Fa
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-24843
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
(Exact name of registrant as specified in its charter)
Delaware |
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47-0810385 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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1004 Farnam Street, Suite 400 |
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Omaha, Nebraska 68102 |
(Address of principal executive offices) |
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(Zip Code) |
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(402) 444-1630 |
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(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 ☒ 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.
Large accelerated filer |
☐ |
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Accelerated filer |
☒ |
Non- accelerated filer |
☐ |
(do not check if a smaller reporting company) |
Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
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 ☒
PART I – FINANCIAL INFORMATION
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2 |
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2 |
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3 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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4 |
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5 |
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6 |
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7 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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39 |
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56 |
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58 |
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PART II – OTHER INFORMATION |
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59 |
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59 |
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60 |
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:
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current maturities of our financing arrangements and our ability to renew or refinance such financing arrangements; |
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• |
defaults on the mortgage loans securing our mortgage revenue bonds (“MRBs”); |
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the competitive environment in which we operate; |
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• |
risks associated with investing in multifamily, student, senior citizen residential and commercial properties, including changes in business conditions and the general economy; |
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• |
changes in interest rates; |
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• |
our ability to use borrowings to finance our assets; |
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local, regional, national and international economic and credit market conditions; |
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recapture of previously issued Low Income Housing Tax Credits (“LIHTCs”) in accordance with Section 42 of the Internal Revenue Code; |
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changes in the United States Department of Housing and Urban Development’s Capital Fund Program (“HUD”); |
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geographic and developer concentration within the MRB portfolio held by the Partnership; |
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• |
appropriations risk related to funding of Federal housing programs, including HUD Section 8; and |
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• |
changes in the U.S. corporate tax code and other 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 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.
PART I - FINANCIAL INFORMATION
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, 2017 |
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December 31, 2016 |
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Unaudited |
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Assets |
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Cash and cash equivalents |
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$ |
35,556,115 |
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$ |
20,748,521 |
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Restricted cash |
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2,449,346 |
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6,757,699 |
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Interest receivable, net |
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7,319,913 |
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6,983,203 |
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Mortgage revenue bonds held in trust, at fair value (Note 6) |
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739,967,192 |
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590,194,179 |
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Mortgage revenue bonds, at fair value (Note 6) |
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39,346,686 |
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90,016,872 |
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Public housing capital fund trusts, at fair value (Note 7) |
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54,913,748 |
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57,158,068 |
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Real estate assets: (Note 8) |
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Land and improvements |
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10,798,832 |
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17,354,587 |
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Buildings and improvements |
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105,323,268 |
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113,089,041 |
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Real estate assets before accumulated depreciation |
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116,122,100 |
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130,443,628 |
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Accumulated depreciation |
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(17,623,467 |
) |
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(16,217,028 |
) |
Net real estate assets |
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98,498,633 |
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114,226,600 |
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Investment in unconsolidated entities (Note 9) |
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34,335,649 |
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19,470,006 |
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Property loans, net of loan loss allowance (Note 10) |
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31,194,704 |
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29,763,334 |
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Other assets (Note 12) |
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9,613,734 |
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8,795,192 |
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Total Assets |
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$ |
1,053,195,720 |
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$ |
944,113,674 |
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Liabilities |
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Accounts payable, accrued expenses and other liabilities |
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$ |
8,297,418 |
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$ |
7,255,327 |
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Distribution payable |
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7,607,693 |
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8,017,950 |
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Unsecured lines of credit (Note 13) |
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12,471,000 |
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40,000,000 |
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Secured line of credit, net (Note 14) |
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- |
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19,816,667 |
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Debt financing, net (Note 15) |
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594,635,819 |
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495,383,033 |
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Mortgages payable and other secured financing, net (Note 16) |
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50,579,400 |
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51,379,512 |
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Derivative swaps, at fair value (Note 17) |
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1,196,701 |
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1,339,283 |
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Total Liabilities |
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674,788,031 |
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623,191,772 |
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Commitments and Contingencies (Note 18) |
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Redeemable Series A preferred units, approximately $77.0 and $40.9 million redemption value, 10.0 million authorized, 7.7 million and 4.1 million issued and outstanding, respectively (Note 19) |
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76,855,492 |
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40,788,034 |
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Partnersʼ Capital |
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General Partner (Note 1) |
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331,429 |
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102,536 |
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Beneficial Unit Certificate holders |
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301,220,768 |
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280,026,669 |
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Total Partnersʼ Capital |
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301,552,197 |
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280,129,205 |
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Noncontrolling interest |
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- |
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4,663 |
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Total Capital |
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301,552,197 |
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280,133,868 |
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Total Liabilities and Partnersʼ Capital |
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$ |
1,053,195,720 |
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$ |
944,113,674 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
2
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Revenues: |
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Property revenues |
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$ |
3,244,440 |
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$ |
3,414,788 |
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$ |
10,280,940 |
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$ |
13,483,760 |
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Investment income |
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12,242,533 |
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9,071,460 |
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35,886,934 |
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27,238,601 |
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Contingent interest income |
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- |
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90,000 |
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219,217 |
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309,396 |
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Other interest income |
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735,123 |
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645,691 |
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2,047,056 |
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2,043,162 |
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Other income |
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12,734 |
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- |
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75,371 |
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|
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- |
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Total revenues |
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16,234,830 |
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|
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13,221,939 |
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48,509,518 |
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43,074,919 |
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Expenses: |
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Real estate operating (exclusive of items shown below) |
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2,225,845 |
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2,252,939 |
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6,331,145 |
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7,259,071 |
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Impairment charge |
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- |
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- |
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- |
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61,506 |
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Depreciation and amortization |
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1,259,055 |
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1,361,259 |
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4,122,260 |
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5,292,889 |
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Amortization of deferred financing costs |
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577,413 |
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425,520 |
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1,880,236 |
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1,350,200 |
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Interest expense |
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5,714,181 |
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3,485,172 |
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16,997,761 |
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12,577,361 |
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General and administrative |
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3,197,853 |
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2,377,148 |
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9,205,183 |
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7,474,500 |
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Total expenses |
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12,974,347 |
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9,902,038 |
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38,536,585 |
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34,015,527 |
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Other Income: |
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|
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Gain (loss) on sale of real estate assets |
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- |
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1,633,973 |
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7,152,512 |
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14,076,902 |
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Gain on sale of securities |
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- |
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|
|
- |
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|
|
- |
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8,097 |
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Income before income taxes |
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|
3,260,483 |
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|
|
4,953,874 |
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|
17,125,445 |
|
|
|
23,144,391 |
|
Income tax expense (benefit) |
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|
(285,000 |
) |
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|
331,000 |
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|
|
2,110,047 |
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|
|
4,984,000 |
|
Net income |
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|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Net income (loss) available to Partners and noncontrolling interest allocated to: |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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): |
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|
|
|
|
|
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|
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Net income per unit, basic and diluted |
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$ |
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.
3
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
|
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.
4
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 and 2016
(UNAUDITED)
|
|
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.
5
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
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.
6
AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(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 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.
2. Summary of Significant Accounting Policies
Consolidation
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:
|
• |
ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the Tax Exempt Bond Securitization (“TEBS”) Financing (“M24 TEBS Financing”) with Freddie Mac. |
|
• |
ATAX TEBS II, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the second TEBS Financing, (“M31 TEBS Financing”) with Freddie Mac. |
|
• |
ATAX TEBS III, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the third TEBS Financing (“M33 TEBS Financing”), with Freddie Mac. |
|
• |
ATAX Vantage Holdings, LLC, a wholly owned subsidiary of the Partnership, committed to loan money or provide equity for the development of multifamily properties. |
|
• |
Four MF Properties are owned by a wholly-owned corporation (“the Greens Hold Co”). The Greens Hold Co held a 99% limited partnership interest in the northern View MF Property until its sale in March 2017. |
|
• |
One MF Property is owned by a wholly-owned subsidiary of the Partnership and one MF Property is owned directly by the Partnership. |
Acquisition Accounting
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.
Investment in unconsolidated entities
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
7
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.
Income Taxes
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 Partnership fully utilized its NOL carryforwards during 2016. The Partnership records a valuation allowance for deferred income tax assets if it believes all, or some portion, of the deferred income tax asset may not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances that causes a change in the estimated ability to realize the related deferred income tax asset is included in deferred income tax expense.
Restricted Unit Awards (“RUAs”)
The Partnership’s 2015 Equity Incentive Plan (the “Plan”), as approved by the Unitholders in September 2015, permits the grant of Restricted Units and other awards to the employees of Burlington, the Partnership, or any affiliate of either, and members of Burlington’s Board of Managers for up to 3.0 million BUCs. RUAs are generally granted with vesting conditions ranging from three months to three years. RUAs currently provide for the payment of quarterly distributions during the restriction period. The RUAs provide for accelerated vesting if there is a change in control or upon death or disability of the Participant. The Partnership accounts for forfeitures when they occur.
The fair value of each RUA is estimated on the grant date based on the Partnership’s exchange-listed closing price of the BUCs. The Partnership recognizes compensation expense for the RUAs on a straight-line basis over the requisite vesting period. The Partnership will account for modifications to RUAs as they occur if the fair value of the RUAs change, there are changes to vesting conditions or the awards no longer qualify for equity classification.
Estimates and assumptions
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“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 in accordance with 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 in accordance with 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 Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016. These condensed
8
consolidated financial statements and notes have been prepared consistently with the 2016 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the financial position at September 30, 2017, 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. The condensed consolidated balance sheet at December 31, 2016, was derived from audited annual financial statements, but does not contain all the footnote disclosures from the annual consolidated financial statements.
Recently Issued Accounting Pronouncements
In March 2017, the FASB issued ASU 2017-08. The ASU requires that premiums on purchased callable debt securities be amortized as a yield adjustment to the earliest call date. Previously, premiums were required to be amortized as a yield adjustment to maturity. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. The standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The Partnership is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05. The ASU eliminates guidance specific to real estate sales in Accounting Standards Codification 360-20. As such, sales and partial sales of real estate assets will now be subject to the same derecognition model as all other nonfinancial assets. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period. The effective date of this guidance coincides with revenue recognition guidance. The Partnership is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations; Clarifying the Definition of a Business.” The ASU modifies the requirements to meet the definition of a business under Topic 805, “Business Combinations.” The amendments provide a screen to determine when a set of identifiable assets and liabilities is not a business. The screen requires that when substantially all the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. The impact is expected to result in fewer transactions being accounted for as business combinations. The ASU is effective for the Partnership for fiscal years beginning after December 15, 2017 and is applied prospectively. It is expected that the new standard would reduce the number of future real estate acquisitions that will be accounted for as business combinations and, therefore, reduce the amount of acquisition costs that will be expensed.
In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows; Restricted Cash.” The ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2017 and is applied retrospectively. The Partnership is currently assessing the impact this standard will have on its condensed consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230).” The ASU clarifies the presentation of cash receipts and cash payments related to certain transactions. The ASU is effective for the Partnership for fiscal years beginning after December 15, 2017 and is applied retrospectively. The Partnership is currently assessing the impact of the adoption of this pronouncement on the condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The ASU enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better inform credit loss estimates. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2019 and is applied under a modified-retrospective approach. The Partnership is currently assessing the impact of the adoption of this pronouncement on the condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The ASU requires the recognition of right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The ASU offers specific accounting guidance for embedded lease arrangements, lease terms and incentives, sale-leaseback agreements, and related disclosures. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2018 and requires a modified retrospective adoption, with early adoption permitted. The Partnership has performed a preliminary assessment of its lessor and lessee leasing arrangements. Lessor arrangements with tenants at the MF Properties are not expected to be materially impacted by adoption of the standard as substantially all leases are for terms of 12 months or less. The Partnership has four lessee arrangements for which it is assessing the quantitative and qualitative impact of the standard. The Partnership has not elected early adoption of the standard as of September 30, 2017 and is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
9
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments Overall (Subtopic 825-10).” The ASU simplifies and clarifies the recognition, measurement, presentation, and disclosure of financial instruments. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2017. The Partnership continues to assess the impact of the adoption of this standard but preliminarily does not believe adoption will have a material impact on the Partnership’s condensed consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. During 2016, the FASB issued ASU Nos. 2016-10, 2016-12 and 2016-20 that provide additional guidance related to the identification of performance obligations within a contract, assessing collectability, contract costs, and other technical corrections and improvements. The Partnership expects to use the modified retrospective transition method and will adopt the standard effective January 1, 2018. The Partnership has completed an assessment of its revenue streams and performance obligations and is currently evaluating the quantitative and qualitative impacts of the new standard on the business. The Partnership has determined that revenues within investment income, contingent interest income, other interest income are not within the scope of this standard. Furthermore, the majority of property revenues are within the scope of the Lease ASU and outside the scope of the Revenue ASU. The Partnership believes the new standard will only impact property revenues related to non-lease revenue streams and certain provisions that apply to gains on sale of real estate assets. The impact to non-lease revenue streams within the scope of this standard is immaterial to the condensed consolidated financial statements.
3. Partnership Income, Expenses and Cash Distributions
The Partnership’s Amended and Restated Agreement of Limited Partnership (the “Amended and Restated LP Agreement”) 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 on that date. For purposes of the Amended and Restated LP Agreement, cash distributions, if any, received by the Partnership from its investment in MF Properties will be included in the Partnership’s Net Interest Income and cash distributions received by the Partnership from the sale of such properties will be included in the Partnership’s Net Residual Proceeds.
Series A Preferred Units were created pursuant to the First Amendment to the Amended and Restated LP Agreement (the “First Amendment”), which became effective on March 30, 2016. The holders of the Series A Preferred Units are entitled to distributions at a fixed rate prior to payment of distributions to other Unitholders.
Cash distributions are currently made on a quarterly basis. AFCA 2 can elect to make distributions on a monthly or semi-annual basis. On each distribution date, Net Interest Income is distributed 99% to the limited partners and Unitholders as a class and 1% to AFCA 2 and Net Residual Proceeds are distributed 100% to the limited partners and Unitholders as a class, 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 MRBs on a cumulative basis (defined as Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2), respectively) are distributed 75% to the limited partners and Unitholders as a class and 25% to AFCA 2.
4. Net income per BUC
The Partnership has disclosed basic and diluted net income per BUC on the condensed consolidated statements of operations. The unvested RUAs issued under the Plan are considered participating securities. The Partnership uses the two-class method to allocate net income available to BUCs and the unvested Restricted Units. Unvested Restricted Units are included with BUCs for the calculation of diluted net income per BUC using the treasury stock method, if the treasury stock method is more dilutive than the two-class method.
5. Variable Interest Entities
Consolidated Variable Interest Entities (“VIEs”)
The Partnership determined the TOB Trusts, Term A/B Trusts and TEBS Financings are VIEs and the Partnership is the primary beneficiary. As such, the Partnership reports the TOB Trusts, Term A/B Trusts and TEBS Financings on a consolidated basis. The
10
Partnership reports the senior floating-rate participation interests (“SPEARS”) related to the TOB Trusts and the Class A Certificates for both the Term A/B Trusts and TEBS Financings as secured debt financings on the condensed consolidated balance sheets. The MRBs secured by the TOB Trusts, Term A/B Trusts and TEBS Financings are reported as assets on the condensed consolidated balance sheets. In determining the primary beneficiary of these specific VIEs, the Partnership considered which party 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 executed agreements related to the TOB Trusts, Term A/B Trusts and TEBS Financings stipulate the Partnership has the sole right to cause the Trusts to sell the underlying assets. If they were sold, the extent to which the VIEs will be exposed to gains or losses would result from decisions made by the Partnership.
Non-Consolidated VIEs
The Partnership has variable interests in certain entities that are the borrowers on the Partnership’s MRBs and/or property loans. The Partnership has no equity ownership interest in the entities, but the MRBs and property loans issued by the Partnership are considered variable interests. In addition, the Partnership’s investments in unconsolidated entities are considered variable interests. The Partnership does not have the power to direct the activities that most significantly impact the economic performance of such VIEs. As a result, the Partnership is not considered the primary beneficiary and does not consolidate the financial statements of these entities in the condensed consolidated financial statements.
The Partnership held variable interests in 21 and 20 non-consolidated VIEs at September 30, 2017 and December 31, 2016, respectively. The following table summarizes information regarding the Partnership’s variable interests in these entities at September 30, 2017 and December 31, 2016:
|
|
Maximum Exposure to Loss |
|
|||||
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
Mortgage revenue bonds |
|
$ |
144,529,000 |
|
|
$ |
137,921,000 |
|
Property loans |
|
|
17,369,365 |
|
|
|
16,476,073 |
|
Investment in unconsolidated entities |
|
|
34,335,649 |
|
|
|
19,470,006 |
|
|
|
$ |
196,234,014 |
|
|
$ |
173,867,079 |
|
The maximum exposure to loss for the MRBs is equal to the cost adjusted for paydowns at September 30, 2017 and December 31, 2016. The difference between a MRB’s carrying value on the condensed consolidated balance sheets and the maximum exposure to loss is a function of the unrealized gains or losses on the MRB.
The maximum exposure to loss on the property loans at September 30, 2017 and December 31, 2016 is equal to the unpaid principal balance plus accrued interest. The difference between a property loans’ carrying value and the maximum exposure is the value of loan loss allowances that have been previously recorded against the property loans.
