UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
OR
o 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 charter)
|
| |
Delaware | 47-0810385 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
1004 Farnam Street, Suite 400 | Omaha, Nebraska 68102 |
(Address of principal executive offices) | (Zip Code) |
(402) 444-1630 |
(Registrant's telephone number, including area code) |
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 x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
| | | |
Large accelerated filer o | Accelerated filer x | Non- accelerated filer o | Smaller reporting company o |
| | (do not check if a smaller reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x
INDEX
PART I – FINANCIAL INFORMATION
|
| | | |
| Financial Statements (Unaudited) | | |
| Condensed Consolidated Balance Sheets | |
| Condensed Consolidated Statements of Operations | |
| Condensed Consolidated Statements of Comprehensive Income | |
| Condensed Consolidated Statements of Partners’ Capital | |
| Condensed Consolidated Statements of Cash Flows | |
| Notes to Condensed Consolidated Financial Statements | |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| Quantitative and Qualitative Disclosures About Market Risk | |
| Controls and Procedures | |
PART II – OTHER INFORMATION
Forward-Looking Statements
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 a number of 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 and contained in this report and, accordingly, we cannot guarantee their accuracy or completeness.
These forward-looking statements are subject to various risks and uncertainties, including those relating to:
| |
• | defaults on the mortgage loans securing our tax-exempt mortgage revenue bonds and mortgage-backed securities; |
| |
• | risks associated with investing in multifamily apartments, including changes in business conditions and the general economy; |
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• | changes in short-term interest rates; |
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• | our ability to use borrowings to finance our assets; |
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• | current negative economic and credit market conditions |
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• | changes in government regulations affecting our business; and |
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• | changes in the appropriation amounts received by the Public Housing Authorities from the United States Department of Housing and Development Capital Fund Program which are used by the Public Housing Authorities to make interest and principal payments for the Public Housing Capital Fund Trusts' Certificates. |
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 as a result of new information, future events or otherwise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries 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 headings “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and in Item 1A of Part II of this document.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
| | | | | | | | |
| | September 30, 2013 | | December 31, 2012 |
Assets | | | | |
Cash and cash equivalents | | $ | 11,906,607 |
| | $ | 30,172,773 |
|
Restricted cash | | 7,697,739 |
| | 5,471,522 |
|
Interest receivable | | 8,012,423 |
| | 8,473,360 |
|
Tax-exempt mortgage revenue bonds held in trust, at fair value (Notes 4 & 10) | | 154,914,137 |
| | 99,534,082 |
|
Tax-exempt mortgage revenue bonds, at fair value (Note 4) | | 48,161,743 |
| | 45,703,294 |
|
Public housing capital fund trusts, at fair value (Note 5) | | 61,793,516 |
| | 65,389,298 |
|
Mortgage-backed securities, at fair value (Note 6) | | 38,880,996 |
| | 32,121,412 |
|
Real estate assets: (Note 7) | | | | |
Land | | 12,491,559 |
| | 11,202,876 |
|
Buildings and improvements | | 115,981,355 |
| | 93,615,479 |
|
Real estate assets before accumulated depreciation | | 128,472,914 |
| | 104,818,355 |
|
Accumulated depreciation | | (23,138,783 | ) | | (19,330,063 | ) |
Net real estate assets | | 105,334,131 |
| | 85,488,292 |
|
Other assets (Note 8) | | 13,353,435 |
| | 8,216,295 |
|
Assets of discontinued operations (Note 9) | | — |
| | 32,580,427 |
|
Total Assets | | $ | 450,054,727 |
| | $ | 413,150,755 |
|
| | | | |
Liabilities | | | | |
Accounts payable, accrued expenses and other liabilities | | $ | 5,160,479 |
| | $ | 5,013,947 |
|
Distribution payable | | 5,400,622 |
| | 5,566,908 |
|
Debt financing (Note 10) | | 226,569,000 |
| | 177,948,000 |
|
Mortgages payable (Note 11) | | 51,802,031 |
| | 39,119,507 |
|
Bond purchase commitment - fair market value adjustment (Notes 4 & 16) | | 4,865,536 |
| | — |
|
Liabilities of discontinued operations (Note 9) | | — |
| | 1,531,462 |
|
Total Liabilities | | 293,797,668 |
| | 229,179,824 |
|
| | | | |
Commitments and Contingencies (Note 16) | |
|
| |
|
|
| | | | |
Partners' Capital | | | | |
General Partner (Note 2) | | 84,551 |
| | (430,087 | ) |
Beneficial Unit Certificate holders | | 182,079,780 |
| | 207,383,087 |
|
Unallocated deficit of Consolidated VIEs | | (25,897,611 | ) | | (25,035,808 | ) |
Total Partners' Capital | | 156,266,720 |
| | 181,917,192 |
|
Noncontrolling interest (Note 7) | | (9,661 | ) | | 2,053,739 |
|
Total Capital | | 156,257,059 |
| | 183,970,931 |
|
Total Liabilities and Partners' Capital | | $ | 450,054,727 |
| | $ | 413,150,755 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| | | | | | | | | | | | | | | | |
| | For the Three Months Ended, | | For the Nine Months Ended, |
| | September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Revenues: | | | | | | | | |
Property revenues | | $ | 4,299,376 |
| | $ | 3,186,964 |
| | $ | 11,984,229 |
| | $ | 9,003,313 |
|
Investment income | | 5,247,808 |
| | 3,110,717 |
| | 17,559,622 |
| | 7,770,767 |
|
Contingent tax-exempt interest income | | — |
| | — |
| | 6,497,160 |
| | — |
|
Other interest income | | 216,993 |
| | 15,224 |
| | 1,558,158 |
| | 97,996 |
|
Gain on sale of bonds | | — |
| | — |
| | — |
| | 667,821 |
|
Other income | | — |
| | — |
| | 250,000 |
| | — |
|
Total revenues | | 9,764,177 |
| | 6,312,905 |
| | 37,849,169 |
| | 17,539,897 |
|
Expenses: | | | | | | | | |
Real estate operating (exclusive of items shown below) | | 2,609,955 |
| | 2,135,455 |
| | 6,982,316 |
| | 5,495,883 |
|
Realized loss on taxable property loan | | — |
| | — |
| | 4,557,741 |
| | — |
|
Provision for loan loss | | 72,000 |
| | — |
| | 168,000 |
| | — |
|
Provision for (recovery of) loss on receivables | | — |
