FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2001 or
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 TAX EXEMPT INVESTORS, L.P.
(Exact name of registrant as specified in its
Agreement of Limited Partnership)
Delaware 47-0810385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by the 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 X No
PAGE i
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
BALANCE SHEETS
March 31, 2001
(Unaudited) Dec. 31, 2000
-------------- --------------
Assets
Cash and cash equivalents (Note 4) $ 5,956,800 $ 5,858,216
Investment in tax-exempt mortgage bonds, at estimated fair value (Notes 3 and 5) 110,500,000 110,500,000
Investment in other tax-exempt bonds, at estimated fair value (Note 6) 3,000,000 3,000,000
Interest receivable 1,213,893 948,081
Other assets 4,341,502 4,059,207
-------------- --------------
$ 125,012,195 $ 124,365,504
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 7) $ 671,263 $ 511,178
Distribution payable 1,343,960 1,341,536
Debt financing (Note 3) 49,255,000 49,255,000
-------------- --------------
51,270,223 51,107,714
-------------- --------------
Partners' Capital
General Partner 8,234 3,392
Beneficial Unit Certificate Holders
($7.49 per BUC in 2001 and $7.45 in 2000) 73,733,738 73,254,398
-------------- --------------
73,741,972 73,257,790
-------------- --------------
$ 125,012,195 $ 124,365,504
============== ==============
The accompanying notes are an integral part of the financial statements.
PAGE 1
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
For the For the
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
-------------- --------------
Income
Mortgage bond investment income $ 2,359,323 $ 1,436,244
Other bond investment income 61,875 -
Other interest income 161,067 66,817
Contingent interest income (Note 5) 10,000 -
-------------- --------------
2,592,265 1,503,061
Expenses
Interest expense 562,468 61,833
General and administrative expenses (Note 7) 201,655 237,701
-------------- --------------
764,123 299,534
-------------- --------------
Net income and comprehensive income $ 1,828,142 $ 1,203,527
============== ==============
Net income allocated to:
General Partner $ 20,681 $ 12,035
BUC Holders 1,807,461 1,191,492
-------------- --------------
$ 1,828,142 $ 1,203,527
============== ==============
Net income, basic and diluted, per BUC $ .18 $ .12
============== ==============
Weighted average number of BUCs outstanding, basic and diluted 9,837,928 9,889,295
============== ==============
The accompanying notes are an integral part of the financial statements.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
STATEMENT OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED)
Beneficial Unit
General Certificate Holders
Partner # of BUCs Amount Total
-------------- --------------- -------------- --------------
Partners' Capital (excluding accumulated other
comprehensive income)
Balance at December 31, 2000 $ 3,392 9,837,928 $ 71,535,398 $ 71,538,790
Net income 20,681 - 1,807,461 1,828,142
Cash distributions paid or accrued (15,839) - (1,328,121) (1,343,960)
-------------- --------------- -------------- --------------
8,234 9,837,928 72,014,738 72,022,972
-------------- --------------- -------------- --------------
Accumulated Other Comprehensive Income
Balance at December 31, 2000 and March 31, 2001 - - 1,719,000 1,719,000
-------------- --------------- -------------- --------------
Balance at March 31, 2001 $ 8,234 9,837,928 $ 73,733,738 $ 73,741,972
============== =============== ============== ==============
The accompanying notes are an integral part of the financial statements.
PAGE 2
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three For the Three
Months Ended Months Ended
March 31, 2001 March 31, 2000
-------------- --------------
Cash flows from operating activities
Net income $ 1,828,142 $ 1,203,527
Adjustments to reconcile net income to net cash
from operating activities
Increase in interest receivable (265,812) (24,749)
Decrease in other assets 7,180 200
Increase (decrease) in accounts payable 160,085 (127,034)
-------------- --------------
Net cash provided by operating activities 1,729,595 1,051,944
-------------- --------------
Cash flows from investing activities
Acquisition of tax-exempt mortgage bonds - (17,155,000)
Increase in other assets (288,110) (671,564)
Purchase of BUCs - (693,332)
Bond issuance costs paid (1,365) -
-------------- --------------
Net cash used in investing activities (289,475) (18,519,896)
-------------- --------------
Cash flows from financing activities
Proceeds from debt financing - 17,155,000
Distributions paid (1,341,536) -
-------------- --------------
Net cash provided by (used in) financing activities (1,341,536) 17,155,000
-------------- --------------
Net increase (decrease) in cash and cash equivalents 98,584 (312,952)
Cash and cash equivalents at beginning of period 5,858,216 3,914,863
-------------- --------------
Cash and cash equivalents at end of period $ 5,956,800 $ 3,601,911
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 341,455 $ 66,593
============== ==============
The accompanying notes are an integral part of the financial statements.
