ATAX 12.31.13 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

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 MULTIFAMILY 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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

Beneficial Unit Certificates representing assignments of limited The NASDAQ Stock Market LLC

partnership interests in America First Multifamily Investors, L.P. (the “BUCs")

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES o NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section (15) of the Act.

YES o NO x

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 Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of the chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 definitions of “large accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨	Accelerated filer x	Non- accelerated filer ¨	Smaller reporting company ¨
		(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

The aggregate market value of the registrant's BUCs held by non-affiliates based on the final sales price of the BUCs on the last business day of the registrant's most recently completed second fiscal quarter was $163,465,627.

DOCUMENTS INCORPORATED BY REFERENCE

None

INDEX



	PART I

Item 1	Business	1
Item 1A	Risk Factors	12
Item 1B	Unresolved Staff Comments	21
Item 2	Properties	21
Item 3	Legal Proceedings	22
Item 4	Mine Safety Disclosures	23

	PART II

Item 5	Market for Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities	24
Item 6	Selected Financial Data	25
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	59
Item 8	Financial Statements and Supplementary Data	62
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	120
Item 9A	Controls and Procedures	120
Item 9B	Other Information	122

	PART III

Item 10	Directors, Executive Officers and Corporate Governance	122
Item 11	Executive Compensation	125
Item 12	Security Ownership of Certain Beneficial Owners and Management	125
Item 13	Certain Relationships and Related Transactions, and Director Independence	126
Item 14	Principal Accountant Fee and Services	127

	PART IV

Item 15	Exhibits and Financial Statement Schedules	128

SIGNATURES		131

PART I

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. 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 this report.

These forward-looking statements are subject to various risks and uncertainties, including those relating to:


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


•	defaults on the mortgage loans securing our mortgage revenue bonds;


•	risks associated with investing in multifamily apartments, including changes in business conditions and the general economy;


•	changes in short-term interest rates;


•	our ability to use borrowings to finance our assets;


•	current negative economic and credit market conditions;


•	changes in the United States Department of Housing and Urban Development's Capital Fund Program; and


•	changes in government regulations affecting our business.

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All references to “we,” “us,” and the “Partnership” in this document mean America First Multifamily Investors, L.P. As used in this document, the “Company” refers to the Partnership, its wholly-owned subsidiaries, and its consolidated variable interest entities.

Item 1. Business.

America First Multifamily Investors, L.P. was formed for the primary purpose of acquiring a portfolio of mortgage revenue bonds that are issued by state and local housing authorities to provide construction and/or permanent financing of multifamily residential properties that provide affordable housing in their market areas. The Partnership expects and believes the interest received on these bonds is excludable from gross income for federal income tax purposes. As a result, the Partnership expects most of the income it earns is exempt from federal income taxes. See "Risk Factors - Shareholders may incur tax liability if any of the interest on our mortgage revenue bonds is determined to be taxable."

The Partnership has been in operation since 1998 and owned 42 mortgage revenue bonds with an aggregate outstanding principal amount of approximately $314.7 million as of December 31, 2013. These bonds were issued by various state and local housing authorities in order to provide construction and/or permanent financing of 32 multifamily residential apartments containing a total of 5,409 rental units located in the states of California, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Minnesota, North Carolina, Ohio, South Carolina, Tennessee, and Texas. In each case the Partnership owns, either directly or indirectly, 100% of the bonds issued for these properties. Each bond is secured by a mortgage or deed of trust on the financed apartment property. Each of the bonds provides for "base" interest payable at a fixed rate on a periodic basis. Additionally, four of the bonds also provide for the payment of contingent interest determined by the net cash flow and net capital appreciation of the underlying real estate properties. As a result, these mortgage revenue bonds provide the Partnership with the potential to participate in future increases in the cash flow generated by the financed properties, either through operations or from their ultimate sale. Of the 42 bonds owned, 16 are owned directly by the Partnership, 13 are owned by ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to facilitate a Tax Exempt Bond Securitization (“TEBS”) Financing with Freddie Mac and 13 are securitized and held by Deutsche Bank AG ("DB") in Tender Option Bond ("TOB") facilities (see Notes 2 and 11 to the Company's consolidated financial statements included herein). Two of the entities that own the apartment properties financed by two of the Partnership's mortgage revenue bonds were deemed to be consolidated variable interest entities ("VIEs") of the Partnership at December 31, 2013 and, as a result, these bonds are eliminated in consolidation on the Company's consolidated financial statements.

The ability of the properties collateralizing our mortgage revenue bonds to make payments of base and contingent interest is a function of the net operating income generated by these properties. Net operating income from a multifamily residential property depends on the rental and occupancy rates of the property and the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market areas in which a property is located. This, in turn, is affected by several factors such as the requirement that a certain percentage of the rental units be set aside for tenants who qualify as persons of low to moderate income, local or national economic conditions, the amount of new apartment construction and interest rates on single-family mortgage loans. In addition, factors such as government regulation, inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of a property. Because the return to the Partnership from its investments in mortgage revenue bonds depends upon the economic performance of the multifamily residential properties which collateralize these bonds, the Partnership may be considered to be in competition with other multifamily rental properties located in the same geographic areas as the properties financed with its mortgage revenue bonds.

The Partnership may also invest in other types of securities that may or may not be secured by real estate to the extent allowed by its Agreement of Limited Partnership dated October 1, 1998, as amended (the "Partnership Agreement") and the conditions to the exemption from registration under the Investment Company Act of 1940 that is relied upon by the Partnership. Under the Partnership Agreement, these other securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency and may not represent more than 25% of the Partnership's assets at the time of acquisition. In addition, the Partnership Agreement requires management to assess and conclude that the income from these other securities are exempt from inclusion in income for federal taxation purposes at the time of purchase. At December 31, 2013, the Partnership has two other classes of investments, the Public Housing Capital Fund Trusts' Certificates ("PHC Certificates") and mortgage-backed securities ("MBS"). The PHC Certificates had an aggregate principal outstanding of $65.3 million at December 31, 2013 and are securitized into three separate Tender Option Bond financing facilities ("TOB Trusts") with DB ("PHC Trusts") (see Note 11 to the Company's consolidated financial statements included herein). The PHC Certificates held by the PHC Trusts consist of custodial receipts evidencing loans made to a number of public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by the United States Department of Housing and Urban Development (“HUD”) under HUD's Capital Fund Program established under Quality Housing and Work Responsibility Act of 1998 (the “Capital Fund Program”). The PHC Trusts have a first lien on these annual Capital Fund Program payments to secure the public housing authorities' respective obligations to pay principal and interest on their loans. The state issued MBS had an aggregate principal outstanding of $42.8 million at December 31, 2013 and have been securitized into six separate TOB Trusts with DB. The MBS are backed by residential mortgage loans and have investment grade ratings by the most recent S&P or Moody's rating.

The Partnership may also make taxable property loans secured by multifamily properties which are financed by mortgage revenue bonds held by the Partnership. The Partnership does this in order to provide financing for capital improvements at these properties or to otherwise support property operations when we determine it is in the best long-term interest of 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 mortgage revenue bonds or taxable property 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 bonds issued to finance these properties and which the Partnership expects and believes generate tax-exempt interest. The Partnership currently holds interests in eight MF Properties containing 1,582 rental units, of which two are located in Nebraska, one is located in Kansas, one is located in Kentucky, one is located in Indiana, one is located in Georgia, and two are located in Texas. The Partnership also has a student housing development under construction at the University of Nebraska - Lincoln, which is expected to be completed in the third quarter of 2014.

The Ohio Properties and the Greens Property (defined below) were previously reported each as MF Properties but are now reported as discontinued operations as a result of the sale of the Partnership's interests in these properties in connection with the acquisition of mortgage revenue bonds secured by these properties.

To restructure each of the MF Properties into a mortgage revenue bond, the Partnership teams with a third party developer who works to secure a mortgage revenue bond issuance from the local housing authority. Once the developer receives the mortgage revenue bond commitment, the Partnership will sell the MF Property to a not-for-profit entity or to an entity owned by the developer in connection with a syndication of Low Income Housing Tax Credits ("LIHTCs") under Section 42 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). The Partnership expects to acquire the mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured. Such restructurings will generally be expected to occur within 36 months of the Partnership's initial investment in an MF Property and will often coincide with the expiration of the compliance period relating to LIHTCs previously issued with respect to the MF Property. The Partnership will not acquire LIHTCs in connection with these transactions. In the event that the MF Property cannot secure a mortgage revenue bond, the Partnership will operate the MF Property until the opportunity arises to sell it at what management believes is its optimal fair value. These types of transactions represent a long-term market opportunity for the Partnership and will provide us with a pipeline of future bond investment opportunities as the market for LIHTC syndications continues to strengthen.

The Company currently operates in five reportable business segments: (1) Mortgage Revenue Bond Investments; (2) MF Properties; (3) Public Housing Capital Fund Trusts; (4) MBS Investments; and (5) Consolidated VIEs. In addition to the five reportable segments, the Company also separately reports its consolidation and elimination information because it does not allocate certain items to the segments. For a disclosure of the revenues, net income and loss, total assets, and certain other key financial information as of and for the years ended December 31, 2013, 2012, and 2011 for each of the Company’s five reportable segments, see Note 20 to the Company’s consolidated financial statements included herein.

Properties Management. Nine of the 32 properties which collateralize the bonds owned by the Partnership are managed by America First Properties Management Company, L.L.C. (“Properties Management”), an affiliate of the Partnership's general partner, America First Capital Associates Limited Partnership Two ("AFCA 2"). In this regards, Properties Management provides property management services for Ashley Square, Bent Tree Apartments, Lake Forest Apartments, Fairmont Oaks Apartments, Cross Creek, Crescent Village, Willow Bend, Post Woods (collectively, the "Ohio Properties"), Greens of Pine Glen, (the "Greens Property") and each of the MF Properties. Management believes that this relationship provides greater insight and understanding of the underlying property operations and their ability to meet debt service requirements to the Partnership and helps assure these properties are being operated in compliance with operating restrictions imposed by the terms of the applicable bond financing and/or LIHTC relating to these properties. The properties not currently managed by Properties Management are Arbors at Hickory Ridge, Autumn Pines, Avistar on the Boulevard, Avistar at Chase Hill, Avistar at the Crest, Renaissance Apartments, Avistar on the Hills Apartments, Avistar at the Oaks Apartments, Avistar in 09 Apartments, Bella Vista Apartments, Bridle Ridge, Brookstone Apartments, Copper Gate Apartments, Runnymede Apartments, South Park Ranch Apartments, The Palms at Premier Park, The Suites on Paseo, Tyler Park Townhomes, Vantage at Harlingen Apartments,Vantage at Judson, Villages at Lost Creek, Westside Village Market, and Woodlynn Village.

Business Objectives and Strategy

Our business objectives are to (i) preserve and protect our capital and (ii) provide regular cash distributions to our shareholders which we expect and believe are substantially exempt from federal income tax. We have sought to meet these objectives by primarily investing in a portfolio of mortgage revenue bonds that were issued to finance, and are secured by mortgages on, multifamily apartment properties, including student housing. Certain of these bonds may be structured to provide a potential for an enhanced yield through the payment of contingent interest which is payable out of net cash flow from operations and net capital appreciation of the financed apartment properties. The Partnership expects and believes that any contingent interest it receives will be exempt from inclusion in gross income for federal income tax purposes.

We are pursuing a business strategy of acquiring additional mortgage revenue bonds and other investments on a leveraged basis in order to (i) increase the amount of interest available for distribution to our shareholders; (ii) reduce risk through asset diversification and interest rate hedging; and (iii) achieve economies of scale. We are pursuing this growth strategy by investing in additional mortgage revenue bonds and other investments as permitted by the Partnership Agreement, taking advantage of attractive financing structures available in the securities market, and entering into interest rate risk management instruments. We may finance the acquisition of additional mortgage revenue bonds and other investments through the reinvestment of cash flow, the issuance of additional units, or securitization financing using our existing portfolio of mortgage revenue bonds. Our operating policy is to use securitizations or other forms of leverage to maintain a level of debt financing between 40% and 60% of the total par value of our mortgage revenue bond portfolio. At December 31, 2013, the leverage on the portfolio of the mortgage revenue bonds calculated to a ratio of 55% of the par value of the portfolio.

In connection with our business strategy, we continually assess opportunities to reposition our existing portfolio of mortgage revenue bonds. The principal objective of this assessment is to improve the quality and performance of our revenue bond portfolio and, ultimately, increase the amount of cash available for distribution to our unitholders. In some cases, we may elect to redeem selected mortgage revenue bonds that are secured by multifamily properties that have experienced significant appreciation. Through the selective redemption of the bonds, a sale or refinancing of the underlying property will be required which, if sufficient sale or refinancing proceeds exist, may entitle the Partnership to receive payment of contingent interest on its bond investment. In other cases, we may elect to sell bonds on properties that are in stagnant or declining markets. The proceeds received from these transactions would be redeployed into other investments consistent with our investment objectives. We may also be able to use a higher-quality investment portfolio to obtain higher leverage to be used to acquire additional investments.

In executing our growth strategy, we expect to invest primarily in bonds issued to provide affordable rental housing, but may also consider bonds issued to finance student housing projects and housing for senior citizens. The four basic types of multifamily housing revenue bonds which we may acquire as investments are as follows:


1.	Private activity bonds issued under Section 142(d) of the Internal Revenue Code;


2.	Bonds issued under Section 145 of the Internal Revenue Code by not-for-profit entities qualified under Section 501(c)(3) of the Internal Revenue Code;


3.	Essential function bonds issued by a public instrumentality to finance an apartment property owned by such instrumentality; and


4.	Existing “80/20 bonds” that were issued under Section 103(b)(4)(A) of the Internal Revenue Code of 1954.

Each of these bond structures permits the issuance of mortgage revenue bonds to finance the construction or acquisition and rehabilitation of affordable rental housing. Under applicable Treasury Regulations, any affordable apartment project financed with mortgage revenue bonds that are purportedly tax-exempt must set aside a percentage of its total rental units for occupancy by tenants whose incomes do not exceed stated percentages of the median income in the local area. In each case, the balance of the rental units in the apartment project may be rented at market rates. With respect to private activity bonds issued under Section 142(d) of the Internal Revenue Code, the owner of the apartment project may elect, at the time the bonds are issued, whether to set aside a minimum of 20% of the units for tenants making less than 50% of area median income (as adjusted for household size) or 40% of the units for tenants making less than 60% of the area median income (as adjusted for household size). Multifamily housing bonds that were issued prior to the Tax Reform Act of 1986 (so called “80/20” bonds) require that 20% of the rental units be set aside for tenants whose income does not exceed 80% of the area median income, without adjustment for household size.

We expect that many of the private activity housing bonds that we evaluate for acquisition will be issued in conjunction with the syndication of LIHTCs by the owner of the financed apartment project. Additionally, to facilitate our investment strategy of acquiring additional mortgage revenue bonds secured by MF Properties, we may acquire ownership positions in the MF Properties. We expect to acquire mortgage revenue bonds on these MF Properties in many cases at the time of a restructuring of the MF Property ownership. Such restructuring may involve the syndication of LIHTCs in conjunction with property rehabilitation.

Investment Types

Mortgage Revenue Bonds. The Partnership invests in mortgage revenue bonds that are secured by a mortgage or deed of trust on multifamily apartment projects. Each of these bonds bears interest at a fixed annual base rate. Four of the mortgage revenue bonds currently owned by the Partnership also provide for the payment of contingent interest, which is payable out of the net cash flow and net capital appreciation of the underlying apartment properties. As a result, the amount of interest earned by the Partnership from its investment in mortgage revenue bonds is a function of the net operating income generated by the properties collateralizing the mortgage revenue bonds. Net operating income from a multifamily residential property depends on the rental and occupancy rates of the property and the level of operating expenses.

Other Securities. The Partnership may invest in other types of securities that may or may not be secured by real estate. These securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency and may not represent more than 25% of the Partnership's assets at the time of acquisition.

Public Housing Capital Fund Trust Certificates. The PHC Certificates consist of custodial receipts evidencing loans made to a number of public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by HUD under HUD's Capital Fund Program. The PHC Certificates have a first lien on these annual Capital Fund Program payments to secure the public housing authorities' respective obligations to pay principal and interest on their loans. The PHC Certificates rating by Standard & Poor's is investment grade as of December 31, 2013.

Mortgage-backed securities ("MBS"). The Partnership also invests in state-issued MBS that are backed by residential mortgage loans. These MBS are rated investment grade by Standard & Poor's or Moody's as of December 31, 2013.

Taxable Property Loans. The Partnership may also make taxable property loans secured by multifamily properties which are financed by mortgage revenue bonds that are held by the Partnership.

Interests in Real Property. While the Partnership generally does not seek to acquire equity interests in real property as long-term or permanent investments, it may acquire real estate securing its revenue bonds or taxable property loans through foreclosure in the event of a default. In addition, as part of its growth strategy, the Partnership may acquire direct or indirect interests in MF Properties on a temporary basis in order to position itself for a future investment in mortgage revenue bonds issued to finance the acquisition or substantial rehabilitation of such apartment complexes by a new owner. A new owner would typically seek to obtain LIHTCs in connection with the issuance of the new mortgage revenue bonds, but if LIHTCs had previously been issued for the property, such a restructuring could not occur until the expiration of a 15-year compliance period for the initial LIHTCs. The Partnership may acquire an interest in MF Properties prior to the end of the LIHTC compliance period. After the LIHTC compliance period, the Partnership would expect to sell its interest in such MF Property to a new owner which could syndicate new LIHTCs and seek mortgage revenue bond financing on the MF Property which the Partnership could acquire. Such restructurings will generally be expected to occur within 36 months of the acquisition by the Partnership of an interest in an MF Property. The Partnership will not acquire LIHTCs in connection with these transactions.

Investment Opportunities and Business Challenges

There continues to be a significant unmet demand for affordable multifamily housing in the United States. The HUD reports that there are approximately 7.1 million American households in need of quality affordable housing. The types of mortgage revenue bonds in which we invest offer developers of affordable housing a low-cost source of construction and permanent debt financing for these types of properties. Investors purchase these bonds because the interest income paid on these bonds is expected to be exempt from federal income taxation. The National Council of State Housing Agencies Fact Sheet, Joint Center for Housing Studies at Harvard University, and HUD have captured some key scale metrics and opportunities of this market:


•	HUD has provided over 1.0 million lower-income Americans with affordable rental housing opportunities;


•	The LIHTC program supported the construction of 1.2 million affordable rental units and the rehabilitation of 749,000 affordable rental units during the quarter-century between 1987 and 2011;


•	The availability of mortgage revenue bond financing for affordable multifamily housing to be owned by private, for-profit developers in each state in each calendar year is limited by the statewide volume cap distributed as described in Section 146 of the Internal Revenue Code; this private activity bond financing is based on state population and indexed to inflation; and


•	The number of renters meeting the affordable benchmark (income not exceeding 50% of the area median income) increased by 3.3 million between 2007 and 2011 while the number of renters able to obtain housing assistance expanded by only 225,000.

In addition to mortgage revenue bonds, the federal government promotes affordable housing through the use of LIHTCs for affordable multifamily rental housing. The syndication and sale of LIHTCs along with mortgage revenue bond financing is attractive to developers of affordable housing because it helps them raise equity and debt financing for their projects. Under this program, developers that receive an allocation of private activity bonds will also receive an allocation of federal LIHTCs as a method to encourage the development of affordable multifamily housing. The Partnership does not invest in LIHTCs, but is attracted to mortgage revenue bonds that are issued in association with federal LIHTC syndications because in order to be eligible for federal LIHTCs a property must either be newly constructed or substantially rehabilitated and; therefore, may be less likely to become functionally obsolete in the near term than an older property. There are various requirements in order to be eligible for federal LIHTCs, including rent and tenant income restrictions. In general, the property owner must elect to set aside either 40% or more of the property's residential units for occupancy by individuals whose income is 60% or less of the area median gross income or 20% or more of the property's residential units for occupancy by individuals whose income is 50% or less of the area median gross income. These units remain subject to these set aside requirements for a minimum of 30 years.

The 2008 Housing Act simplified and expanded the use of LIHTCs and mortgage revenue bond financing for low-income multifamily housing industry. Additionally, it exempted newly issued tax-exempt private activity bonds from Alternative Minimum Tax if the multifamily project serving as the collateral for the bond meets certain specific affordable rental unit criteria. Previously, these tax-exempt private activity bonds were Alternative Minimum Tax preference items for individual taxpayers. We believe these changes should enhance the Partnership's opportunities for making investments in accordance with its investment criteria.

The disruptions in domestic and international financial markets, and the resulting availability of debt financing has improved since the restrictions seen in 2008. The decline in construction and rehabilitation of affordable multifamily properties during the recent credit crisis, in our view, will continue to create potential investment opportunities for the Partnership in both mortgage revenue bonds as well as quality MF Properties. Our ability to restructure existing debt together with the ability to improve the operations of the apartment properties through our affiliated property management company can position these MF Properties for an eventual financing with mortgage revenue bonds meeting our investment criteria and that will be supported by a valuable and well-run apartment property. We believe we can selectively acquire MF Properties, restructure debt and improve operations in order to create value to our shareholders in the form of a strong mortgage revenue bond investment.