| | (261,825 | ) | | 241,698 |
| | 214,525 |
|
Depreciation and amortization | | 1,762,224 |
| | 1,231,729 |
| | 5,004,682 |
| | 3,446,111 |
|
Interest | | 2,325,372 |
| | 1,551,543 |
| | 5,287,994 |
| | 4,317,329 |
|
General and administrative | | 985,778 |
| | 834,301 |
| | 3,097,713 |
| | 2,533,246 |
|
Total expenses | | 7,755,329 |
| | 5,491,203 |
| | 25,340,144 |
| | 16,007,094 |
|
Income from continuing operations | | 2,008,848 |
| | 821,702 |
| | 12,509,025 |
| | 1,532,803 |
|
Income from discontinued operations (including gain on sale of MF Properties of $1,401,656 for the three months ended September 30, 2013, $3,177,183 for nine months ended September 30, 2013 and $1,277,976 in 2012) | | 1,342,498 |
| | 1,526,964 |
| | 3,442,404 |
| | 2,013,713 |
|
Net income | | 3,351,346 |
| | 2,348,666 |
| | 15,951,429 |
| | 3,546,516 |
|
Net (loss) income attributable to noncontrolling interest | | (59,913 | ) | | 137,099 |
| | 263,584 |
| | 398,469 |
|
Net income - America First Tax Exempt Investors, L.P. | | $ | 3,411,259 |
| | $ | 2,211,567 |
| | $ | 15,687,845 |
| | $ | 3,148,047 |
|
| | | | | | | | |
Net income (loss) allocated to: | | | | | | | | |
General Partner | | $ | 373,696 |
| | $ | 333,962 |
| | $ | 1,393,480 |
| | $ | 508,592 |
|
Limited Partners - Unitholders | | 3,356,268 |
| | 2,390,780 |
| | 15,156,168 |
| | 3,651,497 |
|
Unallocated loss of Consolidated Property VIEs | | (318,705 | ) | | (513,175 | ) | | (861,803 | ) | | (1,012,042 | ) |
Noncontrolling interest | | (59,913 | ) | | 137,099 |
| | 263,584 |
| | 398,469 |
|
| | $ | 3,351,346 |
| | $ | 2,348,666 |
| | $ | 15,951,429 |
| | $ | 3,546,516 |
|
Unitholders' interest in net income per unit (basic and diluted): | | | | | | | | |
Income from continuing operations | | $ | 0.05 |
| | $ | 0.02 |
| | $ | 0.27 |
| | $ | 0.04 |
|
Income from discontinued operations | | 0.03 |
| | 0.04 |
| | 0.08 |
| | 0.06 |
|
Net income, basic and diluted, per unit | | $ | 0.08 |
| | $ | 0.06 |
| | $ | 0.35 |
| | $ | 0.10 |
|
Distributions declared, per unit | | $ | 0.125 |
| | $ | 0.125 |
| | $ | 0.375 |
| | $ | 0.375 |
|
Weighted average number of units outstanding, basic and diluted | | 42,772,928 |
| | 42,772,928 |
| | 42,772,928 |
| | 35,572,562 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | |
| | For the Three Months Ended, | | For the Nine Months Ended, |
| | September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Net income | | $ | 3,351,346 |
| | $ | 2,348,666 |
| | $ | 15,951,429 |
| | $ | 3,546,516 |
|
Unrealized (loss) gain on securities | | (19,159,797 | ) | | 2,121,836 |
| | (24,636,006 | ) | | 9,043,887 |
|
Unrealized loss on bond purchase commitment | | (4,865,535 | ) | | — |
| | (4,865,535 | ) | | — |
|
Comprehensive (loss) income - America First Tax Exempt Investors, L.P. | | $ | (20,673,986 | ) | | $ | 4,470,502 |
| | $ | (13,550,112 | ) | | $ | 12,590,403 |
|
| | | | | | | | |
Comprehensive (loss) income allocated to: | | | | | | | | |
General Partner | | $ | 133,443 |
| | $ | 355,180 |
| | $ | 1,098,465 |
| | $ | 599,031 |
|
Limited Partners - Unitholders | | (20,428,811 | ) | | 4,491,398 |
| | (14,050,358 | ) | | 12,604,945 |
|
Unallocated loss of Consolidated Property VIEs | | (318,705 | ) | | (513,175 | ) | | (861,803 | ) | | (1,012,042 | ) |
Noncontrolling interest | | (59,913 | ) | | 137,099 |
| | 263,584 |
| | 398,469 |
|
Comprehensive (loss) income - America First Tax Exempt Investors, L.P. | | $ | (20,673,986 | ) | | $ | 4,470,502 |
| | $ | (13,550,112 | ) | | $ | 12,590,403 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 and 2012
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| General Partner | | # of Units | | Beneficial Unit Certificate Holders | | Unallocated Deficit of Consolidated VIEs | | Non- controlling Interest | | Total | | Accumulated Other Comprehensive Income (Loss) |
Balance at January 1, 2013 | $ | (430,087 | ) | | 42,772,928 |
| | $ | 207,383,087 |
| | $ | (25,035,808 | ) | | $ | 2,053,739 |
| | $ | 183,970,931 |
| | $ | 7,161,381 |
|
Deconsolidation of Ohio Properties | 14,064 |
| | | | 1,392,303 |
| | — |
| | (1,012,966 | ) | | 393,401 |
| | 1,406,367 |
|
Deconsolidation of Greens Property | — |
| | | | — |
| | — |
| | (1,314,018 | ) | | (1,314,018 | ) | | — |
|
Redemption of tax-exempt mortgage revenue bond | (6,518 | ) | | | | (645,331 | ) | | — |
| | — |
| | (651,849 | ) | | (651,849 | ) |
Foreclosure of tax-exempt mortgage revenue bond | 40,807 |
| | | | 4,039,927 |
| | — |
| | — |
| | 4,080,734 |
| | 4,080,734 |
|
Distributions paid or accrued | (632,180 | ) | | | | (16,039,848 | ) | | — |
| | — |
| | (16,672,028 | ) | | — |
|
Net income (loss) | 1,393,480 |
| | | | 15,156,168 |
| | (861,803 | ) | | 263,584 |
| | 15,951,429 |
| | — |
|
Unrealized loss on securities | (295,015 | ) | | | | (29,206,526 | ) | | — |
| | — |
| | (29,501,541 | ) | | (29,501,541 | ) |
Balance at September 30, 2013 | $ | 84,551 |
| | 42,772,928 |
| | $ | 182,079,780 |
| | $ | (25,897,611 | ) | | $ | (9,661 | ) | | $ | 156,257,059 |
| | $ | (17,504,908 | ) |
| | | | | | | | | | | | | |
| General Partner | | # of Units | | Beneficial Unit Certificate Holders | | Unallocated Deficit of Consolidated VIEs | | Non- controlling Interest | | Total | | Accumulated Other Comprehensive Income |
Balance at January 1, 2012 | $ | (354,006 | ) | | 30,122,928 |
| | $ | 154,911,228 |
| | $ | (23,512,962 | ) | | $ | 544,785 |
| | $ | 131,589,045 |
| | $ | 95,894 |
|
Sale of Beneficial Unit Certificates | — |
| | 12,650,000 |
| | 59,948,265 |
| | — |
| | — |
| | 59,948,265 |
| | — |
|
Noncontrolling interest contribution | — |
| | | | — |
| | — |
| | 4,037 |
| | 4,037 |
| | — |
|
Distributions paid or accrued | (612,603 | ) | | | | (14,458,598 | ) | | — |
| | — |
| | (15,071,201 | ) | | — |
|
Net income (loss) | 508,592 |
| | | | 3,651,497 |
| | (1,012,042 | ) | | 398,469 |
| | 3,546,516 |
| | — |
|
Unrealized gain on securities | 90,439 |
| | | | 8,953,448 |
| | — |
| | — |
| | 9,043,887 |
| | 9,043,887 |
|
Balance at September 30, 2012 | $ | (367,578 | ) | | 42,772,928 |
| | $ | 213,005,840 |
| | $ | (24,525,004 | ) | | $ | 947,291 |
| | $ | 189,060,549 |
| | $ | 9,139,781 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| | | | | | |
| | For Nine Months Ended, |
| | September 30, 2013 | | September 30, 2012 |
Cash flows from operating activities: | | | | |
Net income | | 15,951,429 |
| | 3,546,516 |
|
Adjustments to reconcile net income to net cash provided (used) by operating activities: | | | | |
Depreciation and amortization expense | | 5,014,542 |
