atax-10q_20170930.htm

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

Indicate by check mark whether the registrant has submitted electronically 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 ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

These forward-looking statements are subject, but not limited, to various risks and uncertainties, including those relating to:

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Risk Factors” in Item 1A of America First Multifamily Investors, L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

All references to “we,” “us,” and the “Partnership” in this document mean America First Multifamily Investors, L.P. (“ATAX”) and its wholly-owned subsidiaries. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the Partnership’s report for additional details.

	September 30, 2017			December 31, 2016
	Unaudited
Assets
Cash and cash equivalents	$	35,556,115		$	20,748,521
Restricted cash		2,449,346			6,757,699
Interest receivable, net		7,319,913			6,983,203
Mortgage revenue bonds held in trust, at fair value (Note 6)		739,967,192			590,194,179
Mortgage revenue bonds, at fair value (Note 6)		39,346,686			90,016,872
Public housing capital fund trusts, at fair value (Note 7)		54,913,748			57,158,068
Real estate assets: (Note 8)
Land and improvements		10,798,832			17,354,587
Buildings and improvements		105,323,268			113,089,041
Real estate assets before accumulated depreciation		116,122,100			130,443,628
Accumulated depreciation		(17,623,467	)		(16,217,028	)
Net real estate assets		98,498,633			114,226,600
Investment in unconsolidated entities (Note 9)		34,335,649			19,470,006
Property loans, net of loan loss allowance (Note 10)		31,194,704			29,763,334
Other assets (Note 12)		9,613,734			8,795,192
Total Assets	$	1,053,195,720		$	944,113,674

Liabilities
Accounts payable, accrued expenses and other liabilities	$	8,297,418		$	7,255,327
Distribution payable		7,607,693			8,017,950
Unsecured lines of credit (Note 13)		12,471,000			40,000,000
Secured line of credit, net (Note 14)		-			19,816,667
Debt financing, net (Note 15)		594,635,819			495,383,033
Mortgages payable and other secured financing, net (Note 16)		50,579,400			51,379,512
Derivative swaps, at fair value (Note 17)		1,196,701			1,339,283
Total Liabilities		674,788,031			623,191,772

Commitments and Contingencies (Note 18)

Redeemable Series A preferred units, approximately $77.0 and $40.9 million redemption value, 10.0 million authorized, 7.7 million and 4.1 million issued and outstanding, respectively (Note 19)		76,855,492			40,788,034

Partnersʼ Capital
General Partner (Note 1)		331,429			102,536
Beneficial Unit Certificate holders		301,220,768			280,026,669
Total Partnersʼ Capital		301,552,197			280,129,205
Noncontrolling interest		-			4,663
Total Capital		301,552,197			280,133,868
Total Liabilities and Partnersʼ Capital	$	1,053,195,720		$	944,113,674

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Property revenues	$	3,244,440		$	3,414,788		$	10,280,940		$	13,483,760
Investment income		12,242,533			9,071,460			35,886,934			27,238,601
Contingent interest income		-			90,000			219,217			309,396
Other interest income		735,123			645,691			2,047,056			2,043,162
Other income		12,734			-			75,371			-
Total revenues		16,234,830			13,221,939			48,509,518			43,074,919
Expenses:
Real estate operating (exclusive of items shown below)		2,225,845			2,252,939			6,331,145			7,259,071
Impairment charge		-			-			-			61,506
Depreciation and amortization		1,259,055			1,361,259			4,122,260			5,292,889
Amortization of deferred financing costs		577,413			425,520			1,880,236			1,350,200
Interest expense		5,714,181			3,485,172			16,997,761			12,577,361
General and administrative		3,197,853			2,377,148			9,205,183			7,474,500
Total expenses		12,974,347			9,902,038			38,536,585			34,015,527
Other Income:
Gain (loss) on sale of real estate assets		-			1,633,973			7,152,512			14,076,902
Gain on sale of securities		-			-			-			8,097
Income before income taxes		3,260,483			4,953,874			17,125,445			23,144,391
Income tax expense (benefit)		(285,000	)		331,000			2,110,047			4,984,000
Net income		3,545,483			4,622,874			15,015,398			18,160,391
Net income (loss) attributable to noncontrolling interest		-			(668	)		71,653			(781	)
Partnership net income		3,545,483			4,623,542			14,943,745			18,161,172
Redeemable Series A preferred unit distributions and accretion		(523,682	)		(181,969	)		(1,280,874	)		(308,635	)
Net income available to Partners	$	3,021,801		$	4,441,573		$	13,662,871		$	17,852,537

