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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 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)
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Delaware |
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47-0810385 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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1004 Farnam Street, Suite 400, Omaha, Nebraska |
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68102 |
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(Address of principal executive offices) |
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(Zip Code) |
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(402) 444-1630 |
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(Registrant’s telephone number, including area code)
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N/A |
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( Former name, former address and former fiscal year, if changed since last report ) |
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P. |
ATAX |
The NASDAQ Stock Market, LLC |
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 |
☐ |
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Accelerated filer |
☒ |
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Non- accelerated filer |
☐ |
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Smaller reporting company |
☒ |
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Emerging growth company |
☐ |
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|
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 September 30, 2019, the registrant had 60,835,204 Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P. outstanding.
PART I – FINANCIAL INFORMATION
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4 |
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4 |
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5 |
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6 |
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7 |
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9 |
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10 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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42 |
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62 |
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64 |
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PART II – OTHER INFORMATION |
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65 |
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66 |
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68 |
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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:
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• |
current maturities of our financing arrangements and our ability to renew or refinance such financing arrangements; |
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• |
defaults on the mortgage loans securing our mortgage revenue bonds (“MRBs”); |
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• |
the competitive environment in which we operate; |
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• |
risks associated with investing in multifamily and student residential properties and commercial properties, including changes in business conditions and the general economy; |
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• |
changes in interest rates; |
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• |
our ability to use borrowings or obtain capital to finance our assets; |
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• |
local, regional, national and international economic and credit market conditions; |
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• |
recapture of previously issued Low Income Housing Tax Credits (“LIHTCs”) in accordance with Section 42 of the Internal Revenue Code; |
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• |
changes in the United States Department of Housing and Urban Development’s (“HUD”) Capital Fund Program; |
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• |
geographic concentration within the MRB portfolio held by the Partnership; |
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• |
appropriations risk related to the funding of federal housing programs, including HUD Section 8; and |
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• |
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 - FINANCI AL INFORMATION
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
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September 30, 2019 |
|
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December 31, 2018 |
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|
|
|
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|
|
Cash and cash equivalents |
|
$ |
40,782,506 |
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$ |
32,001,925 |
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Restricted cash |
|
|
570,990 |
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|
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1,266,686 |
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Interest receivable, net |
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7,927,509 |
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|
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7,011,839 |
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Mortgage revenue bonds held in trust, at fair value (Note 6) |
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747,157,387 |
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645,258,873 |
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Mortgage revenue bonds, at fair value (Note 6) |
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30,125,333 |
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86,894,562 |
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Public housing capital fund trust certificates, at fair value (Note 7) |
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44,684,506 |
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48,672,086 |
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Real estate assets: (Note 8) |
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|
|
|
|
|
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Land and improvements |
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4,900,465 |
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|
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4,971,665 |
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Buildings and improvements |
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72,003,079 |
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|
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71,897,070 |
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Real estate assets before accumulated depreciation |
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76,903,544 |
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|
|
76,868,735 |
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Accumulated depreciation |
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(14,650,397 |
) |
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(12,272,387 |
) |
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Net real estate assets |
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|
62,253,147 |
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64,596,348 |
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Investments in unconsolidated entities (Note 9) |
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87,059,995 |
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76,534,306 |
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Property loans, net of loan loss allowance (Note 10) |
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|
7,999,094 |
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15,961,012 |
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Other assets (Note 12) |
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|
4,940,703 |
|
|
|
4,515,609 |
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Total Assets |
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$ |
1,033,501,170 |
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$ |
982,713,246 |
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Liabilities: |
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Accounts payable, accrued expenses and other liabilities (Note 13) |
|
$ |
9,592,950 |
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$ |
7,543,822 |
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Distribution payable |
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|
8,869,350 |
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|
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7,576,167 |
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Unsecured lines of credit (Note 14) |
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13,200,000 |
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|
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35,659,200 |
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Debt financing, net (Note 15) |
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|
538,812,130 |
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505,663,565 |
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Mortgages payable and other secured financing, net (Note 16) |
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|
27,049,871 |
|
|
|
27,454,375 |
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Total Liabilities |
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597,524,301 |
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|
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583,897,129 |
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Commitments and Contingencies (Note 18) |
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|
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|
|
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Redeemable Series A Preferred Units, approximately $94.5 million redemption value, 9.5 million issued and outstanding, net (Note 19) |
|
|
94,377,414 |
|
|
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94,350,376 |
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Partnersʼ Capital: |
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|
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General Partner (Note 1) |
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|
731,741 |
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|
|
344,590 |
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Beneficial Unit Certificates ("BUCs," Note 1) |
|
|
340,867,714 |
|
|
|
304,121,151 |
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Total Partnersʼ Capital |
|
|
341,599,455 |
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|
|
304,465,741 |
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Total Liabilities and Partnersʼ Capital |
|
$ |
1,033,501,170 |
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|
$ |
982,713,246 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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|
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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||||||||||
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2019 |
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2018 |
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2019 |
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2018 |
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Revenues: |
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|
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Property revenues |
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$ |
1,974,546 |
|
|
$ |
2,285,736 |
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$ |
6,002,971 |
|
|
$ |
7,025,390 |
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Investment income |
|
|
12,589,743 |
|
|
|
12,733,013 |
|
|
|
37,072,288 |
|
|
|
38,360,534 |
|
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Contingent interest income |
|
|
3,360 |
|
|
|
4,246,094 |
|
|
|
3,045,462 |
|
|
|
4,246,094 |
|
|
Other interest income |
|
|
206,625 |
|
|
|
5,217,741 |
|
|
|
635,732 |
|
|
|
7,019,465 |
|
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Other income |
|
|
91,428 |
|
|
|
1,518,531 |
|
|
|
120,181 |
|
|
|
1,592,831 |
|
|
Total revenues |
|
|
14,865,702 |
|
|
|
26,001,115 |
|
|
|
46,876,634 |
|
|
|
58,244,314 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate operating (exclusive of items shown below) |
|
|
1,381,909 |
|
|
|
1,606,765 |
|
|
|
3,477,983 |
|
|
|
4,292,745 |
|
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Impairment of securities |
|
|
- |
|
|
|
309,958 |
|
|
|
- |
|
|
|
1,141,020 |
|
|
Impairment charge on real estate assets |
|
|
75,000 |
|
|
|
150,000 |
|
|
|
75,000 |
|
|
|
150,000 |
|
|
Depreciation and amortization |
|
|
743,503 |
|
|
|
864,600 |
|
|
|
2,384,115 |
|
|
|
2,692,731 |
|
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Interest expense (Note 2) |
|
|
6,509,021 |
|
|
|
6,394,683 |
|
|
|
19,110,876 |
|
|
|
18,091,314 |
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General and administrative |
|
|
6,992,528 |
|
|
|
3,653,288 |
|
|
|
12,267,917 |
|
|
|
9,506,258 |
|
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Total expenses |
|
|
15,701,961 |
|
|
|
12,979,294 |
|
|
|
37,315,891 |
|
|
|
35,874,068 |
|
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Other Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of real estate assets, net |
|
|
- |
|
|
|
4,051,429 |
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|
|
- |
|
|
|
4,051,429 |
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|
Gain on sale of investment in an unconsolidated entity |
|
|
10,475,927 |
|
|
|
- |
|
|
|
10,475,927 |
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|
|
- |
|
|
Income before income taxes |
|
|
9,639,668 |
|
|
|
17,073,250 |
|
|
|
20,036,670 |
|
|
|
26,421,675 |
|
|
Income tax benefit |
|
|
(68,235 |
) |
|
|
(809,805 |
) |
|
|
(9,236 |
) |
|
|
(803,805 |
) |
|
Net income |
|
|
9,707,903 |
|
|
|
17,883,055 |
|
|
|
20,045,906 |
|
|
|
27,225,480 |
|
|
Redeemable Series A Preferred Unit distributions and accretion |
|
|
(717,762 |
) |
|
|
(717,763 |
) |
|
|
(2,153,288 |
) |
|
|
(2,153,288 |
) |
|
Net income available to Partners |
|
$ |
8,990,141 |
|
|
$ |
17,165,292 |
|
|
$ |
17,892,618 |
|
|
$ |
25,072,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to Partners allocated to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner |
|
$ |
1,266,157 |
|
|
$ |
2,163,058 |
|
|
$ |
2,078,086 |
|
|
$ |
2,242,127 |
|
|
Limited Partners - BUCs |
|
|
7,695,468 |
|
|
|
14,933,260 |
|
|
|
15,719,693 |
|
|
|
22,662,993 |
|
|
Limited Partners - Restricted units |
|
|
28,516 |
|
|
|
68,974 |
|
|
|
94,839 |
|
|
|
167,072 |
|
|
|
|
$ |
8,990,141 |
|
|
$ |
17,165,292 |
|
|
$ |
17,892,618 |
|
|
$ |
25,072,192 |
|
|
BUC holders' interest in net income per BUC, basic and diluted |
|
$ |
0.13 |
|
|
$ |
0.25 |
|
|
$ |
0.26 |
|
|
$ |
0.38 |
|
|
Weighted average number of BUCs outstanding, basic |
|
|
60,519,542 |
|
|
|
59,907,123 |
|
|
|
60,457,299 |
|
|
|
59,989,585 |
|
|
Weighted average number of BUCs outstanding, diluted |
|
|
60,519,542 |
|
|
|
59,907,123 |
|
|
|
60,457,299 |
|
|
|
59,989,585 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Net income |
|
$ |
9,707,903 |
|
|
$ |
17,883,055 |
|
|
$ |
20,045,906 |
|
|
$ |
27,225,480 |
|
|
Reversal of net unrealized losses on securities with other-than-temporary impairment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
525,446 |
|
|
Unrealized gain (loss) on securities |
|
|
19,048,316 |
|
|
|
(6,744,509 |
) |
|
|
42,112,324 |
|
|
|
(24,097,818 |
) |
|
Unrealized gain (loss) on bond purchase commitments |
|
|
- |
|
|
|
51,760 |
|
|
|
- |
|
|
|
(1,956,095 |
) |
|
Comprehensive income |
|
|
28,756,219 |
|
|
|
11,190,306 |
|
|
|
62,158,230 |
|
|
|
1,697,013 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(UNAUDITED)
|
|
|
General Partner |
|
|
# of BUCs - Restricted and Unrestricted |
|
|
BUCs - Restricted and Unrestricted |
|
|
Total |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|||||
|
|
$ |
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 |
|
|
Distributions paid or accrued ($0.125 per BUC): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular distribution |
|
|
(76,631 |
) |
|
|
- |
|
|
|
(7,586,433 |
) |
|
|
(7,663,064 |
) |
|
|
- |
|
|
Net income allocable to Partners |
|
|
31,684 |
|
|
|
- |
|
|
|
3,136,743 |
|
|
|
3,168,427 |
|
|
|
- |
|
|
Restricted unit compensation expense |
|
|
1,862 |
|
|
|
- |
|
|
|
184,368 |
|
|
|
186,230 |
|
|
|
- |
|
|
Unrealized gain on securities |
|
|
149,201 |
|
|
|
- |
|
|
|
14,770,880 |
|
|
|
14,920,081 |
|
|
|
14,920,081 |
|
|
Balance as of June 30, 2019 |
|
|
507,393 |
|
|
|
60,691,467 |
|
|
|
320,238,700 |
|
|
|
320,746,093 |
|
|
|
82,042,050 |
|
|
Distributions paid or accrued ($0.125 per BUC): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of Tier 2 income (Note 3) |
|
|
(1,264,949 |
) |
|
|
- |
|
|
|
(3,794,847 |
) |
|
|
(5,059,796 |
) |
|
|
- |
|
|
Distribution of Tier 3 income (Note 3) |
|
|
- |
|
|
|
- |
|
|
|
(3,809,553 |
) |
|
|
(3,809,553 |
) |
|
|
- |
|
|
Net income allocable to Partners |
|
|
1,266,157 |
|
|
|
- |
|
|
|
7,723,984 |
|
|
|
8,990,141 |
|
|
|
- |
|
|
Restricted units awarded |
|
|
- |
|
|
|
353,197 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Restricted unit compensation expense |
|
|
32,657 |
|
|
|
- |
|
|
|
3,233,020 |
|
|
|
3,265,677 |
|
|
|
- |
|
|
BUCs surrendered to pay tax withholding on vested restricted units |
|
|
- |
|
|
|
(209,460 |
) |
|
|
(1,581,423 |
) |
|
|
(1,581,423 |
) |
|
|
- |
|
|
Unrealized gain on securities |
|
|
190,483 |
|
|
|
- |
|
|
|
18,857,833 |
|
|
|
19,048,316 |
|
|
|
19,048,316 |
|
|
Balance as of September 30, 2019 |
|
$ |
731,741 |
|
|
|
60,835,204 |
|
|
$ |
340,867,714 |
|
|
$ |
341,599,455 |
|
|
$ |
101,090,366 |
|
7
|
|
|
General Partner |
|
|
# of BUCs - Restricted and Unrestricted |
|
|
BUCs - Restricted and Unrestricted |
|
|
Total |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|||||
|
|
$ |
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 |
|
|
Distributions paid or accrued ($0.125 per BUC): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular distribution |
|
|
(76,330 |
) |
|
|
- |
|
|
|
(7,556,616 |
) |
|
|
(7,632,946 |
) |
|
|
- |
|
|
Net income allocable to Partners |
|
|
26,204 |
|
|
|
- |
|
|
|
2,594,155 |
|
|
|
2,620,359 |
|
|
|
- |
|
|
Repurchase of BUCs |
|
|
- |
|
|
|
(70,110 |
) |
|
|
(440,959 |
) |
|
|
(440,959 |
) |
|
|
- |
|
|
Restricted units awarded |
|
|
- |
|
|
|
70,110 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Restricted units compensation expense |
|
|
5,436 |
|
|
|
- |
|
|
|
538,085 |
|
|
|
543,521 |
|
|
|
- |
|
|
Unrealized gain on securities |
|
|
45,216 |
|
|
|
- |
|
|
|
4,476,351 |
|
|
|
4,521,567 |
|
|
|
4,065,221 |
|
|
Unrealized loss on bond purchase commitments |
|
|
(10,328 |
) |
|
|
- |
|
|
|
(1,022,460 |
) |
|
|
(1,032,788 |
) |
|
|
(1,032,788 |
) |
|
Reversal of net unrealized loss on securities with other-than-temporary impairment |
|
|
5,254 |
|
|
|
- |
|
|
|
520,192 |
|
|
|
525,446 |
|
|
|
981,792 |
|
|
Balance as of June 30, 2018 |
|
|
180,641 |
|
|
|
60,452,928 |
|
|
|
286,492,826 |
|
|
|
286,673,467 |
|
|
|
56,788,112 |
|
|
Distributions paid or accrued ($0.125 per BUC): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular distribution |
|
|
(13,554 |
) |
|
|
- |
|
|
|
(1,341,891 |
) |
|
|
(1,355,445 |
) |
|
|
- |
|
|
Distribution of Tier 2 income (Note 3) |
|
|
(2,074,381 |
) |
|
|
|
|
|
|
(6,223,142 |
) |
|
|
(8,297,523 |
) |
|
|
|
|
|
Net income allocable to Partners |
|
|
2,163,058 |
|
|
|
- |
|
|
|
15,002,234 |
|
|
|
17,165,292 |
|
|
|
- |
|
|
Sale of BUCs, net of issuance costs |
|
|
- |
|
|
|
67,333 |
|
|
|
383,990 |
|
|
|
383,990 |
|
|
|
- |
|
|
Restricted units compensation expense |
|
|
6,222 |
|
|
|
- |
|
|
|
616,005 |
|
|
|
622,227 |
|
|
|
- |
|
|
Unrealized loss on securities |
|
|
(67,445 |
) |
|
|
- |
|
|
|
(6,677,064 |
) |
|
|
(6,744,509 |
) |
|
|
(6,288,163 |
) |
|
Unrealized gain on bond purchase commitments |
|
|
518 |
|
|
|
- |
|
|
|
51,242 |
|
|
|
51,760 |
|
|
|
51,760 |
|
|
Reversal of net unrealized loss on securities with other-than-temporary impairment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(456,346 |
) |
|
Balance as of September 30, 2018 |
|
$ |
195,059 |
|
|
|
60,520,261 |
|
|
$ |
288,304,200 |
|
|
$ |
288,499,259 |
|
|
$ |
50,095,363 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
8
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
2019 |
|
|
2018 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
20,045,906 |
|
|
$ |
27,225,480 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
2,384,115 |
|
|
|
2,692,731 |
|
|
Gain on sale of real estate assets, net |
|
|
- |
|
|
|
(4,051,429 |
) |
|
Gain on sale of investment in an unconsolidated entity |
|
|
(10,475,927 |
) |
|
|
- |
|
|
Contingent interest realized on investing activities |
|
|
(3,045,462 |
) |
|
|
(4,246,094 |
) |
|
Impairment of securities |
|
|
- |
|
|
|
1,141,020 |
|
|
Impairment charge on real estate assets |
|
|
75,000 |
|
|
|
150,000 |
|
|
Loss (gain) on derivatives, net of cash paid |
|
|
574,028 |
|
|
|
(1,266,808 |
) |
|
Restricted unit compensation expense |
|
|
3,636,091 |
|
|
|
1,372,384 |
|
|
Bond premium/discount amortization |
|
|
(106,114 |
) |
|
|
(50,839 |
) |
|
Debt premium amortization |
|
|
(8,410 |
) |
|
|
- |
|
|
Amortization of deferred financing costs |
|
|
1,476,463 |
|
|
|
1,304,879 |
|
|
Deferred income tax expense (benefit) & income tax payable/receivable |
|
|
100,804 |
|
|
|
(840,871 |
) |
|
Change in preferred return receivable from unconsolidated entities, net |
|
|
(1,935,286 |
) |
|
|
(2,642,634 |
) |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Increase in interest receivable |
|
|
(915,670 |
) |
|
|
(1,395,660 |
) |
|
(Increase) decrease in other assets |
|
|
694,925 |
|
|
|
(921,756 |
) |
|
Increase (decrease) in accounts payable and accrued expenses |
|
|
327,188 |
|
|
|
(473,415 |
) |
|
Net cash provided by operating activities |
|
|
12,827,651 |
|
|
|
17,996,988 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(88,110 |
) |
|
|
(496,336 |
) |
|
Proceeds from sale of MF Properties |
|
|
- |
|
|
|
13,450,000 |
|
|
Proceeds from sale of investment in an unconsolidated entity |
|
|
20,189,663 |
|
|
|
- |
|
|
Acquisition of mortgage revenue bonds |
|
|
(19,250,000 |
) |
|
|
(19,540,000 |
) |
|
Contributions to unconsolidated entities |
|
|
(18,304,139 |
) |
|
|
(35,153,613 |
) |
|
Principal payments received on mortgage revenue bonds and contingent interest |
|
|
15,508,192 |
|
|
|
46,001,893 |
|
|
Principal payments received on taxable mortgage revenue bonds |
|
|
25,997 |
|
|
|
33,384 |
|
|
Principal payments received on PHC Certificates |
|
|
4,775,103 |
|
|
|
226,714 |
|
|
Cash paid for land held for development and deposits on potential purchases |
|
|
- |
|
|
|
(2,764,403 |
) |
|
Advances on property loans |
|
|
(405,717 |
) |
|
|
(66,652 |
) |
|
Principal payments received on property loans and contingent interest |
|
|
11,413,098 |
|
|
|
5,762,536 |
|
|
Net cash provided by investing activities |
|
|
13,864,087 |
|
|
|
7,453,523 |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Distributions paid |
|
|
(25,758,751 |
) |
|
|
(25,800,111 |
) |
|
Repurchase of BUCs |
|
|
- |
|
|
|
(1,697,613 |
) |
|
Proceeds from the sale of BUCs |
|
|
- |
|
|
|
626,033 |
|
|
Payment of offering costs related to the sale of BUCs |
|
|
- |
|
|
|
(12,531 |
) |
|
Payment of tax withholding related to restricted unit awards |
|
|
(1,581,423 |
) |
|
|
- |
|
|
Proceeds from debt financing |
|
|
122,921,712 |
|
|
|
238,920,000 |
|
|
Principal payments on debt financing |
|
|
(90,025,780 |
) |
|
|
(253,250,185 |
) |
|
Principal payments on mortgages payable |
|
|
(474,391 |
) |
|
|
(7,963,815 |
) |
|
Principal borrowing on unsecured lines of credit |
|
|
23,200,000 |
|
|
|
30,540,000 |
|
|
Principal payments on unsecured lines of credit |
|
|
(45,659,200 |
) |
|
|
(52,074,400 |
) |
|
Decrease in security deposit liability related to restricted cash |
|
|
(51,324 |
) |
|
|
(23,243 |
) |
|
Debt financing and other deferred costs |
|
|
(1,177,696 |
) |
|
|
(625,706 |
) |
|
Net cash used in financing activities |
|
|
(18,606,853 |
) |
|
|
(71,361,571 |
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
8,084,885 |
|
|
|
(45,911,060 |
) |
|
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 |
|
$ |
41,353,496 |
|
|
$ |
25,672,269 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
16,874,341 |
|
|
$ |
17,571,617 |
|
|
Cash paid during the period for income taxes |
|
|
155,000 |
|
|
|
178,564 |
|
|
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Distributions declared but not paid for BUCs and General Partner |
|
$ |
8,869,350 |
|
|
$ |
9,652,968 |
|
|
Distributions declared but not paid for Series A Preferred Units |
|
|
708,750 |
|
|
|
708,750 |
|
|
Land contributed as investment in an unconsolidated entity |
|
|
- |
|
|
|
2,879,473 |
|
|
Capital expenditures financed through accounts payable |
|
|
24,504 |
|
|
|
5,898 |
|
|
Deferred financing costs financed through accounts payable |
|
|
15,000 |
|
|
|
12,836 |
|
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:
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|||
|
Cash and cash equivalents |
|
$ |
40,782,506 |
|
|
$ |
24,969,157 |
|
|
Restricted cash |
|
|
570,990 |
|
|
|
703,112 |
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
41,353,496 |
|
|
$ |
25,672,269 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
9
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
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 to 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 and student 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 Greystone AF Manager LLC (“Greystone Manager”). The Partnership has previously issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partnership 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 September 30, 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, which is committed to loan money or 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. |
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.