Supplemental disclosure of non-cash financing activity:
As more fully described in Notes 3 and 5(7), on March 28, 2000, the
Partnership securitized $17,155,000 of tax-exempt mortgage bonds on Iona Lakes
Apartments by depositing such bonds with a custodian. The bonds were credit
enhanced and interests in substantially all of such bonds were sold to
institutional investors with the Partnership acquiring a residual interest
therein. This arrangement has been accounted for as a financing transaction.
PAGE 3
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
1. Organization
America First Tax Exempt Investors, L.P. was formed on April 2, 1998 under the
Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring,
holding, operating, selling and otherwise dealing with a portfolio of
federally tax-exempt mortgage bonds which have been issued to provide
construction and/or permanent financing of multifamily residential
apartments. The Partnership commenced operations on February 1, 1999. The
General Partner of the Partnership is America First Capital Associates Limited
Partnership Two (AFCA 2).
2. Basis of Presentation
The interim unaudited financial statements have been prepared according to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted according to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. The financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
2000. In the opinion of management, all normal and recurring adjustments
necessary to present fairly the financial position at March 31, 2001, and
results of operations for all periods presented have been made. The results
of operations for the three month period ended March 31, 2001 are not
necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
3. Debt Financing
As of March 31, 2001, the Partnership had securitized $49,285,000 (of which
$49,255,000 was outstanding at March 31, 2001 and December 31, 2000) of its
tax-exempt mortgage bond portfolio under four separate financing transactions
as described below.
The Partnership securitized $5,000,000 of its tax-exempt mortgage bonds during
August 1999. In connection with the securitization, the Partnership deposited
$25,250,000 of such tax-exempt mortgage bonds into a trust (the Primary Trust)
which issued $25,250,000 in trust certificates (the Primary Trust
Certificates). The Primary Trust issued and delivered to a Merrill Lynch
affiliate $5,000,000 in Primary Trust Certificates which have a first priority
claim on principal and base interest on the underlying tax-exempt mortgage
bonds. The $5,000,000 in Primary Trust Certificates were placed in a secondary
trust (the Secondary Trust) and credit enhanced by a Merrill Lynch affiliate.
The Merrill Lynch affiliate sold to institutional investors floating rate
securities (the Secondary Securities) in the amount of $4,995,000. The
Partnership also pledged and transferred an additional $3,000,000 of Primary
Trust Certificates to a Merrill Lynch affiliate to secure payment of the
$5,000,000 principal amount of and accrued interest on the aforementioned
Primary Trust Certificates. The Partnership obtained ownership of the
remaining Primary Trust Certificates in the principal amount of $17,250,000
and the rights to all subordinate interest paid on the related tax-exempt
mortgage bonds. The Partnership also acquired a residual interest in the
Secondary Trust with a face amount of $5,000 and proceeds of the transfer of
the Primary Trust Certificates to the Merrill Lynch affiliate in the amount of
$4,995,000. The Partnership has a call right on the Secondary Securities and
upon exercise of such right may collapse the Secondary and Primary Trusts and,
therefore, retains a level of control over the Secondary Securities. The
purchase price of the Secondary Securities is equal to the par amount plus 10%
of any increase in the market price of the underlying Primary Trust
Certificates. (Also see Note 5 (7)).