11
6. Investments in Mortgage Revenue Bonds (“MRBs”)
MRBs owned by the Partnership have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties. MRBs are either held directly by the Partnership or are held in trusts created in connection with debt financing transactions (Note 15). The Partnership had the following investments in MRBs at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017 |
|
|||||||||||||||
Description of Mortgage Revenue Bonds Held in Trust |
|
State |
|
Cost Adjusted for Paydowns |
|
|
Cumulative Unrealized Gain |
|
|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
||||
Courtyard - Series A & B (2) |
|
CA |
|
$ |
16,458,000 |
|
|
$ |
1,138,145 |
|
|
$ |
- |
|
|
$ |
17,596,145 |
|
Glenview Apartments - Series A (4) |
|
CA |
|
|
4,638,152 |
|
|
|
640,243 |
|
|
|
- |
|
|
|
5,278,395 |
|
Harmony Court Bakersfield - Series A & B (2) |
|
CA |
|
|
3,730,000 |
|
|
|
398,115 |
|
|
|
- |
|
|
|
4,128,115 |
|
Harmony Terrace - Series A & B (2) |
|
CA |
|
|
14,300,000 |
|
|
|
812,807 |
|
|
|
- |
|
|
|
15,112,807 |
|
Harden Ranch - Series A (3) |
|
CA |
|
|
6,862,983 |
|
|
|
1,086,331 |
|
|
|
- |
|
|
|
7,949,314 |
|
Las Palmas II - Series A & B (2) |
|
CA |
|
|
3,465,000 |
|
|
|
179,028 |
|
|
|
- |
|
|
|
3,644,028 |
|
Montclair Apartments - Series A (4) |
|
CA |
|
|
2,512,746 |
|
|
|
401,052 |
|
|
|
- |
|
|
|
2,913,798 |
|
San Vicente - Series A & B (2) |
|
CA |
|
|
5,320,000 |
|
|
|
279,275 |
|
|
|
- |
|
|
|
5,599,275 |
|
Santa Fe Apartments - Series A (4) |
|
CA |
|
|
3,044,098 |
|
|
|
525,978 |
|
|
|
- |
|
|
|
3,570,076 |
|
Seasons at Simi Valley - Series A (2) |
|
CA |
|
|
4,376,000 |
|
|
|
784,070 |
|
|
|
- |
|
|
|
5,160,070 |
|
Seasons Lakewood - Series A & B (2) |
|
CA |
|
|
12,610,000 |
|
|
|
822,322 |
|
|
|
- |
|
|
|
13,432,322 |
|
Seasons San Juan Capistrano - Series A & B (2) |
|
CA |
|
|
18,949,000 |
|
|
|
1,127,068 |
|
|
|
- |
|
|
|
20,076,068 |
|
Summerhill - Series A & B (2) |
|
CA |
|
|
9,795,000 |
|
|
|
684,808 |
|
|
|
- |
|
|
|
10,479,808 |
|
Sycamore Walk - Series A (2) |
|
CA |
|
|
3,632,000 |
|
|
|
466,553 |
|
|
|
- |
|
|
|
4,098,553 |
|
The Village at Madera - Series A & B (2) |
|
CA |
|
|
4,804,000 |
|
|
|
311,708 |
|
|
|
- |
|
|
|
5,115,708 |
|
Tyler Park Townhomes - Series A (3) |
|
CA |
|
|
5,980,454 |
|
|
|
877,348 |
|
|
|
- |
|
|
|
6,857,802 |
|
Westside Village Market - Series A (3) |
|
CA |
|
|
3,908,215 |
|
|
|
604,569 |
|
|
|
- |
|
|
|
4,512,784 |
|
Lake Forest (1) |
|
FL |
|
|
8,540,000 |
|
|
|
1,485,248 |
|
|
|
- |
|
|
|
10,025,248 |
|
Ashley Square (1) |
|
IA |
|
|
4,994,000 |
|
|
|
13,538 |
|
|
|
- |
|
|
|
5,007,538 |
|
Brookstone (1) |
|
IL |
|
|
7,454,205 |
|
|
|
2,113,460 |
|
|
|
- |
|
|
|
9,567,665 |
|
Copper Gate Apartments (3) |
|
IN |
|
|
5,145,000 |
|
|
|
867,844 |
|
|
|
- |
|
|
|
6,012,844 |
|
Renaissance - Series A (4) |
|
LA |
|
|
11,267,286 |
|
|
|
1,628,900 |
|
|
|
- |
|
|
|
12,896,186 |
|
Live 929 Apartments (2) |
|
MD |
|
|
40,594,362 |
|
|
|
3,961,295 |
|
|
|
- |
|
|
|
44,555,657 |
|
Woodlynn Village (1) |
|
MN |
|
|
4,289,000 |
|
|
|
10,736 |
|
|
|
- |
|
|
|
4,299,736 |
|
Greens Property - Series A (3) |
|
NC |
|
|
8,147,000 |
|
|
|
1,230,615 |
|
|
|
- |
|
|
|
9,377,615 |
|
Silver Moon - Series A (4) |
|
NM |
|
|
7,893,310 |
|
|
|
1,079,738 |
|
|
|
- |
|
|
|
8,973,048 |
|
Ohio Properties - Series A (1) |
|
OH |
|
|
14,140,000 |
|
|
|
996,412 |
|
|
|
- |
|
|
|
15,136,412 |
|
Bridle Ridge (1) |
|
SC |
|
|
7,465,000 |
|
|
|
57,667 |
|
|
|
- |
|
|
|
7,522,667 |
|
Columbia Gardens (2) |
|
SC |
|
|
15,175,444 |
|
|
|
498,008 |
|
|
|
- |
|
|
|
15,673,452 |
|
Companion at Thornhill Apartments (2) |
|
SC |
|
|
11,431,237 |
|
|
|
1,314,765 |
|
|
|
- |
|
|
|
12,746,002 |
|
Cross Creek (1) |
|
SC |
|
|
6,133,621 |
|
|
|
3,014,744 |
|
|
|
- |
|
|
|
9,148,365 |
|
The Palms at Premier Park Apartments (3) |
|
SC |
|
|
19,284,860 |
|
|
|
2,938,148 |
|
|
|
- |
|
|
|
22,223,008 |
|
Willow Run (2) |
|
SC |
|
|
15,176,206 |
|
|
|
135,745 |
|
|
|
- |
|
|
|
15,311,951 |
|
Arbors at Hickory Ridge (3) |
|
TN |
|
|
11,372,772 |
|
|
|
1,655,828 |
|
|
|
- |
|
|
|
13,028,600 |
|
Pro Nova 2014-1 (2) |
|
TN |
|
|
10,039,648 |
|
|
|
193,874 |
|
|
|
- |
|
|
|
10,233,522 |
|
Avistar at Chase Hill - Series A (3) |
|
TX |
|
|
9,773,429 |
|
|
|
- |
|
|
|
(280,678 |
) |
|
|
9,492,751 |
|
Avistar at Copperfield - Series A (2) |
|
TX |
|
|
10,000,000 |
|
|
|
423,447 |
|
|
|
- |
|
|
|
10,423,447 |
|
Avistar at the Crest - Series A (3) |
|
TX |
|
|
9,480,225 |
|
|
|
1,021,050 |
|
|
|
- |
|
|
|
10,501,275 |
|
Avistar at the Oaks - Series A (3) |
|
TX |
|
|
7,654,594 |
|
|
|
880,439 |
|
|
|
- |
|
|
|
8,535,033 |
|
Avistar at the Parkway - Series A (4) |
|
TX |
|
|
13,262,378 |
|
|
|
908,602 |
|
|
|
- |
|
|
|
14,170,980 |
|
Avistar at Wilcrest - Series A (2) |
|
TX |
|
|
3,775,000 |
|
|
|
207,425 |
|
|
|
- |
|
|
|
3,982,425 |
|
Avistar at Wood Hollow - Series A (2) |
|
TX |
|
|
31,850,000 |
|
|
|
1,348,678 |
|
|
|
- |
|
|
|
33,198,678 |
|
Avistar in 09 - Series A (3) |
|
TX |
|
|
6,609,446 |
|
|
|
666,232 |
|
|
|
- |
|
|
|
7,275,678 |
|
Avistar on the Boulevard - Series A (3) |
|
TX |
|
|
16,150,587 |
|
|
|
1,664,812 |
|
|
|
- |
|
|
|
17,815,399 |
|
Avistar on the Hills - Series A (3) |
|
TX |
|
|
5,288,542 |
|
|
|
608,293 |
|
|
|
- |
|
|
|
5,896,835 |
|
Bella Vista (1) |
|
TX |
|
|
6,295,000 |
|
|
|
100,991 |
|
|
|
- |
|
|
|
6,395,991 |
|
Bruton Apartments (2) |
|
TX |
|
|
18,080,240 |
|
|
|
2,607,782 |
|
|
|
- |
|
|
|
20,688,022 |
|
Concord at Gulfgate - Series A (2) |
|
TX |
|
|
19,185,000 |
|
|
|
2,611,745 |
|
|
|
- |
|
|
|
21,796,745 |
|
Concord at Little York - Series A (2) |
|
TX |
|
|
13,440,000 |
|
|
|
1,896,349 |
|
|
|
- |
|
|
|
15,336,349 |
|
Concord at Williamcrest - Series A (2) |
|
TX |
|
|
20,820,000 |
|
|
|
2,834,325 |
|
|
|
- |
|
|
|
23,654,325 |
|
Crossing at 1415 - Series A (2) |
|
TX |
|
|
7,590,000 |
|
|
|
295,343 |
|
|
|
- |
|
|
|
7,885,343 |
|
Decatur Angle (2) |
|
TX |
|
|
22,834,591 |
|
|
|
2,518,998 |
|
|
|
- |
|
|
|
25,353,589 |
|
Heights at 515 - Series A (2) |
|
TX |
|
|
6,435,000 |
|
|
|
329,490 |
|
|
|
- |
|
|
|
6,764,490 |
|
Heritage Square - Series A (4) |
|
TX |
|
|
11,088,157 |
|
|
|
989,114 |
|
|
|
- |
|
|
|
12,077,271 |
|
Oaks at Georgetown - Series A & B (2) |
|
TX |
|
|
17,842,000 |
|
|
|
808,259 |
|
|
|
- |
|
|
|
18,650,259 |
|
Runnymede (1) |
|
TX |
|
|
10,200,000 |
|
|
|
168,797 |
|
|
|
- |
|
|
|
10,368,797 |
|
Southpark (1) |
|
TX |
|
|
11,809,069 |
|
|
|
3,192,305 |
|
|
|
- |
|
|
|
15,001,374 |
|
Vantage at Harlingen - Series B (4) |
|
TX |
|
|
24,379,208 |
|
|
|
1,921,472 |
|
|
|
- |
|
|
|
26,300,680 |
|
Vantage at Judson -Series B (4) |
|
TX |
|
|
26,187,732 |
|
|
|
3,403,014 |
|
|
|
- |
|
|
|
29,590,746 |
|
15 West Apartments (2) |
|
WA |
|
|
9,812,357 |
|
|
|
1,733,769 |
|
|
|
- |
|
|
|
11,546,126 |
|
Mortgage revenue bonds held in trust |
|
|
|
$ |
672,771,154 |
|
|
$ |
67,476,716 |
|
|
$ |
(280,678 |
) |
|
$ |
739,967,192 |
|
(1) |
MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 15 |
12
(2) |
MRBs held by Deutsche Bank in a secured financing transaction, Note 15 |
(3) |
MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 15 |
(4) |
MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 15 |
|
|
September 30, 2017 |
|
|||||||||||||||
Description of Mortgage Revenue Bonds held by the Partnership |
|
State |
|
Cost Adjusted for Paydowns |
|
|
Cumulative Unrealized Gain |
|
|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
||||
Montecito at Williams Ranch Apartments - Series A & B |
|
CA |
|
$ |
12,471,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
12,471,000 |
|
Seasons at Simi Valley - Series B |
|
CA |
|
|
1,944,000 |
|
|
|
84 |
|
|
|
- |
|
|
|
1,944,084 |
|
Sycamore Walk - Series B |
|
CA |
|
|
1,815,000 |
|
|
|
- |
|
|
|
(1,078 |
) |
|
|
1,813,922 |
|
Greens Property - Series B |
|
NC |
|
|
938,204 |
|
|
|
211,542 |
|
|
|
- |
|
|
|
1,149,746 |
|
Ohio Properties - Series B |
|
OH |
|
|
3,539,619 |
|
|
|
192,655 |
|
|
|
- |
|
|
|
3,732,274 |
|
Avistar at Chase Hill - Series B |
|
TX |
|
|
954,095 |
|
|
|
- |
|
|
|
(56,474 |
) |
|
|
897,621 |
|
Avistar at Copperfield - Series B |
|
TX |
|
|
4,000,000 |
|
|
|
12,278 |
|
|
|
- |
|
|
|
4,012,278 |
|
Avistar at the Crest - Series B |
|
TX |
|
|
750,423 |
|
|
|
47,206 |
|
|
|
- |
|
|
|
797,629 |
|
Avistar at the Oaks - Series B |
|
TX |
|
|
548,883 |
|
|
|
33,008 |
|
|
|
- |
|
|
|
581,891 |
|
Avistar at the Parkway - Series B |
|
TX |
|
|
124,922 |
|
|
|
30,779 |
|
|
|
- |
|
|
|
155,701 |
|
Avistar at Wilcrest - Series B |
|
TX |
|
|
1,550,000 |
|
|
|
4,816 |
|
|
|
- |
|
|
|
1,554,816 |
|
Avistar at Wood Hollow - Series B |
|
TX |
|
|
8,410,000 |
|
|
|
27,395 |
|
|
|
- |
|
|
|
8,437,395 |
|
Avistar in 09 - Series B |
|
TX |
|
|
452,779 |
|
|
|
25,439 |
|
|
|
- |
|
|
|
478,218 |
|
Avistar on the Boulevard - Series B |
|
TX |
|
|
445,904 |
|
|
|
26,313 |
|
|
|
- |
|
|
|
472,217 |
|
Crossing at 1415 - Series B |
|
TX |
|
|
335,000 |
|
|
|
1,079 |
|
|
|
- |
|
|
|
336,079 |
|
Heights at 515 - Series B |
|
TX |
|
|
510,000 |
|
|
|
1,815 |
|
|
|
- |
|
|
|
511,815 |
|
Mortgage revenue bonds held by the Partnership |
|
|
|
$ |
38,789,829 |
|
|
$ |
614,409 |
|
|
$ |
(57,552 |
) |
|
$ |
39,346,686 |
|
13
|
|
December 31, 2016 |
|
|||||||||||||||
Description of Mortgage Revenue Bonds Held in Trust |
|
State |
|
Cost Adjusted for Paydowns |
|
|
Cumulative Unrealized Gain |
|
|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
||||
Glenview Apartments - Series A (4) |
|
CA |
|
$ |
4,670,000 |
|
|
$ |
132,402 |
|
|
$ |
- |
|
|
$ |
4,802,402 |
|
Harmony Terrace - Series A & B (2) |
|
CA |
|
|
14,300,000 |
|
|
|
- |
|
|
|
- |
|
|
|
14,300,000 |
|
Harden Ranch - Series A (3) |
|
CA |
|
|
6,912,535 |
|
|
|
369,738 |
|
|
|
- |
|
|
|
7,282,273 |
|
Montclair Apartments - Series A (4) |
|
CA |
|
|
2,530,000 |
|
|
|
108,608 |
|
|
|
- |
|
|
|
2,638,608 |
|
Santa Fe Apartments - Series A (4) |
|
CA |
|
|
3,065,000 |
|
|
|
177,093 |
|
|
|
- |
|
|
|
3,242,093 |
|
Seasons at Simi Valley - Series A (2) |
|
CA |
|
|
4,376,000 |
|
|
|
308,335 |
|
|
|
- |
|
|
|
4,684,335 |
|
Sycamore Walk - Series A (2) |
|
CA |
|
|
3,632,000 |
|
|
|
130,431 |
|
|
|
- |
|
|
|
3,762,431 |
|
Tyler Park Townhomes - Series A (3) |
|
CA |
|
|
6,024,120 |
|
|
|
237,582 |
|
|
|
- |
|
|
|
6,261,702 |
|
Westside Village Market - Series A (3) |
|
CA |
|
|
3,936,750 |
|
|
|
102,641 |
|
|
|
- |
|
|
|
4,039,391 |
|
Lake Forest (1) |
|
FL |
|
|
8,639,000 |
|
|
|
899,694 |
|
|
|
- |
|
|
|
9,538,694 |
|
Ashley Square (1) |
|
IA |
|
|
5,039,000 |
|
|
|
338,556 |
|
|
|
- |
|
|
|
5,377,556 |
|
Brookstone (1) |
|
IL |
|
|
7,462,678 |
|
|
|
1,457,340 |
|
|
|
- |
|
|
|
8,920,018 |
|
Copper Gate Apartments (3) |
|
IN |
|
|
5,145,000 |
|
|
|
528,855 |
|
|
|
- |
|
|
|
5,673,855 |
|
Renaissance - Series A (4) |
|
LA |
|
|
11,348,364 |
|
|
|
826,369 |
|
|
|
- |
|
|
|
12,174,733 |
|
Live 929 Apartments (2) |
|
MD |
|
|
40,687,425 |
|
|
|
3,587,993 |
|
|
|
- |
|
|
|
44,275,418 |
|
Woodlynn Village (1) |
|
MN |
|
|
4,310,000 |
|
|
|
294,976 |
|
|
|
- |
|
|
|
4,604,976 |
|
Greens Property - Series A (3) |
|
NC |
|
|
8,210,000 |
|
|
|
844,585 |
|
|
|
- |
|
|
|
9,054,585 |
|
Silver Moon - Series A (4) |
|
NM |
|
|
7,933,259 |
|
|
|
465,382 |
|
|
|
- |
|
|
|
8,398,641 |
|
Ohio Properties - Series A (1) |
|
OH |
|
|
14,215,000 |
|
|
|
2,327,468 |
|
|
|
- |
|
|
|
16,542,468 |
|
Bridle Ridge (1) |
|
SC |
|
|
7,535,000 |
|
|
|
517,881 |
|
|
|
- |
|
|
|
8,052,881 |
|
Columbia Gardens (2) |
