UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

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

For the fiscal year ended December 31, 20162017

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

47-0810385

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

1004 Farnam Street, Suite 400

Omaha, Nebraska 68102

(Address of principal executive offices)

(Zip Code)

(402) 444-1630

(Registrant’s telephone number, including area code)

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

 

Title of each class

Name of each exchange on which registered

Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P. (the “BUCs”)

The NASDAQ Stock Market LLC

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES      NO  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES      NO  

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 Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES      NO  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of the chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non- accelerated filer

(do not check if a smaller reporting company)

Smaller reporting company

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  

The aggregate market value of the registrant’s BUCs held by non-affiliates based on the final sales price of the BUCs on the last business day of the registrant’s most recently completed second fiscal quarter was  $330,186,045$358,504,922

DOCUMENTS INCORPORATED BY REFERENCE

None

 

 

 

 


 

INDEX

 

 

 

PART I

 

 

 

 

 

Item 1

 

Business

34

Item 1A

 

Risk Factors

12

Item 1B

 

Unresolved Staff Comments

2324

Item 2

 

Properties

24

Item 3

 

Legal Proceedings

24

Item 4

 

Mine Safety Disclosures

24

 

 

 

 

 

 

PART II

 

 

 

 

 

Item 5

 

Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

25

Item 6

 

Selected Financial Data

27

Item 7

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 7A

 

Quantitative and Qualitative Disclosures About Market Risk

5054

Item 8

 

Financial Statements and Supplementary Data

5457

Item 9

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

109114

Item 9A

 

Controls and Procedures

109114

Item 9B

 

Other Information

110115

 

 

 

 

 

 

PART III

 

 

 

 

 

Item 10

 

Directors, Executive Officers and Corporate Governance

111116

Item 11

 

Executive Compensation

114119

Item 12

 

Security Ownership of Certain Beneficial Owners and Management

118122

Item 13

 

Certain Relationships and Related Transactions, and Director Independence

118123

Item 14

 

Principal Accountant Fees and Services

119124

 

 

 

 

 

 

PART IV

 

 

 

 

 

Item 15

 

Exhibits and Financial Statement Schedules

120125

 

 

 

 

SIGNATURES

124130

 

 

 


PART I

Forward-Looking Statements

This Annual Report (“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 and contained in this report, and, accordingly, we cannot guarantee their accuracy or completeness. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Risk Factors” in Item 1A of this report.

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

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

defaults on the mortgage loans securing our mortgage revenue bonds;bonds (“MRBs”);

the competitive environment in which we operate;

risks associated with investing in multifamily, student, senior citizen residential and commercial properties, including changes in business conditions and the general economy;

the general level ofchanges in interest rates;

our ability to use borrowings or obtain capital to finance our assets;

local, regional, national and international economic and credit market conditions;

recapture of previously issued Low Income Housing Tax Credits (“LIHTCs”) in accordance with Section 42 of the Internal Revenue Code;

changes in the United States Department of Housing and Urban Development’s Capital Fund Program (“HUD”);

geographic concentration with the MRB portfolio held by the Partnership;

appropriations risk related to the funding of Federalfederal housing programs, including HUD Section 8; and

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 this Annual Report on Form 10-K.

All references to “we,” “us,” and the “Partnership” in this document mean America First Multifamily Investors, L.P. (“ATAX”) and its wholly-owned subsidiaries. As used in this document, the “Company” refers to the Partnership, its wholly-owned subsidiaries, and its consolidated variable interest entities (“Consolidated VIEs”).  See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of the Company’s report for additional details.

 



Item 1. Business.Business.

The Partnership was formed for the primary purpose of acquiring a portfolio of mortgage revenue bondsMRBs 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. Unitholders may incur tax liability if any interest earned


on the Partnership’s mortgage revenue bondsMRBs is determined to be taxable.” See Item 1A, “Risk Factors” in the Company’s report for additional details.  

The Partnership has been in operation since 1998 and owns 83 mortgage revenue bonds87 MRBs with an aggregate outstanding principal amount of approximately $648.4$719.8 million as of December 31, 2016.2017. The majority of these bondsMRBs were issued by various state and local housing authorities in order to provide construction and/or permanent financing for 5863 Residential Properties containing a total of 9,96810,666 rental units located in 1514 states in the United States.  One mortgage revenue bond is collateralized by commercial real estate located in Tennessee. Eighty-three of the mortgage revenue bonds are secured by mortgages or deeds of trust onEach MRB for the Residential Properties. One mortgage revenue bondProperties is secured by a mortgage or deed of trust.  One MRB is secured by a mortgage on the ground, facility,facilities, and equipment of a commercial ancillary health care facility.facility in Tennessee. Each of the bondsMRBs provides for “base” interest payable at a fixed rate on a periodic basis. Additionally, the bondsMRBs may also provide for the payment of contingent interest determined by the net cash flow and net capital appreciation of the underlying real estate properties. Thus, these mortgage revenue bondsSuch MRBs provide us with the potential to participate in future increases in the cash flow generated by the financed properties, either through operations, from the refinancing of the MRB or from their ultimate sale. Of the bondsMRBs owned, 3020 are owned directly by us. Tenthe Partnership. Nine of the bondsMRBs are owned by ATAX TEBS I, LLC, 13 bonds12 MRBs are owned by ATAX TEBS II, LLC, and 9 bonds8 MRBs are owned by ATAX TEBS III, LLC. Each of these LLCs is a special purpose entity owned and controlled by usthe Partnership to facilitate Tax Exempt Bond Securitization (“TEBS”) Financings with Freddie Mac. Two bondsMRBs are securitized and held by Deutsche Bank AG (“DB”) in Term Tender Option Bond (“Term TOB”) facilities. Seventeen bondsThirty-six MRBs are securitized and held by DB in Term A/B Trust financing facilities. See Notes 2 and 17 to the Partnership’s consolidated financial statements for additional details.

The ability of the Residential Properties and the commercial property which collateralize our mortgage revenue bondsMRBs to make payments of base and contingent interest is a function of the net cash flow generated by these properties. Net cash flow from a multifamily, student, or senior citizen residential property depends on the rental and occupancy rates of the property and the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market areas in which a property is located. This, in turn, is affected by several factors such as the requirement that a certain percentage of the rental units be set aside for tenants who qualify as persons of low to moderate income, local or national economic conditions, and the amount of new apartment construction and interest rates on single-family mortgage loans. Net cash flow from the commercial property depends on the number of cancer patients which utilize the cancer therapy center and the ability to hire and retain key employees to provide the related cancer treatment. In addition, factors such as government regulation, inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of the properties which collateralize the bonds.MRBs. The return we realize from our investments in mortgage revenue bondsMRBs depends upon the economic performance of the Residential Properties and the commercial property which collateralize these bonds.MRBs. We may be considered to be in competition with other residential rental properties and commercial properties located in the same geographic areas as the properties financed with our mortgage revenue bonds.MRBs.

We may also make taxable property loans secured by the Residential Properties which are financed by mortgage revenue bondsMRBs held by us. We do this to provide financing for capital improvements at these properties or to otherwise support property operations when we determine it is in our best long-term interest.

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 America First Multifamily Investors, L.P.ATAX’s First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as further amended (the “Amended and Restated LP Agreement”) and the conditions to the exemption from registration under the Investment Company Act of 1940 that isare relied upon by us. Under the Amended and Restated LP Agreement, any tax-exempt investments, other than mortgage revenue bonds,MRBs, that are not secured by a direct or indirect interest in a property must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency.  The Partnership’s acquisition by the Partnership of any tax-exempt investment or other investment may not cause the aggregate book value of such investments to exceed 25% of our assets at the time of acquisition. At December 31, 2016,2017, we had one class of other tax-exempt investments, the Public Housing Capital Fund Trusts’ Certificates (“PHC Certificates”). The PHC Certificates had an aggregate carrying valueoutstanding principal amount of $56.8approximately $50.4 million at December 31, 2016.2017. The PHC Certificates are securitized into three separate TOB financing facilities (“TOB Trusts”) with DB (“PHC Trusts”).  See Note 17 to the Company’s consolidated financial statements for additional details. The PHC Certificates held by the PHC Trusts consist of custodial receipts evidencing loans made to a number of public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by the United States Department of Housing and Urban Development (“HUD”) under HUD’s Capital Fund Program established under 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.


At December 31, 2017, we own limited membership interests in certain unconsolidated entities (“Vantage Properties”). Our investments in the Vantage Properties are used to construct multifamily real estate properties. We do not have controlling interests in the Vantage Properties and account for the limited partnership interests under the equity method of accounting.  The Partnership earns a return on its investments accruing immediately on its contributed capital, which is guaranteed during the construction phase by an unrelated third party.  The limited membership interests entitle the Partnership to shares of certain cash flows generated by the Vantage Properties from operations or upon the occurrence of certain capital transactions, such as a sale or refinancing.

We may acquire interests in multifamily, student, and senior citizen apartment properties (“MF Properties”) in order to position ourselves for future investments in bondsMRBs issued to finance these properties and which we expect and believe will generate tax-exempt interest. We currently hold interests in seventhree MF Properties containing 2,0041,013 rental units of which one islocated in Nebraska, one in


Kentucky, one in Indiana, one in California, one in Florida and two in Texas.Florida. In addition, we may acquire real estate securing our mortgage revenue bondsMRBs or taxable property loans through foreclosure in the event of a default.

To restructure each of the MF Properties into a mortgage revenue bond,MRB, we team with a third partythird-party developer who works to secure a mortgage revenue bondMRB issuance from the local housing authority. Once the developer receives the mortgage revenue bondMRB commitment, we will sell the MF Property to a not-for-profit entity, public finance authority or to a for profit entity in connection with a syndication of LIHTCs under Section 42 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). We expect to acquire the mortgage revenue bondsMRBs issued to provide debt financing for these properties at the time the property ownership is restructured. Such restructurings will generally be expected to occur within 36 months of our initial investment in an MF Property and will often coincide with the expiration of the compliance period relating to LIHTCs previously issued with respect to the MF Property. We will not acquire LIHTCs in connection with these transactions. In the event that the MF Property cannot secure a mortgage revenue bond,MRB, we will operate the MF Property until the opportunity arises to sell it at what we believe is its optimal fair value. The MF Property could be sold to any of the following: (1) a LIHTC or other developer, (2) a not-for-profit entity, or (3) a public finance authority. These types of transactions represent a long-term market opportunity for us and will provide us with a pipeline of future bondMRB investment opportunities.

In the first quarter of 2016, we sold our remaining three mortgage-backed securities (“MBS Securities”). The sale of the Partnership’s MBS Securities eliminated the MBS Securities Investment reportable segment.  

In the second quarter of 2015, the property owners entered into brokerage contracts to sell Bent Tree and Fairmont Oaks, the Consolidated VIEs. As a result, these entities met the criteria for discontinued operations and have been classified as such in the Company’s consolidated financial statements for all periods presented. At that time, the Consolidated VIEs reportable segment was eliminated.

At December 31, 2016,2017, we have four reportable segments: (1) Mortgage Revenue Bond Investments, (2) MF Properties, (3) Public housingHousing Capital Fund Trust, and (4) Other Investments. In addition to the reportable segments, the CompanyPartnership also separately reports its consolidation and elimination information because it does not allocate certain items to the segments.  See Note 26 to the Company consolidated financial statements for additional details.

Properties Management. SevenAt December 31, 2017, eight of the 5863 Residential Properties which collateralize the bondsMRBs owned by us are managed by Burlington Capital Properties, LLC (“Properties Management”), an affiliate of the Partnership’s general partner, America First Capital Associates Limited Partnership Two (“AFCA 2” or the “General Partner”). In this regard, Properties Management provides property management services for Ashley Square, Lake Forest Apartments, Cross Creek, Greens of Pine Glen (the “Greens Property”), Crescent Village, Willow Bend and Post Woods (collectively, the “Ohio Properties”), Rosewood Townhomes and South Point Apartments. Property Management also provides management services to each of the MF Properties, except for the Suites on Paseo. Management believes that this relationship provides greater insight and understanding of the underlying property operations and their ability to meet debt service requirements to us and helps assure these properties are being operated in compliance with operating restrictions imposed by the terms of the applicable bond financing and/or LIHTC relating to these properties.LIHTC.

Business Objectives and Strategy

Our business objectives are to (i) preserve and protect our capital, (ii) provide regular cash distributions to our Unitholders which we believe are substantially exempt from federal income tax, and (iii) generate additional returns from appreciation of real estate or the opportunistic sale of the asset investments. We have sought to meet these objectives by primarily investing in a portfolio of mortgage revenue bondsMRBs that were issued to finance, and are secured by mortgages on, multifamily, student, and senior citizen residential properties. Certain of these bonds may be structured to provide a potential for an enhanced yield through the payment of contingent interest which is payable out of net cash flow from operations and the realization of net capital appreciation of the financed multifamily residential properties. We expect and believe that any contingent interest we receive will be exempt from inclusion in gross income for federal income tax purposes.

We are pursuing a business strategy of acquiring additional mortgage revenue bondsMRBs and other investments on a leveraged basis in order to (i) increase the amount of interest available for distribution to our Unitholders; (ii) reduce risk through asset diversification and interest rate hedging; and (iii) achieve economies of scale. We are pursuing this growth strategy by investing in additional mortgage revenue bondsMRBs and other investments as permitted by the Amended and Restated LP Agreement, taking advantage of attractive financing structures available in the securities market, and entering into interest rate risk management instruments. We may finance the acquisition of additional mortgage revenue bondsMRBs and other investments through the reinvestment of cash flow, the issuance of additional units,Units, lines of credit, or securitization financing using our existing portfolio of mortgage revenue bonds.MRBs. Our current operating policy is to use securitizations or other forms of leverage which will not exceed 65%75% of the total Partnership assets. The assets are defined as the parcarrying value of the mortgage revenue bonds,MRBs, PHC Certificates, MBS Securities, initial finance costs, and the


MF Properties at cost.  See the discussion of financing arrangements and liquidity and capital resources in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.


In connection with our business strategy, weWe continually assess opportunities to reposition our existing portfolio of mortgage revenue bonds.MRBs. The principal objective of this assessment is to improve the quality and performance of our revenue bondMRB portfolio and, ultimately, increase the amount of cash available for distribution to our Unitholders. In some cases, we may elect to redeem selected mortgage revenue bondsMRBs that have experienced significant appreciation. Through the selective redemption of the bonds,MRBs, a sale or refinancing of the underlying property will be required, which ifrequired. If sufficient sale or refinancing proceeds exist, we may entitle usbe entitled to receive payment of contingent interest on our bond investment. In other cases, we may elect to sell bondsMRBs on properties that are in stagnant or declining markets. The proceeds received from these transactions would be redeployed into other investments consistent with our investment objectives.

In executing our growth strategy, weWe expect to invest primarily in mortgage revenue bondsMRBs issued to provide affordable rental housing, student housing projects, housing for senior citizens, and commercial property. The four basic types of mortgage revenue bondsMRBs which we may acquire as investments are as follows:

 

1.

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

 

2.

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

 

3.

Essential function bonds issued by a public instrumentality to finance a multifamily residential property owned by such instrumentality; and

 

4.

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

Each of these bond structures permitspermit the issuance of mortgage revenue bondsMRBs to finance the construction or acquisition and rehabilitation of affordable rental housing or other not-for-profit commercial property. Under applicable Treasury Regulations, any affordable multifamily residential project financed with mortgage revenue bondsMRBs that are purportedly tax-exempt must set aside a percentage of its total rental units for occupancy by tenants whose incomes do not exceed stated percentages of the median income in the local area. In each case, the balance of the rental units in the multifamily residential project may be rented at market rates (unless otherwise restricted by local housing authorities). With respect to private activity bonds issued under Section 142(d) of the Internal Revenue Code, the owner of the multifamily residential project may elect, at the time the bondsMRBs are issued, whether to set aside a minimum of 20% of the units for tenants making less than 50% of area median income (as adjusted for household size) or 40% of the units for tenants making less than 60% of the area median income (as adjusted for household size). The mortgage revenue bondsMRBs that were secured by Residential Properties issued prior to the Tax Reform Act of 1986 (so called “80/20” bonds) require that 20% of the rental units be set aside for tenants whose income does not exceed 80% of the area median income, without adjustment for household size. There are no Treasury Regulations related to the mortgage revenue bondsMRBs which are collateralized by the commercial property.

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

Investment Types

Mortgage Revenue Bonds. We invest in mortgage revenue bondsMRBs that are secured by a mortgage or deed of trust on Residential Properties and a commercial property. Each of these bonds bears interest at a fixed annual base rate. TwoOne of the mortgage revenue bondsMRBs currently owned by us also provideprovides for the payment of contingent interest, which is payable out of the net cash flow and net capital appreciation of the underlying multifamily residential properties. As a result, theproperty. The amount of interest earned by us from our investment in mortgage revenue bondsMRBs is a function of the net cash flow generated by the Residential Properties and the commercial property which collateralize the mortgage revenue bonds.MRBs. Net cash flow from a residential property depends on the rental and occupancy rates of the property and the level of operating expenses. Net cash flow from the commercial property depends on the number of cancer patients whichthat utilize the cancer therapy center and the ability to hire and retain key employees to provide the related cancer treatment.


Other InvestmentsSecurities. We may invest in other types of securities that may or may not be secured by real estate. Any security acquired by the Partnership which is not secured by a direct or indirect interest in a propertyOther tax-exempt investments must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency. These tax-exempt investments and other securities may not represent more than 25% of our assets at the total assetstime of the Partnership.acquisition.

PHC Certificates. The PHC Certificates consist of custodial receipts evidencing loans made to a number ofnumerous public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program. The PHC Certificates have a first lien on these annual Capital Fund Program payments to secure the public housing authorities’ respective obligations to pay principal and interest on their loans. The PHC Certificates rating by Standard & Poor’s is investment grade as ofat December 31, 2016.2017.


MBS Securities.Other Investments.We also invest in state-issued MBS Securities that are backed by residential mortgage loans. These MBS Securities were rated investment grade by Standard & Poor’s or Moody’s ashave a reportable segment consisting of ATAX Vantage Holdings, LLC, which, at December 31, 2015. In January 2016,2017, is invested in the Partnership sold its remaining MBS Securities. See Note 8 to the Company’s consolidated financial statements for additional details.

Other Investments. We also extend financingVantage Properties, and direct equity investments in unconsolidated entities. See Notes 10has issued property loans due from Vantage at Brooks LLC and 11 to the Company’s consolidated financial statements for additional details.Vantage at New Braunfels LLC.

Property Loans. We may also make taxable property loans secured by Residential Properties which are financed by mortgage revenue bondsMRBs that are held by us.

Interests in Real Property. As part of our growth strategy, we may acquire direct or indirect interests in MF Properties to position ourselves for a future investment in mortgage revenue bondsMRBs issued to finance the acquisition or substantial rehabilitation of such MF Properties by a new owner. A new owner would typically seek to obtain LIHTCs in connection with the issuance of the new mortgage revenue bonds, but if LIHTCs had previously been issued for the property, such a restructuring could not occur until the expiration of a 15-year compliance period for the initial LIHTCs. We may acquire an interest in MF Properties prior to the end of the LIHTC compliance period. After the LIHTC compliance period, we would expect to sell our interest in such MF Property to a new owner which could syndicate new LIHTCs and seek mortgage revenue bond financing on the MF Property which we could acquire. We will not acquire LIHTCs in connection with these transactions. In the event that the MF Property cannot secure a mortgage revenue bond, we will operate the MF Property until the opportunity arises to sell it at what we believe is our optimal fair value. The MF Property could be sold to any of the following: (1) a LIHTC or other developer, (2) a not-for-profit entity, or (3) a public finance authority. These types of transactions represent a long-term market opportunity for us and will provide us with a pipeline of future bond investment opportunities.

Investment Opportunities and Business Challenges

There continues to be a significant unmet demand for affordable multifamily, student, and senior citizen residential housing in the United States. HUD reports that there is a high demand for quality affordable housing. The types of mortgage revenue bondsMRBs in which we invest offer developers of affordable housing a low-cost source of construction and permanent debt financing for these types of properties. Investors purchase these bondsMRBs because the interest income paid on these bonds is expected to be exempt from federal income taxation.

The demand for affordable housing by qualified potential residents whose income does not exceed 50-60% of the area median income continues to increase. Government programs that provide direct rental support to residents has not kept up with the demand, therefore programs that support private sector development and support for affordable housing through mortgage revenue bonds,MRBs, tax credits and grant funding to developers have become more prominent.

In addition to mortgage revenue bonds,MRBs, the federal government promotes affordable housing using LIHTCs for affordable multifamily rental housing. The syndication and sale of LIHTCs along with mortgage revenue bondMRB financing is attractive to developers of affordable housing because it helps them raise equity and debt financing for their projects. Under this program, developers that receive an allocation of private activity bonds will also receive an allocation of federal LIHTCs as a method to encourage the development of affordable multifamily housing. We do not invest in LIHTCs, but are attracted to mortgage revenue bondsMRBs that are issued in association with federal LIHTC syndications because in order to be eligible for federal LIHTCs a property must either be newly constructed or substantially rehabilitated and therefore, may be less likely to become functionally obsolete in the near term than an older property. There are various requirements in order to be eligible for federal LIHTCs, including rent and tenant income restrictions. In general, the property owner must elect to set aside either 40% or more of the property’s residential units for occupancy by households whose income is 60% or less (adjusted for family size) of the area median gross income or 20% or more of the


property’s residential units for occupancy by households whose income is 50% or less (adjusted for family size) of the area median gross income. These units remain subject to these set aside requirements for a minimum of 30 years.

The inability to access debt financing may result in adverse effects on our financial condition and results of operations. There can be no assurance that we will be able to finance additional acquisitions of mortgage revenue bondsMRBs or other investments through either additional equity or debt financing. Although the consequences of market and economic conditions and their impact on our ability to pursue our plan to grow through investments in additional housing bonds are not fully known, we do not anticipate that our existing assets will be adversely affected in the long-term. In addition, the Residential Properties and MF Properties which have not reached stabilization (which is 90% occupancy for 90 days and the achievement of 1.15 times debt service coverage ratio on amortizing debt service during the period) will result in lower economic occupancy at the related properties. The overall economic occupancy (which is adjusted to reflect rental concessions, delinquent rents and non-revenue units such as model units and employee units) of the stabilized Residential Properties that we have financed with mortgage revenue bonds was approximately 86%, 87% and 83% for the years ended December 31, 2016, 2015 and 2014, respectively. The economic occupancy of the stabilized MF Properties was approximately 85%, 89%, and 82% for the years ended December 31, 2016, 2015 and 2014, respectively.

Financing Arrangements

The Partnership may finance the acquisition of additional mortgage revenue bondsMRBs or other investments through the reinvestment of cash flow, use of available lines of credit, with debt financing collateralized by our existing portfolio of mortgage revenue bondsMRBs or other investments (including the securitization of these bonds), issuance of Preferred Units or the issuance of additional Beneficial Unit Certificates (“BUCs”).

Debt Financing. We utilize leverage to enhance investor rates of return. We use target constraints for each type of financing utilized by us to manage an overall 65%75% leverage constraint. The amount of leverage utilized is dependent upon several factors, including the assets being leveraged, the tenor of the leverage program, whether the financing is subject to market collateral calls, and the liquidity and marketability of the financing collateral. While short term variations from targeted levels may occur within financing classes, overall Partnership leverage will not exceed 65%75%. Our overall leverage ratio is calculated as total outstanding debt divided by total partnership assets using the carrying value of the mortgage revenue bonds,MRBs, PHC Certificates, MBS Securities, initial finance costs, and the MF Properties at cost. At December 31, 2016,2017, our leverage ratio was approximately 65%64%.


Equity Financing. There were no issuancesWe may, from time to time, issue additional BUCs in the public market. In November 2016, a Registration Statement on Form S-3 (“Registration Statement”) was declared effective by the SEC under which the Partnership may offer up to $225.0 million of additional BUCs from time to time. The Registration Statement will expire in 2016. See Note 22November 2019. In December 2017, the Partnership initiated an “at the market offering” to sell up to $75.0 million of BUCs at market prevailing on the Company’s consolidated financial statementsdate of sale. The $75 million available under the “at the market program” represents a portion of the $225 million Registration Statement. The Partnership sold 161,383 BUCs under the program for our ability to issue additional BUCs.net proceeds of approximately $806,000, net of issuance costs, during the year ended December 31, 2017.

Preferred Equity. WeUnder the Amended and Restated LP Agreement, we are authorized to issue partnership securities, including preferred units of limited partnership interests, containing certain designations, preferences, rights, powers, and duties.  In this regard, we previously authorized the issuance of up to $100 million of Series A Preferred Units throughpursuant to a private placement. During 2016,placement, and this offering was terminated as of October 25, 2017. Under this authorization, the Partnership issued approximately 4.19.5 million Series A Preferred Units to fourfive financial institutions resulting in approximately $40.9$94.5 million in gross proceeds. The Partnership will useused the proceeds received to acquire mortgage revenue bondsMRBs that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily, student housing, and commercial properties that are likely to receive consideration as “qualified investments” under the Community Reinvestment Act of 1977 (“CRA”).

