ATAX 10-Q 033114

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2014

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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o	Accelerated filer x	Non- accelerated filer o	Smaller reporting company o
		(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

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INDEX

PART I – FINANCIAL INFORMATION



Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Partners’ Capital	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4	Controls and Procedures	60

PART II – OTHER INFORMATION



Item 1A	Risk Factors	61
Item 6	Exhibits	61



SIGNATURES			62

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Forward-Looking Statements

This report (including, but not limited to, the information contained in “Management's Discussion and Analysis of Financial Condition and Results of Operations”) contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. When used, statements which are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements. We have based forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. This report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this report and, accordingly, we cannot guarantee their accuracy or completeness.

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


•	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 and mortgage-backed securities;


•	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 Development 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. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and in Item 1A of Part II of this document.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	March 31, 2014			December 31, 2013
Assets
Cash and cash equivalents	$	46,698,901		$	11,318,015
Restricted cash	4,131,477			6,845,543
Interest receivable	11,549,123			9,536,515
Mortgage revenue bonds held in trust, at fair value (Notes 4 & 10)	232,276,390			216,371,801
Mortgage revenue bonds, at fair value (Note 4)	84,195,337			68,946,370
Public housing capital fund trusts, at fair value (Note 5)	62,070,540			62,056,379
Mortgage-backed securities, at fair value (Note 6)	39,922,601			37,845,661
Real estate assets: (Note 7)
Land and improvements	11,081,992			11,081,992
Buildings and improvements	120,982,988			111,195,695
Real estate assets before accumulated depreciation	132,064,980			122,277,687
Accumulated depreciation	(20,368,846		)	(19,128,753		)
Net real estate assets	111,696,134			103,148,934
Other assets (Note 8)	18,342,083			18,163,814
Total Assets	$	610,882,586		$	534,233,032

Liabilities
Accounts payable, accrued expenses and other liabilities	$	6,733,498		$	5,450,694
Distribution payable	8,295,024			6,446,076
Debt financing (Note 10)	257,511,000			257,274,000
Mortgages payable (Note 11)	64,950,092			57,087,320
Bond purchase commitment - fair market value adjustment (Notes 4 & 16)	1,362,940			4,852,177
Total Liabilities	338,852,554			331,110,267

Commitments and Contingencies (Note 16)

Partners' Capital
General Partner (Note 2)	193,195			16,671
Beneficial Unit Certificate holders	292,416,929			223,573,312
Unallocated deficit of Consolidated VIEs	(20,568,667		)	(20,455,896		)
Total Partners' Capital	272,041,457			203,134,087
Noncontrolling interest (Note 7)	(11,425		)	(11,322		)
Total Capital	272,030,032			203,122,765
Total Liabilities and Partners' Capital	$	610,882,586		$	534,233,032

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



	For the Three Months Ended,
	March 31, 2014			March 31, 2013
Revenues:
Property revenues	$	3,951,216		$	3,732,807
Investment income	6,205,558			7,716,617
Gain on mortgage revenue bond redemption	2,835,243			—
Other interest income	208,823			1,244,985
Other income	—			250,000
Total revenues	13,200,840			12,944,409
Expenses:
Real estate operating (exclusive of items shown below)	2,100,293			2,057,036
Provision for loss on receivables	—			238,175
Depreciation and amortization	1,613,346			1,581,376
Interest	2,169,549			1,536,273
General and administrative	1,270,926			970,491
Total expenses	7,154,114			6,383,351
Income from continuing operations	6,046,726			6,561,058
Income from discontinued operations (including gain on sale of MF Properties of $1,775,527 in 2013)	—			1,933,019
Net income	6,046,726			8,494,077
Net (loss) income attributable to noncontrolling interest	(103		)	172,651
Net income - America First Mulitfamily Investors, L.P.	$	6,046,829		$	8,321,426

Net income (loss) allocated to:
General Partner	$	742,055		$	511,751
Limited Partners - Unitholders	5,417,545			8,050,634
Unallocated loss of Consolidated Property VIEs	(112,771		)	(240,959		)
Noncontrolling interest	(103		)	172,651
	$	6,046,726		$	8,494,077
Unitholders' interest in net income per unit (basic and diluted):
Income from continuing operations	$	0.10		$	0.15
Income from discontinued operations	—			0.04
Net income, basic and diluted, per unit	$	0.10		$	0.19
Distributions declared, per unit	$	0.125		$	0.125
Weighted average number of units outstanding, basic and diluted	56,919,595			42,772,928

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)



	For the Three Months Ended,
	March 31, 2014			March 31, 2013
Net income	$	6,046,726		$	8,494,077
Unrealized gain on securities	18,041,725			2,800,619
Unrealized gain (loss) on bond purchase commitments	3,489,237			—
Comprehensive income - America First Multifamily Investors, L.P.	$	27,577,688		$	11,294,696

Comprehensive (loss) income allocated to:
General Partner	$	957,364		$	539,757
Limited Partners - Unitholders	26,733,198			10,823,247
Unallocated loss of Consolidated Property VIEs	(112,771		)	(240,959		)
Noncontrolling interest	(103		)	172,651
Comprehensive income - America First Multifamily Investors, L.P.	$	27,577,688		$	11,294,696

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2014 and 2013

(UNAUDITED)



	General Partner			# of Units	Beneficial Unit Certificate Holders			Unallocated Deficit of Consolidated VIEs			Non- controlling Interest			Total			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2014	$	16,671		51,052,928	$	223,573,312		$	(20,455,896	)	$	(11,322	)	$	203,122,765		$	(20,128,314	)
Sale of beneficial unit certificates				9,200,000	51,367,692									51,367,692
Redemption of mortgage revenue bond	(17,431		)		(1,725,657		)							(1,743,088		)	(1,743,088		)
Distributions paid or accrued	(763,409		)		(7,531,616		)	—			—			(8,295,025		)	—
Net income (loss)	742,055				5,417,545			(112,771		)	(103		)	6,046,726			—
Unrealized gain on securities	180,417				17,861,308			—			—			18,041,725			18,041,725
Unrealized gain (loss) on bond purchase commitment	34,892				3,454,345			—			—			3,489,237			3,489,237
Balance at March 31, 2014	$	193,195		60,252,928	$	292,416,929		$	(20,568,667	)	$	(11,425	)	$	272,030,032		$	(340,440	)