PAGE 4
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
The Partnership also securitized tax-exempt mortgage bonds of $17,155,000 on
Iona Lakes Apartments which were acquired by the Partnership on March 28,
2000. Similar to the $5,000,000 securitization described above, the
$17,155,000 of tax-exempt mortgage bonds (the Iona Bonds) were deposited with
a custodian pursuant to a custody and participation agreement (the Custody
Agreement). The custodian issued (i) a certificate to a Merrill Lynch
affiliate evidencing a beneficial ownership interest in all outstanding
principal and base interest on the Iona Bonds (the Senior Certificate) and
(ii) a certificate to the Partnership evidencing a beneficial ownership
interest in all contingent interest on the Iona Bonds (the Residual
Certificate). The Merrill Lynch affiliate then transferred the Senior
Certificate to a secondary trust (Secondary Trust) and credit enhanced such
Senior Certificate. The Merrill Lynch affiliate sold to institutional
investors floating rate securities (the Secondary Securities) in the amount of
$17,150,000. In addition to the Residual Certificate, the Partnership
acquired for $5,000 a residual interest in the Secondary Trust with a face
amount of $5,000. The Partnership has a call right on the Secondary
Securities and, upon exercise of such right, may collapse the Custody
Agreement and the Secondary Trust and, therefore, retains a level of control
over the Secondary Securities. The purchase price of the Secondary Securities
is equal to the par amount plus 10% of any increase in the market value of the
underlying Senior Certificates. The Partnership has also pledged $12,600,000
of its Woodbridge Apartments of Bloomington III tax-exempt mortgage bonds and
$5,300,000 of Primary Trust Certificates related to the Northwoods Lake
Apartments tax-exempt mortgage bonds as additional collateral in connection
with the securitization. (Also see Notes 5(4), (7) and (8)).
The Partnership also securitized tax-exempt mortgage bonds of $16,000,000 on
Clear Lake Colony Apartments which was acquired by the Partnership on June 8,
2000 and $11,130,000 on Bent Tree Apartments which was acquired on December
21, 2000. Such securitizations are structured similar to the $17,155,000
securitization described above. Floating rate securities in the amount of
$15,995,000 and $11,125,000 for Clear Lake Colony Apartments and Bent Tree
Apartments, respectively, were sold to institutional investors and the
Partnership acquired residual interests in trusts with a face value of $10,000
($5,000 for each of the securitized bonds) for $10,000 ($5,000 each). The
Partnership also pledged $8,976,000 of its Woodbridge Apartments of Louisville
II tax-exempt mortgage bonds and $2,000,000 of Primary Trust Certificates
related to the Northwoods Lake Apartments tax-exempt mortgage bonds as
additional collateral in connection with the securitization of the Clear Lake
Colony Apartments bonds. The Partnership also pledged $6,700,000 of its
Ashley Pointe at Eagle Crest tax-exempt mortgage bonds as additional
collateral in connection with the securitization of the Bent Tree Apartments
Bonds. (Also see Notes 5(5), (6), (7), (9), and (10)).
For financial statement purposes, the transactions described above have been
accounted for as financing transactions and, in effect, provide variable-rate
financing for the acquisition of new, or the securitization of existing,
tax-exempt mortgage bonds. Accordingly, the $49,255,000 of tax-exempt
mortgage bonds financed are required to be held in trust, the subordinated
interests are classified as other assets, and, in the case of the $5,000,000
debt financing, the net cash proceeds were classified as cash and temporary
cash investments. In all of the transactions, the financing debt bears
interest, plus credit enhancement, servicing, trustee and related fees.
Financing debt of $32,130,000 bears interest at a weekly floating bond rate
which averaged approximately 4.22% for 2000, including fees. The remaining
$17,125,000 of financing debt provided for interest at a weekly floating rate
through June 21, 2000 at which time the Partnership elected to lock in the
then current rate of 4.70% until June 20, 2001. The stated maturity date is
October 2011 for the $5,000,000 of debt financing, September 2002 for the
$16,000,000 of debt financing, June 2002 for the $11,130,000 of debt financing
and the final stated maturity date is April 2004 for the remaining $17,125,000
of debt financing. In each case, the debt financing is subject to the
respective call feature described above. The Partnership did not recognize a
gain or loss in connection with any of the financing transactions.
PAGE 5
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
4. Partnership Reserve Account
The Partnership maintains a reserve account which totaled $5,664,116 at
March 31, 2001.