|
SC |
|
|
15,214,223 |
|
|
|
- |
|
|
|
(927,030 |
) |
|
|
14,287,193 |
|
Companion at Thornhill Apartments (2) |
|
SC |
|
|
11,500,000 |
|
|
|
645,552 |
|
|
|
- |
|
|
|
12,145,552 |
|
Cross Creek (1) |
|
SC |
|
|
6,122,312 |
|
|
|
2,655,730 |
|
|
|
- |
|
|
|
8,778,042 |
|
The Palms at Premier Park Apartments (3) |
|
SC |
|
|
19,826,716 |
|
|
|
1,784,386 |
|
|
|
- |
|
|
|
21,611,102 |
|
Willow Run (2) |
|
SC |
|
|
15,214,085 |
|
|
|
- |
|
|
|
(917,852 |
) |
|
|
14,296,233 |
|
Arbors at Hickory Ridge (3) |
|
TN |
|
|
11,461,719 |
|
|
|
891,274 |
|
|
|
- |
|
|
|
12,352,993 |
|
Pro Nova 2014-1 (2) |
|
TN |
|
|
10,041,924 |
|
|
|
685,576 |
|
|
|
- |
|
|
|
10,727,500 |
|
Avistar at Chase Hill - Series A (3) |
|
TX |
|
|
9,844,994 |
|
|
|
589,023 |
|
|
|
- |
|
|
|
10,434,017 |
|
Avistar at the Crest - Series A (3) |
|
TX |
|
|
9,549,644 |
|
|
|
753,267 |
|
|
|
- |
|
|
|
10,302,911 |
|
Avistar at the Oaks - Series A (3) |
|
TX |
|
|
7,709,040 |
|
|
|
563,138 |
|
|
|
- |
|
|
|
8,272,178 |
|
Avistar at the Parkway - Series A (4) |
|
TX |
|
|
13,300,000 |
|
|
|
- |
|
|
|
(78,749 |
) |
|
|
13,221,251 |
|
Avistar in 09 - Series A (3) |
|
TX |
|
|
6,656,458 |
|
|
|
359,562 |
|
|
|
- |
|
|
|
7,016,020 |
|
Avistar on the Boulevard - Series A (3) |
|
TX |
|
|
16,268,850 |
|
|
|
1,283,272 |
|
|
|
- |
|
|
|
17,552,122 |
|
Avistar on the Hills - Series A (3) |
|
TX |
|
|
5,326,157 |
|
|
|
423,496 |
|
|
|
- |
|
|
|
5,749,653 |
|
Bella Vista (1) |
|
TX |
|
|
6,365,000 |
|
|
|
500,162 |
|
|
|
- |
|
|
|
6,865,162 |
|
Bruton Apartments (2) |
|
TX |
|
|
18,145,000 |
|
|
|
349,886 |
|
|
|
- |
|
|
|
18,494,886 |
|
Concord at Gulfgate - Series A (2) |
|
TX |
|
|
19,185,000 |
|
|
|
1,200,246 |
|
|
|
- |
|
|
|
20,385,246 |
|
Concord at Little York - Series A (2) |
|
TX |
|
|
13,440,000 |
|
|
|
1,044,752 |
|
|
|
- |
|
|
|
14,484,752 |
|
Concord at Williamcrest - Series A (2) |
|
TX |
|
|
20,820,000 |
|
|
|
1,302,534 |
|
|
|
- |
|
|
|
22,122,534 |
|
Crossing at 1415 - Series A (2) |
|
TX |
|
|
7,590,000 |
|
|
|
- |
|
|
|
(45,555 |
) |
|
|
7,544,445 |
|
Decatur Angle (2) |
|
TX |
|
|
22,950,214 |
|
|
|
- |
|
|
|
(290,985 |
) |
|
|
22,659,229 |
|
Heights at 515 - Series A (2) |
|
TX |
|
|
6,435,000 |
|
|
|
- |
|
|
|
(38,623 |
) |
|
|
6,396,377 |
|
Heritage Square - Series A (4) |
|
TX |
|
|
11,161,330 |
|
|
|
905,455 |
|
|
|
- |
|
|
|
12,066,785 |
|
Oaks at Georgetown - Series A & B (2) |
|
TX |
|
|
17,842,000 |
|
|
|
- |
|
|
|
- |
|
|
|
17,842,000 |
|
Runnymede (1) |
|
TX |
|
|
10,250,000 |
|
|
|
774,285 |
|
|
|
- |
|
|
|
11,024,285 |
|
Southpark (1) |
|
TX |
|
|
11,751,861 |
|
|
|
3,286,203 |
|
|
|
- |
|
|
|
15,038,064 |
|
Vantage at Harlingen - Series B (4) |
|
TX |
|
|
24,529,580 |
|
|
|
917,720 |
|
|
|
- |
|
|
|
25,447,300 |
|
Vantage at Judson -Series B (4) |
|
TX |
|
|
26,356,498 |
|
|
|
1,658,508 |
|
|
|
- |
|
|
|
28,015,006 |
|
15 West Apartments (2) |
|
WA |
|
|
9,850,000 |
|
|
|
1,584,281 |
|
|
|
- |
|
|
|
11,434,281 |
|
Mortgage revenue bonds held in trust |
|
|
|
$ |
554,678,736 |
|
|
$ |
37,814,237 |
|
|
$ |
(2,298,794 |
) |
|
$ |
590,194,179 |
|
(1) |
MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 15 |
(2) |
MRBs held by Deutsche Bank in a secured financing transaction, Note 15 |
(3) |
MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 15 |
(4) |
MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 15 |
14
|
|
December 31, 2016 |
|
|||||||||||||||
Description of Mortgage Revenue Bonds held by the Partnership |
|
State |
|
Cost Adjusted for Paydowns |
|
|
Cumulative Unrealized Gain |
|
|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
||||
Courtyard - Series A & B |
|
CA |
|
$ |
16,458,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
16,458,000 |
|
Harmony Court Bakersfield - Series A & B |
|
CA |
|
|
5,727,000 |
|
|
|
29,252 |
|
|
|
- |
|
|
|
5,756,252 |
|
Las Palmas II - Series A & B |
|
CA |
|
|
3,465,000 |
|
|
|
15,139 |
|
|
|
- |
|
|
|
3,480,139 |
|
San Vicente - Series A & B |
|
CA |
|
|
5,320,000 |
|
|
|
- |
|
|
|
(30,019 |
) |
|
|
5,289,981 |
|
Seasons at Simi Valley - Series B |
|
CA |
|
|
1,944,000 |
|
|
|
27,727 |
|
|
|
- |
|
|
|
1,971,727 |
|
Seasons Lakewood - Series A & B |
|
CA |
|
|
12,610,000 |
|
|
|
- |
|
|
|
- |
|
|
|
12,610,000 |
|
Seasons San Juan Capistrano - Series A & B |
|
CA |
|
|
18,949,000 |
|
|
|
- |
|
|
|
- |
|
|
|
18,949,000 |
|
Summerhill - Series A & B |
|
CA |
|
|
9,795,000 |
|
|
|
- |
|
|
|
(174,982 |
) |
|
|
9,620,018 |
|
Sycamore Walk - Series B |
|
CA |
|
|
1,815,000 |
|
|
|
- |
|
|
|
(64,432 |
) |
|
|
1,750,568 |
|
The Village at Madera - Series A & B |
|
CA |
|
|
4,804,000 |
|
|
|
- |
|
|
|
(84,437 |
) |
|
|
4,719,563 |
|
Greens Property - Series B |
|
NC |
|
|
940,479 |
|
|
|
118,216 |
|
|
|
- |
|
|
|
1,058,695 |
|
Ohio Properties - Series B |
|
OH |
|
|
3,549,780 |
|
|
|
449,068 |
|
|
|
- |
|
|
|
3,998,848 |
|
Avistar at Chase Hill - Series B |
|
TX |
|
|
957,627 |
|
|
|
41,820 |
|
|
|
- |
|
|
|
999,447 |
|
Avistar at the Crest - Series B |
|
TX |
|
|
753,201 |
|
|
|
64,228 |
|
|
|
- |
|
|
|
817,429 |
|
Avistar at the Oaks - Series B |
|
TX |
|
|
550,836 |
|
|
|
47,231 |
|
|
|
- |
|
|
|
598,067 |
|
Avistar at the Parkway - Series B |
|
TX |
|
|
125,000 |
|
|
|
- |
|
|
|
(3,341 |
) |
|
|
121,659 |
|
Avistar in 09 - Series B |
|
TX |
|
|
454,390 |
|
|
|
38,961 |
|
|
|
- |
|
|
|
493,351 |
|
Avistar on the Boulevard - Series B |
|
TX |
|
|
447,554 |
|
|
|
38,165 |
|
|
|
- |
|
|
|
485,719 |
|
Crossing at 1415 - Series B |
|
TX |
|
|
335,000 |
|
|
|
- |
|
|
|
(2,614 |
) |
|
|
332,386 |
|
Heights at 515 - Series B |
|
TX |
|
|
510,000 |
|
|
|
- |
|
|
|
(3,977 |
) |
|
|
506,023 |
|
Mortgage revenue bonds held by the Partnership |
|
|
|
$ |
89,510,867 |
|
|
$ |
869,807 |
|
|
$ |
(363,802 |
) |
|
$ |
90,016,872 |
|
See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the MRBs. Unrealized gains or losses on the MRBs are recorded in the condensed consolidated statements of 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 MRBs.
Bond Activity in the First Nine Months of 2017
The following table includes the details of the MRB acquisitions during the nine months ended September 30, 2017:
Property Name |
|
Month Acquired |
|
Property Location |
|
Units |
|
|
Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Acquisition |
|
|||
Avistar at Copperfield - Series A |
|
February |
|
Houston, TX |
|
|
192 |
|
|
5/1/2054 |
|
|
5.75 |
% |
|
$ |
10,000,000 |
|
Avistar at Copperfield - Series B |
|
February |
|
Houston, TX |
|
|
192 |
|
|
6/1/2054 |
|
|
12.00 |
% |
|
|
4,000,000 |
|
Avistar at Wilcrest - Series A |
|
February |
|
Houston, TX |
|
|
88 |
|
|
5/1/2054 |
|
|
5.75 |
% |
|
|
3,775,000 |
|
Avistar at Wilcrest - Series B |
|
February |
|
Houston, TX |
|
|
88 |
|
|
6/1/2054 |
|
|
12.00 |
% |
|
|
1,550,000 |
|
Avistar at Wood Hollow - Series A |
|
February |
|
Austin, TX |
|
|
409 |
|
|
5/1/2054 |
|
|
5.75 |
% |
|
|
31,850,000 |
|
Avistar at Wood Hollow - Series B |
|
February |
|
Austin, TX |
|
|
409 |
|
|
6/1/2054 |
|
|
12.00 |
% |
|
|
8,410,000 |
|
Montecito at Williams Ranch Apartments - Series A |
|
September |
|
Salinas, CA |
|
|
132 |
|
|
10/1/2034 |
|
|
5.50 |
% |
|
|
7,690,000 |
|
Montecito at Williams Ranch Apartments - Series B |
|
September |
|
Salinas, CA |
|
|
132 |
|
|
10/1/2019 |
|
|
5.50 |
% |
|
|
4,781,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
72,056,000 |
|
In August 2017, the Partnership redeemed one MRB for approximately $2.0 million, which approximated the carrying value plus accrued interest. The following table includes details of the MRB redeemed:
Property Name |
|
Month Redeemed |
|
Property Location |
|
Units |
|
|
Original Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Redemption |
|
|||
Harmony Court Bakersfield - Series B |
|
August |
|
Bakersfield, CA |
|
|
96 |
|
|
12/1/2018 |
|
|
5.50 |
% |
|
$ |
1,997,000 |
|
15
Bond Activity in the First Nine Months of 2016
The following table includes the details of the MRB acquisitions during the nine months ended September 30, 2016:
Property Name |
|
Month Acquired |
|
Property Location |
|
Units |
|
|
Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Acquisition |
|
|||
Companion at Thornhill Apartments |
|
January |
|
Lexington, SC |
|
|
178 |
|
|
1/1/2052 |
|
|
5.80 |
% |
|
$ |
11,500,000 |
|
Las Palmas II - Series A |
|
September |
|
Coachella, CA |
|
81 |
|
|
11/1/2033 |
|
|
5.00 |
% |
|
|
1,695,000 |
|
|
Las Palmas II - Series B |
|
September |
|
Coachella, CA |
|
81 |
|
|
11/1/2018 |
|
|
5.50 |
% |
|
|
1,770,000 |
|
|
San Vicente - Series A |
|
September |
|
Soledad, CA |
|
50 |
|
|
11/1/2033 |
|
|
5.00 |
% |
|
|
3,495,000 |
|
|
San Vicente - Series B |
|
September |
|
Soledad, CA |
|
50 |
|
|
11/1/2018 |
|
|
5.50 |
% |
|
|
1,825,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,285,000 |
|
In March 2016, the Partnership sold the Pro Nova 2014-2 bond for approximately $9.5 million, which approximated the MRB’s carrying value plus accrued interest. The Partnership used approximately $8.4 million of the proceeds from the sale to pay in full and collapse the TOB Trust securitizing this MRB (Note 15). The following table includes details of the MRB redeemed:
Property Name |
|
Month Exchanged |
|
Property Location |
|
Units |
|
|
Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Exchange |
|
|||
Pro Nova - 2014B 1 |
|
March |
|
Knoxville, TN |
|
|
- |
|
|
5/1/2025 |
|
|
5.25 |
% |
|
$ |
9,295,000 |
|
In May 2016, the Partnership redeemed the four Series B MRBs for approximately $5.2 million which approximated their carrying value plus accrued interest. The following table includes details of the MRBs redeemed:
Property Name |
|
Month Redeemed |
|
Property Location |
|
Units |
|
|
Original Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Redemption |
|
|||
Glenview Apartments - Series B |
|
May |
|
Cameron, CA |
|
|
88 |
|
|
12/1/2016 |
|
|
8.00 |
% |
|
$ |
2,053,000 |
|
Montclair Apartments - Series B |
|
May |
|
Lemoore, CA |
|
|
80 |
|
|
12/1/2016 |
|
|
8.00 |
% |
|
|
928,000 |
|
Santa Fe Apartments - Series B |
|
May |
|
Hesperia, CA |
|
|
89 |
|
|
12/1/2016 |
|
|
8.00 |
% |
|
|
1,671,000 |
|
Heritage Square - Series B |
|
May |
|
Edinburg, TX |
|
|
204 |
|
|
10/1/2051 |
|
|
12.00 |
% |
|
|
520,000 |
|
In August 2016, six of the Partnership’s MRBs relating to three properties were restructured. For each property, the Series B mortgage revenue bond was redeemed and the outstanding principal balance was added to the outstanding principal on the Series A bonds. The terms of the three Series B mortgage revenue bonds that were redeemed are as follows:
Property Name |
|
Month Restructured |
|
Property Location |
|
Units |
|
|
Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Restructuring |
|
|||
Concord at Gulfgate - Series B |
|
August |
|
Houston, TX |
|
|
288 |
|
|
3/1/2032 |
|
|
12.00 |
% |
|
$ |
2,125,000 |
|
Concord at Little York - Series B |
|
August |
|
Houston, TX |
|
|
276 |
|
|
3/1/2032 |
|
|
12.00 |
% |
|
|
960,000 |
|
Concord at Williamcrest - Series B |
|
August |
|
Houston, TX |
|
|
288 |
|
|
3/1/2032 |
|
|
12.00 |
% |
|
|
2,800,000 |
|
7. PHC Certificates
The Partnership owned 100% of the Residual Participation Receipts (“LIFERs”) in three tender option bond trusts (“PHC TOB Trusts”) that contain the PHC Certificates. 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 HUD under HUD’s Capital Fund Program established under the 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.
