GHI 10-Q Quarter ended March 31, 2018

☒

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 (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

45

Item 4

Controls and Procedures

47

PART II – OTHER INFORMATION

Item 1A

Risk Factors

48

Item 6

Exhibits

48

SIGNATURES

49

•

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

•

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

•

the competitive environment in which we operate;

•

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

•

changes in interest rates;

•

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

•

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”);

•

geographic concentration with the MRB portfolio held by the Partnership;

•

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

•

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

March 31, 2018

December 31, 2017

Unaudited

Assets

Cash and cash equivalents

$

53,959,775

$

69,597,699

Restricted cash

1,115,880

1,985,630

Interest receivable, net

8,197,276

6,541,132

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

681,201,158

710,867,447

Mortgage revenue bonds, at fair value (Note 6)

74,758,296

77,971,208

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

48,939,254

49,641,588

Real estate assets: (Note 8)

Land and improvements

7,414,657

7,319,235

Buildings and improvements

79,130,567

78,953,488

Real estate assets before accumulated depreciation

86,545,224

86,272,723

Accumulated depreciation

(10,484,484

)

(9,580,531

)

Net real estate assets

76,060,740

76,692,192

Investment in unconsolidated entities (Note 9)

52,809,740

39,608,927

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

29,430,525

29,513,874

Other assets (Note 12)

7,026,986

7,348,302

Total Assets

$

1,033,499,630

$

1,069,767,999

Liabilities

Accounts payable, accrued expenses and other liabilities

$

7,752,984

$

8,494,227

Distribution payable

7,632,945

8,423,803

Unsecured lines of credit (Note 13)

50,000,000

50,000,000

Debt financing, net (Note 14)

550,425,793

558,328,347

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

35,453,563

35,540,174

Derivative swaps, at fair value (Note 16)

341,740

826,852

Total Liabilities

651,607,025

661,613,403

Commitments and Contingencies (Note 17)

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

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

94,323,338

94,314,326

Partnersʼ Capital

General Partner (Note 1)

185,189

437,256

Beneficial Unit Certificate holders

287,384,078

313,403,014

Total Partnersʼ Capital

287,569,267

313,840,270

Total Liabilities and Partnersʼ Capital

$

1,033,499,630

$

1,069,767,999

For the Three Months Ended March 31,

2018

2017

Revenues:

Property revenues

$

2,336,512

$

3,729,778

Investment income

13,378,486

11,470,186

Contingent interest income

-

132,650

Other interest income

743,036

645,137

Other income

-

62,637

Total revenues

16,458,034

16,040,388

Expenses:

Real estate operating (exclusive of items shown below)

1,395,493

2,484,216

Depreciation and amortization

906,315

1,592,826

Amortization of deferred financing costs

464,772

740,238

Interest expense

4,882,305

5,442,253

General and administrative

2,811,845

3,130,880

Total expenses

10,460,730

13,390,413

Other Income:

Gain on sale of real estate assets, net

-

7,168,587

Income before income taxes

5,997,304

9,818,562

Income tax expense (benefit)

(7,000

)

2,458,047

Net income

6,004,304

7,360,515

Net income attributable to noncontrolling interest

-

71,653

Partnership net income

6,004,304

7,288,862

Redeemable Series A preferred unit distributions and accretion

(717,763

)

(324,642

)

Net income available to Partners

$

5,286,541

$

6,964,220

Net income available to Partners and noncontrolling interest allocated to:

General Partner

$

52,865

$

1,147,072

Limited Partners - Unitholders

5,199,401

5,794,702

Limited Partners - Restricted Unitholders

34,275

22,446

Noncontrolling interest

-

71,653

$

5,286,541

$

7,035,873

Net income per Unit, basic and diluted

$

0.09

$

0.10

Distributions declared, per Unit

$

0.125

$

0.125

Weighted average number of Units outstanding, basic

60,124,333

60,037,687

Weighted average number of Units outstanding, diluted

60,124,333

60,037,687

For the Three Months Ended March 31,

2018

2017

Net income

$

6,004,304

$

7,360,515

Unrealized gain (loss) on securities

(21,874,876

)