	General Partner			# of Units	Beneficial Unit Certificate Holders			Unallocated Deficit of Consolidated VIEs			Non- controlling Interest			Total			Accumulated Other Comprehensive Income
Balance at January 1, 2013	$	(430,087	)	42,772,928	$	207,383,087		$	(25,035,808	)	$	2,053,739		$	183,970,931		$	7,161,381
Deconsolidation of Ohio Properties	14,064				1,392,303						(1,012,966		)	393,401			1,406,367
Distributions paid or accrued	(54,006		)		(5,346,616		)							(5,400,622		)
Net income (loss)	511,751				8,050,634			(240,959		)	172,651			8,494,077			—
Unrealized gain on securities	28,006				2,772,613			—			—			2,800,619			2,800,619
Balance at March 31, 2013	$	69,728		42,772,928	$	214,252,021		$	(25,276,767	)	$	1,213,424		$	190,258,406		$	11,368,367

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	For Three Months Ended,
	March 31, 2014			March 31, 2013
Cash flows from operating activities:
Net income	$	6,046,726		$	8,494,077
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	1,613,346			1,585,605
Provision for loss from receivables	—			238,175
Non-cash loss on derivatives	182,597			104,658
Bond premium/discount amortization	(62,008		)	(83,638		)
Gain on mortgage revenue bond redemption	(2,835,243		)	—
Gain on the sale of discontinued operations	—			(1,775,527		)
Changes in operating assets and liabilities, net of effect of acquisitions
Increase in interest receivable	(2,012,608		)	(2,616,713		)
Decrease (increase) in other assets	1,147,599			(652,147		)
Decrease in accounts payable and accrued expenses	(2,192,953		)	(2,248,190		)
Net cash provided operating activities	1,887,456			3,046,300
Cash flows from investing activities:
Capital expenditures	(6,323,590		)	(1,645,272		)
Acquisition of mortgage revenue bonds	(34,778,800		)	(38,400,000		)
Purchase of rate derivative	(391,500		)	—
Proceeds from the mortgage revenue bond redemption	18,744,294			—
Restricted cash - debt collateral released	2,000,000			644,833
Principal payments received on mortgage revenue bonds	1,778,734			684,763
(Increase) decrease in restricted cash	(73,820		)	137,443
Proceeds from the sale of discontinued operations	—			16,195,000
Investment in bonds due to the sale recognition of discontinued operations	—			(18,313,000		)
Cash received from taxable property loans receivable - Ohio Properties	—			4,064,089
Change in restricted cash - Greens Property sale	—			2,097,691
Acquisition of mortgage-backed securities	—			(2,557,373		)
Acquisition of taxable bonds	—			(804,000		)
Net cash used by investing activities	(19,044,682		)	(37,895,826		)
Cash flows from financing activities:
Distributions paid	(6,446,077		)	(5,566,909		)
Net proceeds from the sale of beneficial unit certificates	51,367,692			—
Proceeds from debt financing	17,250,000			16,705,000
Principal borrowings on mortgages payable	7,976,690			7,500,000
Principal payments on debt financing	(17,013,000		)	(562,486		)
Principal payments on mortgages payable	(113,919		)	—
Increase (decrease) in liabilities related to restricted cash	73,820			(137,443		)
Debt financing costs	(557,094		)	(32,942		)
Net cash provided by financing activities	52,538,112			17,905,220
Net increase (decrease) in cash and cash equivalents	35,380,886			(16,944,306		)
Cash and cash equivalents at beginning of period, including cash and cash equivalents of discontinued operations of $0 and $158,727, respectively	11,318,015			30,331,500
Cash and cash equivalents at end of period, including cash and cash equivalents of discontinued operations of $0 and $50,882, respectively	$	46,698,901		$	13,387,194

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AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(UNAUDITED)



	For Three Months Ended,
	March 31, 2014		March 31, 2013
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	1,798,217	$	1,286,483
Distributions declared but not paid	$	8,295,025	$	5,400,622
Supplemental disclosure of non cash activities:
Cash borrowed for financing costs	$	—	$	115,900
Capital expenditures financed through accounts and notes payable	$	3,475,757	$	2,006,159
Deconsolidation of the discontinued operations - noncontrolling interest	$	—	$	1,012,966
Recognition of taxable property loans receivable - discontinued operations	$	—	$	1,236,236

The accompanying notes are an integral part of the condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

1. Basis of Presentation

General

America First Multifamily Investors, L.P. (the “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the primary purpose of acquiring, holding, selling and otherwise dealing with a portfolio of mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential properties. The Partnership expects and believes the interest earned on these mortgage revenue bonds is excludable from gross income for federal income tax purposes. As a result, most of the income earned by the Partnership is exempt from federal income taxes. The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make taxable property loans secured by multifamily properties which are financed by mortgage revenue bonds held by the Partnership. The Partnership generally does not seek to acquire direct interests in real property as long term or permanent investments. The Partnership may, however, acquire real estate securing its mortgage revenue bonds or taxable mortgage loans through foreclosure in the event of a default. In addition, the Partnership may acquire interests in multifamily apartment properties (“MF Properties”) in order to position itself for future investments in mortgage revenue bonds issued to finance these properties. The Partnership expects to sell its interest in these MF Properties in connection with the future syndication of low income housing tax credits under Section 42 of the Internal Revenue Code ("LIHTCs") or to a tax-exempt organization and to acquire mortgage revenue bonds on these properties to provide debt financing to the new owners.

Our general partner is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”). The general partner of AFCA2 is The Burlington Capital Group LLC ("Burlington"). The Partnership has issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partner interests to investors (“unitholders”). The Partnership will terminate on December 31, 2050, unless terminated earlier under provisions of its Agreement of Limited Partnership.