| | 4,618,505 |
|
Provision for loss from receivables | | 241,698 |
| | 214,525 |
|
Non-cash loss on derivatives | | 304,085 |
| | 1,055,311 |
|
Bond premium/discount amortization | | (249,476 | ) | | (315,580 | ) |
Gain on sale of bonds | | — |
| | (667,821 | ) |
Gain on the sale of discontinued operations | | (3,177,183 | ) | | (1,277,976 | ) |
Contingent interest realized upon sale of Iona Lakes tax-exempt mortgage revenue bond | | (6,497,160 | ) | | — |
|
Realized loss on taxable property loan | | 4,557,741 |
| | — |
|
Changes in operating assets and liabilities, net of effect of acquisitions | | | | |
Increase in interest receivable | | (3,431,931 | ) | | (2,834,210 | ) |
Increase in other assets | | (1,288,680 | ) | | (842,388 | ) |
Decrease in accounts payable and accrued expenses | | (753,912 | ) | | (115,370 | ) |
Net cash provided operating activities | | 10,671,153 |
| | 3,381,512 |
|
Cash flows from investing activities: | | | | |
Capital expenditures | | (6,903,635 | ) | | (4,750,312 | ) |
Acquisition of tax-exempt mortgage revenue bonds | | (72,752,000 | ) | | (10,165,287 | ) |
Proceeds from the sale of discontinued operations | | 22,610,000 |
| | 8,325,000 |
|
Investment in bonds due to the sale recognition of discontinued operations | | (27,778,000 | ) | | — |
|
Cash received from taxable property loans receivable - Ohio Properties | | 4,064,089 |
| | — |
|
Change in restricted cash - Greens Property sale | | 2,546,363 |
| | — |
|
Proceeds from the sale/redemption of bonds | | 21,935,343 |
| | 16,829,960 |
|
Acquisition of mortgage-backed securities | | (12,629,888 | ) | | — |
|
Acquisition of taxable bonds | | (2,918,000 | ) | | — |
|
Decrease in restricted cash | | 68,418 |
| | 160,820 |
|
Restricted cash - debt collateral (paid) released | | (4,500,000 | ) | | 7,895,236 |
|
Acquisition of partnerships, net of cash acquired | | — |
| | (5,500,000 | ) |
Acquisition of public housing capital trusts | | — |
| | (65,985,913 | ) |
Purchase of interest rate derivative | | (793,000 | ) | | — |
|
Deposit on MF Property | | (100,000 | ) | | — |
|
Principal payments received on tax-exempt and taxable mortgage revenue bonds | | 1,776,418 |
| | 666,458 |
|
Net cash used by investing activities | | (75,373,892 | ) | | (52,524,038 | ) |
Cash flows from financing activities: | | | | |
Distributions paid | | (16,838,315 | ) | | (13,277,259 | ) |
Proceeds from debt financing | | 42,530,000 |
| | 48,995,000 |
|
Principal borrowings on mortgages payable | | 15,300,343 |
| | 3,769,044 |
|
Principal borrowing on line of credit | | 16,015,900 |
| | — |
|
Principal payments on line of credit | | (8,565,900 | ) | | — |
|
Proceeds from the sale of beneficial unit certificates | | — |
| | 59,948,265 |
|
Principal payments on debt and mortgage financing | | (1,740,179 | ) | | (14,690,798 | ) |
Decrease in liabilities related to restricted cash | | (68,418 | ) | | (160,820 | ) |
Debt financing costs | | (355,585 | ) | | (116,542 | ) |
Sale of Limited Partnership Interests | | — |
| | 4,037 |
|
Net cash provided by financing activities | | 46,277,846 |
| | 84,470,927 |
|
Net (decrease) increase in cash and cash equivalents | | (18,424,893 | ) | | 35,328,401 |
|
Cash and cash equivalents at beginning of period, including cash and cash equivalents of discontinued operations of $158,727 and $126,572, respectively | | 30,331,500 |
| | 20,213,413 |
|
Cash and cash equivalents at end of period, including cash and cash equivalents of discontinued operations of $0 and $78,541, respectively | | 11,906,607 |
| | 55,541,814 |
|
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
|
| | | | | | | | |
| | For Nine Months Ended, |
| | September 30, 2013 | | September 30, 2012 |
Supplemental disclosure of cash flow information: | | | | |
Cash paid during the period for interest | | $ | 4,657,186 |
| | $ | 3,086,659 |
|
Distributions declared but not paid | | $ | 5,400,622 |
| | $ | 5,705,283 |
|
Supplemental disclosure of non cash activities: | | | | |
Capital expenditures financed through accounts and notes payable | | $ | 1,110,092 |
| | $ | 58,304 |
|
Deconsolidation of the discontinued operations - noncontrolling interest | | $ | 2,326,984 |
| | $ | — |
|
Recognition of taxable property loans receivable - discontinued operations | | $ | 2,086,236 |
| | $ | — |
|
Foreclosure of Woodland Park bond | | $ | 15,662,000 |
| | $ | — |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
(UNAUDITED)
1. Basis of Presentation
General
America First Tax Exempt Investors, L.P. (the “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the primary purpose of acquiring, holding, selling and otherwise dealing with a portfolio of federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential properties. Interest on these tax-exempt mortgage revenue bonds is excludable from gross income for federal income tax purposes. As a result, most of the income earned by the Partnership is exempt from federal income taxes. The Partnership may also invest in other types of tax-exempt securities that may or may not be secured by real estate and may make taxable property loans secured by multifamily properties which are financed by tax-exempt mortgage revenue bonds held by the Partnership. The Partnership generally does not seek to acquire direct interests in real property as long term or permanent investments. The Partnership may, however, acquire real estate securing its tax-exempt mortgage revenue bonds or taxable mortgage loans through foreclosure in the event of a default. In addition, the Partnership may acquire interests in multifamily apartment properties (“MF Properties”) in order to position itself for future investments in tax-exempt mortgage revenue bonds issued to finance these properties. The Partnership expects to sell its interest in these MF Properties in connection with the future syndication of low income housing tax credits under Section 42 of the Internal Revenue Code ("LIHTCs") or to a tax-exempt organization and to acquire tax-exempt mortgage revenue bonds on these properties to provide debt financing to the new owners.
Our general partner is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”). The general partner of AFCA2 is The Burlington Capital Group LLC ("Burlington"). The Partnership has issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partner interests to investors (“unitholders”). The Partnership will terminate on December 31, 2050, unless terminated earlier under provisions of its Agreement of Limited Partnership.
