GHI 10-Q Quarter ended June 30, 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

36

Item 3

Quantitative and Qualitative Disclosures About Market Risk

49

Item 4

Controls and Procedures

51

PART II – OTHER INFORMATION

Item 1A

Risk Factors

52

Item 6

Exhibits

52

SIGNATURES

53

•

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

•

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

•

the competitive environment in which we operate;

•

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

•

changes in interest rates;

•

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

•

continued performance by counterparties to our interest rate derivative agreements;

•

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

•

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

•

changes in the United States Department of Housing and Urban Development’s 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.

June 30, 2018

December 31, 2017

Assets

Cash and cash equivalents

$

26,328,497

$

69,597,699

Restricted cash

1,493,295

1,985,630

Interest receivable, net

7,682,580

6,541,132

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

673,152,217

710,867,447

Mortgage revenue bonds, at fair value (Note 6)

94,477,120

77,971,208

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

49,070,710

49,641,588

Real estate assets: (Note 8)

Land and improvements

7,518,727

7,319,235

Buildings and improvements

79,378,136

78,953,488

Real estate assets before accumulated depreciation

86,896,863

86,272,723

Accumulated depreciation

(11,403,940

)

(9,580,531

)

Net real estate assets

75,492,923

76,692,192

Investment in unconsolidated entities (Note 9)

60,494,767

39,608,927

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

28,930,525

29,513,874

Other assets (Note 12)

6,408,246

7,348,302

Total Assets

$

1,023,530,880

$

1,069,767,999

Liabilities

Accounts payable, accrued expenses and other liabilities

$

7,837,981

$

8,494,227

Distribution payable

7,632,945

8,423,803

Unsecured lines of credit (Note 13)

49,540,000

50,000,000

Debt financing, net (Note 14)

542,172,329

558,328,347

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

35,212,789

35,540,174

Derivative swaps, at fair value (Note 16)

129,018

826,852

Total Liabilities

642,525,062

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)

94,332,351

94,314,326

Partnersʼ Capital

General Partner (Note 1)

180,641

437,256

Beneficial Unit Certificate holders

286,492,826

313,403,014

Total Partnersʼ Capital

286,673,467

313,840,270

Total Liabilities and Partnersʼ Capital

$

1,023,530,880

$

1,069,767,999

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2018

2017

2018

2017

Revenues:

Property revenues

$

2,403,142

$

3,306,722

$

4,739,654

$

7,036,500

Investment income

12,249,035

12,174,215

25,627,521

23,644,401

Contingent interest income

-

86,567

-

219,217

Other interest income

1,058,688

666,796

1,801,724

1,311,933

Other income

74,300

-

74,300

62,637

Total revenues

15,785,165

16,234,300

32,243,199

32,274,688

Expenses:

Real estate operating (exclusive of items shown below)

1,290,487

1,621,084

2,685,980

4,105,300

Impairment of securities

831,062

-

831,062

-

Depreciation and amortization

921,816

1,270,379

1,828,131

2,863,205

Amortization of deferred financing costs

430,687

562,585

895,459

1,302,823

Interest expense

5,918,867

5,841,327

10,801,172

11,283,580

General and administrative

3,041,125

2,876,450

5,852,970

6,007,330

Total expenses

12,434,044

12,171,825

22,894,774

25,562,238

Other Income:

Gain (loss) on sale of real estate assets, net

-

(16,075

)

-

7,152,512

Income before income taxes

3,351,121

4,046,400

9,348,425

13,864,962

Income tax expense (benefit)

13,000

(63,000

)

6,000

2,395,047

Net income

3,338,121

4,109,400

9,342,425

11,469,915

Net income attributable to noncontrolling interest

-

-

-

71,653

Partnership net income

3,338,121

4,109,400

9,342,425

11,398,262

Redeemable Series A preferred unit distributions and accretion

(717,762

)

(432,550

)

(1,435,525

)

(757,192

)

Net income available to Partners

$

2,620,359

$

3,676,850

$

7,906,900

$

10,641,070

Net income available to Partners and noncontrolling interest allocated to:

General Partner

$

26,204

$

35,139

$

79,069

$

1,182,211

Limited Partners - Unitholders

2,530,332

3,594,529

7,729,733

9,389,231

Limited Partners - Restricted Unitholders

63,823

47,182

98,098

69,628

Noncontrolling interest

-

-

-

71,653

$

2,620,359

$

3,676,850

$

7,906,900

$

10,712,723

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

$

0.04

$

0.06

$

0.13

$

0.16

Distributions declared, per Unit

$

0.125

$

0.125

$

0.25

$

0.25

Weighted average number of Units outstanding, basic

59,937,300

59,862,969

60,030,817

59,950,328

Weighted average number of Units outstanding, diluted

59,937,300

59,862,969

60,030,817

59,950,328

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2018

2017

2018

2017

Net income

$

3,338,121

$

4,109,400

$

9,342,425

$

11,469,915

Reversal of net unrealized losses on securities with

other-than-temporary impairment

981,792

-

525,446

-

Unrealized gain (loss) on securities

4,065,221

10,226,688

(17,353,309

)