The "Company" refers to the consolidated financial statements reported in this Form 10-Q which include the assets, liabilities, and results of operations of the Partnership, its Consolidated Subsidiaries (defined below) and three entities in which the Partnership does not hold an ownership interest but which own multifamily apartment properties financed with mortgage revenue bonds held by the Partnership and which are treated as variable interest entities ("VIEs") of which the Partnership has been determined to be the primary beneficiary (the “Consolidated VIEs”). The Consolidated Subsidiaries of the Partnership currently consist of:


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


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

Stand alone financial information of the Partnership reported in this Form 10-Q includes only the assets, liabilities, and results of operations of the Partnership and its Consolidated Subsidiaries (hereafter the “Partnership”) without the Consolidated VIEs. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership, the Consolidated Subsidiaries and the Consolidated VIEs have been eliminated in consolidation. The Partnership does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) affects the Partnership’s status as a partnership for federal income tax purposes or the status of unitholders as partners of the Partnership, the treatment of the mortgage revenue bonds on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the mortgage revenue bonds secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs is primarily comprised of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the VIEs and the VIEs' net losses subsequent to that date are not allocated to the General Partner and unitholders as such activity is not contemplated by, or addressed in, the Agreement of Limited Partnership.

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying interim unaudited condensed consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. These condensed consolidated financial statements and notes have been prepared consistently with the 2013 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the financial position as of March 31, 2014, and the results of operations for the interim periods presented have been made. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.

2. Partnership Income, Expenses and Cash Distributions

The Agreement of Limited Partnership of the Partnership contains provisions for the distribution of Net Interest Income, Net Residual Proceeds and Liquidation Proceeds, for the allocation of income or loss from operations and for the allocation of income and loss arising from a repayment, sale, or liquidation of investments. Income and losses will be allocated to each unitholder on a periodic basis, as determined by the General Partner, based on the number of BUCs held by each unitholder as of the last day of the period for which such allocation is to be made. Distributions of Net Interest Income and Net Residual Proceeds will be made to each unitholder of record on the last day of each distribution period based on the number of BUCs held by each unitholder as of such date. For purposes of the Agreement of Limited Partnership, cash distributions, if any, received by the Partnership from its indirect interest in MF Properties (Note 7) will be included in the Partnership’s Interest Income and cash distributions received by the Partnership from the sale of such properties will be included in the Partnership Residual Proceeds.

Cash distributions are currently made on a quarterly basis but may be made on a monthly or semiannual basis at the election of AFCA 2. On each distribution date, Net Interest Income is distributed 99% to the unitholders and 1% to AFCA 2 and Net Residual Proceeds are distributed 100% to unitholders except that Net Interest Income and Net Residual Proceeds representing contingent interest in an amount equal to 0.9% per annum of the principal amount of the mortgage revenue bonds on a cumulative basis (defined as Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2), respectively) are distributed 75% to the unitholders and 25% to AFCA 2.

3. Variable Interest Entities

The Partnership invests in mortgage revenue bonds which have been issued to provide construction and/or permanent financing of multifamily residential apartments. The Partnership owns 100% of these mortgage revenue bonds and each bond is secured by a first mortgage on the property. In certain cases, the Partnership has also made taxable property loans to the property owners which are secured by second mortgages on these properties. Although each multifamily property financed with mortgage revenue bonds held by the Partnership is owned by a separate entity in which the Partnership has no equity ownership interest, the debt financing provided by the Partnership creates a variable interest in these ownership entities that may require the Partnership to report the assets, liabilities, and results of operations of these entities on a consolidated basis under GAAP.

At March 31, 2014 and December 31, 2013, the Partnership determined that four of the entities financed by mortgage revenue bonds owned by the Partnership were held by VIEs. These VIEs were Ashley Square, Bent Tree, Cross Creek, and Fairmont Oaks. The Partnership then determined that it is the primary beneficiary of two of these VIEs; Bent Tree and Fairmont Oaks and has continued to consolidate these entities. As of March 31, 2013, a fifth entity, Lake Forest, which is also financed by a mortgage revenue bond owned by the Partnership, was held by a VIE. Effective December 1, 2013, the ownership of Lake Forest became a not-for-profit entity and Lake Forest ceased to be reported as a Consolidated VIE.

The Partnership does not hold an equity interest in these VIEs and, therefore, the assets of the VIEs cannot be used to settle the general commitments of the Partnership and the Partnership is not responsible for the commitments and liabilities of the VIEs. The primary risks to the Partnership associated with these VIEs relate to the entities ability to meet debt service obligations to the Partnership and the valuation of the underlying multifamily apartment property which serves as bond collateral.

The following is a discussion of the significant judgments and assumptions made by the Partnership in determining the primary beneficiary of the VIE and, therefore, whether the Partnership must consolidate the VIE.

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Consolidated VIEs

In determining the primary beneficiary of these VIEs, the Partnership considers the activities of the VIE which most significantly impact the VIEs' economic performance, who has the power to control such activities, the risks which the entities were designed to create, the variability associated with those risks and the interests which absorb such variability. The Partnership also considers the related party relationship of the entities involved in the VIEs. At March 31, 2014 and December 31, 2013, the Partnership determined it is the primary beneficiary of the Bent Tree and Fairmont Oaks VIEs. The capital structure of Bent Tree and Fairmont Oaks VIEs consists of senior debt, subordinated debt, and equity capital. The senior debt is in the form of a mortgage revenue bond and accounts for the majority of the VIEs' total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The equity ownership of the consolidated VIEs is ultimately held by corporations which are owned by four individuals, two of which are related parties. Additionally, each of these properties is managed by an affiliate of the Partnership, America First Properties Management Company, LLC (“Properties Management”) which is an affiliate of Burlington Capital Group, LLC ("Burlington").