The "Company" refers to the consolidated financial statements reported in this Form 10-Q which include the assets, liabilities, and results of operations of the Partnership, its Consolidated Subsidiaries (defined below) and three entities in which the Partnership does not hold an ownership interest but which own multifamily apartment properties financed with tax-exempt mortgage revenue bonds held by the Partnership and which are treated as variable interest entities ("VIEs") of which the Partnership has been determined to be the primary beneficiary (the “Consolidated VIEs”). The Consolidated Subsidiaries of the Partnership currently consist of:
| |
• | ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold tax-exempt mortgage revenue bonds in order to facilitate the Tax Exempt Bond Securitization (“TEBS”) Financing with Freddie Mac (Note 10). |
| |
• | Nine multifamily apartments ("MF Properties") which are either wholly or majority owned by subsidiaries of the Partnership. |
Stand alone financial information of the Partnership reported in this Form 10-Q includes only the assets, liabilities, and results of operations of the Partnership and its Consolidated Subsidiaries (hereafter the “Partnership”) without the Consolidated VIEs. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership, the Consolidated Subsidiaries and the Consolidated VIEs have been eliminated in consolidation. The Partnership does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) affects the Partnership’s status as a partnership for federal income tax purposes or the status of unitholders as partners of the Partnership, the treatment of the tax-exempt mortgage revenue bonds on the properties owned by Consolidated VIEs as debt, the tax-exempt nature of the interest payments received on the tax-exempt mortgage revenue bonds secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to unitholders on IRS Form K-1.
The unallocated deficit of the Consolidated VIEs is primarily comprised of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the VIEs and the VIEs' net losses subsequent to that date are not allocated to the General Partner and unitholders as such activity is not contemplated by, or addressed in, the Agreement of Limited Partnership.
The preparation of financial statements in conformity with 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 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 GAAP 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 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. These condensed consolidated financial statements and notes have been prepared consistently with the 2012 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the financial position as of September 30, 2013, and the results of operations for the interim periods presented have been made. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.
2. Partnership Income, Expenses and Cash Distributions
The Agreement of Limited Partnership 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 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 BUCs held by each unitholder as of such date. For purposes of the Agreement of Limited Partnership, cash distributions, if any, received by the Partnership from its indirect interest in MF Properties (Note 7) will be included in the Partnership’s Interest Income and cash distributions received by the Partnership from the sale of such properties will be included in the Partnership Residual Proceeds.
Cash distributions are currently made on a quarterly basis but may be made on a monthly or semiannual basis at the election of AFCA 2. On each distribution date, Net Interest Income is distributed 99% to the unitholders and 1% to AFCA 2 and Net Residual Proceeds are distributed 100% to unitholders except that Net Interest Income and Net Residual Proceeds representing contingent interest in an amount equal to 0.9% per annum of the principal amount of the tax-exempt mortgage revenue bonds on a cumulative basis (defined as Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2), respectively) are distributed 75% to the unitholders and 25% to AFCA 2.
In June 2010, the Company completed a sales transaction whereby four of the MF Properties, Crescent Village, Post Woods (I and II), and Willow Bend apartments in Ohio (the “Ohio Properties”), were sold to three new ownership entities controlled by an unaffiliated not-for-profit entity and in October 2011, the three limited partnerships that own the Ohio Properties admitted two entities that are affiliates of Boston Capital ("BC Partners") as new limited partners as part of a syndication of LIHTCs. The Company acquired 100% of the $18.3 million tax-exempt mortgage revenue bonds issued by the Ohio Housing Finance Agency as part of a plan of financing for the acquisition and rehabilitation of the Ohio Properties. The tax-exempt mortgage revenue bonds secured by the Ohio Properties were acquired by the Company at par and consisted of two series. The Series A bond had a par value of $14.7 million and bears interest at an annual rate of 7.0%. The Series B bond had a par value of $3.6 million and bears interest at an annual interest rate of 10.0%. Both series of tax-exempt mortgage revenue bonds mature in June 2050. The BC Partners agreed to contribute equity to these limited partnerships, subject to the Ohio Properties meeting certain debt service coverage ratios specified in the applicable limited partnership agreements. As such, there was not sufficient equity invested at closing by the not-for-profit or BC Partners into the Ohio Properties to allow the Company to recognize a real estate sale.
During the first quarter of 2013, BC Partners contributed $6.5 million of capital into the Ohio Properties which was sufficient to allow the Company to recognize the sale pursuant to the accounting guidance. The Company determined that the approximate $1.8 million gain from the sale of the Ohio Properties was Tier 2 income in 2010, the year in which the Ohio Properties were sold to the unaffiliated not-for-profit. As such, 25% of that gain was distributed to AFCA 2 in 2010 and there was no Tier 2 income reported in 2013 related to the Ohio Properties.
The deposit method of accounting for real estate sales required both the deferral of the gain from the real estate sale and also did not allow recognition of the tax-exempt interest payments by the Ohio Properties to the Company between June 2010 and the date of the equity contribution by BC Partners. In conjunction with the recognition of the real estate sale, approximately $3.5 million of tax-exempt interest was recognized within investment income in the first quarter of 2013 which represents the tax-exempt interest payments received from the Ohio Properties between June 2010 and December 2012. In addition, the Partnership reported approximately $1.1 million in taxable note interest income and $250,000 guarantee fee from the general partner of the Ohio Properties during the first quarter of 2013 (Note 9). The deposit method of accounting also deferred the recognition of the sale of the the Ohio Properties and the purchase of the tax-exempt mortgage revenue bonds they secure in the consolidated statement of cash flows. As such, these transactions were recognized in the consolidated statement of cash flows in 2013.
3. Variable Interest Entities
The Partnership invests in federally tax-exempt mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. The Partnership owns 100% of these tax-exempt mortgage revenue bonds and each bond is secured by a first mortgage on the property. In certain cases, the Partnership has also made taxable property loans to the property owners which are secured by second mortgages on these properties. Although each multifamily property financed with tax-exempt mortgage revenue bonds held by the Partnership is owned by a separate entity in which the Partnership has no equity ownership interest, the debt financing provided by the Partnership creates a variable interest in these ownership entities that may require the Partnership to report the assets, liabilities, and results of operations of these entities on a consolidated basis under GAAP.
The Partnership determined that five of the entities financed by tax-exempt mortgage revenue bonds owned by the Partnership are held by VIEs as of September 30, 2013 and December 31, 2012. These VIEs are Ashley Square, Bent Tree, Cross Creek, Fairmont Oaks, and Lake Forest. At December 31, 2012, the Partnership also determined that the Exchange Accommodation Titleholder ("EAT (Maples on 97th)") was also a VIE based on the Qualified Exchange Accommodation Agreement and Master Lease Agreement between the Partnership and EAT (Maples on 97th).
The Partnership does not hold an equity interest in these VIEs and, therefore, the assets of the VIEs cannot be used to settle the general commitments of the Partnership and the Partnership is not responsible for the commitments and liabilities of the VIEs. The primary risks to the Partnership associated with these VIEs relate to the entities ability to meet debt service obligations to the Partnership and the valuation of the underlying multifamily apartment property which serves as bond collateral.
The following is a discussion of the significant judgments and assumptions made by the Partnership in determining the primary beneficiary of the VIE and, therefore, whether the Partnership must consolidate the VIE.
Consolidated VIEs
In determining the primary beneficiary of these VIEs, the Partnership considers the activities of the VIE which most significantly impact the VIEs' economic performance, who has the power to control such activities, the risks which the entities were designed to create, the variability associated with those risks and the interests which absorb such variability. The Partnership also considers the related party relationship of the entities involved in the VIEs. It was determined that the Partnership, as part of the related party group, met both of the primary beneficiary criteria and was the most closely associated with the VIEs and; therefore, was determined to be the primary beneficiary of the following VIEs at September 30, 2013: Bent Tree, Fairmont Oaks, and Lake Forest. The capital structure of Bent Tree, Fairmont Oaks, and Lake Forest consists of senior debt, subordinated debt, and equity capital. The senior debt is in the form of a tax-exempt mortgage revenue bonds and accounts for the majority of each VIE's total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The equity ownership of the consolidated VIEs is ultimately held by corporations which are owned by four individuals, two of which are related parties. Additionally, each of these properties is managed by an affiliate of the Partnership, America First Properties Management Company, LLC (“Properties Management”) which is an affiliate of Burlington Capital Group, LLC ("Burlington").