5. Investment in Tax-Exempt Mortgage Bonds
The Partnership classified its investment in tax-exempt mortgage bonds as
available-for-sale. At March 31, 2001, and December 31, 2000, the total
amortized cost, gross unrealized holding gains and aggregate fair value of
available-for-sale securities were $108,781,000, $1,719,000 and $110,500,000,
respectively.
Descriptions of the properties collateralizing the tax-exempt mortgage bonds
and certain terms of such bonds owned by the Partnership at
March 31, 2001, are as follows:
Base Principal
Maturity Interest Outstanding at
Property Name Location Date Rate March 31, 2001
- --------------------------------- ----------------- -------- -------- ---------
Shoals Crossing Atlanta, GA 12/01/25 7.5% (1) 4,500,000
Woodbridge Apts. of Bloomington III (4) Bloomington, IN 12/01/27 7.5% (1) 12,600,000
Ashley Pointe at Eagle Crest (5) Evansville, IN 12/01/27 7.0% (1) 6,700,000
Woodbridge Apts. of Louisville II (6) Louisville, KY 12/01/27 7.5% (1) 8,976,000
Northwoods Lake Apartments (7) Duluth, GA 09/01/25 7.5% (1) 25,250,000
Ashley Square Des Moines, IA 12/01/25 7.5% (2) 6,500,000
Iona Lakes Apartments (8) Ft. Myers, FL 04/01/30 6.9% (3) 17,125,000
Clear Lake Colony Apartments (9) West Palm Beach, FL 06/15/30 6.9% (3) 16,000,000
Bent Tree Apartments (10) Columbia, SC 12/15/30 7.1% (3) 11,130,000
(1) In addition to the base interest rates shown, the bonds bear contingent
interest, as defined in each revenue note, of an additional 3.5% per annum
that is payable out of 100% (50% in the case of Woodbridge Apartments of
Bloomington III and Woodbridge Apartments of Louisville II) of the net cash
flow generated by the respective property. The Partnership received
contingent interest of $10,000 from Ashley Pointe at Eagle Crest during the
three months ended March 31, 2001. No contingent interest was received from
any of the other mortgage bonds in 2001.
(2) In addition to the base interest rate shown, the bond bears contingent
interest, as defined in the revenue note, of an additional 3% per annum
payable out of the net cash flow generated by the property. Past due unpaid
contingent interest compounds at a rate of 10.5% per annum. The Partnership
did not receive any contingent interest during the three months ended March
31, 2001.
(3) In addition to the base interest rate shown, the bonds bear contingent
interest, as defined in the revenue note, of an additional 2.6% per annum,
1.885% per annum and 1.9% per annum for Iona Lakes Apartments, Clear Lake
Colony Apartments and Bent Tree Apartments, respectively, payable out of the
net cash flow generated by each such property. Past due unpaid contingent
interest compounds at a rate of 9.5% per annum, 8.785% per annum and 9% per
annum for Iona Lakes Apartments, Clear Lake Colony Apartments and Bent Tree
Apartments, respectively.
(4) Tax-exempt mortgage bonds of $12,600,000, in addition to the $5,300,000
of Primary Trust Certificates described in (7) below, have been pledged as
additional security to the beneficial owner of the tax-exempt mortgage bonds
as described in (8) below.
PAGE 6
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
(5) Tax-exempt mortgage bonds of $6,700,000 have been pledged as additional
security to the beneficial owner of the tax-exempt mortgage bonds as described
in (10) below.
(6) Tax-exempt mortgage bonds of $8,976,000, in addition to the $2,000,000 of
Primary Trust Certificates described in (7) below, have been pledged as
additional security to the beneficial owner of the tax-exempt mortgage bonds
as described in (9) below.
(7) Tax-exempt mortgage bonds of $25,250,000 have been deposited with a trust
(the Primary Trust as described in Note 3). In addition to the $8,000,000 of
Primary Trust Certificates pledged as collateral as described in Note 3), the
Partnership also pledged Primary Trust Certificates representing a beneficial
interest in $5,300,000 and $2,000,000 in principal amount of such bonds as
described in (4) and (6) above, respectively.