18,980,366

Unrealized gain (loss) on bond purchase commitments

(975,067

)

220,944

Comprehensive income (loss)

(16,845,639

)

26,561,825

Comprehensive income allocated to noncontrolling interest

-

71,653

Partnership comprehensive income (loss)

$

(16,845,639

)

$

26,490,172

General Partner

# of Units - Restricted and Unrestricted

Beneficial Unit

Certificate Holders - Restricted and Unrestricted

Non-controlling

Interest

Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2017

$

437,256

60,373,674

$

313,403,014

$

-

$

313,840,270

$

75,623,830

Cumulative effect of accounting change

(Note 2)

(2,169

)

(214,779

)

-

(216,948

)

-

Distributions paid or accrued

Regular distribution

(76,329

)

(7,556,616

)

-

(7,632,945

)

-

Net income allocable to Partners

52,865

5,233,676

-

5,286,541

-

Sale of Beneficial Unit Certificates, net

of issuance costs

-

38,617

192,310

-

192,310

-

Repurchase of Beneficial Unit

Certificates

-

(198,465

)

(1,256,654

)

-

(1,256,654

)

-

Restricted units awarded

-

239,102

-

-

-

-

Restricted units compensation

expense

2,066

204,570

-

206,636

-

Unrealized gain on securities

(218,749

)

(21,656,127

)

-

(21,874,876

)

(21,874,876

)

Unrealized gain on bond

purchase commitment

(9,751

)

(965,316

)

-

(975,067

)

(975,067

)

Balance at March 31, 2018

$

185,189

60,452,928

$

287,384,078

$

-

$

287,569,267

$

52,773,887

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 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

For the Three Months Ended March 31,

2018

2017

Cash flows from operating activities:

Net income

$

6,004,304

$

7,360,515

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

Depreciation and amortization expense

906,315

1,592,826

Gain on sale of real estate assets, net

-

(7,168,587

)

Loss (gain) on derivatives, net of cash paid

(1,082,333

)

121,349

Restricted unit compensation expense

206,636

170,840

Bond premium/discount amortization

(17,041

)

(35,767

)

Amortization of deferred financing costs

464,772

740,238

Deferred income tax expense & income tax payable

2,754

2,458,047

Change in preferred return receivable from unconsolidated entities

(877,995

)

(581,772

)

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

Increase in interest receivable

(1,656,144

)

(290,486

)

Increase in other assets

(255,901

)

(97,700

)

Increase (decrease) in accounts payable and accrued expenses

(824,082

)

612,007

Net cash provided by operating activities

2,871,285

4,881,510

Cash flows from investing activities:

Capital expenditures

(150,460

)

(112,629

)

Proceeds from sale of MF Properties

-

13,750,000

Acquisition of mortgage revenue bonds

-

(59,585,000

)

Contributions to unconsolidated entities

(9,725,034

)

(6,412,262

)

Principal payments received on mortgage revenue bonds

11,301,939

1,114,063

Principal payments received on taxable mortgage revenue bonds

2,732

3,888

Principal payments received on PHCs

226,714

-

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

(2,560,244

)

-

Advances on property loans

(66,651

)

(1,701,499

)

Principal payments received on property loans

150,000

500,000

Net cash used in investing activities

(821,004

)

(52,443,439

)

Cash flows from financing activities:

Distributions paid

(9,116,720

)

(8,289,468

)

Proceeds from the sale of redeemable Series A Preferred Units

-

16,131,000

Repurchase of Beneficial Unit Certificates

(1,256,654

)

(823,358

)

Proceeds from the sale of Beneficial Unit Certificates

233,633

-

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

(4,678

)

-

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

(8,303,677

)

(31,593,250

)

Principal payments on mortgages payable

(113,308

)