On the other hand, economic weakness in real estate and municipal bond markets may limit our ability to access additional debt financing that the Partnership uses to partially finance its investment portfolio or otherwise meet its liquidity requirements. The inability to access debt financing may result in adverse effects on our financial condition and results of operations. There can be no assurance that we will be able to finance additional acquisitions of mortgage revenue bonds through either additional equity or debt financing. Although the consequences of market and economic conditions and their impact on our ability to pursue our plan to grow through investments in additional housing bonds are not fully known, we do not anticipate that our existing assets will be adversely affected in the long-term. In addition, the current national economic conditions including sluggish job growth and low home mortgage interest rates have had a negative effect on some of the apartment properties which collateralize our mortgage revenue bond investments and our MF Properties in the form of lower occupancy. While some properties have been negatively effected, our overall economic occupancy (which is adjusted to reflect rental concessions, delinquent rents and non-revenue units such as model units and employee units) of the apartment properties that the Partnership has financed with mortgage revenue bonds was approximately at 88% during 2013 and 2012. Overall economic occupancy of the MF Properties has increased to approximately 83% during 2013 as compared to 76% during 2012.

Financing Arrangements

The Partnership may finance the acquisition of additional mortgage revenue bonds through the reinvestment of cash flow, the issuance of additional shares or with debt financing collateralized by our existing portfolio of mortgage revenue bonds, including the securitization of these bonds.

Debt Financing. Our operating policy is to maintain a level of debt financing between 40% and 60% of the total par value of our mortgage revenue bond portfolio. As of December 31, 2013, the total par value of the Partnerships' total bond portfolio is approximately $314.7 million. The six TOB financing facilities with DB and the TEBS financing agreement with Freddie Mac, which have an outstanding balance of $174.4 million in total, are the outstanding debt financing arrangements that have securitized mortgage revenue bonds. This calculates to a leverage ratio of 55%. The Partnership's operating policy is to use securitizations or other forms of leverage to maintain a level of debt financing between 60% and 80% of the total par value of the Partnership's other investments. There are six outstanding TOB facilities at December 31, 2013, which amount to outstanding borrowings of $82.9 million, which are securitizations of the PHC Certificates and MBS. The par value of the PHC Certificates and MBS is $108.1 million which calculates to a leverage ratio of 77%. Additionally, the MF Properties are encumbered by mortgage loans with an aggregate principal balance of approximately $57.1 million. These mortgage loans mature at various times from March 2014 through March 2020. The total debt financing plus mortgage loans of $314.4 million results in a leverage ratio to Partnership Total Assets of 58% as of December 31, 2013.

Equity Financing. Beginning in 2007, the Partnership has issued BUCs to raise additional equity capital to fund investment opportunities. In November 2013, a Registration Statement on Form S-3 (the "Registration Statement") was declared effective by the SEC under which the Partnership may offer up to $225 million of additional BUCs from time to time. In December 2013, the Partnership issued an additional 8,280,000 BUCs through an underwritten public offering at a public offering price of $6.25 per BUC pursuant to this new Registration Statement. Net proceeds realized by the Partnership from this issuance of these BUCs were approximately $48.2 million after payment of an underwriter's discount and other offering costs of approximately $3.5 million. In the first quarter of 2014, the Partnership issued an additional 9,200,000 BUCs through an underwritten public offering at a public offering price of $5.95 per BUC pursuant to this Registration Statement. Net proceeds realized by the Partnership from this issuance of these BUCs were approximately $51.4 million after payment of an underwriter's discount and other offering costs of approximately $4.5 million.

Recent Developments

Bond Redemption. In June 2013, the Partnership redeemed its interest in the Iona Lakes mortgage revenue bond for approximately $21.9 million. This redemption resulted in the realization of approximately $6.5 million in contingent interest income and an approximately $4.6 million realized loss on a taxable property loan. The trust indenture for this bond had a waterfall feature which stipulated that all unpaid contingent interest must be paid prior to making payment on any taxable property loan between the owner of the bond and the property.

Bond Acquisitions. In December 2013, the Partnership acquired seven mortgage revenue bonds. They are as follows:


•	The Partnership purchased an approximate $5.2 million par value Series A mortgage revenue bond with a stated interest rate of 6.25% per annum secured by Copper Gate Apartments, a 128 unit multifamily complex in Lafayette, Indiana, maturing on December 1, 2029.

•

The Partnership purchased an approximate $6.1 million par value senior bond and an approximate $2.0 million par value subordinate mortgage revenue bond with stated interest rates of 5.75% and 5.5% per annum, respectively. These mortgage revenue bonds are secured by Tyler Park Townhomes, an 88 unit multifamily complex in Greenfield, California. The senior mortgage revenue bond matures on January 1, 2030 and the subordinate mortgage revenue bond matures on January 1, 2016.

•

The Partnership purchased an approximate $4.0 million par value senior bond and an approximate $1.4 million par value subordinate mortgage revenue bond with stated interest rates of 5.75% and 5.5% per annum, respectively. These mortgage revenue bonds are secured by Westside Village, an 81 unit multifamily complex in Shafter, California. The senior mortgage revenue bond matures on January 1, 2030 and the subordinate mortgage revenue bond matures on January 1, 2016.


•	The Partnership purchased an approximate $20.2 million par value Series A mortgage revenue bond with a stated interest rate of 6.25% per annum secured by The Palms at Premier Park Apartments, a 240 unit multifamily complex in Columbia, South Carolina. This mortgage revenue bond matures on January 1, 2050.


•	The Partnership purchased an approximate $35.8 million par value Series A mortgage revenue bond with a stated interest rate of 6.25% per annum secured by The Suites on Paseo, a 384 bed student housing project in San Diego, California. This mortgage revenue bond matures on December 1, 2048.

In conjunction with the purchase of the mortgage revenue bond secured by The Palms at Premier Park Apartments, the Company purchased a parcel of land for approximately $1.1 million. The Company is holding this land as an asset available for sale reported in Other Assets at December 31, 2013.

Effective December 1, 2013, the ownership of Lake Forest Apartments in Daytona Beach, Florida ("Lake Forest") became a not-for-profit entity, a reconsideration event, and Lake Forest ceased to be reported as a Consolidated VIE. As such, the Partnership is reporting the estimated fair value of the Lake Forest mortgage revenue bond as an asset in the consolidated balance sheet for the first time in 2013.

On November 26, 2013, the Company executed a loan agreement with Foundation for Affordable Housing, a not-for-profit borrower, for approximately $1.6 million. The proceeds from this loan were used to fund a portion of the not-for-profit borrower’s acquisition of Abbington at Stones River, a 96 unit multifamily property located in Tennessee. The term of the loan is approximately eighteen months and the stated interest rate is 9.0% per annum.

In August 2013, the Partnership acquired a mortgage revenue bond secured by the Vantage at Harlingen Apartments, a 288 unit multifamily apartment complex located in Harlingen, Texas which is under construction. The Series C bond was purchased for approximately $6.7 million par value, carries a base interest rate of 9.0% per annum, and matures on August 1, 2053. The Partnership also acquired a $1.3 million subordinate taxable mortgage bond which is recorded as an Other Asset. The Vantage at Harlingen Apartments has a construction loan with an unrelated bank and the Partnership's mortgage revenue bonds are second lien borrowings to that construction loan.

Under the terms of a Forward Delivery Bond Purchase Agreement, the Partnership has agreed to purchase a new mortgage revenue bond between $18.0 million to $24.7 million (“Harlingen Series B Bond”) secured by the Vantage at Harlingen apartments which will be delivered by the mortgage revenue bond issuer once the property meets specific obligations and occupancy rates. The final amount of the Series B Bond will depend on the appraisal of the stabilized property. The Harlingen Series B Bond will have a stated annual interest rate of 6.0% per annum and bond proceeds must be used to pay off the construction loan to the bank and all or a portion of the $6.7 million subordinate Series C mortgage revenue bond. The Partnership accounts for the bond purchase commitment as an available-for-sale security and, as such, records the change in the estimated fair value of the bond purchase commitment as an asset or liability with changes in such valuation recorded in other comprehensive income. As of December 31, 2013, the Partnership estimated the value of this bond purchase commitment and recorded a liability of approximately $1.7 million.

In July 2013, the limited partner property owner contributed an approximate additional $800,000 of capital into the Greens Property which allowed the Company to recognize a sale of the discontinued operations (see Note 10 to the consolidated financial statements). As such, the Partnership is reporting the estimated fair value of the Greens Property mortgage revenue bonds as an asset in the consolidated balance sheet for the first time in 2013.

The Company finalized the foreclosure of the Woodland Park (Topeka, Kansas) bond in May 2013. The bond trustee assigned its right to the property to the Partnership on May 8, 2013 and Woodland Park became an MF Property upon title conveyance (see Note 8 to the consolidated financial statements). The Partnership requested and has received the removal of the Land Use Restriction Agreement ("LURA") on the property and thereby is converting it to 100% market-rate rents, which it currently believes is the best way to maximize the value of the property.

In June 2013, the Partnership acquired six mortgage revenue bonds secured by three properties located in San Antonio, Texas. The mortgage revenue bond purchases are as follows: approximately $5.9 million par value Series A and approximately $2.5 million par value Series B mortgage revenue bonds secured by the Avistar at the Oaks Apartments, a 156 unit multifamily apartment complex; approximately $3.1 million Series A and approximately $2.3 million Series B mortgage revenue bonds secured by the Avistar on the Hills Apartments, a 129 unit multifamily apartment complex; and approximately $5.5 million Series A and approximately $1.7 million Series B mortgage revenue bonds secured by Avistar in 09 Apartments, a 133 unit multifamily apartment complex. The three Series A mortgage revenue bonds each carry an annual interest rate of 6.0% per annum and mature on August 1, 2050. The three Series B mortgage revenue bonds each carry an annual base interest rate of 9.0% per annum and mature on September 1, 2050. The Partnership also acquired approximately $831,000 of taxable mortgage bonds which also carry a base interest rate of 9.0% per annum and mature on September 1, 2050. The Company has determined that the entity which owns the three properties is an unrelated not-for-profit which under the accounting guidance is not subject to applying the VIE consolidation guidance. As a result, the properties' financial statements are not consolidated into the consolidated financial statements of the Company.

In April 2013, the Partnership acquired the Series C mortgage revenue bond secured by the Renaissance Gateway Apartments, a 208 unit multifamily apartment complex located in New Orleans, Louisiana for approximately $2.9 million par value. In the third and fourth quarters of 2013, the Partnership purchased approximately $1.3 million par value Series B and approximately $3.8 million par value Series A, respectively, mortgage revenue bonds. The Series C mortgage revenue bond carries a base interest rate of 12.0% per annum and matures on June 1, 2015. The Series A and Series B mortgage revenue bonds carry a base interest rate of 6% and 12% per annum, respectively, maturing on June 1, 2030. This property is undergoing a major rehabilitation and the Partnership has agreed to fund a total of approximately $8.6 million of a Series A mortgage revenue bond during construction which is estimated to be completed on June 30, 2014. Upon completion of construction and stabilization, the approximate $2.9 million Series C bond will be paid back on the earlier of when the property receives its final equity contribution by the limited partner or June 1, 2015. The Partnership accounts for the bond purchase commitment as an available-for-sale security and, as such, records the change in estimated fair value of the bond purchase commitment as an asset or liability with changes in such valuation recorded in other comprehensive income. As of December 31, 2013, the Partnership estimated the value of this Bond Purchase Commitment and recorded a liability of approximately $600,000.

During the first quarter of 2013, the LIHTC limited Partner owner ("BC Partners") contributed $6.5 million of capital into the Ohio Properties which allowed the Company to recognize a sale of the discontinued operations (see Note 10 to the consolidated financial statements). As such, the Partnership is reporting the estimated fair value of the Ohio Properties’ mortgage revenue bonds as assets in the consolidated balance sheet for the first time in 2013.

In February 2013, the Partnership acquired six mortgage revenue bonds secured by three properties located in San Antonio, Texas. The bond purchases are as follows: approximately $13.8 million par value Series A and approximately $3.2 million par value Series B mortgage revenue bonds secured by the Avistar on the Boulevard, a 344 unit multifamily apartment complex; approximately $9.0 million Series A and approximately $2.0 million Series B mortgage revenue bonds secured by the Avistar at Chase Hill, a 232 unit multifamily apartment complex; and approximately $8.8 million Series A and approximately $1.7 million Series B mortgage revenue bonds secured by Avistar at the Crest, a 200 unit multifamily apartment complex. The three Series A mortgage revenue bonds each carry an annual interest rate of 6.0% per annum and mature on March 1, 2050. The three Series B mortgage revenue bonds each carry an annual base interest rate of 9.0% per annum and mature on April 1, 2050. The Partnership also acquired approximately $804,000 of taxable mortgage bonds which also carry a base interest rate of 9.0% per annum and mature on April 1, 2050. The Company has determined that the entity which owns the three Avistar properties is an unrelated not-for-profit which under the accounting guidance is not subject to applying the VIE consolidation guidance. As a result, the properties' financial statements are not consolidated into the consolidated financial statements of the Company.

MF Property Recent Activity. The Partnership, as sole bondholder, previously directed the bond trustee to file a foreclosure action on the Woodland Park mortgage revenue bond. On February 28, 2013, the court granted Summary Judgment in the bond trustee's favor confirming that the mortgage revenue bond is senior to mechanic's liens filed on the property. Subsequently, the court ordered a sale of the Woodland Park property and on April 23, 2013, the Partnership made a bid to purchase the property for the amount of the outstanding principal and interest it is owed. The Partnership's Motion of Confirmation was approved by the court on May 2, 2013. The bond trustee assigned its right to the property to the Partnership on May 8, 2013 and the Partnership received the Sheriff's deed conveying title to a wholly-owned subsidiary of the Partnership on May 29, 2013. Woodland Park became an MF Property at a net asset value of approximately $15.7 million upon conveyance of title. The Partnership requested and received the removal of the LURA on the property and is converting it to 100% market-rate rents. The Partnership may convert it back to a rent restricted property, and seek to place new financing on the property and acquire the mortgage revenue bonds if it deems that the best way to maximize the value in the future.

In March 2013, a wholly-owned subsidiary of the Company executed a 35-year ground lease with the University of Nebraska- Lincoln) (“Lessor”) with an annual lease payment of $100. The leased property will have a mixed-use development consisting of a 1,605 stall parking garage and 475 bed student housing mixed-use project constructed on it. The Lessor will own the parking garage for which it will contribute approximately $16.7 million to its construction. The Company will own the student housing mixed-use project, which is called The 50/50 Student Housing at the University of Nebraska-Lincoln ("The 50/50 Student Housing at UNL"), and currently estimates that construction will cost approximately $34.0 million. The Company executed a guaranteed maximum price contract with the general contractor for the construction on the mixed-use development. The Company expects to restructure its ownership of The 50/50 Student Housing at UNL into a mortgage revenue bond holding after the construction is completed (which is estimated as August 1, 2014) and when the development has a sufficient history of operating results. The Company has secured approximately $29.8 million in financing facilities to cover the majority of the construction costs. The Company has borrowed approximately $7.2 million on this facility as of December 31, 2013 (see Notes 8, 12, and 17 to the Company's consolidated financial statements included herein).

MF Property Sales. In February 2013, the limited partner owners of the Ohio Properties contributed sufficient capital for a real estate sale to be recognized. 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 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 approximate $1.8 million gain on real estate sale, approximately $3.5 million of interest has been recognized within investment income during 2013 which represents the 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 received from the Ohio Properties and $250,000 guarantee fee from the general partner of the Ohio Properties during the first quarter of 2013 (see Note 10 to the Company's consolidated financial statements included herein).

In July 2013, the limited partner owners of the Greens Property contributed sufficient capital for a real estate sale to be recognized. The gain on sale of discontinued operations was approximately $1.4 million. 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 interest payments by the Greens Property to the Company between October 2012 and the July 2013, the date of the second equity contribution by BC Partners. In conjunction with the recognition of the real estate sale, approximately $523,000 of interest has been recognized within investment income during 2013 which represents the interest payments received from the Greens Property between October 2012 and July 31, 2013 (see Note 10 to the consolidated financial statements).

Recent Financing Activities

In December 2013, the Company executed a new TOB Trust under its credit facility with DB securitizing The Suites on Paseo Series A mortgage revenue bond. The amount borrowed was approximately $25.8 million with a variable interest rate tied to SIFMA. The facility matures in December 2014. On the date of the closing the total fixed TOB Trust fee was approximately 1.6% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.4% per annum resulting in a total cost of borrowing of approximately 2.0% per annum. The outstanding balance remains at approximately $25.8 million on December 31, 2013.

In October 2013, the Company executed a new TOB Trust under its credit facility with DB securitizing the Avistar at the Oaks Apartments, the Avistar on the Hills Apartments, and the Avistar in 09 Apartments Series A mortgage revenue bonds. The amount borrowed was approximately $13.2 million with a variable interest rate tied to SIFMA. The facility matures in October 2014. On the date of the closing the total fixed TOB Trust fee was approximately 1.8% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.4% per annum resulting in a total cost of borrowing of approximately 2.2% per annum. The outstanding balance remains at $13.2 million on December 31, 2013.

Management and Employees

The Partnership is managed by its general partner, America First Capital Associates Limited Partnership Two (“AFCA 2” or the "General Partner") which is controlled by its general partner, the Burlington Capital Group LLC ("Burlington"). The persons acting as the Board of Managers and executive officers of Burlington act as the directors and executive officers of the Partnership. Certain services are provided to the Partnership by other employees of Burlington and the Partnership reimburses Burlington for its allocated share of these salaries and benefits. The Partnership is not charged, and does not reimburse Burlington, for the services performed by executive officers of Burlington. As of December 31, 2013, there are no employees of the Partnership.

Competition

The Partnership competes with private investors, lending institutions, trust funds, investment partnerships, and other entities with objectives similar to the Partnership for the acquisition of mortgage revenue bonds and other investments. This competition could reduce the availability of mortgage revenue bonds for acquisition and reduce the interest rate that issuers pay on these bonds.

Because the Partnership holds mortgage revenue bonds secured entirely by multifamily residential properties and holds an interest in the MF Properties, the Partnership may be considered to be in competition with other residential real estate in the same geographic areas. In each city in which the properties financed by the Partnership's mortgage revenue bonds owned by the Partnership or MF Properties are located, such properties compete with a substantial number of other multifamily properties. Multifamily properties also compete with single-family housing that is either owned or leased by potential tenants. To compete effectively, the apartment properties financed or owned by the Partnership must offer quality apartments at competitive rental rates. In order to maintain occupancy rates and attract quality tenants, the Partnership's apartment properties may also offer rental concessions, such as free rent to new tenants for a stated period. These apartment properties also compete by offering quality apartments in attractive locations and that provide tenants with amenities such as recreational facilities, garages and pleasant landscaping.

Environmental Matters

The Partnership believes that each of the MF Properties and the properties collateralizing its mortgage revenue bonds are in compliance, in all material respects, with federal, state and local regulations regarding hazardous waste and other environmental matters and is not aware of any environmental contamination at any of such properties that would require any material capital expenditure by the underlying properties, and therefore the Partnership, for the remediation thereof.

Tax Status

The Partnership is classified as a partnership for federal income tax purposes and accordingly, it makes no provision for income taxes. The distributive share of the Partnership's income, deductions and credits is included in each unitholder's income tax return.

The Partnership holds its interests in MF Properties through various subsidiaries which are “C” corporations for income tax purposes. These subsidiaries file separate income tax returns. Therefore, the Partnership is only subject to income taxes on these investments to the extent it receives dividends from the subsidiaries.

The VIEs which are reported on a consolidated basis with the Partnership for GAAP reporting purposes are separate legal entities who record and report income taxes based upon their individual legal structure which may include corporations, limited partnerships, and limited liability companies. The Partnership does not presently believe that the consolidation of VIEs for reporting under GAAP will impact the Partnership's tax status, amounts reported to shareholders on IRS Form K-1, the Partnership's ability to distribute income to shareholders which it believes is tax-exempt, the current level of quarterly distributions, or the tax-exempt status of the underlying mortgage revenue bonds.

All financial information in this Annual Report on Form 10-K presented on the basis of Accounting Principles Generally Accepted in the United States of America, is that of the Partnership and the VIEs on a consolidated basis. All references to “we,” “us,” and the “Partnership” in this document mean America First Multifamily Investors, L.P. As used in this document, the “Company” refers to the Partnership, its wholly-owned subsidiaries, and its consolidated variable interest entities.

General Information

We are a Delaware limited partnership. Our general partner is AFCA 2, whose general partner is Burlington. Since 1984, Burlington has specialized in the management of investment funds, many of which were formed to acquire real estate investments such as mortgage revenue bonds, mortgage-backed securities, and multifamily real estate properties. Burlington maintains its principal executive offices at 1004 Farnam Street, Suite 400, Omaha, Nebraska 68102, and its telephone number is (402) 444-1630.