In August 2012, the EAT (Maples on 97th), a wholly-owned subsidiary of a Title Company which owned a multi-family property located in Omaha, Nebraska, executed a Master Lease Agreement and Construction Management Agreement with the Partnership. These two agreements gave the Partnership the rights and obligations to manage this property as well as the rehabilitation during the six month hold period which contractually ended in February 2013. The Partnership determined that it was the primary beneficiary of the EAT (Maples on 97th) and consolidated the EAT as a VIE as of December 31, 2012. Based on the terms of the Master Lease Agreement, the Partnership reported the rental income and related real estate operating expenses for the Maples on 97th property during the six month holding period as an MF Property since it had all the rights and obligations of landlord for the property. In February 2013, title to the Maples on 97th property transferred to the Partnership from the EAT (Maples on 97th) and the property is reported as an MF Property in the consolidated balance sheet as of September 30, 2013.
Non-Consolidated VIEs
The Company did not consolidate two VIE entities, Ashley Square and Cross Creek as of September 30, 2013 based on its determination of the primary beneficiary of these two VIE entities. As discussed below, while the capital structures of these VIEs resulted in the Partnership holding a majority of the variable interests in these VIEs, the Partnership determined it does not have the power to direct the activities of these VIEs that most significantly impact the VIEs’ economic performance and, as a result, is not the primary beneficiary of these VIEs.
Ashley Square – Ashley Square Housing Cooperative acquired the ownership of the Ashley Square Apartments in December 2008 from Ashley Square LLC through a warranty deed of transfer and an assumption of debt. This transfer of ownership constituted a reconsideration event as outlined in the consolidation guidance which triggered a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans and equity capital. The senior debt is in the form of tax-exempt mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE’s total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The VIE is organized as a housing cooperative and the 99% equity owner of this VIE is The Foundation for Affordable Housing (“FAH”), an unaffiliated Nebraska not-for-profit organization. Additionally, this property is managed by Properties Management.
Cross Creek – Cross Creek Apartments Holdings LLC is the owner of the Cross Creek Apartments. On January 1, 2010, Cross Creek Apartment Holdings LLC entered into a new operating agreement and admitted three new members. These new members committed approximately $2.2 million of capital payable in three installments including $563,000 on January 1, 2010. The new operating agreement and admission of new owner members constituted a reconsideration event as outlined in the consolidation guidance which triggered a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans, and equity capital at risk. The senior debt is in the form of tax-exempt mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE’s total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The three newly admitted members of this VIE are each unaffiliated with the Partnership and have contributed significant equity capital to the VIE. These members collectively control a 99% interest in the VIE. The other 1% member of this VIE is FAH, which is also unaffiliated with the Partnership. Additionally, this property is managed by Properties Management.
The following table presents information regarding the carrying value and classification of the assets held by the Partnership as of September 30, 2013, which constitute a variable interest in Ashley Square and Cross Creek.
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| | | | | | | | | |
| Balance Sheet Classification | | Carrying Value | | Maximum Exposure to Loss |
Ashley Square Apartments | | | | | |
Tax Exempt Mortgage Revenue Bond | Bond Investment | | $ | 5,224,000 |
| | $ | 5,224,000 |
|
Taxable Property Loan | Other Asset | | 1,462,000 |
| | 7,032,123 |
|
| | | $ | 6,686,000 |
| | $ | 12,256,123 |
|
Cross Creek Apartments | | | | | |
Tax Exempt Mortgage Revenue Bond | Bond Investment | | $ | 7,616,316 |
| | $ | 6,033,317 |
|
Taxable Property Loans | Other Asset | | 3,383,615 |
| | 3,383,615 |
|
| | | $ | 10,999,931 |
| | $ | 9,416,932 |
|
The tax-exempt mortgage revenue bonds are classified on the balance sheet as available for sale investments and are carried at fair value while taxable property loans are presented on the balance sheet as Other assets and are carried at the unpaid principal and interest less any loan loss reserves. See Note 4 for additional information regarding the tax-exempt mortgage revenue bonds and Note 8 for additional information regarding the taxable property loans. The maximum exposure to loss for the tax-exempt mortgage revenue bonds is equal to the unpaid principal balance as of September 30, 2013. The difference between the tax-exempt mortgage revenue bond's carrying value and the maximum exposure to loss is a function of the fair value of the bond. The difference between the taxable property loan's carrying value and the maximum exposure is the value of loan loss reserves that have been previously recorded against the outstanding taxable property loan balances.
The following tables present the effects of the consolidation of the Consolidated VIEs on the Company’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations.
Condensed Consolidating Balance Sheets as of September 30, 2013 and December 31, 2012:
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| | | | | | | | | | | | | | | | |
| | Partnership as of September 30, 2013 | | Consolidated VIEs as of September 30, 2013 | | Consolidation -Elimination as of September 30, 2013 | | Total as of September 30, 2013 |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 11,872,782 |