16
The Partnership had the following investments in the PHC Certificates at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017 |
|
|||||||||||||||||||||||
Description of PHC Certificates |
|
Weighted Average Lives (Years) |
|
|
Investment Rating |
|
Weighted Average Interest Rate Over Life |
|
|
Cost Adjusted for Paydowns |
|
|
Cumulative Unrealized Gain |
|
|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
||||||
PHC Certificate Trust I |
|
|
7.76 |
|
|
AA- |
|
|
5.39% |
|
|
$ |
25,962,421 |
|
|
$ |
- |
|
|
$ |
(151,764 |
) |
|
$ |
25,810,657 |
|
PHC Certificate Trust II |
|
|
6.80 |
|
|
A+ |
|
|
4.32% |
|
|
|
9,455,117 |
|
|
|
- |
|
|
|
(50,820 |
) |
|
|
9,404,297 |
|
PHC Certificate Trust III |
|
|
8.19 |
|
|
BBB |
|
|
5.45% |
|
|
|
19,727,376 |
|
|
|
- |
|
|
|
(28,582 |
) |
|
|
19,698,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
55,144,914 |
|
|
$ |
- |
|
|
$ |
(231,166 |
) |
|
$ |
54,913,748 |
|
|
|
December 31, 2016 |
|
|||||||||||||||||||||
Description of PHC Certificates |
|
Weighted Average Lives (Years) |
|
Investment Rating |
|
Weighted Average Interest Rate Over Life |
|
|
Cost Adjusted for Paydowns |
|
|
Cumulative Unrealized Gain |
|
|
Cumulative Unrealized Loss |
|
|
Estimated Fair Value |
|
|||||
PHC Certificate Trust I |
|
8.31 |
|
AA- |
|
|
5.36% |
|
|
$ |
26,077,158 |
|
|
$ |
672,097 |
|
|
$ |
- |
|
|
$ |
26,749,255 |
|
PHC Certificate Trust II |
|
7.65 |
|
A+ |
|
|
4.31% |
|
|
|
10,600,967 |
|
|
|
84,756 |
|
|
|
- |
|
|
|
10,685,723 |
|
PHC Certificate Trust III |
|
8.79 |
|
BBB |
|
|
5.42% |
|
|
|
20,122,937 |
|
|
|
- |
|
|
|
(399,847 |
) |
|
|
19,723,090 |
|
|
|
|
|
|
|
|
|
|
|
$ |
56,801,062 |
|
|
$ |
756,853 |
|
|
$ |
(399,847 |
) |
|
$ |
57,158,068 |
|
See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the PHC Certificates. Unrealized gains or losses on the PHC Certificates are recorded in the condensed consolidated statements of 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 PHC Certificates.
8. Real Estate Assets
The following tables summarizes information regarding the Partnership’s real estate assets at September 30, 2017 and December 31, 2016:
Real Estate Assets at September 30, 2017 |
|
|||||||||||||||||
Property Name |
|
Location |
|
Number of Units |
|
|
Land and Land Improvements |
|
|
Buildings and Improvements |
|
|
Carrying Value on September 30, 2017 |
|
||||
Eagle Village |
|
Evansville, IN |
|
|
511 |
|
|
$ |
567,880 |
|
|
$ |
12,675,216 |
|
|
$ |
13,243,096 |
|
Residences of DeCordova |
|
Granbury, TX |
|
|
110 |
|
|
|
1,170,337 |
|
|
|
8,055,928 |
|
|
|
9,226,265 |
|
Residences of Weatherford |
|
Weatherford, TX |
|
|
76 |
|
|
|
1,942,229 |
|
|
|
5,777,617 |
|
|
|
7,719,846 |
|
Suites on Paseo |
|
San Diego, CA |
|
|
394 |
|
|
|
3,166,463 |
|
|
|
38,413,559 |
|
|
|
41,580,022 |
|
The 50/50 MF Property |
|
Lincoln, NE |
|
|
475 |
|
|
|
- |
|
|
|
32,932,981 |
|
|
|
32,932,981 |
|
Jade Park |
|
Daytona, FL |
|
|
144 |
|
|
|
2,292,035 |
|
|
|
7,467,967 |
|
|
|
9,760,002 |
|
Land held for development |
|
(1) |
|
(1) |
|
|
|
1,659,888 |
|
|
|
- |
|
|
|
1,659,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
116,122,100 |
|
Less accumulated depreciation |
|
|
|
(17,623,467 |
) |
|||||||||||||
Total real estate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
98,498,633 |
|
1 Land held for development consists of parcels of land in Johnson County, KS and Richland County, SC and land development costs for a site in Douglas County, NE.
17
Real Estate Assets at December 31, 2016 |
|
|||||||||||||||||
Property Name |
|
Location |
|
Number of Units |
|
|
Land and Land Improvements |
|
|
Buildings and Improvements |
|
|
Carrying Value on December 31, 2016 |
|
||||
Eagle Village |
|
Evansville, IN |
|
|
511 |
|
|
$ |
567,880 |
|
|
$ |
12,655,244 |
|
|
$ |
13,223,124 |
|
Northern View |
|
Highland Heights, KY |
|
|
294 |
|
|
|
688,539 |
|
|
|
8,088,059 |
|
|
|
8,776,598 |
|
Residences of DeCordova |
|
Granbury, TX |
|
|
110 |
|
|
|
1,170,337 |
|
|
|
8,029,404 |
|
|
|
9,199,741 |
|
Residences of Weatherford |
|
Weatherford, TX |
|
|
76 |
|
|
|
1,942,229 |
|
|
|
5,751,260 |
|
|
|
7,693,489 |
|
Suites on Paseo |
|
San Diego, CA |
|
|
394 |
|
|
|
3,162,463 |
|
|
|
38,365,351 |
|
|
|
41,527,814 |
|
The 50/50 MF Property |
|
Lincoln, NE |
|
|
475 |
|
|
|
- |
|
|
|
32,928,878 |
|
|
|
32,928,878 |
|
Jade Park |
|
Daytona, FL |
|
|
144 |
|
|
|
2,292,035 |
|
|
|
7,270,845 |
|
|
|
9,562,880 |
|
Land held for development |
|
(2) |
|
(2) |
|
|
|
7,531,104 |
|
|
|
- |
|
|
|
7,531,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
130,443,628 |
|
Less accumulated depreciation |
|
|
|
(16,217,028 |
) |
|||||||||||||
Total real estate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
114,226,600 |
|
2 Land held for development consists of parcels of land in St. Petersburg, FL, Johnson County, KS, and Richland County, SC and land and development costs for a site in Panama City Beach, FL.
Activity in the First Nine Months of 2017
In March 2017, the Partnership sold its 99% limited partner interest in Northern View. Gross proceeds from the sale were approximately $13.8 million. The Partnership recognized a gain on sale of approximately $7.2 million before income taxes. The gain on sale, net of income taxes, is considered Tier 2 income (See Note 3). The Partnership determined the sale did not meet the criteria for discontinued operations.
In May 2017, the Partnership closed on the sale of a parcel of land in St. Petersburg, Florida. The Partnership recognized a loss on sale of approximately $22,000, attributable to direct selling expenses.
In June 2017, the Partnership executed a listing agreement with a broker to market the Suites on Paseo MF Property for sale. The listing agreement was terminated in September 2017 and the property is no longer listed for sale at September 30, 2017.
During 2016, the Partnership executed Purchase and Sales Agreements (“PSAs”) to acquire two contiguous tracts of land in Douglas County, Nebraska. If these tracts of land are successfully acquired, they will be classified as “Land held for development.”
At September 30, 2017, the Partnership has listed the Eagle Village, Residences of DeCordova, and Residences of Weatherford MF Properties for sale. See Note 24 for additional information.
Activity in the First Nine Months of 2016
In July and June 2016, the Partnership sold the Woodland Park and Arboretum MF Properties for $15.7 million and $30.2 million, respectively. The Partnership realized gains of approximately $1.6 million and $12.4 million before income taxes, respectively. The gains on sale, net of income taxes, are considered Tier 2 income (See Note 3). The Partnership determined the sale did not meet the criteria for discontinued operations.
In March 2016, the Partnership executed an agreement to sell a parcel of land in St. Petersburg, Florida, carried at a cost of approximately $3.1 million, which is part of the Land Held for Investment and Development. The asset was evaluated for impairment and the Partnership determined the carrying value of this asset is greater than its fair market value less cost to sell and recorded an impairment expense of approximately $62,000 in the second quarter of 2016. The sale of the land closed in May 2017, as noted previously.
18
On September 30, 2016, the Partnership purchased the Jade Park MF Property for approximately $10.0 million. Jade Park is contiguous to the Lake Forest property, for which the Partnership owns a mortgage revenue bond. The buildings and improvements will be depreciated straight-line over a weighted average useful life of 22.7 years. The in-place lease assets will be amortized over an average useful life of 6 months. The Partnership incurred approximately $135,000 of acquisition costs related to the purchase. The following tables contain the assets acquired and liabilities assumed:
|
|
Jade Park 9/30/2016 (Date of Acquisition) |
|
|
Land |
|
$ |
1,993,369 |
|
Buildings and improvements |
|
|
7,543,200 |
|
In-place lease assets (included in other assets) |
|
|
463,431 |
|
Other assets |
|
|
18,126 |
|
Total assets |
|
$ |
10,018,126 |
|
|
|
|
|
|
Accounts payable, accrued expenses and other |
|
$ |
135,326 |
|
Net assets |
|
|
9,882,800 |
|
Total liabilities and net assets |
|
$ |
10,018,126 |
|
The following table contains pro forma revenue, net income and net income per unit for the acquisition of Jade Park as if it occurred on January 1, 2016:
|
|
For the Three Months Ended September 30, 2016 |
|
|
For the Nine Months Ended September 30, 2016 |
|
||
|
$ |
13,573,945 |
|
|
$ |
44,104,855 |
|
|
Pro forma net income |
|
$ |
4,724,056 |
|
|
$ |
18,194,751 |
|
Pro forma net income allocated to Unitholders |
|
$ |
4,216,059 |
|
|
$ |
15,371,803 |
|
Pro forma Unitholder's interest in net income per unit (basic and diluted) |
|
$ |
0.07 |
|
|
$ |
0.26 |
|
Net income (loss), exclusive of the gains on sale related to the Arboretum, Woodland Park and Northern View MF Properties, for the three and nine months ended September 30, 2017 and 2016 are as follows:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
Net income (loss) |
|
$ |
(907 |
) |
|
$ |
(143,093 |
) |
|
$ |
(19,642 |
) |
|
$ |
144,060 |
|
9. Investment in Unconsolidated Entities
ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has equity commitments and reported equity contributions as investment in unconsolidated entities on the condensed consolidated balance sheets. The investments represent the Partnership’s maximum exposure to loss. ATAX Vantage Holdings, LLC is the only limited equity investor in the unconsolidated entities. An affiliate of the unconsolidated entities guarantees ATAX Vantage Holdings, LLC’s return on its investments through the second anniversary of construction completion. The return on these investments earned by the Partnership is reported as investment income on the condensed consolidated statements of operations.
In March 2017, the Partnership closed on an $11.7 million equity commitment to fund construction of the Vantage at Panama City Beach multifamily property. The Partnership also entered into a guarantee agreement related to the property’s construction loan (Note 18).
19
The following table provides the details of the investments in unconsolidated entities at September 30, 2017 and December 31, 2016:
Property Name |
|
Location |
|
Units |
|
Construction Completion Date |
|
Carrying Value at September 30, 2017 |
|
|
Carrying Value at December 31, 2016 |
|
|
Maximum Remaining Equity Commitment at September 30, 2017 |
|
|||
Vantage at Corpus Christi |
|
Corpus Christi, TX |
|
288 |
|
August 2017 |
|
$ |
9,131,689 |
|
|
$ |
8,447,343 |
|
|
$ |
1,550,000 |
|
Vantage at Waco |
|
Waco, TX |
|
288 |
|
N/A |
|
|
8,532,984 |
|
|
|
5,964,861 |
|
|
|
1,592,039 |
|
Vantage at Boerne |
|
Boerne, TX |
|
288 |
|
N/A |
|
|
8,069,390 |
|
|
|
5,057,802 |
|
|
|
1,475,936 |
|
Vantage at Panama City Beach |
|
Panama City Beach, FL |
|
288 |
|
N/A |
|
|
8,601,586 |
|
|
|
- |
|
|
|
3,490,259 |
|
|
|
|
|
|
|
|
|
$ |
34,335,649 |
|
|
$ |
19,470,006 |
|
|
$ |
8,108,234 |
|
10. Property Loans, Net of Loan Loss Allowances
The following table summarizes the Partnership’s property loans, net of loan loss allowances, at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017 |
|
|||||||||
|
|
Outstanding Balance |
|
|
Loan Loss Allowances |
|
|
Property Loan Principal, net of allowance |
|
|||
Arbors at Hickory Ridge |
|
$ |
191,264 |
|
|
$ |
- |
|
|
$ |
191,264 |
|
Ashley Square |
|
|
5,078,342 |
|
|
|
(3,596,342 |
) |
|
|
1,482,000 |
|
Avistar (February 2013 portfolio) |
|
|
274,496 |
|
|
|
- |
|
|
|
274,496 |
|
Avistar (June 2013 portfolio) |
|
|
251,622 |
|
|
|
- |
|
|
|
251,622 |
|
Cross Creek |
|
|
7,155,545 |
|
|
|
(3,447,472 |
) |
|
|
3,708,073 |
|
Greens Property |
|
|
850,000 |
|
|
|
- |
|
|
|
850,000 |
|
Lake Forest |
|
|
4,659,438 |
|
|
|
- |
|
|
|
4,659,438 |
|
Ohio Properties |
|
|
2,390,446 |
|
|
|
- |
|
|
|
2,390,446 |
|
Vantage at Brooks, LLC |
|
|
8,417,635 |
|
|
|
- |
|
|
|
8,417,635 |
|
Vantage at Braunfels, LLC |
|
|
7,469,730 |
|
|
|
- |
|
|
|
7,469,730 |
|
Winston Group, Inc |
|
|
1,500,000 |
|
|
|
- |
|
|
|
1,500,000 |
|
Total |
|
$ |
38,238,518 |
|
|
$ |
(7,043,814 |
) |
|
$ |
31,194,704 |
|
|
|
December 31, 2016 |
|
|||||||||
|
|
Outstanding Balance |
|
|
Loan Loss Allowances |
|
|
Net Taxable Property Loans |
|
|||
Arbors at Hickory Ridge |
|
$ |
191,264 |
|
|
$ |
- |
|
|
$ |
191,264 |
|
Ashley Square |
|
|
5,078,342 |
|
|
|
(3,596,342 |
) |
|
|
1,482,000 |
|
Avistar (February 2013 portfolio) |
|
|
274,496 |
|
|
|
- |
|
|
|
274,496 |
|
Avistar (June 2013 portfolio) |
|
|
251,622 |
|
|
|
- |
|
|
|
251,622 |
|
Cross Creek |
|
|
7,155,545 |
|
|
|
(3,447,472 |
) |
|
|
3,708,073 |
|
Greens Property |
|
|
850,000 |
|
|
|
- |
|
|
|
850,000 |
|
Lake Forest |
|
|
4,623,704 |
|
|
|
(55,000 |
) |
|
|
4,568,704 |
|
Ohio Properties |
|
|
2,390,446 |
|
|
|
- |
|
|
|
2,390,446 |
|
Vantage at Brooks, LLC |
|
|
7,199,424 |
|
|
|
- |
|
|
|
7,199,424 |
|
Vantage at Braunfels, LLC |
|
|
6,347,305 |
|
|
|
- |
|
|
|
6,347,305 |
|
Winston Group, Inc |
|
|
2,500,000 |
|
|
|
- |
|
|
|
2,500,000 |
|
Total |
|
$ |
36,862,148 |
|
|
$ |
(7,098,814 |
) |
|
$ |
29,763,334 |
|
During the nine months ended September 30, 2017, the Partnership advanced funds of approximately $35,700 to Lake Forest, $1.2 million to Vantage at Brooks, LLC and $1.1 million to Vantage at Braunfels, LLC. During the nine months ended September 30, 2016, the Partnership advanced net funds of approximately $83,500 to Cross Creek, $2,500 to the Ohio Properties, $2.5 million to the Winston Group, Inc., $3.7 million to Vantage at Brooks, LLC and $2.1 million to Vantage at Braunfels, LLC. During the nine months ended September 30, 2017, the Partnership received $1.0 million of principal from the Winston Group, Inc.
20
The Partnership’s property loans to Ashley Square, Cross Creek, and Lake Forest remain on nonaccrual status at September 30, 2017. The Partnership recognizes interest income on nonaccrual loans when cash is received, and the Partnership will reassess the property loan’s nonaccrual status. The Partnership did reverse the loan loss allowance of $55,000 on the Lake Forest property loan during the three months ended September 30, 2017.
11. Income Tax Provision
The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by our taxable subsidiary, the Greens Hold Co, which owns all the MF Properties except the Suites on Paseo and Jade Park. The Partnership’s income tax expense fluctuates from period to period based on the timing of the taxable income. Deferred income tax expense is generally a function of the period’s temporary differences (i.e. depreciation, amortization of finance costs, etc.), and the utilization of net operating losses generated in prior years that had been previously recognized as a deferred income tax asset.
The following represents income tax expense for the Greens Hold Co for the three and nine months ended September 30, 2017 and 2016:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
Current income tax expense (benefit) |
|
$ |
(276,000 |
) |
|
$ |
467,000 |
|
|
$ |
2,484,047 |
|
|
$ |
4,567,000 |
|
Deferred income tax expense (benefit) |
|
|
(9,000 |
) |
|
|
(136,000 |
) |
|
|
(374,000 |
) |
|
|
417,000 |
|
Total income tax expense (benefit) |
|
$ |
(285,000 |
) |
|
$ |
331,000 |
|
|
$ |
2,110,047 |
|
|
$ |
4,984,000 |
|
The Partnership recognizes franchise margin tax expense on revenues in certain jurisdictions relating to MF Properties and investments in unconsolidated entities. The Partnership recognized franchise margin tax expense of approximately $47,000 and $52,000 for the three and nine months ended September 30, 2017, respectively. The Partnership did not recognized any franchise margin tax expense during the three and nine months ended September 30, 2016.