29,207,054

Unrealized gain (loss) on bond purchase commitments

(1,032,788

)

544,779

(2,007,855

)

765,723

Comprehensive income (loss)

7,352,346

14,880,867

(9,493,293

)

41,442,692

Comprehensive income allocated to noncontrolling interest

-

-

-

71,653

Partnership comprehensive income (loss)

$

7,352,346

$

14,880,867

$

(9,493,293

)

$

41,371,039

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

(152,659

)

(15,113,232

)

-

(15,265,891

)

-

Net income allocable to Partners

79,069

7,827,831

-

7,906,900

-

Sale of Beneficial Unit Certificates, net

of issuance costs

-

38,617

192,310

-

192,310

-

Repurchase of Beneficial Unit

Certificates

-

(268,575

)

(1,697,613

)

-

(1,697,613

)

-

Restricted units awarded

-

309,212

-

-

-

-

Restricted units compensation

expense

7,502

742,655

-

750,157

-

Unrealized loss on securities

(173,533

)

(17,179,776

)

-

(17,353,309

)

(17,353,309

)

Unrealized loss on bond

purchase commitment

(20,079

)

(1,987,776

)

-

(2,007,855

)

(2,007,855

)

Reversal of net unrealized loss on

securities with other-than-temporary

impairment

5,254

520,192

525,446

525,446

Balance at June 30, 2018

$

180,641

60,452,928

$

286,492,826

$

-

$

286,673,467

$

56,788,112

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

(118,196

)

(11,701,357

)

-

(11,819,553

)

-

Distribution of Tier 2

earnings (Note 3)

(1,120,625

)

(3,361,875

)

-

(4,482,500

)

-

Net income allocable to

Partners

1,182,211

9,458,859

71,653

10,712,723

-

Repurchase of Beneficial Unit

Certificates

-

(254,656

)

(1,466,222

)

-

(1,466,222

)

-

Restricted units awarded

-

283,046

-

-

-

-

Restricted units compensation

expense

6,097

603,636

-

609,733

-

Unrealized gain on securities

292,071

28,914,983

-

29,207,054

29,207,054

Unrealized gain on bond

purchase commitment

7,657

758,066

-

765,723

765,723

Balance at June 30, 2017

$

351,751

60,252,928

$

303,232,759

$

-

$

303,584,510

$

68,868,261

For the Six Months Ended June 30,

2018

2017

Cash flows from operating activities:

Net income

$

9,342,425

$

11,469,915

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

Depreciation and amortization expense

1,828,131

2,863,205

Gain on sale of real estate assets, net

-

(7,152,512

)

Impairment of securities

831,062

-

Loss (gain) on derivatives, net of cash paid

(1,127,589

)

302,769

Restricted unit compensation expense

750,157

609,733

Bond premium/discount amortization

(33,987

)

(74,873

)

Amortization of deferred financing costs

895,459

1,302,823

Deferred income tax expense (benefit) & income tax payable

(183,303

)

(365,000

)

Change in preferred return receivable from unconsolidated entities

(1,799,127

)

(1,343,013

)

Changes in operating assets and liabilities

(Increase) decrease in interest receivable

(1,141,448

)

585,695

Increase in other assets

(928,527

)

(40,101

)

Increase (decrease) in accounts payable and accrued expenses

(516,061

)

50,585

Net cash provided by operating activities

7,917,192

8,209,226

Cash flows from investing activities:

Capital expenditures

(431,784

)

(175,193

)

Proceeds from sale of MF Properties

-

13,750,000

Proceeds from sale of land held for development

-

3,000,000

Acquisition of mortgage revenue bonds

(19,540,000

)

(59,585,000

)

Contributions to unconsolidated entities

(16,488,929

)

(8,017,189

)

Principal payments received on mortgage revenue bonds

23,285,577

2,003,281

Principal payments received on taxable mortgage revenue bonds

30,526

27,864

Principal payments received on PHC Certificates

226,714

437,000

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

(2,660,649

)

(95,932

)

Advances on property loans

(66,651

)

(2,340,636

)

Principal payments received on property loans

650,000

500,000

Net cash used in investing activities

(14,995,196

)

(50,495,805

)

Cash flows from financing activities:

Distributions paid

(17,458,416

)

(17,288,919

)

Proceeds from the sale of redeemable Series A Preferred Units

-

16,131,000

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

-

(668

)

Acquisition of interest rate derivatives

-

(496,800

)

Repurchase of Beneficial Unit Certificates

(1,697,613

)

(1,466,222

)

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

(16,924,182

)

(32,751,484

)

Principal payments on mortgages payable

(380,775

)

(658,271

)

Principal borrowing on unsecured lines of credit

19,540,000

24,460,000

Principal payments on unsecured and secured lines of credit

(20,000,000

)

(84,460,000

)

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

17,168

(92,951

)

Debt financing and other deferred costs

(8,670

)

(1,452,517

)

Net cash provided by (used in) financing activities

(36,683,533

)

36,793,546

Net decrease in cash, cash equivalents and restricted cash

(43,761,537

)

(5,493,033

)

