GHI 10-Q Quarter ended Sept. 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)

N/A

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

Large accelerated filer

☐

Accelerated filer

☒

Non- accelerated filer

☐

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

8

Item 2

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

40

Item 3

Quantitative and Qualitative Disclosures About Market Risk

56

Item 4

Controls and Procedures

58

PART II – OTHER INFORMATION

Item 1A

Risk Factors

59

Item 6

Exhibits

59

SIGNATURES

60

•

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

•

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

•

the competitive environment in which we operate;

•

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

•

changes in interest rates;

•

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

•

continued performance by counterparties to our interest rate derivative agreements;

•

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

•

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

•

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

•

geographic concentration with the MRB portfolio held by the Partnership;

•

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

•

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

September 30, 2018

December 31, 2017

Assets

Cash and cash equivalents

$

24,969,157

$

69,597,699

Restricted cash

703,112

1,985,630

Interest receivable, net

7,936,792

6,541,132

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

678,700,712

710,867,447

Mortgage revenue bonds, at fair value (Note 6)

63,765,212

77,971,208

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

48,741,478

49,641,588

Real estate assets: (Note 8)

Land and improvements

4,974,417

7,319,235

Buildings and improvements

71,819,902

78,953,488

Real estate assets before accumulated depreciation

76,794,319

86,272,723

Accumulated depreciation

(11,457,254

)

(9,580,531

)

Net real estate assets

65,337,065

76,692,192

Investment in unconsolidated entities (Note 9)

80,294,647

39,608,927

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

23,817,990

29,513,874

Other assets (Note 12)

6,950,752

7,348,302

Total Assets

$

1,001,216,917

$

1,069,767,999

Liabilities

Accounts payable, accrued expenses and other liabilities

$

7,831,188

$

8,494,227

Distribution payable

9,652,968

8,423,803

Unsecured lines of credit (Note 13)

28,465,600

50,000,000

Debt financing, net (Note 14)

544,718,144

558,328,347

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

27,681,596

35,540,174

Derivative swaps, at fair value (Note 16)

26,798

826,852

Total Liabilities

618,376,294

661,613,403

Commitments and Contingencies (Note 17)

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

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

94,341,364

94,314,326

Partnersʼ Capital

General Partner (Note 1)

195,059

437,256

Beneficial Unit Certificate holders (Note 1)

288,304,200

313,403,014

Total Partnersʼ Capital

288,499,259

313,840,270

Total Liabilities and Partnersʼ Capital

$

1,001,216,917

$

1,069,767,999

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2018

2017

2018

2017

Revenues:

Property revenues

$

2,285,736

$

3,244,440

$

7,025,390

$

10,280,940

Investment income

12,733,013

12,242,533

38,360,534

35,886,934

Contingent interest income

4,246,094

-

4,246,094

219,217

Other interest income

5,217,741

735,123

7,019,465

2,047,056

Other income

1,518,531

12,734

1,592,831

75,371

Total revenues

26,001,115

16,234,830

58,244,314

48,509,518

Expenses:

Real estate operating (exclusive of items shown below)

1,606,765

2,225,845

4,292,745

6,331,145

Impairment of securities

309,958

-

1,141,020

-

Impairment charge on real estate assets

150,000

-

150,000

-

Depreciation and amortization

864,600

1,259,055

2,692,731

4,122,260

Amortization of deferred financing costs

409,420

577,413

1,304,879

1,880,236

Interest expense

5,985,263

5,714,181

16,786,435

16,997,761

General and administrative

3,653,288

3,197,853

9,506,258

9,205,183

Total expenses

12,979,294

12,974,347

35,874,068

38,536,585

Other Income:

Gain on sale of real estate assets, net

4,051,429

-

4,051,429

7,152,512

Income before income taxes

17,073,250

3,260,483

26,421,675

17,125,445

Income tax expense (benefit)

(809,805

)

(285,000

)

(803,805

)

2,110,047

Net income

17,883,055

3,545,483

27,225,480

15,015,398

Net income attributable to noncontrolling interest

-

-

-

71,653

Partnership net income

17,883,055

3,545,483

27,225,480

14,943,745

Redeemable Series A preferred unit distributions and accretion

(717,763

)

(523,682

)

(2,153,288

)