 


Recent Developments

The following table presents information regarding the investment activity of the Partnership for the years ended December 31, 20162017 and 2015:2016:

 

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

consolidated

financial

statements

 

#

 

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 consolidated financial

statements

For the Three Months Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

7

 

$

49,291

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond redemptions

 

5

 

 

40,391

 

 

$

38,592

 

 

$

732

 

 

6

Mortgage revenue bond restructured

 

1

 

 

510

 

 

N/A

 

 

N/A

 

 

6

MF Properties sold

 

3

 

 

32,775

 

 

 

14,741

 

 

 

197

 

 

9

Taxable mortgage revenue bond redemptions

 

2

 

 

1,510

 

 

N/A

 

 

N/A

 

 

13

Property loan advances

 

1

 

 

336

 

 

N/A

 

 

N/A

 

 

11

Property loan redemptions

 

4

 

 

1,667

 

 

N/A

 

 

N/A

 

 

11

Investment in unconsolidated entities

 

2

 

 

4,527

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 advances

 

1

 

 

36

 

 

N/A

 

 

N/A

 

 

11

Property loan redemptions

 

1

 

 

500

 

 

N/A

 

 

N/A

 

 

11

Investment in unconsolidated entities

 

1

 

 

1,552

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land held for development sold

 

1

 

$

3,000

 

 

N/A

 

 

$

(5

)

 

9

Investment in unconsolidated entities

 

2

 

 

1,605

 

 

N/A

 

 

N/A

 

 

10

Property loan advances

 

2

 

 

639

 

 

N/A

 

 

N/A

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

9

Investments in unconsolidated entities

 

3

 

 

9,503

 

 

N/A

 

 

N/A

 

 

10

Property loan redemptions

 

1

 

 

500

 

 

N/A

 

 

N/A

 

 

11

Property loan advances

 

3

 

 

1,705

 

 

N/A

 

 

N/A

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

17

 

$

110,335

 

 

N/A

 

 

N/A

 

 

6

 

17

 

$

110,335

 

 

N/A

 

 

N/A

 

 

6

Property loan redemption

 

1

 

 

2,797

 

 

N/A

 

 

 

345

 

 

11

 

1

 

 

2,797

 

 

N/A

 

 

$

345

 

 

11

Investment in unconsolidated entities

 

3

 

 

5,908

 

 

N/A

 

 

N/A

 

 

10

 

3

 

 

5,908

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable bond redemption

 

1

 

$

499

 

 

$

-

 

 

$

-

 

 

13

Taxable mortgage revenue bond redemption

 

1

 

$

499

 

 

$

-

 

 

$

-

 

 

13

Mortgage revenue bond acquisitions

 

4

 

 

8,785

 

 

N/A

 

 

N/A

 

 

6

 

4

 

 

8,785

 

 

N/A

 

 

N/A

 

 

6

Investments in unconsolidated entities

 

2

 

 

10,682

 

 

N/A

 

 

N/A

 

 

10

Mortgage revenue bond restructured

 

3

 

 

5,885

 

 

N/A

 

 

N/A

 

 

6

 

3

 

 

5,885

 

 

N/A

 

 

N/A

 

 

6

Property loan issued

 

1

 

 

2,500

 

 

N/A

 

 

N/A

 

 

11

 

1

 

 

2,500

 

 

N/A

 

 

N/A

 

 

11

MF Property sold

 

1

 

 

15,650

 

 

 

7,501

 

 

 

276

 

 

9

 

1

 

 

15,650

 

 

 

7,501

 

 

 

276

 

 

9

MF Property acquisition

 

1

 

 

9,883

 

 

N/A

 

 

N/A

 

 

9

 

1

 

 

9,883

 

 

N/A

 

 

N/A

 

 

9

Investment in unconsolidated entities

 

3

 

 

9,471

 

 

N/A

 

 

N/A

 

 

10

 

3

 

 

9,471

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond redemptions

 

4

 

$

5,172

 

 

$

-

 

 

$

-

 

 

6

 

4

 

$

5,172

 

 

$

-

 

 

$

-

 

 

6

MF Property sold

 

1

 

 

30,200

 

 

 

16,519

 

 

 

2,078

 

 

9

 

1

 

 

30,200

 

 

 

16,519

 

 

 

2,078

 

 

9

Investment in an unconsolidated entity

 

1

 

 

929

 

 

N/A

 

 

N/A

 

 

10

 

1

 

 

3,372

 

 

N/A

 

 

N/A

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MBS Securities sold

 

3

 

$

15,081

 

 

$

11,945

 

 

$

-

 

 

8

 

3

 

$

15,081

 

 

$

11,945

 

 

$

-

 

 

8

Mortgage revenue bond sold

 

1

 

 

9,479

 

 

 

8,375

 

 

 

-

 

 

6

 

1

 

 

9,479

 

 

 

8,375

 

 

 

-

 

 

6, 8

Mortgage revenue bond acquisitions

 

1

 

 

11,500

 

 

N/A

 

 

N/A

 

 

6

 

1

 

 

11,500

 

 

N/A

 

 

N/A

 

 

6

Investment in an unconsolidated entity

 

1

 

 

2,443

 

 

N/A

 

 

N/A

 

 

10

 

1

 

 

2,443

 

 

N/A

 

 

N/A

 

 

10

Property loan advances

 

2

 

 

5,820

 

 

N/A

 

 

N/A

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

8

 

$

50,317

 

 

N/A

 

 

N/A

 

 

6

Forward mortgage revenue bond commitment executed

 

1

 

 

16,400

 

 

N/A

 

 

N/A

 

 

20

Land purchased

 

1

 

 

2,900

 

 

N/A

 

 

N/A

 

 

9

Property loan redemption

 

1

 

 

2,813

 

 

N/A

 

 

N/A

 

 

11

Property loan advances

 

2

 

 

7,727

 

 

N/A

 

 

N/A

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond redemptions

 

3

 

$

5,795

 

 

$

-

 

 

$

-

 

 

6

Mortgage revenue bond acquisitions

 

2

 

 

6,320

 

 

N/A

 

 

N/A

 

 

6

Forward mortgage revenue bond commitment executed

 

1

 

 

19,540

 

 

N/A

 

 

N/A

 

 

20

MF Property sold

 

1

 

 

5,500

 

 

 

-

 

 

 

854

 

 

9

Exchanged mortgage revenue bonds for MF

Property deed

 

1

 

 

40,950

 

 

N/A

 

 

N/A

 

 

6, 9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

5

 

$

72,540

 

 

N/A

 

 

N/A

 

 

6

Mortgage revenue bond restructured

 

1

 

 

11,500

 

 

N/A

 

 

N/A

 

 

6

Forward mortgage revenue bond commitment executed

 

1

 

 

11,000

 

 

N/A

 

 

N/A

 

 

20

Property loan issued

 

1

 

 

2,813

 

 

N/A

 

 

N/A

 

 

11

MF Property sold

 

2

 

 

10,700

 

 

 

7,432

 

 

 

297

 

 

9

Taxable bond acquisition

 

1

 

 

500

 

 

N/A

 

 

N/A

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage revenue bond acquisitions

 

7

 

$

58,945

 

 

N/A

 

 

N/A

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See "Cash Available for Distribution" in this Item 7 below.

 

 

 

 

 

 

 

 

 

 

 

Property loan advances, net

 

2

 

 

5,828

 

 

N/A

 

 

N/A

 

 

11

(1)

See “Cash Available for Distribution” in Item 7.


 

Recent Financing Activities

The following table presents information regarding the debt financing, activitiesderivative and Series A Preferred Units activity of the Partnership for the years ended December 31, 20162017 and 2015,2016, exclusive of retired debt amounts listed in the investment activity table above:

 

Recent Financing and Derivative Activity

 

#

 

Amount of

Change

in Debt,

Derivative, Preferred Units in

000's

 

 

Secured

 

Maximum

SIFMA Cap

Rate (1)

 

 

Notes to the

Partnership's

consolidated

financial

statements

Recent Financing, Derivative and Capital Activity

 

#

 

Amount of Change

in Debt, Derivative, or Preferred Units

(in 000's)

 

 

Secured

 

Maximum

SIFMA Cap

Rate (1)

 

 

Notes to the

Partnership's consolidated financial

statements

For the Three Months Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

1

 

$

37,529

 

 

No

 

N/A

 

 

15

Term A/B Financings with DB

 

1

 

 

9,000

 

 

Yes

 

N/A

 

 

17

Redeemable Series A preferred unit issuance

 

2

 

 

17,500

 

 

N/A

 

N/A

 

 

21

Issuance of Beneficial Unit Certificates, net of issuance costs

 

1

 

 

806

 

 

N/A

 

N/A

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

1

 

$

12,471

 

 

No

 

N/A

 

 

15

Interest rate derivative purchased

 

1

 

 

52

 

 

N/A

 

4.0%

 

 

19

Redeemable Series A preferred unit issuance

 

1

 

 

20,000

 

 

N/A

 

N/A

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate derivative purchased

 

2

 

$

497

 

 

N/A

 

1.5%

 

 

19

Refinance of Mortgages Payable

 

2

 

 

-

 

 

Yes

 

N/A

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

2

 

$

(40,000

)

 

No

 

N/A

 

 

15

Net borrowing on secured LOC

 

1

 

 

(20,000

)

 

Yes

 

N/A

 

 

16

New Term A/B Financings with DB

 

19

 

 

106,810

 

 

Yes

 

N/A

 

 

17

Refinance of Term A/B Financings with DB

 

4

 

 

(2,245

)

 

Yes

 

N/A

 

 

17

Redeemable Series A preferred unit issuance

 

2

 

 

16,131

 

 

N/A

 

N/A

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

2

 

$

40,000

 

 

No

 

N/A

 

 

15

 

2

 

$

40,000

 

 

No

 

N/A

 

 

15

Net borrowing on secured LOC

 

1

 

 

20,000

 

 

Yes

 

N/A

 

 

16

 

1

 

 

20,000

 

 

Yes

 

N/A

 

 

16

Term A/B Financings with DB

 

5

 

 

38,910

 

 

Yes

 

N/A

 

 

17

 

5

 

 

38,910

 

 

Yes

 

N/A

 

 

17

Redeemable Series A preferred unit issuance

 

1

 

 

7,000

 

 

N/A

 

N/A

 

 

21

 

1

 

 

7,000

 

 

N/A

 

N/A

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (repayments) on unsecured LOCs

 

2

 

$

(23,997

)

 

No

 

N/A

 

 

15

 

2

 

$

(23,997

)

 

No

 

N/A

 

 

15

Mortgage payable related to MF Property acquisition

 

1

 

 

7,459

 

 

Yes

 

N/A

 

 

18

 

1

 

 

7,459

 

 

Yes

 

N/A

 

 

18

Term A/B Financings with DB

 

12

 

 

134,393

 

 

Yes

 

N/A

 

 

17

 

12

 

 

134,393

 

 

Yes

 

N/A

 

 

17

TOB Financing with DB paid in full and collapsed

 

7

 

 

(105,273

)

 

Yes

 

N/A

 

 

17

 

7

 

 

(105,273

)

 

Yes

 

N/A

 

 

17

Redeemable Series A preferred unit issuance

 

1

 

 

10,000

 

 

N/A

 

N/A

 

 

21

 

1

 

 

10,000

 

 

N/A

 

N/A

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (repayments) on unsecured LOCs

 

2

 

$

(3,988

)

 

No

 

N/A

 

 

15

 

2

 

$

(3,988

)

 

No

 

N/A

 

 

15

Net borrowing (repayments) on mortgages payable and

other secured financing

 

7

 

 

(16,986

)

 

Yes

 

N/A

 

 

18

Redeemable Series A preferred unit issuance

 

1

 

 

13,869

 

 

N/A

 

N/A

 

 

21

 

1

 

 

13,869

 

 

N/A

 

N/A

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

3

 

$

10,488

 

 

No

 

N/A

 

 

15

 

3

 

$

10,488

 

 

No

 

N/A

 

 

15

TOB Financing with DB paid in full and collapsed

 

4

 

 

(20,320

)

 

Yes

 

N/A

 

 

17

 

4

 

 

(20,320

)

 

Yes

 

N/A

 

 

17

Redeemable Series A preferred unit issuance

 

1

 

 

10,000

 

 

N/A

 

N/A

 

 

21

 

1

 

 

10,000

 

 

N/A

 

N/A

 

 

21

Interest rate derivative sold

 

1

 

 

(11,000

)

 

N/A

 

 

1.0

%

 

19

 

1

 

 

(11,000

)

 

N/A

 

1.0%

 

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

3

 

$

12,497

 

 

No

 

N/A

 

 

15

Net borrowing (repayments) on mortgages payable and

other secured financing

 

8

 

 

(203

)

 

Yes

 

N/A

 

 

18

TOB Financing with DB

 

2

 

 

23,400

 

 

Yes

 

N/A

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (repayments) on unsecured LOCs

 

3

 

$

(42,408

)

 

No

 

N/A

 

 

15

TEBS Financing interest rate derivatve acquisition

 

1

 

 

84,285

 

 

Yes

 

 

3.0

%

 

17

TOB Financing with DB

 

8

 

 

137,235

 

 

Yes

 

N/A

 

 

17

TOB Financing with DB paid in full and collapsed

 

9

 

 

(139,700

)

 

Yes

 

N/A

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

3

 

$

37,408

 

 

No

 

N/A

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowing on unsecured LOCs

 

3

 

$

11,425

 

 

No

 

N/A

 

 

15

Net TOB Financing with DB

 

4

 

 

22,750

 

 

Yes

 

N/A

 

 

17

Interest rate derivative revision

 

2

 

 

11,000

 

 

N/A

 

 

1.0

%

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A below.

 

(1)

See “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A.


Management and Employees

We are managed by our General Partner which is controlled by its general partner, Burlington Capital LLC (“Burlington”). The Board of Managers and certain employees of Burlington act as directorsthe managers (and effectively as the directors) and executive officers of the Partnership. Certain services are provided to us by employees of Burlington and we reimburse Burlington for its allocated share of these salaries and benefits. We are not charged, and do not reimburse Burlington, for the services performed by executive officers of Burlington. As ofAt December 31, 2016,2017, the Partnership had no employees.

Competition

We compete with private investors, lending institutions, trust funds, investment partnerships, the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and other entities with objectives similar to ours for the acquisition of mortgage revenue bondsMRBs and other investments. This competition could reduce the availability of investments to the Partnership for acquisition and reduce the interest rate that issuers pay on these investments.

Because we hold mortgage revenue bondsMRBs secured by Residential Properties, a commercial property, and hold interests in the MF Properties, we may be in competition with other real estate in the same geographic areas. In each city in which the properties financed by the mortgage revenue bondsMRBs owned by us or MF Properties are located, such properties compete with a substantial number of other multifamily rental properties. Multifamily rental properties also compete with single-family housing that is either owned or leased by potential tenants. To compete effectively, the multifamily, student, and senior citizen residential properties financed or owned by us must offer quality apartments at competitive rental rates. To maintain occupancy rates and attract quality tenants, the Residential Properties and MF Properties may also offer rental concessions, such as free rent to new tenants for a stated period. These Residential Properties and MF Properties also compete by offering quality apartments in attractive locations and that provide tenants with amenities such as recreational facilities, garages and pleasant landscaping.

Environmental Matters

We believe each of the MF Properties, the Residential Properties, and the commercial property comply, in all material respects, with federal, state and local regulations regarding hazardous waste and other environmental matters. We are not aware of any environmental contamination at any of these properties that would require any material capital expenditure by the underlying properties, and therefore the Partnership, for the remediation thereof.

Tax Status

We are classified as a partnership for federal income tax purposes and accordingly, there is no provision for income taxes. The distributive share of our income, deductions and credits is included in each Unitholder’s income tax return.

We hold interests in all MF Properties, except for the Suites on Paseo and Jade Park, through a wholly-owned subsidiary whichthat is a “C” corporation for income tax purposes. ThisThe subsidiary files separate federal and state income tax returns and its income is subject to federal and state income taxes.

We consolidate separate legal entities who record, and report income taxes based upon their individual legal structure which may include corporations, limited partnerships, and limited liability companies. The Bent Tree and Fairmont Oaks Consolidated VIEs results of operations were reported as discontinued operations for all periods as presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for reporting purposes and are separate legal entities for all years presented. We do not believe the consolidation of VIEs for reporting under GAAP will impact our tax status, amounts reported to Unitholders on Internal Revenue Service (“IRS”) Form K-1, our ability to distribute income to Unitholders which we believe is tax-exempt, the current level of quarterly distributions, or the tax-exempt status of the underlying mortgage revenue bonds.MRBs.

All financial information in this Annual Report on Form 10-K is presented on the basis of Accounting Principles Generally Accepted in the United States of America, with the exception of the Non-GAAP measure disclosed in Item 7.

General Information

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


The Partnership does not have any employees of its own. Employees of Burlington, acting through AFCA 2 (our general partner)General Partner), are responsible for our operations and we reimburse Burlington for the allocated salaries and benefits of these employees and for other expenses incurred in running our business operations. AFCA 2 is entitled to an administrative fee equal to 0.45% per annum of the outstanding principal balance of any mortgage revenue bonds,MRBs, tax-exempt investments or other investments for which an unaffiliated party is not obligated to pay. When the administrative fee is payable by a property owner, it is subordinated to the payment of all base interest to the Partnership on the mortgage revenue bondMRB on that property. Our Amended and Restated LP Agreement provides that the administrative fee will be paid directly by us with respect to any investments for which the administrative fee is not payable by the property owner or a third party. In addition, our Amended and Restated LP Agreement provides that we will pay the administrative fee to the General Partner with respect to any foreclosed mortgage revenue bonds.MRBs.

AFCA 2 may also earn mortgage placement fees resulting from the identification and evaluation of additional investments that we acquire. In addition, an affiliate of AFCA 2, Farnam Capital Advisors, LLC (“FCA”), acts as an origination advisor and consultant to the borrowers when mortgage revenue bonds,MRBs, other investments and financing facilities are acquired by the Partnership. Any such fees will be paid by the owners of the properties financed by the acquired mortgage revenue bondsMRBs or other investments out of their proceeds. Any fees related to the origination of financing facilities are paid by the Trustee out of the gross proceeds of the financing. The fees, if any, will be subject to negotiation between AFCA 2, its affiliate, and such property owners.

Properties Management is an affiliate of Burlington that is engaged in the management of multifamily, student and senior citizen residential properties. Properties Management earns a fee paid out of property revenues. Properties Management may also seek to become the manager of multifamily, student and senior citizen residential properties financed by additional mortgage revenue bondsMRBs acquired by the Partnership, subject to negotiation with the owners of such properties. If we acquire ownership of any property through foreclosure of a revenue bond,an MRB, Properties Management may provide property management services for such property and receive a fee payable out of property revenues.

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

Information Available on Website

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

 

 

Item 1A. Risk Factors

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

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

CurrentlyThroughout 2017, cash distributions arewere made to its Unitholders at an annual rate of $0.50 per unit.Unit. The amount of the cash per unitUnit distributed by the Partnership may increase or decrease at the determination of AFCA 2 based on its assessment of the amount of cash available to us for this purpose, as well as other factors it may deem to be relevant. During the years ended December 31, 20162017 and 2015,2016, we generated Cash Available for Distribution of $0.60 and $0.50 and $0.53 per unit,Unit, respectively. Although we may supplement our cash available for distribution with unrestricted cash, unless we can increase our cash receipts through completion of our current investment plans, we may need to reduce the level of cash distributions per unit from the current level. In addition, there is no assurance that we will be able to maintain our current level of annual cash distributions per unit even if we complete our current investment plans. Any change in our distribution policy could have a material adverse effect on the market price of our units.Units.

The receipt of interest and principal payments on our mortgage revenue bondsMRBs will be affected by the economic results of the underlying Residential Properties and a commercial property.

Although our mortgage revenue bondsMRBs are issued by state or local housing authorities, they are not obligations of these governmental entities and are not backed by any taxing authority. Instead, each of these revenue bondsMRBs is backed by a non-recourse loan made to the owner of the underlying Residential Properties and commercial property. Because of the non-recourse nature of the underlying mortgage loans, the sole source of cash to pay base and contingent interest on the mortgage revenue bond,MRB, and to ultimately pay the


principal amount of the bond, is the net cash flow


generated by the operation of the financed property and the net proceeds from the ultimate sale or refinancing of the property, (except in cases where a property owner has provided a limited guarantee of certain payments). This makes our investments in these mortgage revenue bondsMRBs subject to risks usually associated with direct investments in multifamily real estate. If a property is unable to sustain net cash flow at a level necessary to pay its debt service obligations on our mortgage revenue bondMRB on the property, a default may occur. Net cash flow and net sale proceeds from a particular property are applied only to debt service payments of the particular mortgage revenue bondMRB secured by that property and are not available to satisfy debt service obligations on other mortgage revenue bondsMRBs that we hold. In addition, the value of a property at the time of its sale or refinancing will be a direct function of its perceived future profitability. Therefore, the amount of base and contingent interest that we earn on our mortgage revenue bonds,MRBs, and whether or not we will receive the entire principal balance of the bonds as and when due, will depend to a large degree on the economic results of the underlying properties.

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

The value of the properties is the only source of repayment of our mortgage revenue bonds.MRBs is principally dependent upon proceeds from the sale or refinancing of the underlying properties.

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

InThe properties securing the event a propertyour MRBs are geographically dispersed throughout the United States, with significant concentrations in certain states.

The properties securing a mortgage revenue bond is not sold priorthe our MRBs are geographically dispersed throughout the United States, with significant concentrations in certain states. Such concentrations expose us to the maturitypotentially negative effects of local or refinancing of the bond, any contingentregional economic downturns, which could prevent us from collecting interest payable from the net sale or refinancing proceeds of the underlying property will be determinedand principal on the basis of the appraised value of the underlying property. Real estate appraisals represent only an estimate of the value of the property being appraised and are based on subjective determinations, such as the extent to which the properties used for comparison purposes are comparable to the property being evaluated and the rate at which a prospective purchaser would capitalize the cash flow of the property to determine a purchase price. Accordingly, such appraisals may result in us realizing less contingent interest from a mortgage revenue bond than we would have realized had the underlying property been sold or refinanced.our MRBs.

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

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

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

To facilitate our investment strategy of acquiring additional mortgage revenue bondsMRBs secured by Residential Properties, we may acquire ownership positions in MF Properties that we expect to ultimately sell as part of a syndication of LIHTCs after the expiration of the compliance period relating to existing LIHTCs issued with respect to the MF Properties. Our plan is to provide mortgage revenue bondMRB financing to the new property owners at the time of a syndication of new LIHTCs in connection with a rehabilitation of these MF Properties. The market for LIHTC syndications may be negatively affected from time to time by economic and market conditions, including the potential for corporate tax reform in the U.S. For this and other reasons, we may not be able to sell our


interest in these MF Properties after the applicable LIHTC compliance period. In addition, the value of our interest in these MF Properties will be affected by the economic performance of the MF Properties and other factors generally affecting the value of residential rental properties. As a result, we may


incur a loss upon the sale of our interest in an MF Property. In addition, we may not be able to acquire mortgage revenue bondsMRBs on the MF Properties even if we are able to sell our interests in the MF Properties. During the time we own an interest in an MF Property, any net income we receive from these MF Properties will not be exempt from federal or state income taxation.

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

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

We may suffer adverse consequences from changing interest rates.

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

An increase in interest rates could also decrease the market value of assets owned by the Partnership. A decrease in the market value of assets owned by the Partnership could also decrease the amount we could realize on the sale of our investments and would thereby decrease the amount of funds available for distribution to our Unitholders. During periods of low prevailing interest rates, the interest rates we earn on new interest-bearing assets we acquire may be lower than the interest rates on our existing portfolio of interest-bearing assets.

To the extent we finance the acquisition of additional interest-bearing assets through the issuance of additional BUC’s, from the issuance of preferred units or from the proceeds from the sale of existing assets held by the Partnership and we earn a lower interest rate on these additional interest-bearing assets, the amount of cash available for distribution on a per unit basis may be reduced.

 

High interest rates may make it difficult for us to finance or refinance our debt obligations, which could reduce the number of investments we can acquire, our cash flow from operations and the amount of cash distributions we can make.

If debt is unavailable at reasonable rates, we may not be able to finance the purchase of additional investments. If we place debt on our investments, we run the risk of being unable to refinance the debt when it becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance, our income could be reduced. We may be unable to refinance our debt obligations. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution and may hinder our ability to raise capital by issuing more stock or borrowing more money.

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

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


There are risks associated with debt financing programs that involve securitization of our mortgage revenue bondsMRBs and PHC Certificates.

We have obtained debt financing through the securitization of our mortgage revenue bondsMRBs and PHC Certificates and may obtain this type of debt financing in the future. The terms of these securitization programs differ, but in general require our investment assets be placed into a trust or other special purpose entity that issues a senior security to unaffiliated investors and a residual interest to us. The trust or other entity receives all the interest payments from its underlying mortgage revenue bondsMRBs and PHC Certificates from which it pays interest on the senior security at a variable or fixed rate. As the holder of the residual interest, we are entitled to any remaining interest received by the trust


holding the securitized asset after it has paid the full amount of interest due on the senior security and all of the expenses of the trust, including various fees to the trustee, remarketing agents, credit providers, and liquidity providers. Specific risks generally associated with these asset securitization programs include the following:

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

The interest rate payable on the senior securities resets periodically based on the weekly Securities Industry and Financial Markets Association (“SIFMA”) floating index usually tied to interest rates on short-term instruments. In addition, because the senior securities may typically be tendered back to the trust, causing the trust to remarket the senior securities from time to time, an increase in interest rates may require an increase to the interest rate paid on the senior securities in order to successfully remarket these securities. Any increase in interest rate payable on the senior securities will result in more of the underlying interest being used to pay interest on the senior securities leaving less interest available to us. Higher short-term interest rates will reduce, and could even eliminate, our return on a residual interest in this type of financing.

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

We hold a residual interest (known as Class B interests in the TEBS Financing with Freddie Mac, Term TOB Trust and Term A/B Trust facilities with Deutsche Bank and residual participating interests (“LIFER”s)LIFERs”) in the TOB financing facilities) in the securitization trusts established for the debt financing facilities. These residual interests are subordinate to the senior securities sold to investors. As a result, none of the interest received by such a trust will be paid to us as the holder of a residual interest until all payments currently due on the senior securities have been paid in full and other trust expenses satisfied. As the holder of a residual certificate in these trusts, we can look only to the assets of the trust remaining after payment of these senior obligations for payment on the residual certificates. No third party guarantees the payment of any amount on the residual certificates.

Termination of an asset securitization financing can occur for many reasons which could cause us to lose the assets and other collateral we pledged for such financing.

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

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

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


Conditions in the tax credit markets due to known or potential changes in U.S. corporate tax rates may increase our cost of borrowing, make financing difficult to obtain or restrict our ability to invest in mortgage revenue bondsMRBs and other investments, each of which may have a material adverse effect on our results of operations and business.

Conditions in the tax credit market due to the potential changes in the U.S. corporate tax rates have had, and may continue to have, an adverse impact on our cost of borrowings and may restrict our ability to invest in mortgage revenue bondsMRBs and other investments.  It is unclear when and how quickly conditions will stabilize in the tax credit markets. These conditions, the cost and availability of credit has been, and may continue to be, adversely affected in all markets in which we operate. Concern about the stability of the tax credit markets has led many lenders and institutional investors to reduce, and in some cases, cease, providing funding to borrowers. Our access to debt and equity financing may be adversely affected. IfChanges in the U.S. tax rates, and the resulting impacts to the tax credit market, and the potential decrease in U.S. tax rates is realized, they may limit


our ability to replace or renew maturing debt financing on a timely basis, may impair our ability to acquire mortgage revenue bondsMRBs and other investments and may impair our access to capital markets to meet our liquidity and growth requirements which may have an adverse effect on our financial condition and results of operations.

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

The “Volcker Rule” adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 limits the ability of banking entities to sponsor or invest in certain types of “covered funds” (such as private equity funds and hedge funds) or to engage in certain types of proprietary trading in the U.S. The Volcker Rule restricts banking entities from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with certain “covered funds.” As currently structured, TOB Trusts like those used as part of our TOB financing program with DB, fit within the definition of “covered funds” and will be affected by the Volcker Rule. The Volcker Rule does not apply to Freddie Mac or more specifically, the M33,M24, M31 and M24M33 TEBS Financing facilities with Freddie Mac.

The regulators specifically noted that banks will need to evaluate if TOB Trusts are, in fact, covered funds and if so, whether an exception to the definition is available. The regulators declined to provide a specific exclusion from the definition of “covered funds” for TOB financing programs. The preamble also notes that participation in a TOB transaction is not prohibited per se, but is subject to the same restrictions on other covered funds. The rule provides for a phase in period during which time banks need to make good faith efforts to have full compliance with the rule by July 21, 2017, provided that the interest in the covered fund was established prior to December 31, 2013.

Any downgrade, or perceived potential of a downgrade, of U.S. sovereign credit ratings or the credit ratings of the U.S. Government-sponsored entities (or GSEs) by the various credit rating agencies may materially adversely affect our business.

Our TEBS Financing facilities are an integral part of our business strategy and those financings are dependent upon an investment grade rating of Freddie Mac. If Freddie Mac were downgraded to below investment grade, it would have a negative effect on our ability to finance our bond portfolio on a longer-term basis and could negatively impact Cash Available for Distribution and our ability to continue distributions at current levels.

The federal conservatorship of Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Freddie Mac and the U.S. Government, may materially adversely affect our business.

The problems faced by Fannie Mae and Freddie Mac commencing in 2008 resulting in them being placed into federal conservatorship and receiving significant U.S. Government support have sparked serious debate among federal policy makers regarding the continued role of the U.S. Government in providing liquidity and credit enhancement for mortgage loans. The Trump administration has publicly indicated a desire to reform Fannie Mae and Freddie Mac, including their relationship with the federal government. As a result, the future roles of Fannie Mae and Freddie Mac are likely to be reduced (perhaps significantly) and the nature of their guarantee obligations could be considerably limited relative to historical measurements. Alternatively, it is still possible that Fannie Mae and Freddie Mac could be dissolved entirely or privatized, and, as mentioned above, the U.S. Government could determine to stop providing liquidity support of any kind to the mortgage market. Any changes to the nature of the GSEs or their guarantee obligations could have broad adverse implications for the market and our business, operations and financial condition. If Fannie Mae or Freddie Mac were to be eliminated, or their structures were to change radically (i.e., limitation or removal of the guarantee obligation), our ability to utilize TEBS Financings facilities couldwould be materially and adversely impacted.