(8) Tax-exempt mortgage bonds of $17,155,000 secured by Iona Lakes Apartments
were acquired by the Partnership on March 28, 2000. Such bonds have been
deposited with a custodian as described in Note 3). Such bonds had a
remaining principal balance of $17,125,000 at March 31, 2001. Also see (4)
and (7) above.
(9) Tax-exempt mortgage bonds of $16,000,000 secured by Clear Lake Colony
Apartments were acquired by the Partnership on June 8, 2000. Such bonds have
been deposited with a custodian as described in Note 3). Also see (6) and
(7) above.
(10) Tax-exempt mortgage bonds of $11,130,000 secured by Bent Tree Apartments
were acquired by the Partnership on December 21, 2000. Such bonds have been
deposited with a custodian as described in Note 3). Also see (5) above.
6. Investment in Other Tax-Exempt Bonds
At March 31, 2001 and December 31, 2000, the Partnership had an investment in
other tax-exempt bonds with a principal amount of $3,000,000. Such tax-exempt
bonds bear interest at the rate of 8.25% per annum and mature on December 1,
2026. The bonds are guaranteed by an affiliate of the borrower.
The Partnership classified its investment in other tax-exempt mortgage bonds
as available-for-sale. At March 31, 2001, and December 31, 2000, the general
partner estimates that the fair value of the other tax-exempt bonds was
$3,000,000.
7. Transactions with Related Parties
Substantially all of the Partnership's general and administrative expenses and
certain costs capitalized by the Partnership are paid by AFCA 2 or an
affiliate and are reimbursed by the Partnership. The amount of such expenses
reimbursed to AFCA 2 during 2001 was $288,637. The reimbursed expenses
included in this footnote are presented on a cash basis and do not reflect
accruals made at quarter end which are reflected in the accompanying financial
statements.
AFCA 2 is entitled to receive an administrative fee from the Partnership equal
to 0.45% of the outstanding principal balance of any tax-exempt mortgage bond
or other mortgage investment, unless the owner of the property financed by
such tax-exempt mortgage bond or other mortgage investment or another third
party is required to pay such administrative fee. Under the terms of each of
the Partnership's existing tax-exempt mortgage bonds, the property owners are
obligated to pay the administrative fee to AFCA 2. For the three months ended
March 31, 2001, the Partnership paid to AFCA 2 $3,375 in administrative fees
related to an investment in other tax-exempt bonds it acquired in November
2000. The Partnership may become obligated to pay additional administrative
fees to AFCA 2 in the event it acquires additional tax-exempt mortgage bonds
or other mortgage investments and is not able to negotiate the payment of
these fees by the property owners or in the event it acquires title to any of
the properties securing its existing tax-exempt mortgage bonds by reason of
foreclosure. AFCA 2 received administrative fees of $116,144 during the three
months ended March 31, 2001 from the owners of properties financed by the
tax-exempt mortgage bonds held by the Partnership. Since these administrative
PAGE 7
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
fees are not Partnership expenses, they have not been reflected in the
accompanying financial statements. However, such fees are payable by the
property owners prior to the payment of any contingent interest on the
tax-exempt mortgage bonds secured by these properties.
AFCA 2 was also entitled to receive approximately $359,000 in
administrative fees from the Partnership for the year ended December 31,
1989. The payment of these fees, which has been deferred by AFCA 2, is
contingent upon, and will be paid only out of future profits realized by the
Partnership from the disposition of any Partnership assets. This amount will
be recorded as an expense by the Partnership when it is probable that these
fees will be paid.
An affiliate of AFCA 2 was retained to provide property management services
for Ashley Square, Northwoods Lake Apartments, Ashley Pointe at Eagle Crest,
Shoals Crossing, Iona Lakes Apartments (beginning in April 2000), Clear Lake
Colony Apartments (beginning in June 2000) and Bent Tree Apartments (beginning
in December 2000). The management fees paid to the affiliate of AFCA 2
reflect market rates for such services in the areas in which these properties
are located and totaled $147,265 during the three months ended March 31, 2001.