10
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 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, operating 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 lessor 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.
PHC Certificate Impairment
The Partnership periodically reviews the PHC Certificates for impairment. The Partnership evaluates whether declines in the fair value of the investments below amortized cost are other-than temporary. Factors considered include:
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• |
The duration and severity of the decline in fair value, |
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|
• |
The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers, |
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|
• |
Potential changes in HUD appropriations to local housing authorities, |
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|
• |
Downgrade in the security’s rating by Standard & Poor’s, and |
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|
• |
Volatility of the fair value of the security. |
Real Estate Assets Impairment
The Partnership reviews real estate assets for impairment at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of a real estate asset may not be recoverable, the Partnership compares the carrying amount of the real estate asset to the undiscounted net cash flows expected to be generated from the use of the asset. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.
11
Certain prior year amounts have been reclassified for consistency with the current period presentation.
In the three and nine months ended September 30, 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 reported as a separate line item in the Partnership’s condensed consolidated statement of operations. Accordingly, for the three and nine months ended September 30, 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.
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 September 30, 2019, and the results of operations for the interim periods presented, have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying 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 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. In October 2019, the FASB approved a delay in the effective date of this ASU for smaller reporting companies, such as the Partnership, and other non-SEC reporting entities. The FASB expects to issue two final ASUs relating to this matter in mid-November 2019. The new ASUs will delay the effective date for such entities to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Partnership is a smaller reporting company, it may elect to delay its effective date. The Partnership has c ompleted an assessment of the items that are within the scope of the new ASU. The items include property loans, receivables reported within other assets, financial guarantees and commitments. Also within the scope of the ASU are changes to the impairment model for available-for-sale debt securities, which includes the Partnership’s MRBs, PHC Certificates, and taxable MRBs. The Partnership is currently developing data collection processes, assessment procedures and internal controls required to implement the ASU for such items in the Partnership’s condensed consolidated financial statements. The Partnership is continuing to evaluate whether to defer their implementation date of the ASU and will make a final determination in the fourth quarter of 2019.
In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections” which amends the SEC Rules, Regulations and Interpretations section of various topics within the FASB Accounting Standards Codification. The amendments were made as the result of the SEC’s Final Rule Releases No. 33-10532, “Disclosure Update and Simplification”, No. 33-10231, “Investment Company Reporting Modernization”, and No. 33-10442, “Miscellaneous Update”. The Partnership’s condensed consolidated financial statements and notes to condensed consolidated financial statements are in compliance with the relevant Codification updates. There were no significant changes to the Partnership’s condensed consolidated financial statements as a result of the ASU.
12
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 and nine months ended September 30, 2019 and 2018.
5. Variable Interest Entities
Consolidated VIEs
The Partnership has determined the Tender Option Bond (“TOB”), Term TOB, Term A/B and TEBS Financings are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of each VIE, the Partnership considered which party has the power to control the activities of the VIE 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 underlying assets were sold, the extent to which the VIEs will be exposed to gains or losses would result from decisions made by the Partnership.
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 Floater Certificates for the TOB Trusts and the Class A Certificates for the Term TOB, 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 Notes 6 and 7).
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 16 and 17 non-consolidated VIEs as of September 30, 2019 and December 31, 2018, respectively. The following table summarizes the Partnership’s variable interests in these entities as of September 30, 2019 and December 31, 2018:
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Maximum Exposure to Loss |
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|
September 30, 2019 |
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|
December 31, 2018 |
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||
|
Mortgage revenue bonds |
|
$ |
30,480,000 |
|
|
$ |
51,791,000 |
|
|
Property loans |
|
|
- |
|
|
|
8,367,635 |
|
|
Investment in unconsolidated entities |
|
|
87,059,995 |
|
|
|
76,534,306 |
|
|
|
|
$ |
117,539,995 |
|
|
$ |
136,692,941 |
|
13
The maximum exposure to loss for the MRBs as of September 30, 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 September 30, 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 September 30, 2019 and December 31, 2018 is equal to the Partnership’s carrying value.
14
6 . Investments in Mortgage Revenue Bonds
MRBs owned by the Partnership provide construction and/or permanent financing for Residential Properties and a commercial property. 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 September 30, 2019 and December 31, 2018:
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|
September 30, 2019 |
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|
Description of Mortgage Revenue Bonds Held in Trust |
|
State |
|
Cost Adjusted for Paydowns |
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|
Cumulative Unrealized Gain |
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|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
||||
|
Courtyard - Series A (5) |
|
CA |
|
$ |
10,168,651 |
|
|
$ |
1,696,441 |
|
|
$ |
- |
|
|
$ |
11,865,092 |
|
|
Glenview Apartments - Series A (4) |
|
CA |
|
|
4,546,210 |
|
|
|
767,387 |
|
|
|
- |
|
|
|
5,313,597 |
|
|
Harmony Court Bakersfield - Series A (5) |
|
CA |
|
|
3,707,631 |
|
|
|
582,453 |
|
|
|
- |
|
|
|
4,290,084 |
|
|
Harmony Terrace - Series A (5) |
|
CA |
|
|
6,863,296 |
|
|
|
1,185,795 |
|
|
|
- |
|
|
|
8,049,091 |
|
|
Harden Ranch - Series A (3) |
|
CA |
|
|
6,719,931 |
|
|
|
1,207,559 |
|
|
|
- |
|
|
|
7,927,490 |
|
|
Las Palmas II - Series A (5) |
|
CA |
|
|
1,682,524 |
|
|
|
278,924 |
|
|
|
- |
|
|
|
1,961,448 |
|
|
Montclair Apartments - Series A (4) |
|
CA |
|
|
2,462,936 |
|
|
|
415,737 |
|
|
|
- |
|
|
|
2,878,673 |
|
|
Montecito at Williams Ranch Apartments - Series A (7) |
|
CA |
|
|
7,690,000 |
|
|
|
1,651,838 |
|
|
|
- |
|
|
|
9,341,838 |
|
|
San Vicente - Series A (5) |
|
CA |
|
|
3,469,276 |
|
|
|
558,315 |
|
|
|
- |
|
|
|
4,027,591 |
|
|
Santa Fe Apartments - Series A (4) |
|
CA |
|
|
2,983,755 |
|
|
|
548,485 |
|
|
|
- |
|
|
|
3,532,240 |
|
|
Seasons at Simi Valley - Series A (5) |
|
CA |
|
|
4,293,474 |
|
|
|
912,975 |
|
|
|
- |
|
|
|
5,206,449 |
|
|
Seasons Lakewood - Series A (5) |
|
CA |
|
|
7,310,902 |
|
|
|
1,191,125 |
|
|
|
- |
|
|
|
8,502,027 |
|
|
Seasons San Juan Capistrano - Series A (5) |
|
CA |
|
|
12,309,171 |
|
|
|
2,005,465 |
|
|
|
- |
|
|
|
14,314,636 |
|
|
Summerhill - Series A (5) |
|
CA |
|
|
6,384,482 |
|
|
|
972,132 |
|
|
|
- |
|
|
|
7,356,614 |
|
|
Sycamore Walk - Series A (5) |
|
CA |
|
|
3,568,952 |
|
|
|
590,916 |
|
|
|
- |
|
|
|
4,159,868 |
|
|
The Village at Madera - Series A (5) |
|
CA |
|
|
3,066,499 |
|
|
|
481,734 |
|
|
|
- |
|
|
|
3,548,233 |
|
|
Tyler Park Townhomes - Series A (3) |
|
CA |
|
|
5,854,394 |
|
|
|
859,781 |
|
|
|
- |
|
|
|
6,714,175 |
|
|
Vineyard Gardens - Series A (7) |
|
CA |
|
|
3,995,000 |
|
|
|
852,151 |
|
|
|
- |
|
|
|
4,847,151 |
|
|
Westside Village Market - Series A (3) |
|
CA |
|
|
3,825,835 |
|
|
|
601,208 |
|
|
|
- |
|
|
|
4,427,043 |
|
|
Brookstone (1) |
|
IL |
|
|
7,413,743 |
|
|
|
2,191,618 |
|
|
|
- |
|
|
|
9,605,361 |
|
|
Copper Gate Apartments (3) |
|
IN |
|
|
5,055,000 |
|
|
|
710,986 |
|
|
|
- |
|
|
|
5,765,986 |
|
|
Renaissance - Series A (4) |
|
LA |
|
|
11,032,412 |
|
|
|
1,899,144 |
|
|
|
- |
|
|
|
12,931,556 |
|
|
Live 929 Apartments (7), (8) |
|
MD |
|
|
40,055,592 |
|
|
|
- |
|
|
|
(149,095 |
) |
|
|
39,906,497 |
|
|
Woodlynn Village (1) |
|
MN |
|
|
4,197,000 |
|
|
|
10,509 |
|
|
|
- |
|
|
|
4,207,509 |
|
|
Gateway Village (2) |
|
NC |
|
|
2,600,000 |
|
|
|
289,170 |
|
|
|
- |
|
|
|
2,889,170 |
|
|
Greens Property - Series A (3) |
|
NC |
|
|
7,960,000 |
|
|
|
844,249 |
|
|
|
- |
|
|
|
8,804,249 |
|
|
Lynnhaven Apartments (2) |
|
NC |
|
|
3,450,000 |
|
|
|
383,707 |
|
|
|
- |
|
|
|
3,833,707 |
|
|
Silver Moon - Series A (4) |
|
NM |
|
|
7,777,580 |
|
|
|
1,447,981 |
|
|
|
- |
|
|
|
9,225,561 |
|
|
Village at Avalon - Series A (6) |
|
NM |
|
|
16,329,272 |
|
|
|
3,275,151 |
|
|
|
- |
|
|
|
19,604,423 |
|
|
Ohio Properties - Series A (1) |
|
OH |
|
|
13,890,001 |
|
|
|
48,160 |
|
|
|
- |
|
|
|
13,938,161 |
|
|
Bridle Ridge (1) |
|
SC |
|
|
7,315,000 |
|
|
|
54,050 |
|
|
|
- |
|
|
|
7,369,050 |
|
|
Columbia Gardens (5) |
|
SC |
|
|
13,105,293 |
|
|
|
2,157,828 |
|
|
|
- |
|
|
|
15,263,121 |
|
|
Companion at Thornhill Apartments (5) |
|
SC |
|
|
11,208,284 |
|
|
|
1,729,367 |
|
|
|
- |
|
|
|
12,937,651 |
|
|
Cross Creek (1) |
|
SC |
|
|
6,144,672 |
|
|
|
2,520,743 |
|
|
|
- |
|
|
|
8,665,415 |
|
|
Rosewood Townhomes - Series A (7) |
|
SC |
|
|
9,280,000 |
|
|
|
114,365 |
|
|
|
- |
|
|
|
9,394,365 |
|
|
South Pointe Apartments - Series A (7) |
|
SC |
|
|
21,600,000 |
|
|
|
362,290 |
|
|
|
- |
|
|
|
21,962,290 |
|
|
The Palms at Premier Park Apartments (3) |
|
SC |
|
|
18,891,224 |
|
|
|
2,779,140 |
|
|
|
- |
|
|
|
21,670,364 |
|
|
Village at River's Edge (5) |
|
SC |
|
|
9,889,108 |
|
|
|
2,330,806 |
|
|
|
- |
|
|
|
12,219,914 |
|
|
Willow Run (5) |
|
SC |
|
|
12,923,882 |
|
|
|
2,126,087 |
|
|
|
- |
|
|
|
15,049,969 |
|
|
Arbors at Hickory Ridge (3) |
|
TN |
|
|
11,092,043 |
|
|
|
2,021,048 |
|
|
|
- |
|
|
|
13,113,091 |
|
|
Pro Nova 2014-1 (2), (8) |
|
TN |
|
|
10,023,617 |
|
|
|
- |
|
|
|
(347,124 |
) |
|
|
9,676,493 |
|
|
Avistar at Copperfield - Series A (2) |
|
TX |
|
|
13,977,000 |
|
|
|
2,333,591 |
|
|
|
- |
|
|
|
16,310,591 |
|
|
Avistar at the Crest - Series A (3) |
|
TX |
|
|
9,279,129 |
|
|
|
1,772,133 |
|
|
|
- |
|
|
|
11,051,262 |
|
|
Avistar at the Oaks - Series A (3) |
|
TX |
|
|
7,496,870 |
|
|
|
1,407,554 |
|
|
|
- |
|
|
|
8,904,424 |
|
|
Avistar at the Parkway - Series A (4) |
|
TX |
|
|
13,020,181 |
|
|
|
2,117,134 |
|
|
|
- |
|
|
|
15,137,315 |
|
|
Avistar at Wilcrest - Series A (2) |
|
TX |
|
|
5,297,000 |
|
|
|
818,097 |
|
|
|
- |
|
|
|
6,115,097 |
|
|
Avistar at Wood Hollow - Series A (2) |
|
TX |
|
|
40,220,000 |
|
|
|
6,546,613 |
|
|
|
- |
|
|
|
46,766,613 |
|
|
Avistar in 09 - Series A (3) |
|
TX |
|
|
6,473,257 |
|
|
|
1,068,331 |
|
|
|
- |
|
|
|
7,541,588 |
|
|
Avistar on the Boulevard - Series A (3) |
|
TX |
|
|
15,807,997 |
|
|
|
2,738,122 |
|
|
|
- |
|
|
|
18,546,119 |
|
|
Avistar on the Hills - Series A (3) |
|
TX |
|
|
5,179,570 |
|
|
|
996,345 |
|
|
|
- |
|
|
|
6,175,915 |
|
|
Bruton Apartments (5) |
|
TX |
|
|
17,839,917 |
|
|
|
3,637,297 |
|
|
|
- |
|
|
|
21,477,214 |
|
|
Concord at Gulfgate - Series A (5) |
|
TX |
|
|
19,018,891 |
|
|
|
3,758,251 |
|
|
|
- |
|
|
|
22,777,142 |
|
|
Concord at Little York - Series A (5) |
|
TX |
|
|
13,323,633 |
|
|
|
2,757,400 |
|
|
|
- |
|
|
|
16,081,033 |
|
|
Concord at Williamcrest - Series A (5) |
|
TX |
|
|
20,639,734 |
|
|
|
4,174,795 |
|
|
|
- |
|
|
|
24,814,529 |
|
|
Crossing at 1415 - Series A (5) |
|
TX |
|
|
7,423,125 |
|
|
|
1,149,904 |
|
|
|
- |
|
|
|
8,573,029 |
|
|
Decatur Angle (5) |
|
TX |
|
|
22,500,338 |
|
|
|
3,869,765 |
|
|
|
- |
|
|
|
26,370,103 |
|
|
Esperanza at Palo Alto (5) |
|
TX |
|
|
19,390,360 |
|
|
|
4,290,792 |
|
|
|
- |
|
|
|
23,681,152 |
|
|
Heights at 515 - Series A (5) |
|
TX |
|
|
6,795,999 |
|
|
|
1,229,217 |
|
|
|
- |
|
|
|
8,025,216 |
|
|
Heritage Square - Series A (4) |
|
TX |
|
|
10,722,964 |
|
|
|
1,471,450 |
|
|
|
- |
|
|
|
12,194,414 |
|
|
Oaks at Georgetown - Series A (5) |
|
TX |
|
|
12,264,411 |
|
|
|
1,750,507 |
|
|
|
- |
|
|
|
14,014,918 |
|
|
Runnymede (1) |
|
TX |
|
|
9,985,000 |
|
|
|
154,466 |
|
|
|
- |
|
|
|
10,139,466 |
|
|
Southpark (1) |
|
TX |
|
|
11,679,665 |
|
|
|
2,411,352 |
|
|
|
- |
|
|
|
14,091,017 |
|
|
15 West Apartments (5) |
|
WA |
|
|
9,689,570 |
|
|
|
2,382,417 |
|
|
|
- |
|
|
|
12,071,987 |
|
|
Mortgage revenue bonds held in trust |
|
|
|
$ |
650,161,253 |
|
|
$ |
97,492,353 |
|
|
$ |
(496,219 |
) |
|
$ |
747,157,387 |
|
|
(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 |
15
|
(5) |
MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 15 |
|
(6) |
MRB held by Morgan Stanley in a secured financing transaction, Note 15 |
|
(7) |
MRBs held by Mizuho Capital Markets, LLC in a secured financing transaction, Note 15 |
|
(8) |
As of the date presented, the MRB had been in a cumulative unrealized loss for less than 12 consecutive months. |
16
|
|
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 |
17
|
|
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 had been in a cumulative unrealized loss position for less than 12 consecutive 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 considered credit losses as of September 30, 2019. The cumulative unrealized loss for the Pro Nova 2014-1 MRB, related to a commercial property, as of September 30, 2019, is a result of fluctuations in market interest rates and comparable trades of MRBs for similar commercial properties. Due to the historical volatility of the fair value of this MRB, the cumulative unrealized loss is considered temporary. The cumulative unrealized loss for the Live 929 Apartments MRB as of September 30, 2019, is due to recent operational results and debt service coverage declines. The Partnership has evaluated the operational results and loan-to-collateral value ratio for the property underlying this MRB and has determined that the cumulative unrealized loss is temporary.