We do not have any employees of our own. Employees of Burlington, acting through our general partner, are responsible for our operations and we reimburse Burlington for the allocated salaries and benefits of these employees and for other expenses incurred in running our business operations. In connection with the operation of the Partnership, AFCA 2 is entitled to an administrative fee in an amount equal to 0.45% per annum of the principal amount of the revenue bonds, other tax-exempt investments, and taxable property loans held by the Partnership. Ten of the mortgage revenue bonds held by the Partnership provide for the payment of this administrative fee to the general partner by the owner of the financed property. When the administrative fee is payable by a property owner, it is subordinated to the payment of all base interest to the Partnership on the mortgage revenue bond on that property. Our Partnership Agreement provides that the administrative fee will be paid directly by the Partnership with respect to any investments for which the administrative fee is not payable by the property owner or a third party. In addition, our Partnership Agreement provides that the Partnership will pay the administrative fee to the general partner with respect to any foreclosed mortgage revenue bonds.

AFCA 2 may also earn mortgage placement fees in connection with the identification and evaluation of additional investments that we acquire. Any mortgage placement fees will be paid by the owners of the properties financed by the acquired mortgage revenue bonds out of bond proceeds. The amount of mortgage placement fees, if any, will be subject to negotiation between AFCA 2 and such property owners.

Properties Management is an affiliate of Burlington that is engaged in the management of apartment complexes. Properties Management earns a fee paid out of property revenues. Properties Management may also seek to become the manager of apartment complexes financed by additional mortgage revenue bonds acquired by the Partnership, subject to negotiation with the owners of such properties. If the Partnership acquires ownership of any property through foreclosure of a revenue bond, Properties Management may provide property management services for such property and, in such case, earn a fee payable out of property revenues.

Our sole limited partner is America First Fiduciary Corporation Number Five, a Nebraska corporation. BUCs represent assignments by the sole limited partner of its rights and obligations as a limited partner to outside third party investors. Because each such outside third party effectively holds a share of the sole limited partner’s rights and obligations as a limited partner, BUCs are also referred to herein as “shares” or "units" for purposes of calculating amounts per BUC, and the holders thereof are referred to as “shareholders.”

Information Available on Website

The Partnership's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and press releases are available free of charge at www.ataxfund.com as soon as reasonably practical after they are filed with the SEC. The information on the website is not incorporated by reference into this Form 10-K.

Item 1A. Risk Factors

The financial condition, results of operations, and cash flows of the Partnership are affected by various factors, many of which are beyond the Partnership's control. These include the following:

Cash distributions from the Partnership may change depending on the amount of cash available for distribution.

The Partnership currently distributes cash to shareholders at an annual rate of $0.50 per unit. The amount of the cash per unit distributed by the Partnership may increase or decrease at the determination of AFCA 2 based on its assessment of the amount of cash available to the Partnership for this purpose. During the years ended December 31, 2013 and 2012, the Partnership generated cash available for distribution of $0.42 and $0.33 per unit, respectively, resulting in the remainder of the $0.50 per unit annual distribution being a return of capital to shareholders for both years. Although the Partnership may supplement its cash available for distribution with unrestricted cash, unless the Partnership is able to increase its cash receipts through completion of its current investment plans, the Partnership may need to reduce the level of cash distributions per unit from the current level. In addition, there is no assurance that the Partnership will be able to maintain its current level of annual cash distributions per unit even if the Partnership completes its current investment plans. Any change in our distribution policy could have a material adverse effect on the market price of our shares.

The receipt of interest and principal payments on our mortgage revenue bonds will be affected by the economic results of the underlying multifamily properties.

Although our mortgage revenue bonds are issued by state or local housing authorities, they are not obligations of these governmental entities and are not backed by any taxing authority. Instead, each of these revenue bonds is backed by a non-recourse loan made to the owner of the underlying apartment complex. Because of the non-recourse nature of the underlying mortgage loans, the sole source of cash to pay base and contingent interest on the revenue bond, and to ultimately pay the principal amount of the bond, is the net cash flow generated by the operation of the financed property and the net proceeds from the ultimate sale or refinancing of the property, except in limited cases where a property owner has provided a limited guarantee of certain payments. This makes our investments in these mortgage revenue bonds subject to the kinds of risks usually associated with direct investments in multifamily real estate. If a property is unable to sustain net cash flow at a level necessary to pay its debt service obligations on our mortgage revenue bond on the property, a default may occur. Net cash flow and net sale proceeds from a particular property are applied only to debt service payments of the particular mortgage revenue bond secured by that property and are not available to satisfy debt service obligations on other mortgage revenue bonds that we hold. In addition, the value of a property at the time of its sale or refinancing will be a direct function of its perceived future profitability. Therefore, the amount of base and contingent interest that we earn on our mortgage revenue bonds, and whether or not we will receive the entire principal balance of the bonds as and when due, will depend to a large degree on the economic results of the underlying apartment complexes.

The net cash flow from the operation of a property may be affected by many things, such as the number of tenants, the rental rates, operating expenses, the cost of repairs and maintenance, taxes, government regulation, competition from other apartment complexes, mortgage rates for single-family housing, and general and local economic conditions. In most of the markets in which the properties financed by our bonds are located, there is significant competition from other apartment complexes and from single-family housing that is either owned or leased by potential tenants. Low mortgage interest rates and federal tax credits make single-family housing more accessible to persons who may otherwise rent apartments.

The value of the properties is the only source of repayment of our mortgage revenue bonds.

The principal of most of our mortgage revenue bonds does not fully amortize over their terms. This means that all or some of the balance of the mortgage loans underlying these bonds will be repaid as a lump-sum “balloon” payment at the end of the term. The ability of the property owners to repay the mortgage loans with balloon payments is dependent upon their ability to sell the properties securing our mortgage revenue bonds or obtain adequate refinancing. The mortgage revenue bonds are not personal obligations of the property owners, and we rely solely on the value of the properties securing these bonds for security. Similarly, if a mortgage revenue bond goes into default, our only recourse is to foreclose on the underlying multifamily property. If the value of the underlying property securing the bond is less than the outstanding principal balance and accrued interest on the bond, we will suffer a loss.

In the event a property securing a mortgage revenue bond is not sold prior to the maturity or remarketing of the bond, any contingent interest payable from the net sale or refinancing proceeds of the underlying property will be determined on the basis of the appraised value of the underlying property. Real estate appraisals represent only an estimate of the value of the property being appraised and are based on subjective determinations, such as the extent to which the properties used for comparison purposes are comparable to the property being evaluated and the rate at which a prospective purchaser would capitalize the cash flow of the property to determine a purchase price. Accordingly, such appraisals may result in us realizing less contingent interest from a mortgage revenue bond than we would have realized had the underlying property been sold.

There is additional credit risk when we make a taxable loan on a property.

The taxable property loans that we make to owners of the apartment properties that secure mortgage revenue bonds held by us are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments on these taxable property loans is the net cash flow generated by these properties or the net proceeds from the sale of these properties. The net cash flow from the operation of a property may be affected by many things as discussed above. In addition, any payment of principal and interest on a taxable property loan on a particular property will be subordinate to payment of all principal and interest (including contingent interest) on the mortgage revenue bond secured by the same property. As a result, there may be a higher risk of default on the taxable property loans than on the associated mortgage revenue bonds. If a property is unable to sustain net cash flow at a level necessary to pay current debt service obligations on the taxable property loan on such property, a default may occur. While these taxable property loans are secured by the underlying properties, in general, the Partnership does not expect to pursue foreclosure or other remedies against a property upon default of a taxable property loan if the property is not in default on the mortgage revenue bonds financing the property.

There are risks associated with our strategy of acquiring ownership interests in MF Properties in anticipation of future bond financings of these projects.

To facilitate our investment strategy of acquiring additional mortgage revenue bonds secured by multifamily apartment properties, we may acquire ownership positions in MF Properties that we expect to ultimately sell as part of a syndication of LIHTCs after the expiration of the compliance period relating to existing LIHTCs issued with respect to the MF Properties. Our plan is to provide mortgage financing to the new property owners at the time of a syndication of new LIHTCs in connection with a rehabilitation of these MF Properties. The market for LIHTC syndications may be negatively affected from time to time by economic and market conditions. For this and other reasons, the Partnership may not be able to sell its interests in the MF Properties after the applicable LIHTC compliance period. In addition, the value of the Partnership's interest in MF Properties will be affected by the economic performance of the MF Properties and other factors generally affecting the value of residential rental properties. As a result, the Partnership may incur a loss upon the sale of its interest in an MF Property. In addition, we may not be able to acquire mortgage revenue bonds on the MF Properties even if we are able to sell our interests in the MF Properties. During the time the Partnership owns an interest in an MF Property, any net income it receives from these MF Properties will not be exempt from federal or state income taxation.

Any future issuances of additional shares could cause their market value to decline.

The Partnership may issue additional shares from time to time in order to raise additional equity capital. The issuance of additional units could cause dilution of the existing shares and a decrease in the market price of the shares. In addition, if additional shares are issued but we are unable to invest the additional equity capital in assets that generate what we expect and believe to be tax-exempt income at levels at least equivalent to our existing assets, the amount of cash available for distribution on a per share basis may decline.

We may suffer adverse consequences from changing interest rates.

We have financed the acquisition of some of our assets using variable-rate debt financing. The interest that we pay on these financings fluctuates with a specific interest rate indices. All of our mortgage revenue bonds bear interest at fixed rates and, notwithstanding the contingent interest feature on some of these bonds, the amount of interest we earn on these bonds will not increase with a general rise in interest rates. Accordingly, an increase in our interest expense due to an increase in the applicable interest rate index used for our variable rate debt financing will reduce the amount of cash we have available for distribution to shareholders and may affect the market value of our shares. The use of derivatives is designed to mitigate some but not all of the exposure to the negative impact of a higher cost of borrowing.

An increase in interest rates could also decrease the value of our mortgage revenue bonds. A decrease in the value of our mortgage revenue bonds could also decrease the amount we could realize on the sale of our investments and would thereby decrease the amount of funds available for distribution to our shareholders. During periods of low prevailing interest rates, the interest rates we earn on new mortgage revenue bonds that we acquire may be lower than the interest rates on our existing portfolio of mortgage revenue bonds.

To the extent we finance the acquisition of additional mortgage revenue bonds through the issuance of additional shares or from the proceeds from the sale of existing mortgage revenue bonds and we earn a lower interest rate on these additional bonds, the amount of cash available for distribution on a per share basis may be reduced.

We are subject to various risks associated with our derivative agreements.

We use derivative instruments, such as interest rate caps, to mitigate the risks we are exposed to as a result of changing interest rates. However, there is no assurance that these instruments will fully insulate the Partnership from the interest rate risks to which it is exposed. In addition, there are costs associated with these derivative instruments and these costs may not ultimately turn out to exceed the losses we would have suffered, if any, had these instruments not been in place. There is also a risk that a counterparty to such an instrument will be unable to perform its obligations to the Partnership. If a liquid secondary market does not exist for these instruments, we may be required to maintain a position until exercise or expiration, which could result in losses to the Partnership. In addition, we are required to record the fair value of these derivative instruments on our financial statements by recording changes in their values as interest earnings or expense. This can result in significant period to period volatility in the Partnership's reported net income over the term of these instruments.

There are risks associated with debt financing programs that involve securitization of our mortgage revenue bonds, PHC Certificates, and mortgage-backed securities.

We have obtained debt financing through the securitization of our mortgage revenue bonds, PHC Certificates, and MBS and may obtain this type of debt financing in the future. The terms of these securitization programs differ, but in general require our investment assets be placed into a trust or other special purpose entity that issues a senior security to unaffiliated investors and a residual interest to the Partnership. The trust or other entity receives all of the interest payments from its underlying mortgage revenue bonds, PHC Certificates, and MBS from which it pays interest on the senior security at a variable rate. As the holder of the residual interest, the Partnership is entitled to any remaining interest received by the trust holding the securitized asset after it has paid the full amount of interest due on the senior security and all of the expenses of the trust, including various fees to the trustee, remarketing agents and liquidity providers. Specific risks generally associated with these asset securitization programs include the following:

Changes in short-term interest rates can adversely affect the cost of an asset securitization financing.

The interest rate payable on the senior securities resets periodically based on a specified index usually tied to interest rates on short-term instruments. In addition, because the senior securities may typically be tendered back to the trust, causing the trust to remarket the senior securities from time to time, an increase in interest rates may require an increase to the interest rate paid on the senior securities in order to successfully remarket these securities. Any increase in interest rate payable on the senior securities will result in more of the underlying interest being used to pay interest on the senior securities leaving less interest available to the Partnership. As a result, higher short-term interest rates will reduce, and could even eliminate, the Partnership's return on a residual interest in this type of financing.

Payments on the residual interests in these financing structures are subordinate to payments on the senior securities and to payment of trust expenses and no party guarantees the payment of any amounts under the residual interests.

The Partnership holds a residual interest (known as Class B interests in a TEBS financing facility and a LIFER in a TOB financing facility) in the securitization trusts established for the debt financing facilities. These residual interests are subordinate to the senior securities sold to investors. As a result, none of the interest received by such a trust will be paid to the Partnership as the holder of a residual interest until all payments currently due on the senior securities have been paid in full and other trust expenses satisfied. As the holder of a residual certificate in these trusts, the Partnership can look only to the assets of the trust remaining after payment of these senior obligations for payment on the residual certificates. No third party guarantees the payment of any amount on the residual certificates.

Termination of an asset securitization financing can occur for a number of reasons which could cause the Partnership to lose the assets and other collateral it pledged for such financing.

In general, the trust or other special purpose entity formed for an asset securitization financing can terminate for a number of different reasons relating to problems with the assets or problems with the trust itself. Problems with the assets that could cause the trust to collapse include payment or other defaults or a determination that the interest on the assets is taxable. Problems with a trust include a downgrade in the investment rating of the senior securities that it has issued, a ratings downgrade of the liquidity provider for the trust, increases in short term interest rates in excess of the interest paid on the underlying assets, an inability to remarket the senior securities or an inability to obtain liquidity for the trust. In each of these cases, the trust will be collapsed and the mortgage revenue bonds and other collateral held by the trusts will be sold. If the proceeds from the sale of the trust collateral are not sufficient to pay the principal amount of the senior securities with accrued interest and the other expenses of the trusts then the Partnership will be required, through its guarantee of the trusts, to fund any such shortfall. As a result, the Partnership, as holder of the residual interest in the trust, may not only lose its investment in the residual certificates but could also realize additional losses in order to fully repay trust obligations to the senior securities.

An insolvency or receivership of the program sponsor could impair the Partnership's ability to recover the assets and other collateral pledged by it in connection with a bond securitization financing.

In the event the sponsor of an asset securitization financing program becomes insolvent, it could be placed in receivership. In that situation, it is possible that the Partnership would not be able to recover the investment assets and other collateral it pledged in connection with the securitization financing or that it would not receive all or any of the payments due from the trust or other special purpose entity on the residual interest held by the Partnership in such trust or other entity.

Conditions in the credit markets may increase our cost of borrowing or may make financing difficult to obtain, each of which may have a material adverse effect on our results of operations and business.

Economic conditions in international and domestic credit markets have been, and remain, challenging. Tighter credit conditions and slower economic growth combined with continued concerns about the systemic impact of high unemployment, restricted availability of credit, and overall business and consumer confidence have contributed to a slow economic recovery and it is unclear when and how quickly conditions and markets will improve. As a result of these economic conditions, the cost and availability of credit has been, and may continue to be, adversely affected in all markets in which we operate. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease, providing funding to borrowers. As a result, our access to debt and equity financing may be adversely affected. If these market and economic conditions continue, they may limit our ability to replace or renew maturing debt financing on a timely basis and may impair our access to capital markets to meet our liquidity and growth requirements which may have an adverse effect on our financial condition and results of operations.

Federal regulations adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may require us to unwind our tender option bond financing facilities by July 2015.

On December 10, 2013, U.S. regulators finalized the “Volcker Rule” adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which limits the ability of banking entities to sponsor or invest in certain types of “covered funds” (such as private equity funds and hedge funds) or to engage in certain types of proprietary trading in the U.S. The Volcker Rule restricts banking entities from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with certain “covered funds.” As currently structured, TOB Trusts like those used as part of the Company’s TOB financing program with DB, fit within the definition of “covered funds” and will be affected by the Volcker Rule. (Note that the Volcker Rule does not apply to Freddie Mac or more specifically, the Company’s TEBS financing facility with Freddie Mac.)

The regulators specifically noted that banks will need to evaluate if TOB Trusts are, in fact, covered funds and if so, whether an exception to the definition is available. The regulators declined to provide a specific exclusion from the definition of "covered funds" for TOB financing programs. The preamble also notes that participation in a TOB transaction is not prohibited per se, but is subject to the same restrictions on other covered funds. The effective date for the Volcker Rule is April 1, 2014, however the rule provides for a phase in period during which time banks need to make good faith efforts to have full compliance with the rule by July 21, 2015. There is also a possibility that this compliance or conformance period could be extended by up to two years. At this time, industry participants are working together to modify the structure of TOBs generally so that they qualify for one of the exceptions contained in the Volcker Rule. Market participants are confident that they will be able to restructure TOBs to permit banks, such as DB, to continue to sponsor TOB Trusts.

As discussed elsewhere in this document, the Company had approximately $164.3 million of outstanding debt financing under its TOB program with DB as of December 31, 2013. If DB terminates its participation in the TOB program, the Company would likely need to find another source of financing to replace the DB TOB financing. The Company may not, however, be able to secure such replacement financing at all and if it can get replacement financing, such financing may be on terms less favorable than those offered by DB. Any changes to the Company’s TOB financing program with DB required by the Volcker Rule could have an adverse effect on the Company’s financial condition and results of operations.

Our mortgage revenue bonds are illiquid assets and their value may decrease.

The majority of our assets consist of our mortgage revenue bonds. These mortgage revenue bonds are relatively illiquid, and there is no existing trading market for them. As a result, there are no market makers, price quotations, or other indications of a developed trading market for these mortgage revenue bonds. In addition, no rating has been issued on any of the existing mortgage revenue bonds and we do not expect to obtain ratings on mortgage revenue bonds we may acquire in the future. Accordingly, any buyer of these mortgage revenue bonds would need to perform its own due diligence prior to a purchase. As a result, our ability to sell our mortgage revenue bonds, and the price we may receive upon their sale, will be affected by the number of potential buyers, the number of similar securities on the market at the time and a number of other market conditions. As a result, such a sale could result in a loss to us.

Delay, Reduction, or Elimination of Appropriations from the U.S. Department of Housing and Urban Development can result in payment defaults on the Company's investments in PHC Trusts.

The Company has acquired interests (known as "LIFERS") in three tender option bond trusts (“PHC TOB Trusts”), which, in turn, hold PHC Certificates that have been issued by three PHC Trusts which hold custodial receipts evidencing loans made to a number of public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities solely out of annual appropriations to be made to the public housing authorities by HUD under HUD's Capital Fund Program. Annual appropriations for the Capital Fund Program must be determined by Congress each year, and there is no assurance that Congress will continue to make such appropriations at current levels or at all. If Congress fails to continue to make annual appropriations for the Capital Fund Program at or near current levels, or there is a delay in the approval of appropriations, the public housing authorities may not have funds from which to pay principal and interest on the loans underlying the PHC Certificates. The failure of public housing authorities to pay principal and interest on these loans will reduce or eliminate the payments received by the Company from the PHC TOB Trusts.

A Reduction in the Rating of PHC Certificates and MBS below investment grade would result in the liquidation of the investment in that TOB Trust

The Company's investment in PHC Certificates and MBS are made pursuant to the provision of its Partnership Agreement that allows investment in securities that are not mortgage revenue bonds backed by multifamily housing projects provided that these alternative securities are rated investment grade in one of the four highest rating categories by at least one nationally recognized securities rating agency and provide what the Company expects and believes to be tax-exempt income. In the event the investment rating of any of the PHC Certificates held by a PHC TOB Trust or any of the MBS was reduced to less than investment grade, the trustee over the TOB Trust has no obligation to divest of that securitized asset. Accordingly, the Partnership would be required to liquidate its LIFERS in that TOB Trust or liquidate the TOB Trust entirely. The TOB Trusts have no obligation to purchase the LIFERS and there is no established trading market for the LIFERS. Likewise, if the Partnership liquidates the TOB Trust, any downgrade in the investment rating of the PHC Certificates or MBS will likely decrease the value of the investment. As a result, the Partnership may not be able to divest its position in these LIFERS or terminate the TOB Trusts without incurring a material loss.

Prepayment rates on the mortgage loans underlying the Company's mortgage-backed securities may materially adversely affect our profitability or result in liquidity shortfalls that could require us to sell assets in unfavorable market conditions.

The Company's MBS are secured by pools of mortgages on residential properties. In general, the mortgages collateralizing our MBS may be prepaid at any time without penalty. Prepayments on our MBS result when homeowners/mortgagees satisfy (i.e., pay off) the mortgage upon selling or refinancing their mortgaged property. When we acquire a particular MBS, we anticipate that the underlying mortgage loans will prepay at a projected rate which, together with expected coupon income, provides us with an expected yield on such MBS. If we purchase assets at a premium to par value, and borrowers prepay their mortgage loans faster than expected, the corresponding prepayments on the MBS may reduce the expected yield on such securities because we will have to amortize the related premium on an accelerated basis. Conversely, if we purchase assets at a discount to par value, when borrowers prepay their mortgage loans slower than expected, the decrease in corresponding prepayments on the MBS may reduce the expected yield on such securities because we will not be able to accrete the related discount as quickly as originally anticipated. Prepayment rates on loans are influenced by changes in mortgage and market interest rates and a variety of economic, geographic, and other factors, all of which are beyond our control. Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. In periods of declining interest rates, prepayment rates on mortgage loans generally increase. If general interest rates decline at the same time, the proceeds of such prepayments received during such periods are likely to be reinvested by us in assets yielding less than the yields on the assets that were prepaid (to the extent such assets are available for us to reinvest in). In addition, the market value of our MBS may, because of the risk of prepayment, benefit less than other fixed-income securities from declining interest rates.