Our mortgage revenue bonds,MRBs, PHC Certificates, property loans and investments in unconsolidated entities are illiquid assets and their value may decrease.

Our mortgage revenue bonds,MRBs, PHC Certificates, property loans and investments in unconsolidated entities are relatively illiquid, and there is no existing trading market for them. There are no market makers, price quotations, or other indications of a developed trading market for these investments. In addition, no rating has been issued on any of the existing mortgage revenue bondsMRBs and we do not expect to obtain ratings on mortgage revenue bondsMRBs we may acquire in the future. Accordingly, any buyer of these mortgage revenue bondsMRBs would need to perform its own due diligence prior to a purchase. The Partnership’s ability to sell its mortgage revenue bonds,MRBs, PHC Certificates, property loans and investments in unconsolidated entities and the price it may receive upon their sale, will be affected by the number of potential buyers, the number of similar securities on the market at the time and by other market conditions. Such a sale could result in a loss to the Partnership.


Delay, reduction, or elimination of appropriations from the U.S. Department of Housing and Urban Development can result in payment defaults on our investments in PHC Trusts.

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

A reduction in the rating of PHC Certificates below investment grade would result in the liquidation of the investment in that TOB Trust

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

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

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

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

Two of the multifamily housing properties financed by mortgage revenue bondsMRBs held by us and one MF Property are in an area prone to damage from hurricanes and other major storms. Due to the significant losses incurred by insurance companies in recent years due to damages from hurricanes, many property and casualty insurers now require property owners to assume the risk of first loss on a larger percentage of their property’s value. In general, the current insurance policies on the property financed by us that is located in an area rated for hurricane and storm exposure carry a five percent deductible on the insurable value of the properties. As a result, if


either of these properties were damaged in a hurricane or other major storm, the amount of uninsured losses could be significant, and the property owner may not have the resources to fully rebuild the property, which could result in a default on the mortgage revenue bondsMRBs secured by the property. In addition, the damages to a property may result in all or a portion of the rental units not being rentable for a period of time. Unless a property owner carries rental interruption insurance, this loss of rental income would reduce the cash flow available to pay base or contingent interest on our mortgage revenue bondsMRBs collateralized by these properties.


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

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

If we acquire ownership of Residential Properties, we will be subject to all of the risks normally associated with the ownership of commercial real estate.

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

There are many risks related to the construction of Residential Properties that may affect the mortgage revenue bondsMRBs issued to finance these properties.properties and multifamily properties that underlie our Investments in Unconsolidated Entities.

We may invest in mortgage revenue bondsMRBs secured by residential housing properties, which are still under construction.and we make equity investments in limited liability companies created to develop, construct and operate multifamily properties. Construction of such properties generally takes approximately twelve to eighteen months. The principal risk associated with construction lendingthese investment activities is that construction of the property willunderlying properties may be substantially delayed or never completed. This may occur for many reasons including (i) insufficient financing to complete the project due to underestimated construction costs or cost overruns; (ii) failure of contractors or subcontractors to perform under their agreements; (iii) inability to obtain governmental approvals; (iv) labor disputes; and (v) adverse weather and other unpredictable contingencies beyond the control of the developer. While we may be able to protect ourselves from some of these risks by obtaining construction completion guarantees from developers, agreements of construction lenders to purchase our bonds if construction is not completed on time, and/or payment and performance bonds from contractors, we may not be able to do so in all cases or such guarantees or bonds may not fully protect us in the event a property is not completed. In other cases, we may decide to forego certain types of available security if we determine that the security is not necessary or is too expensive to obtain in relation to the risks covered.

If a property is not completed or costs more to complete than anticipated, it may cause us to receive less than the full amount of interest owed to us on the mortgage revenue bond financing such property or otherwise result in a default under the mortgage loan that secures our mortgage revenue bond on the property. In such case, we may be forced to foreclose on the incomplete property and sell it in order to recover the principal and accrued interest on our mortgage revenue bond and we may suffer a loss of capital as a result. Alternatively, we may decide to finance the remaining construction of the property, in which event we will need to invest additional funds into the property, either as equity or as a taxable property loan. Any return on this additional investment would be taxable. Also, if we foreclose on a property, we will no longer receive interest on the bond issued to finance the property. The overall return to us from our investment in such property is likely to be less than if the construction had been completed on time or within budget.

As it relates to our equity investments, if a property is not completed or costs more to complete than anticipated, it may cause us to receive less distributions than expected. Furthermore, we may be prevented from receiving a return on our investments or recovering our initial investment, which would likely adversely affect our results of operations.

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

We may acquire mortgage revenue bondsMRBs issued to finance properties in various stages of construction or renovation. As construction or renovation is completed, these properties will move into the lease-up phase. The lease-up of these properties may not be completed on schedule or at anticipated rent levels, resulting in a greater risk that these investments may go into default rather than investments secured by mortgages on properties that are stabilized or fully leased-up. The underlying property may not achieve expected occupancy or debt


service coverage levels. While we may require property developers to provide us with a guarantee covering operating deficits of the property during the lease-up phase, we may not be able to do so in all cases or such guarantees may not fully protect us in the event a property is not leased up to an adequate level of economic occupancy as anticipated.


There are various risks associated with our Investments in Unconsolidated Entities.

Our Investments in Unconsolidated Entities represent equity investments in limited liability companies created to develop, construct and operate multifamily properties. We are entitled to certain distributions under the terms of the investees’ governing documents based on the availability of cash to pay such distributions. The only sources of cash flows for such distributions are either the net cash flows from the operation of the property, the cash proceeds from a sale of the property, or through the permanent financing in the form of a mortgage revenue bond. The net cash flow from the operation of a property may be affected by many factors, such as the number of tenants, the rental and fee rates, operating expenses, the cost of repairs and maintenance, taxes, debt service requirements, competition from other similar multifamily properties and general and local economic conditions. Sale proceeds are primarily dependent, among other things, on the value of a property to a prospective buyer at the time of its sale. If there are no net cash flows from operations or insufficient proceeds from a sale or a refinancing event, we are unlikely to receive distributions from our investees and we may be unable to recover our investments in these entities.

There is a risk associated with a third-party developer that has provided guarantees of our returns on Investments in Unconsolidated Entities.

One developer has provided a guarantee of returns on our Investments in Unconsolidated Entities during the period of construction of the underlying multifamily property.  The guarantees remain through the two-year anniversary of construction completion of each multifamily property up to a maximum amount for each investment. If the underlying multifamily properties do not generate sufficient cash proceeds, either through net cash flows from operations or upon a sale event or through the permanent financing in the form of a mortgage revenue bond, then we are entitled to enforce the guarantee against the developer. If the developer is unable to perform on the guarantee, we may be prevented from realizing our returns earned on our Investments in Unconsolidated Entities during the period of construction which may result in the recognition of losses.

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

We have acquired indirect interests in several MF Properties that generated LIHTCs for the previous investors in these properties. When we acquire an interest in an MF Property, itwe generally must agree to reimburse the prior partners for any liabilities they incur due to a recapture of LIHTCs that result from the failure to operate the MF Property in a manner consistent with the laws and regulations relating to LIHTCs after we acquired our interest in the MF Property. The amount of this recapture liability can be substantial and could negatively impact the financial performance of the MF Property.

We are not registered under the Investment Company Act.

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

We engage in transactions with related parties.

EachThe majority of the executive officers of Burlington, the named executive officers of the Partnership, and four of the managersManagers of Burlington hold equity positions in Burlington. A subsidiary of Burlington acts as our General Partner and manages our investments and performs administrative services for us and earns certain fees that are either paid by the properties financed by our mortgage revenue bondsMRBs or by us. Another subsidiary of Burlington provides on-site management for some of the Residential Properties that underlie our mortgage revenue bondsMRBs and each of our MF Properties and earns fees from the property owners based on the gross revenues of these properties. The owners of the limited-purpose corporations which own two of the Residential Properties financed with mortgage revenue bondsMRBs and taxable property loans held by us are employees of Burlington who are not involved in our operation or management and who are not executive officers or managers of Burlington. These two Residential Properties are Bent Tree and Fairmont Oaks, which were sold during 2015. Because of these relationships, our agreements with Burlington and its subsidiaries are related-party transactions. By their nature, related-party transactions may not be considered to have been negotiated at arm’s length. These relationships may also cause a conflict of interest in other situations where we are negotiating with Burlington.

Unitholders may incur tax liability if any of the interest on our mortgage revenue bondsMRBs or PHC Certificates is determined to be taxable.

In each mortgage revenue bondMRB transaction, the governmental issuer, as well as the underlying borrower, has covenanted and agreed to comply with all applicable legal and regulatory requirements necessary to establish and maintain the tax-exempt status of interest earned on the mortgage revenue bonds.MRBs. Failure to comply with such requirements may cause interest on the related issue of bonds to be includable in gross income for federal


income tax purposes retroactive to the date of issuance, regardless of when such noncompliance occurs. Should the interest income on a mortgage revenue bondMRB be deemed to be taxable, the bond documents include a variety of rights and remedies that we have concluded would help mitigate the economic impact of taxation of the interest income on the affected bonds. Under such circumstances, we would enforce all of such rights and remedies as set forth in the related bond documents as well as any other rights and remedies available under applicable law. In addition, in the event the tax-exemption of interest income on any mortgage revenue bondMRB is challenged by the IRS, we would participate in the tax and legal proceedings to contest any such challenge and would, under appropriate circumstances, appeal any adverse final determinations. The loss of tax-exemption for any particular issue of bonds would not, in and of itself, result in the loss of tax-exemption for any unrelated issue of bonds. However, the loss of such tax-exemption could result in the distribution to our Unitholders of taxable income relating to such bonds.

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

In addition, we have, and may in the future, obtain debt financing through asset securitization programs in which we place mortgage revenue bondsMRBs and PHC Certificates into trusts and are entitled to a share of the interest received by the trust on these bonds after the


payment of interest on senior securities and related expenses issued by the trust. It is possible that the characterization of our residual interest in such a securitization trust could be challenged and the income that we receive through these instruments could be treated as ordinary taxable income includable in our gross income for federal tax purposes.

Not all the income received by us is exempt from taxation.

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

Furthermore, income and gains generated by assets within a wholly-owned subsidiary (the “Greens Hold Co”) and its subsidiaries are subject to federal, state and local incomes as the Greens Hold Co is a “C” corporation for income tax purposes.

If we were determined to be an association taxable as a corporation, it will have adverse economic consequences for us and our Unitholders.

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


To the extent we generate taxable income; Unitholders will be subject to income taxes on this income, whether or not they receive cash distributions.

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

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

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

Holders of the Series A Preferred Units may be required to bear the risks of an investment for an indefinite period of time.

Holders of the Series A Preferred Units may be required to bear the financial risks of an investment in the Series A Preferred Units for an indefinite period of time.  In addition, the Series A Preferred Units will rank junior to all Partnership current and future indebtedness (including indebtedness outstanding under the Partnership’s senior bank credit facility) and other liabilities, and any other senior securities we may issue in the future with respect to assets available to satisfy claims against the Partnership.

The Series A Preferred Units are subordinated to existing and future debt obligations, and the interests could be diluted by the issuance of additional units, including additional Series A Preferred Units, and by other transactions.

The Series A Preferred Units are subordinated to all existing and future indebtedness, including indebtedness outstanding under any senior bank credit facility.  The Partnership may incur additional debt under its senior bank credit facility or future credit facilities.  The payment of principal and interest on its debt reduces cash available for distribution to Unitholders, including the Series A Preferred Units.


The issuance of additional units pari passu with or senior to the Series A Preferred Units would dilute the interests of the holders of the Series A Preferred Units, and any issuance of senior securities, parity securities, or additional indebtedness could affect the Partnership’s ability to pay distributions on or redeem the Series A Preferred Units.

Holders of Series A Preferred Units have extremely limited voting rights.

The voting rights as a holder of Series A Preferred Units will be extremely limited.  Our BUCs are the only class of our partnership interests carrying full voting rights.

Holders of Series A Preferred Units generally have no voting rights.  

There is no public market for the Series A Preferred Units, which may prevent an investor from liquidating its investment.

The Series A Preferred Units have been, and are beingwere offered in a private placement and the Partnership hasdid not registeredregister the Series A Preferred Units with the SEC or any state securities commission.  The Series A Preferred Units may not be resold unless the Partnership registers the securities with the SEC or an exemption from the registration requirement is available.  It is not expected that any market for the Series A Preferred Units will develop or be sustained in the future.  The lack of any public market for the Series A Preferred Units severely limits the ability to liquidate the investment, except for the right to put the Series A Preferred Units to the Partnership under certain circumstances.

Market interest rates may adversely affect the value of the Series A Preferred Units.

One of the factors that will influence the value of the Series A Preferred Units will be the distribution rate on the Series A Preferred Units (as a percentage of the price of the units) relative to market interest rates.  An increase in market interest rates, which are currently at low levels relative to historical rates, may lower the value of the Series A Preferred Units and also would likely increase the Partnership’s borrowing costs.


Holders of Series A Preferred Units may have liability to repay distributions.

Under certain circumstances, holders of the Series A Preferred Units may have to repay amounts wrongfully returned or distributed to them.  Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution if the distribution would cause the Partnership’s liabilities to exceed the fair value of its assets.  Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.

Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount.  A purchaser of Series A Preferred Units who becomes a limited partner is liable for the obligations of the transferring limited partner to make contributions to the Partnership that are known to such purchaser of units at the time it became a limited partner and for unknown obligations if the liabilities could be determined from our Amended and Restated LP Agreement.

The Partnership’s portfolio investment decisions may create CRA strategy risks.

Portfolio investment decisions take into account the Partnership’s goal of holding mortgage revenue bondsMRBs and other securities in designated geographic areas and will not be exclusively based on the investment characteristics of such assets, which may or may not have an adverse effect on the Partnership’s investment performance.  CRA qualified assets in geographic areas sought by the Partnership may not provide as favorable return as CRA qualified assets in other geographic areas.  The Partnership may sell assets for reasons relating to CRA qualification at times when such sales may not be desirable and may hold short-term investments that produce relatively low yields pending the selection of long-term investments believed to be CRA-qualified.

Under certain circumstances, investors may not receive CRA credit for their investment in the Series A Preferred Units.

The CRA requires the three federal bank supervisory agencies, the FRB, the OCC, and the FDIC, to encourage the institutions they regulate to help meet the credit needs of their local communities, including low- and moderate-income neighborhoods.  Each agency has promulgated rules for evaluating and rating an institution’s CRA performance which, as the following summary indicates, vary according to an institution’s asset size.  An institution’s CRA performance can also be adversely affected by evidence of discriminatory credit practices regardless of its asset size.


For an institution to receive CRA credit with respect to an investment in the Series A Preferred Units, the Partnership must hold CRA-qualifying investments that relate to the institution’s delineated CRA assessment area.  The Partnership expects that an investment in its units will be considered a qualified investment under the CRA, but neither the Partnership nor the General Partner has received an interpretative letter from the Federal Financial Institutions Examination Council (“FFIEC”) stating that an investment in the Partnership is considered eligible for regulatory credit under the CRA.  Moreover, there is no guarantee that future changes to the CRA or future interpretations by the FFIEC will not affect the continuing eligibility of the Partnership’s investments.  So that the Partnership itself may be considered a qualified investment, the Partnership will seek to invest only in investments that meet the prevailing community investing standards put forth by U.S. regulatory agencies.  

In this regard, the Partnership expects that a majority of its investments will be considered eligible for regulatory credit under the CRA, but there is no guarantee that an investor will receive CRA credit for its investment in the Series A Preferred Units.  For example, a state banking regulator may not consider the Partnership eligible for regulatory credit.  If CRA credit is not given, there is a risk that an investor may not fulfill its CRA requirements.

The assets held by the Partnership may not be considered qualified investments under the CRA by the bank regulatory authorities.

In most cases, “qualified investments,” as defined by the CRA, are required to be responsive to the community development needs of a financial institution’s delineated CRA assessment area or a broader statewide or regional area that includes the institution’s assessment area.  For an institution to receive CRA credit with respect to the Series A Preferred Units, the Partnership must hold CRA qualifying investments that relate to the institution’s assessment area.

As defined in the CRA, qualified investments are any lawful investments, deposits, membership shares, or grants that have as their primary purpose community development.  The term “community development” is defined in the CRA as: (1) affordable housing (including multifamily rental housing) for low- to moderate-income individuals; (2) community services targeted to low- or moderate-income individuals; (3) activities that promote economic development by financing businesses or farms that meet the size eligibility standards of 13 C.F.R. §121.802(a)(2) and (3) or have gross annual revenues of $1 million or less; or (4) activities that revitalize or stabilize low- or moderate-income geographies, designated disaster areas, or distressed or underserved non-metropolitan middle-income geographies designated by the federal banking regulators.


Investments are not typically designated as qualifying investments at the time of issuance by any governmental agency.  Accordingly, the General Partner must evaluate whether each potential investment may be qualifying investments with respect to a specific Unitholder.  The final determinations that assets held by the Partnership are qualifying investments are made by the federal and, where applicable, state bank supervisory agencies during their periodic examinations of financial institutions.  There is no assurance that the agencies will concur with the General Partner’s evaluation of any of the Partnership’s assets as qualifying investments.

Each investor will be a limited partner of the Partnership, not just of the investments in its Designated Target Region(s).  The financial returns on an investor’s investment will be determined based on the performance of all the assets in the Partnership’s geographically diverse portfolio, not just by the performance of the assets in the Designated Target Region(s) selected by the investor.

In determining whether a particular investment is qualified, the General Partner will assess whether the investment has as its primary purpose community development.  The General Partner will consider whether the investment: (1) provides affordable housing for low- to moderate-income individuals; (2) provides community services targeted to low- to moderate-income individuals; (3) funds activities that (a) finance businesses or farms that meet the size eligibility standards of the Small Business Administration’s Development Company or Small Business Investment Company programs or have annual revenues of $1 million or less and (b) promote economic development; or (4) funds activities that revitalize or stabilize low- to moderate-income areas.  For institutions whose primary regulator is the FRB, OCC, or FDIC, the General Partner may also consider whether an investment revitalizes or stabilizes a designated disaster area, or an area designated by those agencies as a distressed or underserved non-metropolitan middle-income area.

An activity may be deemed to promote economic development if it supports permanent job creation, retention, and/or improvement for persons who are currently low- to moderate-income, or supports permanent job creation, retention, and/or improvement in low- to moderate-income areas targeted for redevelopment by federal, state, local, or tribal governments.  Activities that revitalize or stabilize a low- to moderate-income geography are activities that help attract and retain businesses and residents.  The General Partner maintains documentation, readily available to a financial institution or an examiner, supporting its determination that a Partnership asset is a qualifying investment for CRA purposes.

There may be a time lag between sale of the Series A Preferred Units and the Partnership’s acquisition of a significant volume of investments in a particular geographic area.  The length of time will depend upon the depth of the market for CRA qualified investments in the relevant areas.  In some cases, the General Partner expects that CRA qualified investments will be immediately


available.  In others, it may take weeks or months to acquire a significant volume of CRA qualified investments in a particular area.  The General Partner believes that investments in the Series A Preferred Units during these time periods will be considered CRA qualified investments, provided the purpose of the Partnership includes serving the investing institution’s assessment area(s) and the Partnership is likely to achieve a significant volume of investments in the region after a reasonable period of time.  As the Partnership continues to operate, it may dispose of assets that were acquired for CRA qualifying purposes, in which case the General Partner will normally attempt to acquire a replacement asset that would be a qualifying investment.

Obligations of U.S. Government agencies, authorities, instrumentalities, and sponsored enterprises (such as Fannie Mae and Freddie Mac) have historically involved little risk of loss of principal if held to maturity.  However, the maximum potential liability of the issuers of some of these securities may greatly exceed their current resources and no assurance can be given that the U.S. Government would provide financial support to any of these entities if it is not obligated to do so contractually or by law.

The investment in the Series A Preferred Units is not a deposit or obligation of, or insured or guaranteed by, any entity or person, including the U.S. Government and the FDIC.  An investment in the Partnership may be particularly appropriate for banks and other financial institutions that are subject to the CRA; institutional investors, such as pension plans, that find the Partnership meets their asset management needs; and socially responsible investors who desire to channel their investments in ways that help communities.  The value of the Partnership’s assets will vary, reflecting changes in market conditions, interest rates, and other political and economic factors.  There is no assurance that the Partnership can achieve its investment objective, since all investments are inherently subject to market risk.  There also can be no assurance that either the Partnership’s investments or units of the Partnership will receive investment test credit under the CRA.

The Partnership faces legislative and regulatory risks in connection with its assets and operations, including under the CRA.

Many aspects of the Partnership’s investment objectives are directly affected by the national and local legal and regulatory environments.  Changes in laws, regulations, or the interpretation of regulations could all pose risks to the successful realization of the Partnership’s investment objectives.

It is not known what changes, if any, may be made to the CRA in the future and what impact these changes could have on regulators or the various states that have their own versions of the CRA.  Changes in the CRA might affect Partnership operations and might pose a risk to the successful realization of the Partnership’s investment objectives.  In particular, repealRepeal of the CRA would significantly reduce the attractiveness of an investment in the Partnership’s units for regulated investors.  There is no guarantee that an investor will receive CRA credit for is investment in the Series A Preferred Units.  If CRA credit is not given, there is a risk that an investor may not fulfill its CRA obligations.

We are increasingly dependent on information technology, and potential disruption, cyber-attacks, security problems, and expanding social media vehicles present new risks.

We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure and to maintain and protect the related automated and manual control processes, we could be subject to billing and collection errors, business disruptions, or damage resulting from security breaches. If any of our significant information technology systems suffer severe damage, disruption, or shutdown, and our business continuity plans do not effectively resolve the


issues in a timely manner, our revenues, financial condition, and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results. In addition, there is a risk of business interruption, litigation risks, and reputational damage from leakage of confidential information or from systems conversions when, and if, they occur in the normal course of business.

The inappropriate use of certain media vehicles could cause brand damage or information leakage. Negative posts or comments about the Partnership on any social networking web site could seriously damage its reputation. In addition, the disclosure of non-public company sensitive information through external media channels could lead to information loss. Identifying new points of entry as social media continues to expand presents new challenges. Any business interruptions or damage to our reputation could negatively impact our financial condition, results of operations, and the market price of our BUCs.

 

 

Item 1B.  Unresolved Staff Comments.

None

 


 

Item 2.  Properties.

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

Each of the Partnership’s mortgage revenue bondsMRBs are collateralized by the Residential Properties or commercial property. The Partnership may have property loans that are also collateralized by the Residential Properties but does not hold title or any other interest in these properties.

At December 31, 2016,2017, a wholly-owned subsidiary of the Partnership held interests inowns one entity that owns an MF Property Northern View.  The wholly-owned subsidiary also owns four MF Properties Residences of DeCordova, Eagle Village, Residences of Weatherford, and The 50/50. In addition, the Partnership owns the Suites on Paseo, Jade Park and land held for development directly.

The Partnerships’ Real Estate Assets are reported within the MF Properties segment at December 31, 2016 are:2017 and are summarized as follows:

 

Real Estate Assets at December 31, 2016

 

Real Estate Assets at December 31, 2017

Real Estate Assets at December 31, 2017

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value on

December 31, 2016

 

 

Location

 

Number of

Units (Unaudited)

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value on

December 31, 2017

 

Eagle Village

 

Evansville, IN

 

 

511

 

 

$

567,880

 

 

$

12,655,244

 

 

$

13,223,124

 

Northern View (f/k/a Meadowview)

 

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

 

 

San Diego, CA

 

 

394

 

 

$

3,166,463

 

 

$

38,454,894

 

 

$

41,621,357

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,928,878

 

 

 

32,928,878

 

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,932,981

 

 

 

32,932,981

 

Jade Park

 

Daytona, FL

 

 

144

 

 

 

2,292,035

 

 

 

7,270,845

 

 

 

9,562,880

 

 

Daytona, FL

 

 

144

 

 

 

2,292,035

 

 

 

7,565,613

 

 

 

9,857,648

 

Land held for development

 

Various

 

N/A

 

 

 

7,531,104

 

 

 

-

 

 

 

7,531,104

 

 

(1)

 

(1)

 

 

 

1,860,737

 

 

 

-

 

 

 

1,860,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

130,443,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

86,272,723

 

Less accumulated depreciation

Less accumulated depreciation

 

 

 

(16,217,028

)

Less accumulated depreciation

 

 

 

(9,580,531

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

114,226,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,692,192

 

(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.

 

 

Item 3.  Legal Proceedings.

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

 

 

Item 4.  Mine Safety Disclosures

Not Applicable.

 


PART II

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

Market Information

The Partnership’s BUCs trade on the NASDAQ Global Select Market under the trading symbol “ATAX.”  On March 2, 2017,February 27, 2018, the closing price of our BUCs, as reported on the NASDAQ was $5.70.$6.20. The following table sets forth, for the periods indicated, the high and low intraday sales prices of our BUCs and the distributions paid by us in each of the periods listed.

 

2017

 

High

 

 

Low

 

 

Distributions (1)

 

1st Quarter

 

$

5.80

 

 

$

5.40

 

 

$

0.125

 

2nd Quarter

 

$

6.05

 

 

$

5.60

 

 

$

0.125

 

3rd Quarter

 

$

6.25

 

 

$

5.85

 

 

$

0.125

 

4th Quarter

 

$

6.20

 

 

$

5.95

 

 

$

0.125

 

2016

 

High

 

 

Low

 

 

Distributions (1)

 

1st Quarter

 

$

5.38

 

 

$

4.51

 

 

$

0.125

 

2nd Quarter

 

$

5.55

 

 

$

5.13

 

 

$

0.125

 

3rd Quarter

 

$

6.09

 

 

$

5.50

 

 

$

0.125

 

4th Quarter

 

$

5.89

 

 

$

5.30

 

 

$

0.125

 

 

2015

 

High

 

 

Low

 

 

Distributions (1)

 

1st Quarter

 

$

5.84

 

 

$

5.24

 

 

$

0.125

 

2nd Quarter

 

$

5.76

 

 

$

5.46

 

 

$

0.125

 

3rd Quarter

 

$

5.66

 

 

$

5.08

 

 

$

0.125

 

4th Quarter

 

$

5.48

 

 

$

5.03

 

 

$

0.125

 

(1) Represents distributions declared, on a per unit basis, with respect to that quarter

Stockholder Information

As of December 31, 2016,2017, we had 60,066,23460,131,605 BUCs outstanding held by a total of approximately 12,000 Unitholders. Theholders of record. In addition, the Partnership also has unvested restricted unit awards for 158,304242,069 BUCs held by 9 individuals.ten individuals at December 31, 2017.

Distributions

Future distributions paid by the Partnership on the BUCs will be at the discretion of the Board of Managers and will be based upon financial, capital, and cash flow considerations. In addition, distributions on the BUCs rank junior to distributions on the Series A Preferred Units, and, therefore, such distributions may be considered to be limited under certain circumstances.  See note 2221 to the consolidated financial statements for a further description.  