MRB Activity in the First Nine Months of 2019
Acquisitions:
The following MRBs were acquired during the nine months ended September 30, 2019:
|
|
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 |
|
|
Montevista - Series A |
|
June |
|
San Pablo, CA |
|
82 |
|
7/1/2036 |
|
|
5.75 |
% |
|
|
6,720,000 |
|
|
Montevista - Series B |
|
June |
|
San Pablo, CA |
|
82 |
|
7/1/2021 |
|
|
5.75 |
% |
|
|
6,480,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,250,000 |
|
18
The following MRBs were redeemed at prices that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2019:
|
|
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 |
|
|
Courtyard Apartments - Series B |
|
April |
|
Fullerton, CA |
|
|
108 |
|
|
6/1/2019 |
|
|
8.00 |
% |
|
|
6,228,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,802,000 |
|
Restructurings:
The following MRBs were restructured during the nine months ended September 30, 2019. The principal outstanding on the Series B MRBs were collapsed into the principal outstanding on the associated Series A MRBs and the Series B MRBs were eliminated. No cash was paid or received on restructuring. The terms of the Series B MRBs that were eliminated are as follows:
|
|
Month Restructured |
|
Property Location |
|
Units |
|
|
Original Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Restructuring |
|
||||
|
Avistar at Copperfield - Series B |
|
May |
|
Houston, TX |
|
|
192 |
|
|
6/1/2054 |
|
|
12.00 |
% |
|
$ |
4,000,000 |
|
|
Avistar at Wilcrest - Series B |
|
May |
|
Houston, TX |
|
|
88 |
|
|
6/1/2054 |
|
|
12.00 |
% |
|
|
1,550,000 |
|
|
Avistar at Wood Hollow - Series B |
|
May |
|
Austin, TX |
|
|
409 |
|
|
6/1/2054 |
|
|
12.00 |
% |
|
|
8,410,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,960,000 |
|
MRB Activity in the First Nine Months of 2018
Acquisitions:
The following MRB was acquired during the nine months ended September 30, 2018:
|
Property Name |
|
Month Acquired |
|
Property Location |
|
Units |
|
|
Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Acquisition |
|
|||
|
Esperanza at Palo Alto (1) |
|
May |
|
San Antonio, TX |
|
|
322 |
|
|
7/1/2058 |
|
|
5.80 |
% |
|
$ |
19,540,000 |
|
|
(1) |
Previously reported bond purchase commitment that converted to an MRB in May 2018. |
Redemptions:
The following MRBs were redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 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 |
|
|
Oaks at Georgetown - Series B |
|
April |
|
Georgetown, TX |
|
|
192 |
|
|
1/1/2019 |
|
|
8.00 |
% |
|
|
5,512,000 |
|
|
Seasons at Simi Valley - Series B |
|
April |
|
Simi Valley, CA |
|
|
69 |
|
|
9/1/2018 |
|
|
8.00 |
% |
|
|
1,944,000 |
|
|
San Vicente - Series B |
|
May |
|
Soledad, CA |
|
|
50 |
|
|
11/1/2018 |
|
|
8.00 |
% |
|
|
1,825,000 |
|
|
The Village at Madera - Series B |
|
May |
|
Madera, CA |
|
|
75 |
|
|
12/1/2018 |
|
|
8.00 |
% |
|
|
1,719,000 |
|
|
Las Palmas - Series B |
|
July |
|
Coachella, CA |
|
|
81 |
|
|
11/1/2018 |
|
|
8.00 |
% |
|
|
1,770,000 |
|
|
Harmony Terrace - Series B |
|
August |
|
Simi Valley, CA |
|
|
136 |
|
|
1/1/2019 |
|
|
8.00 |
% |
|
|
7,400,000 |
|
|
Lake Forest |
|
September |
|
Daytona Beach, FL |
|
|
240 |
|
|
12/1/2031 |
|
|
6.25 |
% |
|
|
8,397,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
39,014,000 |
|
19
Upon redemption of the Lake Forest MRB, the Partnership realized contingent interest income of approximately $4.2 million. The Partnership also realized additional income due to the e arly redemption of the MRB of approximately $1.5 million. The additional income is reported within other income on the condensed consolidated statements of operations.
7. Public Housing Capital Fund Trust (“PHC”) Certificates
The Partnership’s PHC Certificates represent beneficial interests in three 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 PHC Certificates are held in trust at Mizuho Capital Markets, LLC (“Mizuho”) in secured financing transactions as of September 30, 2019 (see Note 15).
The Partnership had the following investments in the PHC Certificates as of September 30, 2019 and December 31, 2018:
|
|
|
September 30, 2019 |
|
|||||||||||||||||||||||
|
|
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 |
|
|
5.73 |
|
|
AA- |
|
5.37% |
|
|
$ |
24,510,244 |
|
|
$ |
483,113 |
|
|
$ |
- |
|
|
$ |
24,993,357 |
|
|
|
PHC Certificate Trust II |
|
|
4.09 |
|
|
AA- |
|
4.38% |
|
|
|
4,372,215 |
|
|
|
362,710 |
|
|
|
- |
|
|
|
4,734,925 |
|
|
|
PHC Certificate Trust III |
|
|
6.08 |
|
|
BBB |
|
5.12% |
|
|
|
14,588,947 |
|
|
|
367,277 |
|
|
|
- |
|
|
|
14,956,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,471,406 |
|
|
$ |
1,213,100 |
|
|
$ |
- |
|
|
$ |
44,684,506 |
|
|
|
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 .
The Partnership recognized an impairment charge on the three PHC Certificates of approximately $310,000 and $1.1 million during the three and nine months ended September 30, 2018, respectively. See Note 2 for information considered in the Partnership’s evaluation of impairment of the PHC Certificates.
20
The following tables summarize information regarding the Partnership’s real estate assets as of September 30, 2019 and 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 |
|
|
$ |
3,199,268 |
|
|
$ |
39,065,722 |
|
|
$ |
42,264,990 |
|
|
The 50/50 MF Property |
|
Lincoln, NE |
|
|
475 |
|
|
|
- |
|
|
|
32,937,357 |
|
|
|
32,937,357 |
|
|
Land held for development |
|
(1) |
|
(1) |
|
|
|
1,701,197 |
|
|
|
- |
|
|
|
1,701,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
76,903,544 |
|
|
Less accumulated depreciation |
|
|
|
(14,650,397 |
) |
|||||||||||||
|
Total real estate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
62,253,147 |
|
|
(1) |
Land held for development consists of land and development costs for parcels in Gardner, KS; Richland County, SC and Omaha, NE. |
|
|
||||||||||||||||||
|
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 land and development costs for parcels in Gardner, KS; Richland County, SC and Omaha, NE. |
Activity in the First Nine Months of 2019
As of September 30, 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 2018 and October 2018, respectively.
In September 2019, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded an impairment charge of $75,000 in the third quarter of 2019, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.
Activity in the First Nine 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).
In September 2018, the Partnership sold the Jade Park MF Property to an unrelated third party. The table below summarizes information related to the sale. The gain on sale is considered Tier 2 income (Note 3). The Partnership determined the sale did not meet the criteria for discontinued operations.
|
|
Month Sold |
|
Property Location |
|
Units |
|
Gross Proceeds |
|
|
Gain on Sale before Income Taxes |
|
|||
|
Jade Park |
|
September |
|
Daytona, FL |
|
144 |
|
$ |
13,450,000 |
|
|
$ |
4,051,429 |
|
In September 2018, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded an impairment charge of $150,000 in the third quarter of 2018, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.
21
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. The carrying value of the equity investments represents the Partnership’s maximum exposu re 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.
The following table provides the details of the investments in unconsolidated entities as of September 30, 2019 and December 31, 2018 and remaining equity investment commitment amounts as of September 30, 2019:
|
Property Name |
|
Location |
|
Units |
|
|
Month Commitment Executed |
|
Construction Completion Date |
|
Carrying Value as of September 30, 2019 |
|
|
Carrying Value as of December 31, 2018 |
|
|
Maximum Remaining Equity Commitment as of September 30, 2019 |
|
||||
|
|
Boerne, TX |
|
|
288 |
|
|
August 2016 |
|
April 2018 |
|
$ |
8,363,500 |
|
|
$ |
8,830,000 |
|
|
$ |
1,475,936 |
|
|
|
Vantage at Waco |
|
Waco, TX |
|
|
288 |
|
|
August 2016 |
|
May 2018 |
|
|
9,337,166 |
|
|
|
9,337,166 |
|
|
|
1,592,039 |
|
|
Vantage at Panama City Beach |
|
Panama City Beach, FL |
|
|
288 |
|
|
March 2017 |
|
July 2018 |
|
|
- |
|
|
|
11,408,135 |
|
|
|
- |
|
|
Vantage at Powdersville |
|
Powdersville, SC |
|
|
288 |
|
|
November 2017 |
|
N/A |
|
|
12,295,801 |
|
|
|
11,535,895 |
|
|
|
- |
|
|
Vantage at Stone Creek |
|
Omaha, NE |
|
|
294 |
|
|
March 2018 |
|
N/A |
|
|
7,840,500 |
|
|
|
7,572,819 |
|
|
|
- |
|
|
Vantage at Bulverde |
|
Bulverde, TX |
|
|
288 |
|
|
March 2018 |
|
August 2019 |
|
|
9,894,619 |
|
|
|
9,182,522 |
|
|
|
- |
|
|
Vantage at Germantown |
|
Germantown, TN |
|
|
288 |
|
|
June 2018 |
|
N/A |
|
|
11,456,353 |
|
|
|
7,033,398 |
|
|
|
- |
|
|
Vantage at Murfreesboro |
|
Murfreesboro, TN |
|
|
288 |
|
|
September 2018 |
|
N/A |
|
|
13,184,069 |
|
|
|
6,254,104 |
|
|
|
- |
|
|
Vantage at Coventry |
|
Omaha, NE |
|
|
288 |
|
|
September 2018 |
|
N/A |
|
|
8,825,914 |
|
|
|
5,380,267 |
|
|
|
- |
|
|
Vantage at Conroe |
|
Conroe, TX |
|
|
288 |
|
|
April 2019 |
|
N/A |
|
|
5,862,073 |
|
|
|
- |
|
|
|
3,393,059 |
|
|
|
|
|
|
|
2,886 |
|
|
|
|
|
|
$ |
87,059,995 |
|
|
$ |
76,534,306 |
|
|
$ |
6,461,034 |
|
Activity in the First Nine Months of 2019
In September 2019, the membership interests of Vantage at Panama City Beach were sold to an unrelated third party. The Partnership received cash of approximately $22.7 million upon sale. The Partnership recognized approximately $547,000 of investment income and approximately $10.5 million of gain on sale of investment in an unconsolidated entity associated with the sale. The Partnership may also be entitled to receive up to $325,000 of additional proceeds in the third quarter of 2020 if certain gain contingencies are satisfied.
In April 2019, the Partnership executed a $9.0 million equity commitment to fund construction of the Vantage at Conroe multifamily property.
Activity in the First Nine 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).
In June 2018, the Partnership executed a $10.4 million equity commitment to fund construction of the Vantage at Germantown multifamily property.
In September 2018, the Partnership executed equity commitments to fund construction of the Vantage at Coventry and Vantage at Murfreesboro multifamily properties of approximately $8.1 million and $12.2 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Coventry (Note 18).
22
The following table prov ides combined summary financial information for the Partnership’s investments in unconsolidated entities for three and nine months ended September 30, 2019 and 2018:
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Property Revenues |
|
$ |
3,713,106 |
|
|
$ |
2,824,019 |
|
|
$ |
9,534,250 |
|
|
$ |
5,687,214 |
|
|
Gain on sale of property |
|
$ |
22,556,694 |
|
|
$ |
- |
|
|
$ |
22,556,694 |
|
|
$ |
- |
|
|
Net income (loss) |
|
$ |
21,606,621 |
|
|
$ |
(353,067 |
) |
|
$ |
20,918,176 |
|
|
$ |
(2,688,985 |
) |
10. Property Loans, Net of Loan Loss Allowances
The following tables summarize the Partnership’s property loans, net of loan loss allowances, as of September 30, 2019 and December 31, 2018:
|
|
|
September 30, 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 |
|
|
Live 929 Apartments |
|
|
405,717 |
|
|
|
- |
|
|
|
405,717 |
|
|
Total |
|
$ |
15,392,908 |
|
|
$ |
(7,393,814 |
) |
|
$ |
7,999,094 |
|
|
|
|
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 and nine months ended September 30, 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 and nine months ended September 30, 2019 and 2018, interest to be earned on approximately $983,000 of property loan principal for the Ohio Properties and all principal for Live 929 Apartments was in nonaccrual status as, in management’s opinion, the interest was not considered collectible.
Activity in the First Nine Months of 2019
In August 2019, the Partnership entered into a secured property loan with Live 929 Apartments. The property may request additional advances for the sole purpose of funding monthly operating shortfalls up to a total loan amount of $1.0 million. The property loan is subordinate to the MRBs associated with the property and has a stated maturity date of July 31, 2049.
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 of 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).
23
Activity in the First Nine Months of 2018
In September 2018, the Lake Forest property was sold by its owner. Upon the sale, the Partnership received all outstanding principal and accrued interest on the Lake Forest property loans. The Partnership received approximately $5.1 million of principal and approximately $4.6 million of interest on the property loans at sale. The interest received was not previously recognized as income as the property loans were on nonaccrual status. The interest realized is reported within other interest income on the condensed consolidated statements of operations for the three and nine months ended September 30, 2018.
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 and nine months ended September 30, 2019 and 2018:
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Current income tax expense (benefit) |
|
$ |
13,932 |
|
|
$ |
(809,805 |
) |
|
$ |
129,095 |
|
|
$ |
(837,805 |
) |
|
Deferred income tax expense (benefit) |
|
|
(82,167 |
) |
|
|
- |
|
|
|
(138,331 |
) |
|
|
34,000 |
|
|
Total income tax benefit |
|
$ |
(68,235 |
) |
|
$ |
(809,805 |
) |
|
$ |
(9,236 |
) |
|
$ |
(803,805 |
) |
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 September 30, 2019 and December 31, 2018.
12. Other Assets
The following table summarizes the other assets as of September 30, 2019 and December 31, 2018:
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
|||
|
Deferred financing costs, net |
|
$ |
333,004 |
|
|
$ |
397,823 |
|
|
Fair value of derivative instruments (Note 17) |
|
|
52,605 |
|
|
|
626,633 |
|
|
Taxable mortgage revenue bonds, at fair value |
|
|
1,427,336 |
|
|
|
1,409,895 |
|
|
Operating lease right-of-use assets, net |
|
|
1,681,238 |
|
|
|
- |
|
|
Other assets |
|
|
1,446,520 |
|
|
|
2,081,258 |
|
|
Total other assets |
|
$ |
4,940,703 |
|
|
$ |
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.
13. Accounts Payable, Accrued Expenses and Other Liabilities
The following table summarizes the accounts payable, accrued expenses and other liabilities as of September 30, 2019 and December 31, 2018:
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
|||
|
Accounts payable |
|
$ |
182,099 |
|
|
$ |
230,631 |
|
|
Accrued expenses |
|
|
3,023,629 |
|
|
|
2,956,368 |
|
|
Accrued interest expense |
|
|
2,572,279 |
|
|
|
2,270,348 |
|
|
Operating lease liabilities |
|
|
2,137,792 |
|
|
|
- |
|
|
Other liabilities |
|
|
1,677,151 |
|
|
|
2,086,475 |
|
|
Total accounts payable, accrued expenses and other liabilities |
|
$ |
9,592,950 |
|
|
$ |
7,543,822 |
|
See Note 2 for discussion of the adoption of ASC 842 effective January 1, 2019.
24
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 September 30, 2019, the minimum aggregate annual payment due under the agreement is approximately $132,000. The minimum aggregate annual payment increases 2% annually until July 31, 2034 and increases 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 and $126,000 for the three and nine months ended September 30, 2019 and 2018 and are included within real estate operating expenses on the Partnership’s 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:
|
|
$ |
34,165 |
|
|
|
2020 |
|
|
135,812 |
|
|
2021 |
|
|
136,366 |
|
|
2022 |
|
|
139,091 |
|
|
2023 |
|
|
141,871 |
|
|
Thereafter |
|
|
4,661,979 |
|
|
Total |
|
|
5,249,284 |
|
|
Less: Amount representing interest |
|
|
(3,111,492 |
) |
|
Total operating lease liabilities |
|
$ |
2,137,792 |
|
14. Unsecured Lines of Credit
The following tables summarize the unsecured lines of credit (“LOC”) as of September 30, 2019 and December 31, 2018:
|
|
Outstanding as of September 30, 2019 |
|
|
Total Commitment |
|
|
Commitment Maturity |
|
Variable / Fixed |
|
Reset Frequency |
|
Period End Rate |
|
||||
|
Bankers Trust non-operating |
|
$ |
13,200,000 |
|
|
$ |
50,000,000 |
|
|
June 2021 |
|
Variable (1) |
|
Monthly |
|
|
4.58 |
% |
|
Bankers Trust operating |
|
|
- |
|
|
|
10,000,000 |
|
|
June 2021 |
|
Variable (1) |
|
Monthly |
|
|
5.33 |
% |
|
Total unsecured lines of credit |
|
$ |
13,200,000 |
|
|
$ |
60,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The variable rate is indexed to LIBOR plus an applicable margin. |
|
|
Outstanding as of December 31, 2018 |
|
|
Total Commitment |
|
|
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. |
The outstanding balance of the non-operating LOC as of September 30, 2019 is due in March 2020. The Partnership can extend final repayment of the amount due by making partial repayments in accordance with the Credit Agreement to December 2020. The Partnership was in compliance with all covenants in the Credit Agreement as of September 30, 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 fourth quarter of 2019 repayment obligation as it maintained a zero balance in the operating LOC for fifteen consecutive days during October 2019.
15. Debt Financing
25
The following tables summarize the Partnership’s debt f inancings, net of deferred financing costs, as of September 30, 2019 and December 31, 2018:
|
|
|
Outstanding Debt Financings as of September 30, 2019, net |
|
|
Restricted Cash |
|
|
Year Acquired |
|
Stated Maturities |
|
Reset Frequency |
|
SIFMA Based Rates |
|
|
Facility Fees |
|
|
Period End Rates |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed - M24 |
|
$ |
40,792,062 |
|
|
$ |
98,007 |
|
|
2010 |
|
May 2027 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
3.05% |
|
|||
|
Variable - M31 (1) |
|
|
79,885,290 |
|
|
|
4,999 |
|
|
2014 |
|
July 2024 |
|
Weekly |
|
1.61% |
|
|
1.42% |
|
|
3.03% |
|
|||
|
Fixed - M33 |
|
|
31,638,938 |
|
|
|
2,606 |
|
|
2015 |
|
September 2030 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
3.24% |
|
|||
|
Fixed - M45 (2) |
|
|
218,030,897 |
|
|
|
5,000 |
|
|
2018 |
|
July 2034 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
3.82% |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOB & Term A/B Trusts Securitization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed - Term TOB |
|
|
8,010,000 |
|
|
|
- |
|
|
2014 |
|
October 2019 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
4.01% |
|
|||
|
Fixed - Term A/B |
|
|
5,256,054 |
|
|
|
- |
|
|
2019 |
|
February 2020 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
4.53% |
|
|||
|
Fixed - Term A/B |
|
|
38,404,644 |
|
|
|
- |
|
|
2017 |
|
February 2027 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
4.46% |
|
|||
|
Mizuho Capital Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable - TOB |
|
|
25,645,347 |
|
|
|
- |
|
|
2019 |
|
July 2020 |
|
Weekly |
|
1.68% |
|
|
1.17% |
|
|
2.85% |
|
|||
|
Variable - TOB |
|
|
42,228,417 |
|
|
|
- |
|
|
2019 |
|
August 2020 |
|
Weekly |
|
1.68% |
|
|
1.17% - 1.66% |
|
|
2.85% - 3.34% |
|
|||
|
Variable - TOB |
|
|
35,841,489 |
|
|
|
- |
|
|
2019 |
|
September 2020 |
|
Weekly |
|
2.03% |
|
|
1.12% |
|
|
3.15% |
|
|||
|
Morgan Stanley: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed - Term TOB |
|
|
13,078,992 |
|
|
|
- |
|
|
2019 |
|
May 2022 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
3.53% |
|
|||
|
Total Debt Financings |
|
$ |
538,812,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Facility fees are variable. |
|
(2) |
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. |
|
|
|
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 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable - M24 (1) |
|
$ |
41,466,000 |
|
|
$ |
432,998 |
|
|
2010 |
|
September 2020 |
|
Weekly |
|
1.76% |
|
|
1.85% |
|
|
3.61% |
|
|||
|
Variable - M31 (2) |
|
|
80,418,505 |
|
|
|
181,626 |
|
|
2014 |
|
July 2019 |
|
Weekly |
|
1.74% |
|
|
1.49% |
|
|
3.23% |
|
|||
|
Variable - M33 (3) |
|
|
31,262,039 |
|
|
|
58,002 |
|
|
2015 |
|
July 2020 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
In July 2019, the Partnership refinanced the M2 4 TEBS Financing with Freddie Mac. After refinancing, the M24 TEBS Financing has a fixed interest rate of 3.05% and a stated maturity of May 2027. |
|
(2) |
In June 2019, the Partnership exercised its unilateral right to extend the financing for an additional five-year period through July 2024 . Facility fees are variable . |
|
(3) |
In July 2019, the Partnership refinanced the M33 TEBS Financing with Freddie Mac. After refinancing, the M33 TEBS Financing has a fixed interest rate of 3.24% and a stated maturity of September 2030 . |
|
(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. |
26
The TOB, Term TO B and Term A/B Trusts with Deutsche Bank are subject to a Master Trust Agreement 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 t he financing facilities would be triggered which would require the Partnership to purchase a portion or all of the senior SPEARS or Class A Certificates held by Deutsche Bank . 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 September 30, 2019.