The rent restrictions and occupant income limitations imposed on properties financed by our mortgage revenue bonds and on our MF Properties may limit the revenues of such properties.

All of the apartment properties securing our mortgage revenue bonds and the MF Properties in which our subsidiaries hold indirect interests are subject to certain federal, state and/or local requirements with respect to the permissible income of their tenants. Since federal rent subsidies are not generally available on these properties, rents must be charged on a designated portion of the units at a level to permit these units to be continuously occupied by low or moderate income persons or families. As a result, these rents may not be sufficient to cover all operating costs with respect to these units and debt service on the applicable mortgage revenue bond. This may force the property owner to charge rents on the remaining units that are higher than they would be otherwise and may, therefore, exceed competitive rents. This may adversely affect the occupancy rate of a property securing an investment and the property owner's ability to service its debt.

The properties financed by certain of our mortgage revenue bonds are not completely insured against damages from hurricanes and other major storms.

Three of the multifamily housing properties financed by mortgage revenue bonds held by the Partnership are located in areas that are prone to damage from hurricanes and other major storms. The current insurable value of these three properties is approximately $.50.1 million. Due to the significant losses incurred by insurance companies in recent years due to damages from hurricanes, many property and casualty insurers now require property owners to assume the risk of first loss on a larger percentage of their property's value. In general, the current insurance policies on the five properties financed by the Partnership that are located in areas rated for hurricane and storm exposure carry a five percent deductible on the insurable value of the properties. As a result, if any of these properties were damaged in a hurricane or other major storm, the amount of uninsured losses could be significant and the property owner may not have the resources to fully rebuild the property and this could result in a default on the mortgage revenue bonds secured by the property. In addition, the damages to a property may result in all or a portion of the rental units not being rentable for a period of time. Unless a property owner carries rental interruption insurance, this loss of rental income would reduce the cash flow available to pay base or contingent interest on the Partnership's mortgage revenue bonds collateralized by these properties.

The properties securing our revenue bonds or the MF Properties may be subject to liability for environmental contamination which could increase the risk of default on such bonds or loss of our investment.

The owner or operator of real property may become liable for the costs of removal or remediation of hazardous substances released on its property. Various federal, state and local laws often impose such liability without regard to whether the owner or operator of real property knew of, or was responsible for, the release of such hazardous substances. We cannot assure you that the properties that secure our mortgage revenue bonds or the MF Properties in which our subsidiaries hold indirect interests, will not be contaminated. The costs associated with the remediation of any such contamination may be significant and may exceed the value of a property or result in the property owner defaulting on the revenue bond secured by the property or otherwise result in a loss of our investment in a property.

If we acquire ownership of apartment properties we will be subject to all of the risks normally associated with the ownership of commercial real estate.

We may acquire ownership of apartment complexes financed by mortgage revenue bonds held by us in the event of a default on such bonds. We may also acquire indirect ownership of MF Properties on a temporary basis in order to facilitate the eventual acquisition by us of mortgage revenue bonds on these apartment properties. In either case, during the time we own an apartment complex, we will generate taxable income or losses from the operations of such property rather than tax exempt interest. In addition, we will be subject to all of the risks normally associated with the operation of commercial real estate including declines in property value, occupancy and rental rates and increases in operating expenses. We may also be subject to government regulations, natural disasters and environmental issues, any of which could have an adverse effect on the Partnership's financial results and ability to make distributions to shareholders.

There are a number of risks related to the construction of multifamily apartment properties that may affect the mortgage revenue bonds issued to finance these properties.

We may invest in mortgage revenue bonds secured by multifamily housing properties which are still under construction. Construction of such properties generally takes approximately twelve to eighteen months. The principal risk associated with construction lending is that construction of the property will be substantially delayed or never completed. This may occur for a number of reasons including (i) insufficient financing to complete the project due to underestimated construction costs or cost overruns; (ii) failure of contractors or subcontractors to perform under their agreements; (iii) inability to obtain governmental approvals; (iv) labor disputes; and (v) adverse weather and other unpredictable contingencies beyond the control of the developer. While we may be able to protect ourselves from some of these risks by obtaining construction completion guarantees from developers, agreements of construction lenders to purchase our bonds if construction is not completed on time, and/or payment and performance bonds from contractors, we may not be able to do so in all cases or such guarantees or bonds may not fully protect us in the event a property is not completed. In other cases, we may decide to forego certain types of available security if we determine that the security is not necessary or is too expensive to obtain in relation to the risks covered. If a property is not completed, or costs more to complete than anticipated, it may cause us to receive less than the full amount of interest owed to us on the mortgage revenue bond financing such property or otherwise result in a default under the mortgage loan that secures our mortgage revenue bond on the property. In such case, we may be forced to foreclose on the incomplete property and sell it in order to recover the principal and accrued interest on our mortgage revenue bond and we may suffer a loss of capital as a result. Alternatively, we may decide to finance the remaining construction of the property, in which event we will need to invest additional funds into the property, either as equity or as a taxable property loan. Any return on this additional investment would be taxable. Also, if we foreclose on a property, we will no longer receive interest on the bond issued to finance the property. The overall return to the Partnership from its investment in such property is likely to be less than if the construction had been completed on time or within budget.

There are a number of risks related to the lease-up of newly constructed or renovated properties that may affect the mortgage revenue bonds issued to finance these properties.

We may acquire mortgage revenue bonds issued to finance properties in various stages of construction or renovation. As construction or renovation is completed, these properties will move into the lease-up phase. The lease-up of these properties may not be completed on schedule or at anticipated rent levels, resulting in a greater risk that these investments may go into default than investments secured by mortgages on properties that are stabilized or fully leased-up. The underlying property may not achieve expected occupancy or debt service coverage levels. While we may require property developers to provide us with a guarantee covering operating deficits of the property during the lease-up phase, we may not be able to do so in all cases or such guarantees may not fully protect us in the event a property is not leased up to an adequate level of economic occupancy as anticipated.

We have assumed certain potential liabilities relating to recapture of tax credits on MF Properties.

The Partnership has acquired indirect interests in several MF Properties that generated LIHTCs for the previous investors in these properties. When the Partnership acquires an interest in an MF Property, it generally must agree to reimburse the prior partners for any liabilities they incur due to a recapture of LIHTCs that result from the failure to operate the MF Property in a manner consistent with the laws and regulations relating to LIHTCs after the Partnership acquired its interest in the MF Property. The amount of this recapture liability can be substantial.

The Partnership is not registered under the Investment Company Act.

The Partnership is not required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) because it operates under an exemption therefrom. As a result, none of the protections of the Investment Company Act (such as provisions relating to disinterested directors, custody requirements for securities, and regulation of the relationship between a fund and its advisor) will be applicable to the Partnership.

The Partnership engages in transactions with related parties.

Each of the executive officers of Burlington and four of the managers of Burlington hold equity positions in Burlington. A subsidiary of Burlington acts as the General Partner to the Partnership and manages our investments and performs administrative services for us and earns certain fees that are either paid by the properties financed by our mortgage revenue bonds or by us. Another subsidiary of Burlington provides on-site management for some of the multifamily apartment properties that underlie our mortgage revenue bonds and each of our MF Properties and earns fees from the property owners based on the gross revenues of these properties. The owners of the limited-purpose corporations which own three of the apartment properties financed with mortgage revenue bonds and taxable property loans held by the Partnership are employees of Burlington who are not involved in the operation or management of the Partnership and who are not executive officers or managers of Burlington. Because of these relationships, our agreements with Burlington and its subsidiaries are related-party transactions. By their nature, related-party transactions may not be considered to have been negotiated at arm's length. These relationships may also cause a conflict of interest in other situations where we are negotiating with Burlington.

Shareholders may incur tax liability if any of the interest on our mortgage revenue bonds, PHC Certificates, or MBS is determined to be taxable.

In each mortgage revenue bond transaction, the governmental issuer, as well as the underlying borrower, has covenanted and agreed to comply with all applicable legal and regulatory requirements necessary to establish and maintain the tax-exempt status of interest earned on the bonds. Failure to comply with such requirements may cause interest on the related issue of bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance, regardless of when such noncompliance occurs. Should the interest income on a mortgage revenue bond be deemed to be taxable, the bond documents include a variety of rights and remedies that the Partnership has concluded would help mitigate the economic impact of taxation of the interest income on the affected bonds. Under such circumstances, the Partnership would enforce any and all of such rights and remedies as set forth in the related bond documents as well as any other rights and remedies available under applicable law. In addition, in the event the tax-exemption of interest income on any mortgage revenue bond is challenged by the IRS, the Partnership would participate in the tax and legal proceedings to contest any such challenge and would, under appropriate circumstances, appeal any adverse final determinations. The loss of tax-exemption for any particular issue of bonds would not, in and of itself, result in the loss of tax-exemption for any unrelated issue of bonds. However, the loss of such tax-exemption could result in the distribution to our shareholders of taxable income relating to such bonds.

Certain of our mortgage revenue bonds bear interest at rates which include contingent interest. Payment of the contingent interest depends on the amount of net cash flow generated by, and net proceeds realized from a sale of, the property securing the bond. Due to this contingent interest feature, an issue may arise as to whether the relationship between the property owner and us is that of debtor and creditor or whether we are engaged in a partnership or joint venture with the property owner. If the IRS were to determine that these mortgage revenue bonds represented an equity investment in the underlying property, the interest paid to us could be viewed as a taxable return on such investment and would not qualify as tax-exempt interest for federal income tax purposes.

In addition, we have, and may in the future, obtain debt financing through asset securitization programs in which we place mortgage revenue bonds, PHC Certificates, and MBS into trusts and are entitled to a share of the interest received by the trust on these bonds after the payment of interests on senior securities issued by the trust, it is possible that the characterization of our residual interest in such a securitization trust could be challenged and the income that we receive through these instruments could be treated as ordinary taxable income includable in our gross income for federal tax purposes.

Not all of the income received by the Partnership is exempt from taxation.

We have made, and may make in the future, taxable property loans to the owners of properties which are secured by mortgage revenue bonds that we hold. The interest income earned by the Partnership on these mortgage loans is subject to federal and state income taxes. In addition, if we acquire direct or indirect interests in real estate, either through foreclosure of a property securing a mortgage revenue bond or a taxable property loan or through the acquisition of an MF Property, any income we receive from the property will be taxable income from the operation of real estate. In that case, the taxable income received by the Partnership will be allocated to our shareholders and will represent taxable income to them regardless of whether an amount of cash equal to such allocable share of this taxable income is actually distributed to shareholders.

If the Partnership was determined to be an association taxable as a corporation, it will have adverse economic consequences for the Partnership and its shareholders.

The Partnership has determined to be treated as a partnership for federal income tax purposes. The purpose of this determination is to eliminate federal and state income tax liability for the Partnership and allow us to pass through our interest which we expect and believe to be tax-exempt to our shareholders so that they are not subject to federal tax on this income. If our

treatment as a partnership for tax purposes is challenged, we would be classified as an association taxable as a corporation. This would result in the Partnership being taxed on its taxable income, if any, and, in addition, would result in all cash distributions made by the Partnership to shareholders being treated as taxable dividend income to the extent of the Partnership’s earnings and profits. The payment of these dividends would not be deductible by the Partnership. The listing of the Partnership’s shares for trading on the NASDAQ causes the Partnership to be treated as a “publicly traded partnership” under Section 7704 of the Internal Revenue Code. A publicly traded partnership is generally taxable as a corporation unless 90% or more of its gross income is “qualifying” income. Qualifying income includes interest, dividends, real property rents, gain from the sale or other disposition of real property, gain from the sale or other disposition of capital assets held for the production of interest or dividends and certain other items. The Partnership expects and believes that substantially all of the Partnership’s gross income will continue to be tax-exempt interest income on its mortgage revenue bonds, but there can be no assurance that will be the case. While we believe that all of this interest income is qualifying income, it is possible that some or all of our income could be determined not to be qualifying income. In such a case, if more than ten percent of our annual gross income in any year is not qualifying income, the Partnership will be taxable as a corporation rather than a partnership for federal income tax purposes. We have not received, and do not intend to seek, a ruling from the Internal Revenue Service regarding our status as a partnership for tax purposes.

To the extent the Partnership generates taxable income; shareholders will be subject to income taxes on this income, whether or not they receive cash distributions.

As a partnership, our shareholders will be individually liable for income tax on their proportionate share of any taxable income realized by the Partnership, whether or not we make cash distributions.

There are limits on the ability of our shareholders to deduct Partnership losses and expenses allocated to them.

The ability of shareholders to deduct their proportionate share of the losses and expenses generated by the Partnership will be limited in certain cases, and certain transactions may result in the triggering of the Alternative Minimum Tax for shareholders who are individuals.

Item 1B. Unresolved Staff Comments.

None

Item 2. Properties.

The Partnership conducts its business operations from and maintains its executive offices at 1004 Farnam Street, Omaha, Nebraska 68102. This property is owned by Burlington. The Partnership believes that this property is adequate to meet its business needs for the foreseeable future.

Each of the Partnership's mortgage revenue bonds is collateralized by a multifamily housing property. The Partnership does not hold title or any other interest in these properties, other than the mortgages securing the bonds.

As a result of the guidance on consolidations, the Company is required to consolidate certain of the multifamily residential properties securing its bonds because the owners of those properties are treated as Consolidated VIEs for which the Company is the primary beneficiary. As of December 31, 2013, the Company consolidated two multifamily housing properties owned by VIEs located in Florida and South Carolina. The Partnership does not hold title to the properties owned by the VIEs.

In addition to the properties owned by Consolidated VIEs, the Company reports the financial results of the MF Properties on a consolidated basis due to the limited partnership interests held by its subsidiary in the partnerships that own the MF Properties. The Company consolidated nine MF Properties located in Georgia, Indiana, Kentucky, Kansas, Nebraska, and Texas as of December 31, 2013.

The following table sets forth certain information for each of the consolidated properties as of December 31, 2013:



Consolidated VIEs
Property Name	Location	Number of Units	Land		Buildings and Improvements		Carrying Value at December 31, 2013
Bent Tree Apartments	Columbia, SC	232	$	986,000	$	12,097,419	$	13,083,419
Fairmont Oaks Apartments	Gainsville, FL	178	850,400		8,845,020		9,695,420
							$	22,778,839
Less accumulated depreciation (depreciation expense of approximately $1.4 million in 2013)							(9,741,942		)
Balance at December 31, 2013							$	13,036,897



MF Properties
Property Name	Location	Number of Units	Land		Buildings and Improvements		Carrying Value at December 31, 2013
Arboretum	Omaha, NE	145	$	1,739,554	$	19,123,872	$	20,863,426
Eagle Village	Evansville, IN	511	567,880		12,336,975		12,904,855
Glynn Place	Brunswick, GA	128	743,996		4,937,172		5,681,168
Maples on 97th	Omaha, NE	258	1,180,058		7,613,668		8,793,726
Meadowview	Highland Heights, KY	118	688,539		5,416,293		6,104,832
Residences of DeCordova	Granbury, TX	110	1,137,832		7,965,574		9,103,406
Residences of Weatherford	Weatherford, TX	76	1,927,701		5,695,600		7,623,301
Woodland Park	Topeka, KS	236	1,260,032		14,033,777		15,293,809
Construction work in process ⁽¹⁾	Lincoln, NE	N/A	—		13,130,325		13,130,325
							$	99,498,848
Less accumulated depreciation (depreciation expense of approximately $3.8 million in 2013)							(9,386,811		)
Balance at December 31, 2013							$	90,112,037

⁽¹⁾ The construction work in process represents the costs related to The 50/50 Student Housing at UNL, a 475 student bed mixed-use project, to be built above a 1,605 parking stall garage to be constructed at the University of Nebraska-Lincoln.

Item 3. Legal Proceedings.

The Partnership is periodically involved in ordinary routine litigation incidental to its business, including foreclosure actions relating to properties securing mortgage revenue bonds held by the Partnership. In our judgment, there are no material pending legal proceedings to which the Partnership is a party or to which any of the properties collateralizing the Partnership's mortgage revenue bonds are subject the resolution of which is expected to have a material adverse effect on the Company’s consolidated results of operations, cash flows, or financial condition.

Item 4. Mine Safety Disclosures

None

PART II

Item 5. Market for the Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities.

(a)Market Information. BUCs represent assignments by the sole limited partner of its rights and obligations as a limited partner. The rights and obligations of shareholders are set forth in the Partnership Agreement. BUCs of the Partnership trade on the NASDAQ Global Select Market under the trading symbol "ATAX". The following table sets forth the high and low sale prices for the BUCs for each quarterly period from January 1, 2012 through December 31, 2013.



2013	High		Low
1st Quarter	$	7.32	$	6.94
2nd Quarter	$	7.23	$	6.51
3rd Quarter	$	7.08	$	6.60
4th Quarter	$	7.20	$	6.29

2012	High		Low
1st Quarter	$	5.59	$	4.91
2nd Quarter	$	5.93	$	4.98
3rd Quarter	$	6.19	$	5.25
4th Quarter	$	7.10	$	5.81

(b) Shareholders. The approximate number of shareholders on December 31, 2013 was 19,400.

(c) Distributions. Distributions to shareholders were made on a quarterly basis during 2013, 2012, and 2011. Total distributions for the years ended December 31, 2013, 2012, and 2011 were approximately $23,118,000, $20,643,000, and $15,061,000, respectively.

(d)The distributions paid or accrued per BUC during the fiscal years ended December 31, 2013, 2012, and 2011 were as follows:



	For the Year Ended		For the Year Ended		For the Year Ended
	December 31, 2013		December 31, 2012		December 31, 2011
Cash Distributions	$	0.5000	$	0.5000	$	0.5000

See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” for information regarding the sources of funds that will be used for cash distributions and for a discussion of factors which may adversely affect the Partnership's ability to make cash distributions at the same levels in 2013 and thereafter.

(e)Sales of Unregistered Securities. The Partnership did not sell any of its securities during the past three years which were not registered under the Securities Act of 1933, as amended.

(f)Issuer Purchases of Equity Securities. None

Item 6. Selected Financial Data.