Distributions by quarter for the years ended December 31, 20162017 and 2015,2016, respectively, were as follows (amounts in thousands, except per unit amounts):

 

 

Distributions

 

 

Distributions

 

2016

 

Declared per unit

 

 

Total Paid

 

2017

 

Declared per unit

 

 

Total Paid

 

1st Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,531,616

 

2nd Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,531,616

 

3rd Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,531,616

 

4th Quarter

 

$

0.125

 

 

$

7,528,068

 

 

$

0.125

 

 

$

7,549,910

 

 

 

Distributions

 

 

Distributions

 

2015

 

Declared per unit

 

 

Total Paid

 

2016

 

Declared per unit

 

 

Total Paid

 

1st Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,531,616

 

2nd Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,531,616

 

3rd Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,531,616

 

4th Quarter

 

$

0.125

 

 

$

7,531,616

 

 

$

0.125

 

 

$

7,528,068

 

 


Equity Compensation Plan Information

 

The following table provides information with respect to compensation plans under which equity securities of the Partnership are currently authorized for issuance as of December 31, 2016:2017:

 

 

Number of shares to be issued upon exercise of outstanding options, warrants, and rights

 

 

Weighted-average price of outstanding options, warrants, and rights

 

 

Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a))

 

 

 

Number of shares to be issued upon exercise of outstanding options, warrants, and rights

 

 

Weighted-average price of outstanding options, warrants, and rights

 

 

Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a))

 

 

Plan Category

 

(a)

 

 

(b)

 

 

(c)

 

 

 

(a)

 

 

(b)

 

 

(c)

 

 

Equity compensation plans

approved by Unitholders

 

 

272,307

 

 

$

-

 

 

 

2,727,693

 

(1)

 

 

242,069

 

 

$

-

 

 

 

2,513,674

 

(1)

Equity compensation plan not

approved by Unitholders

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

Total

 

 

272,307

 

 

$

-

 

 

 

2,727,693

 

 

 

 

242,069

 

 

$

-

 

 

 

2,513,674

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Represents the units which remain available for future issuance under the America First Multifamily Investors, L. P. 2015 Equity Incentive Plan

(1) Represents the units which remain available for future issuance under the America First Multifamily Investors, L. P. 2015 Equity Incentive Plan

(1) Represents the units which remain available for future issuance under the America First Multifamily Investors, L. P. 2015 Equity Incentive Plan

 

Unregistered Sale of Equity Securities

The Partnership did not sell any of its BUCs in 2017, 2016, or 2015 or 2014 whichthat were not registered under the Securities Act of 1933, as amended. During 2016, theThe Partnership sold 5,363,100 and 4,086,900 Series A Preferred Units for gross proceeds of approximately $53.6 million and $40.9 million during 2017 and 2016, respectively, the information for which the Partnership previously disclosed in Current Reports on Form 8-K.

On August 24, 2016, The Partnership used the Partnership announced that the Board of Managers of Burlington, which is the general partner of the Partnership’s general partner, authorized a unit repurchase program for upproceeds to 272,307 of the Partnership’s outstanding BUCs.  Under the terms of the repurchase program, BUCs may be repurchased from time to time at the Partnership’s discretion on the open market, through block trades, or otherwise, subject to market conditions, applicable legal requirements,acquire MRBs and other considerations.  allowable investments provided for in the Amended and Restated LP Agreement.

The program doesPartnership did not have a stated expiration date and will continue until all of therepurchase any outstanding BUCs authorized under the program have been repurchased, or the program is otherwise modified or terminated by the Board in its sole discretion.  During the year ended December 31, 2016, the Partnership repurchased 272,307 BUCs under the program for approximately $1.6 million.

Information on the BUCs repurchased during the fourth quarter ended December 31, 2016 under the program is as follows:of 2017.

Period

 

Total number of shares (or units) purchased

 

 

Average price paid per share (or unit)

 

 

Total number of shares (or units) purchased as part of publicly announced plans or programs

 

 

Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or program

 

October 1 - October 31, 2016

 

 

-

 

 

$

-

 

 

 

-

 

 

 

33,371

 

November 1 - November 30, 2016

 

 

33,371

 

 

 

5.81

 

 

 

33,371

 

 

 

-

 

December 1 - December 31, 2016

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

33,371

 

 

$

5.81

 

 

 

33,371

 

 

 

 

 

 

 


Item 6.  Selected Financial Data.

Set forth below is selected financial data for the Company as of and for the years ended December 31, 20162017 through 2012.2013.  Item 6 should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s consolidated financial statements and Notes filed in Item 8 of this report.  

 

 

For the Year Ended December 31,

 

 

For the Year Ended December 31,

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

 

2012

 

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

Property revenue

 

$

17,404,439

 

 

$

17,789,125

 

 

$

14,250,572

 

 

$

13,115,858

 

 

$

9,686,414

 

 

$

13,499,645

 

 

$

17,404,439

 

 

$

17,789,125

 

 

$

14,250,572

 

 

$

13,115,858

 

Real estate operating expenses

 

 

(9,223,108

)

 

 

(10,052,669

)

 

 

(7,796,761

)

 

 

(7,622,182

)

 

 

(6,022,923

)

 

 

(8,228,297

)

 

 

(9,223,108

)

 

 

(10,052,669

)

 

 

(7,796,761

)

 

 

(7,622,182

)

Depreciation and amortization expense

 

 

(6,862,530

)

 

 

(6,505,011

)

 

 

(4,897,916

)

 

 

(4,790,892

)

 

 

(3,318,974

)

 

 

(5,212,859

)

 

 

(6,862,530

)

 

 

(6,505,011

)

 

 

(4,897,916

)

 

 

(4,790,892

)

Investment income

 

 

36,892,996

 

 

 

34,409,809

 

 

 

26,606,234

 

 

 

22,651,622

 

 

 

11,078,467

 

 

 

48,225,068

 

 

 

36,892,996

 

 

 

34,409,809

 

 

 

26,606,234

 

 

 

22,651,622

 

Contingent interest income

 

 

2,021,077

 

 

 

4,756,716

 

 

 

40,000

 

 

 

6,497,160

 

 

 

-

 

 

 

3,147,165

 

 

 

2,021,077

 

 

 

4,756,716

 

 

 

40,000

 

 

 

6,497,160

 

Other interest income

 

 

2,660,238

 

 

 

2,624,262

 

 

 

856,217

 

 

 

1,772,338

 

 

 

150,882

 

 

 

4,681,578

 

 

 

2,660,238

 

 

 

2,624,262

 

 

 

856,217

 

 

 

1,772,338

 

Gain on sale of securities

 

 

8,097

 

 

 

-

 

 

 

3,701,772

 

 

 

-

 

 

 

680,444

 

 

 

-

 

 

 

8,097

 

 

 

-

 

 

 

3,701,772

 

 

 

-

 

Gain on sale of MF Properties

 

 

14,072,317

 

 

 

4,599,109

 

 

 

-

 

 

 

-

 

 

 

-

 

Gain on sale of real estate assets, net

 

 

17,753,303

 

 

 

14,072,317

 

 

 

4,599,109

 

 

 

-

 

 

 

-

 

Other income

 

 

-

 

 

 

373,379

 

 

 

188,000

 

 

 

250,000

 

 

 

555,328

 

 

 

828,089

 

 

 

-

 

 

 

373,379

 

 

 

188,000

 

 

 

250,000

 

Provision for loss on receivables

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(241,698

)

 

 

(452,700

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(241,698

)

Provision for loan loss

 

 

-

 

 

 

-

 

 

 

(75,000

)

 

 

(168,000

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(75,000

)

 

 

(168,000

)

Realized loss on taxable property loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,557,741

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,557,741

)

Impairment expense

 

 

(61,506

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Impairment of securities

 

 

(761,960

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Impairment charge on real estate assets

 

 

-

 

 

 

(61,506

)

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of deferred financing costs

 

 

(1,862,509

)

 

 

(1,622,789

)

 

 

(1,183,584

)

 

 

(1,032,585

)

 

 

(737,638

)

 

 

(2,324,535

)

 

 

(1,862,509

)

 

 

(1,622,789

)

 

 

(1,183,584

)

 

 

(1,032,585

)

Interest expense

 

 

(15,469,639

)

 

 

(14,826,217

)

 

 

(11,165,911

)

 

 

(6,990,844

)

 

 

(5,275,008

)

 

 

(22,155,443

)

 

 

(15,469,639

)

 

 

(14,826,217

)

 

 

(11,165,911

)

 

 

(6,990,844

)

General and administrative expenses

 

 

(10,837,188

)

 

 

(8,660,889

)

 

 

(5,547,208

)

 

 

(4,237,245

)

 

 

(3,512,233

)

 

 

(12,769,757

)

 

 

(10,837,188

)

 

 

(8,660,889

)

 

 

(5,547,208

)

 

 

(4,237,245

)

Income before income taxes

 

 

28,742,684

 

 

 

22,884,825

 

 

 

14,976,415

 

 

 

14,645,791

 

 

 

2,832,059

 

 

 

36,681,997

 

 

 

28,742,684

 

 

 

22,884,825

 

 

 

14,976,415

 

 

 

14,645,791

 

Income tax expense

 

 

(4,959,000

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,019,146

)

 

 

(4,959,000

)

 

 

-

 

 

 

-

 

 

 

-

 

Income from continuing operations

 

 

23,783,684

 

 

 

22,884,825

 

 

 

14,976,415

 

 

 

14,645,791

 

 

 

2,832,059

 

 

 

30,662,851

 

 

 

23,783,684

 

 

 

22,884,825

 

 

 

14,976,415

 

 

 

14,645,791

 

Income from discontinued operations, (including

gain on sale of VIEs of approximately $3.2 million in 2015

and MF Properties of approximately $3.2 million and

$1.4 million in 2013 and 2012, respectively)

 

 

-

 

 

 

3,721,397

 

 

 

52,773

 

 

 

3,331,051

 

 

 

2,163,979

 

Income from discontinued operations, (including

gain on sale of VIEs of approximately $3.2 million in 2015

and MF Properties of approximately $3.2 million in 2013)

 

 

-

 

 

 

-

 

 

 

3,721,397

 

 

 

52,773

 

 

 

3,331,051

 

Net income

 

 

23,783,684

 

 

 

26,606,222

 

 

 

15,029,188

 

 

 

17,976,842

 

 

 

4,996,038

 

 

 

30,662,851

 

 

 

23,783,684

 

 

 

26,606,222

 

 

 

15,029,188

 

 

 

17,976,842

 

Less: net (loss) income attributable to noncontrolling interest

 

 

(823

)

 

 

(2,801

)

 

 

(4,673

)

 

 

261,923

 

 

 

549,194

 

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

 

 

(4,673

)

 

 

261,923

 

Net income (loss) - America First Multifamily Investors, L. P.

 

 

23,784,507

 

 

 

26,609,023

 

 

 

15,033,861

 

 

 

17,714,919

 

 

 

4,446,844

 

Net income - America First Multifamily Investors, L. P.

 

 

30,591,198

 

 

 

23,784,507

 

 

 

26,609,023

 

 

 

15,033,861

 

 

 

17,714,919

 

Redeemable Series A preferred unit distribution and accretion

 

 

(583,407

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,982,538

)

 

 

(583,407

)

 

 

-

 

 

 

-

 

 

 

-

 

Net income available to Partners

 

 

23,201,100

 

 

 

26,609,023

 

 

 

15,033,861

 

 

 

17,714,919

 

 

 

4,446,844

 

 

 

28,608,660

 

 

 

23,201,100

 

 

 

26,609,023

 

 

 

15,033,861

 

 

 

17,714,919

 

Less: General Partnersʼ interest in net income

 

 

2,992,106

 

 

 

2,474,274

 

 

 

1,056,316

 

 

 

1,416,296

 

 

 

691,312

 

 

 

2,140,074

 

 

 

2,992,106

 

 

 

2,474,274

 

 

 

1,056,316

 

 

 

1,416,296

 

Less: Unallocated gain (loss) of Consolidated Property VIEs

 

 

-

 

 

 

3,721,397

 

 

 

(635,560

)

 

 

(1,116,262

)

 

 

(1,522,846

)

 

 

-

 

 

 

-

 

 

 

3,721,397

 

 

 

(635,560

)

 

 

(1,116,262

)

Unitholdersʼ interest in net income (loss)

 

$

20,208,994

 

 

$

20,413,352

 

 

$

14,613,105

 

 

$

17,414,885

 

 

$

5,278,378

 

Unitholdersʼ Interest in net income (loss) per

unit (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

 

$

0.32

 

 

$

0.09

 

Unitholdersʼ interest in net income

 

$

26,468,586

 

 

$

20,208,994

 

 

$

20,413,352

 

 

$

14,613,105

 

 

$

17,414,885

 

Unitholdersʼ Interest in net income per

unit (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

 

$

0.32

 

Income from discontinued operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.08

 

 

$

0.05

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.08

 

Net income (loss), basic and diluted, per unit

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

 

$

0.40

 

 

$

0.14

 

Net income, basic and diluted, per unit

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

 

$

0.40

 

Distributions paid or accrued per BUC

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

Weighted average number of BUCs outstanding, basic

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

 

 

43,453,476

 

 

 

37,367,600

 

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

 

 

43,453,476

 

Weighted average number of BUCs outstanding, diluted

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

 

 

43,453,476

 

 

 

37,367,600

 

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

 

 

43,453,476

 

Mortgage revenue bonds, at fair value

 

$

90,016,872

 

 

$

47,366,656

 

 

$

70,601,045

 

 

$

68,946,370

 

 

$

45,703,294

 

 

$

77,971,208

 

 

$

90,016,872

 

 

$

47,366,656

 

 

$

70,601,045

 

 

$

68,946,370

 

Mortgage revenue bonds held in trust, at fair value

 

$

590,194,179

 

 

$

536,316,481

 

 

$

378,423,092

 

 

$

216,371,801

 

 

$

99,534,082

 

 

$

710,867,447

 

 

$

590,194,179

 

 

$

536,316,481

 

 

$

378,423,092

 

 

$

216,371,801

 

Public housing capital fund trusts, at fair value

 

$

57,158,068

 

 

$

60,707,290

 

 

$

61,263,123

 

 

$

62,056,379

 

 

$

65,389,298

 

 

$

49,641,588

 

 

$

57,158,068

 

 

$

60,707,290

 

 

$

61,263,123

 

 

$

62,056,379

 

Mortgage-backed securities, at fair value

 

$

-

 

 

$

14,775,309

 

 

$

14,841,558

 

 

$

37,845,661

 

 

$

32,121,412

 

 

$

-

 

 

$

-

 

 

$

14,775,309

 

 

$

14,841,558

 

 

$

37,845,661

 

Real estate assets, net

 

$

114,226,600

 

 

$

141,017,390

 

 

$

110,351,512

 

 

$

90,112,037

 

 

$

71,932,938

 

 

$

76,692,192

 

 

$

114,226,600

 

 

$

141,017,390

 

 

$

110,351,512

 

 

$

90,112,037

 

Total assets held for sale

 

$

-

 

 

$

-

 

 

$

13,204,015

 

 

$

13,748,427

 

 

$

46,854,190

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

13,204,015

 

 

$

13,748,427

 

Total assets

 

$

944,113,674

 

 

$

867,110,483

 

 

$

739,823,986

 

 

$

531,880,602

 

 

$

410,425,781

 

 

$

1,069,767,999

 

 

$

944,113,674

 

 

$

867,110,483

 

 

$

739,823,986

 

 

$

531,880,602

 

Total debt of continuing operations

 

$

606,579,212

 

 

$

538,241,290

 

 

$

417,651,603

 

 

$

312,008,890

 

 

$

214,342,533

 

 

$

643,868,521

 

 

$

606,579,212

 

 

$

538,241,290

 

 

$

417,651,603

 

 

$

312,008,890

 

Total debt of discontinued operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Cash flows provided by operating activities

 

$

15,231,531

 

 

$

19,387,418

 

 

$

17,444,171

 

 

$

14,232,724

 

 

$

7,482,090

 

 

$

17,139,527

 

 

$

15,231,531

 

 

$

19,387,418

 

 

$

17,444,171

 

 

$

14,232,724

 

Cash flows used in investing activities

 

$

(83,052,386

)

 

$

(138,703,473

)

 

$

(105,887,640

)

 

$

(158,421,463

)

 

$

(97,296,115

)

 

$

(21,505,164

)

 

$

(83,052,386

)

 

$

(138,703,473

)

 

$

(105,887,640

)

 

$

(158,421,463

)

Cash flows provided by financing activities

 

$

71,533,594

 

 

$

87,158,494

 

 

$

126,318,797

 

 

$

125,175,254

 

 

$

99,932,112

 

 

$

53,214,815

 

 

$

71,533,594

 

 

$

87,158,494

 

 

$

126,318,797

 

 

$

125,175,254

 

 

 

 


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

General

In this Management’s Discussion and Analysis, all references to “we,” “us,” and the “Partnership” refer to America First Multifamily Investors, L.P. and its wholly-owned subsidiaries at December 31, 2016.2017. The “Company” refers to the Partnership and the Consolidated VIEs.

We were formed for the primary purpose of acquiring a portfolio of mortgage revenue bondsMRBs that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily and student housing, the Residential Properties, and commercial properties in their market areas.  The Company includes the assets, liabilities, and results of operations of the Partnership, its wholly-owned subsidiaries and two other consolidated entities infor which we do not hold an ownership interest and which are treated as VIEs of which we have been determined to be the primary beneficiary, the Consolidated VIEs.  Bent Tree and Fairmont Oaks, the two Consolidated VIEs, are presented as discontinued operations for all periods presented. All significant transactions and accounts between us and the Consolidated VIEs have been eliminated in consolidation. See Note 2 to the Company’s consolidated financial statements for additional details.

Executive Summary

The Partnership was formed for the primary purpose of acquiring a portfolio of mortgage revenue bondsMRBs 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 America First Multifamily Investors, L.P. First Amended and Restated Agreement of Limited Partnership. We may acquire interests in multifamily, student, and senior citizen apartment properties (“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 December 31, 2016,2017, we have 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 Company also separately reports its consolidation and elimination information because it does not allocate certain items to the segments.  See Notes 2 and 26 to the Company’s consolidated financial statements for additional details.

Mortgage Revenue Bond Investments Segment  

As of December 31, 2017, we owned 87 MRBs with an aggregate outstanding principal amount of $719.8 million.  The majority of these bonds were issued by various state and local housing authorities in order to provide construction and/or permanent financing for 63 Residential Properties containing a total of 10,666 rental units located in 14 states in the United States.  Each MRB for the Residential Properties is secured by a mortgage or deed of trust.  One MRB is secured by a mortgage on the ground, facilities, and equipment of a commercial ancillary health care facility in Tennessee.

As of December 31, 2016, we owned 83 mortgage revenue bonds with an aggregate outstanding principal amount of $648.4 million.  The majority of these bonds were issued by various state and local housing authorities in order to provide construction and/or permanent financing for 58 Residential Properties containing a total of 9,968 rental units located in 15 states in the United States.  One bond is collateralized by commercial real estate located in Tennessee. Each mortgage revenue bond for the Residential Properties is secured by a mortgage or deed of trust on the Residential Properties.  One mortgage revenue bondMRB is secured by ground, facility, and equipment of a commercial ancillary health care facility.

As of December 31, 2015, we owned 64 mortgage revenue bonds with an aggregate outstanding principal amount of $534.7 million.  Sixty-two of these bonds were issued by various state and local housing authoritiesfacility in order to provide construction and/or permanent financing for 44 Residential Properties containing a total of 8,041 rental units located in 14 states in the United States. Two of the bonds’ properties located in Texas are not operational and are under construction and two bonds are collateralized by commercial real estate located in Tennessee. Each of the sixty-two mortgage revenue bonds are secured by mortgages or deeds of trust on the financed Residential Properties.  Two mortgage revenue bonds are secured by ground, facility, and equipment of a commercial ancillary health care facility.


The following table compares total revenues, other income, total interest expense and net income for the mortgage revenue bond investmentMortgage Revenue Bond Investments segment for the periods indicated (in thousands):

 

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

Mortgage Revenue Bond

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

36,673

 

 

$

38,773

 

 

$

(2,100

)

 

 

-5.4

%

 

$

38,773

 

 

$

23,228

 

 

$

15,545

 

 

 

66.9

%

 

$

49,100

 

 

$

36,673

 

 

$

12,427

 

 

 

33.9

%

 

$

36,673

 

 

$

38,773

 

 

$

(2,100

)

 

 

-5.4

%

Other income - gain on

sale of securities

 

$

8

 

 

$

-

 

 

$

8

 

 

 

100.0

%

 

$

-

 

 

$

3,702

 

 

$

(3,702

)

 

N/A

 

Total interest expense

 

$

11,905

 

 

$

10,787

 

 

$

1,118

 

 

 

10.4

%

 

$

10,787

 

 

$

7,147

 

 

$

3,640

 

 

 

50.9

%

 

$

18,705

 

 

$

11,905

 

 

$

6,800

 

 

 

57.1

%

 

$

11,905

 

 

$

10,787

 

 

$

1,118

 

 

 

10.4

%

Net income

 

$

11,756

 

 

$

17,924

 

 

$

(6,168

)

 

 

-34.4

%

 

$

17,924

 

 

$

13,182

 

 

$

4,742

 

 

 

36.0

%

 

$

15,439

 

 

$

11,756

 

 

$

3,683

 

 

 

31.3

%

 

$

11,756

 

 

$

17,924

 

 

$

(6,168

)

 

 

-34.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparison of the years ended December 31, 2017 and 2016

The net increase in total revenue between 2017 and 2016 is comprised of the following factors:

An increase of approximately $9.9 million in recurring investment interest income related MRB acquisitions during 2017 and 2016. We acquired MRBs totaling approximately $121.3 million at a weighted-average base interest rate of approximately 6.5% in 2017 and approximately $130.6 million at a weighted-average base interest rate of approximately 5.3% in 2016. Approximately $110.3 million of the 2016 acquisitions occurred in the fourth quarter.

A decrease of approximately $948,000 in recurring investment income from MRB redemptions in 2016 and 2017. We had redemptions and sales of MRBs and taxable MRBs totaling approximately $43.9 million at a weighted-average base interest rate of 6.5% in 2017 and approximately $15.0 million at a weighted-average base interest rate of approximately 8.7% in 2016.

An increase of approximately $1.1 million in contingent interest. In 2017, we realized contingent interest of approximately $219,000 from excess cash flow on the Lake Forest MRBs and approximately $2.9 million of cash proceeds from redemption of the Ashley Square MRB. In 2016, we realized contingent interest of approximately $642,000 from excess cash flow on the Ashley Square and Lake Forest MRBs and approximately $1.4 million on excess cash proceeds from the sale of the property underlying the Foundation for Affordable Housing property loan.  

Approximately $1.7 million of other interest income received on the Ashley Square property loans in connection with the sale of the underlying property in the fourth quarter of 2017. The Ashley Square property loans were in non-accrual status during 2016, so there was no interest income for these property loans in 2016.

Approximately $624,000 of other income related to early redemptions of the MRBs for Vantage at Harlingen and Avistar at Chase Hill during the fourth quarter of 2017. No such income was recognized in 2016.

The net increase in total interest expense between 2017 and 2016 is due to the following factors:

An increase of approximately $2.0 million due to an increase of approximately $78.6 million in average principal outstanding, mostly due to new Term A/B Trusts.

An increase of approximately $4.5 million due to an increase of approximately 83 basis points in the average interest rate.

An increase of approximately $287,000 in expense related to mark to market adjustments on derivative financial instruments.

The increase in net income is due to the increase in total revenues and increase in interest expense described above, in addition to the following factors:

Amortization of deferred financing costs increased approximately $463,000 due to costs associated with Term A/B Trusts, mainly those created in September 2016 and February 2017.

General and administrative expenses increased approximately $1.3 million due to increased salary, benefits and restricted unit award compensation expense, increased approximately $858,000 from additional administrative fees on new investments in 2016 and 2017, offset by a decrease of approximately $287,000 in board and professional expenses.


 

Comparison of the years ended December 31, 2016 and 2015

 

The net decrease in total revenue between 2016 and 2015 is comprised of the following factors:

A decrease of approximately $2.7 million in contingent interest. In 2016, we realized contingent interest of approximately $642,000 from excess cash flow on the Ashley Square and Lake Forest mortgage revenue bondsMRBs and approximately $1.4 million on excess cash proceeds from the sale of the property underlying the Foundation for Affordable Housing property loan. In 2015, we realized approximately $4.8 million of contingent interest from the sale of the Bent Tree and Fairmont Oaks mortgage revenue bonds.MRBs.

A decrease of approximately $2.6 million in recurring investment income from mortgage revenue bondMRB redemptions in 2015 and 2016. We had redemptions and sales of mortgage revenue bondsMRBs totaling approximately $15.0 million at a weighted-average base interest rate of approximately 8.7% in 2016 and approximately $48.9 million at a weighted-average interest rate of approximately 6.6% in 2015. The 2015 sales and redemptions includesinclude approximately $41.0 million of bonds for the SuiteSuites on Paseo that were exchangeexchanged for the deed to the property.

An increase of approximately $4.5 million in recurring investment interest income related mortgage revenue bondMRB acquisitions during 2015 and 2016. We acquired mortgage revenue bondsMRBs totaling approximately $130.6 million at a weighted-average base interest rate of approximately 5.3% in 2016 and approximately $188.1 million at a weighted-average interest rate of approximately 6.2% in 2015. Approximately $110.3 million of the 2016 acquisitions occurred in the fourth quarter.

A decrease of approximately $1.5 million in interest income from the Fairmont Oaks property loan that was paid in full in the fourth quarter of 2015.

The gain on sale of securities for 2016 is from the sale of the Pro Nova 2014-2 mortgage revenue bond.

The net increase in total interest expense between 2016 and 2015 is due to the following factors:

An increase of approximately $2.9 million in expense due to higher outstanding debt balances during 2016.

A decrease of approximately $1.8 million in expense related to market to market adjustments on derivative financial instruments. We recognized a net decrease in expense on the mark to market adjustments of approximately $18,000 during 2016 and a net increase in expense of approximately $1.8 million in 2015.

The decrease in net income from 2015 to 2016 is due to the decrease in total revenues and increase in interest expense described above. In addition, general and administrative expenses increased approximately $1.6 million due to increased salary, benefits and restricted unit award compensation expense and increased approximately $663,000 due to administrative and advisor fees related to the mortgage revenue bonds.MRBs.

Comparison of the years ended December 31, 2015 and 2014

The increase in revenue between 2015 and 2014 is comprised of several factors:

An increase of approximately $4.8 million of contingent interest realized on the sale of the Consolidated VIEs in 2015;

An increase of approximately $1.5 million in note interest received from Fairmont Oaks, a Consolidated VIE, at the date of sale in 2015; and


An increase of approximately $9.8 million in recurring investment interest income related to acquisitions of new mortgage revenue bonds during 2015.

The other income realized on the sale of securities in 2014 of approximately $3.7 million is from the 2014 Lost Creek mortgage revenue bond redemption and the 2014 Autumn Pines mortgage revenue bond sale.

The increase in interest expense is related primarily to additional debt and mark to market adjustments on derivatives. These items contributed increases totaling approximately $3.6 million.

The increase in net income between 2015 and 2014 is due to the items noted above and the following factors:

An increase in administrative expense of approximately $651,000 due to the increase in the mortgage revenue bond portfolio,

As increase in professional fee expense including approximately $368,000 due to the 2015 consent solicitation.

See Item 7, “Results of Operations” and Notes 5 and 2017 to the Company’s consolidated financial statements for additional details.

Public Housing Capital Fund Trust Segment  

The PHC Certificates within this segment consist of custodial receipts evidencing loans made to 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 its Capital Fund Program.