The TOB Trusts with Mizuho require that the Partnership’s residual interest in the TOB Trusts maintain a certain value in relation to the total assets in each Trust. If the Partnership is not in compliance with any of these covenants, a termination event of the financing facility would be triggered which would require the Partnership to purchase a portion or all of the senior interests issued by each TOB Trust. The Partnership was in compliance with these covenants as of September 30, 2019.
The Term TOB Trust with Morgan Stanley Bank, N.A. (“Morgan Stanley”) is subject to a Trust Agreement and other related agreements that contains covenants with which the Partnership is required to comply. If the Partnership is out of compliance with any of these covenants, a termination event of the financing facility would be triggered which would require the Partnership to purchase a portion or all of the Class A Certificates held by Morgan Stanley. The most restrictive covenant within the Trust Agreement and related agreements requires the maintenance of a debt service coverage ratio above a specified threshold and the Partnership’s net assets cannot decline by more than specific percentages over designated periods of time. The Partnership was in compliance with these covenants as of September 30, 2019.
The Partnership’s variable rate debt financing arrangements include maximum interest rate provisions that prevent the debt service on the debt financings from exceeding the cash flows from the underlying securitized asset.
As of September 30, 2019 and December 31, 2018, the Partnership had posted restricted cash as contractually required under the terms of the four TEBS Financings. In addition, the Partnership has entered in interest rate cap agreements to mitigate its exposure to interest rate fluctuations on the variable-rate debt financings (Note 17).
The TOB, Term TOB, Term A/B and TEBS Financing arrangements are consolidated VIE’s to the Partnership (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 Nine Months of 2019
New Debt Financings:
In July 2019, the Partnership refinanced the M24 TEBS Financing with Freddie Mac. The M24 TEBS Financing was converted to a fixed interest rate of 3.05%, which is inclusive of credit enhancement and servicing fees, and the stated maturity was extended to May 2027. The refinancing was treated as an extinguishment for accounting purposes and the Partnership capitalized approximately $307,000 as deferred financing costs related to the refinancing.
In July 2019, the Partnership refinanced the M33 TEBS Financing with Freddie Mac. The M33 TEBS Financing converted to a fixed interest rate of 3.24%, which is inclusive of credit enhancement and servicing fees, and the stated maturity was extended to September 2030. The refinancing was treated as an extinguishment for accounting purposes and the Partnership expensed approximately $496,000 of previously unamortized deferred financing costs associated with the M33 TEBS Financing. The Partnership capitalized approximately $265,000 as deferred financing costs related to the refinancing. The Partnership received premium proceeds upon refinancing of approximately $435,000, which will be amortized using the effective interest method through the term of the agreement.
27
During the third quarter of 2019, The Partnership entered into various TOB Trust financings with Mizuho secured by MRBs and PHC Certificates. U nder each TOB Trust structure, the trustee issues senior Floater Certificates and Residual Certificates that represent beneficial interests in the securitized asset held by the TOB Trusts. The Fl oa ter Certificates are sold to unaffiliated investors and ent itle the holder to cash flows from the securitized assets at a stated interest rate. The Floater Certificates are credit enhanced by Mizuho such that Mizuho will cover any shortfall if the cash flows from the securitized assets are less than the contractua l principal and interest due to the Floater Certificate holders. The Partnership would then be required to reimburse Mizuho for any credit enhancement payments. The Residual Certificates are retained by the Partnership and grant the Partnership rights to c ertain cash flows from the securitized assets after payment to the Floater Certificates and related trust fees, as well as certain other rights to the securitized assets. The TOB Trusts are considered VIE s (Note 5) because the Partnership’s rights are such that the Partnership is the primary beneficiary and the Partnership consolidates the TOB Trusts in its condensed consolidated financial statements. The following table summarizes the gross principal and terms of the TOB Trusts:
|
TOB Trusts Securitization |
|
Outstanding TOB Trust Financing |
|
|
Stated Maturity |
|
Reset Frequency |
|
Variable Rate Index |
|
Facility Fees |
|
||
|
Rosewood Townhomes |
|
$ |
7,715,000 |
|
|
July 2020 |
|
Weekly |
|
SIFMA |
|
1.17% |
|
|
|
South Pointe Apartments |
|
|
18,035,000 |
|
|
July 2020 |
|
Weekly |
|
SIFMA |
|
1.17% |
|
|
|
Live 929 Apartments |
|
|
31,800,000 |
|
|
August 2020 |
|
Weekly |
|
SIFMA |
|
1.66% |
|
|
|
Montecito at Williams Ranch |
|
|
6,925,000 |
|
|
August 2020 |
|
Weekly |
|
SIFMA |
|
1.17% |
|
|
|
Vineyard Gardens |
|
|
3,595,000 |
|
|
August 2020 |
|
Weekly |
|
SIFMA |
|
1.17% |
|
|
|
PHC Trust I |
|
|
20,121,000 |
|
|
September 2020 |
|
Weekly |
|
SIFMA |
|
1.12% |
|
|
|
PHC Trust II |
|
|
3,803,000 |
|
|
September 2020 |
|
Weekly |
|
SIFMA |
|
1.12% |
|
|
|
PHC Trust III |
|
|
12,062,000 |
|
|
September 2020 |
|
Weekly |
|
SIFMA |
|
1.12% |
|
|
|
Total Term TOB Trust Financing |
|
$ |
104,056,000 |
|
|
|
|
|
|
|
|
|
|
|
In May 2019, the Partnership entered into a Term TOB Trust financing with Morgan Stanley secured by an MRB. The following table summarizes the gross principal and terms of the Term TOB Trust:
|
|
Outstanding Term TOB Trust Financing |
|
|
Stated Maturity |
|
Fixed Interest Rate |
|
|||
|
Village at Avalon |
|
$ |
13,167,000 |
|
|
May 2022 |
|
|
3.53 |
% |
|
Total Term TOB Trust Financing |
|
$ |
13,167,000 |
|
|
|
|
|
|
|
In February 2019, the Partnership entered into two Term A/B Trusts financings with Deutsche Bank secured by MRBs. The following table summarizes the gross principal and terms of the Term A/B Trusts:
|
|
Outstanding Term A/B Trust Financing |
|
|
Stated Maturity |
|
Fixed Interest Rate |
|
|||
|
Gateway Village |
|
$ |
2,262,000 |
|
|
February 2020 |
|
|
4.53 |
% |
|
Lynnhaven Apartments |
|
|
3,001,500 |
|
|
February 2020 |
|
|
4.53 |
% |
|
Total Term A/B Trust Financing |
|
$ |
5,263,500 |
|
|
|
|
|
|
|
Redemptions:
The following debt financing facilities 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 |
|
|
|
Live 929 Apartments |
|
Term TOB Trust |
|
August 2019 |
|
$ |
37,553,300 |
|
|
Montecito at Williams Ranch |
|
Term A/B Trust |
|
August 2019 |
|
|
6,921,000 |
|
|
Vineyard Gardens |
|
Term A/B Trust |
|
August 2019 |
|
|
3,595,000 |
|
|
PHC Trust I |
|
TOB Trust |
|
September 2019 |
|
|
19,755,000 |
|
|
PHC Trust II |
|
TOB Trust |
|
September 2019 |
|
|
3,430,000 |
|
|
PHC Trust III |
|
TOB Trust |
|
September 2019 |
|
|
11,000,000 |
|
|
|
|
|
|
|
|
$ |
82,254,300 |
|
28
Debt Financing Activity in the First Nine Months of 2018
New Debt Financings:
In August 2018, the Partnership and its newly created consolidated subsidiary, ATAX TEBS IV, LLC (the “2018 Sponsor”), entered into a long-term debt financing facility provided through the securitization of 25 MRBs, with an initial par value of approximately $260.6 million owned by the 2018 Sponsor pursuant to the M45 TEBS Financing. The M45 TEBS financing facility provides the Partnership with a long-term fixed-rate facility. Of the 25 MRBs securitized in the M45 TEBS Financings, 24 MRBs were in Term A/B Trusts that were collapsed prior to the closing of the M45 TEBS Financing. The collapse of the Term A/B Trusts and subsequent closing of the M45 TEBS Financing resulted in a debt modification for accounting purposes and the Partnership capitalized approximately $371,000 as deferred financing costs.
In August 2018, the Partnership entered into four Term A/B Trusts financings secured by various MRBs. The following table summarizes the gross principal and terms of the Term A/B Trusts:
|
|
Outstanding Term A/B Trust Financing |
|
|
Stated Maturity |
|
Fixed Interest Rate |
|
|||
|
Montecito at Williams Ranch - Series A |
|
$ |
6,921,000 |
|
|
November 2018 |
|
|
4.53 |
% |
|
Montecito at Williams Ranch - Series B |
|
|
4,303,000 |
|
|
November 2018 |
|
|
4.53 |
% |
|
Vineyard Gardens - Series A |
|
|
3,595,000 |
|
|
November 2018 |
|
|
4.53 |
% |
|
Vineyard Gardens - Series B |
|
|
2,561,000 |
|
|
November 2018 |
|
|
4.53 |
% |
|
Total Term A/B Trust Financing |
|
$ |
17,380,000 |
|
|
|
|
|
|
|
29
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 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 |
|
|
Oaks at Georgetown - Series B |
|
Term A/B Trust |
|
April 2018 |
|
|
4,690,000 |
|
|
San Vicente - Series B |
|
Term A/B Trust |
|
May 2018 |
|
|
1,555,000 |
|
|
The Village at Madera - Series B |
|
Term A/B Trust |
|
May 2018 |
|
|
1,465,000 |
|
|
Las Palmas II - Series B |
|
Term A/B Trust |
|
July 2018 |
|
|
1,505,000 |
|
|
15 West Apartments (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
8,300,012 |
|
|
Bruton Apartments (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
15,279,403 |
|
|
Columbia Gardens (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
10,222,680 |
|
|
Companion at Thornhill Apartments (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
9,642,587 |
|
|
Concord at Gulfgate - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
16,310,000 |
|
|
Concord at Little York - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
11,425,000 |
|
|
Concord at Williamcrest - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
17,695,000 |
|
|
Courtyard - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
9,210,000 |
|
|
Courtyard - Series B |
|
Term A/B Trust |
|
August 2018 |
|
|
5,295,000 |
|
|
Crossing at 1415 - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
6,370,877 |
|
|
Decatur Angle (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
21,362,472 |
|
|
Harmony Court Bakersfield - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
3,360,000 |
|
|
Harmony Terrace - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
6,210,000 |
|
|
Harmony Terrace - Series B |
|
Term A/B Trust |
|
August 2018 |
|
|
6,290,000 |
|
|
Heights at 515 - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
5,402,307 |
|
|
Las Palmas II - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
1,530,000 |
|
|
Oaks at Georgetown - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
11,100,000 |
|
|
San Vicente - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
3,150,000 |
|
|
Seasons at Simi Valley - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
3,688,843 |
|
|
Seasons Lakewood - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
6,615,000 |
|
|
Seasons San Juan Capistrano - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
11,140,000 |
|
|
Seasons San Juan Capistrano - Series B |
|
Term A/B Trust |
|
August 2018 |
|
|
5,590,000 |
|
|
Summerhill - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
5,785,000 |
|
|
Sycamore Walk - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
3,066,769 |
|
|
The Village at Madera - Series A (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
2,780,000 |
|
|
Village at River's Edge (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
8,963,207 |
|
|
Willow Run (1) |
|
Term A/B Trust |
|
August 2018 |
|
|
10,079,940 |
|
|
|
|
|
|
|
|
$ |
242,424,098 |
|
|
(1) |
In August 2018, the MRB was transferred to the M45 TEBS Financing upon collapsing of the Term A/B Trust. |
Future Maturities
The Partnership’s contractual maturities of borrowings for the twelve-month periods ending December 31 st for the next five years and thereafter are as follows:
|
|
$ |
9,445,353 |
|
|
|
|
|
114,279,468 |
|
|
|
2021 |
|
|
5,328,914 |
|
|
2022 |
|
|
18,499,166 |
|
|
2023 |
|
|
5,899,262 |
|
|
Thereafter |
|
|
387,921,886 |
|
|
Total |
|
|
541,374,049 |
|
|
Unamortized deferred financing costs and debt premium |
|
|
(2,561,919 |
) |
|
Total debt financing, net |
|
$ |
538,812,130 |
|
30
16. Mortgages Payable and Other Secured Financing
The following tables summarize the Partnership’s mortgages payable and other secured financing, net of deferred financing costs, as of September 30, 2019 and December 31, 2018:
|
|
Outstanding Mortgage Payable as of September 30, 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 |
|
$ |
2,988,989 |
|
|
2014 |
|
December 2019 |
|
Fixed |
|
N/A |
|
N/A |
|
|
|
4.65 |
% |
|
|
The 50/50 MF Property--Mortgage |
|
|
24,060,882 |
|
|
2013 |
|
March 2020 |
|
Variable |
|
Monthly |
|
|
5.00 |
% |
(1) |
|
5.00 |
% |
|
Total Mortgage Payable\Weighted Average Period End Rate |
|
$ |
27,049,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.96 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Variable rate is based on the Wall Street Journal Prime Rate, but not to exceed 5.0%. |
|
|
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%. |
In September 2018, the Partnership sold the Jade Park MF Property. At the closing of the sale, the Partnership paid all outstanding principal and accrued interest on the related mortgage payable.
Future Maturities
The Partnership’s contractual maturities of borrowings for the twelve-month periods ending December 31 st for the next five years and thereafter are as follows:
|
|
$ |
3,133,103 |
|
|
|
2020 |
|
|
23,945,254 |
|
|
2021 |
|
|
- |
|
|
2022 |
|
|
- |
|
|
2023 |
|
|
- |
|
|
Thereafter |
|
|
- |
|
|
Total |
|
|
27,078,357 |
|
|
Unamortized deferred financing costs |
|
|
(28,486 |
) |
|
Total mortgages payable and other secured financings, net |
|
$ |
27,049,871 |
|
31
17 . Interest Rate Derivative Agreements
The following tables summarize the Partnership’s interest rate derivatives as of September 30, 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 September 30, 2019 |
|
|||
|
July 2015 |
|
|
27,117,092 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
TOB Trusts |
|
Wells Fargo Bank |
|
|
2 |
|
|
July 2015 |
|
|
27,117,092 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
TOB Trusts |
|
Royal Bank of Canada |
|
|
2 |
|
|
July 2015 |
|
|
27,117,092 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
TOB Trusts |
|
SMBC Capital Markets, Inc |
|
|
2 |
|
|
June 2017 |
|
|
81,351,277 |
|
|
Aug 2020 |
|
|
1.5 |
% |
|
SIFMA |
|
M33 TEBS |
|
Barclays Bank PLC |
|
|
45,274 |
|
|
Sept 2017 |
|
|
58,447,000 |
|
|
Sept 2020 |
|
|
4.0 |
% |
|
SIFMA |
|
M24 TEBS |
|
Barclays Bank PLC |
|
|
- |
|
|
Aug 2019 |
|
|
79,695,286 |
|
|
Aug 2024 |
|
|
4.5 |
% |
|
SIFMA |
|
M31 TEBS |
|
Barclays Bank PLC |
|
|
7,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52,605 |
|
|
(1) |
See Note 22 for additional details. |
|
Purchase Date |
|
Notional Amount |
|
|
Maturity Date |
|
Effective Capped Rate (2) |
|
|
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. |
In August 2019, the Partnership purchased an interest rate derivative intended to cap the variable interest rate component of the M31 TEBS Financing at 4.5%. The Partnership paid approximately $30,000 for the interest rate derivative.
During the nine months ended September 30, 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 interest rate swaps were terminated in September 2018 and October 2018.
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.
32
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 September 30, 2019:
|
Borrower |
|
Year the Guarantee was Executed |
|
Maximum Balance Available on Construction Loan |
|
|
Construction Loan Balance as of September 30, 2019 |
|
|
Partnership's Maximum Exposure as of September 30, 2019 |
|
|
Guarantee Terms |
|||
|
Vantage at Stone Creek |
|
2018 |
|
$ |
30,824,000 |
|
|
$ |
24,826,510 |
|
|
$ |
24,826,510 |
|
|
(1) |
|
Vantage at Coventry |
|
2018 |
|
|
31,500,000 |
|
|
|
5,275,651 |
|
|
|
5,275,651 |
|
|
(1) |
|
(1) |
The Partnership’s maximum exposure will decrease to 50% of the construction loan balance upon receipt of the certificate of occupancy and to 25% of the construction loan balance when certain debt service coverage levels are achieved by the borrower. |
Other Guarantees and Commitments
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 September 30, 2019:
|
|
Year the Guarantee was Executed |
|
End of Guarantee Period |
|
Partnership's Maximum Exposure as of September 30, 2019 |
|
||
|
Ohio Properties |
|
2011 |
|
2026 |
|
$ |
3,712,436 |
|
|
Greens of Pine Glen, LP |
|
2012 |
|
2027 |
|
|
2,429,658 |
|
The Partnership has agreed, in limited instances, to indemnify certain parties to the TOB Trusts related to the PHC Certificates for claims by the Floater Certificates holders related to the calculation of interest and principal payments. The maximum exposure for such claims is up to the total value of the Floater Certificates plus accrued interest. The Partnership has not accrued any amount for this commitment as of September 30, 2019 because the likelihood of a claim is remote. The maximum exposure was approximately $36.0 million as of September 30, 2019.
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 September 30, 2019 and December 31, 2018 :
|
|
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 September 30, 2019 and December 31, 2018 |
|
|
9,450,000 |
|
|
$ |
94,500,000 |
|
|
|
|
|
|
|
|
|
|
|
33
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 Greystone Manager, the Partnership, or any affiliate of either, and members of the Board of Managers of Greystone Manager 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 Greystone Manager; or death or disability of the participant. All of the restrictions applicable to the previously unvested RUAs lapsed and all such RUAs became immediately vested and nonforfeitable upon the closing of the previously disclosed acquisition of all of the issued and outstanding partnership interests in the General Partner from Burlington Capital LLC (“Burlington”) by Greystone Manager and Greystone AF Holdings, LLC (“Greystone Holdings,” and collectively with Greystone Manager, “Greystone”), which occurred on September 10, 2019.
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 $3,266,000 and $622,000 for the three months ended September 30, 2019 and 2018, respectively. The compensation expense for RUAs totaled approximately $3,636,000 and $1,372,000 for the nine months ended September 30, 2019 and 2018, respectively. Compensation expense is reported within general and administrative expenses in the Partnership’s condensed consolidated statements of operations.
The following table summarizes the RUA activity as of and for the nine months ended September 30, 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 |
|
|
353,197 |
|
|
|
7.74 |
|
|
Vested |
|
|
(618,487 |
) |
|
|
7.05 |
|
|
Nonvested as of September 30, 2019 |
|
|
- |
|
|
$ |
- |
|
There was no unrecognized compensation expense related to nonvested RUAs granted under the Plan as of September 30, 2019.
21. Transactions with Related Parties
Effective September 10, 2019, Greystone acquired all of the issued and outstanding partnership interests of AFCA 2, at which time Burlington and its affiliates ceased to be related parties of the Partnership. The disclosures herein related to Burlington and its affiliates only reflect transactions that occurred through September 9, 2019.