Set forth below is selected financial data for the Company as of and for the years ended December 31, 2009 through 2013. The information should be read in conjunction with the Company's consolidated financial statements and notes thereto filed in response to Item 8 of this report. Please refer to the discussions in Item 1 and Item 7 regarding the implementation of guidance on consolidations and its effects on the presentation of financial data in this report on Form10-K:



	For the Year Ended December 31, 2013			For the Year Ended December 31, 2012			For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009


Property revenue	16,110,740			12,654,530			10,976,250			9,106,667			10,174,848
Real estate operating expenses	(9,574,822		)	(7,877,931		)	(6,758,707		)	(6,060,676		)	(6,973,134		)
Depreciation and amortization expense	(6,732,580		)	(4,982,030		)	(3,963,502		)	(3,590,151		)	(4,178,377		)
Investment income	22,651,622			11,078,467			9,187,291			6,881,314			4,253,164
Contingent interest income	6,497,160			—			309,990			—			—
Other interest income	1,772,338			150,882			485,679			455,622			106,082
Gain on sale and retirement of bonds	—			680,444			445,257			—			—
Other income	250,000			555,328			294,328			—			—
Provision for loss on receivables	(241,698		)	(452,700		)	(952,700		)	—			—
Provision for loan loss	(168,000		)	—			(4,242,571		)	(562,385		)	(1,401,731		)
Realized loss on taxable property loans	(4,557,741		)	—			—			—			—
Gain on sale of assets held for sale	—			—			—			—			862,865
Gain on early extinquishment of debt	—			—			—			435,395			—
Asset impairment charge - Weatherford	—			—			—			(2,528,852		)	—
Interest expense	(7,235,336		)	(5,530,995		)	(5,441,700		)	(1,887,823		)	(3,307,854		)
General and administrative expenses	(4,237,245		)	(3,512,233		)	(2,764,970		)	(2,383,784		)	(1,997,661		)
Income (loss) from continuing operations	14,534,438			2,763,762			(2,425,355		)	(134,673		)	(2,461,798		)
Income (loss) from discontinued operations, (including gain on sale of $3,177,183, $1,406,608 and $26,514,809 in 2013, 2012, and 2009, respectively)	3,442,404			2,232,276			752,192			(469,518		)	26,289,211
Net income (loss)	17,976,842			4,996,038			(1,673,163		)	(604,191		)	23,827,413
Less: net income (loss) attributable to noncontrolling interest	261,923			549,194			570,759			(203,831		)	(11,540		)
Net income (loss) - America First Multifamily Investors, L. P.	17,714,919			4,446,844			(2,243,922		)	(400,360		)	23,838,953
Less: general partners' interest in net income	1,416,296			691,312			152,359			28,532			804,223
Unallocated (loss) income related to variable interest entities	(1,116,262		)	(1,522,846		)	(1,289,539		)	(2,466,260		)	20,495,957
Unitholders' interest in net income (loss)	$	17,414,885		$	5,278,378		$	(1,106,742	)	$	2,037,368		$	2,538,773
Unitholders' Interest in net income per unit (basic and diluted):
Income (loss) from continuing operations	$	0.32		$	0.09		$	(0.06	)	$	0.09		$	0.18
Income (loss) from discontinued operations	$	0.08		$	0.05		$	0.02		$	(0.02	)	$	(0.03	)
Net income (loss), basic and diluted, per unit	$	0.40		$	0.14		$	(0.04	)	$	0.07		$	0.15
Distributions paid or accrued per BUC	$	0.5000		$	0.5000		$	0.5000		$	0.5400		$	0.5450
Weighted average number of BUCs outstanding, basic and diluted	43,453,476			37,367,600			30,122,928			27,493,449			16,661,969

Please refer to the discussions in Item 1 and Item 7 regarding the implementation of guidance on consolidations and it's effects on the presentation of financial data in this report on Form10-K (continued):



	For the Year Ended December 31, 2013			For the Year Ended December 31, 2012			For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009


Mortgage revenue bonds, at fair value	$	68,946,370		$	45,703,294		$	26,542,565		$	27,115,164		$	69,399,763
Mortgage revenue bonds held in trust, at fair value	$	216,371,801		$	99,534,082		$	109,152,787		$	73,451,479		$	—
Public housing capital fund trusts, at fair value	$	62,056,379		$	65,389,298		$	—		$	—		$	—
Mortgage-backed securities, at fair value	$	37,845,661		$	32,121,412		$	—		$	—		$	—
Real estate assets, net	$	103,148,934		$	85,488,292		$	75,268,936		$	51,750,123		$	61,148,393
Total assets of discontinued operations	$	—		$	32,580,427		$	37,494,700		$	33,714,886		$	31,891,383
Total assets	$	534,233,032		$	413,150,755		$	297,976,545		$	241,607,250		$	190,770,720
Total debt of continuing operations	$	314,361,320		$	217,067,507		$	148,137,455		$	99,972,100		$	59,783,065
Total debt of discontinued operations	$	—		$	—		$	10,779,428		$	6,281,882		$	25,697,122
Cash flows provided by (used in) operating activities	$	14,232,724		$	7,482,090		$	10,229,300		$	2,200,893		$	(339,254	)
Cash flows (used in) provided by investing activities	$	(158,421,463	)	$	(97,296,115	)	$	(31,811,420	)	$	(48,549,857	)	$	11,822,244
Cash flows provided by (used in) financing activities	$	125,175,254		$	99,932,112		$	28,518,485		$	42,345,477		$	(1,563,495	)
Cash Available for Distribution ("CAD")⁽¹⁾	$	18,379,205		$	12,288,089		$	10,612,090		$	9,513,494		$	8,708,527

⁽¹⁾ To calculate CAD, amortization expense related to debt financing costs and bond reissuance costs, Tier 2 income due to the general partner (as defined in the Partnership Agreement), interest rate derivative income or expense (including adjustments to fair value), provision for loan losses, provision for loss on receivables, impairments on assets, deferred gain and related interest, bond discount amortization net of cash received, losses related to consolidated VIEs, and depreciation and amortization expense on MF Property assets are added back to the Company's net income (loss) as computed in accordance with GAAP. The Company uses CAD as a supplemental measurement of its ability to pay distributions. The Company believes that CAD provides relevant information about its operations and is necessary along with net income (loss) for understanding its operating results.

Management utilizes a calculation of cash available for distribution or "CAD" as a means to determine the Partnership's ability to make distributions to shareholders. The General Partner believes that CAD provides relevant information about the Partnership's operations and is necessary along with net income for understanding its operating results. Net income is the GAAP measure most comparable to CAD. There is no generally accepted methodology for computing CAD, and the Partnership's computation of CAD may not be comparable to CAD reported by other companies. Although the Partnership considers CAD to be a useful measure of its operating performance, CAD is a non-GAAP measure and should not be considered as an alternative to net income or net cash flows from operating activities which are calculated in accordance with GAAP, or any other measures of financial performance or liquidity presented in accordance with GAAP.

The following sets forth a reconciliation of the Company's net income (loss) as determined in accordance with GAAP and the Partnership's CAD for the periods set forth.



	2013			2012			2011			2010			2009
Net income (loss) - America First Multifamily Investors L.P.	$	17,714,919		$	4,446,844		$	(2,243,922	)	$	(400,360	)	$	23,838,953
Net loss (income) related to VIEs and eliminations due to consolidation	1,116,262			1,522,846			1,289,539			2,466,260			(20,495,957		)
Net income (loss) before impact of VIE consolidation	18,831,181			5,969,690			(954,383		)	2,065,900			3,342,996
Change in fair value of derivatives and interest rate derivative amortization	283,610			944,541			2,083,521			(571,684		)	830,142
Depreciation and amortization expense (Partnership only)	5,374,802			3,447,316			2,281,541			1,337,859			1,625,120
Provision for loss on receivables	241,698			452,700			952,700			—			—
Provision for loan loss	168,000			—			4,242,571			1,147,716			1,696,730
Deposit liability gain - sale of the Ohio Properties ⁽¹⁾	(1,775,527		)	—			—			1,775,527			—
Tier 2 Income distributable to the General Partner⁽¹⁾	(484,855		)	(657,933		)	(170,410		)	(472,246		)	(802,909		)
Deposit liability gain - sale of the Greens Property ⁽²⁾	(1,401,656		)	—			—			—			—
Developer income ⁽³⁾	528,000			—			—			—			—
Asset impairment charge - Weatherford	—			—			—			2,716,330			—
Depreciation and amortization related to discontinued operations	9,859			452,942			887,492			1,172,771			1,888,953
Loss on bond sale	—			—			—			—			127,495
Bond purchase discount accretion (net of cash received)	256,615			160,464			(100,998		)	(403,906		)	—
Greens Property deferred interest and reversal of deferral ⁽⁴⁾	(135,264		)	135,264			—			—			—
Ohio Properties deferred interest and reversal of deferral ⁽⁵⁾	(3,517,258		)	1,383,105			1,390,056			745,227			—
CAD	$	18,379,205		$	12,288,089		$	10,612,090		$	9,513,494		$	8,708,527
Weighted average number of units outstanding,
basic and diluted	43,453,476			37,367,600			30,122,928			27,493,449			16,661,969
Net income (loss), basic and diluted, per unit	$	0.40		$	0.14		$	(0.04	)	$	0.07		$	0.15
Total CAD per unit	$	0.42		$	0.33		$	0.35		$	0.35		$	0.52
Distributions per unit	$	0.5000		$	0.5000		$	0.5000		$	0.5000		$	0.5450

⁽¹⁾As described in Note 2 to the consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the shareholders and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner.

•

For the year ended December 31, 2013, the Company realized approximately $1.9 million in Tier 2 income from the Iona Lakes mortgage revenue bond redemption. 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.


•	For the year ended 2012, the Tier 2 income is approximately $557K recognized on the Arbors at Hickory Ridge mortgage revenue bond re-structuring, $668K recognized on the GMF-Madison and GMF-Warren/Tulane mortgage revenue bond sale and $1.4 million recognized on the sale of the MF Properties.


•	For the year ended December 31, 2011, the Tier 2 income is approximately $445K recognized on the Briarwood mortgage revenue bond retirement and approximately $308K of contingent interest recognized upon the Clarkson mortgage revenue bond retirement.


•	For the year ended December 31, 2010, the deferred gain on the sale of the Ohio Properties generated approximately $1.8 million and contingent interest generated approximately $33K of Tier 2 income.


•	For 2009, the Tier 2 income distributable to the General Partner was generated by the early redemption of Woodbridge - Bloomington and Woodbridge - Louisville mortgage revenue bond investments, the sale of Oak Grove, and contingent interest received from Fairmont Oaks and Lake Forest Apartments.

⁽²⁾The Partnership sold the Greens Property in conjunction with the purchase of mortgage revenue bonds secured by the property. The sales price approximated the 2009 property purchase price and therefore the gain from the sale of the property related entirely to depreciation recapture. For this reason, the General Partner concluded that the gain should be excluded from the calculation of CAD.

⁽³⁾ The developer income amount represents cash received by the Partnership for developer and construction management services performed on The 50/50 Student Housing at UNL mixed-use project in Lincoln, Nebraska. The development under construction at the University of Nebraska - Lincoln is accounted for as an MF property and the cash received for these fees has been eliminated within the consolidated financial statements. For purposes of CAD, management is treating these fees as if received from an unconsolidated entity.

⁽⁴⁾In July 2013, the Company recognized the sale of the Greens Property. The Company was required to follow the deposit method of accounting and had to defer to the gain until sufficient equity was invested by the new unaffiliated owners (which occurred in July 2013). Mortgage interest income of approximately $135,000 was received by the Partnership between October 2012 and December 31, 2012 and reported in 2012 CAD, and as such, the amount was reversed in the first nine months of the 2013 CAD calculation. As such, approximately $135,000 of CAD is being reversed out in the 2013 calculation of CAD.

⁽⁵⁾The recognition of the sale of the Ohio Properties allowed the Company to 1) realize approximately $4.2 million of interest income on the mortgage revenue bonds, 2) recognize approximately $1.1 million of taxable interest income on taxable property loans receivable it holds with the Ohio Properties, and 3) realize a $250,000 guarantee fee from the general partner owner of the Ohio Properties all in 2013 (see Note 10 to the consolidated financial statements). Mortgage interest income of $3.5 million of the $4.2 million had been previously received by the Partnership and reported in CAD, and as such, the amount was reversed in the 2013 CAD calculation.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

In this Management's Discussion and Analysis, the “Partnership” refers to America First Multifamily Investors, L.P. and its Consolidated Subsidiaries which consist of:


•	ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold mortgage revenue bonds in order to facilitate the Tax Exempt Bond Securitization (“TEBS”) Financing with Freddie Mac (See Note 10 to the consolidated financial statements).


•	Nine multifamily apartments ("MF Properties") which are either wholly or majority owned by subsidiaries of the Partnership.

The “Company” refers to the consolidated financial statements reported in this Form 10-K which include the assets, liabilities, and results of operations of the Partnership, its Consolidated Subsidiaries and three other consolidated entities in which the Partnership does not hold an ownership interest but which own multifamily apartment properties financed with 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”). All significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation.

Executive Summary

Mortgage Revenue Bonds. As of December 31, 2013, the Partnership owned 42 mortgage revenue bonds with an aggregate outstanding principal amount of $314.7 million. These bonds were issued by various state and local housing authorities in order to provide construction and/or permanent financing of 32 multifamily residential apartments containing a total of 5,409 rental units located in the states of California, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Minnesota, North Carolina, Ohio, South Carolina, Tennessee, and Texas. In each case the Partnership owns, either directly or indirectly, 100% of the bonds issued for these properties. Each bond is secured by a mortgage or deed of trust on the financed apartment property. As of December 31, 2012, the properties underlying the fourteen non-consolidated mortgage revenue bonds contain a total of 2,700 rental units. Two bonds secured by the three Ohio Properties containing 362 rental units and two bonds secured by the Greens Property containing 168 rental units are eliminated in consolidation in the Company's financial statements (see Note 3 to the consolidated financial statements) and the multifamily apartment properties are reported as discontinued operations in 2012. Three bonds secured by three multifamily residential apartments contained 650 rental units are reported as VIEs and are eliminated upon consolidation in 2012, and the property for one bond, Vantage at Judson, is under construction.

The mortgage revenue bond segment reported revenue of approximately $27.8 million, interest expense of approximately $3.3 million and income from continuing operations of approximately $14.5 million for the year ended December 31, 2013. The mortgage revenue bond investments segment reported revenue of approximately $12.2 million, interest expense of approximately $3.5 million, and income from continuing operations of approximately $4.1 million for the year ended December 31, 2012. For the year ended December 31, 2011, the mortgage revenue bond segment reported revenue of approximately $12.6 million, interest expense of approximately $4.5 million, and a loss from continuing operations of approximately $0.4 million.

The increase in income from continuing operations between 2013 and 2012 is comprised of several factors:


•	Approximately $6.0 million of mortgage revenue bond and taxable interest income and a guarantee fee of $250,000 realized from the recognition of the sale of the Ohio Properties,


•	A net realized gain of approximately $1.9 million from the redemption of the Iona Lakes mortgage revenue bond (see Note 5 to the consolidated financial statements), with


•	The remaining net increase from the acquisitions of new mortgage revenue bonds during 2013.

The majority of the increase in income from continuing operations between 2011 to 2012 resulted from a $4.2 million reserve recorded against the Iona Lakes taxable property loan in 2011 and no taxable property loan reserves recorded in 2012. The remaining reason for the increase is due to the non-cash change in the fair value of the interest rate derivatives; which was a loss of $2.1 million in 2011 versus a loss of approximately $945,000 in 2012, respectively.

Other Securities. During 2013 and 2012, the Company invested in other types of securities. In accordance with the terms of the Partnership Agreement, these securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency, must generate income which is exempt from inclusion for federal income taxation purposes at the time of acquisition, and may not represent more than 25% of the Partnership's assets at the time of acquisition.

Public Housing Capital Fund Trusts' Certificates ("PHC Certificates"). The PHC Certificates, acquired during July 2012, consist of custodial receipts evidencing loans made to a number of public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by United States Department of Housing and Urban Development (“HUD”) under it's Capital Fund Program. At December 31, 2013 and 2012, the Company owned PHC Certificates with an aggregate outstanding principal amount of $65.3 million. The PHC Certificates segment reported revenue of approximately $3.3 million, interest expense of approximately $1.3 million, and income from continuing operations of $1.9 million for the year ended December 31, 2013. The PHC Certificates segment reported revenue of approximately $1.6 million, interest expense of approximately $542,000, and income from continuing operations of $1 million for the year ended December 31, 2012. The increase in revenue, interest expense, and income from continuing operations can be attributed to only a partial year of investment ownership in 2012.

Mortgage-backed securities ("MBS"). The third class of security owned by the Company is MBS. As of December 31, 2013, the Company owned fourteen state-issued MBS with an aggregate outstanding principal amount of approximately $42.8 million. The MBS were acquired during the fourth quarter of 2012 and first six months of 2013 and are backed by residential mortgage loans. The MBS segment reported revenue of approximately $1.6 million, interest expense of approximately $464,000, and income from continuing operations of approximately $1.1 million for the year ended December 31, 2013. As of December 31, 2012, the Company owned ten state-issued MBS with an aggregate outstanding principal amount of approximately $31.6 million.The MBS segment reported revenue of approximately $194,000, interest expense of approximately $39,000, and income from continuing operations of $149,000 for the year ended December 31, 2012. The increase in revenue, interest expense, and income from continuing operations can be attributed to only a partial year of investment ownership in 2012.

MF Properties. To facilitate its investment strategy of acquiring additional mortgage revenue bonds secured by multifamily apartment properties, the Partnership may acquire ownership positions in MF Properties, in order to ultimately restructure the property ownership through a sale of the MF Properties. The Partnership expects each of these MF Properties to eventually be sold to a not-for-profit entity or in connection with a syndication of LIHTCs under Section 42 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Partnership expects to acquire mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured. The Partnership expects to provide the mortgage revenue bonds to the new property owners as part of the restructuring. At December 31, 2013, the Partnership’s wholly-owned subsidiaries held interests in three entities that own MF Properties containing a total of 504 rental units. In addition, the Partnership's subsidiaries own five MF Properties, Arboretum, DeCordova, Eagle Village, Weatherford, and Woodland Park containing a total of 1,078 rental units, plus The 50/50 Student Housing at the University of Nebraska-Lincoln mixed-use project in Lincoln, Nebraska that is currently under construction (see Note 8 to the consolidated financial statements). The MF Properties' operating goal is similar to that of the properties underlying the Partnership's mortgage revenue bonds. As of December 31, 2012, the Partnership’s wholly-owned subsidiaries held interests in three entities that own MF Properties containing a total of 504 rental units and the Partnership's subsidiaries owned four MF Properties, Arboretum, DeCordova, Eagle Village and Weatherford containing a total of 842 rental units.

The MF Properties segment reported revenue of approximately $11.4 million and $7.8 million and a loss from continuing operations of approximately $1.8 million and $1.1 million for the years ended December 31, 2013 and 2012, respectively. The MF Properties segment reported revenue of approximately $5.1 million and a loss from continuing operations of approximately $783,000 for the year ended December 31, 2011. The increase in revenue and loss from continuing operations for the year ended December 31, 2013 compared to the prior year can be attributed to the foreclosure of Woodland Park mortgage revenue bond during 2013 and the acquisition of Maples on 97th properties which was owned an entire year in 2013.

The increase in revenue for the year ended 2012 as compared to 2011 is due to having a full year's worth of revenue from the Arboretum and Eagle Village properties which were acquired during 2011 and the Maples on 97th property which was acquired in August 2012. This increase in revenue was more than offset by an increase in real estate operating expenses and depreciation expense also attributed to these acquired properties as well as real estate operating expenses and depreciation expense from the Weatherford property which finalized construction during the first half of 2012 and was in lease-up at December 31, 2012.

Discontinued Operations. As of December 31, 2012, the Partnership’s wholly-owned subsidiaries held interests in three Ohio Properties containing 362 rental units and the Greens Property containing 168 rental units which are reported as discontinued operations (see Notes 2 and 10 to the consolidated financial statements). The income from discontinued operations was approximately $3.4 million in 2013, $2.2 million in 2012, and $752,000 in 2011. The Partnership reported gains of approximately $3.2 million from the recognition of the sale of the Ohio Properties and Greens Property for the year ended December 31, 2013. The increase in income between 2011 and 2012 can be attributed to the $1.4 million gain realized from the sales of the Commons at Churchland and Eagle Ridge properties in 2012.

Tender Option Bond ("TOB") Financing. In July 2011, the Company executed a Master Trust Agreement with DB which allows the Company to execute multiple Tender Option Bond financing facility ("TOB Trust") structures upon the approval and agreement of terms by DB. Under each TOB Trust structure issued through the Master Trust Agreement, the TOB trustee issues senior floating-rate participation interests ("SPEARS") and residual participating interests ("LIFERS"). These SPEARS and LIFERS represent beneficial interests in the securitized asset held by the TOB trustee. The Company will purchase the LIFERS from each of these TOB Trusts which will grant them certain rights to the securitized assets. During 2013, the Company closed on six new TOB Trusts. During 2012, the Company closed on six new TOB Trusts. The TOBS in 2013 and 2012 were issued under the terms of the Company's Master Trust Agreement with DB.

At December 31, 2013, the Company owed approximately $164.3 million under fifteen separate TOB Trusts and owed approximately $84.0 million under nine separate TOB Trusts at December 31, 2012 (see Note 11 to the consolidated financial statements), as follows:


•	$49.0 million was owed under three TOB Trusts which are securitized by PHC Certificates ("PHC TOB Trusts") with outstanding principal balances of approximately $65.3 million at both December 31, 2013 and 2012;


•	Approximately $33.9 million was owed under six TOB Trusts which securitized mortgage-backed securities ("MBS TOB Trusts") with a par value of approximately $42.8 million at December 31, 2013. The Company owed approximately $25.1 million under five MBS TOB Trusts with a par value of approximately $31.6 million at December 31, 2012, and


•	The Company also owes approximately $81.4 million under six TOB Trusts which securitized ten mortgage revenue bonds with a par value of approximately $121.2 million at December 31, 2013. The Company owed approximately $9.8 million which was the securitization of one $13.2 million mortgage revenue bond as of December 31, 2012.

As of December 31, 2013 and 2012, the total cost of borrowing for the PHC Certificates TOB financing facilities was approximately 2.26% and 2.30% per annum, respectively, and the weighted average cost of borrowing on the TOB financing facilities securitizing mortgage-backed securities were approximately 1.27% and 1.30% per annum, respectively. The Company's total cost of borrowing under the TOB financing facilities collateralized by the mortgage revenue bonds was approximately 2.66% and 1.94% per annum as of December 31, 2013 and 2012, respectively. The Company is accounting for these TOB transactions as secured financing arrangements.

Tax Exempt Bond Securitization ("TEBS") Financing. As of September 1, 2010, the Partnership and its consolidated subsidiary ATAX TEBS I, LLC, entered into a number of agreements relating to a long-term debt financing facility provided through the securitization of 13 mortgage revenue bonds pursuant to Freddie Mac's TEBS program. The gross proceeds from TEBS financing were approximately $95.8 million. After the payment of transaction expenses, the Company received net proceeds from the TEBS financing of approximately $90.4 million and the Company owes approximately $93.0 and $94.0 million at December 31, 2013 and 2012, respectively, (see Note 11 to the consolidated financial statements).

The TEBS financing essentially provides the Company with a long-term variable-rate debt facility at interest rates reflecting prevailing short-term tax-exempt rates. As of December 31, 2013, the total cost of borrowing was 2.00% per annum for the TEBS facility. As of December 31, 2012, the total cost of borrowing for the TEBS was 2.03% per annum.