The following table compares total revenues and net income for the PHC Trusts segment for the periods indicated (in thousands):

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

PHC Trusts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

2,888

 

 

$

2,994

 

 

$

(106

)

 

 

-3.5

%

 

$

2,994

 

 

$

3,039

 

 

$

(45

)

 

 

-1.5

%

 

$

2,952

 

 

$

2,888

 

 

$

64

 

 

 

2.2

%

 

$

2,888

 

 

$

2,994

 

 

$

(106

)

 

 

-3.5

%

Total interest expense

 

$

1,350

 

 

$

1,222

 

 

$

128

 

 

 

10.5

%

 

$

1,222

 

 

$

1,295

 

 

$

(73

)

 

 

-5.6

%

 

$

1,350

 

 

$

1,350

 

 

$

-

 

 

 

0.0

%

 

$

1,350

 

 

$

1,222

 

 

$

128

 

 

 

10.5

%

Net income

 

$

1,538

 

 

$

1,758

 

 

$

(220

)

 

 

-12.5

%

 

$

1,758

 

 

$

1,715

 

 

$

43

 

 

 

2.5

%

 

$

840

 

 

$

1,538

 

 

$

(698

)

 

 

-45.4

%

 

$

1,538

 

 

$

1,758

 

 

$

(220

)

 

 

-12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Comparison of the years ended December 31, 2017 and 2016

The total revenues were consistent between 2017 and 2016. Total interest expense was consistent between 2017 and 2016 due to offsetting factors. Interest expense decreased due to the mark to market adjustments on our interest rate swaps, net of cash payments, of approximately $102,000 in 2017, which was offset by increasing interest rates on the related variable rate TOB financings. During 2017, we re-designated the interest rate swaps from the Mortgage Revenue Bond Investments segment to this segment as they are now intended to mitigate interest rate risk for debt financings related to the PHC Certificates.

The decrease in net income is primarily due to an impairment charge of approximately $762,000 recognized in 2017. No such impairment was recognized in 2016.

 

Comparison of the years ended December 31, 2016 and 2015

 

The decrease in total revenue between 2016 and 2015 is due to principal paydowns on the PHC CertificateCertificates totaling approximately $2.0 million during 2016, which resulted in lower interest income.

 

The decrease in net income between 2016 and 2015 is due to lower revenues discussed above and an increase in the average annual interest rate on the variable TOB Trust secured by the PHC Certificates from 2.3% for the year ended December 31, 2015 to 2.6% for the year ended December 31, 2016.

 

Comparison of the years ended December 31, 2015 and 2014Former MBS Securities Investment Segment

 

The slight decrease in total revenues when comparing 2015 to 2014 was the result of the principal reductions of the PHC Certificates owned by us. The slight increase in net income when comparing the same periods was related to less interest expense incurred due to the reduction of approximately $610,000 in related PHC TOB Trust financing.

MBS Securities Investments Segment  

As of December 31, 2015, we owned three state-issued MBS Securities with an aggregate outstanding principal amount of approximately $14.8 million.   In January 2016, we sold its three remaining MBS Securities for approximately $15.0 million, which approximated the amortized cost plus interest. We then collapsed the related three remaining MBS TOB Trusts and paid all obligations in full from the proceeds of the sales.


The following table compares total revenues and net income for the MBS Securities segment for the periods indicated (in thousands):

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

MBS Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

18

 

 

$

226

 

 

$

(208

)

 

 

-92.0

%

 

$

226

 

 

$

1,424

 

 

$

(1,198

)

 

 

-84.1

%

 

$

-

 

 

$

18

 

 

$

(18

)

 

N/A

 

$

18

 

 

$

226

 

 

$

(208

)

 

 

-92.0

%

Total interest expense

 

$

15

 

 

$

158

 

 

$

(143

)

 

 

-90.5

%

 

$

158

 

 

$

404

 

 

$

(246

)

 

 

-60.9

%

 

$

-

 

 

$

15

 

 

$

(15

)

 

N/A

 

$

15

 

 

$

158

 

 

$

(143

)

 

 

-90.5

%

Net income

 

$

52

 

 

$

68

 

 

$

(16

)

 

 

-23.5

%

 

$

68

 

 

$

1,018

 

 

$

(950

)

 

 

-93.3

%

 

$

-

 

 

$

52

 

 

$

(52

)

 

N/A

 

$

52

 

 

$

68

 

 

$

(16

)

 

 

-23.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparison of the years ended December 31, 2017 and 2016

There were no operations in the MBS Securities Investments segment during the year ended December 31, 2017.

 

Comparison of the years ended December 31, 2016 and 2015

 

The decreases in total revenues and net income are due to the sale of the remaining MBS Securities in January 2016.

Comparison of the years ended December 31, 2015 and 2014

The decrease in total revenues and net income when comparing 2015 and 2014 resulted from the change in prospective premium amortization of MBS Securities and the sale of approximately $24.6 million par value of the MBS Securities during 2014.

MF Properties Segment  

At December 31, 2017, the Partnership owns the Jade Park and Suites on Paseo MF Properties directly. The Partnership also owns, through the Greens Hold Co, a 100% interest in The 50/50 MF Property. These MF Properties contain a total of 1,013 rental units.

At December 31, 2016, our wholly-owned subsidiary heldthe Partnership owned the Jade Park and Suites on Paseo MF Properties directly. The Partnership also owned, through the Greens Hold Co, 100% ownership interests in four MF Properties and a 99% limited partner position in one limited partnership and 100% member positions in four limited liability companies that own the MF Properties. We owned two of the MF Properties directly.Northern View. These MF Properties contain a total of 2,004 rental units.


At December 31, 2015, our wholly-owned subsidiary held a 99% limited partner position in one limited partnership and 100% member positions in six limited liability companies that own the MF Properties. We owned one MF Property directly. These MF Properties contain a total of 2,217 rental units.

The following table compares total revenues, other income, total interest expense and net income for the MF Properties segment for the periods indicated (in thousands):

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

MF Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

17,404

 

 

$

17,789

 

 

$

(385

)

 

 

-2.2

%

 

$

17,789

 

 

$

14,251

 

 

$

3,538

 

 

 

24.8

%

 

$

13,678

 

 

$

17,404

 

 

$

(3,726

)

 

 

-21.4

%

 

$

17,404

 

 

$

17,789

 

 

$

(385

)

 

 

-2.2

%

Other income - Gain on

sale of MF Properties

 

 

14,072

 

 

 

4,599

 

 

 

9,473

 

 

 

206.0

%

 

 

4,599

 

 

 

-

 

 

 

4,599

 

 

 

100.0

%

Gain on sale of

real estate assets, net

 

$

17,753

 

 

$

14,072

 

 

$

3,681

 

 

 

26.2

%

 

$

14,072

 

 

$

4,599

 

 

$

9,473

 

 

 

206.0

%

Total interest expense

 

 

2,201

 

 

 

2,659

 

 

 

(458

)

 

 

-17.2

%

 

 

2,659

 

 

 

2,320

 

 

 

339

 

 

 

14.6

%

 

$

2,100

 

 

$

2,201

 

 

$

(101

)

 

 

-4.6

%

 

$

2,201

 

 

$

2,659

 

 

$

(458

)

 

 

-17.2

%

Net income

 

 

8,444

 

 

 

2,967

 

 

 

5,477

 

 

 

184.6

%

 

 

2,967

 

 

 

(933

)

 

 

3,900

 

 

 

-418.0

%

 

$

9,668

 

 

$

8,444

 

 

$

1,224

 

 

 

14.5

%

 

$

8,444

 

 

$

2,967

 

 

$

5,477

 

 

 

184.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparison of the years ended December 31, 2017 and 2016

The net decrease in total revenue between 2017 and 2016 is comprised of the following factors:

A decrease of approximately $4.4 million in revenue due to sales of the Northern View in March 2017, sales of the Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017, and sales of the Arboretum and Woodland Park in 2016;

An increase of approximately $1.0 million in revenue due to the acquisition Jade Park in September 2016;

A decrease of approximately $458,000 in revenue from declining occupancy at The 50/50 MF Property. The decline was due to low occupancy during the 2016-2017 academic year. Physical occupancy is approximately 97% at December 31, 2017 as compared to 72% at December 31, 2016, so the Partnership expects increasing revenues at this property going forward; and

An increase of approximately $165,000 in other income for due diligence services provided in connection with the sales of MF properties during 2017. There were no such income items recognized in 2016.

The gains on sale of MF Properties in 2017 consists primarily of gains of approximately $7.2 million, $2.6 million, $5.2 million and $2.8 million from the sales of Northern View, Residences of Weatherford, Residences of DeCordova and Eagle Village, respectively. The gains on sale of MF Properties in 2016 consists of gains of approximately $12.4 million and $1.7 million from the sales of the Arboretum and Woodland Park, respectively.

Total interest expense between 2017 and 2016 decreased slightly due to settlement of mortgages payable at Residences of Weatherford, Residences of DeCordova, and Eagle Village upon sale of the properties in November 2017.

The net increase in net income is due to the changes in revenues, other income and interest expense described above. In addition, the following changes further contributed to the change in net income:

Increase of approximately $652,000 in real estate operating expenses and of approximately $330,000 in depreciation and amortization expenses related to the acquisition of Jade Park in September of 2016;

Decreases of approximately $2.3 million in real estate operating expenses and approximately $1.5 million in depreciation and amortization expenses related to the sales of Northern View in March 2017, sales of the Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017, and sales of the Arboretum and Woodland Park in 2016;

An increase of approximately $628,000 in real estate operating expenses at The 50/50 and Suites on Paseo MF Properties. The increase at The 50/50 is related to one-time expenses incurred in 2017 and not expected to recur in future periods. The increase at Suites on Paseo relates primarily to a one-time refund of real estate taxes in 2016 that did not recur in 2017; and

An increase of approximately $1.1 million in income tax expense related to MF property sales and operations in the Greens Hold Co.


 

Comparison of the years ended December 31, 2016 and 2015

 

The net decrease in total revenue between 2016 and 2015 is comprised of the following factors:

A decrease of approximately $4.0 million in revenue due to sales of the Arboretum and Woodland Park in 2016 and Glynn Place and the Colonial in 2015.

An increase of approximately $3.4 million in revenue due to the acquisition of the Suites on Paseo in 2015 and Jade Park in 2016; and

An increase of approximately $156,000 in revenue from improving operations at existing MF Properties.

 

The gain on sale of MF Properties in 2016 consists of gains of approximately $12.4 million and $1.7 million from the sales of the Arboretum and Woodland Park, respectively. The gain on sale of MF Properties in 2015 consists of gains of approximately $3.4 million and $1.2 million from the sales of the Colonial and Glynn Place in 2015, respectively.

 

The net increase in total interest expense between 2016 and 2015 is due primarily to increases in total outstanding debt during the year, which caused an increase in expense of approximately $461,000.

 


The net increase in net income is due to the changes in revenues, other income and interest expense described above. In addition, the following changes to general real estate operating expenses contributed to the change in net income:

An increase of approximately $1.7 million in expenses related to the acquisitions of the Suite on Paseo in September of 2015 and Jade Park in September of 2016;

A decrease of approximately $2.0 million in expenses related to the sales of the Arboretum and Woodland Park in 2016 and sales of the Colonial and Glynn Place in 2015; and

A decrease of approximately $470,000 in expenses related to tax increment financing proceeds received in 2016 that are accounted for as a reduction in real estate tax expense.

 

Comparison of the years ended December 31, 2015 and 2014

During 2015 we included the 50/50 MF Property that began leasing in August 2014, and the Suites on Paseo that became an MF Property in September 2015. We did not include Glynn Place and The Colonial beyond their August and May 2015 sale dates, respectively. The increase in net income for 2015, as compared to 2014 is attributable, for the most part, to a gain of approximately $4.6 million reported on the sale of Glynn Place and The Colonial in 2015.  Excluding these 2015 gains the majority of the increase in the loss 2015 as compared to 2014 was attributable to the property operations after the completion of The 50/50 MF Property in August 2014 and the Suites on Paseo was added to the MF Properties in September 2015. During 2015, The 50/50 MF Property began to accrue real estate taxes and the Suites on Paseo incurred one time acquisition and accrued expenses.  

Other Investments Segment

Due to the increased investments in ATAX Vantage Holdings, LLC, the Partnership added a new segment, Other Investments, during the second quarter of 2016. The Other Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which holds noncontrolling equity investments in certain multifamily projects and has issued property notes receivableloans due from other multifamily projects.

The following table compares total revenues and net income for the Other Investments segment for the periods indicated (in thousands):

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

Other Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,995

 

 

$

171

 

 

$

1,824

 

 

 

1066.7

%

 

$

171

 

 

$

-

 

 

$

171

 

 

N/A

 

$

4,652

 

 

$

1,995

 

 

$

2,657

 

 

 

133.2

%

 

$

1,995

 

 

$

171

 

 

$

1,824

 

 

 

1066.7

%

Net income

 

$

1,995

 

 

$

171

 

 

$

1,824

 

 

 

1066.7

%

 

$

171

 

 

$

-

 

 

$

171

 

 

N/A

 

$

4,645

 

 

$

1,995

 

 

$

2,650

 

 

 

132.8

%

 

$

1,995

 

 

$

171

 

 

$

1,824

 

 

 

1066.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Comparison of the years ended December 31, 2017 and 2016

The increases in total revenue and net income between 2017 and 2016 is comprised of the following factors:

An increase of approximately $2.4 million in recurring investment interest income related to additional investments in unconsolidated entities during 2017 and 2016. We made investments in unconsolidated entities of totaling approximately $17.2 million and $18.8 million in 2017 and 2016, respectively; and

An increase of approximately $273,000 in recurring investment interest income related to additional advances on the Vantage at Brooks, LLC and Vantage at New Braunfels, LLC property loans during 2017 and 2016.

 

Comparison of the years ended December 31, 2016 and 2015

 

The first investments in this segment were made in the fourth quarter of 2015. The increase in total revenues and net income from 2015 to 2016 are due to additional investments in this segment, which total approximately $34.5 million at December 31, 2016.

 

Comparison of the years ended December 31, 2015 and 2014

The first investments in this segment were made in the fourth quarter of 2015 and there were no operations during 2014.

Discontinued Operations  

The sales of the Consolidated VIEs were closed in the fourth quarter of 2015 with the gains and results of operations of the Consolidated VIEs reported as part of the discontinued operations in net income for all periods presented. The Company reported income from discontinued operations of approximately $3.7 million, inclusive of gains of sale of Consolidated VIEs of approximately $3.2 million, related to the sale of the Consolidated VIEs as discontinued operations for the year ended December 31, 2015. No net income or loss from these properties operations or sale accrued to the Unitholders or the General Partner during 2015.


The following table compares netThere was no income from discontinued operations reported for the periods indicated:years ended December 31, 2017 and 2016.

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations (including gains on sale of Consolidated VIEs of

   approximately $3.2 million for 2015)

 

$

-

 

 

$

3,721

 

 

$

53

 

Debt Financing

The following table providessummarizes the details related to the totalPartnership’s Debt Financing, net of deferred financing costs, at December 31, 20162017 and 2015:

 

 

Outstanding Debt

Financings on

December 31, 2016, net

 

 

Restricted

Cash

 

 

Years

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

 

Jul 2017 - Jul 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

171,778,950

 

 

 

1,373,695

 

 

2016

 

(1)

 

(1)

 

(1)

 

 

(1)

 

 

(1)

 

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 (2)

 

 

91,768,081

 

 

 

170,988

 

 

2014

 

July 2019

 

Weekly

 

 

0.75

%

 

 

1.62%

 

 

 

2.37%

 

Variable - TEBS III (2)

 

 

82,089,312

 

 

 

3,495,592

 

 

2015

 

July 2020

 

Weekly

 

 

0.75

%

 

 

1.39%

 

 

 

2.14%

 

Total Debt Financings

 

$

495,383,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See table below for a summary of terms for the individual Term A/B Trust securitizations

 

(2) Facility fees are variable

 

 

 

Outstanding Debt

Financings on

December 31,

2015, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TOB Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

$

160,582,124

 

 

$

1,930,027

 

 

(3)

 

(3)

 

(3)

 

(3)

 

 

(3)

 

 

(3)

 

Variable - TOB

 

 

55,930,000

 

 

 

-

 

 

2012

 

April 2016 - June 2016

 

Weekly

 

0.16 - 0.68%

 

 

0.94 - 1.62%

 

 

1.1 - 2.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TEBS I

 

 

60,735,743

 

 

 

364,637

 

 

2010

 

September 2017

 

Weekly

 

 

0.04%

 

 

 

1.91%

 

 

 

1.95%

 

Variable - TEBS II (4)

 

 

92,280,069

 

 

 

163,418

 

 

2014

 

July 2019

 

Weekly

 

 

0.02%

 

 

 

1.42%

 

 

 

1.44%

 

Variable - TEBS III (4)

 

 

81,968,780

 

 

 

4,843,625

 

 

2015

 

July 2020

 

Weekly

 

 

0.02%

 

 

 

1.26%

 

 

 

1.28%

 

Total Debt Financings

 

$

451,496,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) See table below for a summary of terms for the individual Term TOB Trust securitizations

 

(4) Facility fees are variable

 

The fixed Term TOB Financings at December 31, 2016 are secured by the mortgage revenue bonds for Live 929 Apartments and Pro Nova 2014-1. The variable TOB Financings at December 31, 2016 are secured by three PHC Certificates.


The following table summarizes the individual Term A/B Trust securitizations at December 31, 2016:

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing at

December 31, 2016, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Willow Run

 

$

11,564,852

 

 

$

-

 

 

2016

 

September 2026

 

 

3.64

%

Columbia Gardens

 

 

11,565,068

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Little York

 

 

11,301,031

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Williamscrest

 

 

17,504,186

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Gulfgate

 

 

16,133,987

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Companion at Thornhill Apartment

 

 

9,666,656

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Seasons at Simi Valley Apartments

 

 

3,678,770

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Sycamore Walk

 

 

3,050,786

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Decatur-Angle Apartments

 

 

21,387,126

 

 

 

755,489

 

 

2016

 

September 2026

 

 

3.64

%

Berrendo Square Apartments

 

 

5,409,361

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Laurel Crossings Apartments

 

 

6,378,482

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Bruton Apartments

 

 

15,258,925

 

 

 

618,206

 

 

2016

 

September 2026

 

 

3.64

%

15 West Apartments

 

 

8,366,804

 

 

 

-

 

 

2016

 

December 2026

 

 

3.64

%

Oaks at Georgetown A

 

 

11,709,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace A

 

 

6,549,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Oaks at Georgetown B

 

 

5,229,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace B

 

 

7,024,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Total A/B Trust

   Financing\ Weighted

   Average Period End Rate

 

$

171,778,950

 

 

 

 

 

 

 

 

 

 

 

3.80

%

 

 

Outstanding Debt

Financings on

December 31, 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

 

$

46,787,036

 

 

$

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

279,533,565

 

 

 

-

 

 

2016 - 2017

 

June 2018 - November 2027

 

N/A

 

N/A

 

 

N/A

 

 

3.64% - 4.52%

 

Variable - TOB

 

 

38,130,000

 

 

 

850,327

 

 

2012

 

May 2018

 

Weekly

 

2.24 - 2.29%

 

 

1.67%

 

 

3.91 - 3.96%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TEBS I

 

 

55,468,000

 

 

 

372,222

 

 

2010

 

September 2020

 

Weekly

 

1.79%

 

 

1.85%

 

 

3.64%

 

Variable - TEBS II (1)

 

 

81,003,688

 

 

 

176,685

 

 

2014

 

July 2019

 

Weekly

 

1.77%

 

 

1.39%

 

 

3.16%

 

Variable - TEBS III (1)

 

 

57,406,058

 

 

 

57,364

 

 

2015

 

July 2020

 

Weekly

 

1.77%

 

 

1.16%

 

 

2.93%

 

Total Debt Financings

 

$

558,328,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Facility fees have a variable component.

 

 

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

 

 

171,778,950

 

 

 

1,373,695

 

 

2016

 

March 2017 - December 2026

 

N/A

 

N/A

 

 

N/A

 

 

3.64% - 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 have a variable component.

The variable TOB Financings at December 31, 20152017 and 2016 are secured by three PHC CertificatesTrust Certificates.

The following table summarizes the individual Term TOB and three MBS Securities.Term A/B Trust securitizations at December 31, 2017:

 

 

Outstanding Financing at

December 31, 2017, net

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Fixed - Term TOB Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Live 929

 

$

37,777,036

 

 

2014

 

October 2019

 

 

4.39

%

Pro Nova 1

 

 

9,010,000

 

 

2014

 

October 2019

 

 

4.01

%

Total Fixed Term TOB

   Financing\ Weighted

   Average Period End Rate

 

$

46,787,036

 

 

 

 

 

 

 

4.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Term A/B Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Willow Run

 

$

10,029,289

 

 

2016

 

September 2026

 

 

3.64

%

Columbia Gardens

 

 

10,172,857

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Little York

 

 

11,315,538

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Williamscrest

 

 

17,526,516

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Gulfgate

 

 

16,154,584

 

 

2016

 

September 2026

 

 

3.64

%

Companion at Thornhill Apartment

 

 

9,608,733

 

 

2016

 

September 2026

 

 

3.64

%

Seasons at Simi Valley Apartments

 

 

3,675,323

 

 

2016

 

September 2026

 

 

3.64

%

Sycamore Walk

 

 

3,054,841

 

 

2016

 

September 2026

 

 

3.64

%

Decatur-Angle Apartments

 

 

21,276,657

 

 

2016

 

September 2026

 

 

3.64

%

Heights at 515

 

 

5,380,814

 

 

2016

 

September 2026

 

 

3.64

%

Crossing at 1415

 

 

6,344,418

 

 

2016

 

September 2026

 

 

3.64

%

Bruton Apartments

 

 

15,199,181

 

 

2016

 

September 2026

 

 

3.64

%

15 West Apartments

 

 

8,326,731

 

 

2016

 

December 2026

 

 

3.64

%

San Vicente - Series A

 

 

3,112,976

 

 

2017

 

February 2022

 

 

3.89

%

San Vicente - Series B

 

 

1,545,930

 

 

2017

 

June 2018

 

 

3.76

%

Las Palmas - Series A

 

 

1,507,389

 

 

2017

 

February 2022

 

 

3.89

%

Las Palmas - Series B

 

 

1,494,702

 

 

2017

 

June 2018

 

 

3.76

%

The Village at Madera - Series A

 

 

2,746,364

 

 

2017

 

February 2022

 

 

3.89

%

The Village at Madera - Series B

 

 

1,455,570

 

 

2017

 

July 2018

 

 

3.76

%

Harmony Court Bakersfield - Series A

 

 

3,322,157

 

 

2017

 

February 2022

 

 

3.89

%

Summerhill - Series A

 

 

5,730,185

 

 

2017

 

February 2022

 

 

3.89

%

Summerhill - Series B

 

 

2,855,809

 

 

2017

 

July 2018

 

 

3.76

%

Courtyard - Series A

 

 

9,131,896

 

 

2017

 

February 2022

 

 

3.89

%

Courtyard - Series B

 

 

5,272,090

 

 

2017

 

July 2018

 

 

3.76

%

Seasons Lakewood - Series A

 

 

6,555,646

 

 

2017

 

February 2022

 

 

3.89

%

Seasons Lakewood - Series B

 

 

4,453,076

 

 

2017

 

August 2018

 

 

3.76

%

Seasons San Juan Capistrano - Series A

 

 

11,047,869

 

 

2017

 

February 2022

 

 

3.89

%

Seasons San Juan Capistrano - Series B

 

 

5,564,539

 

 

2017

 

August 2018

 

 

3.76

%

Avistar at Wood Hollow - Series A

 

 

26,838,000

 

 

2017

 

February 2027

 

 

4.46

%

Avistar at Wilcrest - Series A

 

 

3,168,088

 

 

2017

 

February 2027

 

 

4.46

%

Avistar at Copperfield - Series A

 

 

8,414,834

 

 

2017

 

February 2027

 

 

4.46

%

Oaks at Georgetown - Series A

 

 

11,087,478

 

 

2017

 

March 2022

 

 

3.89

%

Oaks at Georgetown - Series B

 

 

4,686,120

 

 

2017

 

August 2018

 

 

3.76

%

Harmony Terrace - Series A

 

 

6,199,955

 

 

2017

 

March 2022

 

 

3.89

%

Harmony Terrace - Series B

 

 

6,284,318

 

 

2017

 

August 2018

 

 

3.76

%

Village at River's Edge

 

 

8,993,092

 

 

2017

 

November 2027

 

 

4.52

%

Total Fixed A/B Trust

   Financing\ Weighted

   Average Period End Rate

 

$

279,533,565

 

 

 

 

 

 

 

3.85

%


The following table summarizes the individual fixed rate Term TOB and Term A/B Trust securitizations at December 31, 2015:2016:

 

Term TOB Trusts Securitization

 

Outstanding Term TOB

Trust Financing at

December 31, 2015,  net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Decatur Angle

 

$

22,847,450

 

 

$

1,078,823

 

 

2014

 

October 2016

 

 

4.26

%

 

Outstanding Financing at

December 31, 2016, net

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Fixed - Term TOB Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Live 929

 

 

37,935,981

 

 

 

-

 

 

2014

 

July 2019

 

 

4.39

%

 

$

37,851,960

 

 

2014

 

July 2019

 

 

4.39

%

Pro Nova 1

 

 

9,008,739

 

 

2014

 

July 2017

 

 

4.01

%

Total Fixed Term TOB

Financing\ Weighted

Average Period End Rate

 

$

46,860,699

 

 

 

 

 

 

 

4.31

%

 

 

 

 

 

 

 

 

 

 

 

 

Term A/B Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Willow Run

 

$

11,564,852

 

 

2016

 

September 2026

 

 

3.64

%

Columbia Gardens

 

 

11,565,068

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Little York

 

 

11,301,031

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Williamscrest

 

 

17,504,186

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Gulfgate

 

 

16,133,987

 

 

2016

 

September 2026

 

 

3.64

%

Companion at Thornhill Apartment

 

 

9,666,656

 

 

2016

 

September 2026

 

 

3.64

%

Seasons at Simi Valley Apartments

 

 

3,678,770

 

 

2016

 

September 2026

 

 

3.64

%

Sycamore Walk

 

 

3,050,786

 

 

2016

 

September 2026

 

 

3.64

%

Decatur-Angle Apartments

 

 

21,387,126

 

 

2016

 

September 2026

 

 

3.64

%

Heights at 515

 

 

5,409,361

 

 

2016

 

September 2026

 

 

3.64

%

Crossing at 1415

 

 

6,378,482

 

 

2016

 

September 2026

 

 

3.64

%

Bruton Apartments

 

 

17,246,899

 

 

 

851,204

 

 

2014

 

July 2017

 

 

4.51

%

 

 

15,258,925

 

 

2016

 

September 2026

 

 

3.64

%

Pro Nova 2014-1

 

 

9,006,899

 

 

 

-

 

 

2014

 

July 2017

 

 

4.01

%

Pro Nova 2014-2

 

 

8,371,899

 

 

 

-

 

 

2014

 

July 2017

 

 

4.01

%

Concord at Gulfgate

 

 

14,936,685

 

 

 

-

 

 

2015

 

February 2018

 

 

2.76

%

Concord at Little York

 

 

11,231,685

 

 

 

-

 

 

2015

 

February 2018

 

 

2.76

%

Concord at Williamcrest

 

 

15,606,685

 

 

 

-

 

 

2015

 

February 2018

 

 

2.76

%

Columbia Gardens

 

 

11,699,209

 

 

 

-

 

 

2015

 

December 2017

 

 

2.76

%

Willow Run

 

 

11,698,732

 

 

 

-

 

 

2015

 

December 2017

 

 

2.76

%

Total TOB Trust

Financing\Weighted

Average Period End Rate

 

$

160,582,124

 

 

 

 

 

 

 

 

 

 

 

3.68

%

15 West Apartments

 

 

8,366,804

 

 

2016

 

December 2026

 

 

3.64

%

Oaks at Georgetown A

 

 

11,709,479

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace A

 

 

6,549,479

 

 

2016

 

March 2017

 

 

4.56

%

Oaks at Georgetown B

 

 

5,229,479

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace B

 

 

7,024,479

 

 

2016

 

March 2017

 

 

4.56

%

Total Fixed A/B Trust

Financing\ Weighted

Average Period End Rate

 

$

171,778,950

 

 

 

 

 

 

 

3.80

%

The Partnership is required to meet certain covenants under the Master Trust Agreement. At December 31, 2017, the most restrictive covenant requiring that cash available to distribute plus interest expense for the trailing twelve months must be at least twice the trailing twelve-month interest expense. On December 31, 2017, the Partnership was in compliance with all covenants. If the Partnership were to be out of compliance with any of these covenants, it would trigger a termination event of the financing facilities.