The Partnership incurs costs for services and makes contractual payments to AFCA 2, the general partner of AFCA 2, 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 and nine months ended September 30, 2019 and 2018:
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Partnership administrative fees paid to AFCA 2 (1) |
|
$ |
914,000 |
|
|
$ |
940,000 |
|
|
$ |
2,714,000 |
|
|
$ |
2,789,000 |
|
|
Property management fees paid to an affiliate (2) |
|
|
28,000 |
|
|
|
49,000 |
|
|
|
101,000 |
|
|
|
147,000 |
|
|
Reimbursable franchise margin taxes incurred on behalf of unconsolidated entities (3) |
|
|
12,000 |
|
|
|
- |
|
|
|
44,000 |
|
|
|
- |
|
|
(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. |
34
|
(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 receives 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 and nine months ended September 30, 2019 and 2018:
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Non-Partnership property administrative fees received by AFCA 2 (1) |
|
|
9,000 |
|
|
|
17,000 |
|
|
$ |
27,000 |
|
|
$ |
60,000 |
|
|
Investment/mortgage placement fees received by AFCA 2 (2) |
|
|
- |
|
|
|
1,189,000 |
|
|
|
822,000 |
|
|
|
2,787,000 |
|
|
MRB redemption administrative fee received by AFCA 2 (3) |
|
|
- |
|
|
|
114,000 |
|
|
|
- |
|
|
|
114,000 |
|
|
(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. |
|
(3) |
AFCA 2 received a one-time administrative fee related to early redemption of the Lake Forest MRB from the property in September 2018. |
In addition, Properties Management provided 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. Properties Management ceased to be a related party effective September 10, 2019.
The Partnership reported receivables due from unconsolidated entities and affiliates totaling approximately $29,000 and $77,000 as of September 30, 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 $599,000 and $330,000 as of September 30, 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. |
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. |
35
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.
The fair value of the Partnership’s investments in MRBs and taxable MRBs, as of September 30, 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 or 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 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 and 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 the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s investments in MRBs and taxable MRBs are categorized as a Level 3 input. As of September 30, 2019, the range of effective yields on the individual MRBs was 2.6% to 8.7% per annum, with a weighted average effective yield of 3.8% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.1% to 8.8% per annum, with a weighted average effective yield of 8.6% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date. As of December 31, 2018, the range of effective yields on the individual MRBs was 3.3% to 9.1% per annum, with a weighted average effective yield of 4.6% when weighted by the total principal outstanding of all MRBs as of the reporting date; and 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 total principal outstanding of all taxable MRBs as of the reporting date.
Investments in PHC Certificates
The fair value of the Partnership’s investment in PHC Certificates as of September 30, 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 September 30, 2019, the range of effective yields on the PHC Certificates was 4.5% to 5.4% per annum, with a weighted average effective yield of 5.3% when weighted by the principal outstanding of all 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 all PHC Certificates 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, subject to performance by the counterparty, 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.
36
Assets measured at fair value on a recurring basis as of September 30, 2019 are summarized as follows:
|
|
|
Fair Value Measurements as of September 30, 2019 |
|
|||||||||||||
|
|
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 |
|
$ |
747,157,387 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
747,157,387 |
|
|
Mortgage revenue bonds |
|
|
30,125,333 |
|
|
|
- |
|
|
|
- |
|
|
|
30,125,333 |
|
|
PHC Certificates |
|
|
44,684,506 |
|
|
|
- |
|
|
|
- |
|
|
|
44,684,506 |
|
|
Taxable mortgage revenue bonds (reported within other assets) |
|
|
1,427,336 |
|
|
|
- |
|
|
|
- |
|
|
|
1,427,336 |
|
|
Derivative instruments (reported within other assets) |
|
|
52,605 |
|
|
|
- |
|
|
|
- |
|
|
|
52,605 |
|
|
Total Assets at Fair Value, net |
|
$ |
823,447,167 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
823,447,167 |
|
The following tables summarize the activity related to Level 3 assets for the three and nine months ended September 30, 2019:
|
|
|
For the Three Months Ended September 30, 2019 |
|
|||||||||||||||||
|
|
Fair Value Measurements Using Significant |
|
||||||||||||||||||
|
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||
|
|
|
Mortgage Revenue Bonds (1) |
|
|
PHC Certificates |
|
|
Taxable Bonds |
|
|
Interest Rate Derivatives |
|
|
Total |
|
|||||
|
Beginning Balance April 1, 2019 |
|
$ |
759,526,707 |
|
|
$ |
46,516,154 |
|
|
$ |
1,441,316 |
|
|
$ |
118,279 |
|
|
$ |
807,602,456 |
|
|
Total gains (losses) (realized/unrealized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings (interest income and interest expense) |
|
|
35,542 |
|
|
|
2,915 |
|
|
|
- |
|
|
|
(68,333 |
) |
|
|
(29,876 |
) |
|
Included in other comprehensive (loss) income |
|
|
18,886,878 |
|
|
|
173,374 |
|
|
|
(11,936 |
) |
|
|
- |
|
|
|
19,048,316 |
|
|
Purchases |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29,527 |
|
|
|
29,527 |
|
|
Settlements |
|
|
(1,166,407 |
) |
|
|
(2,007,937 |
) |
|
|
(2,044 |
) |
|
|
(26,868 |
) |
|
|
(3,203,256 |
) |
|
Ending Balance September 30, 2019 |
|
$ |
777,282,720 |
|
|
$ |
44,684,506 |
|
|
$ |
1,427,336 |
|
|
$ |
52,605 |
|
|
$ |
823,447,167 |
|
|
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 September 30, 2019 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(68,333 |
) |
|
$ |
(68,333 |
) |
|
(1) |
Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership. |
|
|
|
For the Nine Months Ended September 30, 2019 |
|
|||||||||||||||||
|
|
Fair Value Measurements Using Significant |
|
||||||||||||||||||
|
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||
|
|
|
Mortgage Revenue Bonds (1) |
|
|
PHC Certificates |
|
|
Taxable Mortgage Revenue Bonds |
|
|
Interest Rate Derivatives |
|
|
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) |
|
|
106,909 |
|
|
|
(795 |
) |
|
|
- |
|
|
|
(458,141 |
) |
|
|
(352,027 |
) |
|
Included in other comprehensive income |
|
|
41,280,568 |
|
|
|
788,318 |
|
|
|
43,438 |
|
|
|
- |
|
|
|
42,112,324 |
|
|
Purchases |
|
|
19,250,000 |
|
|
|
- |
|
|
|
- |
|
|
|
29,527 |
|
|
|
19,279,527 |
|
|
Settlements |
|
|
(15,508,192 |
) |
|
|
(4,775,103 |
) |
|
|
(25,997 |
) |
|
|
(145,414 |
) |
|
|
(20,454,706 |
) |
|
Ending Balance September 30, 2019 |
|
$ |
777,282,720 |
|
|
$ |
44,684,506 |
|
|
$ |
1,427,336 |
|
|
$ |
52,605 |
|
|
$ |
823,447,167 |
|
|
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 September 30, 2019 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(458,141 |
) |
|
$ |
(458,141 |
) |
|
(1) |
Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership. |
37
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 |
|
The following tables summarize the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2018:
|
|
For the Three Months Ended September 30, 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 July 1, 2018 |
|
$ |
767,629,337 |
|
|
$ |
994,685 |
|
|
$ |
49,070,710 |
|
|
$ |
2,357,952 |
|
|
$ |
897,958 |
|
|
$ |
820,950,642 |
|
|
Total gains (losses) (realized/unrealized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings (interest income and interest expense) |
|
|
36,126 |
|
|
|
- |
|
|
|
(19,274 |
) |
|
|
- |
|
|
|
91,679 |
|
|
|
108,531 |
|
|
Included in earnings (impairment of securities) |
|
|
- |
|
|
|
- |
|
|
|
(309,958 |
) |
|
|
- |
|
|
|
- |
|
|
|
(309,958 |
) |
|
Included in other comprehensive (loss) income |
|
|
(6,729,317 |
) |
|
|
51,760 |
|
|
|
- |
|
|
|
(15,192 |
) |
|
|
- |
|
|
|
(6,692,749 |
) |
|
Purchases |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Settlements |
|
|
(18,470,222 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,858 |
) |
|
|
47,540 |
|
|
|
(18,425,540 |
) |
|
Ending Balance September 30, 2018 |
|
$ |
742,465,924 |
|
|
$ |
1,046,445 |
|
|
$ |
48,741,478 |
|
|
$ |
2,339,902 |
|
|
$ |
1,037,177 |
|
|
$ |
795,630,926 |
|
|
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 September 30, 2018 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(309,958 |
) |
|
$ |
- |
|
|
$ |
91,679 |
|
|
$ |
(218,279 |
) |
|
(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. |
|
|
For the Nine Months Ended September 30, 2018 |
|
||||||||||||||||||||||
|
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||||||||||
|
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||||||
|
|
|
Mortgage Revenue Bonds (1) |
|
|
Bond Purchase Commitments |
|
|
PHC Certificates |
|
|
Taxable Mortgage Revenue 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) |
|
|
108,661 |
|
|
|
- |
|
|
|
(57,822 |
) |
|
|
- |
|
|
|
1,088,060 |
|
|
|
1,138,899 |
|
|
Included in earnings (impairment of securities) |
|
|
- |
|
|
|
- |
|
|
|
(1,141,020 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,141,020 |
) |
|
Included in other comprehensive (loss) income |
|
|
(24,048,645 |
) |
|
|
(1,956,095 |
) |
|
|
525,446 |
|
|
|
(49,173 |
) |
|
|
- |
|
|
|
(25,528,467 |
) |
|
Purchases |
|
|
19,540,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,540,000 |
|
|
Settlements |
|
|
(41,755,799 |
) |
|
|
- |
|
|
|
(226,714 |
) |
|
|
(33,384 |
) |
|
|
178,748 |
|
|
|
(41,837,149 |
) |
|
Ending Balance September 30, 2018 |
|
$ |
742,465,924 |
|
|
$ |
1,046,445 |
|
|
$ |
48,741,478 |
|
|
$ |
2,339,902 |
|
|
$ |
1,037,177 |
|
|
$ |
795,630,926 |
|
|
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 September 30, 2018 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(1,141,020 |
) |
|
$ |
- |
|
|
$ |
1,088,060 |
|
|
$ |
(52,960 |
) |
38
|
(1) |
Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership. The beginning balance also includes the cumulative effect of accounting change related to the adoption of ASU 2017-08 effective January 1, 2018. |
|
(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.
In September 2019 and 2018, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded impairment charges of $75,000 and $150,000 in the third quarter of 2019 and 2018, respectively. The impairment charges represent the difference between the Partnership’s carrying value and the estimated fair value of the land.
As of September 30, 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 Financings are credit enhanced by Freddie Mac. The variable-rate TOB Trust financings are credit enhanced by either Deutsche Bank or Mizuho. The table below summarizes the fair value of the financial liabilities as of September 30, 2019 and December 31, 2018:
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing and LOCs |
|
$ |
552,012,130 |
|
|
$ |
572,810,140 |
|
|
$ |
541,322,765 |
|
|
$ |
550,766,809 |
|
|
Mortgages payable and other secured financing |
|
|
27,049,871 |
|
|
|
27,078,357 |
|
|
|
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.
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 September 30, 2019, the Partnership held 76 MRBs. The Residential Properties financed by MRBs contain a total of 10,871 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.
39
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 September 30, 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 made property loans to certain multifamily housing properties (Note 10).
The following tables detail certain key financial information for the Partnership’s reportable segments for the three and nine months ended September 30, 2019 and 2018:
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
10,383,867 |
|
|
$ |
21,440,970 |
|
|
$ |
31,074,582 |
|
|
$ |
44,609,666 |
|
|
MF Properties |
|
|
1,974,546 |
|
|
|
2,285,736 |
|
|
|
6,002,971 |
|
|
|
7,099,690 |
|
|
Public Housing Capital Fund Trusts |
|
|
589,024 |
|
|
|
617,661 |
|
|
|
1,812,779 |
|
|
|
1,860,728 |
|
|
Other Investments |
|
|
1,918,265 |
|
|
|
1,656,748 |
|
|
|
7,986,302 |
|
|
|
4,674,230 |
|
|
Total revenues |
|
$ |
14,865,702 |
|
|
$ |
26,001,115 |
|
|
$ |
46,876,634 |
|
|
$ |
58,244,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
5,789,009 |
|
|
$ |
5,583,512 |
|
|
$ |
16,894,378 |
|
|
$ |
16,208,340 |
|
|
MF Properties |
|
|
365,995 |
|
|
|
472,796 |
|
|
|
1,096,016 |
|
|
|
1,325,019 |
|
|
Public Housing Capital Fund Trusts |
|
|
354,017 |
|
|
|
338,375 |
|
|
|
1,120,482 |
|
|
|
557,955 |
|
|
Other Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total interest expense |
|
$ |
6,509,021 |
|
|
$ |
6,394,683 |
|
|
$ |
19,110,876 |
|
|
$ |
18,091,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
MF Properties |
|
|
743,503 |
|
|
|
849,516 |
|
|
|
2,380,815 |
|
|
|
2,672,925 |
|
|
Public Housing Capital Fund Trusts |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Other Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total depreciation expense |
|
$ |
743,503 |
|
|
$ |
849,516 |
|
|
$ |
2,380,815 |
|
|
$ |
2,672,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
(2,492,643 |
) |
|
$ |
12,039,700 |
|
|
$ |
1,836,196 |
|
|
$ |
18,647,585 |
|
|
MF Properties |
|
|
(434,099 |
) |
|
|
4,228,494 |
|
|
|
(946,230 |
) |
|
|
3,770,339 |
|
|
Public Housing Capital Fund Trusts |
|
|
235,007 |
|
|
|
(30,672 |
) |
|
|
692,297 |
|
|
|
161,753 |
|
|
Other Investments |
|
|
12,399,638 |
|
|
|
1,645,533 |
|
|
|
18,463,643 |
|
|
|
4,645,803 |
|
|
Net income |
|
$ |
9,707,903 |
|
|
$ |
17,883,055 |
|
|
$ |
20,045,906 |
|
|
$ |
27,225,480 |
|
40
The following table details total assets for th e Partnership’s reportable segments as of September 30, 2019 and December 31, 2018:
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
|
Total assets |
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
921,054,641 |
|
|
$ |
864,311,647 |
|
|
MF Properties |
|
|
71,013,626 |
|
|
|
71,120,280 |
|
|
Public Housing Capital Fund Trusts |
|
|
45,014,774 |
|
|
|
48,942,334 |
|
|
Other Investments |
|
|
87,089,136 |
|
|
|
85,048,514 |
|
|
Consolidation/eliminations |
|
|
(90,671,007 |
) |
|
|
(86,709,529 |
) |
|
Total assets |
|
$ |
1,033,501,170 |
|
|
$ |
982,713,246 |
|
24. Subsequent Events
In October 2019, the Partnership executed a $7.4 million equity commitment to fund construction of the Vantage at O’Connor multifamily property in San Antonio, TX.
In October 2019, the Partnership extended the maturity of the Term TOB Trust financing secured by the Pro Nova 2014-1 MRB from October 2019 to January 2020.
41
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 for all periods presented. 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 September 30, 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.
42
The following table presents information regarding the investment activity of the Partnership for the first, second and third quarters of 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 September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in an unconsolidated entity |
|
1 |
|
$ |
1,018 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
Return of investment in unconsolidated entity upon sale |
|
1 |
|
|
9,714 |
|
|
N/A |
|
|
$ |
1,265 |
|
|
9 |
|
|
Property loan advance |
|
1 |
|
|
406 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond acquisitions |
|
2 |
|
$ |
13,200 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
|
Mortgage revenue bond redemption |
|
1 |
|
|
6,228 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
|
Mortgage revenue bonds restructured |
|
3 |
|
|
13,960 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
|
Investments in unconsolidated entities |
|
3 |
|
|
10,692 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond acquisitions |
|
2 |
|
$ |
6,050 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
|
Mortgage revenue bond redemption |
|
1 |
|
|
5,574 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
|
Investments in unconsolidated entities |
|
3 |
|
|
6,594 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
Property loan redemption |
|
1 |
|
|
8,368 |
|
|
N/A |
|
|
$ |
753 |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond redemptions |
|
3 |
|
$ |
17,567 |
|
|
$ |
15,917 |
|
|
$ |
1,062 |
|
|
6, 15 |
|
MF Property sold |
|
1 |
|
|
13,450 |
|
|
|
7,500 |
|
|
|
1,001 |
|
|
8, 16 |
|
Investments in unconsolidated entities |
|
6 |
|
|
18,946 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
Property loan redemptions |
|
2 |
|
|
5,113 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond acquisition |
|
1 |
|
$ |
19,540 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
|
Mortgage revenue bond redemptions |
|
4 |
|
|
11,000 |
|
|
$ |
7,710 |
|
|
N/A |
|
|
6, 15 |
|
|
Investments in unconsolidated entities |
|
4 |
|
|
6,764 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
Property loan redemptions |
|
3 |
|
|
500 |
|
|
N/A |
|
|
N/A |
|
|
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. |
43
The following table presents information regarding the debt financing, derivatives, Series A Preferred Units and partners’ capital activities of the Partnership for the first, second and third quarters of 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 September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayment on unsecured LOCs |
|
1 |
|
$ |
10,000 |
|
|
No |
|
N/A |
|
14 |
|
Refinancing of M24 TEBS Financing |
|
1 |
|
|
- |
|
|
Yes |
|
N/A |
|
15 |
|
Refinancing of M33 TEBS Financing and Premium Proceeds |
|
1 |
|
|
435 |
|
|
Yes |
|
N/A |
|
15 |
|
Proceeds from new TOB Financings with Mizuho |
|
8 |
|
|
104,056 |
|
|
Yes |
|
N/A |
|
15 |
|
Repayment of TOB Financings with Deutsche Bank |
|
3 |
|
|
34,185 |
|
|
Yes |
|
N/A |
|
15 |
|
Repayment of Term TOB Financing with Deutsche Bank |
|
1 |
|
|
37,553 |
|
|
Yes |
|
N/A |
|
15 |
|
Repayment of Term A/B Financings with Deutsche Bank |
|
2 |
|
|
10,516 |
|
|
Yes |
|
N/A |
|
15 |
|
Interest rate derivative purchased |
|
1 |
|
|
30 |
|
|
N/A |
|
4.5% |
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments on unsecured LOCs |
|
2 |
|
$ |
12,459 |
|
|
No |
|
N/A |
|
14 |
|
Proceeds from new Term TOB Financings with Morgan Stanley |
|
1 |
|
|
13,167 |
|
|
Yes |
|
N/A |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new Term A/B Financings with Deutsche Bank |
|
2 |
|
$ |
5,264 |
|
|
Yes |
|
N/A |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments on unsecured LOCs |
|
2 |
|
$ |
21,074 |
|
|
No |
|
N/A |
|
14 |
|
Proceeds from M45 TEBS Financings |
|
1 |
|
|
221,540 |
|
|
Yes |
|
N/A |
|
15 |
|
Proceeds from new Term A/B Financings with Deutsche Bank |
|
4 |
|
|
17,380 |
|
|
Yes |
|
N/A |
|
15 |
|
Term A/B Trusts repayments related to M45 TEBS |
|
24 |
|
|
208,689 |
|
|
Yes |
|
N/A |
|
15 |
|
Repayment of Term A/B Financings with Deutsche Bank |
|
2 |
|
|
10,885 |
|
|
Yes |
|
N/A |
|
15 |
|
Interest rate swap terminated |
|
1 |
|
|
- |
|
|
N/A |
|
N/A |
|
17 |
|
Proceeds on issuance of BUCs, net of issuance costs |
|
1 |
|
|
384 |
|
|
N/A |
|
N/A |
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayment on unsecured LOCs |
|
1 |
|
$ |
460 |
|
|
No |
|
N/A |
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
44
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 (dollar amounts in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||||||||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
Mortgage Revenue Bond Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
10,384 |
|
|
$ |
21,441 |
|
|
$ |
(11,057 |
) |
|
|
-51.6 |
% |
|
$ |
31,075 |
|
|
$ |
44,610 |
|
|
$ |
(13,535 |
) |
|
|
-30.3 |
% |
|
Interest expense |
|
|
5,789 |
|
|
|
5,584 |
|
|
|
205 |
|
|
|
3.7 |
% |
|
|
16,894 |
|
|
|
16,208 |
|
|
|
686 |
|
|
|
4.2 |
% |
|
Segment net income (loss) |
|
|
(2,493 |
) |
|
|
12,040 |
|
|
|
(14,533 |
) |
|
|
-120.7 |
% |
|
|
1,836 |
|
|
|
18,648 |
|
|
|
(16,812 |
) |
|
|
-90.2 |
% |
The following tables summarize 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 for the three and nine months ended September 30, 2019 and 2018. 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.