| | $ | 33,825 |
| | $ | — |
| | $ | 11,906,607 |
|
Restricted cash | | 6,444,613 |
| | 1,253,126 |
| | — |
| | 7,697,739 |
|
Interest receivable | | 14,677,455 |
| | — |
| | (6,665,032 | ) | | 8,012,423 |
|
Tax-exempt mortgage revenue bonds held in trust, at fair value | | 178,071,670 |
| | — |
| | (23,157,533 | ) | | 154,914,137 |
|
Tax-exempt mortgage revenue bonds, at fair value | | 48,161,743 |
| | — |
| | — |
| | 48,161,743 |
|
Public housing capital fund trusts, at fair value | | 61,793,516 |
| | — |
| | — |
| | 61,793,516 |
|
Mortgage-backed securities, at fair value | | 38,880,996 |
| | — |
| | — |
| | 38,880,996 |
|
Real estate assets: | | | | | | | | |
Land | | 9,241,515 |
| | 3,250,044 |
| | — |
| | 12,491,559 |
|
Buildings and improvements | | 83,656,608 |
| | 32,324,747 |
| | — |
| | 115,981,355 |
|
Real estate assets before accumulated depreciation | | 92,898,123 |
| | 35,574,791 |
| | — |
| | 128,472,914 |
|
Accumulated depreciation | | (8,382,864 | ) | | (14,755,919 | ) | | — |
| | (23,138,783 | ) |
Net real estate assets | | 84,515,259 |
| | 20,818,872 |
| | — |
| | 105,334,131 |
|
Other assets | | 22,418,827 |
| | 597,081 |
| | (9,662,473 | ) | | 13,353,435 |
|
Total Assets | | $ | 466,836,861 |
| | $ | 22,702,904 |
| | $ | (39,485,038 | ) | | $ | 450,054,727 |
|
| | | | | | | | |
Liabilities | | | | | | | | |
Accounts payable, accrued expenses and other liabilities | | $ | 4,413,261 |
| | $ | 28,761,746 |
| | $ | (28,014,528 | ) | | $ | 5,160,479 |
|
Distribution payable | | 5,400,622 |
| | — |
| | — |
| | 5,400,622 |
|
Debt financing | | 226,569,000 |
| | — |
| | — |
| | 226,569,000 |
|
Mortgages payable | | 51,802,031 |
| | 23,960,000 |
| | (23,960,000 | ) | | 51,802,031 |
|
Bond purchase commitment - fair market value adjustment | 4,865,536 |
| | — |
| | — |
| | 4,865,536 |
|
Total Liabilities | | 293,050,450 |
| | 52,721,746 |
| | (51,974,528 | ) | | 293,797,668 |
|
Partners' Capital | | | | | | | | |
General Partner | | 84,551 |
| | — |
| | — |
| | 84,551 |
|
Beneficial Unit Certificate holders | | 173,711,521 |
| | — |
| | 8,368,259 |
| | 182,079,780 |
|
Unallocated deficit of Consolidated VIEs | | — |
| | (30,018,842 | ) | | 4,121,231 |
| | (25,897,611 | ) |
Total Partners' Capital | | 173,796,072 |
| | (30,018,842 | ) | | 12,489,490 |
| | 156,266,720 |
|
Noncontrolling interest | | (9,661 | ) | | — |
| | — |
| | (9,661 | ) |
Total Capital | | 173,786,411 |
| | (30,018,842 | ) | | 12,489,490 |
| | 156,257,059 |
|
Total Liabilities and Partners' Capital | | $ | 466,836,861 |
| | $ | 22,702,904 |
| | $ | (39,485,038 | ) | | $ | 450,054,727 |
|
|
| | | | | | | | | | | | | | | | |
| | Partnership as of December 31, 2012 | | Consolidated VIEs as of December 31, 2012 | | Consolidation -Elimination as of December 31, 2012 | | Total as of December 31, 2012 |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 30,123,447 |
| | $ | 49,326 |
| | $ | — |
| | $ | 30,172,773 |
|
Restricted cash | | 4,538,071 |
| | 933,451 |
| | — |
| | 5,471,522 |
|
Interest receivable | | 14,131,063 |
| | — |
| | (5,657,703 | ) | | 8,473,360 |
|
Tax-exempt mortgage revenue bonds held in trust, at fair value | | 124,149,600 |
| | — |
| | (24,615,518 | ) | | 99,534,082 |
|
Tax-exempt mortgage revenue bonds, at fair value | | 45,703,294 |
| | — |
| | — |
| | 45,703,294 |
|
Public housing capital fund trusts, at fair value | | 65,389,298 |
| | — |
| | — |
| | 65,389,298 |
|
Mortgage-backed securities, at fair value | | 32,121,412 |
| | — |
| | — |
| | 32,121,412 |
|
Real estate assets: | | | | | | | | |
Land | | 6,798,407 |
| | 4,404,469 |
| | — |
| | 11,202,876 |
|
Buildings and improvements | | 55,776,753 |
| | 37,838,726 |
| | — |
| | 93,615,479 |
|
Real estate assets before accumulated depreciation | | 62,575,160 |
| | 42,243,195 |
| | — |
| | 104,818,355 |
|
Accumulated depreciation | | (5,458,961 | ) | | (13,871,102 | ) | | — |
| | (19,330,063 | ) |
Net real estate assets | | 57,116,199 |
| | 28,372,093 |
| | — |
| | 85,488,292 |
|
Other assets | | 22,923,356 |
| | 852,321 |
| | (15,559,382 | ) | | 8,216,295 |
|
Assets of discontinued operations | | 32,580,427 |
| | — |
| | — |
| | 32,580,427 |
|
Total Assets | | $ | 428,776,167 |
| | $ | 30,207,191 |
| | $ | (45,832,603 | ) | | $ | 413,150,755 |
|
| | | | | | | | |
Liabilities | | | | | | | | |
Accounts payable, accrued expenses and other liabilities | | $ | 2,330,852 |
| | $ | 28,529,405 |
| | $ | (25,846,310 | ) | | $ | 5,013,947 |
|
Distribution payable | | 5,566,908 |
| | — |
| | — |
| | 5,566,908 |
|
Debt financing | | 177,948,000 |
| | — |
| | — |
| | 177,948,000 |
|
Mortgages payable | | 39,119,507 |
| | 24,158,000 |
| | (24,158,000 | ) | | 39,119,507 |
|
Liabilities of discontinued operations | | 1,531,462 |
| | — |
| | — |
| | 1,531,462 |
|
Total Liabilities | | 226,496,729 |
| | 52,687,405 |
| | (50,004,310 | ) | | 229,179,824 |
|
Partners' Capital | | | | | | | | |
General Partner | | (430,087 | ) | | — |
| | — |
| | (430,087 | ) |
Beneficial Unit Certificate holders | | 200,655,786 |
| | — |
| | 6,727,301 |
| | 207,383,087 |
|
Unallocated deficit of Consolidated VIEs | | — |
| | (22,480,214 | ) | | (2,555,594 | ) | | (25,035,808 | ) |
Total Partners' Capital | | 200,225,699 |
| | (22,480,214 | ) | | 4,171,707 |
| | 181,917,192 |
|
Noncontrolling interest | | 2,053,739 |
| | — |
| | — |
| | 2,053,739 |
|
Total Capital | | 202,279,438 |
| | (22,480,214 | ) | | 4,171,707 |
| | 183,970,931 |
|
Total Liabilities and Partners' Capital | | $ | 428,776,167 |
| | $ | 30,207,191 |
| | $ | (45,832,603 | ) | | $ | 413,150,755 |
|
Condensed Consolidating Statements of Operations for the three months ended September 30, 2013 and 2012:
|
| | | | | | | | | | | | | | | |
| Partnership For the Three Months Ended September 30, 2013 | | Consolidated VIEs For the Three Months Ended September 30, 2013 | | Consolidation -Elimination For the Three Months Ended September 30, 2013 | | Total For the Three Months Ended September 30, 2013 |