See Item 7a, “Quantitative and Qualitative Disclosures about Market Risk” and Note 17 to the Company’s consolidated financial statements for additional details.

Discussion of the Residential Properties Securing our Mortgage Revenue Bond Holdings and MF Properties as of December 31, 2017, 2016 2015 and 20142015

The following tables outline information regarding the Residential Properties on which we hold mortgage revenue bondsMRBs as investments. The tables also contain information about the MF Properties, but do not include information on the two Consolidated VIEs that have been sold and reported as discontinued operations for all periods presented. The narrative discussion that follows provides a brief operating analysis of each category for the years ended December 31, 2017, 2016 2015 and 2014.2015.


Non-Consolidated Properties - Stabilized

The owners of the following properties either do not meet the definition of a VIE and/or we have evaluated and determined we are not the primary beneficiary of the VIE.  As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis.  For the year ended December 31, 2016,2017, these Residential Properties have met the stabilization criteria (see footnote 3 below the table). Debt service on our mortgage revenue bondsMRBs for the non-consolidated stabilized properties was current on December 31, 2016.2017. The amounts presented below were obtained from records provided by the property owners and their related property management service providers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

Number

 

 

Physical Occupancy (1) at December 31,

 

 

For the Year Ended

December 31,

 

 

 

 

of Units at

December 31,

 

 

Physical Occupancy (1) at December 31,

 

 

For the Years Ended December 31,

 

Property Name

 

State

 

of Units

 

 

2016

 

 

2015

 

 

2014

 

 

2016

 

 

2015

 

 

2014

 

 

State

 

2017

 

 

2017

 

 

2016

 

 

2015

 

 

2017

 

 

2016

 

 

2015

 

Non-Consolidated Properties-Stabilized (3)

Non-Consolidated Properties-Stabilized (3)

 

 

 

 

 

Non-Consolidated Properties-Stabilized (3)

 

 

 

 

 

Glenview Apartments (5)

 

CA

 

 

88

 

 

 

98

%

 

 

100

%

 

n/a

 

 

 

99

%

 

 

99

%

 

n/a

 

 

CA

 

 

88

 

 

 

97

%

 

 

98

%

 

 

100

%

 

 

97

%

 

 

99

%

 

 

99

%

Harden Ranch

 

CA

 

 

100

 

 

 

98

%

 

 

96

%

 

 

99

%

 

 

99

%

 

 

98

%

 

 

98

%

 

CA

 

 

100

 

 

 

100

%

 

 

98

%

 

 

96

%

 

 

98

%

 

 

99

%

 

 

98

%

Montclair Apartments (5)

 

CA

 

 

80

 

 

 

99

%

 

 

96

%

 

n/a

 

 

 

99

%

 

 

100

%

 

n/a

 

Montclair Apartments

 

CA

 

 

80

 

 

 

99

%

 

 

99

%

 

 

96

%

 

 

99

%

 

 

99

%

 

 

100

%

Santa Fe Apartments (5)

 

CA

 

 

89

 

 

 

100

%

 

 

99

%

 

n/a

 

 

 

104

%

 

 

96

%

 

n/a

 

 

CA

 

 

89

 

 

 

98

%

 

 

100

%

 

 

99

%

 

 

102

%

 

 

104

%

 

 

96

%

Seasons at Simi Valley (5)

 

CA

 

 

69

 

 

 

100

%

 

 

100

%

 

n/a

 

 

 

135

%

 

 

137

%

 

n/a

 

 

CA

 

 

69

 

 

 

99

%

 

 

100

%

 

 

100

%

 

 

125

%

 

 

135

%

 

 

137

%

Sycamore Walk (5)

 

CA

 

 

112

 

 

 

100

%

 

 

98

%

 

n/a

 

 

 

101

%

 

n/a

 

 

n/a

 

 

CA

 

 

112

 

 

 

100

%

 

 

100

%

 

 

98

%

 

 

98

%

 

 

101

%

 

n/a

 

Tyler Park Townhomes

 

CA

 

 

88

 

 

 

99

%

 

 

98

%

 

 

99

%

 

 

99

%

 

 

99

%

 

 

99

%

 

CA

 

 

88

 

 

 

97

%

 

 

99

%

 

 

98

%

 

 

97

%

 

 

99

%

 

 

99

%

Westside Village Market

 

CA

 

 

81

 

 

 

99

%

 

 

100

%

 

 

96

%

 

 

101

%

 

 

101

%

 

 

99

%

 

CA

 

 

81

 

 

 

100

%

 

 

99

%

 

 

100

%

 

 

100

%

 

 

101

%

 

 

101

%

Lake Forest Apartments

 

FL

 

 

240

 

 

 

95

%

 

 

97

%

 

 

95

%

 

 

88

%

 

 

92

%

 

 

87

%

 

FL

 

 

240

 

 

 

90

%

 

 

95

%

 

 

97

%

 

 

86

%

 

 

88

%

 

 

92

%

Ashley Square Apartments(7)

 

IA

 

 

144

 

 

 

92

%

 

 

95

%

 

 

94

%

 

 

91

%

 

 

93

%

 

 

91

%

 

IA

 

n/a

 

 

n/a

 

 

 

92

%

 

 

95

%

 

n/a

 

 

 

91

%

 

 

93

%

Brookstone Apartments

 

IL

 

 

168

 

 

 

98

%

 

 

99

%

 

 

98

%

 

 

94

%

 

 

94

%

 

 

91

%

 

IL

 

 

168

 

 

 

99

%

 

 

98

%

 

 

99

%

 

 

98

%

 

 

94

%

 

 

94

%

Copper Gate

 

IN

 

 

128

 

 

 

98

%

 

 

96

%

 

 

95

%

 

 

96

%

 

 

95

%

 

 

96

%

 

IN

 

 

128

 

 

 

96

%

 

 

98

%

 

 

96

%

 

 

95

%

 

 

96

%

 

 

95

%

Renaissance Gateway

 

LA

 

 

208

 

 

 

97

%

 

 

96

%

 

 

93

%

 

 

103

%

 

 

94

%

 

 

55

%

 

LA

 

 

208

 

 

 

96

%

 

 

97

%

 

 

96

%

 

 

96

%

 

 

103

%

 

 

94

%

Live 929 Apartments

 

MD

 

 

575

 

 

 

85

%

 

 

92

%

 

 

97

%

 

 

86

%

 

 

89

%

 

 

90

%

 

MD

 

 

575

 

 

 

90

%

 

 

85

%

 

 

92

%

 

 

85

%

 

 

86

%

 

 

89

%

Woodlynn Village

 

MN

 

 

59

 

 

 

98

%

 

 

100

%

 

 

86

%

 

 

99

%

 

 

97

%

 

 

91

%

 

MN

 

 

59

 

 

 

98

%

 

 

98

%

 

 

100

%

 

 

98

%

 

 

99

%

 

 

97

%

Greens of Pine Glen Apartments

 

NC

 

 

168

 

 

 

91

%

 

 

96

%

 

 

93

%

 

 

88

%

 

 

90

%

 

 

86

%

 

NC

 

 

168

 

 

 

97

%

 

 

91

%

 

 

96

%

 

 

90

%

 

 

88

%

 

 

90

%

Silver Moon

 

NM

 

 

151

 

 

 

91

%

 

 

95

%

 

n/a

 

 

 

84

%

 

 

73

%

 

n/a

 

 

NM

 

 

151

 

 

 

87

%

 

 

91

%

 

 

95

%

 

 

86

%

 

 

84

%

 

 

73

%

Ohio Properties (4)

 

OH

 

 

362

 

 

 

93

%

 

 

96

%

 

 

96

%

 

 

93

%

 

 

95

%

 

 

94

%

 

OH

 

 

362

 

 

 

99

%

 

 

93

%

 

 

96

%

 

 

94

%

 

 

93

%

 

 

95

%

Bridle Ridge Apartments

 

SC

 

 

152

 

 

 

99

%

 

 

99

%

 

 

98

%

 

 

96

%

 

 

98

%

 

 

96

%

 

SC

 

 

152

 

 

 

99

%

 

 

99

%

 

 

99

%

 

 

96

%

 

 

96

%

 

 

98

%

Companion at Thornhill Apartments (5)

 

SC

 

 

178

 

 

 

95

%

 

n/a

 

 

n/a

 

 

 

83

%

 

n/a

 

 

n/a

 

Columbia Gardens (5)

 

SC

 

 

188

 

 

 

98

%

 

 

73

%

 

 

86

%

 

 

96

%

 

 

75

%

 

n/a

 

Companion at Thornhill Apartments

 

SC

 

 

178

 

 

 

99

%

 

 

95

%

 

n/a

 

 

 

87

%

 

 

83

%

 

n/a

 

Cross Creek Apartments

 

SC

 

 

144

 

 

 

97

%

 

 

94

%

 

 

94

%

 

 

95

%

 

 

92

%

 

 

88

%

 

SC

 

 

144

 

 

 

96

%

 

 

97

%

 

 

94

%

 

 

93

%

 

 

95

%

 

 

92

%

Palms at Premier Park

 

SC

 

 

240

 

 

 

94

%

 

 

93

%

 

 

95

%

 

 

82

%

 

 

94

%

 

 

80

%

 

SC

 

 

240

 

 

 

94

%

 

 

94

%

 

 

93

%

 

 

87

%

 

 

82

%

 

 

94

%

Village at River's Edge (6)

 

SC

 

 

124

 

 

 

100

%

 

n/a

 

 

n/a

 

 

 

100

%

 

n/a

 

 

n/a

 

Willow Run (5)

 

SC

 

 

200

 

 

 

98

%

 

 

74

%

 

 

92

%

 

 

97

%

 

 

74

%

 

n/a

 

Arbors of Hickory Ridge

 

TN

 

 

348

 

 

 

86

%

 

 

87

%

 

 

93

%

 

 

81

%

 

 

85

%

 

 

86

%

 

TN

 

 

348

 

 

 

94

%

 

 

86

%

 

 

87

%

 

 

81

%

 

 

81

%

 

 

85

%

Avistar at Chase Hill

 

TX

 

 

232

 

 

 

85

%

 

 

89

%

 

 

90

%

 

 

76

%

 

 

83

%

 

 

75

%

Avistar at Chase Hill (7)

 

TX

 

n/a

 

 

n/a

 

 

 

85

%

 

 

89

%

 

n/a

 

 

 

76

%

 

 

83

%

Avistar at the Crest

 

TX

 

 

200

 

 

 

95

%

 

 

96

%

 

 

92

%

 

 

81

%

 

 

87

%

 

 

82

%

 

TX

 

 

200

 

 

 

91

%

 

 

95

%

 

 

96

%

 

 

78

%

 

 

81

%

 

 

87

%

Avistar at the Oaks

 

TX

 

 

156

 

 

 

94

%

 

 

91

%

 

 

91

%

 

 

86

%

 

 

83

%

 

 

67

%

 

TX

 

 

156

 

 

 

93

%

 

 

94

%

 

 

91

%

 

 

86

%

 

 

86

%

 

 

83

%

Avistar in 09

 

TX

 

 

133

 

 

 

92

%

 

 

95

%

 

 

96

%

 

 

85

%

 

 

87

%

 

 

81

%

 

TX

 

 

133

 

 

 

93

%

 

 

92

%

 

 

95

%

 

 

86

%

 

 

85

%

 

 

87

%

Avistar on the Boulevard

 

TX

 

 

344

 

 

 

89

%

 

 

92

%

 

 

95

%

 

 

81

%

 

 

82

%

 

 

79

%

 

TX

 

 

344

 

 

 

90

%

 

 

89

%

 

 

92

%

 

 

79

%

 

 

81

%

 

 

82

%

Avistar on the Hills

 

TX

 

 

129

 

 

 

95

%

 

 

95

%

 

 

95

%

 

 

89

%

 

 

89

%

 

 

80

%

 

TX

 

 

129

 

 

 

95

%

 

 

95

%

 

 

95

%

 

 

87

%

 

 

89

%

 

 

89

%

Bella Vista Apartments

 

TX

 

 

144

 

 

 

92

%

 

 

96

%

 

 

98

%

 

 

94

%

 

 

93

%

 

 

87

%

 

TX

 

 

144

 

 

 

92

%

 

 

92

%

 

 

96

%

 

 

91

%

 

 

94

%

 

 

93

%

Bruton Apartments (5)

 

TX

 

 

264

 

 

 

97

%

 

n/a

 

 

n/a

 

 

 

42

%

 

n/a

 

 

n/a

 

Concord at Gulfgate (5)

 

TX

 

 

288

 

 

 

98

%

 

 

75

%

 

n/a

 

 

 

86

%

 

 

74

%

 

n/a

 

Concord at Little York (5)

 

TX

 

 

276

 

 

 

98

%

 

 

67

%

 

n/a

 

 

 

81

%

 

 

67

%

 

n/a

 

Concord at Williamcrest (5)

 

TX

 

 

288

 

 

 

95

%

 

 

73

%

 

n/a

 

 

 

84

%

 

 

71

%

 

n/a

 

Decatur Angle (5)

 

TX

 

 

302

 

 

 

95

%

 

n/a

 

 

n/a

 

 

 

69

%

 

n/a

 

 

n/a

 

Heritage Square Apartments (5)

 

TX

 

 

204

 

 

 

95

%

 

 

91

%

 

n/a

 

 

 

83

%

 

 

58

%

 

n/a

 

Bruton Apartments

 

TX

 

 

264

 

 

 

85

%

 

 

97

%

 

n/a

 

 

 

86

%

 

 

42

%

 

n/a

 

Concord at Gulfgate

 

TX

 

 

288

 

 

 

93

%

 

 

98

%

 

 

75

%

 

 

88

%

 

 

86

%

 

 

74

%

Concord at Little York

 

TX

 

 

276

 

 

 

97

%

 

 

98

%

 

 

67

%

 

 

89

%

 

 

81

%

 

 

67

%

Concord at Williamcrest

 

TX

 

 

288

 

 

 

97

%

 

 

95

%

 

 

73

%

 

 

88

%

 

 

84

%

 

 

71

%

Crossing at 1415 (5)

 

TX

 

 

112

 

 

 

93

%

 

 

43

%

 

 

73

%

 

 

69

%

 

 

35

%

 

 

45

%

Decatur Angle

 

TX

 

 

302

 

 

 

94

%

 

 

95

%

 

n/a

 

 

 

86

%

 

 

69

%

 

n/a

 

Heights at 515 (5)

 

TX

 

 

96

 

 

 

93

%

 

 

77

%

 

 

82

%

 

 

79

%

 

 

57

%

 

 

75

%

Heritage Square Apartments

 

TX

 

 

204

 

 

 

91

%

 

 

95

%

 

 

91

%

 

 

80

%

 

 

83

%

 

 

58

%

Runnymede Apartments

 

TX

 

 

252

 

 

 

98

%

 

 

98

%

 

 

97

%

 

 

97

%

 

 

95

%

 

 

96

%

 

TX

 

 

252

 

 

 

100

%

 

 

98

%

 

 

98

%

 

 

96

%

 

 

97

%

 

 

95

%

South Park Ranch Apartments

 

TX

 

 

192

 

 

 

100

%

 

 

100

%

 

 

99

%

 

 

97

%

 

 

97

%

 

 

95

%

 

TX

 

 

192

 

 

 

99

%

 

 

100

%

 

 

100

%

 

 

96

%

 

 

97

%

 

 

97

%

Vantage at Harlingen (7)

 

TX

 

n/a

 

 

n/a

 

 

 

94

%

 

 

82

%

 

n/a

 

 

 

68

%

 

 

55

%

Vantage at Judson

 

TX

 

 

288

 

 

 

91

%

 

 

89

%

 

 

90

%

 

 

83

%

 

 

83

%

 

 

48

%

 

TX

 

 

288

 

 

 

92

%

 

 

91

%

 

 

89

%

 

 

87

%

 

 

83

%

 

 

83

%

15 West Apartments (5)

 

WA

 

 

120

 

 

 

99

%

 

 

99

%

 

n/a

 

 

 

96

%

 

 

72

%

 

n/a

 

 

 

 

 

7,664

 

 

 

94

%

 

 

92

%

 

 

94

%

 

 

86

%

 

 

87

%

 

 

83

%

 

 

 

 

8,128

 

 

 

95

%

 

 

92

%

 

 

91

%

 

 

89

%

 

 

84

%

 

 

85

%

 

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time


measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3)

A property is considered stabilized once it reaches 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service.

(4)

We hold approximately $17.6 million of MRBs secured by the Ohio Properties. The Ohio Properties are: Crescent Village, located in Cincinnati, Ohio, Willow Bend, located in Columbus (Hilliard), Ohio and Postwoods, located in Reynoldsburg, Ohio.

(5)

Newly stabilized properties. Previous period results are not available.

(6)

The property relates to a forward bond purchase commitment that was executed in the fourth quarter of 2017. The property was considered stabilized when the MRB was acquired.

(7)

The MRB associated with the property was redeemed as of December 31, 2017, so the number of units and occupancy are not applicable as of and for the year ended December 31, 2017.

(1) PhysicalOverall physical occupancy is defined asincreased from 2016 to 2017 primarily due to the total numberstabilization of units occupied divided by total unitsthe Columbia Gardens, Willow Run, Heights at the date of measurement.

(2) Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents515 and non-revenue units such as model units and employee units. Physical occupancy is a point in time measure while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancyCrossing at any point in time.

(3) A property is considered stabilized once it reaches 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service.

(4) We hold approximately $17.9 million of mortgage revenue bonds secured by the Ohio Properties. The Ohio Properties are: Crescent Village, located in Cincinnati, Ohio, Willow Bend, located in Columbus (Hilliard), Ohio and Postwoods, located in Reynoldsburg, Ohio.

(5) Newly stabilized properties. Previous period results are not available.

1415 properties during 2017. Overall physical occupancy for the stabilized Residential Properties increased from 2015 to 2016. The increase is2016 primarily due to the stabilization of the Concord at Gulfgate, Concord at Little York, Concord at Williamcrest, Bruton Apartments and Decatur Angle


properties during 2016. Physical occupancy also increased due to the addition of the Companion at Thornhill property during 2016.

Overall physicaleconomic occupancy decreasedincreased from 20142016 to 20152017 primarily due to the additionstabilization of the ConcordColumbia Gardens, Willow Run, Heights at Gulfgate, Concord515 and Crossing at Little York,1415 properties during 2017 and Concordcontinued ramp up of occupancy at Williamcrest properties in 2015 that did not stabilize until 2016.

Bruton Apartments and Decatur Angle. Overall economic occupancy decreased slightly from 2015 to 2016. The decrease is due primarily to the recent stabilization of Bruton Apartments and Decatur Angle during 2016, which had no comparable prior year information. Overall economic occupancy increased from 2014 to 2015 due to improved economic occupancy in the Avistar portfolio of properties that stabilized in 2015.

Non-Consolidated Properties - Not Stabilized

The owners of the following properties either do not meet the definition of a VIE or we have evaluated and determined we are not the primary beneficiary of the VIE.  As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis.  For the year ended December 31, 2016,2017, these Residential Properties have not met the stabilization criteria (see footnote 3 below the table). On December 31, 2016,2017, debt service on our mortgage revenue bondsMRBs for the non-consolidated properties whichthat are not stabilized was current. The amounts presented below were obtained from records provided by the property owners and their related property management service providers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

Number

 

 

Physical Occupancy (1) at December 31,

 

For the Year Ended

December 31,

Property Name

 

State

 

of Units

 

 

2016

 

 

2015

 

 

2014

 

2016

 

 

2015

 

 

2014

Non-Consolidated Properties-Non Stabilized (3)

 

 

 

Courtyard Apartments (4)

 

CA

 

 

108

 

 

 

100

%

 

n/a

 

 

n/a

 

 

101

%

 

n/a

 

 

n/a

Harmony Court Bakersfield (4)

 

CA

 

 

96

 

 

 

95

%

 

n/a

 

 

n/a

 

 

96

%

 

n/a

 

 

n/a

Harmony Terrace (4) (7)

 

CA

 

 

136

 

 

n/a

 

 

n/a

 

 

n/a

 

n/a

 

 

n/a

 

 

n/a

Las Palmas (4)

 

CA

 

 

81

 

 

 

100

%

 

n/a

 

 

n/a

 

 

92

%

 

n/a

 

 

n/a

San Vicente (4)

 

CA

 

 

50

 

 

 

98

%

 

n/a

 

 

n/a

 

 

97

%

 

n/a

 

 

n/a

Seasons Lakewood (4) (7)

 

CA

 

 

85

 

 

n/a

 

 

n/a

 

 

n/a

 

n/a

 

 

n/a

 

 

n/a

Seasons San Juan Capistrano (4) (7)

 

CA

 

 

112

 

 

n/a

 

 

n/a

 

 

n/a

 

n/a

 

 

n/a

 

 

n/a

Summerhill (4)

 

CA

 

 

128

 

 

 

97

%

 

n/a

 

 

n/a

 

 

96

%

 

n/a

 

 

n/a

Village at Madera (4)

 

CA

 

 

75

 

 

 

99

%

 

n/a

 

 

n/a

 

 

99

%

 

n/a

 

 

n/a

Columbia Gardens (5)

 

SC

 

 

188

 

 

 

73

%

 

 

86

%

 

n/a

 

 

75

%

 

n/a

 

 

n/a

Willow Run (5)

 

SC

 

 

200

 

 

 

74

%

 

 

92

%

 

n/a

 

 

74

%

 

n/a

 

 

n/a

Avistar at the Parkway (6)

 

TX

 

 

236

 

 

 

89

%

 

 

47

%

 

n/a

 

 

59

%

 

 

53

%

 

n/a

Crossing at 1415 (6)

 

TX

 

 

112

 

 

 

43

%

 

 

73

%

 

n/a

 

 

35

%

 

 

45

%

 

n/a

Heights at 515 (6)

 

TX

 

 

97

 

 

 

77

%

 

 

82

%

 

n/a

 

 

57

%

 

 

75

%

 

n/a

Oaks at Georgetown (4) (7)

 

TX

 

 

192

 

 

n/a

 

 

n/a

 

 

n/a

 

n/a

 

 

n/a

 

 

n/a

Vantage at Harlingen (6)

 

TX

 

 

288

 

 

 

94

%

 

 

82

%

 

n/a

 

 

68

%

 

 

55

%

 

n/a

15 West Apartments (4)

 

WA

 

 

120

 

 

 

99

%

 

n/a

 

 

n/a

 

 

72

%

 

n/a

 

 

n/a

 

 

 

 

 

2,304

 

 

 

86

%

 

 

76

%

 

n/a

 

 

66

%

 

 

54

%

 

n/a

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

 

of Units at

December 31,

 

 

Physical Occupancy (1) at December 31,

 

 

For the Years Ended December 31,

 

Property Name

 

State

 

2017

 

 

2017

 

 

2016

 

 

2015

 

 

2017

 

 

2016

 

 

2015

 

Non-Consolidated Properties-Non Stabilized (3)

 

 

 

 

 

Courtyard Apartments  (4)

 

CA

 

 

108

 

 

 

100

%

 

 

100

%

 

n/a

 

 

 

100

%

 

 

101

%

 

n/a

 

Harmony Court Bakersfield  (4)

 

CA

 

 

96

 

 

 

99

%

 

 

95

%

 

n/a

 

 

 

94

%

 

 

96

%

 

n/a

 

Harmony Terrace (4)

 

CA

 

 

136

 

 

 

99

%

 

n/a

 

 

n/a

 

 

 

131

%

 

n/a

 

 

n/a

 

Las Palmas  (4)

 

CA

 

 

81

 

 

 

100

%

 

 

100

%

 

n/a

 

 

 

96

%

 

 

92

%

 

n/a

 

Montecito at Williams Ranch (5)

 

CA

 

 

132

 

 

 

98

%

 

n/a

 

 

n/a

 

 

 

93

%

 

n/a

 

 

n/a

 

San Vicente (4)

 

CA

 

 

50

 

 

 

94

%

 

 

98

%

 

n/a

 

 

 

97

%

 

 

97

%

 

n/a

 

Seasons Lakewood (4)

 

CA

 

 

85

 

 

 

99

%

 

n/a

 

 

n/a

 

 

 

107

%

 

n/a

 

 

n/a

 

Seasons San Juan Capistrano (4)

 

CA

 

 

112

 

 

 

96

%

 

n/a

 

 

n/a

 

 

 

98

%

 

n/a

 

 

n/a

 

Summerhill (4)

 

CA

 

 

128

 

 

 

96

%

 

 

97

%

 

n/a

 

 

 

97

%

 

 

96

%

 

n/a

 

The Village at Madera (4)

 

CA

 

 

75

 

 

 

95

%

 

 

99

%

 

n/a

 

 

 

96

%

 

 

99

%

 

n/a

 

Vineyard Gardens (5)

 

CA

 

 

62

 

 

 

100

%

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Rosewood Townhomes (5)

 

SC

 

 

100

 

 

 

93

%

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

South Pointe Apartments (5)

 

SC

 

 

256

 

 

 

98

%

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

Avistar at Copperfield (5)

 

TX

 

 

192

 

 

 

81

%

 

n/a

 

 

n/a

 

 

 

64

%

 

n/a

 

 

n/a

 

Avistar at the Parkway

 

TX

 

 

236

 

 

 

92

%

 

 

89

%

 

 

47

%

 

 

75

%

 

 

59

%

 

 

53

%

Avistar at Wilcrest (5)

 

TX

 

 

88

 

 

 

74

%

 

n/a

 

 

n/a

 

 

 

57

%

 

n/a

 

 

n/a

 

Avistar at Wood Hollow (5)

 

TX

 

 

409

 

 

 

70

%

 

n/a

 

 

n/a

 

 

 

70

%

 

n/a

 

 

n/a

 

Oaks at Georgetown (4)

 

TX

 

 

192

 

 

 

93

%

 

n/a

 

 

n/a

 

 

 

83

%

 

n/a

 

 

n/a

 

 

 

 

 

 

2,538

 

 

 

90

%

 

 

95

%

 

 

47

%

 

 

86

%

 

 

68

%

 

 

53

%

 

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.


(3)(1) Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

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

(3) During 2016,2017, these properties were under construction or renovation.  As such, these properties are not considered stabilized as they have not met the criteria for stabilization. Stabilization is generally defined as 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service.

(4)(4) Previous period occupancy numbers are not available as these are new investments.

(5) Previous period occupancy numbers are not available as these were new investments in late 2015.2016. Properties indicating n/a in 2016 did not have financial information available for 2016.

(5)(6)Previous period occupancy numbers are not available as these were new investments in 2015.2017.

(7) Current periodPhysical occupancy numbersdecreased from 2016 to 2017 Primarily due to the addition of the Avistar at Copperfield, Avistar at Wilcrest and Avistar at Wood Hollow during 2017. These properties are not availablecurrently undergoing major rehabilitations and will likely experience an increase in occupancy during 2018 as these wererehabilitations are completed. Economic occupancy increased from 2016 to 2017 due to new investmentsMRBs related to rehabilitation projects in California in 2017 and in December 2016. These properties had higher than normal occupancy for projects of this type due to a strong local market for multifamily housing.

Physical and economic occupancy increased from 2015 to 2016 primarily due to the addition of non-stabilized Residential Properties with high occupancy in 2016. These new Residential Properties may show a decline in physical and economic occupancy in the near term as the properties go through substantial rehabilitations. There is no comparable data for the non-stabilized Residential Properties in 2014 since they were either under significant renovations or were new investments made in 2015 or 2016.