Opportunities and Challenges. The disruptions in domestic and international financial markets, and the resulting availability of debt financing has improved since the restrictions seen in 2008. The decline in construction and rehabilitation of affordable multifamily properties during the previous credit crisis, in our view, will continue to create potential investment opportunities for the Partnership in both mortgage revenue bonds as well as quality MF Properties. Our ability to restructure existing debt together with the ability to improve the operations of the apartment properties through our affiliated property management company can position these MF Properties for an eventual financing with mortgage revenue bonds meeting our investment criteria and that will be supported by a valuable and well-run apartment property. We believe we can selectively acquire MF Properties, restructure debt and improve operations in order to create value to our shareholders in the form of a strong mortgage revenue bond investment.

On the other hand, economic weakness in real estate and municipal bond markets may limit our ability to access additional debt financing that the Partnership uses to partially finance its investment portfolio or otherwise meet its liquidity requirements. In addition, the economic conditions including slow job growth and low home mortgage interest rates have had a negative effect on some of the apartment properties which collateralize our mortgage revenue bond investments and our MF Properties in the form of lower occupancy. While some properties have been negatively effected, overall economic occupancy (which is adjusted to reflect rental concessions, delinquent rents and non-revenue units such as model units and employee units) of the apartment properties that the Partnership has financed with mortgage revenue bonds was approximately at 88% during 2013 and 2012. Overall economic occupancy of the MF Properties has increased to approximately 83% during 2013 as compared to 76% during 2012. Based on the growth statistics in the market, we expect to see continued improvement in property operations and profitability.

Discussion of the Apartment Properties securing the Partnership Bond Holdings and MF Properties as of December 31, 2013

The following discussion describes the operations and financial results of the individual apartment properties financed by the mortgage revenue bonds held by the Partnership and the MF Properties in which it holds an ownership. The discussion also outlines the bond holdings of the Partnership, discusses the significant terms of the bonds and identifies those ownership entities which are Consolidated VIEs of the Company.



			Number	Percentage of Occupied				Economic Occupancy ⁽¹⁾ for
		Number	of Units	Units as of December 31,				the period ended December 31,
Property Name	Location	of Units	Occupied	2013		2012		2013		2012

Non-Consolidated Properties
Arbors of Hickory Ridge	Memphis, TN	348	319	92	%	92	%	90	%	85	%
Ashley Square Apartments	Des Moines, IA	144	136	94	%	98	%	96	%	95	%
Autumn Pines	Humble, TX	250	232	93	%	92	%	89	%	89	%
Avistar at Chase Hill ⁽³⁾	San Antonio, TX	232	n/a	n/a		n/a		n/a		n/a
Avistar at the Crest ⁽³⁾	San Antonio, TX	200	n/a	n/a		n/a		n/a		n/a
Avistar at the Oaks⁽³⁾	San Antonio, TX	156	n/a	n/a		n/a		n/a		n/a
Avistar in 09 ⁽³⁾	San Antonio, TX	133	n/a	n/a		n/a		n/a		n/a
Avistar on the Boulevard ⁽³⁾	San Antonio, TX	344	n/a	n/a		n/a		n/a		n/a
Avistar on the Hills ⁽³⁾	San Antonio, TX	129	n/a	n/a		n/a		n/a		n/a
Bella Vista Apartments	Gainesville, TX	144	134	93	%	91	%	81	%	88	%
Bridle Ridge Apartments	Greer, SC	152	150	99	%	92	%	91	%	92	%
Brookstone Apartments	Waukegan, IL	168	162	96	%	95	%	86	%	91	%
Cross Creek Apartments	Beaufort, SC	144	140	97	%	89	%	82	%	79	%
Greens of Pine Glen Apartments	Durham, NC	168	158	94	%	93	%	86	%	89	%
Lake Forest Apartments	Daytona Beach, FL	240	215	90	%	90	%	82	%	78	%
Ohio Properties	Ohio	362	338	93	%	95	%	94	%	93	%
Runnymede Apartments	Austin, TX	252	247	98	%	96	%	94	%	95	%
South Park Ranch Apartments	Austin, TX	192	189	98	%	97	%	91	%	96	%
Tyler Park Townhome Apartments ⁽²⁾	Greenfield, CA	88	85	97	%	n/a		98	%	n/a
Villages at Lost Creek	San Antonio, TX	261	250	96	%	95	%	85	%	90	%
Westside Village⁽²⁾	Shafter, CA	81	81	100	%	n/a		101	%	n/a
Woodlynn Village	Maplewood, MN	59	59	100	%	98	%	98	%	98	%
		4,247	2,895	95	%	94	%	89	%	90	%

Consolidated VIEs
Bent Tree Apartments	Columbia, SC	232	219	94	%	91	%	80	%	81	%
Fairmont Oaks Apartments	Gainesville, FL	178	162	91	%	87	%	79	%	78	%
		410	381	93	%	89	%	80	%	80	%

MF Properties
Arboretum	Omaha, NE	145	144	99	%	86	%	89	%	72	%
Eagle Village	Evansville, IN	511	326	64	%	70	%	67	%	75	%
Glynn Place	Brunswick, GA	128	103	80	%	77	%	75	%	67	%
Maples on 97th	Omaha, NE	258	221	86	%	86	%	80	%	84	%
Meadowview	Highland Heights, KY	118	111	94	%	98	%	84	%	89	%
Residences at DeCordova ⁽³⁾	Granbury, TX	110	109	99	%	81	%	88	%	77	%
Residences at Weatherford ⁽³⁾	Weatherford, TX	76	75	99	%	72	%	92	%	n/a
Woodland Park	Topeka, KS	236	214	91	%	89	%	90	%	84	%
		1,582	1,303	82	%	94	%	82	%	76	%

⁽¹⁾Economic occupancy is presented for the twelve months ended December 31, 2013 and 2012, and is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Actual occupancy is a point in time measure while economic occupancy is a measurement over the period presented, therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

⁽²⁾Previous period occupancy numbers are not available, as this is a new investment.

⁽³⁾Construction on these properties has been completed and the properties are in a lease up and stabilization period.

Non-Consolidated Properties

The owners of the following properties do not meet the definition of a VIE and/or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE. As a result, the Company does not report the assets, liabilities and results of operations of these properties on a consolidated basis.

Arbors of Hickory Ridge - Arbors of Hickory Ridge Apartments is located in Memphis, Tennessee and contains 348 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Arbors of Hickory Ridge. The mortgage revenue bond has an outstanding principal amount of $11.5 million and has a base interest rate of 6.25% per annum. The bond does not provide for contingent interest. This bond was purchased at par in December 2012. Arbors of Hickory Ridge's operations resulted in net operating income of $1.18 million and $568,000 before payment of bond debt service on net revenue of approximately $2.35 million and $1.23 million in 2013 and 2012, respectively. The increase in net operating income was due to 2013 being the first full year of operations for this property, 2012 effectively started in July. The property is current on the payment of principal and interest on the Partnership's bond as of December 31, 2013.

Ashley Square - Ashley Square Apartments is located in Des Moines, Iowa and contains 144 units. The mortgage revenue bond owned by the Partnership is a traditional “80/20” bond issued prior to the Tax Reform Act of 1986. This bond requires that 20% of the rental units be set aside for tenants whose income does not exceed 80% of the area median income, without adjustment for household size. The bond has an outstanding principal amount of $5.2 million and has a base interest rate of 6.25% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 3.0% per annum and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the property has not paid any contingent interest and the Partnership has not recognized any contingent interest income related to this bond. Ashley Square's operations resulted in net operating income of $605,000 and $644,000 before payment of bond debt service on net revenue of approximately $1.38 million and $1.36 million in 2013 and 2012, respectively. The decrease in net operating income is the result of an increase in salary, utility and repair and maintenance expenses. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2013.

Autumn Pines - Autumn Pines is located in Humble, Texas and contains 250 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $13.1 million and has a base interest rate of 5.8% per annum. The bond does not provide for contingent interest. The bond was purchased in November 2010 at a discount from par for approximately $12.3 million providing an approximate effective yield to maturity of 7.0%. Autumn Pines' operations resulted in net operating income of $1.27 million and $1.24 million before payment of bond debt service on net revenue of approximately $2.39 million in both 2013 and 2012. The improvement in net operating income from 2012 is primarily the result of a decrease in real estate taxes. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Avistar at Chase Hill - Avistar at Chase Hill is located in San Antonio, Texas and contains 232 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Avistar at Chase Hill. The Series A bond has an outstanding principal amount of $9.0 million and has a base interest rate of 6.00% per annum. The Series B bond has an outstanding principal amount of $2.0 million and has a base interest rate of 9.00% per annum. This bond does not provide for contingent interest. The bonds were purchased in February 2013. Avistar at Chase Hill's operations resulted in net operating income of approximately $660,000 before payment of bond debt service on net revenue of approximately $1.46 million in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Avistar at the Crest - Avistar at the Crest is located in San Antonio, Texas and contains 200 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Avistar at the Crest. The Series A bond has an outstanding principal amount of $8.8 million and has a base interest rate of 6.00% per annum. The Series B bond has an outstanding principal amount of $1.7 million and has a base interest rate of 9.00% per annum. This bond does not provide for contingent interest. The bonds were purchased in February 2013. Avistar at the Crest's operations resulted in net operating income of approximately $404,000 before payment of bond debt service on net revenue of approximately $1.03 million in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Avistar at the Oaks - Avistar at the Oaks is located in San Antonio, Texas and contains 156 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Avistar at the Oaks. The Series A bond has an outstanding principal amount of $5.9 million and has a base interest rate of 6.00% per annum. The Series B bond has an outstanding principal amount of $2.5 million and has a base interest rate of 9.00% per annum. This bond does not provide for contingent interest. The bonds were purchased in June 2013. Avistar at the Oaks' operations resulted in net operating income of approximately $165,000 before payment of bond debt service on net revenue of approximately $480,000 in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Avistar in 09 - Avistar in 09 is located in San Antonio, Texas and contains 133 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Avistar in 09. The Series A bond has an outstanding principal amount of $5.5 million and has a base interest rate of 6.00% per annum. The Series B bond has an outstanding principal amount of $1.7 million and has a base interest rate of 9.00% per annum. This bond does not provide for contingent interest. The bonds were purchased in June 2013. Avistar in 09's operations resulted in net operating income of approximately $241,000 before payment of bond debt service on net revenue of approximately $472,000 in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Avistar on the Boulevard - Avistar on the Boulevard is located in San Antonio, Texas and contains 344 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Avistar on the Boulevard. The Series A bond has an outstanding principal amount of $13.8 million and has a base interest rate of 6.00% per annum. The Series B bond has an outstanding principal amount of $3.2 million and has a base interest rate of 9.00% per annum. This bond does not provide for contingent interest. The bonds were purchased in February 2013. Avistar on the Boulevard's operations resulted in net operating income of approximately $1.00 million before payment of bond debt service on net revenue of approximately $1.90 million in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Avistar on the Hills - Avistar on the Hills is located in San Antonio, Texas and contains 129 units. The mortgage revenue bond owned by the Partnership was sponsored by the 501(c)3 not-for-profit owner of Avistar on the Hills. The Series A bond has an outstanding principal amount of $3.1 million and has a base interest rate of 6.00% per annum. The Series B bond has an outstanding principal amount of $2.3 million and has a base interest rate of 9.00% per annum. This bond does not provide for contingent interest. The bonds were purchased in June 2013. Avistar on the Hills' operations resulted in net operating income of approximately $155,000 before payment of bond debt service on net revenue of approximately $409,000 in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Bella Vista - Bella Vista Apartments is located in Gainesville, Texas and contains 144 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $6.5 million and has a base interest rate of 6.15% per annum. The bond does not provide for contingent interest. Bella Vista's operations resulted in net operating income of $549,000 and $639,000 before payment of debt service on net revenue of approximately $1.11 million and $1.17 million in 2013 and 2012, respectively. The decrease in net operating income is due to a decrease in economic occupancy along with an increase in salary, leasing and utility expenses. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Bridle Ridge - Bridle Ridge Apartments is located in Greer, South Carolina and contains 152 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $7.7 million and a base interest rate of 6.0% per annum. The bond does not provide for contingent interest. Bridle Ridge's operations resulted in net operating income of approximately $694,000 and $717,000 before payment of bond debt service on net revenue of approximately $1.14 million in both 2013 and 2012, respectively. The decrease in net operating income is due to a decrease in economic occupancy along with an increase in salary expense and property insurance. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Brookstone - Brookstone Apartments is located in Waukegan, Illinois and contains 168 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $9.3 million and a base interest rate of 5.45% per annum. The bond does not provide for contingent interest. These bonds were purchased in October 2009 at a discount from par for approximately $7.3 million providing an approximate yield to maturity of 7.5%. Brookstone's operations resulted in net operating income of $863,000 and $895,000 before payment of bond debt service on net revenue of approximately $1.29 million and $1.35 million in 2013 and 2012, respectively. The decrease in net operating income is due to a decrease in economic occupancy along with an increase in utility and salary expenses. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Cross Creek - Cross Creek Apartments is located in Beaufort, South Carolina and contains 144 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $8.5 million and has a base interest rate of 6.15% per annum. The bond does not provide for contingent interest. These bonds were purchased in April 2009 at a discount from par for approximately $5.9 million providing an approximate yield to maturity of 7.4%. Cross Creek's operations resulted in net operating income of $435,000 and $453,000 before payment of bond debt service on net revenue of approximately $1.16 million and $1.12 million in 2013 and 2012, respectively. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2013.

Greens of Pine Glen - Greens of Pine Glen Apartments is located in Durham, North Carolina and contain 168 units and was acquired in February 2009. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The Series A bond has an outstanding principal amount of $8.4 million and has a base interest rate of 6.5% per annum. The Series B bond has an outstanding principal amount of $1.0 million and has a base interest rate of 12.0% per annum. The bond does not provide for contingent interest. The Greens of Pine Glen Apartment's operations resulted in the recognition of approximately $572,000 and $585,000 of net operating income on revenue of approximately $1.40 million and $1.39 million during 2013 and 2012, respectively. The property is current on the payment of principal and interest on the Partnership's bonds as of December 31, 2013.

Lake Forest - Lake Forest Apartments is located in Daytona Beach, Florida and contains 240 units. The mortgage revenue bond owned by the Partnership is a traditional “80/20” bonds issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $9.0 million and has a base interest rate of 6.25% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 1.6% per annum and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the Partnership has realized approximately $21,000 of contingent interest income related to this bond. Lake Forest's operations resulted in net operating income of $891,000 and $694,000 before payment of bond debt service on net revenue of approximately $1.91 million and $1.84 million in 2013 and 2012, respectively. The increase in net operating income is a result of an increase in economic occupancy as well as a decrease in real estate taxes. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2013.

Ohio Properties -The Ohio properties are made up of the following three multifamily apartment complexes located in Ohio. The mortgage revenue bonds owned by the Partnership were a private activity housing bond issued in conjunction with the syndication of LIHTCs. The Series A bond has on outstanding principal amount of $14.5 million and has a base interest rate of 7.0% per annum. The Series B bond has an outstanding principal amount of $3.6 million and has a base interest rate of 10.0% per annum. The bonds are collateralized by the three multifamily apartment complexes. The bond does not provide for contingent interest. The properties are current on the payment of principal and base interest on the Partnership's bond as of December 31, 2013.

Crescent Village - Crescent Village Townhomes is located in Cincinnati, Ohio and contains 90 units and was acquired in July 2007. Crescent Village reported net operating income of approximately $424,000 and $393,000 on net revenue of approximately $848,000 and $825,000 in 2013 and 2012, respectively. The increase in net operating income is the result of a decrease in utility and repair and maintenance expenses.

Post Woods - Post Woods Townhomes is located in Reynoldsburg, Ohio and contains 180 units and was acquired in July 2007. Post Woods reported net operating income of approximately $968,000 and $699,000 on net revenue of approximately $1.91 million and $1.60 million in 2013 and 2012, respectively. The increase in net operating income is a result of a decrease in real estate taxes, salary and repair and maintenance expenses.

Willow Bend - Willow Bend Townhomes is located in Columbus (Hilliard), Ohio and contains 92 units and was acquired in July 2007. Willow Bend reported net operating income of approximately $557,000 and $336,000 on net revenue of approximately $1.02 million and $832,000 in 2013 and 2012, respectively. The increase in net operating income is the result of a decrease in salary and utility expenses and a decrease in real estate taxes.

Runnymede Apartments - Runnymede Apartments is located in Austin, Texas and contains 252 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $10.5 million and has a base interest rate of 6.00% per annum. The bond does not provide for contingent interest. Runnymede's operations resulted in net operating income of $1.09 million and $1.10 million before payment of bond debt service on net revenue of approximately $2.29 million and $2.18 million in 2013 and 2012 respectively. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

South Park Ranch Apartments - South Park Ranch Apartments is located in Austin, Texas and contains 192 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $13.8 million and has a base interest rate of 6.13% per annum. The bond does not provide for contingent interest. These bonds were purchased in August 2009 at a discount from par for approximately $11.9 million providing an approximate yield to maturity of 6.8%. South Park's operations resulted in net operating income of $1.30 million and $1.23 million before payment of bond debt service on net revenue of approximately $2.04 million and $1.95 million in 2013 and 2012, respectively. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Tyler Park - Tyler Park is located in Greenfield, California and contains 88 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond. The Series A bond has an outstanding principal amount of $6.1 million and has a base interest rate of 5.75% per annum. The Series B bond has an outstanding principal amount of $2.0 million and has a base interest rate of 5.50% per annum. This bond does not provide for contingent interest. The bonds were purchased in December 2013. Tyler Park's operations resulted in net operating income of approximately $384,000 before payment of bond debt service on net revenue of approximately $939,000 in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Villages at Lost Creek - Villages at Lost Creek is located in San Antonio, Texas and contains 261 units. The bond has an outstanding principal amount of $18.1 million and has a base interest rate of 6.25% per annum. The bond does not provide for contingent interest. The bond was purchased in May 2010 at a discount from par for approximately $15.9 million providing an approximate yield to maturity of 7.6%. Lost Creek's operations resulted in net operating income of approximately $1.70 million and $1.64 million before payment of bond debt service on net revenue of approximately $2.59 million and $2.45 million in 2013 and 2012, respectively. The increase in net operating income is due to the property increasing gross potential rent offset by an increase in salary and utility expenses and property insurance. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Westside Village - Westside Village is located in Shafter, California and contains 81 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond. The Series A bond has an outstanding principal amount of $4.0 million and has a base interest rate of 5.75% per annum. The Series B bond has an outstanding principal amount of $1.4 million and has a base interest rate of 5.50% per annum. This bond does not provide for contingent interest. The bonds were purchased in December 2013. Westside Village's operations resulted in net operating income of approximately $251,000 before payment of bond debt service on net revenue of approximately $624,000 in 2013. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Woodlynn Village - Woodlynn Village is located in Maplewood, Minnesota and contains 59 units. The mortgage revenue bond owned by the Partnership is a private activity housing bond issued in conjunction with the syndication of LIHTCs. The bond has an outstanding principal amount of $4.4 million and has a base interest rate of 6.0% per annum. The bond does not provide for contingent interest. Woodlynn Village's operations resulted in net operating income of $395,000 and $399,000 before payment of bond debt service on net revenue of approximately $617,000 and $606,000 in 2013 and 2012 respectively. The property is current on principal and interest payments on the Partnership's bond as of December 31, 2013.

Newly Acquired - Copper Gate, The Palms at Premier Park, and The Suites on Paseo mortgage revenue bonds were purchased in the last two weeks of December and each property is in the process of being stabilized. Therefore, they are not included in the table above.

Consolidated VIEs - Continuing Operations

The owners of the following properties have been determined to meet the definition of a VIE and the Partnership has been determined to be the Primary Beneficiary. As a result, the Company reports the assets, liabilities and results of operations of these properties on a consolidated basis.

Bent Tree - Bent Tree Apartments is located in Columbia, South Carolina and contains 232 units. The mortgage revenue bond owned by the Partnership is a traditional “80/20” bond issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $7.5 million and has a base interest rate of 6.25% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 1.9% per annum and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the property has not paid any contingent interest and the Partnership has not recognized any contingent interest income related to this bond. Bent Tree's operations resulted in net operating income of $521,000 and $571,000 before payment of bond debt service on net revenue of approximately $1.58 million in both 2013 and 2012. The decrease in net operating income is due to an increase in repair and maintenance expenses. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2013.

Fairmont Oaks - Fairmont Oaks Apartments is located in Gainesville, Florida and contains 178 units. The mortgage revenue bond owned by the Partnership is a traditional “80/20” bond issued prior to the Tax Reform Act of 1986. The bond has an outstanding principal amount of $7.4 million and has a base interest rate of 6.3% per annum. The bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest. The bond accrues contingent interest at a rate of 2.2% per annum and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property. To date, the Partnership has realized $57,000 in contingent interest income related to this bond. Fairmont Oak's operations resulted in net operating income of $615,000 and $626,000 before payment of bond debt service on net revenue of approximately $1.41 million and $1.39 million in 2013 and 2012, respectively. The property is current on the payment of principal and base interest on the Partnership's bond as of December 31, 2013.

MF Properties

Nine MF Properties are owned by various Partnership subsidiaries. Such subsidiaries hold a 99% limited partner interest in three limited partnerships and 100% membership interests in six limited liability companies. The 50/50 Student Housing at UNL is currently under construction and is planned to be completed in the fall of 2014. Eight of the nine properties are encumbered by mortgage loans with an aggregate principal balance of $57.1 million at December 31, 2013. The Company reports the assets, liabilities, and results of operations of these properties on a consolidated basis.