Non-Consolidated VIEs

The Company did not consolidate two VIE entities, Ashley Square and Cross Creek as of March 31, 2014 based on its determination of the primary beneficiary of these two VIE entities. As discussed below, while the capital structures of these VIEs resulted in the Partnership holding a majority of the variable interests in these VIEs, the Partnership determined it does not have the power to direct the activities of these VIEs that most significantly impact the VIEs’ economic performance and, as a result, is not the primary beneficiary of these VIEs.

Ashley Square – Ashley Square Housing Cooperative acquired the ownership of the Ashley Square Apartments in December 2008 from Ashley Square LLC through a warranty deed of transfer and an assumption of debt. This transfer of ownership constituted a reconsideration event as outlined in the consolidation guidance which triggered a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans and equity capital. The senior debt is in the form of mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE’s total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The VIE is organized as a housing cooperative and the 99% equity owner of this VIE is The Foundation for Affordable Housing (“FAH”), an unaffiliated Nebraska not-for-profit organization. Additionally, this property is managed by Properties Management.

Cross Creek – Cross Creek Apartments Holdings LLC is the owner of the Cross Creek Apartments. On January 1, 2010, Cross Creek Apartment Holdings LLC entered into a new operating agreement and admitted three new members. These new members committed approximately $2.2 million of capital payable in three installments including $563,000 on January 1, 2010. The new operating agreement and admission of new owner members constituted a reconsideration event as outlined in the consolidation guidance which triggered a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans, and equity capital at risk. The senior debt is in the form of mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE’s total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The three newly admitted members of this VIE are each unaffiliated with the Partnership and have contributed significant equity capital to the VIE. These members collectively control a 99% interest in the VIE. The other 1% member of this VIE is FAH, which is also unaffiliated with the Partnership. Additionally, this property is managed by Properties Management.

The following table presents information regarding the carrying value and classification of the assets held by the Partnership as of March 31, 2014 which constitute a variable interest in Ashley Square and Cross Creek.



	Balance Sheet Classification	Carrying Value		Maximum Exposure to Loss
Ashley Square Apartments
Mortgage Revenue Bond	Bond Investment	$	5,406,732	$	5,200,000
Taxable Property Loan	Other Asset	1,482,000		7,131,757
		$	6,888,732	$	12,331,757
Cross Creek Apartments
Mortgage Revenue Bond	Bond Investment	$	7,927,142	$	6,050,941
Taxable Property Loans	Other Asset	3,490,615		3,490,615
		$	11,417,757	$	9,541,556

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The mortgage revenue bonds are classified on the balance sheet as available for sale investments and are carried at fair value while taxable property loans are presented on the balance sheet as Other assets and are carried at the unpaid principal and interest less any loan loss reserves. See Note 4 for additional information regarding the mortgage revenue bonds and Note 8 for additional information regarding the taxable property loans. The maximum exposure to loss for the mortgage revenue bonds is equal to the unpaid principal balance as of March 31, 2014. The difference between the mortgage revenue bond's carrying value and the maximum exposure to loss is a function of the fair value of the bond. The difference between the taxable property loan's carrying value and the maximum exposure is the value of loan loss reserves that have been previously recorded against the outstanding taxable property loan balances.

The following tables present the effects of the consolidation of the Consolidated VIEs on the Company’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations.

Condensed Consolidating Balance Sheets as of March 31, 2014 and December 31, 2013:



	Partnership as of March 31, 2014			Consolidated VIEs as of March 31, 2014			Consolidation -Elimination as of March 31, 2014			Total as of March 31, 2014
Assets
Cash and cash equivalents	$	46,664,860		$	34,041		$	—		$	46,698,901
Restricted cash	3,687,282			444,195			—			4,131,477
Interest receivable	16,617,934			—			(5,068,811		)	11,549,123
Mortgage revenue bonds held in trust, at fair value	247,639,148			—			(15,362,758		)	232,276,390
Mortgage revenue bonds, at fair value	84,195,337			—			—			84,195,337
Public housing capital fund trusts, at fair value	62,070,540			—			—			62,070,540
Mortgage-backed securities, at fair value	39,922,601			—			—			39,922,601
Real estate assets:
Land and improvements	9,245,592			1,836,400			—			11,081,992
Buildings and improvements	100,012,852			20,970,136			—			120,982,988
Real estate assets before accumulated depreciation	109,258,444			22,806,536			—			132,064,980
Accumulated depreciation	(10,403,003		)	(9,965,843		)	—			(20,368,846		)
Net real estate assets	98,855,441			12,840,693			—			111,696,134
Other assets	24,419,708			412,541			(6,490,166		)	18,342,083
Total Assets	$	624,072,851		$	13,731,470		$	(26,921,735	)	$	610,882,586

Liabilities
Accounts payable, accrued expenses and other liabilities	$	6,416,132		$	20,829,342		$	(20,511,976	)	$	6,733,498
Distribution payable	8,295,024			—			—			8,295,024
Debt financing	257,511,000			—			—			257,511,000
Mortgages payable	64,950,092			14,858,000			(14,858,000		)	64,950,092
Bond purchase commitment - fair market value adjustment	1,362,940			—			—			1,362,940
Total Liabilities	338,535,188			35,687,342			(35,369,976		)	338,852,554
Partners' Capital
General Partner	193,195			—			—			193,195
Beneficial Unit Certificate holders	285,355,893			—			7,061,036			292,416,929
Unallocated deficit of Consolidated VIEs	—			(21,955,872		)	1,387,205			(20,568,667		)
Total Partners' Capital	285,549,088			(21,955,872		)	8,448,241			272,041,457
Noncontrolling interest	(11,425		)	—			—			(11,425		)
Total Capital	285,537,663			(21,955,872		)	8,448,241			272,030,032
Total Liabilities and Partners' Capital	$	624,072,851		$	13,731,470		$	(26,921,735	)	$	610,882,586