12. Other Assets
The following represents the Other Assets at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
Deferred financing costs - net |
|
$ |
470,769 |
|
|
$ |
456,890 |
|
Fair value of derivative instruments (Note 17) |
|
|
427,353 |
|
|
|
383,604 |
|
Taxable bonds at fair market value |
|
|
3,929,761 |
|
|
|
4,084,599 |
|
Bond purchase commitments - fair value (Note 18) |
|
|
3,355,047 |
|
|
|
2,399,449 |
|
Other assets |
|
|
1,430,804 |
|
|
|
1,470,650 |
|
Total other assets |
|
$ |
9,613,734 |
|
|
$ |
8,795,192 |
|
In August 2016, one of the Partnership’s taxable bonds was redeemed at a price that approximated carrying value plus accrued interest. The following table summarizes the terms of the taxable bond redeemed:
Property Name |
|
Redemption Date |
|
Location |
|
Units |
|
Original Maturity Date |
|
Base Interest Rate |
|
|
Principal Outstanding at Date of Redemption |
|
||
Silver Moon - Series B |
|
August |
|
Albuquerque, NM |
|
151 |
|
8/1/2055 |
|
|
12.00 |
% |
|
$ |
499,461 |
|
21
13. Unsecured Lines of Credit
The following represents the unsecured lines of credit (“LOC”) at September 30, 2017 and December 31, 2016:
Unsecured Lines of Credit |
|
Outstanding on September 30, 2017 |
|
|
Total Commitment |
|
|
Maturity |
|
Variable / Fixed |
|
Reset Frequency |
|
Period End Rate |
|
|||
Bankers Trust |
|
$ |
12,471,000 |
|
|
$ |
50,000,000 |
|
|
May 2019 |
|
Variable (1) |
|
Monthly |
|
|
4.23 |
% |
Bankers Trust operating |
|
|
- |
|
|
|
10,000,000 |
|
|
May 2019 |
|
Variable (1) |
|
Monthly |
|
|
4.48 |
% |
Total unsecured lines of credit |
|
$ |
12,471,000 |
|
|
$ |
60,000,000 |
|
|
|
|
|
|
|
|
|
|
|
1 |
The variable rate is indexed to LIBOR plus an applicable margin. |
Unsecured Lines of Credit |
|
Outstanding on December 31, 2016 |
|
|
Total Commitment |
|
|
Maturity |
|
Variable / Fixed |
|
Reset Frequency |
|
Period End Rate |
|
|||
Bankers Trust |
|
$ |
40,000,000 |
|
|
$ |
40,000,000 |
|
|
May 2018 |
|
Variable (2) |
|
Monthly |
|
|
3.13 |
% |
Bankers Trust operating |
|
|
- |
|
|
|
7,500,000 |
|
|
May 2018 |
|
Variable (2) |
|
Monthly |
|
|
3.88 |
% |
Total unsecured lines of credit |
|
$ |
40,000,000 |
|
|
$ |
47,500,000 |
|
|
|
|
|
|
|
|
|
|
|
2 |
The variable rate is indexed to LIBOR plus an applicable margin. |
In April 2017, the commitment on the non-operating LOC was increased $10 million to a total commitment of $50 million.
In May 2017, the maturity date on both Bankers Trust LOCs was extended for an additional one-year term. Additionally, the commitment on the operating LOC was increased to $10 million, from $7.5 million previously.
The Partnership drew approximately $12.5 million on the Bankers Trust operating LOC in September 2017 to purchase the Montecito at Williams Ranch Apartments Series A and B MRBs. This draw has an initial maturity date in June 2018, but may be extended up to an additional 270 days, based on certain extension terms defined in the credit agreement.
The Partnership is required to make prepayments of the principal to reduce the Bankers Trust Operating LOC to zero for fifteen consecutive calendar days during each calendar quarter. For all periods presented the Partnership has fulfilled its prepayment obligation. In addition, the Partnership has fulfilled its fourth quarter of 2017 prepayment obligation as it maintained a zero balance in the Operating LOC for the first fifteen days of October 2017. The Partnership is in compliance with all covenants at September 30, 2017.
14. Secured Line of Credit
In December 2016, the Partnership entered into a secured Credit Agreement of up to $20.0 million with Bankers Trust. The secured LOC was paid in full in February 2017 and is no longer available to the Partnership at September 30, 2017.
22
15. Debt Financing
The following represents the Debt Financing, net of deferred financing costs, at September 30, 2017 and December 31, 2016:
|
|
Outstanding Debt Financings on September 30, 2017, net |
|
|
Restricted Cash |
|
|
Year Acquired |
|
Stated Maturities |
|
Reset Frequency |
|
SIFMA Based Rates |
|
|
Facility Fees |
|
|
Period End Rates |
|
|||||
TOB & Term A/B Trusts Securitization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed - Term TOB |
|
$ |
46,800,842 |
|
|
$ |
- |
|
|
2014 |
|
July 2019 - October 2019 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
4.01% - 4.39% |
|
|||
Fixed - Term A/B |
|
|
141,119,616 |
|
|
|
- |
|
|
2016 |
|
September 2026 - December 2026 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
3.64% |
|
||
Fixed - Term A/B |
|
|
38,412,589 |
|
|
|
- |
|
|
2017 |
|
February 2027 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.46% |
|
||
Fixed - Term A/B |
|
|
60,417,436 |
|
|
|
- |
|
|
2017 |
|
February 2022 - March 2022 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
3.89% |
|
||
Fixed - Term A/B |
|
|
33,559,866 |
|
|
|
- |
|
|
2017 |
|
June 2018 - August 2018 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
3.76% |
|
||
Variable - TOB |
|
|
41,295,000 |
|
|
|
1,217,256 |
|
|
2012 |
|
May 2018 |
|
Weekly |
|
1.47 - 1.52% |
|
|
1.67% |
|
|
3.14 - 3.19% |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TEBS Financings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable - TEBS I |
|
|
60,249,000 |
|
|
|
9,687 |
|
|
2010 |
|
September 2020 |
|
Weekly |
|
|
1.01% |
|
|
|
1.85% |
|
|
|
2.86% |
|
Variable - TEBS II (1) |
|
|
90,944,774 |
|
|
|
176,685 |
|
|
2014 |
|
July 2019 |
|
Weekly |
|
|
0.98% |
|
|
|
1.49% |
|
|
|
2.47% |
|
Variable - TEBS III (1) |
|
|
81,836,696 |
|
|
|
57,364 |
|
|
2015 |
|
July 2020 |
|
Weekly |
|
|
0.98% |
|
|
|
1.26% |
|
|
|
2.24% |
|
Total Debt Financings |
|
$ |
594,635,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Facility fees are variable |
|
|
Outstanding Debt Financings on December 31, 2016, net |
|
|
Restricted Cash |
|
|
Year Acquired |
|
Stated Maturities |
|
Reset Frequency |
|
SIFMA Based Rates |
|
|
Facility Fees |
|
|
Period End Rates |
|
|||||
TOB & Term A/B Trusts Securitization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed - Term TOB |
|
$ |
46,860,699 |
|
|
$ |
- |
|
|
2014 |
|
July 2017 - July 2019 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
4.01% - 4.39% |
|
|||
Fixed - Term A/B |
|
|
141,266,034 |
|
|
|
1,373,695 |
|
|
2016 |
|
September 2026 - December 2026 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
3.64% |
|
||
Fixed - Term A/B |
|
|
30,512,916 |
|
|
|
- |
|
|
2016 |
|
March 2017 |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.56% |
|
||
Variable - TOB |
|
|
42,455,000 |
|
|
|
- |
|
|
2012 |
|
Dec 2016 |
|
Weekly |
|
1.29 - 1.39% |
|
|
|
1.62% |
|
|
2.91 - 3.01% |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TEBS Financings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable - TEBS I |
|
|
60,430,991 |
|
|
|
396,412 |
|
|
2010 |
|
September 2017 |
|
Weekly |
|
|
0.77% |
|
|
|
1.85% |
|
|
|
2.62% |
|
Variable - TEBS II (1) |
|
|
91,768,081 |
|
|
|
170,988 |
|
|
2014 |
|
July 2019 |
|
Weekly |
|
|
0.75% |
|
|
|
1.62% |
|
|
|
2.37% |
|
Variable - TEBS III (1) |
|
|
82,089,312 |
|
|
|
3,495,592 |
|
|
2015 |
|
July 2020 |
|
Weekly |
|
|
0.75% |
|
|
|
1.39% |
|
|
|
2.14% |
|
Total Debt Financings |
|
$ |
495,383,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Facility fees are variable |
At September 30, 2017 and December 31, 2016, the Partnership posted cash collateral (i.e. restricted cash) related to the interest rate swaps associated with specific Debt Financings. The Partnership has also posted cash collateral as contractually required under the terms of the three TEBS Financings. In addition, to mitigate its exposure to interest rate fluctuations on the variable rate TEBS Financings, the Partnership also entered into interest rate cap agreements (Note 17).
The TOB and Term A/B Trusts are subject to a Master Trust Agreement with DB that contains covenants with which the Partnership is required to comply. If the Partnership were to be out of compliance with any of these covenants, a termination event of the financing facilities would be triggered. The most restrictive covenant within the Master Trust Agreement states that cash available to distribute for the trailing twelve months must be at least two times trailing twelve-month interest expense. At September 30, 2017, the Partnership was in compliance with these covenants.
23
Debt Financing Activity in the First Nine Months of 2017
In February 2017, the Partnership entered into 19 new Term A/B Trust financings secured by various MRBs. The Partnership capitalized costs totaling approximately $1.2 million as deferred financing costs, of which approximately $921,000 were paid to a related party (Note 21). The following table summarizes the terms of the new Term A/B Trusts:
Term A/B Trusts Securitization |
|
Outstanding Term A/B Trust Financing at September 30, 2017, net |
|
|
Year Acquired |
|
Stated Maturity |
|
Fixed Interest Rate |
|
||
San Vicente - Series A |
|
$ |
3,110,905 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
San Vicente - Series B |
|
|
1,541,427 |
|
|
2017 |
|
June 2018 |
|
|
3.76 |
% |
Las Palmas - Series A |
|
|
1,506,127 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
Las Palmas - Series B |
|
|
1,489,594 |
|
|
2017 |
|
June 2018 |
|
|
3.76 |
% |
The Village at Madera - Series A |
|
|
2,744,485 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
The Village at Madera - Series B |
|
|
1,451,410 |
|
|
2017 |
|
July 2018 |
|
|
3.76 |
% |
Harmony Court Bakersfield - Series A |
|
|
3,320,042 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
Harmony Court Bakersfield - Series B |
|
(1) |
|
|
2017 |
|
July 2018 |
|
|
3.76 |
% |
|
Summerhill - Series A |
|
|
5,727,118 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
Summerhill - Series B |
|
|
2,849,542 |
|
|
2017 |
|
July 2018 |
|
|
3.76 |
% |
Courtyard - Series A |
|
|
9,127,523 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
Courtyard - Series B |
|
|
5,261,967 |
|
|
2017 |
|
July 2018 |
|
|
3.76 |
% |
Seasons Lakewood - Series A |
|
|
6,552,326 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
Seasons Lakewood - Series B |
|
|
4,444,519 |
|
|
2017 |
|
August 2018 |
|
|
3.76 |
% |
Seasons San Juan Capistrano - Series A |
|
|
11,042,713 |
|
|
2017 |
|
February 2022 |
|
|
3.89 |
% |
Seasons San Juan Capistrano - Series B |
|
|
5,554,598 |
|
|
2017 |
|
August 2018 |
|
|
3.76 |
% |
Avistar at Wood Hollow - Series A |
|
|
26,832,573 |
|
|
2017 |
|
February 2027 |
|
|
4.46 |
% |
Avistar at Wilcrest - Series A |
|
|
3,167,131 |
|
|
2017 |
|
February 2027 |
|
|
4.46 |
% |
Avistar at Copperfield - Series A |
|
|
8,412,885 |
|
|
2017 |
|
February 2027 |
|
|
4.46 |
% |
Total Term A/B Trust Financing |
|
$ |
104,136,885 |
|
|
|
|
|
|
|
|
|
(1) |
In August 2017, the Term A/B Trust financing for the Harmony Court Bakersfield – Series B MRB was collapsed and paid off in full. The Partnership paid approximately $1.7 million at settlement, which approximated the outstanding principal plus accrued interest. |
In March 2017, the Partnership refinanced four Term A/B Trusts into new Term A/B Trusts with longer stated terms. Based on the terms of the new and old Term A/B Trusts, the refinancing was accounted for as a modification, with approximately $47,000 capitalized as deferred financing costs. The following table summarizes the terms of the new Term A/B Trusts:
Term A/B Trusts Securitization |
|
Outstanding Term A/B Trust Financing at September 30, 2017, net |
|
|
Year Acquired |
|
Stated Maturity |
|
Fixed Interest Rate |
|
||
Oaks at Georgetown - Series A |
|
$ |
11,086,792 |
|
|
2017 |
|
March 2022 |
|
|
3.89 |
% |
Oaks at Georgetown - Series B |
|
|
4,684,648 |
|
|
2017 |
|
August 2018 |
|
|
3.76 |
% |
Harmony Terrace - Series A |
|
|
6,199,405 |
|
|
2017 |
|
March 2022 |
|
|
3.89 |
% |
Harmony Terrace - Series B |
|
|
6,282,161 |
|
|
2017 |
|
August 2018 |
|
|
3.76 |
% |
Total Term A/B Trust Financing |
|
$ |
28,253,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In June 2017, the maturity date of the Partnership’s variable TOB Trusts was extended until May 2018.
In September 2017, ATAX TEBS I, LLC, a wholly-owned subsidiary of the Partnership, exercised its option to extend the maturity date of the M24 TEBS Financing to September 15, 2020.
Debt Financing Activity in the First Nine Months of 2016
The three MBS TOB Trusts and the TOB Trust collateralized by the Pro Nova 2014-2 MRB were paid in full and collapsed in January 2016 and March 2016, respectively.
24
During the third quarter of 2016, the Partnership paid off and collapsed seven of its nine TOB Trusts, simultaneously executing twelve new Term A/B Trust agreements secured by mortgage revenue bonds. Based on the terms of the Term A/B Trust, the restructuring of the debt was accounted for as a modification, with approximately $1.4 million capitalized as deferred financing costs. Approximately $1.2 million of capitalized costs were paid to a related party (Note 21).
Future Maturities
The following represents the Debt Financing contractual maturities for the next five years and thereafter:
2017 |
|
$ |
3,906,966 |
|
2018 |
|
|
79,029,695 |
|
2019 |
|
|
140,731,413 |
|
2020 |
|
|
141,337,095 |
|
2021 |
|
|
2,291,329 |
|
Thereafter |
|
|
231,978,541 |
|
Total |
|
$ |
599,275,039 |
|
16. Mortgages Payable and Other Secured Financing
The following represents the Mortgages payable and other secured financing, net of deferred financing costs, at September 30, 2017 and December 31, 2016:
MF Property Mortgage Payables |
|
Outstanding Mortgage Payable at September 30, 2017, net |
|
|
Year Acquired |
|
Stated Maturity |
|
Variable / Fixed |
|
Reset Frequency |
|
Variable Based Rate |
|
|
Facility Fees |
|
|
Period End Rate |
|
||||
Eagle Village |
|
$ |
7,702,257 |
|
|
2010 |
|
September 2018 |
|
Variable |
|
Monthly |
|
|
1.25 |
% |
(1) |
|
3.00 |
% |
|
|
4.25 |
% |
Residences of DeCordova |
|
|
1,697,492 |
|
|
2012 |
|
June 2019 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.75 |
% |
||
Residences of Weatherford |
|
|
5,426,767 |
|
|
2011 |
|
June 2019 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.75 |
% |
||
The 50/50 MF Property--TIF Loan |
|
|
3,480,379 |
|
|
2014 |
|
December 2019 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.65 |
% |
||
The 50/50 MF Property--Mortgage |
|
|
24,805,855 |
|
|
2013 |
|
March 2020 |
|
Variable |
|
Monthly |
|
|
4.25 |
% |
(2) |
N/A |
|
|
|
4.25 |
% |
|
Jade Park |
|
|
7,466,650 |
|
|
2016 |
|
October 2021 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
3.85 |
% |
||
Total Mortgage Payable\Weighted Average Period End Rate |
|
$ |
50,579,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Variable rate is based on 30-day LIBOR |
(2) |
Variable rate is based on Wall Street Journal Prime Rate |
MF Property Mortgage Payables |
|
Outstanding Mortgage Payable at December 31, 2016, net |
|
|
Year Acquired |
|
Stated Maturity |
|
Variable / Fixed |
|
Reset Frequency |
|
Variable Based Rate |
|
|
Facility Fees |
|
|
Period End Rate |
|
||||
Residences of DeCordova |
|
$ |
1,744,858 |
|
|
2012 |
|
June 2017 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.75 |
% |
||
Residences of Weatherford |
|
|
5,589,086 |
|
|
2011 |
|
June 2017 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.75 |
% |
||
Eagle Village |
|
|
7,845,711 |
|
|
2010 |
|
September 2018 |
|
Variable |
|
Monthly |
|
|
0.63 |
% |
(1) |
|
3.00 |
% |
|
|
3.63 |
% |
The 50/50 MF Property--TIF Loan |
|
|
3,656,090 |
|
|
2014 |
|
December 2019 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
4.65 |
% |
||
The 50/50 MF Property--Mortgage |
|
|
25,082,636 |
|
|
2013 |
|
March 2020 |
|
Variable |
|
Monthly |
|
|
3.50 |
% |
(2) |
N/A |
|
|
|
3.50 |
% |
|
Jade Park |
|
|
7,461,131 |
|
|
2016 |
|
October 2021 |
|
Fixed |
|
N/A |
|
N/A |
|
|
N/A |
|
|
|
3.85 |
% |
||
Total Mortgage Payable\Weighted Average Period End Rate |
|
$ |
51,379,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Variable rate is based on 30-day LIBOR |
(2) |
Variable rate is based on Wall Street Journal Prime Rate |
25
Activity in the First Nine Months of 2017
In June 2017, the Partnership refinanced the mortgages payable for the Residences and DeCordova and Residences at Weatherford. The interest rates did not change, no commitments fees were paid, the maturity dates for the mortgages payable were extended for additional two-year terms and the mortgages payable can be prepaid prior to maturity with no penalty.