|
|
|
For the Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
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 |
|
$ |
677,993 |
|
|
$ |
10,086 |
|
|
|
6.0 |
% |
|
$ |
704,700 |
|
|
$ |
10,847 |
|
|
|
6.2 |
% |
|
Property loans |
|
|
7,796 |
|
|
|
147 |
|
|
|
7.5 |
% |
|
|
12,090 |
|
|
|
4,742 |
|
(1) |
|
156.9 |
% |
|
Other investments |
|
|
1,756 |
|
|
|
46 |
|
|
|
10.5 |
% |
|
|
2,735 |
|
|
|
72 |
|
|
|
10.5 |
% |
|
Total interest-earning assets |
|
$ |
687,545 |
|
|
$ |
10,279 |
|
|
|
6.0 |
% |
|
$ |
719,525 |
|
|
$ |
15,661 |
|
|
|
8.7 |
% |
|
Contingent interest income |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
4,246 |
|
(2) |
|
|
|
|
MRB redemption income |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
1,519 |
|
(3) |
|
|
|
|
Non-investment income |
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
$ |
10,384 |
|
|
|
|
|
|
|
|
|
|
$ |
21,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured & secured lines of credit |
|
$ |
15,700 |
|
|
$ |
227 |
|
|
|
5.8 |
% |
|
$ |
40,386 |
|
|
$ |
583 |
|
|
|
5.8 |
% |
|
Fixed TEBS financing |
|
|
274,791 |
|
|
|
2,781 |
|
|
|
4.0 |
% |
|
|
110,750 |
|
|
|
1,374 |
|
|
|
5.0 |
% |
|
Variable TEBS financing |
|
|
98,228 |
|
|
|
1,216 |
|
|
|
5.0 |
% |
(4) |
|
192,345 |
|
|
|
1,701 |
|
|
|
3.5 |
% |
|
Fixed Term A/B & TOB financing |
|
|
89,176 |
|
|
|
1,087 |
|
|
|
4.9 |
% |
|
|
207,932 |
|
|
|
1,969 |
|
|
|
3.8 |
% |
|
Variable TOB financing |
|
|
40,470 |
|
|
|
410 |
|
|
|
4.1 |
% |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||
|
Derivative fair value adjustments |
|
N/A |
|
|
|
68 |
|
|
N/A |
|
|
N/A |
|
|
|
(43 |
) |
|
N/A |
|
||||
|
Total interest-bearing liabilities |
|
$ |
518,365 |
|
|
$ |
5,789 |
|
|
|
4.5 |
% |
|
$ |
551,413 |
|
|
$ |
5,584 |
|
|
|
4.1 |
% |
|
Net interest income |
|
|
|
|
|
$ |
4,490 |
|
|
|
2.6 |
% |
|
|
|
|
|
$ |
10,077 |
|
|
|
5.6 |
% |
|
(1) |
Interest income includes approximately $4.6 million of interest received on redemption of the Lake Forest property loans in September 2018. The interest received was not previously recognized as income as the property loans were on nonaccrual status. |
|
(2) |
Contingent interest income was realized upon redemption of the Lake Forest MRB in September 2018. |
|
(3) |
MRB redemption income was related to additional proceeds received upon redemption of the Lake Forest MRB in September 2018. |
|
(4) |
The increase in the average rate of variable TEBS financing was due primarily to approximately $496,000 of previously unamortized deferred financing costs that were recognized as interest expense upon refinancing of the M33 TEBS financing to a fixed interest rate in July 2019. |
45
|
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
|
|
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 |
|
$ |
673,143 |
|
|
$ |
30,340 |
|
|
|
6.0 |
% |
|
$ |
707,375 |
|
|
$ |
32,999 |
|
(1) |
|
6.2 |
% |
|
Property loans |
|
|
7,675 |
|
|
|
432 |
|
|
|
7.5 |
% |
|
|
13,043 |
|
|
|
5,029 |
|
(2) |
|
51.4 |
% |
|
Other investments |
|
|
1,772 |
|
|
|
140 |
|
|
|
10.5 |
% |
|
|
2,754 |
|
|
|
580 |
|
(3) |
|
28.1 |
% |
|
Total interest-earning assets |
|
$ |
682,590 |
|
|
$ |
30,912 |
|
|
|
6.0 |
% |
|
$ |
723,172 |
|
|
$ |
38,608 |
|
|
|
7.1 |
% |
|
Contingent interest income |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
4,246 |
|
(4) |
|
|
|
|
MRB redemption income |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
1,519 |
|
(5) |
|
|
|
|
Non-investment income |
|
|
|
|
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
237 |
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
$ |
31,075 |
|
|
|
|
|
|
|
|
|
|
$ |
44,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured & secured lines of credit |
|
$ |
26,036 |
|
|
$ |
1,121 |
|
|
|
5.7 |
% |
|
$ |
44,109 |
|
|
$ |
1,758 |
|
|
|
5.3 |
% |
|
Fixed TEBS financing |
|
|
242,372 |
|
|
|
7,430 |
|
|
|
4.1 |
% |
|
|
44,300 |
|
|
|
1,374 |
|
|
|
4.1 |
% |
|
Variable TEBS financing |
|
|
131,509 |
|
|
|
4,122 |
|
|
|
4.2 |
% |
(6) |
|
194,181 |
|
|
|
5,059 |
|
|
|
3.5 |
% |
|
Fixed Term A/B & TOB financing |
|
|
96,458 |
|
|
|
3,353 |
|
|
|
4.6 |
% |
|
|
276,741 |
|
|
|
8,517 |
|
|
|
4.1 |
% |
|
Variable TOB financing |
|
|
16,188 |
|
|
|
410 |
|
|
|
3.4 |
% |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||
|
Derivative fair value adjustments |
|
N/A |
|
|
|
458 |
|
|
N/A |
|
|
N/A |
|
|
|
(500 |
) |
|
N/A |
|
||||
|
Total interest-bearing liabilities |
|
$ |
512,563 |
|
|
$ |
16,894 |
|
|
|
4.4 |
% |
|
$ |
559,331 |
|
|
$ |
16,208 |
|
|
|
3.9 |
% |
|
Net interest income |
|
|
|
|
|
$ |
14,018 |
|
|
|
2.7 |
% |
|
|
|
|
|
$ |
22,400 |
|
|
|
4.1 |
% |
|
(1) |
Interest income includes approximately $333,000 of additional interest income that is non-recurring. |
|
(2) |
Interest income includes approximately $4.6 million of interest received on redemption of the Lake Forest property loans in September 2018. The interest received was not previously recognized as income as the property loans were on nonaccrual status. |
|
(3) |
Interest income includes approximately $354,000 of additional interest income that is non-recurring. |
|
(4) |
Contingent interest income was realized upon redemption of the Lake Forest MRB in September 2018. |
|
(5) |
MRB redemption income was related to additional proceeds received upon redemption of the Lake Forest MRB in September 2018. |
|
(6) |
The increase in the average rate of variable TEBS financing was due primarily to approximately $496,000 of previously unamortized deferred financing costs that were recognized as interest expense upon refinancing of the M33 TEBS financing to a fixed interest rate in July 2019. |
The following tables summarize the changes in interest income and interest expense between the three and nine months ended September 30, 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.
46
|
|
|
For the Three Months Ended September 30, 2019 vs. 2018 |
|
|
For the Nine Months Ended September 30, 2019 vs. 2018 |
|
|
||||||||||||||||||
|
|
Total Change |
|
|
Volume $ Change |
|
|
Rate $ Change |
|
|
Total Change |
|
|
Volume $ Change |
|
|
Rate $ Change |
|
|
|||||||
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds |
|
$ |
(761 |
) |
|
$ |
(411 |
) |
(1) |
$ |
(350 |
) |
|
$ |
(2,659 |
) |
|
$ |
(1,597 |
) |
(1) |
$ |
(1,062 |
) |
|
|
Property loans |
|
|
(4,595 |
) |
|
|
(1,684 |
) |
|
|
(2,911 |
) |
|
|
(4,597 |
) |
|
|
(2,070 |
) |
|
|
(2,527 |
) |
|
|
Other investments |
|
|
(26 |
) |
|
|
(26 |
) |
|
|
- |
|
|
|
(440 |
) |
|
|
(207 |
) |
|
|
(233 |
) |
|
|
Total interest-earning assets |
|
$ |
(5,382 |
) |
|
$ |
(2,121 |
) |
|
$ |
(3,261 |
) |
|
$ |
(7,696 |
) |
|
$ |
(3,874 |
) |
|
$ |
(3,822 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured & secured lines of credit |
|
$ |
(356 |
) |
|
$ |
(356 |
) |
|
$ |
- |
|
|
$ |
(637 |
) |
|
$ |
(720 |
) |
|
$ |
83 |
|
|
|
Fixed TEBS financing |
|
|
1,407 |
|
|
|
2,035 |
|
|
|
(628 |
) |
|
|
6,056 |
|
|
|
6,143 |
|
(3) |
|
(87 |
) |
|
|
Variable TEBS financing |
|
|
(485 |
) |
|
|
(832 |
) |
|
|
347 |
|
(2) |
|
(937 |
) |
|
|
(1,633 |
) |
|
|
696 |
|
(2) |
|
Fixed Term A/B & TOB financing |
|
|
(882 |
) |
|
|
(1,125 |
) |
|
|
243 |
|
|
|
(5,164 |
) |
|
|
(5,548 |
) |
(3) |
|
384 |
|
|
|
Variable TOB financing |
|
|
410 |
|
|
|
410 |
|
|
|
- |
|
|
|
410 |
|
|
|
410 |
|
|
|
- |
|
|
|
Derivative fair value adjustments |
|
|
111 |
|
|
N/A |
|
|
|
111 |
|
|
|
958 |
|
|
N/A |
|
|
|
958 |
|
|
||
|
Total interest-bearing liabilities |
|
$ |
205 |
|
|
$ |
132 |
|
|
$ |
73 |
|
|
$ |
686 |
|
|
$ |
(1,348 |
) |
|
$ |
2,034 |
|
|
|
Net interest income |
|
$ |
(5,587 |
) |
|
$ |
(2,253 |
) |
|
$ |
(3,334 |
) |
|
$ |
(8,382 |
) |
|
$ |
(2,526 |
) |
|
$ |
(5,856 |
) |
|
|
(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 increase in rate for the variable TEBS financing was due primarily to approximately $496,000 of previously unamortized deferred financing costs that were recognized as interest expense upon refinancing of the M33 TEBS financing to a fixed interest rate in July 2019. |
|
(3) |
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. |
Comparison of the three months ended September 30, 2019 and 2018
The decrease in total revenues and the increase in total interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the rate and volume changes noted in the tables above.
Segment net income for the three months ended September 30, 2019 decreased as compared to the same period in 2018. The change consisted of the decrease in total revenues and increase in interest expense detailed in the tables above, offset by an increase of approximately $2.6 million in restricted unit compensation expense related to issuances and vesting during the third quarter of 2019. Upon the closing of the acquisition by Greystone of AFCA 2 on September 10, 2019, all outstanding restricted units vested and all previously unrecognized compensation expense was recognized. In addition, there was an increase of approximately $530,000 in professional fees due primarily to lower than usual consulting expenses in the third quarter of 2018.
Comparison of the nine months ended September 30, 2019 and 2018
The decrease in total revenues and increase in total interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the rate and volume changes noted in the tables above.
The decrease in segment net income for the nine months ended September 30, 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 and an increase of approximately $2.3 million in restricted unit compensation related to vesting in the third quarter of 2019. Upon the closing of the acquisition by Greystone of AFCA 2 on September 10, 2019, all outstanding restricted units vested and all previously unrecognized compensation expense was recognized.
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.
47
The following table compares operating results for the Public Housing Capital Fund Trusts segment for the periods in dicated ( dollar amounts in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||||||||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
Public Housing Capital Fund Trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
589 |
|
|
$ |
618 |
|
|
$ |
(29 |
) |
|
|
-4.7 |
% |
|
$ |
1,813 |
|
|
$ |
1,861 |
|
|
$ |
(48 |
) |
|
|
-2.6 |
% |
|
Interest expense |
|
|
354 |
|
|
|
338 |
|
|
|
16 |
|
|
|
4.7 |
% |
|
|
1,120 |
|
|
|
558 |
|
|
|
562 |
|
|
|
100.7 |
% |
|
Segment net income (loss) |
|
|
235 |
|
|
|
(31 |
) |
|
|
266 |
|
|
|
858.1 |
% |
|
|
692 |
|
|
|
162 |
|
|
|
530 |
|
|
|
327.2 |
% |
Comparison of the three months ended September 30, 2019 and 2018
Total revenues were down slightly for the three months ended September 30, 2019 as compared to the same periods in 2018 due to principal repayments.
The increase in interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to fair value adjustments to interest rate swaps. The net increase in interest expense related to these adjustments was approximately $48,000, partially offset by the impact of lower interest rates and principal balances.
The increase in segment net income for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the revenue and interest expense changes noted above and an impairment charge of approximately $310,000 recognized in the third quarter of 2018 that did not recur in 2019.
Comparison of the nine months ended September 30, 2019 and 2018
Total revenues were down slightly for the nine months ended September 30, 2019 as compared to the same periods in 2018 due to principal repayments.
The increase in interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to fair value adjustments to interest rate swaps. The net increase in interest expense related to these adjustments was approximately $588,000, partially offset by the impact of lower interest rates and principal balances.
The increase in segment net income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the revenue and interest expense changes noted above and impairment charges of approximately $1.1 million recognized in 2018 that did not recur in 2019.
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 September 30, 2019 and 2018, the Partnership and its consolidated subsidiaries owned two MF Properties which contained a total of 859 rental units.
The following table compares operating results for the MF Properties segment for the periods indicated (dollar amounts in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||||||||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
MF Properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
1,975 |
|
|
$ |
2,286 |
|
|
$ |
(311 |
) |
|
|
-13.6 |
% |
|
$ |
6,003 |
|
|
$ |
7,100 |
|
|
$ |
(1,097 |
) |
|
|
-15.5 |
% |
|
Gain on sales of real estate assets, net |
|
|
- |
|
|
|
4,051 |
|
|
|
(4,051 |
) |
|
|
-100.0 |
% |
|
|
- |
|
|
|
4,051 |
|
|
|
(4,051 |
) |
|
|
-100.0 |
% |
|
Interest expense |
|
|
366 |
|
|
|
473 |
|
|
|
(107 |
) |
|
|
-22.6 |
% |
|
|
1,096 |
|
|
|
1,325 |
|
|
|
(229 |
) |
|
|
-17.3 |
% |
|
Segment net income (loss) |
|
|
(434 |
) |
|
|
4,228 |
|
|
|
(4,662 |
) |
|
|
-110.3 |
% |
|
|
(946 |
) |
|
|
3,770 |
|
|
|
(4,716 |
) |
|
|
-125.1 |
% |
Comparison of the three months ended September 30, 2019 and 2018
The decrease in total revenues for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $396,000 from the sale of the Jade Park MF Property in September 2018.
48
The gain on sales of real estate assets for the three months ended September 30, 2018 is related to the sale of the Jade Park MF Property in September 2018. There was no g ai n on sale of real estate assets for the three months ended September 30, 2019.
The decrease in interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in the average principal outstanding of approximately $4.4 million, which reduced interest expense by approximately $58,000. 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 September 30, 2019 as compared to the same period in 2018 was due primarily to the changes in revenues, interest expense and gain on sales of real estate assets described above. In addition, there were decreases in real estate operating expenses of approximately $202,000 due to the Jade Park MF Property sale in September 2018, offset by a decrease in income tax benefit of approximately $742,000 due to tax adjustments recorded in the third quarter of 2018 that did not recur in the third quarter of 2019.
Comparison of the nine months ended September 30, 2019 and 2018
The decrease in total revenues for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $1.2 million from the sale of the Jade Park MF Property in September 2018.
The gain on sales of real estate assets for the nine months ended September 30, 2018 is related to the sale of the Jade Park MF Property in September 2018. There was no gain on sale of real estate assets for the nine months ended September 30, 2019.
The decrease in interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in the average principal outstanding of approximately $4.4 million, which reduced interest expense by approximately $168,000. 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 nine months ended September 30, 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 was:
|
|
• |
Decreases in real estate operating expenses of approximately $589,000 and depreciation expense of approximately $267,000 due to the Jade Park MF Property sale in September 2018; |
|
|
• |
A decrease in general operating expenses at the Suites on Paseo MF Property of approximately $188,000 due to utility expense adjustments in 2019 and one-time costs in 2018 that did not recur in 2019; and |
|
|
• |
A decrease in income tax benefit of approximately $795,000 related to tax adjustments upon filing the Greens Hold Co tax returns during 2018 that did not recur in 2019. |
Other Investments Segment
The Other Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which holds noncontrolling equity investments in certain multifamily properties and issues property loans due from other multifamily properties.
The following table compares operating results for the Other Investments segment for the periods indicated (dollar amounts in thousands):
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|||||||||
|
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
1,918 |
|
|
$ |
1,657 |
|
|
$ |
261 |
|
|
|
15.8 |
% |
|
$ |
7,986 |
|
|
$ |
4,674 |
|
|
$ |
3,312 |
|
|
|
70.9 |
% |
|
Gain on sale of investment in an unconsolidated entity |
|
|
10,476 |
|
|
|
- |
|
|
|
10,476 |
|
|
N/A |
|
|
|
10,476 |
|
|
|
- |
|
|
|
10,476 |
|
|
N/A |
|
||
|
Segment net income |
|
|
12,400 |
|
|
|
1,646 |
|
|
|
10,754 |
|
|
|
653.3 |
% |
|
|
18,464 |
|
|
|
4,646 |
|
|
|
13,818 |
|
|
|
297.4 |
% |
49
Comparison of the three months ended September 30, 2019 and 2018
The increase in total revenues for the three months ended September 30, 2019 as compared to the same period in 2018 was primarily due to the following:
|
|
• |
An increase of approximately $646,000 related to additional investments in unconsolidated entities of $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019; and |
|
|
• |
A decrease of approximately $388,000 due to the redemption of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively. |
The gain on sale of investment in an unconsolidated entity was related to the sale of the Vantage at Panama City Beach property in September 2019.
The change in segment net income for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the change in total revenues and gain on sale of an unconsolidated entity discussed above.
Comparison of the nine months ended September 30, 2019 and 2018
The increase in total revenues for the nine months ended September 30, 2019 as compared to the same period in 2018 was primarily due to:
|
|
• |
Approximately $3.0 million of contingent interest income recognized upon redemption of the Vantage at Brooks, LLC property loan in January 2019 and no such transaction occurred during the nine months ended September 30, 2018; |
|
|
• |
An increase of approximately $1.4 million related to additional investments in unconsolidated entities of $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019; and |
|
|
• |
A decrease of approximately $1.2 million due to the redemption of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively. |
The gain on sale of investment in an unconsolidated entity was related to the sale of the Vantage at Panama City Beach property in September 2019.
The change in segment net income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the change in total revenues and gain on sale of an unconsolidated entity discussed above.
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 as of September 30, 2019 and 2018, and for the nine months ended September 30, 2019 and 2018.