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	Partnership as of December 31, 2013			Consolidated VIEs as of December 31, 2013			Consolidation -Elimination as of December 31, 2013			Total as of December 31, 2013
Assets
Cash and cash equivalents	$	11,292,039		$	25,976		$	—		$	11,318,015
Restricted cash	6,344,666			500,877			—			6,845,543
Interest receivable	14,357,065			—			(4,820,550		)	9,536,515
Mortgage revenue bonds held in trust, at fair value	230,885,864			—			(14,514,063		)	216,371,801
Mortgage revenue bonds, at fair value	68,946,370			—			—			68,946,370
Public housing capital fund trusts, at fair value	62,056,379			—			—			62,056,379
Mortgage-backed securities, at fair value	37,845,661			—			—			37,845,661
Real estate assets:
Land and improvements	9,245,592			1,836,400			—			11,081,992
Buildings and improvements	90,253,256			20,942,439			—			111,195,695
Real estate assets before accumulated depreciation	99,498,848			22,778,839			—			122,277,687
Accumulated depreciation	(9,386,811		)	(9,741,942		)	—			(19,128,753		)
Net real estate assets	90,112,037			13,036,897			—			103,148,934
Other assets	24,413,077			456,087			(6,705,350		)	18,163,814
Total Assets	$	546,253,158		$	14,019,837		$	(26,039,963	)	$	534,233,032

Liabilities
Accounts payable, accrued expenses and other liabilities	$	4,963,653		$	20,634,613		$	(20,147,572	)	$	5,450,694
Distribution payable	6,446,076			—			—			6,446,076
Debt financing	257,274,000			—			—			257,274,000
Mortgages payable	57,087,320			14,897,000			(14,897,000		)	57,087,320
Bond purchase commitment at fair value	4,852,177			—			—			4,852,177
Total Liabilities	330,623,226			35,531,613			(35,044,572		)	331,110,267
Partners' Capital
General Partner	16,671			—			—			16,671
Beneficial Unit Certificate holders	215,624,583			—			7,948,729			223,573,312
Unallocated deficit of Consolidated VIEs	—			(21,511,776		)	1,055,880			(20,455,896		)
Total Partners' Capital	215,641,254			(21,511,776		)	9,004,609			203,134,087
Noncontrolling interest	(11,322		)	—			—			(11,322		)
Total Capital	215,629,932			(21,511,776		)	9,004,609			203,122,765
Total Liabilities and Partners' Capital	$	546,253,158		$	14,019,837		$	(26,039,963	)	$	534,233,032

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Condensed Consolidating Statements of Operations for the three months ended March 31, 2014 and 2013:



	Partnership For the Three Months Ended March 31, 2014			Consolidated VIEs For the Three Months Ended March 31, 2014			Consolidation -Elimination For the Three Months Ended March 31, 2014			Total For the Three Months Ended March 31, 2014
Revenues:
Property revenues	$	3,150,344		$	800,872		$	—		$	3,951,216
Investment income	6,438,835			—			(233,277		)	6,205,558
Gain on mortgage revenue bond redemption	2,835,243									2,835,243
Other interest income	208,823			—			—			208,823
Total revenues	12,633,245			800,872			(233,277		)	13,200,840
Expenses:
Real estate operating (exclusive of items shown below)	1,650,647			449,646			—			2,100,293
Depreciation and amortization	1,382,626			237,440			(6,720		)	1,613,346
Interest	2,169,549			557,884			(557,884		)	2,169,549
General and administrative	1,270,926			—			—			1,270,926
Total expenses	6,473,748			1,244,970			(564,604		)	7,154,114
Net income (loss)	6,159,497			(444,098		)	331,327			6,046,726
Net loss attributable to noncontrolling interest	(103		)	—			—			(103		)
Net income (loss) - America First Multifamily Investors, L. P.	$	6,159,600		$	(444,098	)	$	331,327		$	6,046,829



	Partnership For the three months Ended March 31, 2013		Consolidated VIEs For the three months Ended March 31, 2013			Consolidation -Elimination For the three months Ended March 31, 2013			Total For the three months Ended March 31, 2013
Revenues:
Property revenues	$	2,519,738	$	1,213,069		$	—		$	3,732,807
Investment income	8,094,326		—			(377,709		)	7,716,617
Other interest income	1,244,985		—			—			1,244,985
Other income	250,000		—			—			250,000
Total revenues	12,109,049		1,213,069			(377,709		)	12,944,409
Expenses:
Real estate operating (exclusive of items shown below)	1,323,634		733,402			—			2,057,036
Provision for loss on receivables	238,175		—			—			238,175
Depreciation and amortization	1,238,459		353,736			(10,819		)	1,581,376
Interest	1,536,273		819,163			(819,163		)	1,536,273
General and administrative	970,491		—			—			970,491
Total expenses	5,307,032		1,906,301			(829,982		)	6,383,351
Income (loss) from continuing operations	6,802,017		(693,232		)	452,273			6,561,058
Income (loss) from discontinued operations (including gain on sale of MF Properties of $1,775,527 in 2013)	1,933,019		—			—			1,933,019
Net income (loss)	8,735,036		(693,232		)	452,273			8,494,077
Net income attributable to noncontrolling interest	172,651		—			—			172,651
Net income (loss) - America First Multifamily Investors, L. P.	$	8,562,385	$	(693,232	)	$	452,273		$	8,321,426

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4. Investments in Mortgage Revenue Bonds

The mortgage revenue bonds owned by the Company have been issued to provide construction and/or permanent financing of multifamily residential properties and do not include the mortgage revenue bonds issued with respect to properties owned by Consolidated VIEs at March 31, 2014 and December 31, 2013. Mortgage revenue bonds are either held directly by the Company or are held in trusts created in connection with debt financing transactions (Note 10). The Company had the following investments in mortgage revenue bonds as of dates shown:



