted units compensation

expense

1,708

-

169,132

-

170,840

-

Unrealized gain on securities

189,804

-

18,790,562

-

18,980,366

18,980,366

Unrealized gain on bond

purchase commitment

2,209

-

218,735

-

220,944

220,944

Balance at March 31, 2017

$

296,318

60,252,928

$

296,667,272

$

-

$

296,963,590

$

58,096,794

General Partner

# of Units

Beneficial Unit

Certificate Holders

Non-controlling

Interest

Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2015

$

399,077

60,252,928

$

312,720,264

$

5,486

$

313,124,827

$

60,963,687

Reversal of net unrealized

gain sale of securities

(2,364

)

(234,075

)

(236,439

)

(236,439

)

Distributions paid or

accrued

(76,077

)

(7,531,616

)

-

(7,607,693

)

-

Net income (loss) allocated to

Partners and noncontrolling

interests:

Redeemable Series A

Preferred Unit distribution

accrued and accretion

(17

)

(1,667

)

-

(1,684

)

-

Net income (loss)

67,172

2,464,528

(12

)

2,531,688

-

Unrealized gain on

securities

123,374

12,214,053

-

12,337,427

12,337,427

Unrealized gain on bond

purchase commitment

15,878

1,571,935

-

1,587,813

1,587,813

Balance at March 31, 2016

$

527,043

60,252,928

$

321,203,422

$

5,474

$

321,735,939

$

74,652,488

For the Three Months Ended March 31,

2017

2016

Cash flows from operating activities:

Net income

$

7,360,515

$

2,531,688

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

Depreciation and amortization expense

1,592,826

2,124,898

Gain on sale of MF Property

(7,168,587

)

-

Gain on sale of securities

-

(8,097

)

Non-cash loss on derivatives

121,349

1,110,407

Restricted unit compensation expense

170,840

-

Bond premium/discount amortization

(35,767

)

(33,573

)

Amortization of deferred financing costs

740,238

532,187

Deferred income tax expense & income tax payable

2,458,047

-

Change in preferred return receivable from unconsolidated entities

(581,772

)

-

Changes in operating assets and liabilities, net of effect of acquisitions

Increase in interest receivable

(290,486

)

(793,661

)

(Increase) decrease in other assets

(97,700

)

(354,030

)

(Decrease) increase in accounts payable and accrued expenses

612,007

(244,234

)

Net cash provided by operating activities

4,881,510

4,865,585

Cash flows from investing activities:

Capital expenditures

(112,629

)

(157,084

)

Proceeds from sale of MF Properties

13,750,000

-

Proceeds from sale of mortgage revenue bond

-

9,295,000

Proceeds from the sale of MBS Securities

-

14,997,069

Acquisition of mortgage revenue bonds

(59,585,000

)

(11,500,000

)

Contributions to unconsolidated entities

(6,412,262

)

(2,442,846

)

Restricted cash - debt collateral paid

(32,966

)

(750,000

)

Restricted cash - debt collateral released

514,903

812,196

Decrease in restricted cash

364,235

134,615

Principal payments received on mortgage revenue bonds

1,114,063

1,523,757

Principal payments received on taxable bonds

3,888

-

Advances on property loans

(1,701,499

)

(5,836,758

)

Principal payments received on property loans

500,000

8,516

Net cash provided by (used in) investing activities

(51,597,267

)

6,084,465

Cash flows from financing activities:

Distributions paid

(8,289,468

)

(8,759,343

)

Proceeds from the sale of redeemable Series A Preferred Units

16,131,000

10,000,000

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

-

(19,052

)

Repurchase of beneficial unit certificates

(823,358

)

-

Payment of tax withholding related to restricted unit awards

(153,306

)

-

Distribution to noncontrolling interest

(76,316

)

-

Proceeds from debt financing

135,100,000

-

Principal payments on debt financing

(31,593,250

)

(21,600,363

)

Principal payments on mortgages payable

(233,630

)

(234,752

)