Net income (loss) available to Partners and noncontrolling interest allocated to:
General Partner	$	30,218		$	324,059		$	1,212,429		$	2,513,126
Limited Partners - Unitholders		2,936,408			4,115,889			12,325,639			15,337,786
Limited Partners - Restricted Unitholders		55,175			1,625			124,803			1,625
Noncontrolling interest		-			(668	)		71,653			(781	)
	$	3,021,801		$	4,440,905		$	13,734,524		$	17,851,756
Unitholdersʼ interest in net income per unit (basic and diluted):
Net income per unit, basic and diluted	$	0.05		$	0.07		$	0.21		$	0.25
Distributions declared, per unit	$	0.125		$	0.125		$	0.375		$	0.375
Weighted average number of units outstanding, basic		59,811,578			60,176,937			59,904,078			60,227,413
Weighted average number of units outstanding, diluted		59,811,578			60,176,937			59,904,078			60,227,413

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

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2017		2016			2017		2016
Net income	$	3,545,483	$	4,622,874		$	15,015,398	$	18,160,391
Reversal of net unrealized gain on sale of securities		-		-			-		(236,439	)
Unrealized gain (loss) on securities		1,813,314		(29,432,805	)		31,020,368		42,738,951
Unrealized gain (loss) on bond purchase commitments		189,875		(4,596,110	)		955,598		6,988,349
Comprehensive income (loss)		5,548,672		(29,406,041	)		46,991,364		67,651,252
Comprehensive income (loss) allocated to noncontrolling interest		-		(668	)		71,653		(781	)
Partnership comprehensive income (loss)	$	5,548,672	$	(29,405,373	)	$	46,919,711	$	67,652,033

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

	General Partner			# of Units - Restricted and Unrestricted			Beneficial Unit Certificate Holders - Restricted and Unrestricted			Non-controlling Interest			Total			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2016	$	102,536			60,224,538		$	280,026,669		$	4,663		$	280,133,868		$	38,895,484
Distribution to noncontrolling interest		-			-			-			(76,316	)		(76,316	)
Distributions paid or accrued
Regular distribution		(194,272	)		-			(19,232,974	)		-			(19,427,246	)		-
Distribution of Tier 2 earnings (Note 3)		(1,120,625	)		-			(3,361,875	)		-			(4,482,500	)		-
Net income (loss) allocable to Partners		1,212,429			-			12,450,442			71,653			13,734,524			-
Repurchase of Beneficial Unit Certificates		-			(254,656	)		(1,466,222	)		-			(1,466,222	)		-
Restricted units awarded		-			283,046			-			-			-			-
Restricted units compensation expense		11,601			-			1,148,522			-			1,160,123			-
Unrealized gain on securities		310,204			-			30,710,164			-			31,020,368			31,020,368
Unrealized gain on bond purchase commitment		9,556			-			946,042			-			955,598			955,598
Balance at September 30, 2017	$	331,429			60,252,928		$	301,220,768		$	-		$	301,552,197		$	70,871,450

	General Partner			# of Units			Beneficial Unit Certificate Holders			Non-controlling Interest			Total			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2015	$	399,077			60,252,928		$	312,720,264		$	5,486		$	313,124,827		$	60,963,687
Reversal of net unrealized gain sale of securities		(2,364	)		-			(234,075	)		-			(236,439	)		(236,439	)
Distributions paid or accrued		(2,586,413	)		-			(22,594,848	)		-			(25,181,261	)		-
Net income (loss) allocable to Partners		2,513,126			-			15,339,411			(781	)		17,851,756			-
Repurchase of Beneficial Unit Certificates		-			(238,936	)		(1,409,726	)		-			(1,409,726	)		-
Restricted units awarded		-			238,936			-			-			-			-
Restricted units compensation expense		311			-			30,739			-			31,050			-
Unrealized gain on securities		427,390			-			42,311,561			-			42,738,951			42,738,951
Unrealized gain on bond purchase commitment		69,883			-			6,918,466			-			6,988,349			6,988,349
Balance at September 30, 2016	$	821,010			60,252,928		$	353,081,792		$	4,705		$	353,907,507		$	110,454,548