Activity in the First Nine Months of 2016
In June 2016, the Arboretum mortgage payable was paid off in full in conjunction with the sale of the MF property. No prepayment penalties were paid upon settlement of the mortgage payable.
The Partnership entered into a mortgage payable to finance the acquisition of the Jade Park MF Property on September 30, 2016. The initial principal balance on the mortgage payable was $7.5 million, bears interest at a fixed annual rate of 3.85%, and matures in October 2021.
Future Maturities
The following represents the Mortgages payable and other secured financing contractual maturities for the next five years and thereafter:
2017 |
|
$ |
380,147 |
|
2018 |
|
|
8,809,354 |
|
2019 |
|
|
10,768,977 |
|
2020 |
|
|
24,017,631 |
|
2021 |
|
|
6,858,994 |
|
Thereafter |
|
|
- |
|
Total mortgages payable and other secured financings |
|
$ |
50,835,103 |
|
17. Interest Rate Derivative Agreements
The following represents the interest rate derivatives, excluding interest rate swaps, at September 30, 2017:
Purchase Date |
|
Notional Amount |
|
|
Maturity Date |
|
Effective Capped Rate (1) |
|
|
Index |
|
Variable Debt Financing Facility Hedged (1) |
|
Counterparty |
|
Fair Value as of September 30, 2017 (1) |
|
|||
July 2014 |
|
$ |
30,759,409 |
|
|
Aug 2019 |
|
|
3.0 |
% |
|
SIFMA |
|
M31 TEBS |
|
Barclays Bank PLC |
|
$ |
579 |
|
July 2014 |
|
|
30,759,409 |
|
|
Aug 2019 |
|
|
3.0 |
% |
|
SIFMA |
|
M31 TEBS |
|
Royal Bank of Canada |
|
|
579 |
|
July 2014 |
|
|
30,759,409 |
|
|
Aug 2019 |
|
|
3.0 |
% |
|
SIFMA |
|
M31 TEBS |
|
SMBC Capital Markets, Inc |
|
|
579 |
|
July 2015 |
|
|
27,740,685 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
M33 TEBS |
|
Wells Fargo Bank |
|
|
7,674 |
|
July 2015 |
|
|
27,740,685 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
M33 TEBS |
|
Royal Bank of Canada |
|
|
7,674 |
|
July 2015 |
|
|
27,740,685 |
|
|
Aug 2020 |
|
|
3.0 |
% |
|
SIFMA |
|
M33 TEBS |
|
SMBC Capital Markets, Inc |
|
|
7,674 |
|
June 2017 |
|
|
92,278,226 |
|
|
Aug 2019 |
|
|
1.5 |
% |
|
SIFMA |
|
M31 TEBS |
|
Barclays Bank PLC |
|
|
91,628 |
|
June 2017 |
|
|
83,222,056 |
|
|
Aug 2020 |
|
|
1.5 |
% |
|
SIFMA |
|
M33 TEBS |
|
Barclays Bank PLC |
|
|
305,086 |
|
Sept 2017 |
|
|
60,248,999 |
|
|
Sept 2020 |
|
|
4.0 |
% |
|
SIFMA |
|
M24 TEBS |
|
Barclays Bank PLC |
|
|
5,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
427,353 |
|
(1) |
For additional details, see Note 22 to the Partnership's condensed consolidated financial statements. |
In June 2017, the Partnership purchased two interest rate derivatives to roll down the effective capped rate on the M31 and M33 TEBS Financings to 1.5%. The Partnership paid approximately $139,000 and $358,000 for the interest rate derivatives, respectively.
In September 2017, the Partnership purchased an interest rate derivative on the M24 TEBS Financing to cap the variable interest rate at 4.0%. The Partnership paid approximately $52,000 for the interest rate derivative.
The Partnership has contracted for two interest rate swaps with DB. On a quarterly basis, the Partnership reassesses its interest rate swap positions. In the second quarter of 2017, the Partnership determined that due to the stabilization of the Decatur Angle and Bruton MRB properties and securitization of the related MRBs into fixed rate Term A/B Trust financings, the interest rate swaps were not needed to mitigate interest rate risk on financings related to the MRBs. The Partnership then determined that the interest rate swaps are
26
intended to mitigate interest rate risk for the variable rate PHC TOB Trusts. The following table summarizes the terms of the interest rate swaps at September 30, 2017 and December 31, 2016:
Purchase Date |
|
Notional Amount |
|
|
Effective Date |
|
Termination Date |
|
Fixed Rate Paid |
|
|
Period End Variable Rate Received |
|
|
Variable Rate & Index |
|
Counterparty |
|
September 30, 2017 - Fair Value of Liability |
|
|
December 31, 2016 - Fair Value of Liability |
|
|||||
Sept 2014 |
|
$ |
22,860,724 |
|
|
Oct 2016 |
|
Oct 2021 |
|
|
1.96 |
% |
|
|
0.87 |
% |
|
70% 30-day LIBOR |
|
Deutsche Bank |
|
$ |
(603,323 |
) |
|
$ |
(738,574 |
) |
Sept 2014 |
|
|
18,080,240 |
|
|
April 2017 |
|
April 2022 |
|
|
2.06 |
% |
|
|
0.87 |
% |
|
70% 30-day LIBOR |
|
Deutsche Bank |
|
|
(593,378 |
) |
|
|
(600,709 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,196,701 |
) |
|
$ |
(1,339,283 |
) |
The Partnership’s interest rate derivatives and interest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value. Changes in fair value are included in current period earnings as interest expense. See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements. The interest rate derivatives are presented within Other assets and the interest rate swap arrangements are reported as a derivative swap liability on the condensed consolidated balance sheets.
18. Commitments and Contingencies
The Partnership, from time to time, may be subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are frequently covered by insurance. If it has been determined that a loss is probable, the estimated amount of the loss is accrued in the condensed consolidated financial statements. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material effect on the Partnership’s condensed consolidated financial statements.
Bond Purchase Commitments
As part of the Partnership’s strategy of acquiring MRBs, it will enter into bond purchase commitments related to MRBs to be issued and secured by properties under construction. Upon satisfaction of the terms of the bond purchase commitment, the proceeds from the MRBs issued will be used to pay off the construction related debt of the underlying collateral of the MRB to be issued. The Partnership bears no construction or stabilization risk during the commitment period. The Partnership accounts for bond purchase commitments as available-for-sale securities and reports the asset or liability at fair value. Changes in the fair value of bond purchase commitments are recorded in Other comprehensive income.
The following table represents the bond purchase commitments at September 30, 2017 and December 31, 2016:
Bond Purchase Commitments |
|
Commitment Date |
|
Maximum Committed Amounts for 2017 |
|
|
Maximum Committed Amounts for 2018 |
|
|
Rate |
|
|
Closing Date (1) |
|
Fair Value at September 30, 2017 |
|
|
Fair Value at December 31, 2016 |
|
|||||
Villas at Plano Gateway Apartments |
|
December 2014 |
|
$ |
- |
|
|
$ |
- |
|
|
|
6.00 |
% |
|
N/A |
|
$ |
- |
|
|
$ |
838,200 |
|
Village at Rivers Edge |
|
May 2015 |
|
|
11,000,000 |
|
|
|
- |
|
|
|
6.00 |
% |
|
Q4 2017 |
|
|
881,335 |
|
|
|
467,720 |
|
Palo Alto |
|
July 2015 |
|
|
- |
|
|
|
19,540,000 |
|
|
|
5.80 |
% |
|
Q1 2018 |
|
|
1,276,802 |
|
|
|
627,429 |
|
Village at Avalon |
|
November 2015 |
|
|
- |
|
|
|
16,400,000 |
|
|
|
5.80 |
% |
|
Q2 2018 |
|
|
1,196,910 |
|
|
|
466,100 |
|
Total |
|
|
|
$ |
11,000,000 |
|
|
$ |
35,940,000 |
|
|
|
|
|
|
|
|
$ |
3,355,047 |
|
|
$ |
2,399,449 |
|
(1) |
The closing dates are estimated. |
The bond purchase commitment for the Villas at Plano Gateway Apartments expired effective April 1, 2017. The bond purchase commitment was cancelled and the Partnership has no obligation under the agreement after expiration.
27
Property Loan Commitments
ATAX Vantage Holdings, LLC, a wholly owned subsidiary of the Partnership, committed to loan approximately $17.0 million to unrelated third parties to build two new multifamily residential properties, Vantage at Brooks, LLC and Vantage at Braunfels, LLC, both located in Texas. At September 30, 2017, the Partnership’s remaining maximum commitments totaled approximately $1.1 million. See Note 10 for disclosures related to these property loans.
Other Guarantees & Commitments
In March 2017, the Partnership entered into a guaranty agreement whereby the Partnership has guaranteed payment of the construction loan of Vantage at Panama City Beach, LLC. The Partnership will only have to perform on the guarantee upon a default by Vantage at Panama City Beach, LLC. The guarantee is initially for the entire amount of the construction loan and decreases to 50% and 25% as certain debt service coverage levels are obtained by the borrower. The construction loan has a maximum available balance of $25.6 million. At September 30, 2017, there was no outstanding balance on the construction loan and the Partnership had no exposure under the guarantee. The Partnership is also required to maintain minimum cash and net worth requirements, which were met as of September 30, 2017.
Pursuant to the sale of the Greens Property in 2012, the Partnership entered into guarantee agreements with an unaffiliated entity under which the Partnership has guaranteed certain obligations of the general partner of the Greens of Pine Glen limited partnership, including an obligation to repurchase the interests of BC Partners if certain “repurchase events” occur. Remaining potential repurchase events relate primarily to the delivery of LIHTCs, or tax credit recapture and foreclosure. No amount has been accrued for this contingent liability because the likelihood of a repurchase event is remote. The maximum exposure to the Partnership at September 30, 2017, under the guarantee provision of the repurchase clause is approximately $2.8 million and represents 75% of the equity contributed by BC Partners. The term of the guarantee agreement ends in 2027.
Pursuant to the Ohio Properties transaction in 2011, the Partnership entered into guarantee agreements with an unaffiliated entity under which the Partnership has guaranteed certain obligations of the general partner of these limited partnerships, including an obligation to repurchase the interests of BC Partners if certain “repurchase events” occur. Remaining potential repurchase events relate primarily to the delivery of LIHTCs, or tax credit recapture and foreclosure. No amount has been accrued for this contingent liability because the likelihood of a repurchase event is remote. The maximum exposure to the Partnership at September 30, 2017, under the guarantee provision of the repurchase clause is approximately $4.4 million and represents 75% of the equity contributed by BC Partners. The term of the guarantee agreement ends in 2026.
The 50/50 MF Property has a ground lease with the University of Nebraska-Lincoln with an initial lease term expiring in March 2038. There is also an option to extend the lease for an additional five-year period. Annual lease payments are $100 per year. In conjunction with the ground lease, the 50/50 MF Property has entered into an agreement whereby it is required to make monthly payments, when cash is available at the property, to the University of Nebraska-Lincoln based on its revenues. The minimum aggregate annual payment due under the agreement for the twelve-month period from August 1, 2017 through July 31, 2018 is approximately $127,000. The minimum aggregate annual expense increases 2% annually until July 31, 2034 and increases 3% annually thereafter. The 50/50 MF Property may be required to make additional payments under the agreement if its gross revenues exceed certain thresholds. The agreement will terminate upon termination of the ground lease. The Partnership reported accounts payable related to this agreement of approximately $115,000 and $21,000 at September 30, 2017 and December 31, 2016. The Partnership reported expenses related to the agreement of approximately $42,000 and $126,000 for the three and nine months ended September 30, 2017 and 2016.
As the holder of residual interests issued in its TOB Trust, Term A/B Trust and TEBS Financing arrangements, the Partnership is required to guarantee certain losses that can be incurred by the trusts created in connection with these financings. These guarantees may result from a downgrade in the investment rating of PHCs held by the trust or of the senior securities issued by the trust, a ratings downgrade of the liquidity provider for the trust, increases in short term interest rates beyond pre-set maximums, an inability to re-market the senior securities or an inability to obtain liquidity for the trust. In the case of the TEBS, Freddie Mac will step in first on an immediate basis and the Partnership will have 10 to 14 days to remedy. If the Partnership does not remedy, the trust will be collapsed. If such an event occurs, the trust collateral may be sold and if the proceeds are not sufficient to pay the principal amount of the senior securities plus accrued interest and other trust expenses, the Partnership will be required to fund any such shortfall pursuant to its guarantee. If the Partnership does not fund the shortfall, the default and liquidation provisions will be invoked against the Partnership. In the event of a shortfall the maximum exposure to loss would be approximately $599.3 million prior to the consideration of the proceeds from the sale of the trust collateral. The Partnership has never been, and does not expect in the future, to be required to reimburse the financing facilities for any shortfall.
28
19. Redeemable Series A Preferred Units
The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units via private placements to four financial institutions. The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership. The Partnership issued 2.0 million Series A Preferred Units to a financial institution during the three months ended September 30, 2017, in a private placement. The following table summarizes the outstanding Series A Preferred Units at September 30, 2017:
September 30, 2017 |
||||||||||||||||||
Month Issued |
|
Units |
|
|
Purchase Price |
|
|
Distribution Rate |
|
|
Redemption Price per Unit |
|
|
Earliest Redemption Date |
||||
March 2016 |
|
|
1,000,000 |
|
|
$ |
10,000,000 |
|
|
|
3.00 |
% |
|
$ |
10.00 |
|
|
March 2022 |
May 2016 |
|
|
1,386,900 |
|
|
|
13,869,000 |
|
|
|
3.00 |
% |
|
|
10.00 |
|
|
May 2022 |
September 2016 |
|
|
1,000,000 |
|
|
|
10,000,000 |
|
|
|
3.00 |
% |
|
|
10.00 |
|
|
September 2022 |
December 2016 |
|
|
700,000 |
|
|
|
7,000,000 |
|
|
|
3.00 |
% |
|
|
10.00 |
|
|
December 2022 |
March 2017 |
|
|
1,613,100 |
|
|
|
16,131,000 |
|
|
|
3.00 |
% |
|
|
10.00 |
|
|
March 2023 |
August 2017 |
|
|
2,000,000 |
|
|
|
20,000,000 |
|
|
|
3.00 |
% |
|
|
10.00 |
|
|
August 2023 |
|
|
|
7,700,000 |
|
|
$ |
77,000,000 |
|
|
|
|
|
|
|
|
|
|
|
20. Restricted Unit Awards (“RUAs”)
The Partnership’s 2015 Equity Incentive Plan (“Plan”), as approved by the Unitholders, permits the grant of Restricted Units and other awards to the employees of Burlington, the Partnership, or any affiliate of either, and members of Burlington’s Board of Managers for up to 3.0 million BUCs. RUAs are generally granted with vesting conditions ranging from three months to approximately three years. RUAs currently provide for the payment of quarterly distributions during the vesting period. The RUA’s provide for accelerated vesting if there is a change in control or death or disability of the Participant.
The fair value of each RUA is estimated on the grant date based on the Partnership’s exchange-listed closing price of the BUCs. The Partnership recognizes compensation expense for the RUAs on a straight-line basis over the requisite vesting period. The compensation expense for RUAs totaled approximately $550,000 and $1,160,000 for the three and nine months ended September 30, 2017. The compensation expense for RUAs totaled approximately $31,000 for the three and nine months ended September 30, 2016.
The following table represents nonvested Restricted Units at and for the nine months ended September 30, 2017.
|
|
Restricted Units Awarded |
|
|
Weighted-average Grant-date Fair Value |
|
||
Nonvested at January 1, 2017 |
|
|
158,304 |
|
|
$ |
6.03 |
|
Granted |
|
|
283,046 |
|
|
|
5.74 |
|
Vested |
|
|
- |
|
|
|
- |
|
Nonvested at September 30, 2017 |
|
|
441,350 |
|
|
$ |
5.84 |
|
At September 30, 2017, there was approximately $1.3 million of total unrecognized compensation expense related to nonvested RUAs granted under the Plan. The remaining expense is expected to be recognized over a weighted-average period of 0.9 years. The total intrinsic value of nonvested RUAs was approximately $2.7 million at September 30, 2017.
21. Transactions with Related Parties
The General Partner of the Partnership, AFCA 2, is entitled to receive an administrative fee from the Partnership equal to 0.45% per annum of the outstanding principal balance of any of its MRBs, property loans collateralized by real property, and other investments for which the owner of the financed property or other third party is not obligated to pay such administrative fee directly to AFCA 2. The Partnership paid or accrued administrative fees to AFCA 2 of approximately $909,000 and $2.7 million for the three and nine months ended September 30, 2017, respectively. The Partnership paid or accrued administrative fees to AFCA 2 of approximately $682,000 and $2.0 million for the three and nine months ended September 30, 2016, respectively. In addition to the administrative fees paid directly by the Partnership, AFCA 2 receives administrative fees directly from the owners of properties financed by certain of the MRBs held by the Partnership. These administrative fees also equal 0.45% per annum of the outstanding principal balance of these MRBs and totaled approximately $22,000 and $74,000 for the three and nine months ended September 30, 2017, respectively. Such administrative fees totaled approximately $25,000 and $74,000 for the three and nine months ended September 30, 2016, respectively.