50
Non-Consolidated Properties - Stabilized
The owners of the following properties either do not meet the definition of a VIE 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 September 30, 2019. Debt service on the Partnership’s bonds for the non-consolidated stabilized properties was current as of September 30, 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 September 30, |
|
|
Physical Occupancy (1) as of September 30, |
|
|
Economic Occupancy (2) for the Nine Months Ended September 30, |
|
|||||||||||
|
Property Name |
|
State |
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
|
Non-Consolidated Properties-Stabilized (3) |
|
|||||||||||||||||||||
|
Courtyard Apartments |
|
CA |
|
|
108 |
|
|
|
98 |
% |
|
|
99 |
% |
|
|
98 |
% |
|
|
99 |
% |
|
Glenview Apartments |
|
CA |
|
|
88 |
|
|
|
99 |
% |
|
|
93 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
Harden Ranch |
|
CA |
|
|
100 |
|
|
|
100 |
% |
|
|
99 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
Harmony Court Bakersfield |
|
CA |
|
|
96 |
|
|
|
99 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
Harmony Terrace |
|
CA |
|
|
136 |
|
|
|
99 |
% |
|
|
99 |
% |
|
|
127 |
% |
|
|
126 |
% |
|
Las Palmas |
|
CA |
|
|
81 |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
99 |
% |
|
|
98 |
% |
|
Montclair Apartments |
|
CA |
|
|
80 |
|
|
|
98 |
% |
|
|
96 |
% |
|
|
102 |
% |
|
|
99 |
% |
|
Montecito at Williams Ranch |
|
CA |
|
|
132 |
|
|
|
92 |
% |
|
|
97 |
% |
|
|
108 |
% |
|
|
92 |
% |
|
San Vicente |
|
CA |
|
|
50 |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
101 |
% |
|
|
95 |
% |
|
Santa Fe Apartments |
|
CA |
|
|
89 |
|
|
|
97 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
Seasons at Simi Valley |
|
CA |
|
|
69 |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
120 |
% |
|
|
119 |
% |
|
Seasons Lakewood |
|
CA |
|
|
85 |
|
|
|
100 |
% |
|
|
98 |
% |
|
|
99 |
% |
|
|
102 |
% |
|
Seasons San Juan Capistrano |
|
CA |
|
|
112 |
|
|
|
96 |
% |
|
|
99 |
% |
|
|
101 |
% |
|
|
99 |
% |
|
Solano Vista (7) |
|
CA |
|
|
96 |
|
|
|
99 |
% |
|
n/a |
|
|
|
107 |
% |
|
n/a |
|
||
|
Summerhill |
|
CA |
|
|
128 |
|
|
|
95 |
% |
|
|
98 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
Sycamore Walk |
|
CA |
|
|
112 |
|
|
|
99 |
% |
|
|
99 |
% |
|
|
90 |
% |
|
|
98 |
% |
|
The Village at Madera |
|
CA |
|
|
75 |
|
|
|
99 |
% |
|
|
100 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
Tyler Park Townhomes |
|
CA |
|
|
88 |
|
|
|
99 |
% |
|
|
100 |
% |
|
|
98 |
% |
|
|
97 |
% |
|
Vineyard Gardens |
|
CA |
|
|
62 |
|
|
|
100 |
% |
|
|
98 |
% |
|
|
101 |
% |
|
|
102 |
% |
|
Westside Village Market |
|
CA |
|
|
81 |
|
|
|
99 |
% |
|
|
100 |
% |
|
|
99 |
% |
|
|
100 |
% |
|
Brookstone Apartments (8) |
|
IL |
|
|
168 |
|
|
|
97 |
% |
|
|
97 |
% |
|
|
100 |
% |
|
|
96 |
% |
|
Copper Gate (9) |
|
IN |
|
|
128 |
|
|
|
98 |
% |
|
|
98 |
% |
|
|
99 |
% |
|
|
96 |
% |
|
Renaissance Gateway (8) |
|
LA |
|
|
208 |
|
|
|
98 |
% |
|
|
95 |
% |
|
|
90 |
% |
|
|
102 |
% |
|
Live 929 Apartments |
|
MD |
|
|
572 |
|
|
|
90 |
% |
|
|
84 |
% |
|
|
82 |
% |
|
|
85 |
% |
|
Woodlynn Village |
|
MN |
|
|
59 |
|
|
|
98 |
% |
|
|
100 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
Gateway Village (7) |
|
NC |
|
|
64 |
|
|
|
94 |
% |
|
n/a |
|
|
|
88 |
% |
|
n/a |
|
||
|
Greens of Pine Glen Apartments |
|
NC |
|
|
168 |
|
|
|
96 |
% |
|
|
96 |
% |
|
|
91 |
% |
|
|
91 |
% |
|
Lynnhaven Apartments (7) |
|
NC |
|
|
75 |
|
|
|
92 |
% |
|
n/a |
|
|
|
89 |
% |
|
n/a |
|
||
|
Silver Moon |
|
NM |
|
|
151 |
|
|
|
91 |
% |
|
|
97 |
% |
|
|
88 |
% |
|
|
89 |
% |
|
Village at Avalon (6) |
|
NM |
|
|
240 |
|
|
|
99 |
% |
|
n/a |
|
|
|
95 |
% |
|
n/a |
|
||
|
Ohio Properties (4) |
|
OH |
|
|
362 |
|
|
|
98 |
% |
|
|
98 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
Bridle Ridge Apartments |
|
SC |
|
|
152 |
|
|
|
94 |
% |
|
|
99 |
% |
|
|
89 |
% |
|
|
97 |
% |
|
Columbia Gardens (9) |
|
SC |
|
|
188 |
|
|
|
94 |
% |
|
|
95 |
% |
|
|
93 |
% |
|
|
95 |
% |
|
Companion at Thornhill Apartments |
|
SC |
|
|
179 |
|
|
|
99 |
% |
|
|
97 |
% |
|
|
92 |
% |
|
|
87 |
% |
|
Cross Creek Apartments |
|
SC |
|
|
144 |
|
|
|
98 |
% |
|
|
95 |
% |
|
|
90 |
% |
|
|
91 |
% |
|
Palms at Premier Park |
|
SC |
|
|
240 |
|
|
|
99 |
% |
|
|
93 |
% |
|
|
90 |
% |
|
|
89 |
% |
|
Village at River's Edge (8) |
|
SC |
|
|
124 |
|
|
|
98 |
% |
|
|
100 |
% |
|
|
98 |
% |
|
|
98 |
% |
|
Willow Run (9) |
|
SC |
|
|
200 |
|
|
|
91 |
% |
|
|
94 |
% |
|
|
90 |
% |
|
|
90 |
% |
|
Arbors at Hickory Ridge |
|
TN |
|
|
348 |
|
|
|
87 |
% |
|
|
90 |
% |
|
|
77 |
% |
|
|
84 |
% |
|
Avistar at Copperfield |
|
TX |
|
|
192 |
|
|
|
93 |
% |
|
|
95 |
% |
|
|
88 |
% |
|
|
84 |
% |
|
Avistar at the Crest |
|
TX |
|
|
200 |
|
|
|
95 |
% |
|
|
94 |
% |
|
|
80 |
% |
|
|
76 |
% |
|
Avistar at the Oaks |
|
TX |
|
|
156 |
|
|
|
96 |
% |
|
|
97 |
% |
|
|
86 |
% |
|
|
85 |
% |
|
Avistar at the Parkway |
|
TX |
|
|
236 |
|
|
|
90 |
% |
|
|
86 |
% |
|
|
80 |
% |
|
|
78 |
% |
|
Avistar at Wilcrest |
|
TX |
|
|
88 |
|
|
|
91 |
% |
|
|
92 |
% |
|
|
83 |
% |
|
|
79 |
% |
|
Avistar at Wood Hollow |
|
TX |
|
|
409 |
|
|
|
98 |
% |
|
|
97 |
% |
|
|
91 |
% |
|
|
81 |
% |
|
Avistar in 09 |
|
TX |
|
|
133 |
|
|
|
100 |
% |
|
|
97 |
% |
|
|
89 |
% |
|
|
88 |
% |
|
Avistar on the Boulevard |
|
TX |
|
|
344 |
|
|
|
97 |
% |
|
|
94 |
% |
|
|
84 |
% |
|
|
81 |
% |
|
Avistar on the Hills |
|
TX |
|
|
129 |
|
|
|
97 |
% |
|
|
98 |
% |
|
|
87 |
% |
|
|
89 |
% |
|
Bella Vista Apartments (5) |
|
TX |
|
n/a |
|
|
n/a |
|
|
|
95 |
% |
|
n/a |
|
|
|
87 |
% |
|||
|
Bruton Apartments |
|
TX |
|
|
264 |
|
|
|
87 |
% |
|
|
94 |
% |
|
|
85 |
% |
|
|
87 |
% |
|
Concord at Gulfgate |
|
TX |
|
|
288 |
|
|
|
95 |
% |
|
|
94 |
% |
|
|
83 |
% |
|
|
86 |
% |
|
Concord at Little York |
|
TX |
|
|
276 |
|
|
|
93 |
% |
|
|
96 |
% |
|
|
86 |
% |
|
|
89 |
% |
|
Concord at Williamcrest |
|
TX |
|
|
288 |
|
|
|
97 |
% |
|
|
96 |
% |
|
|
91 |
% |
|
|
90 |
% |
|
Crossing at 1415 |
|
TX |
|
|
112 |
|
|
|
96 |
% |
|
|
90 |
% |
|
|
86 |
% |
|
|
83 |
% |
|
Decatur Angle |
|
TX |
|
|
302 |
|
|
|
92 |
% |
|
|
89 |
% |
|
|
83 |
% |
|
|
80 |
% |
|
Esperanza at Palo Alto |
|
TX |
|
|
322 |
|
|
|
94 |
% |
|
|
96 |
% |
|
|
83 |
% |
|
|
87 |
% |
|
Heights at 515 |
|
TX |
|
|
96 |
|
|
|
94 |
% |
|
|
97 |
% |
|
|
87 |
% |
|
|
89 |
% |
|
Heritage Square Apartments |
|
TX |
|
|
204 |
|
|
|
97 |
% |
|
|
88 |
% |
|
|
71 |
% |
|
|
75 |
% |
|
Oaks at Georgetown |
|
TX |
|
|
192 |
|
|
|
93 |
% |
|
|
92 |
% |
|
|
92 |
% |
|
|
92 |
% |
|
Runnymede Apartments |
|
TX |
|
|
252 |
|
|
|
98 |
% |
|
|
100 |
% |
|
|
91 |
% |
|
|
95 |
% |
|
South Park Ranch Apartments |
|
TX |
|
|
192 |
|
|
|
98 |
% |
|
|
99 |
% |
|
|
92 |
% |
|
|
93 |
% |
|
Vantage at Judson (5) |
|
TX |
|
n/a |
|
|
n/a |
|
|
|
94 |
% |
|
n/a |
|
|
|
83 |
% |
|||
|
15 West Apartments |
|
WA |
|
|
120 |
|
|
|
98 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
|
|
|
|
10,433 |
|
|
|
95 |
% |
|
|
95 |
% |
|
|
90 |
% |
|
|
89 |
% |
|
(1) |
Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement. |
51
|
(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) |
The Ohio Properties consist of 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 nine months ended September 30, 2019. |
|
(6) |
The property relates to a forward bond purchase commitment that was executed after September 30, 2018. The property was considered stabilized when the MRB was acquired. Information was not available for the 2018 periods presented. |
|
(7) |
Previous period occupancy information is not available as these are new investments acquired after September 30, 2018. |
|
(8) |
The physical and economic occupancy amounts are based on the latest available occupancy and financial information, which is as of June 30, 2019. |
|
(9) |
The economic occupancy amounts are based on the latest available financial information, which is as of June 30, 2019. Physical occupancy is as of September 30, 2019. |
Physical and economic occupancy as of and for the nine months ended September 30, 2019 were relatively 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 September 30, 2019. Debt service on the Partnership’s MRBs for the non-consolidated non-stabilized properties was current as of September 30, 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 September 30, |
|
|
Physical Occupancy (1) as of September 30, |
|
|
Economic Occupancy (2) for the Nine Months Ended September 30, |
|
|||||||||||
|
Property Name |
|
State |
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
|
Non-Consolidated Properties-Non Stabilized (3) |
|
|||||||||||||||||||||
|
Montevista (4) |
|
CA |
|
|
82 |
|
|
|
98 |
% |
|
n/a |
|
|
|
110 |
% |
|
n/a |
|
||
|
Rosewood Townhomes |
|
SC |
|
|
100 |
|
|
|
98 |
% |
|
|
70 |
% |
|
|
84 |
% |
|
|
73 |
% |
|
South Pointe Apartments |
|
SC |
|
|
256 |
|
|
|
92 |
% |
|
|
67 |
% |
|
|
79 |
% |
|
|
77 |
% |
|
|
|
|
|
|
438 |
|
|
|
94 |
% |
|
|
68 |
% |
|
|
84 |
% |
|
|
76 |
% |
|
(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 undergoing rehabilitation. 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 completion of the rehabilitation. |
|
(4) |
Previous period occupancy information is not available as this was a new investment acquired after September 30, 2018. |
Physical occupancy for the non-stabilized Residential Properties increased as of September 30, 2019 as compared to September 30, 2018 due to a new investment in Montevista with higher than average occupancy and increased occupancy at Rosewood Townhomes and South Pointe Apartments, which are nearing the completion of rehabilitation projects begun in 2018.
Economic occupancy for the non-stabilized Residential Properties increased for the nine months ended September 30, 2019 as compared to the same period in 2018 due to increasing physical occupancy at Rosewood Townhomes and South Pointe Apartments. We expect economic occupancy for these non-stabilized properties to increase in future periods as the properties complete rehabilitation and lease-up.
52
As of September 30, 2019, we owned two MF Properties. We report the assets, liabilities, and results of operations of these properties on a consolidated basis. For the nine months ended September 30, 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 $27.1 million as of September 30, 2019. Debt service on our mortgage payables was current as of September 30, 2019.
|
|
|
|
|
Number of Units as of September 30, |
|
|
Physical Occupancy (1) as of September 30, |
|
|
Economic Occupancy (2) for the Nine Months Ended September 30, |
|
|||||||||||
|
Property Name |
|
State |
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|||||
|
MF Properties-Stabilized (3) |
|
|||||||||||||||||||||
|
Suites on Paseo |
|
CA |
|
|
384 |
|
|
|
90 |
% |
|
|
92 |
% |
|
|
87 |
% |
|
|
90 |
% |
|
The 50/50 |
|
NE |
|
|
475 |
|
|
|
99 |
% |
|
|
99 |
% |
|
|
86 |
% |
|
|
80 |
% |
|
|
|
|
|
|
859 |
|
|
|
95 |
% |
|
|
96 |
% |
|
|
86 |
% |
|
|
86 |
% |
|
(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. |
The physical and economic occupancy as of and for the nine months ended September 30, 2019 were consistent as compared to the same period in 2018. These projects are stabilized and we are focused on maintaining high occupancy and efficient operations.
Results of Operations
The tables and following discussions of the Partnership’s change in operating results for the three and nine months ended September 30, 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 indicated (dollar amounts in thousands):
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|||||||||
|
Revenues and Other Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property revenues |
|
$ |
1,975 |
|
|
$ |
2,286 |
|
|
$ |
(311 |
) |
|
|
-13.6 |
% |
|
$ |
6,003 |
|
|
$ |
7,025 |
|
|
$ |
(1,022 |
) |
|
|
-14.5 |
% |
|
Investment income |
|
|
12,590 |
|
|
|
12,733 |
|
|
|
(143 |
) |
|
|
-1.1 |
% |
|
|
37,073 |
|
|
|
38,361 |
|
|
|
(1,288 |
) |
|
|
-3.4 |
% |
|
Contingent interest income |
|
|
3 |
|
|
|
4,246 |
|
|
|
(4,243 |
) |
|
|
-99.9 |
% |
|
|
3,045 |
|
|
|
4,246 |
|
|
|
(1,201 |
) |
|
|
-28.3 |
% |
|
Other interest income |
|
|
207 |
|
|
|
5,218 |
|
|
|
(5,011 |
) |
|
|
-96.0 |
% |
|
|
636 |
|
|
|
7,020 |
|
|
|
(6,384 |
) |
|
|
-90.9 |
% |
|
Other income |
|
|
91 |
|
|
|
1,519 |
|
|
|
(1,428 |
) |
|
|
-94.0 |
% |
|
|
120 |
|
|
|
1,593 |
|
|
|
(1,473 |
) |
|
|
-92.5 |
% |
|
Gain on sale of real estate assets, net |
|
|
- |
|
|
|
4,051 |
|
|
|
(4,051 |
) |
|
|
-100.0 |
% |
|
|
- |
|
|
|
4,051 |
|
|
|
(4,051 |
) |
|
|
-100.0 |
% |
|
Gain on sale of investment in an unconsolidated entity |
|
|
10,476 |
|
|
|
- |
|
|
|
10,476 |
|
|
N/A |
|
|
|
10,476 |
|
|
|
- |
|
|
|
10,476 |
|
|
N/A |
|
||
|
Total Revenues and Other Income |
|
$ |
25,342 |
|
|
$ |
30,053 |
|
|
$ |
(4,711 |
) |
|
|
-15.7 |
% |
|
$ |
57,353 |
|
|
$ |
62,296 |
|
|
$ |
(4,943 |
) |
|
|
-7.9 |
% |
Discussion of the Total Revenues and Other Income for the Three Months Ended September 30, 2019 and 2018
Property revenues. The decrease in property revenues for the three months ended September 30, 2019 as compared to the same period in 2018 is due primarily to a decrease of approximately $396,000 from the sale of the Jade Park MF Property in September 2018.
53
Investment income. The decrease in investment income for the three months ended September 30 , 2019 as compared to the same period in 2018 was due to the following factors:
|
|
• |
Decreases of approximately of approximately $411,000 and $350,000 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 $646,000 in investment interest income related to additional investments in unconsolidated entities during 2019 and 2018. We made investments in unconsolidated entities totaling approximately $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019. |
Contingent interest income. There was minimal contingent interest income recognized for the three months ended September 30, 2019. The contingent interest income recognized for the three months ended September 30 , 2018 was realized upon redemption of the Lake Forest MRB and sale of the underlying property .
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 September 30, 2019 as compared to the same period in 2018 was primarily due to approximately $4.6 million of interest income realized on the redemption of the Lake Forest property loans during 2018 that did not recur in 2019. In addition, we experienced a decrease of approximately $388,000 related to redemptions of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively.
Other income. Other income was minimal for the three months ended September 30, 2019. The other income reported for the three months ended September 30, 2018 related to early redemption of the Lake Forest MRB in September 2018 .
Gain on sale of real estate assets, net. The gain on sale for the three months ended September 30 , 2018 related to the sale of the Jade Park MF Property in September 2018 . There was no gain on sale reported for the three months ended September 30, 2019.
Gain on sale of investment in an unconsolidated entity. The gain on sale of investment in an unconsolidated entity for the three months ended September 30, 2019 related to the sale of the Vantage at Panama City Beach property in September 2019. There was no gain on sale reported for the three months ended September 30, 2018.
Discussion of the Total Revenues and Other Income for the Nine Months Ended September 30, 2019 and 2018
Property revenues. The decrease in property revenues for the nine months ended September 30, 2019 as compared to the same period in 2018 is due primarily to a decrease of approximately $1.2 million from the sale of the Jade Park MF Property in September 2018.
Investment income. The decrease in investment income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:
|
|
• |
Decreases of approximately $1.6 million and $1.1 million 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 $1.4 million in investment interest income related to additional investments in unconsolidated entities during 2019 and 2018. We made investments in unconsolidated entities totaling approximately $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019. |
Contingent interest income. The contingent interest income recognized for the nine months ended September 30, 2019 was predominantly realized upon redemption of the Vantage at Brooks, LLC property loan in January 2019 . The contingent interest income recognized for the nine months ended September 30 , 2018 was realized upon redemption of the Lake Forest MRB and sale of the underlying property in September 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 nine months ended September 30, 2019 as compared to the same period in 2018 was primarily due to approximately $4.6 million of interest income realized on redemption of the Lake Forest property loans in September 2018 that did not recur in 2019, a decrease of approximately $1.2 million related to redemptions of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively, and non-recurring interest income of approximately $354,000 recognized in 2018. The remaining decrease was due to less interest recognized on cash balances during the nine months ended September 30, 2019.
54
Other income. Other income was minimal for the nine months ended September 30, 2019 . Other income recognized for the nine months ended September 30, 2018 consists primarily of approximately $1.5 million additional income realized upon early redemption of the Lake Forest MRB in September 2018.
Gain on sale of real estate assets, net. The gain on sale for the nine months ended September 30 , 2018 related to the sale of the Jade Park MF Property in September 2018 . There was no gain on sale reported for the nine months ended September 30, 2019.
Gain on sale of investment in an unconsolidated entity. The gain on sale of investment in an unconsolidated entity for the nine months ended September 30, 2019 related to the sale of the Vantage at Panama City Beach property in September 2019. There was no gain on sale reported for the nine months ended September 30, 2018.