Principal borrowing on unsecured lines of credit

22,460,000

15,487,639

Principal payments on unsecured and secured lines of credit

(82,460,000

)

(5,000,000

)

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

(100,762

)

62,399

Debt financing and other deferred costs

(1,215,213

)

(99,907

)

Net cash provided by (used in) financing activities

48,745,697

(10,163,379

)

Net increase in cash and cash equivalents

2,029,940

786,671

Cash and cash equivalents at beginning of period

20,748,521

17,035,782

Cash and cash equivalents at end of period

$

22,778,461

$

17,822,453

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

4,907,078

$

3,646,802

Supplemental disclosure of non cash investing and financing activities:

Distributions declared but not paid for beneficial unit certificates and general partner

$

8,678,628

$

7,607,693

Distributions declared but not paid for Series A Preferred Units

$

320,823

$

1,667

Land contributed as investment in an unconsolidated entity

$

3,091,023

$

-

Capital expenditures financed through accounts payable

$

33,072

$

17,360

Deferred financing costs financed through accounts payable

$

46,764

$

-

Other assets financed through accounts payable

$

40,000

$

-

•

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

•

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

•

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

•

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

•

Six MF Properties which are either owned by the Partnership or subsidiaries of the Partnership.

Maximum Exposure to Loss

March 31, 2017

December 31, 2016

Mortgage revenue bonds

$

137,871,000

$

137,921,000

Property loans

16,857,297

16,476,073

Investment in unconsolidated entities

29,584,325

19,470,006

$

184,312,622

$

173,867,079

March 31, 2017

Description of Mortgage Revenue Bonds Held in Trust

State

Cost Adjusted for

Paydowns

Cumulative

Unrealized Gain

Cumulative

Unrealized Loss

Estimated Fair Value

Courtyard - Series A & B ⁽²⁾

CA

$

16,458,000

$

110,929

$

-

$

16,568,929

Glenview Apartments - Series A ⁽⁴⁾

CA

4,659,536

243,342

-

4,902,878

Harmony Court Bakersfield - Series A & B ⁽²⁾

CA

5,727,000

32,990

-

5,759,990

Harmony Terrace - Series A & B ⁽²⁾

CA

14,300,000

225,094

-

14,525,094

Harden Ranch - Series A ⁽³⁾

CA

6,896,254

458,986

-

7,355,240

Las Palmas II - Series A & B ⁽²⁾

CA

3,465,000

55,226

-

3,520,226

Montclair Apartments - Series A ⁽⁴⁾

CA

2,524,331

182,019

-

2,706,350

San Vicente - Series A & B ⁽²⁾

CA

5,320,000

-

(30,004

)

5,289,996

Santa Fe Apartments - Series A ⁽⁴⁾

CA

3,058,132

298,645

-

3,356,777

Seasons at Simi Valley - Series A ⁽²⁾

CA

4,376,000

373,438

-

4,749,438

Seasons Lakewood - Series A & B ⁽²⁾

CA

12,610,000

162,961

-

12,772,961

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

CA

18,949,000

-

(117,692

)

18,831,308

Summerhill - Series A & B ⁽²⁾

CA

9,795,000

140,099

-

9,935,099

Sycamore Walk - Series A ⁽²⁾

CA

3,632,000

185,900

-

3,817,900

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

CA

4,804,000

-

(31,581

)