29
AFCA 2 earns placement fees in connection with the acquisition of certain MRBs, equity investments in unconsolidated entities and select property loans. These placement fees were paid by the owners of the respective properties and, accordingly, have not been reflected in the accompanying condensed consolidated financial statements because these properties are not considered consolidated VIEs or related parties. AFCA 2 earned placement fees of approximately $125,000 and $1.1 million for the three and nine months ended September 30, 2017. AFCA 2 earned placement fees of approximately $687,000 and $1.2 million for the three and nine months ended September 30, 2016, respectively. In addition, AFCA 2 received a one-time $125,000 negotiated mortgage placement fee related to work performed for a transaction that did not materialize during the second quarter of 2016.
An affiliate of AFCA 2, Burlington Capital Properties, LLC (f/k/a America First Properties Management Company, LLC) (“Properties Management”) provided property management services for the MF Properties (excluding Suites on Paseo) and seven of the properties collateralizing MRBs during the three and nine months ended September 30, 2017. Properties Management earned management fees related to the MF Properties of approximately $94,000 and $299,000 for the three and nine months ended September 30, 2017, respectively. Properties Management earned management fees related to the MF Properties of approximately $141,000 and $541,000 for the three and nine months ended September 30, 2016, respectively. For MF Properties, the property management fees are reflected as real estate operating expenses on the Partnership’s condensed consolidated statements of operations. For the seven properties collateralizing MRBs, the property management fees are not Partnership expenses, but are paid in each case by the owner of the Residential Properties. These property management fees are paid out of the revenues generated by the respective property prior to the payment of debt service on the Partnership's MRBs and property loans, if applicable.
An affiliate of AFCA 2, Farnam Capital Advisors, LLC (“Farnam Cap”), acts as an origination advisor and consultant to the borrowers when MRBs, Investments in unconsolidated entities, select notes receivable, and financing facilities are acquired by the Partnership. The borrowers paid origination fees of approximately $62,000 and $331,000 for the three and nine months ended September 30, 2017. The borrowers paid origination fees of approximately $343,000 and $537,000 for the three and nine months ended September 30, 2016, respectively. These origination fees were paid by the borrower and since they are not Partnership expenses, they have not been reflected in the accompanying condensed consolidated financial statements. The Partnership paid consulting fees to the affiliate of zero and approximately $921,000 for services related to the origination of Term A/B Trusts during the three and nine months ended September 30, 2017, respectively. The Partnership paid consulting fees to Farnam Cap of approximately $1.2 million for services related to origination of the Term A/B Trusts during the three and nine months ended September 30, 2016. In addition, Farnam Cap received a $125,000 origination fee for work performed related to a transaction that did not materialize during the second quarter of 2016.
An affiliate of AFCA 2, Burlington Capital Construction Services, LLC, is the general contractor for certain exterior rehabilitation services for the Jade Park MF Property commencing in June 2017. The contracted services are expected to be completed by the end of 2017. The Partnership paid approximately $6,000 for services under the contract during the three and nine months ended September 30, 2017.
22. Fair Value of Financial Instruments
Current accounting guidance on fair value measurements establishes a framework for measuring fair value and provides for expanded disclosures about fair value measurements. The guidance:
|
• |
Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and |
|
• |
Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. |
Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:
|
• |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
• |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
|
• |
Level 3 inputs are unobservable inputs for asset or liabilities. |
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
30
Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.
Investments in MRBs and Bond Purchase Commitments. The fair value of the Partnership’s investments in MRBs and mortgage bond purchase commitments at September 30, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the MRBs and price quotes for the MRBs are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, seniority to other obligations, operating results of the underlying property, geographic location, and property quality. The MRB values are then estimated using a discounted cash flow and yield to maturity or call analysis. The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these MRBs are based largely on unobservable inputs the believed to be used by market participants and requires the use of judgment on the part of the third-party pricing service and management. Due to the judgments involved, the fair value measurement of the Partnership’s investments in MRBs and mortgage bond purchase commitments are categorized as a Level 3 input. At September 30, 2017, the range of effective yields on the individual MRBs was 2.6% to 9.9% per annum.
Prior to the second quarter of 2017, the fair value of the Partnership’s investments in MRBs and mortgage bond purchase commitments were based on a discounted cash flow and yield to maturity analysis performed by the Partnership. If available, the Partnership considered price quotes on similar MRBs or other information from external sources, such as pricing services. The estimates of the fair values of these MRBs, whether estimated by the Partnership or based on external sources, were based largely on unobservable inputs the Partnership believed would be used by market participants. Additionally, the calculation methodology used by the external sources and the Partnership encompassed the use of judgment in its application. To validate changes in the fair value of the Partnership’s investments in MRBs between reporting periods, the Partnership looked at the key inputs such as changes in the ‘A’ rated municipal bond rates on similar MRBs as well as changes in the operating performance of the underlying property serving as collateral for each MRB. The Partnership validated that the changes in the estimated fair value of the MRBs move with the changes in these monitored factors. Given these facts, the fair value measurement of the Partnership’s investment in MRBs was categorized as a Level 3 input. At December 31, 2016, the range of effective yields on the individual MRBs was 4.9% to 12.4% per annum.
Investments in Public Housing Capital Fund Trust Certificates. The fair value of the Partnership’s investment in PHC Certificates at September 30, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the trusts’ certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Trust as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs. During the second quarter of 2017, the Partnership analyzed pricing data received from the third-party pricing service by comparing it to the Partnership’s internal valuation methodology. The Partnership’s internal valuation methodology utilized 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 Partnership believes would be used by market participants. During the third quarter of 2017, the Partnership continued to utilize the third-party pricing service to obtain prices, which are indicative of market prices, for its PHC Certificates. The Partnership engaged a second third-party pricing service whose methodology was consistent with the Partnership’s internal valuation methodology and is utilized by the Partnership to confirm the values developed by its primary third-party pricing service. As such, the Partnership did not utilize its internal methodology to price the PHC Certificates. The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness. The valuation methodologies used by the third-party pricing services and the Partnership encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input.
The fair value of the Partnership’s investment in PHC Certificates at December 31, 2016 was based on a yield to maturity analysis performed by the Partnership. The Partnership’s valuation methodology 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 Partnership believes would be used by market participants. The Partnership validates that the changes in the estimated fair value of PHC Certificates move with the changes in the market yield rates of investment grade rated mortgage revenue municipal bonds with terms of similar length. Given these facts, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input. At December 31, 2016, the range of effective yields on the PHC Certificates was 4.3% to 6.0% per annum.
31
Taxable Bonds. The fair value of the Partnership’s taxable bonds at September 30, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the taxable bonds and price quotes are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each taxable bond as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, subordinate to other obligations, operating results of the underlying property, geographic location, and property quality. The taxable bonds values are then estimated using a discounted cash flow and yield to maturity or call analysis. The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these taxable bonds are based largely on unobservable inputs believed to be used by market participants and requires the use of judgment on the part of the third-party pricing service and management. Due to the judgments involved, the fair value measurement of the Partnership’s investments in taxable bonds is categorized as a Level 3 input.
Prior to the second quarter of 2017, the fair values of the Partnership’s investments in taxable bonds were based on a discounted cash flow and yield to maturity analysis performed by the Partnership. There is no active trading market for the taxable bonds and price quotes are not available. The estimates of the fair values of these taxable bonds, whether estimated by the Partnership or based on external sources, were based largely on unobservable inputs the Partnership believed would be used by market participants. Additionally, the calculation methodology used by the external sources and the Partnership encompassed the use of judgment in its application. To validate changes in the fair value of the Partnership’s investments in taxable bonds between reporting periods, management looked at the key inputs such as changes in the current market yields on similar bonds as well as changes in the operating performance of the underlying property serving as collateral for each bond. The Partnership validated that the changes in the estimated fair value of the taxable bonds moved with the changes in these monitored factors. Given these facts the fair value measurement of the Partnership’s investment in taxable bonds was categorized as a Level 3 input.
Interest Rate Derivatives. The effect of the Partnership’s interest rate derivatives is to set a cap, or upper limit, on the base rate of interest paid on the Partnership’s variable rate debt equal to the notional amount of the derivative agreement. The effect of the Partnership’s interest rate swaps is to change a variable rate debt obligation to a fixed rate for that portion of the debt equal to the notional amount of the derivative agreement. The fair value of the interest rate derivatives is based on a model whose inputs are not observable and therefore is categorized as a Level 3 input. The inputs in the valuation model include three-month LIBOR rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.
Assets and liabilities measured at fair value on a recurring basis at September 30, 2017 are summarized as follows:
|
|
Fair Value Measurements at September 30, 2017 |
|
|||||||||||||
Description |
|
Assets and Liabilities at Fair Value |
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
Assets and Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds, held in trust |
|
$ |
739,967,192 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
739,967,192 |
|
Mortgage revenue bonds |
|
|
39,346,686 |
|
|
|
- |
|
|
|
- |
|
|
|
39,346,686 |
|
Bond purchase commitments (reported within other assets) |
|
|
3,355,047 |
|
|
|
- |
|
|
|
- |
|
|
|
3,355,047 |
|
PHC Certificates |
|
|
54,913,748 |
|
|
|
- |
|
|
|
- |
|
|
|
54,913,748 |
|
Taxable bonds (reported within other assets) |
|
|
3,929,761 |
|
|
|
- |
|
|
|
- |
|
|
|
3,929,761 |
|
Derivative contracts (reported within other assets) |
|
|
427,353 |
|
|
|
- |
|
|
|
- |
|
|
|
427,353 |
|
Derivative swap liability |
|
|
(1,196,701 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,196,701 |
) |
Total Assets and Liabilities at Fair Value, net |
|
$ |
840,743,086 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
840,743,086 |
|
32
The following tables summarizes the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2017:
|
|
For the Three Months Ended September 30, 2017 |
|
|||||||||||||||||||||
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||||||||||
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||||||
|
|
Mortgage Revenue Bonds (1) |
|
|
Bond Purchase Commitments |
|
|
PHC Certificates |
|
|
Taxable Bonds |
|
|
Interest Rate Derivatives (2) |
|
|
Total |
|
||||||
Beginning Balance July 1, 2017 |
|
$ |
768,129,658 |
|
|
$ |
3,165,172 |
|
|
$ |
55,791,371 |
|
|
$ |
3,931,471 |
|
|
$ |
(761,648 |
) |
|
$ |
830,256,024 |
|
Total gains (losses) (realized/unrealized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings (interest income and interest expense) |
|
|
53,117 |
|
|
|
- |
|
|
|
(14,129 |
) |
|
|
- |
|
|
|
(66,917 |
) |
|
|
(27,929 |
) |
Included in other comprehensive (loss) income |
|
|
1,501,150 |
|
|
|
189,875 |
|
|
|
309,808 |
|
|
|
2,356 |
|
|
|
- |
|
|
|
2,003,189 |
|
Purchases |
|
|
12,471,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
59,217 |
|
|
|
12,530,217 |
|
Settlements |
|
|
(2,841,047 |
) |
|
|
- |
|
|
|
(1,173,302 |
) |
|
|
(4,066 |
) |
|
|
- |
|
|
|
(4,018,415 |
) |
Ending Balance September 30, 2017 |
|
$ |
779,313,878 |
|
|
$ |
3,355,047 |
|
|
$ |
54,913,748 |
|
|
$ |
3,929,761 |
|
|
$ |
(769,348 |
) |
|
$ |
840,743,086 |
|
Total amount of losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets or liabilities held on September 30, 2017 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(66,917 |
) |
|
$ |
(66,917 |
) |
(1) Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.
(2) Interest rate derivatives include derivative contracts reported in other assets as well as derivative swap liabilities.
|
|
For the Nine Months Ended September 30, 2017 |
|
|||||||||||||||||||||
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||||||||||
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||||||
|
|
Mortgage Revenue Bonds (1) |
|
|
Bond Purchase Commitments |
|
|
PHC Certificates |
|
|
Taxable Bonds |
|
|
Interest Rate Derivatives (2) |
|
|
Total |
|
||||||
Beginning Balance January 1, 2017 |
|
$ |
680,211,051 |
|
|
$ |
2,399,449 |
|
|
$ |
57,158,068 |
|
|
$ |
4,084,599 |
|
|
$ |
(955,679 |
) |
|
$ |
742,897,488 |
|
Total gains (losses) (realized/unrealized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings (interest income and interest expense) |
|
|
159,707 |
|
|
|
- |
|
|
|
(45,846 |
) |
|
|
- |
|
|
|
(369,686 |
) |
|
|
(255,825 |
) |
Included in other comprehensive (loss) income |
|
|
31,731,448 |
|
|
|
955,598 |
|
|
|
(588,172 |
) |
|
|
(122,908 |
) |
|
|
- |
|
|
|
31,975,966 |
|
Purchases |
|
|
72,056,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
556,017 |
|
|
|
72,612,017 |
|
Settlements |
|
|
(4,844,328 |
) |
|
|
- |
|
|
|
(1,610,302 |
) |
|
|
(31,930 |
) |
|
|
- |
|
|
|
(6,486,560 |
) |
Ending Balance September 30, 2017 |
|
$ |
779,313,878 |
|
|
$ |
3,355,047 |
|
|
$ |
54,913,748 |
|
|
$ |
3,929,761 |
|
|
$ |
(769,348 |
) |
|
$ |
840,743,086 |
|
Total amount of losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets or liabilities held on September 30, 2017 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(369,686 |
) |
|
$ |
(369,686 |
) |
(1) Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.
(2) Interest rate derivatives include derivative contracts reported in other assets as well as derivative swap liabilities.
33
Assets and liabilities measured at fair value on a recurring basis at December 31, 2016 are summarized as follows:
|
|
Fair Value Measurements at December 31, 2016 |
|
|||||||||||||
Description |
|
Assets and Liabilities at Fair Value |
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
Assets and Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds held in trust |
|
$ |
590,194,179 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
590,194,179 |
|
Mortgage revenue bonds |
|
|
90,016,872 |
|
|
|
- |
|
|
|
- |
|
|
|
90,016,872 |
|
Bond purchase commitments (reported within other assets) |
|
|
2,399,449 |
|
|
|
- |
|
|
|
- |
|
|
|
2,399,449 |
|
PHC Certificates |
|
|
57,158,068 |
|
|
|
- |
|
|
|
- |
|
|
|
57,158,068 |
|
Taxable bonds (reported within other assets) |
|
|
4,084,599 |
|
|
|
- |
|
|
|
- |
|
|
|
4,084,599 |
|
Derivative contracts (reported within other assets) |
|
|
383,604 |
|
|
|
- |
|
|
|
- |
|
|
|
383,604 |
|
Interest swap liability |
|
|
(1,339,283 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,339,283 |
) |
Total Assets and Liabilities at Fair Value |
|
$ |
742,897,488 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
742,897,488 |
|
The following tables summarizes the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2016:
|
|
For the Three Months Ended September 30, 2016 |
|
|||||||||||||||||||||
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||||||||||
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||||||
|
|
Mortgage Revenue Bonds (1) |
|
|
Bond Purchase Commitments |
|
|
PHC Certificates |
|
|
Taxable Bonds |
|
|
Interest Rate Derivatives (2) |
|
|
Total |
|
||||||
Beginning Balance July 1, 2016 |
|
$ |
648,397,372 |
|
|
$ |
17,218,819 |
|
|
$ |
62,180,059 |
|
|
$ |
5,294,229 |
|
|
$ |
(2,615,093 |
) |
|
$ |
730,475,386 |
|
Total gains (losses) (realized/unrealized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings (interest expense) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
263,684 |
|
|
|
263,684 |
|
||||
Included in other comprehensive (loss) income |
|
|
(28,336,831 |
) |
|
|
(4,596,110 |
) |
|
|
(780,342 |
) |
|
|
(315,633 |
) |
|
- |
|
|
|
(34,028,916 |
) |
|
Purchases |
|
|
8,785,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
8,785,000 |
|
||||
Settlements |
|
|
(479,253 |
) |
|
- |
|
|
|
(540,463 |
) |
|
|
(502,211 |
) |
|
- |
|
|
|
(1,521,927 |
) |
||
Ending Balance September 30, 2016 |
|
$ |
628,366,288 |
|
|
$ |
12,622,709 |
|
|
$ |
60,859,254 |
|
|
$ |
4,476,385 |
|
|
$ |
(2,351,409 |
) |
|
$ |
703,973,227 |
|
Total amount of losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets or liabilities held on September 30, 2016 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
263,684 |
|
|
$ |
263,684 |
|
(1) Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.
(2) Interest rate derivatives include derivative contracts reported in other assets as well as derivative swap liabilities.
