atax-10q_20180630.htm

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

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

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

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

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

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

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

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “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, 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.

	June 30, 2018			December 31, 2017
Assets
Cash and cash equivalents	$	26,328,497		$	69,597,699
Restricted cash		1,493,295			1,985,630
Interest receivable, net		7,682,580			6,541,132
Mortgage revenue bonds held in trust, at fair value (Note 6)		673,152,217			710,867,447
Mortgage revenue bonds, at fair value (Note 6)		94,477,120			77,971,208
Public housing capital fund trusts, at fair value (Note 7)		49,070,710			49,641,588
Real estate assets: (Note 8)
Land and improvements		7,518,727			7,319,235
Buildings and improvements		79,378,136			78,953,488
Real estate assets before accumulated depreciation		86,896,863			86,272,723
Accumulated depreciation		(11,403,940	)		(9,580,531	)
Net real estate assets		75,492,923			76,692,192
Investment in unconsolidated entities (Note 9)		60,494,767			39,608,927
Property loans, net of loan loss allowance (Note 10)		28,930,525			29,513,874
Other assets (Note 12)		6,408,246			7,348,302
Total Assets	$	1,023,530,880		$	1,069,767,999

Liabilities
Accounts payable, accrued expenses and other liabilities	$	7,837,981		$	8,494,227
Distribution payable		7,632,945			8,423,803
Unsecured lines of credit (Note 13)		49,540,000			50,000,000
Debt financing, net (Note 14)		542,172,329			558,328,347
Mortgages payable and other secured financing, net (Note 15)		35,212,789			35,540,174
Derivative swaps, at fair value (Note 16)		129,018			826,852
Total Liabilities		642,525,062			661,613,403

Commitments and Contingencies (Note 17)

Redeemable Series A preferred units, approximately $94.5 redemption value, 10.0 million authorized, 9.5 million issued and outstanding (Note 18)		94,332,351			94,314,326

Partnersʼ Capital
General Partner (Note 1)		180,641			437,256
Beneficial Unit Certificate holders		286,492,826			313,403,014
Total Partnersʼ Capital		286,673,467			313,840,270
Total Liabilities and Partnersʼ Capital	$	1,023,530,880		$	1,069,767,999

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
Property revenues	$	2,403,142		$	3,306,722		$	4,739,654		$	7,036,500
Investment income		12,249,035			12,174,215			25,627,521			23,644,401
Contingent interest income		-			86,567			-			219,217
Other interest income		1,058,688			666,796			1,801,724			1,311,933
Other income		74,300			-			74,300			62,637
Total revenues		15,785,165			16,234,300			32,243,199			32,274,688
Expenses:
Real estate operating (exclusive of items shown below)		1,290,487			1,621,084			2,685,980			4,105,300
Impairment of securities		831,062			-			831,062			-
Depreciation and amortization		921,816			1,270,379			1,828,131			2,863,205
Amortization of deferred financing costs		430,687			562,585			895,459			1,302,823
Interest expense		5,918,867			5,841,327			10,801,172			11,283,580
General and administrative		3,041,125			2,876,450			5,852,970			6,007,330
Total expenses		12,434,044			12,171,825			22,894,774			25,562,238
Other Income:
Gain (loss) on sale of real estate assets, net		-			(16,075	)		-			7,152,512
Income before income taxes		3,351,121			4,046,400			9,348,425			13,864,962
Income tax expense (benefit)		13,000			(63,000	)		6,000			2,395,047
Net income		3,338,121			4,109,400			9,342,425			11,469,915
Net income attributable to noncontrolling interest		-			-			-			71,653
Partnership net income		3,338,121			4,109,400			9,342,425			11,398,262
Redeemable Series A preferred unit distributions and accretion		(717,762	)		(432,550	)		(1,435,525	)		(757,192	)
Net income available to Partners	$	2,620,359		$	3,676,850		$	7,906,900		$	10,641,070

Net income available to Partners and noncontrolling interest allocated to:
General Partner	$	26,204		$	35,139		$	79,069		$	1,182,211
Limited Partners - Unitholders		2,530,332			3,594,529			7,729,733			9,389,231
Limited Partners - Restricted Unitholders		63,823			47,182			98,098			69,628
Noncontrolling interest		-			-			-			71,653
	$	2,620,359		$	3,676,850		$	7,906,900		$	10,712,723
Unitholders' interest in net income per Unit, basic and diluted	$	0.04		$	0.06		$	0.13		$	0.16
Distributions declared, per Unit	$	0.125		$	0.125		$	0.25		$	0.25
Weighted average number of Units outstanding, basic		59,937,300			59,862,969			60,030,817			59,950,328
Weighted average number of Units outstanding, diluted		59,937,300			59,862,969			60,030,817			59,950,328