MF Properties

The seven MF Properties are owned by us and our wholly-owned subsidiary. We own two MF Properties directly, and the subsidiary holds a 99% limited partner interest in one limited partnership and 100% of the membership interests in four limited liability companies.  The properties are encumbered by mortgage loans with an aggregate principal balance of $51.7 million atAt December 31, 2016.2017, we owned three MF Properties. We report the assets, liabilities, and results of operations of these properties on a consolidated basis.  For the year ended December 31, 2016,2017, all the MF Properties have met the stabilization criteria (see footnote 3 below the table). OnThe MF properties are encumbered by mortgage loans with an aggregate principal balance of $35.8 million at December 31, 2016, debt2017.  Debt service on our mortgage payables was current.current at December 31, 2017. The amounts presented below were obtained from records provided by property management service providers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

Economic Occupancy (2)

 

 

 

 

Number

 

 

Physical Occupancy (1) at December 31,

 

 

For the Year Ended

December 31,

 

 

 

 

of Units at

December 31,

 

 

Physical Occupancy (1) at December 31,

 

 

For the Years Ended December 31,

 

Property Name

 

State

 

of Units

 

 

2016

 

 

2015

 

 

2014

 

 

2016

 

 

2015

 

 

2014

 

 

State

 

2017

 

 

2017

 

 

2016

 

 

2015

 

 

2017

 

 

2016

 

 

2015

 

MF Properties-Stabilized (3)

MF Properties-Stabilized (3)

 

 

 

 

 

MF Properties-Stabilized (3)

 

 

 

 

 

Suites on Paseo (4)

 

CA

 

 

394

 

 

 

96

%

 

 

89

%

 

n/a

 

 

 

80

%

 

 

83

%

 

n/a

 

 

CA

 

 

394

 

 

 

91

%

 

 

96

%

 

 

89

%

 

 

94

%

 

 

80

%

 

 

83

%

Jade Park (5)(4)

 

FL

 

 

144

 

 

 

89

%

 

n/a

 

 

n/a

 

 

 

83

%

 

n/a

 

 

n/a

 

 

FL

 

 

144

 

 

 

91

%

 

 

89

%

 

n/a

 

 

 

81

%

 

 

83

%

 

n/a

 

Eagle Village(5)

 

IN

 

 

511

 

 

 

80

%

 

 

90

%

 

 

68

%

 

 

86

%

 

 

84

%

 

 

67

%

 

IN

 

n/a

 

 

n/a

 

 

 

80

%

 

 

90

%

 

n/a

 

 

 

86

%

 

 

84

%

Northern View

 

KY

 

 

294

 

 

 

100

%

 

 

90

%

 

 

85

%

 

 

90

%

 

 

80

%

 

 

91

%

Woodland Park (6)

 

KS

 

n/a

 

 

n/a

 

 

n/a

 

 

 

95

%

 

n/a

 

 

n/a

 

 

 

90

%

Northern View (5)

 

KY

 

n/a

 

 

n/a

 

 

 

100

%

 

 

90

%

 

n/a

 

 

 

90

%

 

 

80

%

Arboretum (6)

 

NE

 

n/a

 

 

n/a

 

 

n/a

 

 

 

98

%

 

n/a

 

 

n/a

 

 

 

93

%

The 50/50 MF Property

 

NE

 

 

475

 

 

 

72

%

 

 

99

%

 

 

96

%

 

 

96

%

 

 

96

%

 

n/a

 

 

NE

 

 

475

 

 

 

97

%

 

 

72

%

 

 

99

%

 

 

74

%

 

 

96

%

 

 

96

%

Residences at DeCordova

 

TX

 

 

110

 

 

 

97

%

 

 

96

%

 

 

94

%

 

 

93

%

 

 

92

%

 

 

92

%

Residences at Weatherford

 

TX

 

 

76

 

 

 

100

%

 

 

100

%

 

 

97

%

 

 

101

%

 

 

99

%

 

 

99

%

Residences of DeCordova (5)

 

TX

 

n/a

 

 

n/a

 

 

 

97

%

 

 

96

%

 

n/a

 

 

 

93

%

 

 

92

%

Residences of Weatherford (5)

 

TX

 

n/a

 

 

n/a

 

 

 

100

%

 

 

100

%

 

n/a

 

 

 

101

%

 

 

99

%

 

 

 

 

2,004

 

 

 

87

%

 

 

93

%

 

 

84

%

 

 

85

%

 

 

89

%

 

 

82

%

 

 

 

 

1,013

 

 

 

94

%

 

 

87

%

 

 

94

%

 

 

84

%

 

 

85

%

 

 

90

%

 

(1)

Total revenue is defined as net rental revenue plus other income from the properties.

(2)

Economic occupancy is presented for December 31, 2015 and 2014 and is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Actual occupancy is a point in time measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3)

(1) Total revenue is defined as net rental revenue plus other income from the properties.

(2) Economic occupancy is presented for December 31, 2015 and 2014, and is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Actual occupancy is a point in time measure while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3) Stabilization is generally defined as 90% occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for all MF Properties that are not student housing residential properties. Suites on Paseo, Eagle Village, Northern View, and The 50/50 MF Property are student housing residential properties.

(4)

Occupancy numbers for 2015 are not available as the MF property was acquired in September 2016.

(5)

The property was sold during 2017, so unit and occupancy amounts are not applicable as of and for the year ended December 31, 2017.

(6)

The property was sold during 2016, so unit and occupancy amounts are not applicable as of and for the year ended December 31, 2017 and 2016.

The overall increase in physical occupancy from 2016 to 2017 is due to a sharp increase in occupancy at The 50/50 MF Property are student housing residential properties.

(5) Previous period economic occupancy numbers reflect resultsduring 2017, which is due to marketing and pricing changes implemented by the Partnership and Properties Management for the four months ended December 31, 2015 as the property became an MF Property in September 2015.

(5) Previous period occupancy numbers are not available as the MF property was acquired in September 2016.

fall 2017 lease-up. The overall decrease in physical occupancy from 2015 to 2016 is due to declining occupancy at the 50/50 MF Property during 2016 and the addition of Jade Park with a physical occupancy that is lower than the average of other MF Properties.

The Partnershipoverall increase in economic occupancy is implementing marketing and pricing changes at the 50/50 MF Property to increase physical occupancy for the fall 2017 semester. We also anticipate improving physicala result of higher occupancy at the Jade Park MF PropertySuite on Paseo in 2017 as we have more experience managing the property.compared to 2016. This was somewhat offset by lower economic occupancy at The increase in physical occupancy from 2014 to 2015 is50/50 due to general improvements in operations during 2015 at multiple MF Properties.

the poor fall 2016 lease-up. The overall decrease in economic occupancy from 2015 to 2016 is due declining occupancy at theThe 50/50 MF Property during 2016 and the addition of Jade Park with an economic occupancy that is lower than the average of other MF Properties. The Partnership is implementing marketing and pricing changes at the 50/50 MF Property to increase economic occupancy for the fall 2017 semester. We also anticipate improving economic occupancy at the Jade Park MF Property as we have more experience managing the property. The increase in economic occupancy from 2014 to 2015 was due to the stabilization of the 50/50 MF Property and improved operations at Eagle Village.


Results of Operations

The tables and following discussions of our change in total revenues, total expenses, and net income for the years ended December 31, 2017, 2016 and 2015 and 2014 (in thousands) should be read in conjunction with the Company’s consolidated financial statements and Notes thereto filed in Item 8 of this report.


The following table compares revenue and other income for the Partnership for the periods presented (in thousands):

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

Revenues and Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

17,405

 

 

$

17,789

 

 

$

(384

)

 

 

-2.2

%

 

$

17,789

 

 

$

14,251

 

 

$

3,538

 

 

 

24.8

%

 

$

13,500

 

 

$

17,405

 

 

$

(3,905

)

 

 

-22.4

%

 

$

17,405

 

 

$

17,789

 

 

$

(384

)

 

 

-2.2

%

Investment income

 

 

36,893

 

 

 

34,410

 

 

 

2,483

 

 

 

7.2

%

 

 

34,410

 

 

 

26,606

 

 

 

7,804

 

 

 

29.3

%

 

 

48,225

 

 

 

36,893

 

 

 

11,332

 

 

 

30.7

%

 

��

36,893

 

 

 

34,410

 

 

 

2,483

 

 

 

7.2

%

Contingent interest income

 

 

2,021

 

 

 

4,757

 

 

 

(2,736

)

 

 

-57.5

%

 

 

4,757

 

 

 

40

 

 

 

4,717

 

 

 

11792.5

%

 

 

3,147

 

 

 

2,021

 

 

 

1,126

 

 

 

55.7

%

 

 

2,021

 

 

 

4,757

 

 

 

(2,736

)

 

 

-57.5

%

Other interest income

 

 

2,660

 

 

 

2,624

 

 

 

36

 

 

 

1.4

%

 

 

2,624

 

 

 

856

 

 

 

1,768

 

 

 

206.5

%

 

 

4,682

 

 

 

2,660

 

 

 

2,022

 

 

 

76.0

%

 

 

2,660

 

 

 

2,624

 

 

 

36

 

 

 

1.4

%

Other income

 

 

-

 

 

 

373

 

 

 

(373

)

 

N/A

 

 

 

373

 

 

 

188

 

 

 

185

 

 

 

98.4

%

 

 

828

 

 

 

-

 

 

 

828

 

 

 

100.0

%

 

 

-

 

 

 

373

 

 

 

(373

)

 

N/A

 

Gain on sale of MF Property

 

 

14,072

 

 

 

4,599

 

 

 

9,473

 

 

 

206.0

%

 

 

4,599

 

 

 

-

 

 

 

4,599

 

 

 

100.0

%

Gain on sale of real

estate assets, net

 

 

17,753

 

 

 

14,072

 

 

 

3,681

 

 

 

26.2

%

 

 

14,072

 

 

 

4,599

 

 

 

9,473

 

 

 

206.0

%

Gain on sale of securities

 

 

8

 

 

 

-

 

 

 

8

 

 

 

100.0

%

 

 

-

 

 

 

3,702

 

 

 

(3,702

)

 

N/A

 

 

 

-

 

 

 

8

 

 

 

(8

)

 

N/A

 

 

 

8

 

 

 

-

 

 

 

8

 

 

 

100.0

%

Total Revenues and Other Income

 

$

73,059

 

 

$

64,552

 

 

$

8,507

 

 

 

13.2

%

 

$

64,552

 

 

$

45,643

 

 

$

18,909

 

 

 

41.4

%

 

$

88,135

 

 

$

73,059

 

 

$

15,076

 

 

 

20.6

%

 

$

73,059

 

 

$

64,552

 

 

$

8,507

 

 

 

13.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discussion of the Total Revenues for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Property revenues.  The net decrease in total revenue between 2017 and 2016 is comprised of the following factors:

A decrease of approximately $4.4 million in revenue due to sales of the Northern View in March 2017, sales of the Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017, and sales of the Arboretum and Woodland Park in 2016;

An increase of approximately $1.0 million in revenue due to the acquisition of Jade Park in September 2016; and

A decrease of approximately $458,000 in revenue from declining occupancy at The 50/50 MF Property. The decline was due to low occupancy during the 2016-2017 academic year. Physical occupancy is approximately 97% at December 31, 2017 as compared to 72% at December 31, 2016, so the Partnership expects increasing revenues at this property going forward.

Investment income. The net increase in investment income between 2017 and 2016 is comprised of the following factors:

An increase of approximately $9.9 million in recurring investment interest income related to MRB acquisitions during 2016 and 2017;

A decrease of approximately $948,000 in recurring investment income from MRB redemptions in 2016 and 2017; and

An increase of approximately $2.4 million in preferred return income from investments in unconsolidated entities.

Contingent interest income. In 2017, we realized contingent interest of approximately $219,000 from excess cash flow on the Lake Forest MRBs and approximately $2.9 million of cash proceeds from redemption of the Ashley Square MRB. In 2016, we realized contingent interest of approximately $642,000 from excess cash flow on the Ashley Square and Lake Forest MRBs and approximately $1.4 million on excess cash proceeds from the sale of the property underlying the Foundation for Affordable Housing property loan.

Other interest income. Other interest income is comprised mainly of interest income on taxable property loans held by us. The net increase between 2017 and 2016 is comprised of the following factors:

An increase of approximately $273,000 from property loans to the Vantage at Brooks and Vantage at Braunfels multifamily development projects due to additional advances in 2016 and 2017; and

Approximately $1.7 million of other interest income received on the Ashley Square property loans in connection with the sale of the underlying property in the fourth quarter of 2017. The Ashley Square property loans were in non-accrual status during 2016, so there was no interest income for these property loans in 2016.


Other income.  Other income recognized in 2017 consists of approximately $624,000 of fees related to early redemptions of the MRBs for Vantage at Harlingen and Avistar at Chase Hill during the fourth quarter, approximately $191,000 of fees for due diligence services for sales of properties in November 2017, and approximately $13,000 of miscellaneous non-recurring income items. There was no other income reported for 2016.

Gains on the sales of real estate assets and securities. The gains on sale of MF Properties in 2017 consists primarily of gains of approximately $7.2 million, $2.6 million, $5.2 million and $2.8 million from the sales of Northern View, Residences of Weatherford, Residences of DeCordova and Eagle Village, respectively. The gains on sale of MF Properties in 2016 consist of gains of approximately $12.4 million and $1.7 million from the sales of the Arboretum and Woodland Park, respectively. The gain on sale of securities for 2016 is from the sale of the Pro Nova 2014-2 MRB.

 

Discussion of the Total Revenues for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

 

Property revenues.  The net decrease in total revenue between 2016 and 2015 is comprised of the following factors:

A decrease of approximately $4.0 million in revenue due to sales of the Arboretum and Woodland Park in 2016 and Glynn Place and the Colonial in 2015;

An increase of approximately $3.4 million in revenue due to the acquisition of the Suites on Paseo in 2015 and Jade Park in 2016; and

An increase of approximately $156,000 in revenue from improving operations at existing MF Properties.

 

Investment income. The net increase in investment income between 2016 and 2015 is comprised of the following factors:

An increase of approximately $4.5 million in recurring investment interest income related mortgage revenue bondMRB acquisitions during 2015 and 2016;

A decrease of approximately $2.6 million in recurring investment income from mortgage revenue bondMRB redemptions in 2015 and 2016;

A decrease of approximately $106,000 in interest income from PHC Certificates due to principal paydowns;

A decrease of approximately $208,000 in interest income from MBS Securities due to the sale of the remaining MBS Securities in the first quarter of 2016; and

An increase of approximately $719,000 in preferred return income from investments in unconsolidated entities.

Contingent interest income. In 2016, we realized contingent interest of approximately $642,000 from excess cash flow on the Ashley Square and Lake Forest mortgage revenue bondsMRBs and approximately $1.4 million on settlement of the Foundation for Affordable Housing property loan. In 2015, we realized approximately $4.8 million of contingent interest from the sale of the Bent Tree and Fairmont Oaks mortgage revenue bondsMRBs in the fourth quarter.

Other interest income. Other interest income is comprised mainly of interest income on taxable property loans held by us and was fairly consistent from 2015 to 2016. The net increase is due to various offsetting factors:

An increase of approximately $1.1 million from property loans to the Vantage at Brooks and Vantage at Braunfels multifamily development projects which began in the fourth quarter of 2015;

An increase of approximately $347,000 in interest on other property loans and a new loan with the Winston Group, Inc. in 2016; and

A decrease of approximately $1.4 million in interest income from the Fairmont Oaks property loan that was settled in the fourth quarter of 2015.

Other income.  Other income recognized in 2015 is predominately attributable to development fee income related to the Silver Moon Apartment project which was completed in 2015.  There was no other income reported for 2016.

Gains on the sales of MF Propertiesreal estate assets and securities. The gain on sale of MF Properties in 2016 consists of gains of approximately $12.4 million and $1.7 million from the sales of the Arboretum and Woodland Park, respectively. The gain on sale of MF Properties in 2015 consists of gains of approximately $3.4 million and $1.2 million from the sales of the Colonial and Glynn Place in 2015, respectively. The gain on sale of securities for 2016 is formfrom the sale of the Pro Nova 2014-2 mortgage revenue bond.MRB.


Other income.  Other income recognized in 2015 is predominately attributable to development fee income related to the Silver Moon Apartment project which was completed in 2015.  There was no other income reported for 2016.

Discussion of the Total Revenues for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Property revenues.  Property revenues in 2015 increased approximately $3.5 million, when compared to 2014.  Approximately $4.0 million of the net property revenue increase was due to the completion and lease-up of The 50/50 MF Property in August 2014 and the addition of the Suites on Paseo, an MF Property, in September 2015. Also, in 2015 we sold Glynn Place and The Colonial, resulting in a reduction of approximately $1.3 million when comparing the two periods. The remaining increase is related to the increase in economic occupancy. Annual net revenues per unit related to the MF Properties were approximately $6,747 per unit in 2015 as compared to approximately $6,166 in 2014 which excludes the properties that were sold in 2015.

Investment income. Investment income includes interest earned on mortgage revenue bonds, PHC Certificates, and MBS Securities. Recurring investment income increased in 2015 as compared to 2014 by approximately $9.8 million due to 2015 increases in the investment portfolio held by us at December 31, 2015.  Offsetting this increase was a decrease of approximately $2.4 million related to principal reductions, the 2014 Lost Creek and Autumn Pines mortgage revenue bond redemption and sale, and the MBS Securities sold in 2014.  

Contingent interest income. We realized approximately $4.8 million from the sale of the two Consolidated VIEs in the fourth quarter of 2015.  In addition, we realized and reported $40,000 of contingent interest income from Ashley Square during 2014.  

Other interest income. Other interest income is comprised mainly of interest income on taxable property loans held by us. The increase in other interest income when comparing 2015 to 2014 is attributable to taxable interest income of approximately $1.5 million received from Fairmont Oaks on the taxable property loan when this Consolidated VIE was sold in December of 2015. The remaining increase was related to an increase in notes receivable of approximately $7.7 million held by us in 2015.    

Gains on the sales and redemption of MF Properties and mortgage revenue bonds. We sold The Colonial and Glynn Place, MF Properties, in 2015 which resulted in a gain of approximately $4.6 million. There were no MF Property sales during 2014. However, in April 2014, the Autumn Pines mortgage revenue bond was sold at a gain of approximately $873,000. In addition, the Lost Creek mortgage revenue bond was redeemed and a gain of approximately $2.8 million was recognized. There was no gain realized on the sale of mortgage revenue bonds during 2015.

Other income.  Other income recognized in 2015 is predominately attributable to development fee income related to the Silver Moon Apartment project which was completed in 2015.  The other income earned in 2014 was related to the development of The 50/50.

The following table compares expenses for the Partnership for the periods presented (in thousands):

 

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of

   items shown below)

 

$

9,223

 

 

$

10,053

 

 

$

(830

)

 

 

-8.3

%

 

$

10,053

 

 

$

7,797

 

 

$

2,256

 

 

 

28.9

%

Provision for loan loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.0

%

 

 

-

 

 

 

75

 

 

 

(75

)

 

 

0.0

%

Impairment charge

 

 

62

 

 

 

-

 

 

 

62

 

 

 

100.0

%

 

 

-

 

 

 

-

 

 

 

-

 

 

 

100.0

%

Depreciation and amortization

 

 

6,863

 

 

 

6,505

 

 

 

358

 

 

 

5.5

%

 

 

6,505

 

 

 

4,898

 

 

 

1,607

 

 

 

32.8

%

Amortization of deferred financing

   costs

 

 

1,863

 

 

 

1,623

 

 

 

240

 

 

 

14.8

%

 

 

1,623

 

 

 

1,184

 

 

 

439

 

 

N/A

 

Interest

 

 

15,470

 

 

 

14,826

 

 

 

644

 

 

 

4.3

%

 

 

14,826

 

 

 

11,166

 

 

 

3,660

 

 

 

32.8

%

General and administrative

 

 

10,835

 

 

 

8,661

 

 

 

2,174

 

 

 

25.1

%

 

 

8,661

 

 

 

5,546

 

 

 

3,115

 

 

 

56.2

%

Total Expenses

 

$

44,316

 

 

$

41,668

 

 

$

2,648

 

 

 

6.4

%

 

$

41,668

 

 

$

30,666

 

 

$

11,002

 

 

 

35.9

%

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

2016

 

 

2015

 

 

$ Change

 

 

% Change

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating

   (exclusive of items shown

   below)

 

$

8,228

 

 

$

9,223

 

 

$

(995

)

 

 

-10.8

%

 

$

9,223

 

 

$

10,053

 

 

$

(830

)

 

 

-8.3

%

Impairment of securities

 

 

762

 

 

 

-

 

 

 

762

 

 

 

100.0

%

 

 

-

 

 

 

-

 

 

 

-

 

 

N/A

 

Impairment charge on real estate assets

 

 

-

 

 

 

62

 

 

 

(62

)

 

N/A

 

 

 

62

 

 

 

-

 

 

 

62

 

 

 

100.0

%

Depreciation and amortization

 

 

5,213

 

 

 

6,863

 

 

 

(1,650

)

 

 

-24.0

%

 

 

6,863

 

 

 

6,505

 

 

 

358

 

 

 

5.5

%

Amortization of deferred

   financing costs

 

 

2,325

 

 

 

1,863

 

 

 

462

 

 

 

24.8

%

 

 

1,863

 

 

 

1,623

 

 

 

240

 

 

 

14.8

%

Interest expense

 

 

22,155

 

 

 

15,470

 

 

 

6,685

 

 

 

43.2

%

 

 

15,470

 

 

 

14,826

 

 

 

644

 

 

 

4.3

%

General and administrative

 

 

12,770

 

 

 

10,835

 

 

 

1,935

 

 

 

17.9

%

 

 

10,835

 

 

 

8,661

 

 

 

2,174

 

 

 

25.1

%

Total Expenses

 

$

51,453

 

 

$

44,316

 

 

$

7,137

 

 

 

16.1

%

 

$

44,316

 

 

$

41,668

 

 

$

2,648

 

 

 

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discussion of the Total Expenses for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Real estate operating expenses.  Real estate operating expenses associated with the MF Properties is comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses is fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues.  The overall decrease in real estate operating expenses was due to the following factors:

An increase of approximately $652,000 in real estate operating expenses related to the acquisition of Jade Park in September of 2016;

A decrease of approximately $2.3 million in real estate operating expenses related to the sales of Northern View in March 2017, sales of the Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017, and sales of the Arboretum and Woodland Park in 2016; and

An increase of approximately $628,000 in real estate operating expenses at The 50/50 and Suites on Paseo MF Properties. The increase at The 50/50 are related to one-time expenses incurred in 2017 and not expected to recur in future periods. The increase at Suites on Paseo relates primarily to a one-time refund of real estate taxes in 2016 that did not recur in 2017.


 

Impairment of securities.  The impairment of securities for 2017 relates to the PHC Certificates. There were no such impairment charges in 2016.

Impairment charge on real estate assets.   The impairment charge in 2016 is related to land held for development in St. Petersburg, FL. There were no such impairment charges in 2017.

Depreciation and amortization expense.  Depreciation results primarily from the MF Properties.  Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting. The overall decrease in real estate operating expenses was due to the following factors:


An increase of approximately $330,000 in depreciation related to the acquisition of Jade Park in September of 2016;

A decrease of approximately $614,000 in amortization related to Suites on Paseo in-place leases in 2016 that did not recur in 2017; and

A decrease of approximately $1.5 million in expenses related to the sales of the Northern View in March 2017, sales of the Residences of Weatherford, Residences of DeCordova and Eagle Village in November 2017, and sales of the Arboretum and Woodland Park in 2016.

Amortization of deferred financing costs. The overall increase in amortization of deferred financing costs in 2017 is due to $463,000 of increased amortization related to Term A/B Trust Financings. The increase is due primarily to the addition of new Term A/B Trusts in September 2016 and February 2017.

Interest expense. The net increase in interest expense between 2017 and 2016 is due to the following factors:

An increase of approximately $1.4 million in expense due to an increase of approximately $52.8 million in average principal outstanding;

An increase of approximately $5.1 million due to an increase of approximately 81 basis points in the weighted-average interest rate;

An increase of approximately $185,000 in expense related to market to market adjustments on derivative financial instruments, net of cash paid.

General and administrative expenses.  The overall increase in general and administrative expenses is due an approximately $1.3 million increase in salary, benefits and restricted unit award compensation expense, an approximately $858,000 increase in additional administrative fees on new investments in 2016 and 2017, offset by a decrease of approximately $287,000 in board and professional expenses.

Discussion of the Total Expenses for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Real estate operating expenses.  Real estate operating expenses associated with the MF Properties is comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses is fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues.  The overall decrease in real estate operating expenses was due to the following factors:

An increase of approximately $1.7 million in expenses related to the acquisitions of the SuiteSuites on Paseo in September of 2015 and Jade Park in September of 2016;

A decrease of approximately $2.0 million in expenses related to the sales of the Arboretum and Woodland Park in 2016 and sales of the Colonial and Glynn Place in 2015; and

A decrease of approximately $470,000 in expenses related to tax increment financing proceeds received in 2016 that are accounted for as a reduction in real estate tax expense.

Impairment charge on real estate assets.  Impairment expense in 2016 is related to land held for development in St. Petersburg, FL that was recognized in the second quarter of 2016. See Note 9 of Item 8 of this Form 10-K for additional information.There were no impairment charges in 2015.


Depreciation and amortization expense.  Depreciation results primarily from the MF Properties.  Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting. The overall decrease in real estate operating expenses was due to the following factors:

An increase of approximately $1.4 million in depreciation and amortization related to the acquisitions of the SuiteSuites on Paseo in September of 2015 and Jade Park in September of 2016;

A decrease of approximately $1.1 million in expenses related to the sales of the Arboretum and Woodland Park in 2016 and sales of the Colonial and Glynn Place in 2015.

Amortization of deferred financing costs. The overall increase in amortization of deferred financing costs in 2016 is due to the following factors:

An increase of approximately $290,000 in amortization related to the M33 TEBS Financing that originated in July 2015; and

An increase of approximately $146,000 in amortization related to the new Term A/B Trust Financings in September and December of 2016 and amortization of deferred financing costs related to our line of credit arrangements.

Interest expense. The net increase in interest expense between 2016 and 2015 is due to the following factors:

An increase of approximately $2.5 million in expense due to higher outstanding debt balances during 2016;

A decrease of approximately $1.8 million in expense related to market to market adjustments on derivative financial instruments. We recognized a net decrease in expense on the mark to market adjustments of approximately $18,000 during 2016 and a net increase in expense of approximately $1.8 million in 2015.

 

General and administrative expenses.  The overall increase in general and administrative expenses is due to an approximately $1.6 million increase in salary, benefits and restricted unit award compensation expenses and an approximately $532,000 increase in administrative and professional fees.

 

Discussion of the Total ExpensesIncome from Discontinued Operations for the YearYears Ended December 31, 2017, 2016 and 2015 Compared to December 31, 2014

Real estate operating expenses.  Real estate operating expenses associated

The sales of the Consolidated VIEs were closed in the fourth quarter of 2015 with the MF Properties is comprised principallygains and results of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. A portion of real estate operating expenses is fixed in nature, thus a decrease in physical and economic occupancy would result in a reduction in operating margins. Conversely, as physical and economic occupancy increase, the fixed nature of these expenses will increase operating margins as these real estate operating expenses would not increase at the same rate as rental revenues.  The overall increase in real estate operating expenses was due to various factors. Approximately $2.8 millionoperations of the net increase in real estate operating expenses was directly related to four months of operations for the Suites on Paseo, which became an MF Property in September 2015, and the 50/50 MF Property which began lease-up in August 2014.  Offsetting this increase was a


decrease of approximately $862,000 related to the sale of Glynn Place and The Colonial in 2015. The remaining changes were mostly related to changes in salaries, real estate taxes, and management fees due to normal property operations.