34
|
|
For Nine Months Ended September 30, 2016 |
|
|||||||||||||||||||||
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||||||||||
|
|
Unobservable Inputs (Level 3) |
|
|||||||||||||||||||||
|
|
Mortgage Revenue Bonds (1) |
|
|
Bond Purchase Commitments |
|
|
PHC Certificates |
|
|
Taxable Bonds |
|
|
Interest Rate Derivatives (2) |
|
|
Total |
|
||||||
Beginning Balance January 1, 2016 |
|
$ |
583,683,137 |
|
|
$ |
5,634,360 |
|
|
$ |
60,707,290 |
|
|
$ |
4,824,060 |
|
|
$ |
(972,898 |
) |
|
$ |
653,875,949 |
|
Total gains (losses) (realized/unrealized) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings (interest expense) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,378,112 |
) |
|
|
(1,378,112 |
) |
Included in other comprehensive (loss) income |
|
|
40,781,894 |
|
|
|
6,988,349 |
|
|
|
1,777,372 |
|
|
|
179,684 |
|
|
- |
|
|
|
49,727,299 |
|
|
Purchases |
|
|
20,285,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
20,285,000 |
|
||||
Sale of securities |
|
|
(9,747,124 |
) |
|
- |
|
|
- |
|
|
- |
|
|
|
(399 |
) |
|
|
(9,747,523 |
) |
|||
Settlements |
|
|
(6,636,619 |
) |
|
- |
|
|
|
(1,625,408 |
) |
|
|
(527,359 |
) |
|
- |
|
|
|
(8,789,386 |
) |
||
Ending Balance September 30, 2016 |
|
$ |
628,366,288 |
|
|
$ |
12,622,709 |
|
|
$ |
60,859,254 |
|
|
$ |
4,476,385 |
|
|
$ |
(2,351,409 |
) |
|
$ |
703,973,227 |
|
Total amount of losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets or liabilities held on September 30, 2016 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(1,378,112 |
) |
|
$ |
(1,378,112 |
) |
(1) Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.
(2) Interest rate derivatives include derivative contracts reported in other assets as well as derivative swap liabilities.
Total gains and losses included in earnings for the periods shown above are included in the Partnership’s condensed consolidated statements of operations as interest expense.
The Partnership estimates the fair value of each financial liability using a discounted cash flow model based on the debt amortization schedules and the effective rate of interest for each period presented. This estimate of fair value is based on Level 3 inputs. The TEBS and variable-rate TOB debt financings are credit enhanced by Freddie Mac and DB, respectively. The table below represents the fair value of the financial liabilities held on the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016.
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||||||||||
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing and LOCs |
|
$ |
607,106,819 |
|
|
$ |
606,173,812 |
|
|
$ |
555,199,700 |
|
|
$ |
553,083,924 |
|
Mortgages payable and other secured financing |
|
|
50,579,400 |
|
|
|
50,650,974 |
|
|
|
51,379,512 |
|
|
|
51,595,281 |
|
23. Segments
The Partnership has four reportable segments, Mortgage Revenue Bond Investments, MF Properties, Public Housing Capital Fund Trusts, and Other Investments. In addition to the four reportable segments, the Partnership also separately reports its consolidation and elimination information because it does not allocate certain items to the segments. In January 2016, the Partnership sold its three remaining MBS Securities and eliminated this operating segment.
The Amended and Restated LP Agreement authorizes the Partnership to make investments in tax-exempt securities other than in MRBs provided that the tax-exempt investments are rated in one of the four highest rating categories by a national securities rating agency. The Amended and Restated LP Agreement also allows the Partnership to invest in other securities whose interest may be taxable for federal income tax purposes. Total tax-exempt and other investments cannot exceed 25% of the Partnership’s total assets at the time of acquisition as required under the Amended and Restated LP Agreement. In addition, the amount of other investments is limited based on the conditions to the exemption from registration under the Investment Company Act of 1940. The Partnership’s tax-exempt and other investments include PHC Certificates, MBS Securities, and Other Investments, which are reported as three separate segments.
35
Mortgage Revenue Bond Investments Segment
The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of MRBs and related property loans which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas. Such MRBs are held as investments and the related property loans, net of loan loss, are reported as such on the Partnership’s condensed consolidated balance sheets. At September 30, 2017, the Partnership held 91 MRBs. The Residential Properties financed by MRBs contain a total of 10,788 rental units. In addition, one bond (Pro Nova 2014-1) is collateralized by commercial real estate. All general and administrative expenses on the condensed consolidated statements of operations are reported within this operating segment.
Public Housing Capital Fund Trust Segment
The Public Housing Capital Fund Trust segment consists of the assets, liabilities, and related income and expenses of the Partnership’s PHC Certificates (see Note 7).
MF Properties Segment
The MF Properties segment consists of multifamily, student housing, and senior citizen residential properties held by the Partnership. During the time the Partnership holds an interest in an MF Property, any net rental income generated by the MF Properties in excess of debt service will be available for distribution to the Partnership in accordance with its interest in the MF Property. At September 30, 2017, the segment includes the six MF Properties comprised of a total of 1,710 rental units. Income tax expense for the Greens Hold Co is reported within this segment.
Other Investments Segment
The Other investments segment consists of the operations of ATAX Vantage Holdings, LLC, which is invested in unconsolidated entities (Note 9) and has issued property loans due from Vantage at Brooks LLC and Vantage at Braunfels LLC (Note 10).
36
The following table details certain key financial information for the Partnership’s reportable segments for the three and nine months ended September 30, 2017 and 2016:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
11,035,530 |
|
|
$ |
8,504,675 |
|
|
$ |
32,683,968 |
|
|
$ |
26,074,552 |
|
MF Properties |
|
|
3,257,174 |
|
|
|
3,414,788 |
|
|
|
10,356,311 |
|
|
|
13,483,760 |
|
Public Housing Capital Fund Trust |
|
|
711,823 |
|
|
|
724,735 |
|
|
|
2,139,791 |
|
|
|
2,178,627 |
|
MBS Securities Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,755 |
|
Other Investments |
|
|
1,230,303 |
|
|
|
577,741 |
|
|
|
3,329,448 |
|
|
|
1,289,225 |
|
Total revenues |
|
$ |
16,234,830 |
|
|
$ |
13,221,939 |
|
|
$ |
48,509,518 |
|
|
$ |
43,074,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
4,786,151 |
|
|
$ |
2,691,439 |
|
|
$ |
14,295,635 |
|
|
$ |
9,866,978 |
|
MF Properties |
|
|
556,200 |
|
|
|
441,858 |
|
|
|
1,616,032 |
|
|
|
1,708,551 |
|
Public Housing Capital Fund Trust |
|
|
371,830 |
|
|
|
351,875 |
|
|
|
1,086,094 |
|
|
|
987,140 |
|
MBS Securities Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,692 |
|
Other Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total interest expense |
|
$ |
5,714,181 |
|
|
$ |
3,485,172 |
|
|
$ |
16,997,761 |
|
|
$ |
12,577,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
MF Properties |
|
|
1,256,202 |
|
|
|
1,353,602 |
|
|
|
3,876,768 |
|
|
|
4,649,724 |
|
Public Housing Capital Fund Trust |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
MBS Securities Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total depreciation expense |
|
$ |
1,256,202 |
|
|
$ |
1,353,602 |
|
|
$ |
3,876,768 |
|
|
$ |
4,649,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
2,604,989 |
|
|
$ |
2,918,500 |
|
|
$ |
7,426,810 |
|
|
$ |
7,169,516 |
|
MF Properties |
|
|
(626,827 |
) |
|
|
754,441 |
|
|
|
3,136,765 |
|
|
|
8,458,960 |
|
Public Housing Capital Fund Trust |
|
|
339,993 |
|
|
|
372,860 |
|
|
|
1,053,697 |
|
|
|
1,191,487 |
|
MBS Securities Investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
51,984 |
|
Other Investments |
|
|
1,227,328 |
|
|
|
577,741 |
|
|
|
3,326,473 |
|
|
|
1,289,225 |
|
Partnership net income |
|
$ |
3,545,483 |
|
|
$ |
4,623,542 |
|
|
$ |
14,943,745 |
|
|
$ |
18,161,172 |
|
The following table details certain key financial information for the Partnership’s reportable segments at September 30, 2017 and December 31, 2016:
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
Total assets |
|
|
|
|
|
|
|
|
Mortgage Revenue Bond Investments |
|
$ |
893,205,519 |
|
|
$ |
764,995,675 |
|
MF Properties |
|
|
106,823,052 |
|
|
|
129,895,112 |
|
Public Housing Capital Fund Trust Certificates |
|
|
55,313,588 |
|
|
|
57,461,268 |
|
Other Investments |
|
|
50,487,804 |
|
|
|
34,540,280 |
|
Consolidation/eliminations |
|
|
(52,634,243 |
) |
|
|
(42,778,661 |
) |
Total assets |
|
$ |
1,053,195,720 |
|
|
$ |
944,113,674 |
|
24. Subsequent Events
In October 2017, the owner of the Vantage at Harlingen property that collateralizes the Partnership’s MRBs closed on the sale of the property to an unrelated third party. At closing, the Partnership received the outstanding principal on the outstanding Series B and Series D MRBs, accrued interest and other fees from the borrower. The Partnership also settled approximately $19.5 million of the M33 TEBS Financing concurrent with the settlement of the MRBs.
37
In October 2017, the Partnership executed Commercial Purchase Agreements to sell the Eagle Village, Residences at DeCordova and Residences at Weatherford MF Properties to unrelated third parties.
On October 2, 2017, the Partnership issued 1.0 million of Series A Preferred Units to a financial institution in a private placement for gross proceeds of $10.0 million.
On October 25, 2017, the Partnership issued 750,000 of Series A Preferred Units to a financial institution in a private placement for gross proceeds of $7.5 million. Effective subsequent to the transaction, the Partnership has terminated the private offering of the Series A Preferred Units.
In October 2017, the Partnership executed PSAs to purchase one property in Hanahan, SC and one property in Goose Creek, SC.
38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
In Management’s Discussion and Analysis, the “Partnership” refers to America First Multifamily Investors, L.P. and its Consolidated Subsidiaries at September 30, 2017. See Note 2 and Note 5 to the Partnership’s condensed consolidated financial statements for further disclosure.
Critical Accounting Policies
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 Partnership’s critical accounting policies are the same as those described in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016, except for certain policies regarding the fair value of financial instruments. The Partnership’s updated fair value of financial instruments policy is as follows:
Current accounting guidance on fair value measurements establishes a framework for measuring fair value and provides for expanded disclosures about fair value measurements. The guidance:
|
• |
Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and |
|
• |
Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. |
Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:
|
• |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
• |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
|
• |
Level 3 inputs are unobservable inputs for asset or liabilities. |
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.
Investments in MRBs and Bond Purchase Commitments. The fair value of the Partnership’s investments in MRBs and mortgage bond purchase commitments is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the MRBs and price quotes for the MRBs are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, seniority to other obligations, operating results of the underlying property, geographic location, and property quality. The MRB values are then estimated using a discounted cash flow and yield to maturity or call analysis. The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these MRBs are based largely on unobservable inputs the believed to be used by market participants and requires the use of judgment on the part of the third-party pricing service and management. Due to the judgments involved, the fair value measurement of the Partnership’s investments in MRBs and mortgage bond purchase commitments are categorized as a Level 3 input.
Investments in Public Housing Capital Fund Trust Certificates. The fair value of the Partnership’s investment in PHC Certificates is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the trusts’ certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Trust as well as other
39
quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs. During the third quarter of 2017, the Partnership continued to utilize the third-party pricing service to obtain prices, which are indicative of market prices, for its PHC Certificates. The Partnership engaged a second third-party pricing service whose methodology was consistent with the Partnership’s internal valuation methodology and is utilized by the Partnership to confirm the values developed by its primary third-party pricing service. As such, the Partnership did not utilize its internal methodology to price the PHC Certificates. The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness. The valuation methodologies used by the third-party pricing services and the Partnership encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input.
Taxable Bonds. The fair value of the Partnership’s taxable bonds is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the taxable bonds and price quotes are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each taxable bond as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, subordinate to other obligations, operating results of the underlying property, geographic location, and property quality. The taxable bonds values are then estimated using a discounted cash flow and yield to maturity or call analysis. The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these taxable bonds are based largely on unobservable inputs believed to be used by market participants and requires the use of judgment on the part of the third-party pricing service and management. Due to the judgments involved, the fair value measurement of the Partnership’s investments in taxable bonds is categorized as a Level 3 input.
Interest Rate Derivatives. The effect of the Partnership’s interest rate derivatives is to set a cap, or upper limit, on the base rate of interest paid on the Partnership’s variable rate debt equal to the notional amount of the derivative agreement. The effect of the Partnership’s interest rate swaps is to change a variable rate debt obligation to a fixed rate for that portion of the debt equal to the notional amount of the derivative agreement. The fair value of the interest rate derivatives is based on a model whose inputs are not observable and therefore is categorized as a Level 3 input. The inputs in the valuation model include three-month LIBOR rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.
Financial Liabilities. The Partnership estimates the fair value of each financial liability using a discounted cash flow model based on the debt amortization schedules and the effective rate of interest for each period presented. This estimate of fair value is based on Level 3 inputs.
Executive Summary
The Partnership was formed for the primary purpose of acquiring a portfolio of MRBs that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily and student housing (collectively “Residential Properties”) and commercial properties in their market areas. We expect and believe the interest received on these bonds is excludable from gross income for federal income tax purposes. We may also invest in other types of securities that may or may not be secured by real estate to the extent allowed by the Amended and Restated LP Agreement of the Partnership. We may acquire interests in MF Properties in order to position ourselves for future investments in bonds issued to finance these properties and which we expect and believe will generate tax-exempt interest.
At September 30, 2017, the Partnership has four reportable segments: (1) Mortgage Revenue Bond Investments, (2) MF Properties, (3) Public Housing Capital Fund Trust, and (4) Other Investments. In the first quarter of 2016, the Partnership sold its remaining three mortgage-backed securities (“MBS Securities”). The sale of the Partnership’s MBS Securities eliminated the MBS Securities Investment reportable segment. In addition to the reportable segments, the Partnership also separately reports its consolidation and elimination information because it does not allocate certain items to the segments. See Notes 2 and 23 to the Partnership’s condensed consolidated financial statements for additional details.
40
Recent Investment Activity
The following table presents information regarding the investment activity of the Partnership for the first, second and third quarters of 2017 and 2016:
Recent Investment Activity |
|
# |
|
Amount (in 000's) |
|
|
Retired Debt or Note (in 000's) |
|
|
Tier 2 income distributable to the General Partner (in 000's) (1) |
|
|
Notes to the Partnership's condensed consolidated financial statements |
|||
For the Three Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond acquisitions |
|
2 |
|
$ |
12,471 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
Mortgage revenue bond redemption |
|
1 |
|
|
1,997 |
|
|
$ |
1,700 |
|
|
N/A |
|
|
6 |
|
Property loan issued |
|
1 |
|
|
36 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
Property loan redemptions |
|
1 |
|
|
500 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
Investment in unconsolidated entities |
|
1 |
|
|
1,552 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land held for development sold |
|
1 |
|
$ |
3,000 |
|
|
N/A |
|
|
$ |
(5 |
) |
|
8 |
|
Investment in unconsolidated entities |
|
2 |
|
|
1,605 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
Property loan advances |
|
2 |
|
|
639 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond acquisitions |
|
6 |
|
$ |
59,585 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
MF Property sold |
|
1 |
|
|
13,750 |
|
|
N/A |
|
|
$ |
1,071 |
|
|
8 |
|
Investments in unconsolidated entities |
|
3 |
|
|
9,503 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
Property loan redemptions |
|
1 |
|
|
500 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
Property loan advances |
|
3 |
|
|
1,705 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable bond redemption |
|
1 |
|
$ |
499 |
|
|
$ |
- |
|
|
$ |
- |
|
|
12 |
Mortgage revenue bond acquisitions |
|
4 |
|
|
8,785 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
Mortgage revenue bond restructured |
|
3 |
|
|
5,885 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
Property loan issued |
|
1 |
|
|
2,500 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
MF Property sold |
|
1 |
|
|
15,650 |
|
|
|
7,501 |
|
|
|
276 |
|
|
8 |
MF Property acquisition |
|
1 |
|
|
9,883 |
|
|
N/A |
|
|
N/A |
|
|
8 |
||
Investment in unconsolidated entities |
|
3 |
|
|
9,471 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bond redemptions |
|
4 |
|
$ |
5,172 |
|
|
$ |
- |
|
|
$ |
- |
|
|
6 |
MF Property sold |
|
1 |
|
|
30,200 |
|
|
|
16,519 |
|
|
|
2,078 |
|
|
9 |
Investment in an unconsolidated entity |
|
1 |
|
|
3,372 |
|
|
N/A |
|
|
N/A |
|
|
10 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS Securities sold |
|
3 |
|
$ |
15,081 |
|
|
$ |
11,945 |
|
|
$ |
- |
|
|
15 |
Mortgage revenue bond sold |
|
1 |
|
|
9,479 |
|
|
|
8,375 |
|
|
|
- |
|
|
6, 15 |
Mortgage revenue bond acquisitions |
|
1 |
|
|
11,500 |
|
|
N/A |
|
|
N/A |
|
|
6 |
||
Investment in an unconsolidated entity |
|
1 |
|
|
2,443 |
|
|
N/A |
|
|
N/A |
|
|
9 |
||
Property loan advances, net |
|
2 |
|
|
5,828 |
|
|
N/A |
|
|
N/A |
|
|
10 |
(1) |
See “Cash Available for Distribution” in this Item 2 below. |
41
Recent Financing and Derivative Activities
The following table presents information regarding the debt financing, derivative and Preferred Unit activity of the Partnership for the first, second and third quarters of 2017 and 2016:
Recent Financing and Derivative Activity |
|
# |
|
Amount of Change in Debt, Derivative, or Preferred Units (in 000's) |
|
|
Secured |
|
Maximum SIFMA Cap Rate (1) |
|
|
Notes to the Partnership's condensed consolidated financial statements |
||
For the Three Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowing on unsecured LOCs |
|
1 |
|
$ |
12,471 |
|
|
No |
|
N/A |
|
|
13 |
|
Interest rate derivative purchased |
|
1 |
|
|
52 |
|
|
N/A |
|
|
4.0% |
|
|
17 |
Redeemable Series A preferred unit issuance |
|
1 |
|
|
20,000 |
|
|
N/A |
|