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

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018			2017		2018			2017
Net income	$	3,338,121		$	4,109,400	$	9,342,425		$	11,469,915
Reversal of net unrealized losses on securities with other-than-temporary impairment		981,792			-		525,446			-
Unrealized gain (loss) on securities		4,065,221			10,226,688		(17,353,309	)		29,207,054
Unrealized gain (loss) on bond purchase commitments		(1,032,788	)		544,779		(2,007,855	)		765,723
Comprehensive income (loss)		7,352,346			14,880,867		(9,493,293	)		41,442,692
Comprehensive income allocated to noncontrolling interest		-			-		-			71,653
Partnership comprehensive income (loss)	$	7,352,346		$	14,880,867	$	(9,493,293	)	$	41,371,039

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

	General Partner			# of Units - Restricted and Unrestricted			Beneficial Unit Certificate Holders - Restricted and Unrestricted			Non-controlling Interest		Total			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	437,256			60,373,674		$	313,403,014		$	-	$	313,840,270		$	75,623,830
Cumulative effect of accounting change (Note 2)		(2,169	)					(214,779	)		-		(216,948	)		-
Distributions paid or accrued
Regular distribution		(152,659	)					(15,113,232	)		-		(15,265,891	)		-
Net income allocable to Partners		79,069						7,827,831			-		7,906,900			-
Sale of Beneficial Unit Certificates, net of issuance costs		-			38,617			192,310			-		192,310			-
Repurchase of Beneficial Unit Certificates		-			(268,575	)		(1,697,613	)		-		(1,697,613	)		-
Restricted units awarded		-			309,212			-			-		-			-
Restricted units compensation expense		7,502						742,655			-		750,157			-
Unrealized loss on securities		(173,533	)					(17,179,776	)		-		(17,353,309	)		(17,353,309	)
Unrealized loss on bond purchase commitment		(20,079	)					(1,987,776	)		-		(2,007,855	)		(2,007,855	)
Reversal of net unrealized loss on securities with other-than-temporary impairment		5,254						520,192					525,446			525,446
Balance at June 30, 2018	$	180,641			60,452,928		$	286,492,826		$	-	$	286,673,467		$	56,788,112

	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		(118,196	)					(11,701,357	)		-			(11,819,553	)		-
Distribution of Tier 2 earnings (Note 3)		(1,120,625	)					(3,361,875	)		-			(4,482,500	)		-
Net income allocable to Partners		1,182,211						9,458,859			71,653			10,712,723			-
Repurchase of Beneficial Unit Certificates		-			(254,656	)		(1,466,222	)		-			(1,466,222	)		-
Restricted units awarded		-			283,046			-			-			-			-
Restricted units compensation expense		6,097						603,636			-			609,733			-
Unrealized gain on securities		292,071						28,914,983			-			29,207,054			29,207,054
Unrealized gain on bond purchase commitment		7,657						758,066			-			765,723			765,723
Balance at June 30, 2017	$	351,751			60,252,928		$	303,232,759		$	-		$	303,584,510		$	68,868,261

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

	For the Six Months Ended June 30,
	2018			2017
Cash flows from operating activities:
Net income	$	9,342,425		$	11,469,915
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		1,828,131			2,863,205
Gain on sale of real estate assets, net		-			(7,152,512	)
Impairment of securities		831,062			-
Loss (gain) on derivatives, net of cash paid		(1,127,589	)		302,769
Restricted unit compensation expense		750,157			609,733
Bond premium/discount amortization		(33,987	)		(74,873	)
Amortization of deferred financing costs		895,459			1,302,823
Deferred income tax expense (benefit) & income tax payable		(183,303	)		(365,000	)
Change in preferred return receivable from unconsolidated entities		(1,799,127	)		(1,343,013	)
Changes in operating assets and liabilities
(Increase) decrease in interest receivable		(1,141,448	)		585,695
Increase in other assets		(928,527	)		(40,101	)
Increase (decrease) in accounts payable and accrued expenses		(516,061	)		50,585
Net cash provided by operating activities		7,917,192			8,209,226
Cash flows from investing activities:
Capital expenditures		(431,784	)		(175,193	)
Proceeds from sale of MF Properties		-			13,750,000
Proceeds from sale of land held for development		-			3,000,000
Acquisition of mortgage revenue bonds		(19,540,000	)		(59,585,000	)
Contributions to unconsolidated entities		(16,488,929	)		(8,017,189	)
Principal payments received on mortgage revenue bonds		23,285,577			2,003,281
Principal payments received on taxable mortgage revenue bonds		30,526			27,864
Principal payments received on PHC Certificates		226,714			437,000
Cash paid for land held for development and deposits on potential purchases		(2,660,649	)		(95,932	)
Advances on property loans		(66,651	)		(2,340,636	)
Principal payments received on property loans		650,000			500,000
Net cash used in investing activities		(14,995,196	)		(50,495,805	)
Cash flows from financing activities:
Distributions paid		(17,458,416	)		(17,288,919	)
Proceeds from the sale of redeemable Series A Preferred Units		-			16,131,000
Payment of offering costs related to the sale of redeemable Series A Preferred Units		-			(668	)
Acquisition of interest rate derivatives		-			(496,800	)
Repurchase of Beneficial Unit Certificates		(1,697,613	)		(1,466,222	)
Proceeds from the sale of Beneficial Unit Certificates		233,633			-
Payment of offering costs related to the sale of Beneficial Unit Certificates		(4,678	)		-
Payment of tax withholding related to restricted unit awards		-			(153,306	)
Distribution to noncontrolling interest		-			(76,316	)
Proceeds from debt financing		-			135,100,000
Principal payments on debt financing		(16,924,182	)		(32,751,484	)
Principal payments on mortgages payable		(380,775	)		(658,271	)
Principal borrowing on unsecured lines of credit		19,540,000			24,460,000
Principal payments on unsecured and secured lines of credit		(20,000,000	)		(84,460,000	)
Increase (decrease) in security deposit liability related to restricted cash		17,168			(92,951	)
Debt financing and other deferred costs		(8,670	)		(1,452,517	)
Net cash provided by (used in) financing activities		(36,683,533	)		36,793,546
Net decrease in cash, cash equivalents and restricted cash		(43,761,537	)		(5,493,033	)
Cash, cash equivalents and restricted cash at beginning of period		71,583,329			27,506,220
Cash, cash equivalents and restricted cash at end of period	$	27,821,792		$	22,013,187