Arboretum - Arboretum is located in Omaha, Nebraska and contains 145 units and was acquired in March 2011, for approximately $20.4 million. This is an independent senior living facility. The Arboretum's operations resulted in recognition by the Company of net operating income of approximately $1.42 million and $1.11 million on net revenue of approximately $3.01 million and $2.47 million in 2013 and 2012, respectively. The increase in net operating income is largely due to an increase in economic occupancy.

Eagle Village - Eagle Village Apartments is located in Evansville, Indiana and contains 511 units and was acquired in June 2011, for approximately $12.0 million. This is a student housing facility. Eagle Village's operations resulted in recognition by the Company of net operating income of approximately $646,000 and $898,000 on net revenue of approximately $1.74 million and $1.96 million in 2013 and 2012, respectively. This decrease in net operating income is due to a decrease in economic occupancy along with an increase in administrative and repair and maintenance expenses.

Glynn Place - Glynn Place Apartments is located in Brunswick, Georgia and contains 128 units and was acquired in October 2008. Glynn Place Apartment's operations resulted in the recognition by the Company of approximately $263,000 and $230,000 of net operating income on revenue of approximately $845,000 and $736,000 during 2013 and 2012, respectively. The increase in net operating income is due primarily to an increase in economic occupancy.

Maples on 97th - Maples on 97th Apartments is located in Omaha, NE and contains 258 units and was acquired in August 2012. Maples on 97th's operations resulted in the recognition by the Company of approximately $640,000 of net operating income on revenue of approximately $1.70 million in 2013.

Meadowview - Meadowview Apartments is located in Highland Heights, Kentucky and contains 118 units and was acquired in July 2007. Meadowview's operations resulted in recognition by the Company of net operating income of approximately $542,000 and $529,000 on net revenue of approximately $1.10 million and $1.08 million in 2013 and 2012, respectively.

Residences at DeCordova - This property is a senior (55+) affordable housing project located in Granbury, Texas in the Dallas-Fort Worth area. The Company acquired ownership of the property through foreclosure in February 2011. At this time, the Partnership is operating the 110 unit property as a market rate rental property. DeCordova's operations resulted in recognition by the Company of net operating income of approximately $618,000 and $344,000 on net revenue of approximately $1.10 million and $734,000 in 2013 and 2012, respectively. This increase is primarily due to an increase in both physical and economic occupancy. In February 2012, the Company secured a $2.0 million construction loan for the expansion of the DeCordova property and an additional 34 units were constructed and completed adjacent to the first phase in August 2012.

Residences at Weatherford - This property is a senior (55+) affordable housing project with 76 units located in Weatherford, Texas in the Dallas-Fort Worth area. The Company acquired ownership of the property through foreclosure in February 2011. In July 2011, the Company obtained a construction loan secured by the DeCordova and Weatherford properties. The $6.4 million construction loan funded the completion of Weatherford and is with an unrelated third party. This property was completed in April 2012 and the Partnership is operating the property as a market rate rental property. Weatherford's operations resulted in recognition by the Company of net operating income of approximately $377,000 on net revenue of approximately $786,000 in 2013. The Partnership expects to operate the property as a market rate property and, upon lease stabilization, will evaluate its options in order to recoup its investment.

Woodland Park - Woodland Park is located in Topeka, Kansas and contains 236 units. Upon the conclusion of the foreclosure proceedings on May 29, 2013, Woodland Park became an MF property. The Company owned mortgage revenue bonds secured by the property and did not consolidate the property prior to the foreclosure conclusion. Woodland Park's operations resulted in net operating income of $747,000 and $562,000 on net revenue of approximately $1.71 million and $1.61 million in 2013 and 2012, respectively. The increase in net operating income is due to an increase in economic occupancy along with a decrease in administrative and utility expenses and real estate taxes.

Results of Operations

The Consolidated Company

The tables below compare the results of operations for the Company for 2013, 2012, and 2011:



	For the Year Ended December 31, 2013		For the Year Ended December 31, 2012		For the Year Ended December 31, 2011


Revenues:
Property revenues	$	16,110,740	$	12,654,530	$	10,976,250
Investment income	22,651,622		11,078,467		9,187,291
Contingent interest income	6,497,160		—		309,990
Other interest income	1,772,338		150,882		485,679
Gain on sale and retirement of mortgage revenue bonds	—		680,444		445,257
Other income	250,000		555,328		294,328
Total Revenues	47,281,860		25,119,651		21,698,795

Expenses:
Real estate operating (exclusive of items shown below)	9,574,822		7,877,931		6,758,707
Realized loss on taxable property loan	4,557,741		—		—
Provision for loan loss	168,000		—		4,242,571
Provision for loss on receivables	241,698		452,700		952,700
Depreciation and amortization	6,732,580		4,982,030		3,963,502
Interest	7,235,336		5,530,995		5,441,700
General and administrative	4,237,245		3,512,233		2,764,970
Total Expenses	32,747,422		22,355,889		24,124,150
Income (loss) from continuing operations	14,534,438		2,763,762		(2,425,355		)
Income from discontinued operations (including gain on sale of MF Properties of $3,177,183 in 2013 and $1,406,608 in 2012)	3,442,404		2,232,276		752,192
Net income (loss )	17,976,842		4,996,038		(1,673,163		)
Net income attributable to noncontrolling interest	261,923		549,194		570,759
Net income (loss) - America First Multifamily Investors, L. P.	$	17,714,919	$	4,446,844	$	(2,243,922	)

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Property revenues. Property revenues increased approximately $3.5 million from 2012 to 2013 mostly attributable to the acquisition of Maples on 97th in August 2012, Weatherford which began leasing in the second quarter of 2012, DeCordova which began leasing 34 newly constructed rental units in the third quarter of 2012, and Woodland Park which became an MF Property effective June 1, 2013. In addition, approximately $611,000 of the increase is attributable to the improved occupancy at Arboretum. Annual net rental revenues per unit related to the MF Properties increased to approximately $6,836 per unit in 2013 from approximately $5,587 in 2012. The annual net rental revenues per unit related to the Consolidated VIEs increased to approximately $7,014 in 2013 from approximately $6,982 in 2012.

Investment income. Investment income includes interest earned on mortgage revenue bonds, PHC Certificates, and MBS. This income increased during 2013 as compared to 2012 by approximately $11.6 million due to various factors. Approximately $5.7 million of the increase is tied to the recognition of the sale of the Ohio and Greens Properties during 2013. This income constitutes interest payments received by the Partnership since it acquired the Ohio Properties' mortgage revenue bonds in June 2010 and the Greens Property's mortgage revenue bonds in October 2012 which previously was deferred due to the deposit method of accounting (see Note 10 to the consolidated financial statements). Approximately $4.4 million of the increase in interest income is the result of the addition of the Arbors at Hickory Ridge, Vantage at Judson, Avistar on the Boulevard, Avistar at Chase Hill, Avistar at the Crest, Renaissance Apartments, Avistar on the Hills Apartments, Avistar at the Oaks Apartments, Avistar in 09 Apartments, Vantage at Harlingen Apartments, Tyler Park Townhomes, and Westside Village Market mortgage revenue bonds. Investment income also increased approximately $3.1 million due to a full year of revenue from the PHC Certificates and MBS investment classes compared to a partial years in 2012. These increases were offset by the gain of approximately $400,000 from the sale of GMF-Madison Tower and GMF-Warren/Tulane mortgage revenue bonds in 2012 which did not repeat in 2013, approximately $571,000 decrease in revenue due to the redemption of Iona Lakes mortgage revenue bond in 2013, and the approximate $556,000 decrease due to the foreclosure of Woodland Park in May 2013.

Contingent interest income. The Company realized approximately $6.5 million of contingent interest income upon the redemption of the Iona Lakes mortgage revenue bond in June 2013 (see Note 5 to the consolidated financial statements). There was no contingent interest income realized in 2012.

Other interest income. Other interest income is comprised mainly of interest income on taxable property loans held by the Partnership. Approximately $1.1 million of the increase is attributable to taxable interest income realized from the taxable property loans securitized by the Ohio Properties. This resulted from the Partnership recognizing the sale of the Ohio Properties during 2013 (see Note 10 to the consolidated financial statements).

Gain on sale of bonds. The gain on the sale of bonds is the result of the sale of the GMF-Madison Tower and GMF-Warren/Tulane mortgage revenue bonds in May 2012. There was no gain realized on the sale of bonds in 2013.

Other income. Other income recognized in 2013 is a guarantee fee received from the general partner owner of the Ohio Properties (see Note 10 to the consolidated financial statements). Approximately $555,000 reported in 2012 is the payment on a property owner promissory note received upon the restructuring of the Arbors at Hickory Ridge mortgage revenue bond.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties and the Consolidated VIEs is comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses are fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues. The overall increase in real estate operating expenses was due to various factors. The increase in real estate operating expenses was partly due to approximately $1.3 million of real estate operating expenses related to Maples on 97th which was acquired in August 2012 and Woodland Park which became an MF Property effective June 1, 2013 (see Note 8 to the consolidated financial statements). Arboretum, Meadowview, and Weatherford reported approximately $227,000 greater real estate taxes when comparing 2013 to 2012. The remaining increase was related to the existing VIEs and MF Properties normal operating increases in salaries, administrative fees, and repair and maintenance expenses. These increases were offset by approximately $150,000 in acquisition costs reported by the EAT (Maples on 97th) VIE in 2012.

Realized loss on taxable property loan. In June 2013, the Partnership redeemed its interest in the Iona Lakes mortgage revenue bond for approximately $21.9 million. This redemption resulted in the realization of approximately $4.6 million loss on a taxable property loan as the excess proceeds above the par value of the bond were recognized as contingent interest income. There was no realized loss on taxable property loans reported during 2012.

Provision for loan loss. The Company periodically, or as changes in circumstances or operations dictate, evaluates its taxable property loans for impairment. During 2013, the Company determined a portion of the taxable property loans were potentially impaired and an additional provision for loan loss should be recorded. A provision for loan loss and an associated loan loss reserve of $168,000 was recorded against the Cross Creek taxable property loan in the second quarter of 2013. There was no provision for loan loss or associated loan loss reserve during 2012.

Provision for loss on receivables. A provision for loss was recorded on the interest receivable from the Woodland Park mortgage revenue bond until the foreclosure was completed in May 2013. Any cash receipts of interest income was recorded as received.

Depreciation and amortization expense. Depreciation results primarily from the apartment properties of the Consolidated VIEs and the MF Properties. Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting for the acquisition of MF Properties and deferred finance cost amortization related to the closing of the TEBS and TOB Credit Facilities. Approximately $1.6 million of the increase in depreciation and amortization expense from 2012 to 2013 is related to Woodland Park which became an MF property effective June 1, 2013, Maples on 97th which was acquired at the end of August 2012, the additional depreciation recorded once the Residences at Weatherford's construction was completed and placed in service in second quarter of 2012, and the additional depreciation recorded once the Residences of DeCordova's new unit construction was completed in the third quarter of 2012. The remaining net increase is related to the additional amortization expense reported on the Partnership's financing offset by the depreciation and amortization on the deconsolidation of the Lake Forest VIE.

Interest expense. The net increase in interest expense during the 2013 as compared to 2012 was due to offsetting factors. An increase of approximately $2.7 million resulted from higher average outstanding debt principal when comparing 2013 to 2012. An approximate $661,000 decrease between the two years resulted from the change in the mark to market adjustment of the Company's derivatives. These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense. In addition, a decrease of approximately $178,000 resulted from a decrease in interest rates. The Company's borrowing cost decreased to approximately 2.6% per annum during 2013 as compared to approximately 2.7% per annum during 2012.

General and administrative expenses. The increase in general and administrative expenses is due to offsetting factors. An approximate $623,000 increase is related to increased administrative fees payable to AFCA 2 related to the acquisition of the Public Housing Capital Fund Trusts, MBS, and the Arbors at Hickory Ridge Apartments, Vantage at Judson, Avistar on the Boulevard, Avistar at Chase Hill, Avistar at the Crest, Renaissance Apartments, Avistar at the Oaks Apartments, Avistar on the Hills Apartments, Avistar in 09, and Vantage at Harlingen Apartments mortgage revenue bonds. The remaining increase is comprised of increased professional fees, printing expenses and travel expenses during 2013 as compared to 2012 offset by incentive compensation recorded in 2012 which did not recur in 2013.

Income from discontinued operations. The majority of the increase is attributable to the gain of approximately $1.8 million from the recognition of the sale of the Ohio Properties and approximately $1.4 million from the recognition of the sale of the Greens Property in 2013. The Company sold Churchland during third quarter of 2012 and recognized a gain of approximately $1.3 million.

Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011

Property revenues. Property revenues increased approximately $2.7 million from the addition of Eagle Village and Arboretum which was acquired after the first quarter 2011, DeCordova and Weatherford which began leasing in 2012, and Maples on 97th which was acquired in third quarter 2012. Offsetting these increases was an approximate $1.1 million reduction in revenue due to the deconsolidation of Iona Lakes (which occurred in June 2011). Annual net rental revenues per unit related to the MF Properties increased to $5,587 per unit in 2012 from $5,225 in 2011. The annual net rental revenues per unit related to the Consolidated VIEs increased to approximately $6,982 in 2012 from approximately $6,809 in 2011.

Investment income. Investment income increased during 2012 as compared to 2011 due to offsetting factors. The increases are due to the additional interest payments of approximately $2.3 million from the acquisitions of the PHC Certificates, the Arbors at Hickory Ridge mortgage revenue bond, the MBS, and the Vantage at Judson mortgage revenue bond in 2012 and approximately $444,000 due to the deconsolidation of Iona Lakes in the second quarter 2011. Offsetting these increases was an approximate $659,000 decrease attributable to the redemptions of Briarwood Manor Apartments and Clarkson College mortgage revenue bonds and approximately $230,000 due to the foreclosure of Weatherford in 2011.

Gain on sale and retirements of bonds. Approximately $668,000 of the gain on sale and retirements of bonds is the result of the sale of the GMF-Madison Tower and GMF-Warren/Tulane mortgage revenue bonds in May 2012. Approximately $445,000 on the gain on sale and retirements of bonds reported for fiscal 2011 is the result of the gain on the Briarwood mortgage revenue bond retirement during 2011.

Other interest income. Other interest income is comprised mainly of interest income on taxable property loans held by the Company. The decrease in other interest income is attributable to lower levels of taxable property loans outstanding in 2012.

Other income. Approximately $555,000 reported in 2012 is the payment on a property owner promissory note received upon the restructuring of the Arbors at Hickory Ridge mortgage revenue bond. Other income in 2011 is comprised mostly of the forgiveness of third party debt related to the DeCordova foreclosure and a $150,000 prepayment penalty received from the Foundation for Affordable Housing in third quarter 2011.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties and the Consolidated VIEs is comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses are fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues. The overall increase in real estate operating expenses was due to various factors. The Arboretum and Eagle Village properties reported approximately $507,000 of expenses which were not included in 2011, Weatherford reported approximately $328,000 of expenses as an MF Property for 2012 as it began lease-up in late March 2012, and DeCordova reported an additional approximate $129,000 due to the beginning lease-up of its 34 new units in third quarter 2012. In addition, Maples on 97th Apartments and the EAT reported approximately $468,000 of acquisition and operating expenses as it was acquired in third quarter 2012. The remaining increases were related to the existing VIEs and MF Properties normal operating expense increases in salaries, utilities, insurance and repair and maintenance. These increases in expenses were offset by approximately $678,000 reduction in operating expenses due to the deconsolidation of Iona Lakes in 2011.

Provision for loss on receivables. During 2012, two interest payments from the Woodland Park bond were received and the remaining accrued interest of approximately $452,700 has been reserved. During the second quarter of 2011, an impairment of the interest receivable on the Woodland Park bond occurred and an allowance for loss of approximately $953,000 was recorded against the accrued bond interest receivable in 2011.

Provision for loan loss. During 2011, the Company recorded an allowance against the Iona Lakes taxable property loan. No such provisions for loan losses were recorded against taxable property loans during 2012.

Depreciation and amortization expense. Depreciation and amortization consists primarily of depreciation associated with the apartment properties of the Consolidated VIEs and the MF Properties, amortization associated with in-place lease intangible assets recorded as part of the purchase accounting for the acquisition of MF Properties and deferred finance cost amortization related to the closing of the TEBS and TOB Credit Facilities. The increase in depreciation and amortization expense from the 2011 to 2012 is related to approximately $1.3 million from the Arboretum property (acquired on March 31, 2011), the Eagle Village property acquired at the end of June 2011, the additional depreciation recorded once the Weatherford and DeCordova's construction was completed and placed in service in second and third quarter 2012, and the acquisition of Maples on 97th acquired in third quarter of 2012. Offsetting this increase is the approximate $317,000 decrease in depreciation and amortization expense due to the deconsolidation of Iona Lakes in second quarter 2011.

Interest expense. The increase in interest expense during 2012 compared to 2011 was due to offsetting factors. The Company's borrowing cost remained at approximately 2.7% per annum for both 2011 and 2012. However, the Company realized approximately $1.2 million increase in interest expense as a result of the higher average principal of outstanding debt in 2012 as compared to 2011. Offsetting this increase was the approximate $1.1 million decrease from the mark to market adjustment of the Company's derivatives. These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense.

General and administrative expenses. The increase in general and administrative expenses is mainly due to incentive compensation, increases in administrative fees due to the purchase of PHC Certificates and MBS and increases in professional fees.

The Partnership

The following discussion of the Partnership's results of operations for the years ended December 31, 2013, 2012 and 2011 reflects the operations of the Partnership without the consolidation of the Consolidated VIEs required by the accounting guidance on consolidations. The Ohio Properties and the Green Property are reflected as discontinued operations and not Mortgage Revenue Bond Investments for the years ended December 31, 2012 and 2011 in the following discussion.

This information reflects the information used by management to analyze the Partnership's operations and is reflective of the consolidated operations of the Mortgage Revenue Bond Investments segment, the MF Properties segment, the Public Housing Capital Fund Trusts segment, and the Mortgage-backed Securities segment as presented in Note 20 to the financial statements.



	For the Year Ended December 31, 2013		For the Year Ended December 31, 2012		For the Year Ended December 31, 2011


Revenues:
Property revenues	$	11,358,718	$	7,846,812	$	5,066,443
Investment income	24,109,397		12,599,284		11,205,247
Contingent interest income	6,497,160		—		309,990
Other interest income	1,772,338		150,882		485,679
Gain on sale and retirement of mortgage revenue bonds	—		680,444		445,257
Other income	250,000		557,300		189,340
Total Revenues	43,987,613		21,834,722		17,701,956
Expenses:
Real estate operating (exclusive of items shown below)	6,522,091		4,604,870		3,154,290
Realized loss on taxable property loan	4,557,741		—		—
Provision for loan loss	168,000		—		4,242,571
Provision for loss on receivables	241,698		452,700		952,700
Depreciation and amortization	5,374,802		3,447,316		2,281,541
Interest	7,235,336		5,530,995		5,441,700
General and administrative	4,237,245		3,512,233		2,764,970
Total Expenses	28,336,913		17,548,114		18,837,772
Net income (loss)	15,650,700		4,286,608		(1,135,816		)
Income from discontinued operations (including gain on sale of MF Properties of $3,177,183 in 2013 and $1,406,608 in 2012)	3,442,404		2,232,276		752,192
Net income (loss)	19,093,104		6,518,884		(383,624		)
Net income attributable to noncontrolling interest	261,923		549,194		570,759
Net income (loss) - America First Multifamily Investors, L.P.	$	18,831,181	$	5,969,690	$	(954,383	)

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Property revenues. Property revenues increased approximately $3.5 million between the years mostly attributable to the acquisition of Maples on 97th in August 2012, Weatherford which began leasing in the second quarter of 2012, DeCordova which began leasing 34 newly constructed rental units in the third quarter of 2012, and Woodland Park which became an MF Property effective June 1, 2013. In addition, approximately $611,000 of the increase is attributable to the improved occupancy at Arboretum. Annual net rental revenues per unit related to the MF Properties increased to approximately $6,836 per unit in 2013 from approximately $5,587 in 2012.

Investment income. Investment income includes interest earned on mortgage revenue bonds, PHC Certificates, and MBS. This income increased during 2013 as compared to 2012 by approximately $11.6 million due to various factors. Approximately $5.7 million of the increase in investment income is due to the recognition of the sale of the Ohio and Greens Properties during 2013. This income is interest payments received by the Partnership since it acquired the Ohio Properties' mortgage revenue bonds in June 2010 and the Greens Property's mortgage revenue bonds in October 2012 which previously were deferred due to the deposit method of accounting (see Note 10 to the consolidated financial statements). Approximately $4.4 million of the increase in interest income is the result of the addition of the Arbors at Hickory Ridge, Vantage at Judson, Avistar on the Boulevard, Avistar at Chase Hill, Avistar at the Crest, Renaissance Apartments, Avistar on the Hills Apartments, Avistar at the Oaks Apartments, Avistar in 09 Apartments, Vantage at Harlingen Apartments, Tyler Park Townhomes, and Westside Village Market mortgage revenue bonds. Investment income also increased approximately $3.1 million due to a full year of revenue from the PHC Certificates and MBS investment classes compared to a partial year in 2012. These increases were offset by the gain of approximately $400,000 from the sale of GMF-Madison Tower and GMF-Warren/Tulane mortgage revenue bonds in 2012 which did not repeat in 2013, approximately $571,000 reduction in interest revenue due to the redemption of Iona Lakes mortgage revenue bond in 2013, and the approximate $556,000 reduction in interest revenue due to the completion of the foreclosure of Woodland Park in May 2013.