	March 31, 2014
Description of Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Arbors at Hickory Ridge ⁽²⁾	$	11,574,890	$	878,024	$	—		$	12,452,914
Ashley Square ⁽¹⁾	5,200,000		206,732		—			5,406,732
Autumn Pines ⁽²⁾	12,158,034		670,625		—			12,828,659
Avistar at Chase Hill A Bond ⁽²⁾	8,960,000		—		(381,248		)	8,578,752
Avistar at the Crest A Bond ⁽²⁾	8,759,000		—		(372,695		)	8,386,305
Avistar at the Oaks ⁽²⁾	8,354,000		—		(368,497		)	7,985,503
Avistar in 09 ⁽²⁾	7,192,000		—		(133,697		)	7,058,303
Avistar on the Boulevared A Bond ⁽²⁾	13,760,000		—		(101,136		)	13,658,864
Avistar on the Hills ⁽²⁾	5,389,000		59,570		—			5,448,570
Bella Vista ⁽¹⁾	6,545,000		—		(134,434		)	6,410,566
Bridle Ridge ⁽¹⁾	7,685,000		—		(104,439		)	7,580,561
Brookstone ⁽¹⁾	7,465,447		1,065,045		—			8,530,492
Cross Creek ⁽¹⁾	6,050,941		1,876,201		—			7,927,142
Decatur-Angle ⁽²⁾	23,000,000				(1,201,060		)	21,798,940
Greens Property A Bonds ⁽²⁾	8,420,000		190,568		—			8,610,568
Lake Forest ⁽¹⁾	8,970,000		388,412		—			9,358,412
Ohio Properties A Bonds ⁽¹⁾	14,477,000		847,175		—			15,324,175
Runnymede ⁽¹⁾	10,525,000		144,403		—			10,669,403
Southpark ⁽¹⁾	11,898,465		2,250,791		—			14,149,256
The Suites on Paseo ⁽²⁾	35,750,000		—		(3,932		)	35,746,068
Woodlynn Village ⁽¹⁾	4,426,000		—		(59,795		)	4,366,205
Mortgage revenue bonds held in trust	$	226,559,777	$	8,577,546	$	(2,860,933	)	$	232,276,390



	March 31, 2014
Description of Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Avistar at Chase Hill B Bond	$	2,005,000	$	—	$	(62,235	)	$	1,942,765
Avistar at the Crest B Bond	1,700,000		—		(52,768		)	1,647,232
Avistar on the Boulevard B Bond	3,216,000		17,206		—			3,233,206
Copper Gate Apartments	5,220,000		51,469		—			5,271,469
Greens Property B Bond	947,277		281,519		—			1,228,796
Harden Ranch	9,300,000				(173,406		)	9,126,594
Ohio Properties B Bonds	3,581,140		331,108		—			3,912,248
Renaissance	10,453,800		224,349		—			10,678,149
The Palms at Premier Park Apartments	20,152,000		1,043,672		—			21,195,672
Tyler Park Apartments	8,100,000		—		(412,937		)	7,687,063
Vantage at Harlingen	6,692,000		147,023		—			6,839,023
Vantage at Judson	6,049,000		131,324		—			6,180,324
Westside Village	5,400,000		—		(147,204		)	5,252,796
Mortgage revenue bonds	$	82,816,217	$	2,227,670	$	(848,550	)	$	84,195,337

(1) Bonds owned by ATAX TEBS I, LLC, Note 10

(2) Bond held by Deutsche Bank in a secured financing transaction, Note 10

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	December 31, 2013
Description of mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gains		Unrealized Loss			Estimated Fair Value
Arbors at Hickory Ridge ⁽²⁾	$	11,576,209	$	225,690	$	—		$	11,801,899
Ashley Square ⁽¹⁾	5,212,000		—		—			5,212,000
Autumn Pines ⁽²⁾	12,147,873		—		(195,355		)	11,952,518
Avistar at Chase Hill A Bond ⁽²⁾	8,960,000		—		(850,752		)	8,109,248
Avistar at the Crest A Bond ⁽²⁾	8,759,000		—		(1,298,785		)	7,460,215
Avistar at the Oaks ⁽²⁾	8,354,000		—		(1,103,115		)	7,250,885
Avistar in 09 ⁽²⁾	7,192,000		—		(588,254		)	6,603,746
Avistar on the Boulevard A Bond ⁽²⁾	13,760,000		—		(1,306,512		)	12,453,488
Avistar on the Hills ⁽²⁾	5,389,000		—		(417,724		)	4,971,276
Bella Vista ⁽¹⁾	6,545,000		—		(473,989		)	6,071,011
Bridle Ridge ⁽¹⁾	7,715,000		—		(452,870		)	7,262,130
Brookstone ⁽¹⁾	7,463,641		841,751		—			8,305,392
Cross Creek ⁽¹⁾	6,042,297		1,480,266		—			7,522,563
Greens Property A Bond ⁽²⁾	8,437,501		—		(577,426		)	7,860,075
Lake Forest ⁽¹⁾	8,997,000		—		(289,461		)	8,707,539
Lost Creek ⁽¹⁾	15,883,084		1,743,088		—			17,626,172
Ohio Properties A Bonds ⁽¹⁾	14,498,000		—		—			14,498,000
Runnymede ⁽¹⁾	10,525,000		—		(551,510		)	9,973,490
Southpark ⁽¹⁾	11,878,885		1,018,750		—			12,897,635
The Suites on Paseo ⁽²⁾	35,750,000		—		(2,502		)	35,747,498
Woodlynn Village ⁽¹⁾	4,426,000		—		(340,979		)	4,085,021
Mortgage revenue bonds held in trust	$	219,511,490	$	5,309,545	$	(8,449,234	)	$	216,371,801

	December 31, 2013
Description of Mortgage Revenue Bonds	Cost adjusted for pay-downs		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Avistar at Chase Hill B Bond	$	2,005,000	$	—	$	(159,117	)	$	1,845,883
Avistar at the Crest B Bond	1,700,000		—		(134,912		)	1,565,088
Avistar on the Boulevard B Bond	3,216,000		—		(255,222		)	2,960,778
Copper Gate Apartments	5,220,000		—		(252,648		)	4,967,352
Greens Property B Bond	948,291		189,589		—			1,137,880
Ohio Properties B Bonds	3,583,590		150,864		—			3,734,454
Renaissance	7,975,000		—		(16,964		)	7,958,036
The Palms at Premier Park Apartments	20,152,000		—		(283,942		)	19,868,058
Tyler Park Apartments	8,100,000		—		(526,601		)	7,573,399
Vantage at Harlingen	6,692,000		—		(211,735		)	6,480,265
Vantage at Judson	6,049,000		—		(190,423		)	5,858,577
Westside Village	5,400,000		—		(403,400		)	4,996,600
Mortgage revenue bonds	$	71,040,881	$	340,453	$	(2,434,964	)	$	68,946,370