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	11,702,009		$	10,670,383
Cash paid during the period for income taxes	$	162,963		$	3,007,000
Supplemental disclosure of noncash investing and financing activities:
Distributions declared but not paid for Beneficial Unit Certificates and general partner	$	7,632,945		$	7,623,425
Distributions declared but not paid for Series A Preferred Units	$	708,750		$	427,500
Land contributed as investment in an unconsolidated entity	$	2,597,784		$	3,091,023
Capital expenditures financed through accounts payable	$	24,491		$	54,320
Deferred financing costs financed through accounts payable	$	19,626		$	-

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

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

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

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P. and its wholly-owned subsidiaries. All intercompany transactions are eliminated. At June 30, 2018, the consolidated subsidiaries of the Partnership (the “Consolidated Subsidiaries”) consist of:

Restricted cash is legally restricted to use and is comprised of resident security deposits and escrowed funds. In addition, the Partnership is required to maintain restricted cash balances related to the TEBS Financing facilities and the Partnership’s interest rate derivatives. Restricted cash is presented with cash and cash equivalents on the condensed consolidated statement of cash flows in accordance with the adoption of Accounting Standards Update (“ASU”) 2016-18 effective for the Partnership as of January 1, 2018.

The Partnership owns certain MRBs that were purchased at a discount or premium. The Partnership chose to adopt the provisions of ASU 2017-08 relating to premiums on purchased callable debt securities early, effective January 1, 2018. Upon adoption of this ASU, premiums on callable MRB investments are amortized as a yield adjustment to the earliest call date. Accordingly, on January 1, 2018, the Partnership recorded a cumulative adjustment to partners’ capital of approximately $217,000. Results for prior periods were not adjusted. The impact of the adoption of ASU 2017-08 to net income for the three and six months ended June 30, 2018 was a decrease

in investment income of approximately $17,000 and $34,000, respectively, as compared to the previous accounting policy. Discounts on MRB investments continue to be amortized as a yield adjustment to their stated maturity. Amortization of premiums and discounts are recognized as investment income on the condensed consolidated statements of operations.

The Partnership periodically reviews the Public Housing Capital Fund Trust (“PHC”) Certificates for impairment. The Partnership evaluates whether a decline in the fair value of the investments that is below its amortized cost is other-than-temporary. Factors considered are:

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 recognizes 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 its 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 deferred financing costs, etc.) and the utilization of tax net operating losses (“NOLs”) generated in prior years that had been previously recognized as deferred income tax assets. 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.

The Partnership’s MF Properties are lessors of multifamily, student housing, and senior citizen rental units under leases with terms of one year or less. Rental revenue is recognized, net of rental concessions, on a straight-line method over the related lease term. The Partnership also recognizes other non-lease revenues related to other operations at the MF Properties such as parking and food service revenues at student housing properties. Such revenues are recognized over time as services are provided. Such non-lease revenue streams are within the scope of Accounting Standards Codification (“ASC”) 606, which was effective for the Partnership as of January 1, 2018. The adoption of ASC 606 did not have a material impact on the Partnerships’ condensed consolidated financial statements.

The Partnership’s 2015 Equity Incentive Plan (the “Plan”) 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 vesting 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 as they occur.

Delaware		47-0810385
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1004 Farnam Street, Suite 400		Omaha, Nebraska 68102
(Address of principal executive offices)		(Zip Code)

(402) 444-1630
(Registrant’s telephone number, including area code)

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

Item 1	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Partners’ Capital	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4	Controls and Procedures	51

PART II – OTHER INFORMATION
Item 1A	Risk Factors	52
Item 6	Exhibits	52

SIGNATURES		53

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:	June 30, 2018		June 30, 2017
Cash and cash equivalents	$	26,328,497	$	15,371,898
Restricted cash		1,493,295		6,641,289
Total cash, cash equivalents and restricted cash	$	27,821,792	$	22,013,187