Revenues: | | | | | | | |
Property revenues | $ | 3,074,115 |
| | $ | 1,225,261 |
| | $ | — |
| | $ | 4,299,376 |
|
Investment income | 5,623,450 |
| | — |
| | (375,642 | ) | | 5,247,808 |
|
Other interest income | 216,993 |
| | — |
| | — |
| | 216,993 |
|
Total revenues | 8,914,558 |
| | 1,225,261 |
| | (375,642 | ) | | 9,764,177 |
|
Expenses: | | | | | | | |
Real estate operating (exclusive of items shown below) | 1,794,008 |
| | 815,947 |
| | — |
| | 2,609,955 |
|
Provision for loan loss | 72,000 |
| | — |
| | — |
| | 72,000 |
|
Depreciation and amortization | 1,409,847 |
| | 363,137 |
| | (10,760 | ) | | 1,762,224 |
|
Interest | 2,325,372 |
| | 832,719 |
| | (832,719 | ) | | 2,325,372 |
|
General and administrative | 985,778 |
| | — |
| | — |
| | 985,778 |
|
Total expenses | 6,587,005 |
| | 2,011,803 |
| | (843,479 | ) | | 7,755,329 |
|
Income (loss) from continuing operations | 2,327,553 |
| | (786,542 | ) | | 467,837 |
| | 2,008,848 |
|
Income from discontinued operations (including gain on sale of MF Properties of $1,041,656) | 1,342,498 |
| | — |
| | — |
| | 1,342,498 |
|
Net income (loss) | 3,670,051 |
| | (786,542 | ) | | 467,837 |
| | 3,351,346 |
|
Net loss attributable to noncontrolling interest | (59,913 | ) | | — |
| | — |
| | (59,913 | ) |
Net income (loss) - America First Tax Exempt Investors, L. P. | $ | 3,729,964 |
| | $ | (786,542 | ) | | $ | 467,837 |
| | $ | 3,411,259 |
|
|
| | | | | | | | | | | | | | | |
| Partnership For the Three Months Ended September 30, 2012 | | Consolidated VIEs For the Three Months Ended September 30, 2012 | | Consolidation -Elimination For the Three Months Ended September 30, 2012 | | Total For the Three Months Ended September 30, 2012 |
Revenues: | | | | | | | |
Property revenues | $ | 1,983,077 |
| | $ | 1,203,887 |
| | $ | — |
| | $ | 3,186,964 |
|
Mortgage revenue bond investment income | 3,490,431 |
| | — |
| | (379,714 | ) | | 3,110,717 |
|
Other interest income | 15,224 |
| | — |
| | — |
| | 15,224 |
|
Total revenues | 5,488,732 |
| | 1,203,887 |
| | (379,714 | ) | | 6,312,905 |
|
Expenses: | | | | | | | |
Real estate operating (exclusive of items shown below) | 1,175,585 |
| | 959,870 |
| | — |
| | 2,135,455 |
|
Recovery of loss on receivables | (261,825 | ) | | — |
| | — |
| | (261,825 | ) |
Depreciation and amortization | 854,252 |
| | 388,353 |
| | (10,876 | ) | | 1,231,729 |
|
Interest | 1,551,543 |
| | 808,841 |
| | (808,841 | ) | | 1,551,543 |
|
General and administrative | 834,301 |
| | — |
| | — |
| | 834,301 |
|
Total expenses | 4,153,856 |
| | 2,157,064 |
| | (819,717 | ) | | 5,491,203 |
|
Income (loss) from continuing operations | 1,334,876 |
| | (953,177 | ) | | 440,003 |
| | 821,702 |
|
Income from discontinued operations (including gain on sale of MF Properties of $1,277,976) | 1,526,964 |
| | — |
| | — |
| | 1,526,964 |
|
Net income (loss) | 2,861,840 |
| | (953,177 | ) | | 440,003 |
| | 2,348,666 |
|
Net income attributable to noncontrolling interest | 137,099 |
| | — |
| | — |
| | 137,099 |
|
Net income (loss) - America First Tax Exempt Investors, L. P. | $ | 2,724,741 |
| | $ | (953,177 | ) | | $ | 440,003 |
| | $ | 2,211,567 |
|
|
| | | | | | | | | | | | | | | |
| | | | | | | |
| Partnership For the Nine Months Ended September 30, 2013 | | Consolidated VIEs For the Nine Months Ended September 30, 2013 | | Consolidation -Elimination For the Nine Months Ended September 30, 2013 | | Total For the Nine Months Ended September 30, 2013 |
Revenues: | | | | | | | |
Property revenues | $ | 8,325,593 |
| | $ | 3,658,636 |
| | $ | — |
| | $ | 11,984,229 |
|
Mortgage revenue bond investment income | 18,689,649 |
| | — |
| | (1,130,027 | ) | | 17,559,622 |
|
Contingent tax-exempt interest income | 6,497,160 |
| | — |
| | — |
| | 6,497,160 |
|
Other interest income | 1,558,158 |
| | — |
| | — |
| | 1,558,158 |
|
Other income | 250,000 |
| | — |
| | — |
| | 250,000 |
|
Total revenues | 35,320,560 |
| | 3,658,636 |
| | (1,130,027 | ) | | 37,849,169 |
|
Expenses: | | | | | | | |
Real estate operating (exclusive of items shown below) | 4,632,958 |
| | 2,349,358 |
| | — |
| | 6,982,316 |
|
Realized loss on taxable property loan | 4,557,741 |
| | — |
| | — |
| | 4,557,741 |
|
Provision for loan loss | 168,000 |
| | — |
| | — |
| | 168,000 |
|
Provision for loss on receivables | 241,698 |
| | — |
| | — |
| | 241,698 |
|
Depreciation and amortization | 3,963,628 |
| | 1,073,423 |
| | (32,369 | ) | | 5,004,682 |
|
Interest | 5,287,994 |
| | 2,477,348 |
| | (2,477,348 | ) | | 5,287,994 |
|
General and administrative | 3,097,713 |
| | — |
| | — |
| | 3,097,713 |
|
Total expenses | 21,949,732 |
| | 5,900,129 |
| | (2,509,717 | ) | | 25,340,144 |
|
Income (loss) from continuing operations | 13,370,828 |
| | (2,241,493 | ) | | 1,379,690 |
| | 12,509,025 |
|
Income from discontinued operations (including gain on sale of MF Properties of $3,177,183) | 3,442,404 |
| | — |
| | — |
| | 3,442,404 |
|
Net income (loss) | 16,813,232 |
| | (2,241,493 | ) | | 1,379,690 |
| | 15,951,429 |
|
Net income attributable to noncontrolling interest | 263,584 |
| | — |
| | — |
| | 263,584 |
|
Net income (loss) - America First Tax Exempt Investors, L. P. | $ | 16,549,648 |
| | $ | (2,241,493 | ) | | $ | 1,379,690 |
| | $ | 15,687,845 |
|
|
| | | | | | | | | | | | | | | |
| | | | | | | |
| Partnership For the Nine Months Ended September 30, 2012 | | Consolidated VIEs For the Nine Months Ended September 30, 2012 | | Consolidation -Elimination For the Nine Months Ended September 30, 2012 | | Total For the Nine Months Ended September 30, 2012 |
Revenues: | | | | | | | |
Property revenues | $ | 5,404,772 |
| | $ | 3,598,541 |
| | $ | — |
| | $ | 9,003,313 |
|
Investment income | 8,912,856 |
| | — |
| | (1,142,089 | ) | | 7,770,767 |
|
Other interest income | 97,996 |
| | — |
| | — |
| | 97,996 |
|
Gain on sale of tax-exempt mortgage revenue bonds | 667,821 |
| | — |
| | — |
| | 667,821 |
|
Total revenues | 15,083,445 |
| | 3,598,541 |
| | (1,142,089 | ) | | 17,539,897 |