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

$

27,821,792

$

22,013,187

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

11,702,009

$

10,670,383

Cash paid during the period for income taxes

$

162,963

$

3,007,000

Supplemental disclosure of noncash investing and financing activities:

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

$

7,632,945

$

7,623,425

Distributions declared but not paid for Series A Preferred Units

$

708,750

$

427,500

Land contributed as investment in an unconsolidated entity

$

2,597,784

$

3,091,023

Capital expenditures financed through accounts payable

$

24,491

$

54,320

Deferred financing costs financed through accounts payable

$

19,626

$

-

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:

June 30, 2018

June 30, 2017

Cash and cash equivalents

$

26,328,497

$

15,371,898

Restricted cash

1,493,295

6,641,289

Total cash, cash equivalents and restricted cash

$

27,821,792

$

22,013,187

•

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 America First Multifamily Investors, L.P.

•

The duration and severity of the decline in fair value,

•

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

•

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

•

Volatility of the fair value of the security.

Maximum Exposure to Loss

June 30, 2018

December 31, 2017

Mortgage revenue bonds

$

84,158,000

$

146,344,195

Property loans

15,574,613

15,824,613

Investment in unconsolidated entities

60,494,767

39,608,927

$

160,227,380

$

201,777,735

June 30, 2018

Description of Mortgage Revenue Bonds Held in Trust

State

Cost Adjusted for

Paydowns

Cumulative

Unrealized Gain

Cumulative

Unrealized Loss

Estimated Fair Value

Courtyard - Series A & B ⁽²⁾

CA

$

16,458,000

$

842,894

$

-

$

17,300,894

Glenview Apartments - Series A ⁽⁴⁾

CA

4,604,904

386,744

-

4,991,648

Harmony Court Bakersfield - Series A ⁽²⁾

CA

3,730,000

273,992

-

4,003,992

Harmony Terrace - Series A & B ⁽²⁾

CA

14,300,000

571,942

-

14,871,942

Harden Ranch - Series A ⁽³⁾

CA

6,811,252

868,874

-

7,680,126

Las Palmas II - Series A & B ⁽²⁾

CA

3,465,000

121,498

-

3,586,498

Montclair Apartments - Series A ⁽⁴⁾

CA

2,494,734

316,289

-

2,811,023

San Vicente - Series A ⁽²⁾

CA

3,495,000

238,471

-

3,733,471

Santa Fe Apartments - Series A ⁽⁴⁾

CA

3,022,276

407,346

-

3,429,622

Seasons at Simi Valley - Series A ⁽²⁾

CA

4,346,157

639,914

-

4,986,071

Seasons Lakewood - Series A ⁽²⁾

CA

7,350,000

578,452

-

7,928,452

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

CA

18,949,000

906,168

-

19,855,168

Summerhill - Series A ⁽²⁾

CA

6,423,000

410,548

-

6,833,548

Sycamore Walk - Series A ⁽²⁾

CA

3,616,750

316,436

-

3,933,186

The Village at Madera - Series A ⁽²⁾

CA

3,085,000

226,613

-

3,311,613

Tyler Park Townhomes - Series A ⁽³⁾

CA

5,934,866

627,227

-

6,562,093

Westside Village Market - Series A ⁽³⁾

CA

3,878,423

444,103

-

4,322,526

Lake Forest ⁽¹⁾

FL

8,433,000

1,184,869

-

9,617,869

Brookstone ⁽¹⁾

IL

7,442,163

1,557,750

-

8,999,913

Copper Gate Apartments ⁽³⁾

IN

5,100,000

606,607

-

5,706,607

Renaissance - Series A ⁽⁴⁾

LA

11,182,486

1,498,700

-

12,681,186

Live 929 Apartments ⁽²⁾

MD

40,333,693

3,093,989

-

43,427,682

Woodlynn Village ⁽¹⁾

MN

4,244,000

39,254

-

4,283,254

Greens Property - Series A ⁽³⁾

NC

8,080,000

925,182

-

9,005,182

Silver Moon - Series A ⁽⁴⁾

NM

7,851,526

693,322

-

8,544,848

Ohio Properties - Series A ⁽¹⁾

OH

14,052,997

516,691

-

14,569,688

Bridle Ridge ⁽¹⁾

SC

7,430,000

97,044

-

7,527,044

Columbia Gardens ⁽²⁾

SC

13,299,000

1,300,938

-

14,599,938

Companion at Thornhill Apartments ⁽²⁾

SC

11,350,638

944,340

-

12,294,978

Cross Creek ⁽¹⁾

SC

6,141,122

2,641,911

-

8,783,033

The Palms at Premier Park Apartments ⁽³⁾

SC

19,142,966

1,903,361

-

21,046,327

Village at River's Edge ⁽²⁾

SC

9,969,493

1,327,542

-

11,297,035

Willow Run ⁽²⁾

SC

13,115,524

1,280,882

-

14,396,406

Arbors at Hickory Ridge ⁽³⁾

TN

11,260,696

990,706

-

12,251,402

Pro Nova 2014-1 ⁽²⁾

TN

10,029,943

-