The table below compares expenses for the Partnership for the periods indicated (dollar amounts in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||||||||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate operating (exclusive of items shown below) |
|
$ |
1,382 |
|
|
$ |
1,607 |
|
|
$ |
(225 |
) |
|
|
-14.0 |
% |
|
$ |
3,478 |
|
|
$ |
4,293 |
|
|
$ |
(815 |
) |
|
|
-19.0 |
% |
|
Impairment of securities |
|
|
- |
|
|
|
310 |
|
|
|
(310 |
) |
|
|
-100.0 |
% |
|
|
- |
|
|
|
1,141 |
|
|
|
(1,141 |
) |
|
|
-100.0 |
% |
|
Impairment charge on real estate assets |
|
|
75 |
|
|
|
150 |
|
|
|
(75 |
) |
|
|
-50.0 |
% |
|
|
75 |
|
|
|
150 |
|
|
|
(75 |
) |
|
|
-50.0 |
% |
|
Depreciation and amortization |
|
|
744 |
|
|
|
865 |
|
|
|
(121 |
) |
|
|
-14.0 |
% |
|
|
2,384 |
|
|
|
2,693 |
|
|
|
(309 |
) |
|
|
-11.5 |
% |
|
Interest expense |
|
|
6,509 |
|
|
|
6,394 |
|
|
|
115 |
|
|
|
1.8 |
% |
|
|
19,111 |
|
|
|
18,091 |
|
|
|
1,020 |
|
|
|
5.6 |
% |
|
General and administrative |
|
|
6,992 |
|
|
|
3,653 |
|
|
|
3,339 |
|
|
|
91.4 |
% |
|
|
12,268 |
|
|
|
9,506 |
|
|
|
2,762 |
|
|
|
29.1 |
% |
|
Total Expenses |
|
$ |
15,702 |
|
|
$ |
12,979 |
|
|
$ |
2,723 |
|
|
|
21.0 |
% |
|
$ |
37,316 |
|
|
$ |
35,874 |
|
|
$ |
1,442 |
|
|
|
4.0 |
% |
Discussion of the Total Expenses for the Three Months Ended September 30, 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 September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $202,000 related to the sale of the Jade Park MF Property in September 2018.
Impairment of securities. There was no impairment of securities recognized for the three months ended September 30, 2019. The impairment of securities for the three months ended September 30, 2018 related to decreases in the fair value of the PHC Certificates.
Impairment charge on real estate assets . The impairment charge on real estate assets for the three months ended September 30, 2019 and 2018 related to the land held for development in Gardner, KS.
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 September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in depreciation expense of approximately $76,000 at the 50/50 related to furniture & fixtures that became fully depreciated in July 2019.
Interest expense. The increase in interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:
|
|
• |
A decrease of approximately $400,000 due to lower average principal outstanding; |
|
|
• |
An increase of approximately $19,000 due to an increase in effective interest rates of the debt financing portfolio; |
|
|
• |
An increase of approximately $160,000 related to fair value adjustments to interest rate derivatives, net of cash paid; and |
|
|
• |
An increase of approximately $336,000 in amortization of deferred financing costs. |
General and administrative expenses. The increase in general and administrative expenses for the three months ended September 30, 2019 as compared to the same period in 2018 was primarily due to an increase of approximately $2.6 million in restricted unit compensation expense. Upon the closing of the acquisition by Greystone of AFCA 2 on September 10, 2019, all outstanding restricted
55
units vested and all previously unrecognized compensation expense was recogni zed. In addition, there was an in crease of approximately $530,000 in professional fees due primarily to lower than usual consulting expenses in the third quarter of 2018 .
Discussion of the Total Expenses for the Nine Months Ended September 30, 2019 and 2018
Real estate operating expenses. The decrease in real estate operating expenses for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $589,000 related to the sale of the Jade Park MF Property in September 2018. In addition, there was decrease of approximately $188,000 at the Suites on Paseo MF Property due to utility expense adjustments in 2019, and one-time costs in 2018 that did not recur in 2019.
Impairment of securities. There was no impairment of securities recognized for the nine months ended September 30, 2019. The impairment of securities for the nine months ended September 30, 2018 related to decreases in the fair value of the PHC Certificates.
Impairment charge on real estate assets . The impairment charge on real estate assets for the nine months ended September 30, 2019 and 2018 related to the land held for development in Gardner, KS.
Depreciation and amortization expense. The decrease in depreciation and amortization for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in depreciation expense of approximately $267,000 related to the sale of the Jade Park MF Property in September 2018.
Interest expense. The increase in interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:
|
|
• |
A decrease of approximately $1.4 million due to lower average principal outstanding; |
|
|
• |
An increase of approximately $710,000 due to an increase in effective interest rates of the debt financing portfolio; |
|
|
• |
An increase of approximately $1.5 million related to fair value adjustments to interest rate derivatives, net of cash paid; and |
|
|
• |
An increase of approximately $172,000 in amortization of deferred financing costs. |
General and administrative expenses. The increase in general and administrative expenses for the nine months ended September 30, 2019 as compared to the same period in 2018 was primarily due to an increase of approximately $2.3 million in restricted units compensation expense upon the closing of the acquisition by Greystone of AFCA 2.
Discussion of the Income Tax Expense for the Three and Nine Months Ended September 30, 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 and nine months ended September 30, 2019. The income tax benefit recognized for the three and nine months ended September 30, 2018 related to tax adjustments upon filing the Greens Hold Co tax returns during 2018. The gain on sale of the Jade Park MF Property in September 2018 did not generate taxable income as it was not owned by the Greens Hold Co.
Liquidity and Capital Resources
Our short-term liquidity requirements over the next 12 months will be primarily for distribution payments, operational expenses, equity investment commitments, 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, additional investments in MRBs, and additional investments in 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.
56
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; |
|
|
• |
Proceeds from increasing leverage of debt financings; |
|
|
• |
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.
Net Operating Cash Flows from MF Properties
Cash flows generated by MF Properties, net of operating expenses and mortgage service payments, are considered 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 September 30, 2019. In addition, we have fulfilled this requirement for the fourth quarter of 2019. In July 2019, we extended the maturity of the unsecured operating line of credit to June 2021.
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 270 th 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 September 30, 2019. We anticipate paying off the balances on our unsecured non-operating line of credit by entering into fixed-rate or variable-rate debt financing arrangements, to be secured with the previously acquired MRBs or multifamily real estate. We had approximately $36.8 million available on the unsecured non-operating line of credit as of September 30, 2019. In July 2019, we extended the maturity of the unsecured non-operating line of credit to June 2021.
Proceeds from Increasing Leverage of Debt Financings
In certain circumstances, the Partnership may have debt financings that have a relatively low leverage when comparing the outstanding debt principal to the value of the related securitized assets. This can occur due to either principal paydowns on the debt financings or increasing value of the securitized assets. In such cases, the Partnership may elect to refinance the existing debt financings to increase leverage and obtain additional cash proceeds from increases in the outstanding principal balances.
57
Issuances of BUCs and Series A Preferred Units
As of September 30, 2019, we had an effective Registration Statement on file with the SEC to issue 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 September 30, 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 September 30, 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 and nine months ended September 30, 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.
In September 2019, our investment in Vantage at Panama City Beach was liquidated upon the sale of the property. In total, we received approximately $22.7 million upon sale, which consists of the return of our initial capital contributions, investment income and gain on sale.
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 financings and mortgages payable; and |
|
|
• |
Other contractual obligations of the Partnership. |
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 and nine months ended September 30, 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.
58
Investments in Additional MRBs, Tax Exempt Investments, Other Investments and Unconsolidated E ntities
Our overall strategy is to continue to increase our investment in multifamily properties 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 Financings 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.
Prior to 2019, all our debt financing arrangements, excluding TEBS Financings, were with Deutsche Bank. During 2019, we have strategically diversified our lending relationships to reduce our exposure to Deutsche Bank. We closed on a new Term TOB trust financing structure with Morgan Stanley in May 2019 and new TOB trust financing structures with Mizuho in the third quarter of 2019. The addition of these two investment banking relationships will further diversify our access to debt financing arrangements.
We actively manage both our fixed and variable rate debt financings. The following table summarizes our fixed and variable rate debt financings as of September 30, 2019 and December 31, 2018:
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
|||||||||||
|
Debt Financing Type |
|
Outstanding Principal |
|
|
% of Total Debt Financing |
|
|
Outstanding Principal |
|
|
% of Total Debt |
|
||||
|
Fixed |
|
$ |
357,442,759 |
|
|
|
66.0 |
% |
|
$ |
317,096,477 |
|
|
|
62.3 |
% |
|
Variable |
|
|
183,931,290 |
|
|
|
34.0 |
% |
|
|
191,816,849 |
|
|
|
37.7 |
% |
|
Total |
|
$ |
541,374,049 |
|
|
|
|
|
|
$ |
508,913,326 |
|
|
|
|
|
As disclosed in Note 15 of the condensed consolidated financial statements, we refinanced the M24 and M33 TEBS Financings from variable to fixed in July 2019, which has resulted in an increase in the percentage of fixed rate debt financing. This increase was somewhat offset by eight new variable rate TOB Trusts with Mizuho in the third quarter of 2019.
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 financings and mortgage payable arrangements maturing in the next twelve months with similar arrangements with terms of one year or more. We typically refinance these arrangements with existing lenders, assuming the terms are acceptable to the Partnership, or with similar lending providers. 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.
59
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 Greystone Manager, 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 cost adjusted for paydowns for MRBs, PHC Certificates, property loans, and taxable MRBs, and initial cost for deferred financing costs and MF Properties. As of September 30, 2019, our overall leverage ratio was approximately 61%.
Cash Flows
For the nine months ended September 30, 2019, we generated cash of $8.1 million, which was the net result of $12.8 million provided by operating activities, $13.9 million provided by investing activities, and $18.6 million used in financing activities.
Cash provided by operating activities totaled $12.8 million for the nine months ended September 30, 2019, as compared to $18.0 million generated for the nine months ended September 30, 2018. The decrease between periods was primarily due to a decrease of $7.2 million in net income.
Cash provided by investing activities totaled $13.9 million for the nine months ended September 30, 2019, as compared to cash provided of $7.5 million for the nine months ended September 30, 2018. The change between periods was predominantly due to an increase of $20.2 million received on the sale of an investment in an unconsolidated entity, offset by a decrease of $13.5 million received on the sale of an MF Property. The remaining difference was due to roughly offsetting cash flows from our various investments in MRBs, PHCs, property loans and contributions to unconsolidated entities.
Cash used in financing activities totaled $18.6 million for the nine months ended September 30, 2019, as compared to cash used of $71.4 million for the nine months ended September 30, 2018. The change between periods was predominantly due to an increase of $47.2 million in net proceeds from debt financing and a decrease of $7.5 million in principal payments on mortgages payable.
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.
60
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 and nine months ended September 30, 2019 and 2018.
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Net income |
|
$ |
9,707,903 |
|
|
$ |
17,883,055 |
|
|
$ |
20,045,906 |
|
|
$ |
27,225,480 |
|
|
Change in fair value of derivatives and interest rate derivative amortization |
|
|
68,333 |
|
|
|
(91,679 |
) |
|
|
458,141 |
|
|
|
(1,088,060 |
) |
|
Depreciation and amortization expense |
|
|
743,503 |
|
|
|
864,600 |
|
|
|
2,384,115 |
|
|
|
2,692,731 |
|
|
Impairment of securities |
|
|
- |
|
|
|
309,958 |
|
|
|
- |
|
|
|
1,141,020 |
|
|
Impairment charge on real estate assets |
|
|
75,000 |
|
|
|
150,000 |
|
|
|
75,000 |
|
|
|
150,000 |
|
|
Amortization of deferred financing costs |
|
|
745,457 |
|
|
|
409,420 |
|
|
|
1,476,463 |
|
|
|
1,304,879 |
|
|
RUA compensation expense |
|
|
3,265,677 |
|
|
|
622,227 |
|
|
|
3,636,091 |
|
|
|
1,372,384 |
|
|
Deferred income taxes |
|
|
(82,167 |
) |
|
|
- |
|
|
|
(138,331 |
) |
|
|
34,000 |
|
|
Redeemable Series A Preferred Unit distribution and accretion |
|
|
(717,762 |
) |
|
|
(717,763 |
) |
|
|
(2,153,288 |
) |
|
|
(2,153,288 |
) |
|
Tier 2 Income distributable to the General Partner (1) |
|
|
(1,264,949 |
) |
|
|
(2,074,381 |
) |
|
|
(2,017,974 |
) |
|
|
(2,074,381 |
) |
|
Bond purchase premium (discount) amortization (accretion), net of cash received |
|
|
(24,532 |
) |
|
|
(3,513 |
) |
|
|
(64,970 |
) |
|
|
(11,419 |
) |
|
Total CAD |
|
$ |
12,516,463 |
|
|
$ |
17,351,924 |
|
|
$ |
23,701,153 |
|
|
$ |
28,593,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of BUCs outstanding, basic |
|
|
60,519,542 |
|
|
|
59,907,123 |
|
|
|
60,457,299 |
|
|
|
59,989,585 |
|
|
Net income per BUC, basic |
|
$ |
0.13 |
|
|
$ |
0.25 |
|
|
$ |
0.26 |
|
|
$ |
0.38 |
|
|
Total CAD per BUC, basic |
|
$ |
0.21 |
|
|
$ |
0.29 |
|
|
$ |
0.39 |
|
|
$ |
0.48 |
|
|
Distributions declared, per BUC |
|
$ |
0.125 |
|
|
$ |
0.125 |
|
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
(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 September 30, 2019, Tier 2 income consisted of $10.5 million gain on sale related to the Partnership’s investment in Vantage at Panama City Beach. For the three months ended September 30, 2018, Tier 2 income consisted of $4.2 million of contingent interest from Lake Forest and a $4.1 million gain on sale of the Jade Park MF Property.
For the nine months ended September 30, 2019, Tier 2 income consisted of $3.0 million of contingent interest realized on redemption of the Vantage at Brooks, LLC property loan and $10.5 million gain on sale related to the Partnership’s investment in Vantage at Panama City Beach . For the nine months ended September 30, 2018, Tier 2 income consisted of $4.2 million of contingent interest from Lake Forest and a $4.1 million gain on sale of the Jade Park MF Property.
There was no non-recurring CAD per BUC earned by the Partnership during the three and nine months ended September 30, 2019 and 2018.
Off Balance Sheet Arrangements
As of September 30, 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 those disclosed in Note 21 to the Partnership’s condensed consolidated financial statements.
61
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 and 2020 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 Deutsche Bank, Morgan Stanley, and Mizuho 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 TOB, Term TOB or Term A/B Trust programs with Deutsche Bank, Morgan Stanley, and Mizuho. 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 nine months ended September 30, 2019 as disclosed herein.
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 September 30, 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 |
|
$ |
777,283 |
|
|
|
2.6 |
% |
-8.7% |
|
|
2.9 |
% |
-9.6% |
|
$ |
21,688 |
|
|
PHC Certificates |
|
|
44,685 |
|
|
|
4.5 |
% |
-5.4% |
|
|
5.0 |
% |
-5.9% |
|
|
1,133 |
|
62
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 for the dates indicated:
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 September 30, 2019, the total costs of borrowing by investment type were as follows:
|
|
• |
The unsecured LOCs have variable interest rates ranging between 4.6% and 5.3%; |
|
|
• |
The M31 TEBS facility has a variable interest rate of 3.0%; |
|
|
• |
The M24, M33 and M45 TEBS facilities have fixed interest rates ranging from 3.1% and 3.8%; |
|
|
• |
The Term TOB Trusts securitized by MRBs have fixed interest rates that range between 3.5% and 4.0%; |
|
|
• |
The Term A/B Trusts securitized by MRBs have fixed interest rates of 4.5%; |
|
|
• |
The TOB Trusts securitized by MRBs and PHC Certificates have variable interest rates that range between 2.8% and 3.3%; 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 September 30, 2019:
|
Purchase Date |
|
Notional Amount |
|
|
Maturity Date |
|
Effective Capped Rate (1) |
|
|
Index |
|
Variable Debt Financing Facility Hedged (1) |
|
Counterparty |
|
Fair Value as of September 30, 2019 |
|
|||
|
July 2015 |
|
|
27,117,092 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
TOB Trusts |
|
Wells Fargo Bank |
|
|
2 |
|
|
July 2015 |
|
|
27,117,092 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
TOB Trusts |
|
Royal Bank of Canada |
|
|
2 |
|
|
July 2015 |
|
|
27,117,092 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
TOB Trusts |
|
SMBC Capital Markets, Inc |
|
|
2 |
|
|
June 2017 |
|
|
81,351,277 |
|
|
Aug 2020 |
|
|
1.5 |
% |
|
SIFMA |
|
M33 TEBS |
|
Barclays Bank PLC |
|
|
45,274 |
|
|
Sept 2017 |
|
|
58,447,000 |
|
|
Sept 2020 |
|
|
4.0 |
% |
|
SIFMA |
|
M24 TEBS |
|
Barclays Bank PLC |
|
|
- |
|
|
Aug 2019 |
|
|
79,695,286 |
|
|
Aug 2024 |
|
|
4.5 |
% |
|
SIFMA |
|
M31 TEBS |
|
Barclays Bank PLC |
|
|
7,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52,605 |
|
|
(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 September 30, 2019:
|
Description |
|
- 25 basis points |
|
|
+ 50 basis points |
|
|
+ 100 basis points |
|
|
+ 150 basis points |
|
|
+ 200 basis points |
|
|||||
|
TOB & Term A/B Debt Financings |
|
$ |
152,728 |
|
|
$ |
(276,955 |
) |
|
$ |
(549,141 |
) |
|
$ |
(826,363 |
) |
|
$ |
(1,104,523 |
) |
|
TEBS Debt Financings |
|
|
114,212 |
|
|
|
(207,204 |
) |
|
|
(304,896 |
) |
|
|
(346,539 |
) |
|
|
(388,804 |
) |
|
Other Investment Financings |
|
|
24,987 |
|
|
|
(49,947 |
) |
|
|
(99,859 |
) |
|
|
(149,734 |
) |
|
|
(199,573 |
) |
|
Total |
|
$ |
291,927 |
|
|
$ |
(534,106 |
) |
|
$ |
(953,896 |
) |
|
$ |
(1,322,636 |
) |
|
$ |
(1,692,900 |
) |
63
The above 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 relation ship to 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, liabili ties 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 September 30, 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.
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.
64
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 nine months ended September 30, 2019 .
65
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:
|
3.1 |
|
|||
|
|
|
|
||
|
10.1 |
|
|||
|
|
|
|
||
|
10.2 |
|
|||
|
|
|
|
||
|
10.3 |
|
|||
|
|
|
|
||
|
10.4 |
|
|||
|
|
|
|
||
|
10.5 |
|
|||
|
|
|
|
||
|
10.6 |
|
|||
|
|
|
|
||
|
10.7 |
|
|||
|
|
|
|
||
|
10.8 |
|
|||
|
|
|
|
||
|
10.9 |
|
|||
|
|
|
|
||
|
10.10 |
|
|||
|
|
|
|
||
|
10.11 |
|
|||
|
|
|
|
||
|
10.12 |
|
|||
|
|
|
|
||
|
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. |
||
|
|
|
|
||
66
|
|
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
|
|
|
|
||
|
99.1 |
|
|||
|
|
|
|
||
|
101 |
|
The following materials from the Partnership’s Quarterly Report on Form 10-Q for the period ended September 30, 2019 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets on September 30, 2019 and December 31, 2018, (ii) the Condensed Consolidated Statements of Operations for the periods ended September 30, 2019 and 2018 , (iii) the Condensed Consolidated Statements of Comprehensive Income for the periods ended September 30, 2019 and 2018 , (iv) the Condensed Consolidated Statements of Partners’ Capital for the periods ended September 30, 2019 and 2018 , (v) the Condensed Consolidated Statements of Cash Flows for the periods ended September 30, 2019 and 2018 , and (vi) Notes to Condensed Consolidated Financial Statements. Such materials are presented with detailed tagging of notes and financial statement schedules. |
||
67
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: November 1, 2019 |
|
By: |
|
/s/ Chad L. Daffer |
|
|
|
|
|
Chad L. Daffer |
|
|
|
|
|
Chief Executive Officer |
|
Date: November 1, 2019 |
|
By: |
|
/s/ Craig S. Allen |
|
|
|
|
|
Craig S. Allen |
|
|
|
|
|
Chief Financial Officer |
68
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|