Other income. Other income recognized in 2013 is a guarantee fee received from the General Partner owner of the Ohio Properties (see Note 10 to the consolidated financial statements). Approximately $555,000 reported in 2012 is the payment on a property owner promissory note received upon the restructuring of the Arbors at Hickory Ridge mortgage revenue bond.

Real estate operating expenses. The overall increase in real estate operating expenses was due to various factors. The increase in real estate operating expenses was partly due to approximately $1.3 million of real estate operating expenses related to Maples on 97th which was acquired in August 2012 and Woodland Park which became an MF Property effective June 1, 2013 (see Note 8 to the consolidated financial statements). Arboretum, Meadowview, and Weatherford reported approximately $227,000 greater real estate taxes when comparing 2013 to 2012. The remaining increase was related to the existing VIEs and MF Properties normal operating increases in salaries, administrative fees, and repair and maintenance expenses. These increases were offset by approximately $150,000 in acquisition costs reported by the EAT (Maples on 97th) VIE in 2012.

Depreciation and amortization expense. Depreciation results primarily from the apartment properties of the Consolidated VIEs and the MF Properties. Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting for the acquisition of MF Properties and deferred finance cost amortization related to the closing of the TEBS and TOB Credit Facilities. Approximately $1.6 million of the increase in depreciation and amortization expense from 2012 to 2013 is related to Woodland Park which became an MF property effective June 1, 2013, Maples on 97th which was acquired at the end of August 2012, the additional depreciation recorded once the Residences at Weatherford's construction was completed and placed in service in second quarter of 2012, and the additional depreciation recorded once the Residences of DeCordova's new unit construction was completed in the third quarter of 2012. The remaining increase is related to the additional amortization expense reported on the Partnership's financing.

Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011

Investment income. Investment income increased during 2012 as compared to 2011 due to offsetting factors. The increases are due to the additional interest payments of approximately $2.3 million from the the PHC Certificates, the Arbors at Hickory Ridge mortgage revenue bond, MBS, and the Vantage at Judson mortgage revenue bond acquired in 2012. Offsetting these increases was an approximate $659,000 decrease attributable to the redemptions of Briarwood Manor Apartments and Clarkson College mortgage revenue bonds and approximately $230,000 due to the foreclosure of Weatherford in 2011.

Gain on sale and retirements of bonds. Approximately $668,000 of the gain on sale and retirements of bonds is the result of the sale of the GMF-Madison Tower and GMF-Warren/Tulane mortgage revenue bonds in May 2012. Approximately $445,000 on the gain on sale and retirements of bonds is the result of the gain on the Briarwood mortgage revenue bond retirement.

Other income. The $557,300 reported in 2012 is the payment on a property owner promissory note received upon the restructuring of the Arbors at Hickory Ridge mortgage revenue bond. Other income in 2011 is comprised mostly of the forgiveness of third party debt related to the DeCordova foreclosure and a $150,000 prepayment penalty received from the Foundation for Affordable Housing in third quarter 2011 which was not repeated in 2012.

Real estate operating expenses. Real estate operating expenses associated with the MF Properties is comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses are fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues. The overall increase in real estate operating expenses was due to various factors. The Arboretum and Eagle Village properties reported approximately $507,000 of expenses which were not included in 2011, Weatherford reported approximately $328,000 of expenses as an MF Property for 2012 as it began lease-up in late March 2012, and DeCordova reported an additional approximate $129,000 due to the beginning lease-up of its 34 new units in third quarter 2012. In addition, Maples on 97th Apartments reported approximately $243,000 of acquisition and operating expenses as it was acquired in third quarter 2012. The remaining increases were related to the existing MF Properties normal operating expense increases in salaries, utilities, insurance and repair and maintenance.

Depreciation and amortization expense. Depreciation and amortization consists primarily of depreciation associated with the MF Properties, amortization associated with in-place lease intangible assets recorded as part of the purchase accounting for the acquisition of MF Properties and deferred finance cost amortization related to the closing of the TEBS and TOB Credit Facilities. The increase in depreciation and amortization expense from the 2011 to 2012 is related to approximately $1.1 million from the Arboretum property (acquired on March 31, 2011), the Eagle Village property acquired at the end of June 2011, the additional depreciation recorded once the Weatherford and DeCordova's construction was completed and placed in service in second and third quarters of 2012, and the acquisition of Maples on 97th acquired in third quarter of 2012.

General and administrative expenses. The increase in general and administrative expenses is mainly due to incentive compensation, increases in administrative fees due to the increased bond portfolio and increases in professional fees.

Liquidity and Capital Resources

Primary sources and uses of funds. Interest earned on the mortgage revenue bonds, including those financing properties held by Consolidated VIEs, represents the Partnership's principal source of cash flow. The Partnership also earns interest from its PHC Certificates, and MBS and may also receive cash distributions from equity interests held in MF Properties. Interest is primarily comprised of base interest payments received on the Partnership's mortgage revenue bonds, PHC Certificates, and MBS. Certain of the mortgage revenue bonds may also generate payments of contingent interest to the Partnership from time to time when the underlying apartment properties generate excess cash flow. Because base interest on each of the Partnership's mortgage revenue bonds and MBS is fixed, the Partnership's cash receipts tend to be fairly constant period to period unless the Partnership acquires or disposes of its investments in mortgage revenue bonds. Changes in the economic performance of the properties financed by mortgage revenue bonds with a contingent interest provision will affect the amount of contingent interest, if any, paid to the Partnership.

The Consolidated VIEs' and MF Properties' primary source of cash is net rental revenues generated by their real estate investments. The economic performance of a multifamily apartment property depends on the rental and occupancy rates of the property and on the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market area in which a property is located. This, in turn, is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (such as zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of an apartment property. The primary uses of cash by apartment properties are the payment of operating expenses and debt service.

Other sources of cash available to the Partnership include debt financing, mortgages, and the sale of additional BUCs. The Company currently has outstanding debt financing of $257.3 million under sixteen separate credit facilities and mortgages of $57.1 million secured by eight MF Properties.

The Partnership's principal uses of cash are the payment of distributions to shareholders, interest and principal on debt financing and general and administrative expenses. The Partnership also uses cash to acquire additional investments. Distributions to shareholders may increase or decrease at the determination of the General Partner. The per unit cash available for distribution primarily depends on the amount of interest and other cash received by the Partnership from its portfolio of mortgage revenue bonds and other investments, the amount of the Partnership's outstanding debt and the effective interest rates paid by the Partnership on this debt, the level of operating and other cash expenses incurred by the Partnership and the number of units outstanding. During the year ended December 31, 2013, the Partnership generated cash available for distribution of $0.42 per unit, see “Cash Available for Distribution”. As a result, the Partnership was required to supplement its cash available for distribution during 2013, with unrestricted cash and expects to continue to do so until the Partnership is able to complete its current plans to invest the net proceeds it realized from the most recent issuances of BUCs on a leveraged basis. The General Partner believes that upon completion of its current investment and leverage plans, the Partnership will be able to meet its liquidity requirements, including the payment of expenses, interest on its debt financing, and cash distributions to shareholders at the current level of $0.50 per unit per year without the use of unrestricted cash. However, if leverage plans are delayed, actual results may vary from current projections. If the actual CAD generated continues to be less than the regular distribution to shareholders, such distribution amount may need to be reduced.

The Consolidated VIEs' and MF Properties' primary uses of cash are: (i) the payment of operating expenses; and (ii) the payment of debt service.

Leverage. The Partnership's operating policy is to use securitizations or other forms of leverage to maintain a level of debt financing between 40% and 60% of the total par value of the Partnership's mortgage revenue bond portfolio. As of December 31, 2013, the total par value of the Partnerships' total bond portfolio is approximately $314.7 million. The outstanding debt financing arrangements are six TOB facilities with Duetsche Bank AG ("DB") and the TEBS financing agreement with Freddie Mac which have an outstanding balance of $174.4 million in total. This calculates to a leverage ratio of 55%. The Partnership's operating policy is to use securitizations or other forms of leverage to maintain a level of debt financing between 60% and 80% of the total par value of the Partnership's other investments. There are six outstanding TOB facilities at December 31, 2013, which sum to outstanding borrowings of $82.9 million, which are securitizations of the PHC Certificates and MBS. The par value of the PHC Certificates and MBS is $108.1 million which calculates to a leverage ratio of 77%. Additionally, the MF Properties are encumbered by mortgage loans with an aggregate principal balance of approximately $57.1 million. These mortgage loans mature at various times from March 2014 through March 2020. The debt financing plus mortgage loans total $314.4 million results in a leverage ratio to Partnership Total Assets of 58%.

TEBS financing. As of September 1, 2010, the Partnership and its Consolidated Subsidiary ATAX TEBS I, LLC, entered into a number of agreements relating to a long-term debt financing facility pursuant to Freddie Mac's TEBS program. The TEBS financing essentially provides the Company with a long-term variable-rate debt facility at interest rates reflecting prevailing short-term tax-exempt rates. The TEBS financing offers several advantages over the Company's previous credit facilities which, over time, are expected to positively impact the generation of CAD. These advantages include:

•a longer term thereby addressing the previous refinancing risks,

•better balance sheet leverage thereby providing additional funds for investment, and

•a lower initial cost of borrowing.

Under the TEBS financing, the Company transferred thirteen mortgage revenue bonds, which have a total outstanding principal amount of approximately $122.5 million at December 31, 2013, to ATAX TEBS I, LLC, a special purpose entity controlled by the Company (the “Sponsor”). The securitization of these mortgage revenue bonds was executed through the issuance of two classes of Certificates. The Class A TEBS Certificates were issued in an initial principal amount of $95.8 million and were sold through a placement agent to unaffiliated investors. The Class B TEBS Certificates were issued in an initial principal amount of $20.3 million and were retained by the Sponsor. The holders of the Class A TEBS Certificates are entitled to receive regular payments of interest from Freddie Mac at a variable rate which resets periodically based on the weekly Securities Industry and Financial Markets Association (“SIFMA”) floating index rate plus certain Facility Fees. As of closing, the SIFMA rate was equal to 0.25% per annum and the total Facility Fees were 1.9% per annum, resulting in a total initial cost of borrowing of 2.15% per annum. As of December 31, 2013, the SIFMA rate was equal to 0.10% per annum resulting in a total cost of borrowing of 2.00% per annum on the approximate $93.0 million outstanding balance. As of December 31, 2012, the SIFMA rate was equal to 0.13% per annum resulting in a total cost of borrowing of 2.03% per annum on the approximate $94.0 million outstanding balance.

Payment of interest on the Class A TEBS Certificates are made from the interest payments received by Freddie Mac from the Bonds and Senior Custody Receipts held by Freddie Mac on designated interest payment dates prior to any payments of interest on the Class B TEBS Certificates held by the Sponsor. As the holder of the Class B TEBS Certificates, the Sponsor is not entitled to receive interest payments on the Class B TEBS Certificates at any particular rate, but will be entitled to all payments of principal and interest on the Bonds and Senior Custody Receipts held by Freddie Mac after payment of principal and interest due on the Class A TEBS Certificates and payment of all Facility Fees and associated expenses. Accordingly, the amount of interest paid to the Sponsor on the Class B TEBS Certificates is expected to vary over time, and could be eliminated altogether, due to fluctuations in the interest rate payable on the Class A TEBS Certificates, Facility Fees, expenses and other factors.

Freddie Mac has guaranteed payment of scheduled principal and interest payments on the Class A TEBS Certificates and also guarantees payment of the purchase price of any Class A TEBS Certificates that are tendered to Freddie Mac in accordance with their terms but which cannot be remarketed to new holders within five business days. The Sponsor has pledged the Class B TEBS Certificates to Freddie Mac to secure certain reimbursement obligations of the Sponsor to Freddie Mac. The Company also entered into various subordination and intercreditor agreements with Freddie Mac under which the Company has subordinated its rights and remedies with respect to the taxable property loans made by it to the owners of properties securing certain of the Bonds to the rights of Freddie Mac as the holder of the Bonds.

For financial reporting purposes, the TEBS financing is presented by the Company as a secured financing.

TOB financings. In July 2011, the Company executed a Master Trust Agreement with DB which allows the Company to execute multiple TOB structures upon the approval and agreement of terms by DB. Under each TOB structure issued through the Master Trust Agreement, the TOB trustee issues SPEARS and LIFERS. These SPEARS and LIFERS represent beneficial interests in the securitized asset held by the TOB trustee. The Company will purchase the LIFERS from each of these TOB Trusts which will grant them certain rights to the securitized assets. Under each TOB structure, the asset is transferred to a custodian and trustee that provide these services on behalf of DB. The Master Trust Agreement with DB has covenants that the Company is required to maintain compliance, the most restrictive of which at December 31, 2013, is that cash available to distribute for the trailing twelve months must be at least two times trailing twelve month interest expense. The Company was in compliance with all of these covenants as of December 31, 2013. If the Company were to be out of compliance with any of these covenants, it would trigger a termination event of the financing facilities.

In June 2013, the Company executed a new TOB Trust under its credit facility with DB securitizing the Avistar on the Boulevard, Avistar at Chase Hill, and Avistar at the Crest Series A mortgage revenue bonds. The amount borrowed was $20.0 million with a variable interest rate tied to SIFMA. The facility matures in June 2014. On the date of closing the total fixed TOB Trust fee was approximately 2.1% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.4% per annum resulting in a total cost of borrowing of approximately 2.5% per annum. During the fourth quarter 2013 the total fixed TOB Trust fee was reduced to approximately 1.8% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.4% per annum resulting in a total cost of borrowing of approximately 2.2% per annum. The outstanding balance remains at $20.0 million on December 31, 2013.

In March 2013, the Company executed a new TOB Trust under its credit facility with DB securitizing the Arbors at Hickory Ridge mortgage revenue bond. The amount borrowed was $7.0 million with a variable interest rate tied to SIFMA maturing in February 2014. On the date of closing the total fixed TOB Trust fee was approximately 2.1% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.5% resulting in a total cost of borrowing of approximately 2.6%. During the fourth quarter 2013 the total fixed TOB Trust fee was reduced to approximately 1.8% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.6% per annum resulting in a total cost of borrowing of approximately 2.4% per annum. The outstanding balance remains at $7.0 million on December 31, 2013.

In February 2013, the Company executed a new TOB Trust under its credit facility with DB securitizing the Greens Property mortgage revenue bond. The amount borrowed was approximately $5.8 million with a variable interest rate tied to SIFMA maturing in December 2013. On the date of closing the total fixed TOB trust fee was approximately 2.1% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.5% resulting in a total cost of borrowing of approximately 2.6%. During the fourth quarter 2013 the total fixed TOB Trust fee was reduced to approximately 1.8% per annum and the variable rate paid on the TOB Trust on the SPEARS was approximately 0.6% per annum resulting in a total cost of borrowing of approximately 2.4% per annum. The outstanding balance was $5.7 million on December 31, 2013.

In the fourth quarter of 2012 through the second quarter of 2013, the Company purchased the LIFERS issued by the trustee over six additional TOB Trusts. The LIFERS entitle the Company to all principal and interest payments received by these TOB Trusts on the mortgage-backed securities after payments due to the holders of the SPEARS and trust costs ("MBS TOB Trusts"). The SPEARS represent senior interests in the MBS TOB Trusts and some have been credit enhanced by DB. The Company reports the MBS TOB Trusts on a consolidated basis as it has determined it is the primary beneficiary of these variable interest entities (see Note 6 to the consolidated financial statements). A summary of the six MBS TOB Trusts are as follows:

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During the fourth quarter of 2012, the Company purchased approximately $6.5 million of LIFERS from securitized MBS TOB Trusts with a par value of approximately $31.6 million of MBS. The MBS TOB Trusts also issued SPEARS of approximately $25.1 million to unaffiliated investors. The approximate outstanding amount at December 31, 2013 and December 31, 2012 was $24.1 million which mature in April 2014. On the date of closing the total fixed TOB Trust fee was approximately 0.9% per annum and the variable rate paid on the SPEARS of approximately 0.3% per annum is tied to SIFMA which results in the total cost of borrowing of approximately 1.2% per annum.

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In January 2013, the Company purchased an additional $540,000 of LIFERS from one of the five MBS TOB Trusts which is a securitization of MBS with a par value of $2.5 million. SPEARS of approximately $2.0 million were issued by the MBS TOB Trust which was outstanding at December 31, 2013 and December 31, 2012. This MBS TOB Trust matures in April 2014. On the date of closing the total fixed TOB Trust fee was approximately 0.9% per annum and the variable rate paid on the SPEARS of approximately 0.3% per annum is tied to SIFMA which results in the total cost of borrowing of approximately 1.2% per annum.

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In April 2013, the Company purchased approximately $2.2 million of LIFERS issued by a new MBS TOB Trust which is the securitization of MBS with a par value of approximately $10.0 million. The MBS TOB Trusts issued SPEARS of approximately $7.8 million to unaffiliated investors which is the outstanding amount at December 31, 2013. This facility matures in February 2014. On the date of closing the total fixed TOB Trust fee was approximately 0.9% per annum and the variable rate paid on the SPEARS of approximately 0.1% per annum is tied to SIFMA which results in the total cost of borrowing of approximately 1.0% per annum.

In July 2012, the Company purchased the PHC Certificate LIFERS issued by the trustee over the PHC TOB Trusts for approximately $16.0 million and pledged the LIFERS to the trustee to secure certain reimbursement obligations of the Company as the holder of LIFERS. The LIFERS entitle the Company to all principal and interest payments received by the PHC TOB Trusts on the $65.3 million of PHC Certificates held by it after payments due to the holders of the SPEARS and trust costs. The Company is reporting the PHC TOB Trust on a consolidated basis as it has determined it is the primary beneficiary of these variable interest entities. The PHC TOB Trusts also issued SPEARS of approximately $49.0 million to unaffiliated investors which is the outstanding amount at December 31, 2013 and December 31, 2012. The SPEARS represent senior interests in the PHC TOB Trusts and have been credit enhanced by DB.

In July 2011, the Company closed a $10 million financing utilizing the TOB structure with the securitization of the Company's $13.4 million Autumn Pines Apartments mortgage revenue bond. In December 2011, the Company closed a second $7.8 million TOB financing structured as a securitization of the Company's $15.6 million GMF-Warren/Tulane Apartments and GMF-Madison apartments mortgage revenue and taxable property bonds. The SPEARS were credit-enhanced by DB and sold through a placement agent to unaffiliated investors and the gross proceeds from their sale were remitted to the Company. The LIFERS were retained by the Company and are pledged to DB to secure certain reimbursement obligations. In May 2012, the Company retired the $7.8 million TOB financing structure when the GMF-Warren/Tulane and GMF-Madison Tower mortgage revenue bonds were sold. At December 31, 2013 and December 31, 2012, the Company owed $9.8 million on the Autumn Pines TOB financing facility and at December 31, 2011, the Company owed $17.7 million on both TOB facilities.

As of December 31, 2013, the PHC TOB Trusts required approximately $400,000, and the MBS TOB Trusts required approximately $4.1 million held in restricted cash (see Note 2 to the consolidated financial statements). As of December 31, 2012 there was no restricted cash held as collateral required by these trusts.

As a result, the TOB trusts essentially provide the Company with a secured variable rate debt facility at interest rates that reflect the prevailing short-term tax-exempt rates paid by the TOB trusts on the SPEARS. Payments made to the holders of the SPEARS and the amount of trust fees essentially represent the Company's effective cost of borrowing on the net proceeds it received from the sale of the SPEARS. The holders of the SPEARS are entitled to receive regular payments from the TOB trusts at a variable rate established by a third party remarketing firm that is expected to be similar to the weekly SIFMA floating index rate. Payments on the SPEARS will be made prior to any payments on the LIFERS held by the Company. The Company is accounting for these transactions as secured financing arrangements.

The following table summarizes the amounts outstanding under each TOB Trust and the variable interest rate as of December 31, 2013:



TOB Trusts	SPEARS Outstanding		Year End Rates

PHC Certificates-TOB Trust	$	48,995,000	2.32	%
Autumn Pines-TOB Trust	9,770,000		1.96	%
MBS - TOB Trust 1	2,585,000		1.21	%
MBS - TOB Trust 2	4,090,000		1.29	%
MBS - TOB Trust 3	2,865,000		1.22	%
MBS - TOB Trust 4	5,960,000		1.23	%
MBS - TOB Trust 5	10,545,000		1.27	%
Greens of Pine Glen - TOB Trust	5,700,000		2.40	%
Arbors of Hickory Ridge - TOB Trust	7,000,000		2.40	%
MBS - TOB Trust 6	7,825,000		1.02	%
Avistar (February 2013 portfolio) - TOB Trust ⁽¹⁾	20,000,000		2.21	%
Avistar (June 2013 portfolio) - TOB Trust ⁽²⁾	13,210,000		2.21	%
The Suites on Paseo - TOB Trust	25,750,000