These management fees are not Partnership expenses and, accordingly, have not
been reflected in the accompanying financial statements. However, such fees
are paid out of the revenues generated by these properties prior to the
payment of any interest on the tax-exempt bonds held by the Partnership on
these properties.
The Partnership's "other assets" include approximately $3,600,000 of taxable
mortgage loans due from the owners of Iona Lakes Apartments, Clear Lake Colony
Apartments and Bent Tree Apartments which collateralize the Partnership's
respective tax-exempt mortgage bonds. The taxable mortgage loans bear
interest ranging from 8.25% to 9.10% per annum, may be repaid at any time, and
may increase for additional advances. Each such taxable mortgage loan is
secured by a second mortgage on the respective property. The owners of the
aforementioned properties are employees of the general partner of AFCA 2.
8. Subsequent Event
The Partnership entered into a Standby Reimbursement Agreement guaranteeing
reimbursement of sums up to $12,727,751 as part of a plan to acquire certain
securities representing an interest in tax-exempt bonds secured by the Lake
Forest Apartments which total $12,375,000. In connection with the Standby
Reimbursement Agreement the Partnership pledged $3,900,000 of its other
tax-exempt bonds (of which $900,000 was acquired on April 6, 2001) and
$4,000,000 of Primary Trust Certificates related to the Northwoods Lake
Apartments tax-exempt mortgage bonds as security. This Standby Reimbursement
Agreement is expected to terminate on or about December 1, 2001 in connection
with the issuance of tax-exempt refunding bonds secured by Lake Forest
Apartments. The Partnership plans to acquire certain securities representing
an interest in such tax-exempt bonds.
PAGE 8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with all of the
financial statements and notes 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,
2000.
Liquidity and Capital Resources
The Partnership's primary capital resource consists of nine tax-exempt
mortgage bonds which were issued to the Partnership in order to provide
construction and/or permanent financing for nine multifamily housing
projects. The nine multifamily projects financed at March 31, 2001 are listed
in the following table:
At March 31, 2001
-----------------------------
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------------- ------------------ -------------- -------------- --------------
Shoals Crossing Atlanta, GA 176 164 93%
Ashley Square Des Moines, IA 144 140 97%
Northwoods Lake Apartments Duluth, GA 492 465 95%
Woodbridge Apts. of Bloomington III Bloomington, IN 280 265 95%
Woodbridge Apts. of Louisville II Louisville, KY 190 169 89%
Iona Lakes Apartments Ft. Myers, FL 350 345 99%
Clear Lake Colony Apartments West Palm Beach, FL 316 314 99%
Ashley Pointe at Eagle Crest Evansville, IN 150 138 92%
Bent Tree Apartments Columbia, SC 232 198 85%
-------------- -------------- --------------
2,330 2,198 94%
============== ============== ==============
The aggregate carrying value of the tax-exempt mortgage bonds at March 31,
2001 was $110,500,000. The carrying value of the bonds reflects the general
partner's estimate of the fair value of such bonds. The Partnership has
securitized $49,255,000 of its tax-exempt mortgage bonds as described herein.
As of March 31, 2001, the Partnership has pledged a total of $87,831,000 of
its tax-exempt mortgage bond portfolio in connection with its securitizations.
Each of the bonds bears interest at a fixed rate and provides for the payment
of additional contingent interest that is payable solely from available net
cash flow generated by the financed property. The principal amounts of eight
of the bonds do not amortize over their respective terms. The remaining bond
requires semiannual payments of principal and interest out of operating cash
flow.
PAGE 9
Tax-exempt interest earned on the mortgage bonds represents the Partnership's
principal source of cash flow. The Partnership also earns tax-exempt interest
and taxable interest on certain other investments. The Partnership's
principal uses of cash are the payment of operating expenses and distributions
to BUC holders. The following table sets forth information relating to cash
distributions paid to BUC holders for the periods shown:
For the Three For the Three
Months Ended Months Ended
March 31, 2001 March 31, 2000
-------------- --------------
Cash distributions
Income $ .1350 $ .1350
============== ==============
Distributions
Paid out of current cash flow $ .1350 $ .1210
Paid out of prior undistributed cash flow - .0140
-------------- --------------
Income $ .1350 $ .1350
============== ==============
In addition to cash generated from interest income, the Partnership may draw
on its reserve to pay operating expenses or to supplement cash distributions
to BUC holders. As of March 31, 2001, the amount held by the Partnership in
the reserve was $5,664,116. During three months ended March 31, 2001,
undistributed income totaling $484,182 was placed into reserves. Future
distributions to BUC Holders will depend upon the amount of base and
contingent interest received on the mortgage bonds, the size of the reserves
established by the Partnership and the extent to which withdrawals are made
from reserves.