(1,280,874

)

Net income available to Partners

$

17,165,292

$

3,021,801

$

25,072,192

$

13,662,871

Net income available to Partners and noncontrolling interest allocated to:

General Partner

$

2,163,058

$

30,218

$

2,242,127

$

1,212,429

Limited Partners - Unitholders

14,933,260

2,936,408

22,662,993

12,325,639

Limited Partners - Restricted Unitholders

68,974

55,175

167,072

124,803

Noncontrolling interest

-

-

-

71,653

$

17,165,292

$

3,021,801

$

25,072,192

$

13,734,524

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

$

0.25

$

0.05

$

0.38

$

0.21

Distributions declared, per Unit

$

0.125

$

0.125

$

0.375

$

0.375

Weighted average number of Units outstanding, basic

59,907,123

59,811,578

59,989,585

59,904,078

Weighted average number of Units outstanding, diluted

59,907,123

59,811,578

59,989,585

59,904,078

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2018

2017

2018

2017

Net income

$

17,883,055

$

3,545,483

$

27,225,480

$

15,015,398

Reversal of net unrealized losses on securities with

other-than-temporary impairment

-

-

525,446

-

Unrealized gain (loss) on securities

(6,744,509

)

1,813,314

(24,097,818

)

31,020,368

Unrealized gain (loss) on bond purchase commitments

51,760

189,875

(1,956,095

)

955,598

Comprehensive income (loss)

11,190,306

5,548,672

1,697,013

46,991,364

Comprehensive income allocated to noncontrolling interest

-

-

-

71,653

Partnership comprehensive income (loss)

$

11,190,306

$

5,548,672

$

1,697,013

$

46,919,711

General Partner

# of Units -

Restricted and

Unrestricted

Beneficial Unit

Certificate Holders

- Restricted and

Unrestricted

Non-controlling

Interest

Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2017

$

437,256

60,373,674

$

313,403,014

$

-

$

313,840,270

$

75,623,830

Cumulative effect of accounting change

(Note 2)

(2,169

)

(214,779

)

-

(216,948

)

-

Distributions paid or accrued

Regular distribution

(166,213

)

(16,455,123

)

-

(16,621,336

)

-

Distribution of Tier 2

income (Note 3)

(2,074,381

)

(6,223,142

)

-

(8,297,523

)

-

Net income allocable to Partners

2,242,127

22,830,065

-

25,072,192

-

Sale of Beneficial Unit Certificates, net

of issuance costs

-

105,950

576,300

-

576,300

-

Repurchase of Beneficial Unit

Certificates

-

(268,575

)

(1,697,613

)

-

(1,697,613

)

-

Restricted units awarded

-

309,212

-

-

-

-

Restricted units compensation

expense

13,724

1,358,660

-

1,372,384

-

Unrealized loss on securities

(240,978

)

(23,856,840

)

-

(24,097,818

)

(24,097,818

)

Unrealized loss on bond

purchase commitments

(19,561

)

(1,936,534

)

-

(1,956,095

)

(1,956,095

)

Reversal of net unrealized loss on

securities with other-than-temporary

impairment

5,254

520,192

525,446

525,446

Balance at September 30, 2018

$

195,059

60,520,261

$

288,304,200

$

-

$

288,499,259

$

50,095,363

General Partner

# of Units -

Restricted and

Unrestricted

Beneficial Unit

Certificate Holders

- Restricted and

Unrestricted

Non-controlling

Interest

Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2016

$

102,536

60,224,538

$

280,026,669

$

4,663

$

280,133,868

$

38,895,484

Distribution to noncontrolling

interest

-

-

-

(76,316

)

(76,316

)

Distributions paid or accrued

Regular distribution

(194,272

)

-

(19,232,974

)

-

(19,427,246

)

-

Distribution of Tier 2

income (Note 3)

(1,120,625

)

-

(3,361,875

)

-

(4,482,500

)

-

Net income allocable to

Partners

1,212,429

-

12,450,442

71,653

13,734,524

-

Repurchase of Beneficial Unit

Certificates

-

(254,656

)

(1,466,222

)

-

(1,466,222

)