(1) Mortgage revenue bonds owned by ATAX TEBS I, LLC, Note 10

(2) Mortgage revenue bonds held by Deutsche Bank in a secured financing transaction, Note 10

In February 2014, the Partnership acquired at par the senior $7.0 million par value and a subordinate $2.3 million par value mortgage revenue bond secured by Harden Ranch, an 100 unit multifamily apartment complex in Salinas, California. The senior mortgage revenue bond carries an annual interest rate of 5.75% and matures on March 1, 2030. The subordinate mortgage revenue bond carries an annual interest rate of 5.50% for the first year and 8.0% for the second year and matures on March 1, 2016.

In February 2014, the Company acquired at par the senior $23.0 million par value mortgage revenue bond secured by Decatur-Angle Apartments, a 302 unit multifamily apartment complex under construction in Fort Worth, Texas. The mortgage revenue bond carries an annual interest rate of 5.75% and matures on January 1, 2054.

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In February 2014, the mortgage revenue bond secured by Lost Creek was redeemed for an amount greater than the outstanding principal and accrued base interest. This $18.5 million par value mortgage revenue bond had been acquired for approximately $15.9 million in May 2010. The Company received approximately $18.7 million for the Lost Creek mortgage revenue bond resulting in an approximate $2.8 million realized gain.

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 and an approximate $2.0 million par value subordinate mortgage revenue bonds 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 and an approximate $1.4 million par value subordinate mortgage revenue bonds 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.

Effective December 1, 2013, the ownership of 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 investment asset for the first time in 2013.

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 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 ("Bond Purchase Commitment"), the Partnership has agreed to purchase a new mortgage revenue bond between $18,000,000 to $24,692,000 (“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 March 31, 2014, the Partnership estimated the value of this Bond Purchase Commitment and recorded a liability of approximately $530,000.

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 (Note 9). As such, the Partnership reported the approximate $9.8 million and $9.1 million fair market value of the mortgage revenue bonds related to the Greens Property as assets as of March 31, 2014 and December 31, 2013, respectively.

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 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 loan between the owner of the bond and the property.

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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. Woodland Park became an MF Property upon title conveyance which occurred on May 29, 2013 (Note 7). The Partnership requested the mortgage revenue bond issuer to remove the LURA on the property and the units have been converted to 100% market-rate rents. The Partnership may convert the property back to a rent restricted property, seek to place new financing on the property, and acquire the mortgage revenue bonds.

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 (formerly known as ("f/k/a") Dublin 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 (f/k/a Kingswood 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 (f/k/a Waterford 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 revenue 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. 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. During the third and fourth quarter of 2013, the Partnership purchased $1.3 million par value Series B and $3.9 million par value Series A, respectively, mortgage revenue bonds. During the first quarter of 2014, the Partnership purchased an additional approximate $2.5 million par value Series A mortgage revenue bond. 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. 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 remaining 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 March 31, 2014, the Partnership estimated the value of this Bond Purchase Commitment and recorded a liability of approximately $64,000.

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 revenue 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.

In December 2012, the Partnership purchased a $6,049,000 subordinate mortgage revenue bond and a $934,000 subordinate taxable bond both secured by the Vantage at Judson apartments. This property is located in San Antonio, Texas and is currently under construction. Both bonds mature on February 1, 2053 and carry an annual cash interest rate of 9.0% per annum plus allow for an additional 3.0% per annum of interest calculated on the property's cash flows after debt service. The Vantage at Judson apartments has a construction loan with an unrelated bank and the Partnership's mortgage revenue and taxable bonds are second lien borrowings to that construction loan. The property will have 288 units when construction is completed in the spring of 2014.

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Under the terms of a Bond Purchase Commitment, the Partnership has agreed to purchase a new mortgage revenue bond of between $20,638,000 to $26,687,000 (“Judson Series B Bond”) secured by the Vantage at Judson 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 Judson 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 $6,049,000 subordinate mortgage revenue bond. If the property does not meet its specific obligations and required occupancy rate before January 1, 2015, the Partnership has the right to terminate the Bond Purchase Commitment. 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 March 31, 2014, the Partnership estimated the value of this Bond Purchase Commitment and recorded a liability of approximately $606,000.

Valuation - As all of the Company’s investments in mortgage revenue bonds are classified as available-for-sale securities, they are carried on the balance sheet at their estimated fair values. Due to the limited market for the mortgage revenue bonds, these estimates of fair value do not necessarily represent what the Company would actually receive in a sale of the mortgage revenue bonds. There is no active trading market for the mortgage revenue bonds and price quotes for the mortgage revenue bonds are not generally available. As of March 31, 2014, all of the Company’s mortgage revenue bonds were valued using discounted cash flow and yield to maturity analyses performed by management. Management’s valuation encompasses judgment in its application. The key assumption in management’s yield to maturity analysis is the range of effective yields on the individual mortgage revenue bonds. The effective yield analysis for each mortgage revenue bond considers the current market yield on similar mortgage revenue bonds as well as the debt service coverage ratio of each underlying property serving as collateral for the mortgage revenue bond. At March 31, 2014, the range of effective yields on the individual mortgage revenue bonds was 5.8% to 9.3% per annum. At December 31, 2013, the range of effective yields on the individual mortgage revenue bonds was 6.3% to 9.8% per annum. Additionally, the Company calculated the sensitivity of the key assumption used in calculating the fair values of these mortgage revenue bonds. Assuming a 10% adverse change in the key assumption, the effective yields on the individual mortgage revenue bonds would increase to a range of 6.3% to 10.2% per annum and would result in additional unrealized losses on the mortgage revenue bond portfolio of approximately $23.8 million. This sensitivity analysis is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. If available, the general partner may also consider price quotes on similar mortgage revenue bonds or other information from external sources, such as pricing services. Pricing services, broker quotes and management’s analyses provide indicative pricing only.