(233,630

)

Principal borrowing on unsecured lines of credit

-

22,460,000

Principal payments on unsecured and secured lines of credit

-

(82,460,000

)

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

3,449

(100,762

)

Debt financing and other deferred costs

-

(1,215,213

)

Net cash provided by (used in) financing activities

(18,557,955

)

48,745,697

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

(16,507,674

)

1,183,768

Cash, cash equivalents and restricted cash at beginning of period

71,583,329

27,506,220

Cash, cash equivalents and restricted cash at end of period

$

55,075,655

$

28,689,988

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

5,617,890

$

4,907,078

Cash paid during the period for income taxes

$

14,859

$

-

Supplemental disclosure of noncash investing and financing activities:

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

$

7,632,945

$

8,678,628

Distributions declared but not paid for Series A Preferred Units

$

708,750

$

320,823

Land contributed as investment in an unconsolidated entity

$

2,597,784

$

3,091,023

Capital expenditures financed through accounts payable

$

54,581

$

33,072

Deferred financing and equity issuance costs financed through accounts payable

$

6,222

$

46,764

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

March 31, 2018

March 31, 2017

Cash and cash equivalents

$

53,959,775

$

22,778,461

Restricted cash

1,115,880

5,911,527

Total cash, cash equivalents and restricted cash

$

55,075,655

$

28,689,988

•

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.

•

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

•

One MF Property, Jade Park, is owned by a wholly-owned subsidiary of the Partnership and one MF Property, Suites on Paseo, is owned directly by the Partnership.