The Partnership believes that cash provided by interest income from its
tax-exempt bonds and other investments, supplemented, if necessary, by
withdrawals from its reserve, will be adequate to meet its projected
short-term and long-term liquidity requirements, including the payments of
distributions to BUC Holders.
The Partnership is pursuing an investment strategy whereby it is investing in
additional tax-exempt mortgage bonds and related investments and financing
such acquisitions through the sale of senior interests in its tax-exempt
mortgage bonds. By acquiring additional investments, AFCA 2 hopes to: (i)
increase the amount of tax-exempt interest available for distribution to BUC
holders, (ii) reduce risk through increased asset diversification and (iii)
achieve improved economies of scale. By financing the acquisition of
additional investments through the sale of senior interests in its tax-exempt
bonds, the Partnership foregoes a portion of the interest it earns on its
tax-exempt bonds, but reinvests the sale proceeds in instruments which are
expected to generate a greater amount of interest income. To the extent the
Partnership sells such senior interests and is unable to reinvest the proceeds
in investments that generate interest at least as great as the interest paid
on the senior interests, the amount of interest income available to the
Partnership will decline. AFCA 2 is unable to estimate the amount of
additional tax-exempt mortgage bonds and other investments that the
Partnership may acquire and there can be no assurance that the Partnership
will be able to achieve any of the goals stated above.
PAGE 10
Asset Quality
It is the policy of the Partnership to make a periodic review of the real
estate collateralizing the Partnership's tax-exempt mortgage bonds in order to
assess for impairment the carrying value of the tax-exempt mortgage bonds.
The sole source of funds available for the repayment of principal of the bonds
is the net proceeds from the sale or refinancing of the financed properties,
except for one tax-exempt mortgage bond which requires semiannual payments of
principal and interest out of operating cash flow.
Based on reviews performed during 2001 on the real estate collateralizing the
Partnership's tax-exempt mortgage bonds, no indications of impairment of the
tax-exempt mortgage bonds were noted.
Results of Operations
Comparison of the Three Months Ended March 31, 2001 and March 31, 2000
Mortgage bond investment income increased $923,079 (64%) from $1,436,244 for
the three months ended March 31, 2000 to $2,359,323 for the three months ended
March 31, 2001. The majority of such increase ($769,395) is attributable to
the acquisitions of the Iona Lakes Apartments, Clear Lake Colony Apartments
and Bent Tree Apartments tax-exempt mortgage bonds in March, June, and
December 2000, respectively. The remaining increase of $153,684 is
attributable to increases of $89,160 and $79,740 earned on the Arama
Apartments and Northwoods Lake Apartments tax-exempt mortgage bonds,
respectively, and a net increase of $6,059 earned on certain of the
Partnership's other tax-exempt mortgage bonds. Offsetting such additions to
income was a decrease of $21,275 in mortgage bond investment income on the
Woodbridge Apartments of Bloomington III tax-exempt mortgage bond. Such
variations are more fully described below.
During the three months ended March 31, 2001, the Partnership earned $346,285
of mortgage bond investment income on its former investment in the Arama
Apartments tax-exempt mortgage bond. Such income represents the final payment
of past due base interest and principal that the Partnership will receive on
such bond which was sold in September 2000. During the three months ended
March 31, 2000, the Partnership recorded mortgage bond investment income of
$257,125 on such bond representing the full amount of base interest due for
such period. Accordingly, mortgage bond investment income earned on the Arama
Apartments mortgage bond increased $89,160 for the three months ended March
31, 2001, compared to the same period in 2000.