|
Expenses: | | | | | | | |
Real estate operating (exclusive of items shown below) | 3,096,677 |
| | 2,399,206 |
| | — |
| | 5,495,883 |
|
Provision for loss on receivables | 214,525 |
| | — |
| | — |
| | 214,525 |
|
Depreciation and amortization | 2,376,823 |
| | 1,102,000 |
| | (32,712 | ) | | 3,446,111 |
|
Interest | 4,317,329 |
| | 2,411,676 |
| | (2,411,676 | ) | | 4,317,329 |
|
General and administrative | 2,533,246 |
| | — |
| | — |
| | 2,533,246 |
|
Total expenses | 12,538,600 |
| | 5,912,882 |
| | (2,444,388 | ) | | 16,007,094 |
|
Income (loss) from continuing operations | 2,544,845 |
| | (2,314,341 | ) | | 1,302,299 |
| | 1,532,803 |
|
Income from discontinued operations (including gain on sale of MF Properties of $1,277,976) | 2,013,713 |
| | — |
| | — |
| | 2,013,713 |
|
Net income (loss) | 4,558,558 |
| | (2,314,341 | ) | | 1,302,299 |
| | 3,546,516 |
|
Net income attributable to noncontrolling interest | 398,469 |
| | — |
| | — |
| | 398,469 |
|
Net income (loss) - America First Tax Exempt Investors, L. P. | $ | 4,160,089 |
| | $ | (2,314,341 | ) | | $ | 1,302,299 |
| | $ | 3,148,047 |
|
4. Investments in Tax-Exempt Bonds
The tax-exempt mortgage revenue bonds owned by the Company have been issued to provide construction and/or permanent financing of multifamily residential properties and do not include the tax-exempt mortgage revenue bonds issued with respect to properties owned by Consolidated VIEs at September 30, 2013 and December 31, 2012. In addition, at December 31, 2012, the tax-exempt mortgage revenue bonds secured by the Greens Property and the Ohio Properties were not included as tax-exempt mortgage revenue bonds but were presented as part of discontinued operations (Note 2 and Note 9). Tax-exempt mortgage revenue bonds are either held directly by the Company or are held in trusts created in connection with debt financing transactions (Note 10). The Company had the following investments in tax-exempt mortgage revenue bonds as of dates shown:
|
| | | | | | | | | | | | | | | | |
| | September 30, 2013 |
Description of Tax-Exempt Mortgage Revenue Bonds | | Cost adjusted for pay-downs | | Unrealized Gain | | Unrealized Loss | | Estimated Fair Value |
Arbors at Hickory Ridge (2) | | $ | 11,577,528 |
| | $ | 270,693 |
| | $ | — |
| | $ | 11,848,221 |
|
Ashley Square (1) | | 5,224,000 |
| | — |
| | — |
| | 5,224,000 |
|
Autumn Pines (2) | | 12,247,713 |
| | — |
| | (196,097 | ) | | 12,051,616 |
|
Avistar on the Boulevard A Bond (2) | | 13,760,000 |
| | — |
| | (1,308,163 | ) | | 12,451,837 |
|
Avistar at Chase Hill A Bond (2) | | 8,960,000 |
| | — |
| | (962,394 | ) | | 7,997,606 |
|
Avistar at the Crest A Bond (2) | | 8,759,000 |
| | — |
| | (1,300,361 | ) | | 7,458,639 |
|
Bella Vista (1) | | 6,545,000 |
| | — |
| | (514,568 | ) | | 6,030,432 |
|
Bridle Ridge (1) | | 7,715,000 |
| | — |
| | (455,108 | ) | | 7,259,892 |
|
Brookstone (1) | | 7,461,514 |
| | 857,067 |
| | — |
| | 8,318,581 |
|
Cross Creek (1) | | 6,033,317 |
| | 1,582,999 |
| | — |
| | 7,616,316 |
|
Greens Property (2) | | 9,404,291 |
| | — |
| | (305,540 | ) | | 9,098,751 |
|
Lost Creek (1) | | 15,853,185 |
| | 2,000,560 |
| | — |
| | 17,853,745 |
|
Ohio Properties A Bonds (1) | | 14,519,000 |
| | — |
| | — |
| | 14,519,000 |
|
Runnymede (1) | | 10,565,000 |
| | — |
| | (419,853 | ) | | 10,145,147 |
|
Southpark (1) | | 11,964,156 |
| | 1,029,425 |
| | — |
| | 12,993,581 |
|
Woodlynn Village (1) | | 4,443,000 |
| | — |
| | (396,227 | ) | | 4,046,773 |
|
Tax-exempt mortgage revenue bonds held in trust | | $ | 155,031,704 |
| | $ | 5,740,744 |
| | $ | (5,858,311 | ) | | $ | 154,914,137 |
|
|
| | | | | | | | | | | | | | | | |
| | September 30, 2013 |
Description of Tax-Exempt Mortgage Revenue Bonds | | Cost adjusted for pay-downs | | Unrealized Gain | | Unrealized Loss | | Estimated Fair Value |
Avistar at Chase Hill B Bond | | 2,005,000 |
| | — |
| | (158,696 | ) | | 1,846,304 |
|
Avistar at the Crest B Bond | | 1,700,000 |
| | — |
| | (134,555 | ) | | 1,565,445 |
|
Avistar at the Oaks (f/k/a Dublin) | | 8,354,000 |
| | — |
| | (829,866 | ) | | 7,524,134 |
|
Avistar in 09 (f/k/a Waterford) | | 7,192,000 |
| | — |
| | (658,575 | ) | | 6,533,425 |
|
Avistar on the Boulevard B Bond | | 3,216,000 |
| | — |
| | (254,546 | ) | | 2,961,454 |
|
Avistar on the Hills (f/k/a Kingswood) | | 5,389,000 |
| | — |
| | (534,256 | ) | | 4,854,744 |
|
Ohio Properties B Bonds | | 3,585,980 |
| | 116,702 |
| | — |
| | 3,702,682 |
|
Renaissance | | 6,725,000 |
| | 108,776 |
| | — |
| | 6,833,776 |
|
Vantage at Harlingen | | 6,692,000 |
| | — |
| | (210,196 | ) | | 6,481,804 |
|
Vantage at Judson | | 6,049,000 |
| | — |
| | (191,025 | ) | | 5,857,975 |
|
Tax-exempt mortgage revenue bonds | | $ | 50,907,980 |
| | $ | 225,478 |
| | $ | (2,971,715 | ) | | $ | 48,161,743 |
|
(1) Bonds owned by ATAX TEBS I, LLC, Note 10
(2) Bond held by Deutsche Bank in a secured financing transaction, Note 10
|
| | | | | | | | | | | | | | | | |
| | December 31, 2012 |
Description of Tax-Exempt Mortgage Revenue Bonds | | Cost adjusted for pay-downs | | Unrealized Gains | | Unrealized Loss | | Estimated Fair Value |
Ashley Square (1) | | $ | 5,260,000 |
| | $ | 246,981 |
| | $ | — |
| | $ | 5,506,981 |
|
Autumn Pines (2) | | 12,217,004 |
| | 953,024 |
| | — |
| | 13,170,028 |
|
Bella Vista (1) | | 6,600,000 |
| | 93,324 |
| | — |
| | 6,693,324 |
|
Bridle Ridge (1) | | 7,765,000 |
| | 108,632 |
| | — |
| | 7,873,632 |
|
Brookstone (1) | | 7,453,246 |
| | 1,459,408 |
| | — |
| | 8,912,654 |
|
Cross Creek (1) | | 6,004,424 |
| | 1,994,911 |
| | — |
| | 7,999,335 |
|
Lost Creek (1) | | 15,987,744 |
| | 3,467,182 |
| | — |
| | 19,454,926 |
|
Runnymede (1) | | 10,605,000 |
| | 491,330 |
| | — |
| | 11,096,330 |
|
Southpark (1) | | 11,904,968 |
| | 2,462,350 |
| | — |
| | 14,367,318 |
|
Woodlynn Village (1) | | 4,460,000 |
| | — |
| | (446 | ) | | 4,459,554 |
|
Tax-exempt mortgage revenue bonds held in trust | | $ | 88,257,386 |
| | $ | 11,277,142 |
| | |