-

Restricted units awarded

-

283,046

-

-

-

-

Restricted units compensation

expense

11,601

-

1,148,522

-

1,160,123

-

Unrealized gain on securities

310,204

-

30,710,164

-

31,020,368

31,020,368

Unrealized gain on bond

purchase commitments

9,556

-

946,042

-

955,598

955,598

Balance at September 30, 2017

$

331,429

60,252,928

$

301,220,768

$                           -

$

301,552,197

$

70,871,450

For the Nine Months Ended September 30,

2018

2017

Cash flows from operating activities:

Net income

$

27,225,480

$

15,015,398

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

Depreciation and amortization expense

2,692,731

4,122,260

Provision for loan loss

-

(55,000

)

Gain on sale of real estate assets, net

(4,051,429

)

(7,152,512

)

Contingent interest realized on investing activities

(4,246,094

)

-

Impairment of securities

1,141,020

-

Impairment charge on real estate assets

150,000

-

Loss (gain) on derivatives, net of cash paid

(1,266,808

)

369,686

Restricted unit compensation expense

1,372,384

1,160,123

Bond premium/discount amortization

(50,839

)

(113,861

)

Amortization of deferred financing costs

1,304,879

1,880,236

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

(840,871

)

(374,000

)

Change in preferred return receivable from unconsolidated entities

(2,642,634

)

(2,176,131

)

Changes in operating assets and liabilities

Increase in interest receivable

(1,395,660

)

(336,710

)

Increase in other assets

(921,756

)

(231,498

)

Increase (decrease) in accounts payable and accrued expenses

(473,415

)

1,058,638

Net cash provided by operating activities

17,996,988

13,166,629

Cash flows from investing activities:

Capital expenditures

(496,336

)

(290,042

)

Proceeds from sale of MF Properties

13,450,000

13,750,000

Proceeds from sale of land held for development

-

3,000,000

Acquisition of mortgage revenue bonds

(19,540,000

)

(72,056,000

)

Contributions to unconsolidated entities

(35,153,613

)

(9,569,227

)

Principal payments received on mortgage revenue bonds and contingent interest

46,001,893

4,844,328

Principal payments received on taxable mortgage revenue bonds

33,384

31,930

Principal payments received on PHC Certificates

226,714

1,610,302

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

(2,764,403

)

(168,693

)

Advances on property loans

(66,652

)

(2,376,370

)

Principal payments received on property loans

5,762,536

1,000,000

Net cash provided by (used in) investing activities

7,453,523

(60,223,772

)

Cash flows from financing activities:

Distributions paid

(25,800,111

)

(25,339,844

)

Proceeds from the sale of redeemable Series A Preferred Units

-

36,131,000

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

-

(668

)

Acquisition of interest rate derivatives

-

(556,017

)

Repurchase of Beneficial Unit Certificates

(1,697,613

)

(1,466,222

)

Proceeds from the sale of Beneficial Unit Certificates

626,033

-

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

(12,531

)

-

Payment of tax withholding related to restricted unit awards

-

(153,306

)

Distribution to noncontrolling interest

-

(76,316

)

Proceeds from debt financing

238,920,000

135,100,000

Principal payments on debt financing

(253,250,185

)

(36,093,863

)

Principal payments on mortgages payable

(7,963,815

)

(884,826

)

Principal borrowing on unsecured lines of credit

30,540,000

43,031,000

Principal payments on unsecured and secured lines of credit

(52,074,400

)

(90,560,000

)

Decrease in security deposit liability related to restricted cash

(23,243

)

(105,320

)

Debt financing and other deferred costs

(625,706

)

(1,469,234

)

Net cash provided by (used in) financing activities

(71,361,571

)

57,556,384

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

(45,911,060

)

10,499,241

Cash, cash equivalents and restricted cash at beginning of period

71,583,329

27,506,220

Cash, cash equivalents and restricted cash at end of period

$

25,672,269

$

38,005,461

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

17,571,617

$

16,158,444

Cash paid during the period for income taxes

$

178,564

$

3,007,000

Supplemental disclosure of noncash investing and financing activities:

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

$

9,652,968

$

7,607,693

Distributions declared but not paid for Series A Preferred Units

$

708,750

$

517,500

Land contributed as investment in an unconsolidated entity

$

2,879,473

$

3,091,023

Capital expenditures financed through accounts payable

$

5,898

$

76,064

Deferred financing costs financed through accounts payable

$

12,836

$

1,887

September 30, 2018

September 30, 2017

Cash and cash equivalents

$

24,969,157

$

35,556,115

Restricted cash

703,112

2,449,346

Total cash, cash equivalents and restricted cash

$

25,672,269

$

38,005,461

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

The volatility of the fair value of the security.