Maximum Exposure to Loss

March 31, 2018

December 31, 2017

Mortgage revenue bonds

$

118,447,248

$

146,344,195

Property loans

15,674,613

15,824,613

Investment in unconsolidated entities

52,809,740

39,608,927

$

186,931,601

$

201,777,735

March 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 & B ⁽²⁾

CA

$

16,458,000

$

773,689

$

-

$

17,231,689

Glenview Apartments - Series A ⁽⁴⁾

CA

4,616,146

392,021

-

5,008,167

Harmony Court Bakersfield - Series A ⁽²⁾

CA

3,730,000

267,644

-

3,997,644

Harmony Terrace - Series A & B ⁽²⁾

CA

14,300,000

560,658

-

14,860,658

Harden Ranch - Series A ⁽³⁾

CA

6,828,743

886,164

-

7,714,907

Las Palmas II - Series A & B ⁽²⁾

CA

3,465,000

119,122

-

3,584,122

Montclair Apartments - Series A ⁽⁴⁾

CA

2,500,824

321,683

-

2,822,507

San Vicente - Series A & B ⁽²⁾

CA

5,320,000

178,617

-

5,498,617

Santa Fe Apartments - Series A ⁽⁴⁾

CA

3,029,654

414,470

-

3,444,124

Seasons at Simi Valley - Series A ⁽²⁾

CA

4,356,248

648,547

-

5,004,795

Seasons Lakewood - Series A ⁽²⁾

CA

7,350,000

566,282

-

7,916,282

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

CA

18,949,000

699,621

-

19,648,621

Summerhill - Series A ⁽²⁾

CA

6,423,000

460,878

-

6,883,878

Sycamore Walk - Series A ⁽²⁾

CA

3,625,940

312,495

-

3,938,435

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

CA

4,804,000

219,826

-

5,023,826

Tyler Park Townhomes - Series A ⁽³⁾

CA

5,950,280

570,581

-

6,520,861

Westside Village Market - Series A ⁽³⁾

CA

3,888,497

482,661

-

4,371,158

Lake Forest ⁽¹⁾

FL

8,469,000

1,181,238

-

9,650,238

Brookstone ⁽¹⁾

IL

7,446,582

1,452,965

-

8,899,547

Copper Gate Apartments ⁽³⁾

IN

5,100,000

624,322

-

5,724,322

Renaissance - Series A ⁽⁴⁾

LA

11,211,177

1,495,441

-

12,706,618

Live 929 Apartments ⁽²⁾

MD

40,380,356

3,138,301

-

43,518,657

Woodlynn Village ⁽¹⁾

MN

4,267,000

10,058

-

4,277,058

Greens Property - Series A ⁽³⁾

NC

8,104,000

921,283

-

9,025,283

Silver Moon - Series A ⁽⁴⁾

NM

7,865,663

683,207

-

8,548,870

Ohio Properties - Series A ⁽¹⁾

OH

14,083,000

634,474

-

14,717,474

Bridle Ridge ⁽¹⁾

SC

7,430,000

47,812

-

7,477,812

Columbia Gardens ⁽²⁾

SC

13,336,778

1,267,129

-

14,603,907

Companion at Thornhill Apartments ⁽²⁾

SC

11,377,893

960,039

-

12,337,932

Cross Creek ⁽¹⁾

SC

6,139,056

2,705,228

-

8,844,284

The Palms at Premier Park Apartments ⁽³⁾

SC

19,191,003

1,945,444

-

21,136,447

Village at River's Edge ⁽²⁾

SC

9,984,860

1,324,906

-

11,309,766

Willow Run ⁽²⁾

SC

13,152,289

1,195,384

-

14,347,673

Arbors at Hickory Ridge ⁽³⁾

TN

11,292,992

1,186,994

-

12,479,986

Pro Nova 2014-1 ⁽²⁾

TN

10,031,209

-

(67,060

)

9,964,149

Avistar at Copperfield - Series A ⁽²⁾

TX

10,000,000

198,101

-

10,198,101

Avistar at the Crest - Series A ⁽³⁾

TX

9,432,184

785,646

-

10,217,830

Avistar at the Oaks - Series A ⁽³⁾

TX

7,616,915

629,510

-

8,246,425

Avistar at the Parkway - Series A ⁽⁴⁾

TX

13,204,519

481,891

-

13,686,410

Avistar at Wilcrest - Series A ⁽²⁾

TX

3,775,000

-

(29,262

)

3,745,738

Avistar at Wood Hollow - Series A ⁽²⁾

TX

31,850,000

503,531

-

32,353,531

Avistar in 09 - Series A ⁽³⁾

TX

6,576,911

514,160

-

7,091,071

Avistar on the Boulevard - Series A ⁽³⁾

TX

16,068,745

1,268,206

-

17,336,951

Avistar on the Hills - Series A ⁽³⁾

TX

5,262,510

434,927

-

5,697,437

Bella Vista ⁽¹⁾

TX

6,295,000

72,246

-

6,367,246

Bruton Apartments ⁽²⁾

TX

18,022,873

1,975,389

-

19,998,262

Concord at Gulfgate - Series A ⁽²⁾

TX

19,185,000

2,094,593

-

21,279,593

Concord at Little York - Series A ⁽²⁾

TX

13,440,000

1,530,165

-

14,970,165

Concord at Williamcrest - Series A ⁽²⁾

TX

20,820,000

2,370,389

-

23,190,389

Crossing at 1415 - Series A ⁽²⁾

TX

7,524,044

525,631

-

8,049,675

Decatur Angle ⁽²⁾

TX

22,754,649

1,465,876

-

24,220,525

Heights at 515 - Series A ⁽²⁾

TX

6,888,392

600,565

-

7,488,957

Heritage Square - Series A ⁽⁴⁾

TX

11,037,518

676,672

-

11,714,190

Oaks at Georgetown - Series A & B ⁽²⁾

TX

17,842,000

406,337

-

18,248,337

Runnymede ⁽¹⁾

TX

10,150,000

140,110

-

10,290,110

Southpark ⁽¹⁾

TX

11,712,016

2,679,516

-

14,391,532

Vantage at Judson -Series B ⁽⁴⁾

TX

26,078,566

2,111,015

-

28,189,581

15 West Apartments ⁽²⁾

WA