The $79,740 increase and $21,275 decrease in income earned on the Northwoods
Lake and Woodbridge Apartments of Bloomington III tax-exempt mortgage bonds,
respectively, are attributable to variations in the amount of past due base
interest received on such mortgage bonds that was due to the Partnership prior
to the reissuances in 1998. Such variations are a function of the net cash
flow generated by the respective underlying property. Despite such variations
in net cash flow, the Partnership earned the full amount of base interest due
on each of these mortgage bonds during the three months ended March 31, 2001
and 2000.
The Partnership earned $61,875 of bond investment income during the three
months ended March 31, 2001, on an investment in $3,000,000 of tax-exempt
bonds acquired in November 2000. No such income was earned for the comparable
period of 2000 as the Partnership did not have similar investments during such
period.
Other interest income increased $94,250 for the three months ended March 31,
2001, compared to the same period in 2000. Such increase is primarily
attributable to an increase in the Partnership's taxable mortgage loans which
are classified as other assets on the Partnership's balance sheet.
The Partnership earned contingent interest income of $10,000 from the Ashley
Point at Eagle Crest tax-exempt mortgage bond for the three months ended March
31, 2001, whereas no such income was earned for the comparable period of 2000.
PAGE 11
During the three months ended March 31, 2001, the Partnership incurred
interest expense of $562,468 on the $49,255,000 of debt financing obtained in
connection with securitizing certain of its tax-exempt mortgage bonds. For
the comparable period of 2000, the Partnership incurred interest expense of
$61,833 on $5,000,000 of debt financing. Accordingly, interest expense
increased $500,635 for the three months ended March 31, 2001, compared to the
comparable period of 2000.
General and administrative expenses for the three months ended March 31, 2001
decreased $36,046 (15%) compared to the same period in 2000. Such decrease is
primarily attributable to an decrease of approximately $36,000 in salaries and
related expenses.
Forward Looking Statements
This report contains forward looking statements that reflect management's
current beliefs and estimates of future economic circumstances, industry
conditions, the Partnership's performance and financial results. All
statements, trend analysis and other information concerning possible or
assumed future results of operations of the Partnership and the real estate
investments it has made (including, but not limited to, the information
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations"), constitute forward-looking statements. BUC holders
and others should understand that these forward looking statements are subject
to numerous risks and uncertainties and a number of factors could affect the
future results of the Partnership and could cause those results to differ
materially from those expressed in the forward looking statements contained
herein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership's primary market risk exposure is interest rate risk related
to its investment portfolio and financing debt. There have been no
significant changes in the Partnership's interest rate risk on its investment
portfolio since December 31, 2000.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following documents are filed as part of this report.
Exhibit numbers refer to the paragraph numbers under Item 601
of Regulation S-K:
3. Articles of Incorporation and Bylaws of America First
Fiduciary Corporation Number Five (incorporated herein by
reference to Form S-11 Registration Statement filed August 30,
1985, with the Securities and Exchange Commission by America
First Tax Exempt Mortgage Fund Limited Partnership (Commission
File No. 2-99997)).
4(a) Form of Certificate of Beneficial Unit Certificate
incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-4 (Commission File No. 333-50513) filed by
the Registrant on April 17, 1998.
4(b) Agreement of Limited Partnership of the Registrant
(incorporated by reference to Form 10-K dated December 31, 1998
filed pursuant to Section 13 or 15(d) of the Securities Act of
1934 by America First Tax Exempt Investors, L.P. (Commission
File No. 000-24843)).
4(c) Amended Agreement of Merger, dated June 12, 1998,
between the Registrant and America First Tax Exempt Mortgage
Fund Limited Partnership (incorporated by reference to Exhibit
4.3 to Amendment No. 3 to Registration Statement on Form S-4
(Commission File No. 333-50513) filed by the Registrant on
September 14, 1998.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the
period covered by this report.
PAGE 12
SIGNATURES
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.
Dated: May 11, 2001 AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
By America First Capital
Associates Limited
Partnership Two, General
Partner of the Registrant
By America First Companies L.L.C.,
General Partner of America First
Capital Associates Limited
Partnership Two
By /s/ Michael Thesing
Michael Thesing
Vice President
and Principal Financial Officer
PAGE 13