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

	For the Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income	$	15,015,398		$	18,160,391
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		4,122,260			5,292,889
Provision for loan loss		(55,000	)		-
Gain on sale of real estate assets		(7,152,512	)		(14,076,902	)
Gain on sale of securities		-			(8,097	)
Non-cash loss on derivatives		369,686			1,378,112
Restricted unit compensation expense		1,160,123			31,050
Bond premium/discount amortization		(113,861	)		(113,923	)
Amortization of deferred financing costs		1,880,236			1,350,200
Deferred income tax expense (benefit)		(374,000	)		417,000
Change in preferred return receivable from unconsolidated entities		(2,176,131	)		(307,165	)
Changes in operating assets and liabilities, net of effect of acquisitions
Increase in interest receivable		(336,710	)		(1,662,253	)
(Increase) decrease in other assets		(231,498	)		133,761
Increase (decrease) in accounts payable and accrued expenses		1,058,638			(827,131	)
Net cash provided by operating activities		13,166,629			9,767,932
Cash flows from investing activities:
Capital expenditures		(290,042	)		(540,602	)
Proceeds from sale of MF Properties		13,750,000			45,850,001
Proceeds from sale of land held for development		3,000,000			-
Proceeds from sale of mortgage revenue bond		-			9,295,000
Proceeds from the sale of MBS Securities		-			14,997,069
Acquisition of mortgage revenue bonds		(72,056,000	)		(20,285,000	)
Contributions to unconsolidated entities		(9,569,227	)		(12,843,042	)
Acquisition of MF Property		-			(9,882,800	)
Restricted cash - debt collateral paid		(585,712	)		(1,589,456	)
Restricted cash - debt collateral released		4,576,407			2,704,840
Decrease in restricted cash		317,658			289,112
Principal payments received on mortgage revenue bonds		4,844,328			6,796,703
Principal payments received on taxable bonds		31,930			527,359
Principal payments received on PHCs		1,610,302			1,584,455
Cash paid for land held for development and deposits on potential purchases		(168,693	)		-
Advances on property loans		(2,376,370	)		(8,414,216	)
Principal payments received on property loans		1,000,000			8,516
Net cash provided by (used in) investing activities		(55,915,419	)		28,497,939
Cash flows from financing activities:
Distributions paid		(25,339,844	)		(26,175,652	)
Proceeds from the sale of redeemable Series A Preferred Units		36,131,000			33,869,000
Payment of offering costs related to the sale of redeemable Series A Preferred Units		(668	)		(63,400	)
Acquisition of interest rate derivatives		(556,017	)		-
Repurchase of beneficial unit certificates		(1,466,222	)		(1,409,726	)
Payment of tax withholding related to restricted unit awards		(153,306	)		-
Distribution to noncontrolling interest		(76,316	)		-
Proceeds from debt financing		135,100,000			134,392,645
Principal payments on debt financing		(36,093,863	)		(128,348,340	)
Principal payments on other secured financing		-			(7,500,000	)
Principal borrowing on mortgages payable		-			7,500,000
Principal payments on mortgages payable		(884,826	)		(17,520,435	)
Principal borrowing on unsecured lines of credit		43,031,000			19,987,639
Principal payments on unsecured and secured lines of credit		(90,560,000	)		(37,484,639	)
Decrease in security deposit liability related to restricted cash		(105,320	)		(94,593	)
Debt financing and other deferred costs		(1,469,234	)		(1,539,150	)
Net cash provided by (used in) financing activities		57,556,384			(24,386,651	)
Net increase in cash and cash equivalents		14,807,594			13,879,220
Cash and cash equivalents at beginning of period		20,748,521			17,035,782
Cash and cash equivalents at end of period	$	35,556,115		$	30,915,002