Unrealized gains or losses on these mortgage revenue bonds are recorded in accumulated other comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the underlying properties. As of March 31, 2014, the Avistar at the Crest and Woodlyn Village mortgage revenue bond investments had been in an unrealized loss position for greater than twelve months. The Company has the intent and ability to hold the mortgage revenue bonds until their final maturity.

5. Public Housing Capital Fund Trust Certificates

The Company owns 100% of the residual participation receipts (“LIFERs”) in three tender option bond trusts (“PHC TOB Trusts”). At March 31, 2014, the PHC TOB Trusts own approximately $63.6 million of Public Housing Capital Fund Certificates (“PHC Certificates”) issued by three trusts ("PHC Trusts") sponsored by Deutsche Bank ("DB"). The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to a number of local public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities 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 loans payable by the public housing authorities are not debts of, or guaranteed by, the United States of America or HUD. Interest payable on the public housing authority debt held by the PHC Trusts is exempt from federal income taxes. The PHC Certificates issued by each of the PHC Trusts have been rated investment grade by Standard & Poor's.

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The Company determined that the three PHC TOB trusts are variable interest entities and that the Company was the primary beneficiary of each of the three PHC TOB trusts. As a result, the Company reports the PHC TOB Trusts on a consolidated basis and the senior floating-rate participation interest (“SPEARS”) as debt financing. In determining the primary beneficiary of these specific VIEs, the Company considered who has the power to control the activities of the VIEs which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE. The indenture for the PHC TOB trusts stipulates that the Company has the sole right to cause the PHC TOB trusts to sell the PHC Certificates. If they were sold, the extent to which the VIEs will be exposed to gains or losses associated with variability in the PHC Certificates' fair value arising from changes in municipal bond market rates therefore would result from decisions made by the Company.

The Company had the following investments in the PHC Certificates on March 31, 2014:



Description of Public Housing Capital Fund Trust Certificates	Cost adjusted for amortization of premium and discounts		Unrealized Gain		Unrealized Loss			Estimated Fair Value

Public Housing Capital Fund Trust Certificate I	$	27,944,615	$	—	$	(806,331	)	$	27,138,284
Public Housing Capital Fund Trust Certificate II	15,868,140		—		(485,322		)	15,382,818
Public Housing Capital Fund Trust Certificate III	20,444,661		—		(895,223		)	19,549,438
	$	64,257,416	$	—	$	(2,186,876	)	$	62,070,540

The Company had the following investments in the PHC Certificates on December 31, 2013:



Description of Public Housing Capital Fund Trust Certificates	Cost adjusted for amortization of premium and discounts		Unrealized Gain		Unrealized Loss			Estimated Fair Value

Public Housing Capital Fund Trust Certificate I	$	27,979,527	$	—	$	(1,284,873	)	$	26,694,654
Public Housing Capital Fund Trust Certificate II	17,486,739		—		(1,083,235		)	16,403,504
Public Housing Capital Fund Trust Certificate III	20,434,848		—		(1,476,627		)	18,958,221
	$	65,901,114	$	—	$	(3,844,735	)	$	62,056,379

Valuation - As all of the Company’s investments in PHC Certificates are classified as available-for-sale securities, they are carried on the balance sheet at their estimated fair values. Due to the limited market for the PHC Certificates, these estimates of fair value do not necessarily represent what the Company would actually receive in a sale of the certificates. The estimates of the fair values of these PHC certificates is based on a yield to maturity analysis which begins with the current market yield rate for a “AAA” rated tax-free municipal bond for a term consistent with the weighted-average life of each of the Public Housing Capital Fund trusts adjusted largely for unobservable inputs the General Partner believes would be used by market participants. Management’s valuation encompasses judgment in its application and pricing as determined by pricing services, when available, is compared to Management's estimates. The PHC Certificates are AA- and BBB rated. The Company has concluded that the PHC Certificates are not other than temporarily impaired as of March 31, 2014 as it has the intent and ability to hold this investment until its final maturity.

At March 31, 2014, the range of effective yields on the PHC Certificates was 4.2% to 5.4% per annum. At December 31, 2013, the range of effective yields on the PHC Certificates was 4.2% to 5.4% per annum. Additionally, the Company calculated the sensitivity of the key assumption used in calculating the fair values of these PHC Certificates. Assuming a 10% adverse change in the key assumption, the effective yields on the PHC Certificates would increase to a range of 5.5% to 6.8% per annum and would result in additional unrealized losses on the PHC Certificates of approximately $2.7 million. This sensitivity analysis is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. If available, the general partner may also consider other information from external sources, such as pricing services. Pricing services and management’s analysis provide indicative pricing only.

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The following table sets forth certain information relating to the PHC Certificates held in the PHC TOB Trusts on March 31, 2014:



	Weighted Average Lives (Years)	Investment Rating	Weighted Average Interest Rate over Life		Principal Outstanding
Public Housing Capital Fund Trust Certificate I	12.75	AA-	5.330	%	$	26,406,558
Public Housing Capital Fund Trust Certificate II	12.30	AA-	4.240	%	16,330,476
Public Housing Capital Fund Trust Certificate III	13.30	BBB	5.410	%	20,898,432
Total Public Housing Capital Fund Trust Certificates					$	63,635,466

The following table sets forth certain information relating to the PHC Certificates held in the PHC TOB Trusts on December 31, 2013:



	Weighted Average Lives (Years)	Investment Rating	Weighted Average Interest Rate over Life		Principal Outstanding
Public Housing Capital Fund Trust Certificate I	12.75	AA-	5.330	%	$	26,406,558
Public Housing Capital Fund Trust Certificate II	12.30	AA-	4.240	%	17,959,713
Public Housing Capital Fund Trust Certificate III	13.30	BBB	5.410	%	20,898,432
Total Public Housing Capital Fund Trust Certificates					$	65,264,703