Maximum Exposure to Loss

September 30, 2018

December 31, 2017

Mortgage revenue bonds

$

66,358,000

$

146,344,195

Property loans

15,524,613

15,824,613

Investment in unconsolidated entities

80,294,647

39,608,927

$

162,177,260

$

201,777,735

September 30, 2018

Description of Mortgage Revenue Bonds Held in Trust

State

Cost Adjusted for

Paydowns

Cumulative

Unrealized Gain

Cumulative

Unrealized Loss

Estimated Fair Value

Courtyard - Series A ⁽⁵⁾

CA

$

10,230,000

$

767,954

$

-

$

10,997,954

Glenview Apartments - Series A ⁽⁴⁾

CA

4,593,499

415,667

-

5,009,166

Harmony Court Bakersfield - Series A ⁽⁵⁾

CA

3,730,000

244,930

-

3,974,930

Harmony Terrace - Series A ⁽⁵⁾

CA

6,900,000

520,937

-

7,420,937

Harden Ranch - Series A ⁽³⁾

CA

6,793,508

816,778

-

7,610,286

Las Palmas II - Series A ⁽⁵⁾

CA

1,695,000

110,566

-

1,805,566

Montclair Apartments - Series A ⁽⁴⁾

CA

2,488,555

281,929

-

2,770,484

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

CA

12,471,000

782,663

-

13,253,663

San Vicente - Series A ⁽⁵⁾

CA

3,495,000

211,792

-

3,706,792

Santa Fe Apartments - Series A ⁽⁴⁾

CA

3,014,791

353,169

-

3,367,960

Seasons at Simi Valley - Series A ⁽⁵⁾

CA

4,335,920

558,219

-

4,894,139

Seasons Lakewood - Series A ⁽⁵⁾

CA

7,350,000

520,052

-

7,870,052

Seasons San Juan Capistrano - Series A ⁽⁵⁾

CA

12,375,000

875,598

-

13,250,598

Summerhill - Series A ⁽⁵⁾

CA

6,423,000

391,809

-

6,814,809

Sycamore Walk - Series A ⁽⁵⁾

CA

3,607,439

294,702

-

3,902,141

The Village at Madera - Series A ⁽⁵⁾

CA

3,085,000

202,576

-

3,287,576

Tyler Park Townhomes - Series A ⁽³⁾

CA

5,919,230

669,130

-

6,588,360

Vineyard Gardens - Series A & B ⁽²⁾

CA

6,841,000

456,388

-

7,297,388

Westside Village Market - Series A ⁽³⁾

CA

3,868,205

392,487

-

4,260,692

Brookstone ⁽¹⁾

IL

7,437,328

1,872,124

-

9,309,452

Copper Gate Apartments ⁽³⁾

IN

5,100,000

607,810

-

5,707,810

Renaissance - Series A ⁽⁴⁾

LA

11,153,363

700,482

-

11,853,845

Live 929 Apartments ⁽²⁾

MD

40,287,043

2,642,087

-

42,929,130

Woodlynn Village ⁽¹⁾

MN

4,244,000

9,283

-

4,253,283

Greens Property - Series A ⁽³⁾

NC

8,056,000

811,822

-

8,867,822

Silver Moon - Series A ⁽⁴⁾

NM

7,837,176

647,038

-

8,484,214

Ohio Properties - Series A ⁽¹⁾

OH

14,022,004

363,198

-

14,385,202

Bridle Ridge ⁽¹⁾

SC

7,395,000

44,052

-

7,439,052

Columbia Gardens ⁽⁵⁾

SC

13,261,234

1,281,313

-

14,542,547

Companion at Thornhill Apartments ⁽⁵⁾

SC

11,322,984

967,595

-

12,290,579

Cross Creek ⁽¹⁾

SC

6,142,746

2,519,386

-

8,662,132

The Palms at Premier Park Apartments ⁽³⁾

SC

19,094,174

1,989,068