4,772,419

Tyler Park Townhomes - Series A ⁽³⁾

CA

6,009,773

314,519

-

6,324,292

Westside Village Market - Series A ⁽³⁾

CA

3,927,375

152,881

-

4,080,256

Lake Forest ⁽¹⁾

FL

8,606,000

1,010,956

-

9,616,956

Ashley Square ⁽¹⁾

IA

5,024,000

417,085

-

5,441,085

Brookstone ⁽¹⁾

IL

7,460,242

1,689,582

-

9,149,824

Copper Gate Apartments ⁽³⁾

IN

5,145,000

597,695

-

5,742,695

Renaissance - Series A ⁽⁴⁾

LA

11,321,742

1,657,217

-

12,978,959

Live 929 Apartments ⁽²⁾

MD

40,656,400

4,474,464

-

45,130,864

Woodlynn Village ⁽¹⁾

MN

4,310,000

387,771

-

4,697,771

Greens Property - Series A ⁽³⁾

NC

8,189,000

990,540

-

9,179,540

Silver Moon - Series A ⁽⁴⁾

NM

7,920,141

626,949

-

8,547,090

Ohio Properties - Series A ⁽¹⁾

OH

14,191,000

2,605,877

-

16,796,877

Bridle Ridge ⁽¹⁾

SC

7,500,000

676,500

-

8,176,500

Columbia Gardens ⁽²⁾

SC

15,211,629

-

(689,295

)

14,522,334

Companion at Thornhill Apartments ⁽²⁾

SC

11,483,057

642,679

-

12,125,736

Cross Creek ⁽¹⁾

SC

6,126,494

2,774,745

-

8,901,239

The Palms at Premier Park Apartments ⁽³⁾

SC

19,375,997

2,368,538

-

21,744,535

Willow Run ⁽²⁾

SC

15,211,458

-

(682,914

)

14,528,544

Arbors at Hickory Ridge ⁽³⁾

TN

11,432,508

1,100,249

-

12,532,757

Pro Nova 2014-1 ⁽²⁾

TN

10,041,165

797,435

-

10,838,600

Avistar at Chase Hill - Series A ⁽³⁾

TX

9,821,495

646,280

-

10,467,775

Avistar at Copperfield - Series A ⁽²⁾

TX

10,000,000

981,390

-

10,981,390

Avistar at the Crest - Series A ⁽³⁾

TX

9,526,850

747,812

-

10,274,662

Avistar at the Oaks - Series A ⁽³⁾

TX

7,691,162

708,946

-

8,400,108

Avistar at the Parkway - Series A ⁽⁴⁾

TX

13,300,000

912,068

-

14,212,068

Avistar at Wilcrest - Series A ⁽²⁾

TX

3,775,000

288,734

-

4,063,734

Avistar at Wood Hollow - Series A ⁽²⁾

TX

31,850,000

2,663,590

-

34,513,590

Avistar in 09 - Series A ⁽³⁾

TX

6,641,021

482,819

-

7,123,840

Avistar on the Boulevard - Series A ⁽³⁾

TX

16,230,017

1,590,214

-

17,820,231

Avistar on the Hills - Series A ⁽³⁾

TX

5,313,805

420,499

-

5,734,304

Bella Vista ⁽¹⁾

TX

6,365,000

645,602

-

7,010,602

Bruton Apartments ⁽²⁾

TX

18,135,889

2,262,691

-

20,398,580

Concord at Gulfgate - Series A ⁽²⁾

TX

19,185,000

2,002,365

-

21,187,365

Concord at Little York - Series A ⁽²⁾

TX

13,440,000

1,402,751

-

14,842,751

Concord at Williamcrest - Series A ⁽²⁾

TX

20,820,000

1,953,644

-

22,773,644

Crossing at 1415 - Series A ⁽²⁾

TX

7,590,000

91,901

-

7,681,901

Decatur Angle ⁽²⁾

TX

22,912,234

1,541,021

-

24,453,255

Heights at 515 - Series A ⁽²⁾

TX

6,435,000

362,774

-

6,797,774

Heritage Square - Series A ⁽⁴⁾

TX

11,137,303

899,415

-

12,036,718

Oaks at Georgetown - Series A & B ⁽²⁾

TX

17,842,000

-

(6,057

)

17,835,943

Runnymede ⁽¹⁾

TX

10,250,000

1,387,645

-

11,637,645

Southpark ⁽¹⁾

TX

11,770,930

3,605,964

-

15,376,894

Vantage at Harlingen - Series B ⁽⁴⁾

TX

24,483,475

1,389,153

-

25,872,628

Vantage at Judson -Series B ⁽⁴⁾

TX

26,304,679

2,175,003

-

28,479,682