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	16,158,444		$	11,048,099
Cash paid during the period for income taxes	$	3,007,000		$	-
Supplemental disclosure of noncash investing and financing activities:
Distributions declared but not paid for beneficial unit certificates and general partner	$	7,607,693		$	7,890,161
Distributions declared but not paid for Series A Preferred Units	$	517,500		$	179,851
Land contributed as investment in an unconsolidated entity	$	3,091,023		$	-
Capital expenditures financed through accounts payable	$	76,064		$	12,112
Deferred financing costs financed through accounts payable	$	1,887		$	-
Liabilities assumed in the acquisition of MF Property	$	-		$	135,326

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

America First Multifamily Investors, L.P. (the “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring, holding, selling and otherwise dealing with a portfolio of mortgage revenue bonds (“MRBs”) which have been issued to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. In addition, the Partnership may acquire interests in multifamily, student, and senior citizen residential properties (“MF Properties”) in order to position itself for future investments in MRBs issued to finance these properties or to operate the MF Property until its “highest and best use” can be determined by management.

The general partner of the Partnership is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”). The general partner of AFCA 2 is Burlington Capital LLC (“Burlington”). The Partnership has issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partner interests to investors (“Unitholders”). The Partnership has also issued non-cumulative, non-voting and non-convertible Series A Preferred Units which represent limited partnership interests in the Partnership.

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P. and its wholly-owned subsidiaries. All intercompany transactions are eliminated. At September 30, 2017, the consolidated subsidiaries of the Partnership (the “Consolidated Subsidiaries”) consist of:

Pursuant to the guidance on acquisition accounting, the Partnership allocates the contractual purchase price of a property acquired to the land, building, improvements and leases in existence as of the date of acquisition based on their relative fair values. The building is valued as if vacant. The estimated valuation of in-place leases is calculated by applying a risk-adjusted discount rate to the projected cash flow deficit at each property during an assumed lease-up period for these properties. This allocated cost is amortized over the average remaining term of the leases and is included in the statement of operations under depreciation and amortization expense. The acquisition related costs to acquire a property are expensed as incurred.

The Partnership makes initial investments in and is committed to invest, through ATAX Vantage Holdings, LLC, in certain limited liability companies (“Vantage Properties”). ATAX Vantage Holdings, LLC holds a limited membership interest in the Vantage

Properties. The investments will be used to construct multifamily properties. The Partnership does not have a controlling interest in the Vantage Properties and accounts for its limited partnership interests using the equity method of accounting. The Partnership earns a return on its investment that is guaranteed by an unrelated third party. The term of third-party guarantee is from initial investment date through the second anniversary of construction completion. Due to the third-party guarantee provided, cash flows are expected to be sufficient to pay the Partnership its earned return. As a result, the Partnership records the return on the investment earned as investment income in the Partnership’s condensed consolidated statements of operations.

No provision has been made for income taxes of the Partnership because the Unitholders are required to report their share of the Partnership’s taxable income for federal and state income tax purposes, except for certain entities described below. The Partnership recognizes franchise margin tax expense on revenues in certain jurisdictions relating to MF Properties and Investments in unconsolidated entities.

The Greens Hold Co, a wholly-owned subsidiary of the Partnership, is a corporation subject to federal and state income taxes. The Partnership will recognize income tax expense or benefit for the federal and state income taxes incurred by the Greens Hold Co on the Partnership’s condensed consolidated financial statements.

The Partnership evaluates its tax positions taken in the Partnership’s condensed consolidated financial statements under the interpretation for accounting for uncertainty in income taxes. As such, the Partnership may recognize a tax benefit from an uncertain tax position only if the Partnership believes it is more likely than not that the tax position will be sustained on examination by taxing authorities. The Partnership accrues interest and penalties as incurred within income tax expense.

Deferred income tax expense, or benefit, is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes such as depreciation, amortization of financing costs, etc.) and the utilization of tax net operating losses (“NOL”) generated in prior years that had been previously recognized as deferred income tax assets. The Pa

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)

Large accelerated filer	☐		Accelerated filer	☒
Non- accelerated filer	☐	(do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

Item 1	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Partners’ Capital	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4	Controls and Procedures	58

PART II – OTHER INFORMATION
Item 1A	Risk Factors	59
Item 6	Exhibits	59

SIGNATURES		60