Depreciation and amortization expense.  Depreciation results primarily from the MF Properties.  Amortization consists of in-place lease intangible assets recordedConsolidated VIEs reported as part of the acquisition-method of accounting.  Approximately $2.2 million of thediscontinued operations in net increase in depreciation and amortization was related to the 50/50 MF Property which was placed in service in August 2014 and the addition of the Suites on Paseo in September 2015. Offsetting this increase was a decrease of approximately $563,000 related to the sale ofincome for all periods presented. The Colonial and Glynn Place in 2015.

Amortization of deferred financing costs. The increase in amortization of deferred financing costs due primarily to an approximately $516,000 increase in amortization related to the M31 and M33 TEBS Financings. The M31 TEBS Financing originated in July 2014 and the M33 TEBS Financing originated in July 2015.

Interest expense. The net increase in interest expense in 2015 compared to 2014 was the result of an increase of approximately $3.4 million in interest expense related to an approximately $123.6 million increase in average debt outstanding.  Our borrowing cost averaged approximately 2.7% per annum for 2015, as compared to approximately 2.6% per annum for 2014.  The increase in interest rate resulted in approximately $488,000 in additional interest expense.  Offsetting these increases was approximately $201,000 due to the change in the mark to market adjustment of our derivatives when comparing the two periods. These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense.

General and administrative expenses.  The increase in general and administrative expenses was due to approximately $651,000 increased administrative fees payable to AFCA 2, and approximately $2.0 million in salaries and professional fees which are all attributable to the increased investment portfolio. In addition, one-time consent solicitation expenses were incurred during 2015.

The following table comparesCompany reported income from discontinued operations of the Partnership for the periods presented (in thousands):

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations (including gains on sale of Consolidated VIEs of

   approximately $3.2 million for 2015)

 

$

-

 

 

$

3,721

 

 

$

53

 

Income from discontinued operations.  The discontinued operations reported in 2015 is comprisedapproximately $3.7 million, inclusive of gains of sale of Consolidated VIEs of approximately $3.2 million, of gain on sales relatedfor the year ended December 31, 2015. No net income or loss from these properties operations or sale accrued to Bent Tree and Fairmont Oaks (the Consolidated VIEs) in the fourth quarter and their related results of operationsUnitholders or the General Partner during the year. The2015. There was no income from discontinued operations reported in 2014 wasfor the result of operations related to the Consolidated VIEs.  years ended December 31, 2017 and 2016.

Liquidity and Capital Resources

The Partnership’s principal source of cash flow includes:

Interest income earned on mortgage revenue bondsMRBs;

Interest income earned on the PHC CertificatesCertificates;

Excess cash flow generated by the MF PropertiesProperties;

Excess proceeds from the sale of assetsassets; and

Cash flow, net of expenses, from general Partnership operationsoperations.

OtherAdditional sources of cash flow may include:

Interest payments received from property loansloans; and

Contingent interest received from investments in mortgage revenue bondsMRBs or property loans


Interest income is primarily comprised of fixed rate base interest payments received on our mortgage revenue bondsMRBs and PHC Certificates which provides fairlythat provide consistent cash receipts throughout the year.  Certain of the mortgage revenue bondsMRBs may also generate payments of contingent interest to us from time to time when the underlying Residential Properties generate excess net cash flow.flow from operations, excess proceeds from refinancing or from the sale of the property.   For additional details, see Item 8, Cash Flows from Operating and Investing Activities sections of the Company’sPartnership’s consolidated statement of cash flows.


Similarly, the economic performance of MF Properties will affect the amount of cash distributions, if any, received by the Partnership from our ownership of these properties.  The economic performance of the MF Properties depends on the rental and occupancy rates of the property and on the level of operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, apartments in the market area in which awhere the property is located.  This, in turn, is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes.  In addition, factors such as government regulation (such as zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of an apartment property.  For discussion related to economic risk, see Item 1A, “Risk Factors” in the Company’sPartnership’s report.

Other sources of cash available to the Partnership include:

Unsecured linesOperating line of creditcredit;

Secured lineand unsecured lines of creditcredit;

Debt financingfinancing;

Mortgages payable and other secured financingsfinancings;

Sale of Series A Preferred UnitsUnits; and

Sale of additional BUC’sBUCs.

OnAt December 31, 2016,2017, the Partnership had borrowed the following amounts:

Unsecured lines of credit - $40 million

Secured line of credit, net - $19.8 million$50.0 million;

Debt financing, net - $495.4 million,-$558.3 million; and

Mortgages payable and other secured financing, net - $51.4 million$35.5 million.

In addition, at December 31, 2016,2017, the Partnership had issued approximately 4.19.5 million Series A Preferred units resulting in cash flowUnits at a subscription price of $10.00 per unit.  We issued approximately 5.4 million Series A Preferred Units during the year ended December 31, 2017 for gross proceeds of approximately $40.8$53.6 million.   The offering of the Series A Preferred Units was terminated effective as of October 25, 2017.

In December 2017, the Partnership initiated an “at the market offering” to sell up to $75.0 million of BUCs at prevailing market prices on the date of sale. The Partnership sold 161,383 BUCs under the program for net proceeds of approximately $806,000, net of issuance costs.  We did not issue any additional BUCscosts, during 2016.  See Notes 15, 16, 17, 18 and 21 to the Partnership’s consolidated financial statements for additional details.year ended December 31, 2017.  

Our principal uses of cash are (i) general, administrative and operating expenses, (ii) interest and principal payable on the unsecured and secured lines of credit, (iii) interest and principal payable on the debt financing and mortgages payable and other secured financing, and (iv) payment of distributions to Series A Preferred Unitholders and BUC holders.  We also use cash to acquire additional investments.

 

(i)

Payment of general, administrative, and operating expenses  

The Consolidated VIEs, which are reported as discontinued operations for all periods presented herein, and MF Properties’ primary uses of cash were for operating expenses.  We also useduse cash for general and administrative expenses. For additional details, see Item 1A, “Risk Factors” and Item 8, Cash Flows from Operating Activities section of the Company’s consolidated statementstatements of cash flows.

 

(ii)

Payment of interest and principal on unsecured and secured lines of credit  


We maintain two unsecured lines of creditcredit: an operating and one secureda revolving line of credit. Our operating line of credit allows for the advance of up to $7.5$10.0 million to be used for general operations. We are required to make prepayments of the principal to reduce outstanding principal balance on the operating line to zero for fifteen consecutive days during each calendar quarter. We fulfilled this requirement during the three monthsquarter ended December 31, 2016.2017. In addition, we have fulfilled this requirement for the first quarter of 2018. Our $50$50.0 million revolving line of credit ismay be utilized to for the purchase of multifamily real estate and taxable or tax-exempt mortgage revenue bonds.MRBs. Advances on the line of credit are due on the 270th day following the advance date but may be extended by making certain payments for up to an additional 270 days. Our $20$20.0 million secured term line of credit iswas used to finance the purchase of mortgage revenue bondsMRBs and maturesmatured in March 2017. The secured line of credit was closed and is not available for use by the Partnership at December 31, 2017.

We anticipate paying off the balances on our unsecured and secured linesrevolving line of credit by entering into fixed-rate debt financing arrangements, to be secured with the previously acquired mortgage revenue bonds.MRBs.  See Notes 15 and 16 of the Partnership’s consolidated financial statements for additional details.  In addition, see Note 28 to the Partnership’s consolidated financial statements for disclosure of activity subsequent to December 31, 2016.


 

(iii)

Payment of interest and principal on debt and mortgages payable and other secured financing

Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of mortgage revenue bondsMRBs and other investments. The financing arrangements generally involve the securitization of mortgage revenue bondsMRBs and other investments into trusts whereby we retain beneficial interests in the trusts that provide certain rights to the underlying investment assets. The remaining beneficial interests are sold to unaffiliated parties with the proceeds being received by the Partnership. The beneficial interests held by unaffiliated parties require periodic interest payments whichthat may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments.

Our mortgages payable and other secured financing arrangements are used to leverage our MF Properties. The mortgages and other secured financing are entered into with financial institutions and are secured by security interests in the MF Properties. The mortgages and other secured financing bear interest whichthat may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments.

We anticipate refinancing all financing arrangements coming due in 20172018 with similar arrangements of terms greater than one year.  

See Notes 17 and 18 to the Partnership’s consolidated financial statements for additional details on the maturity of the debt obligations at December 31, 2016.  In addition, see Note 28 to the Partnership’s consolidated financial statements for investment and debt obligation activity subsequent to December 31, 2016.

 

(iv)

Payment of distributions to the Unitholders – Series A Preferred Unit and BUC holders

Distributions to the Series A Preferred unitholders,Unitholders, if declared by the General Partner, will beare paid at a fixed rate of 3.0% annually.  The Series A Preferred unitsUnits are non-cumulative, non-voting and non-convertible.  See Note 21 to our consolidated financial statements for more detail.

Distributions to the BUC holders may increase or decrease at the determination of the General Partner.  The per unitUnit cash available for distribution primarily depends on the amount of interest and other cash received by us from our portfolio of mortgage revenue bondsMRBs and other investments, the amount of our outstanding debt and the effective interest rates paid by us on this debt, the level of operating and other cash expenses incurred by us, and the number of unitsUnits outstanding. During the year ended December 31, 2016, we generated cash available for distribution of $0.50 per unit. For further discussion, see “Cash Available for Distribution” in this section.

Leverage Ratio

We utilize leverage to enhance rates of return to our Unitholders. We use target constraintsratios for each type of financing obligation utilized by us to manage an overall 65% leverage constraint, as previously established by the Partnership’s Board of Managers (the “Board”) of Burlington, which is the general partner of the Partnership’s general partner. During the third quarter of 2017, the Board approved an increase in the overall leverage constraint to 75%. The amount of leverage utilized is dependent upon several factors, including the assets being leveraged, the leverage program utilized, constraints of market collateral calls and the liquidity and marketability of the underlying collateral of the asset being leveraged. We defineddefine our leverage constraintratio as total outstanding debt divided by total assets using the carrying value of the mortgage revenue bonds,MRBs, PHC Certificates, initial finance costs and the MF Properties at cost. OnAt December 31, 2016,2017, our overall leverage constraintratio was approximately 65%64%.  On February 27, 2017, the Board approved an increase in the leverage constraint to 70%.

Cash Flows

 

In fiscal 2016,2017, we generated $3.7$48.8 million of cash, which was the net result of $15.2$17.1 million provided by operating activities, $83.1$21.5 million used in investing activities, and $71.5$53.2 million provided by financing activities.

 


Cash provided by operating activities totaled $15.2$17.1 million in 2016,2017, as compared to $19.4$15.2 million generated in 2015.2016. The decreaseincrease was mainly driven by a $2.7 million decrease in 2016 net income due to factors described in the Resultsinterest receivable of  Operations section of this Item 7 above and a smaller adjustment to net income for the non-cash (gain) loss on derivatives of $1.8$2.2 million.

 

Cash used in investing activities totaled $21.5 million in 2017, as compared to $83.1 million in 2016, as compared to $138.7 million in 2015.2016. The decreasechange is due to an increase in principal payments and redemption proceeds received on MRBs of $45.3 million, a decrease in cash paidused to acquire mortgage revenue bondspurchase MRBs of $58.0$9.3 million, and a decrease in property loan advances of $5.7 million.

 

Cash provided by financing activities totaled $53.2 million in 2017, as compared to $71.5 million in 2016, as compared2016. The change is due to $87.2 milliona net increase in 2015. Major factors that caused the decrease are a reductionpayments on lines of credit of $52.5 million. This change is offset by an increase in net borrowing oncash from debt financingfinancings of $67.2$18.5 million an increase of $9.6 million in principal payments on mortgages payable and an increase in distributions paid of $2.7 million. These reductions are offset by $40.9 million in proceeds from issuancesthe issuance of Series A Preferred Units and a net increased on unsecured and secured lines of credit of $23.6$12.8 million.


We believe our cash balance and cash provided by the sources discussed herein will be sufficient to pay, or refinance, our debt obligations and to meet our liquidity needs over the next 12 months.

Cash Available for Distribution

We utilize a calculation of CAD as a metric to help us determine the Partnership’s ability to make distributions to Unitholders.  We believeThe Partnership believes that CAD provides relevant information about the Partnership’s operations and is necessary, along with net income, for understanding its operating results.  To calculate CAD, we beginthe Partnership begins with net income and addadds back non-cash expenses consisting of amortization expense related to debt financing costs and bond issuance costs, interest rate derivative expense or income, provision for loan losses, impairments on bondsMRBs, PHC Certificates, real estate assets and property loans, losses related to VIEs including depreciationand Restricted Units compensation expense, RUAs, and income received in cash from transactions which have been eliminated in consolidation, to the Partnership’s net income (loss) as computed in accordance with GAAP, and deducts Tier 2 income (see Note 23 to the Partnership’s consolidated financial statements) attributable to the Partnership as defined in the Amended and Restated LP Agreement.  Net income is the GAAP measure most comparable to CAD. There is no generally accepted methodology for computing CAD, and the Partnership’s computation of CAD may not be comparable to CAD reported by other companies.  Although we considerthe Partnership considers CAD to be a useful measure of the Partnership’s operating performance, CAD is a non-GAAP measure that should not be considered as an alternative to net income or net cash flows from operating activities which arethat is calculated in accordance with GAAP, or any other measures of financial performance or liquidity presented in accordance with GAAP.

Currently, cash distributions are made to the Partnership’s Unitholders at an annual rate of $0.50 per unit.Unit. The amount of the cash per unitUnit distributed by us may increase or decrease at the determination of AFCA 2 based on its assessment of the amount of cash available to us for this purpose. During the years ended December 31, 2017, 2016 and 2015, we generated Cash Available for Distribution of $0.60, $0.50 and $0.53 per unit,Unit, respectively. We believe that as we continue to implement our current investment plans, we will be able to continue to generate sufficient CAD to maintain cash distributions to Unitholders at the existing level of $0.50 per unitUnit per year without the use of other available cash.  However, there is no assurance that we will be able to generate CAD at levels in excess of the current annual distribution rate, which could result in a reduced annual distribution rate per unit.Unit.


The following tables show the calculation of CAD (and a reconciliation of ourthe Partnership’s net income (loss) as determined in accordance with GAAP to our CAD) for the years ended December 31, 2017, 2016 2015 and 2014.2015.

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

2014

 

 

2017

 

 

2016

 

 

2015

 

Partnership net income

 

$

23,784,507

 

 

$

26,609,023

 

 

$

15,033,861

 

 

$

30,591,198

 

 

$

23,784,507

 

 

$

26,609,023

 

Net (income) loss related to VIEs and eliminations due to

consolidation

 

 

-

 

 

 

(3,721,397

)

 

 

635,560

 

 

 

-

 

 

 

-

 

 

 

(3,721,397

)

Net income before impact of Consolidated VIE

 

 

23,784,507

 

 

 

22,887,626

 

 

 

15,669,421

 

 

 

30,591,198

 

 

 

23,784,507

 

 

 

22,887,626

 

Change in fair value of derivatives and interest rate

derivative amortization

 

 

(17,618

)

 

 

1,802,655

 

 

 

2,003,350

 

 

 

240,091

 

 

 

(17,618

)

 

 

1,802,655

 

Depreciation and amortization expense

 

 

6,862,530

 

 

 

6,505,011

 

 

 

4,897,916

 

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Provision for loan loss

 

 

-

 

 

 

-

 

 

 

75,000

 

Impairment expense

 

 

61,506

 

 

 

-

 

 

 

-

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Impairment charge on real estate assets

 

 

-

 

 

 

61,506

 

 

 

-

 

Amortization of deferred financing costs

 

 

1,862,509

 

 

 

1,622,789

 

 

 

1,183,584

 

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Restricted units compensation

expense

 

 

833,142

 

 

 

-

 

 

 

-

 

 

 

1,615,242

 

 

 

833,142

 

 

 

-

 

Deferred income taxes

 

 

366,000

 

 

 

-

 

 

 

-

 

 

 

(400,000

)

 

 

366,000

 

 

 

-

 

Redeemable Series A preferred unit distribution and

accretion

 

 

(583,407

)

 

 

-

 

 

 

-

 

Redeemable Series A Preferred Unit distribution and

accretion

 

 

(1,982,538

)

 

 

(583,407

)

 

 

-

 

Tier 2 Income distributable to the General Partner (1)

 

 

(2,858,650

)

 

 

(2,338,956

)

 

 

(937,106

)

 

 

(1,994,518

)

 

 

(2,858,650

)

 

 

(2,338,956

)

Developer income (2)

 

 

-

 

 

 

18,159

 

 

 

619,948

 

 

 

-

 

 

 

-

 

 

 

18,159

 

Bond purchase premium (discount) amortization

(accretion), net of cash received

 

 

(106,439

)

 

 

1,300,932

 

 

 

116,329

 

 

 

(270,048

)

 

 

(106,439

)

 

 

1,300,932

 

Provision for loss on receivables

 

 

-

 

 

 

-

 

 

 

-

 

Depreciation and amortization related to discontinued

operations

 

 

-

 

 

 

7,432

 

 

 

8,208

 

 

 

-

 

 

 

-

 

 

 

7,432

 

Total CAD

 

$

30,204,080

 

 

$

31,805,648

 

 

$

23,636,650

 

 

$

36,098,781

 

 

$

30,204,080

 

 

$

31,805,648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of units outstanding, basic

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

Net income per unit, basic

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

Total CAD per unit, basic

 

$

0.50

 

 

$

0.53

 

 

$

0.40

 

Distributions per unit

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding, basic

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

Net income per Unit, basic

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Total CAD per Unit, basic

 

$

0.60

 

 

$

0.50

 

 

$

0.53

 

Distributions per Unit

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

(1)

(1)As described in Note 3 to the Company’s consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the Unitholders and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner.

For the year ended December 31, 2017, we realized contingent interest of approximately $219,000 from excess cash flow on the Lake Forest MRBs and approximately $2.9 million of cash proceeds from redemption of the Ashley Square MRB, which resulted in Tier 2 income allocable to the general partner of approximately $787,000. The remaining Tier 2 income allocated to the general partner was realized on the gains on sale of the Northern View, Residences of Weatherford, Residences of DeCordova and Eagle Village MF Properties, net of tax. The Amended and Restated LP Agreement limits Tier 2 income to 0.9% per annum of the principal amount of the MRBs and other investments on a cumulative basis. This limit was reached during the year ended December 31, 2017. All income in excess of the limit is considered Tier 3 income that is allocated entirely to the BUCs. See Note 3 of the consolidated financial statements for additional information.  

For the year ended December 31, 2016, we realized contingent interest of approximately $642,000 from excess cash flow on the Ashley Square and Lake Forest mortgage revenue bondsMRBs and approximately $1.4 million on settlement of the Foundation for Affordable Housing property loan, which resulted in Tier 2 income allocable to the general partner of approximately $505,000. In addition, we realized gross gains of approximately $12.4 million and $1.7 million from the sales of the Arboretum and Woodland Park, respectively. After consideration of income taxes, the gain on these sales resulted in approximately $2.4 million allocable to the general partner.

For the year ended December 31, 2015, the Consolidated VIEs were sold and we realized approximately $4.8 million of contingent interest and 25% of Tier 2 income due to the General Partner of approximately $1.2 million.  In addition, we reported the sale of Glynn Place and The Colonial which resulted in an approximately $1.2 million and $3.4 million gain, respectively, and 25% of Tier 2 income due to the General Partner is approximately $297,000 and $854,000, respectively.

For the year ended December 31, 2014, we realized the sale of the Autumn Pines bond which resulted in an approximate $873,000 gain and Tier 2 income due to the General Partner of approximately $218,000, realized the redemption of the Lost Creek bond which resulted in an approximate $2.8 million gain and Tier 2 income due to the General Partner of approximately $709,000, and received contingent interest from Ashley Square generating $10,000 of Tier 2 income due to the General Partner.

(2) The developer income amount represents cash received by us for developer and construction management services performed on The 50/50 Student Housing at UNL mixed-use project in Lincoln, Nebraska.  The development at the University of Nebraska - Lincoln is accounted for as an MF property

(2)

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

 


The table below identifies the composition of CAD per unitUnit earned by us for the years ended December 31, 2017, 2016 2015 and 2014:2015:

 

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Total CAD per unit

 

$

0.50

 

 

$

0.53

 

 

$

0.40

 

Non-Recurring CAD per unit

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative non-recurring expenses

 

 

-

 

 

 

0.006

 

 

 

-

 

One-time expenses related to MF Properties

 

 

-

 

 

 

0.007

 

 

 

-

 

Non-recurring CAD per unit total

 

 

-

 

 

 

0.013

 

 

 

-

 

Recurring CAD per unit

 

$

0.50

 

 

$

0.54

 

 

$

0.40

 

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Total CAD per Unit

 

$

0.60

 

 

$

0.50

 

 

$

0.53

 

Non-Recurring CAD per Unit:

 

 

 

 

 

 

 

 

 

 

 

 

  General and administrative non-recurring expenses

 

 

-

 

 

 

-

 

 

 

0.006

 

  One-time expenses related to MF Properties

 

 

-

 

 

 

-

 

 

 

0.007

 

Non-recurring CAD per Unit

 

 

-

 

 

 

-

 

 

 

0.013

 

Recurring CAD per Unit

 

$

0.60

 

 

$

0.50

 

 

$

0.54

 

 

The non-recurring CAD per unitUnit reflects activity that will not recur within a two–year period.

 

Off Balance Sheet Arrangements

As of December 31, 20162017 and 2015,2016, we held mortgage revenue bonds whichMRBs that are collateralized by Residential Properties.  The Residential Properties are owned by entities that are not controlled by us.  We have no equity interest in these entities and do not guarantee any obligations of these entities.  The Consolidated VIEs did not have off-balance sheet arrangements.  For additional discussions related to guarantees, see Note 20 to the Company’s consolidated financial statements.

We do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

We do not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with us or our related parties, other than what is disclosed in Note 24 to the Company’s consolidated financial statements.

Contractual Obligations

As discussed in Notes 15 through 18 to the Company’s consolidated financial statements, the amounts maturing in 2017 consist of the principal paid on LOCs, the TEBS credit facility with Freddie Mac, the TOB, Term TOB and Term A/B credit facilities with DB, and payments on the MF Property mortgages.mortgages payable and other secured financing.  Our strategic objective is to leverage our bondMRB portfolio utilizing long termlong-term securitization financings either with Freddie Mac through its TEBS program or with Deutsche Bank through its Term A/B Trust program.  This strategy allows us to better match the duration of our assets and liabilities and to better manage the spread between our assets and liabilities. 

As part of our strategy of acquiring mortgage revenue bonds,MRBs, we will enter into bond purchase commitments related to mortgage revenue bondsMRBs to be issued and secured by properties under construction.  Upon execution of the bond purchase commitment, the proceeds from the mortgage revenue bondsMRBs issued will be used to pay off the construction related debt and mortgage revenue bonds.MRBs.  We account for our Bond Purchase Commitments as available-for-sale securities and record the estimated fair value of the Bond Purchase Commitments as an asset or liability with changes in such valuationvaluations recorded in other comprehensive income.  See Note 20 to the Company’s consolidated financial statements for additional details.

We have the following contractual obligations as of December 31, 2016:2017:

 

 

Payments due by period

 

 

Payments due by period

 

 

Total

 

 

Less than 1 year

 

 

1-3 years

 

 

3-5 years

 

 

More than 5 years

 

 

Total

 

 

Less than 1 year

 

 

1-3 years

 

 

3-5 years

 

 

More than 5 years

 

Debt Obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lines of credit - secured and unsecured

 

$

60,000,000

 

 

$

60,000,000

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

50,000,000

 

 

$

50,000,000

 

 

$

-

 

 

$

-

 

 

$

-

 

Debt financing

 

 

500,268,901

 

 

 

148,105,926

 

 

 

133,726,552

 

 

 

83,785,922

 

 

 

134,650,501

 

 

 

562,595,172

 

 

 

75,557,815

 

 

 

244,005,126

 

 

 

63,639,712

 

 

 

179,392,519

 

Mortgages payable and other secured financings

 

 

51,719,928

 

 

 

8,270,379

 

 

 

12,641,257

 

 

 

30,808,292

 

 

 

-

 

 

 

35,767,924

 

 

 

763,246

 

 

 

28,145,684

 

 

 

6,858,994

 

 

 

-

 

Lease Obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease

 

 

5,469,613

 

 

 

128,406

 

 

 

264,568

 

 

 

275,257

 

 

 

4,801,382

 

Purchase Obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward bond purchase commitments

 

 

66,940,000

 

 

 

50,540,000

 

 

 

16,400,000

 

 

 

-

 

 

 

-

 

 

 

35,940,000

 

 

 

35,940,000

 

 

 

-

 

 

 

-

 

 

 

-

 

Total

 

$

618,928,829

 

 

$

206,916,305

 

 

$

162,767,809

 

 

$

114,594,214

 

 

$

134,650,501

 

 

$

689,772,709

 

 

$

162,389,467

 

 

$

272,415,378

 

 

$

70,773,963

 

 

$

184,193,901

 

 

We are also contractually obligated to pay interest on our long-term debt obligations. The weighted average interest of our lines of credit is 3.1%4.4% at December 31, 2016.2017. The weighted average interest of our debt financing is 3.1%3.7% at December 31, 2016.2017. The weighted average interest of our mortgages payable and other secured financings is 3.8%4.2% at December 31, 2016.2017.


Inflation

With respect to the financial results of our investments in mortgage revenue bonds and MF Properties, substantiallySubstantially all of the resident leases at the Residential Properties, which collateralize our mortgage revenue bonds,MRBs, allow for adjustments in the rent payable at the time of renewal, subject to rent restrictions related to mortgage revenue bonds. Thus,the MRBs. Additionally, the MF Properties may be able to seek rent increases. The substantial majority of these leases are for one year or less. The short-term nature of these leases generally serves to reduce the risk to the properties of the adverse effects of inflation; however, market conditions may prevent the properties from increasing rental rates in amounts sufficient to offset higher operating expenses. Inflation did not have a significant impact on our financial results for the years presented in this report.

Critical Accounting Policies

The preparation of financial statements in accordance with GAAP requires us to make a number of judgments, assumptions, and estimates. The application of these judgments, assumptions, and estimates can affect the amounts of assets, liabilities, revenues, and expenses reported by us. All of ourOur significant accounting policies are described in Note 2 and 25 to the Company’s consolidated financial statements, which are incorporated by reference. We consider the following to be our critical accounting policies because they involve our judgments, assumptions and estimates that significantly affect the consolidated financial statements. If these estimates differ significantly from actual results, the impact on our consolidated financial statements may be material.

Variable Interest Entities

Under the consolidation guidance, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are variable interest entities (“VIEs”) and if the Partnership is the primary beneficiary. The entity that is deemed to have (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in the consolidated financial statements.  The Company has consolidated all VIEs in which it has determined it is the primary beneficiary. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership and the Consolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates all VIEs at each reporting date based on events and circumstances at the VIEs.  As a result, changes to the Consolidated VIEs may occur in the future based on changes in circumstances.  The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The General Partner does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) impacts the Partnership’s status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership, the treatment of the mortgage revenue bondsMRBs on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the mortgage revenue bondsMRBs secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to Unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs was comprisedconsists of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partner and Unitholders as such activity is not contemplated by, or addressed in, the First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as amended (the “Amended and Restated LP Agreement”).Agreement.

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 as ofon 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 Mortgage Revenue BondsMRBs and Bond Purchase Commitments.  The fair valuesvalue of the Partnership’s investments in mortgage revenue bondsMRBs and mortgage bond purchase commitments have each beenis based onupon prices obtained from a discounted cash flow or yield to maturity analysis.third-party pricing service, which are indicative of market prices. There is no active trading market for the mortgage revenue bondsMRBs and price quotes for the mortgage revenue bondsMRBs are not available. If 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 may also consider price quotes onanalyzes 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 considers current market interest rates as well as quantitative and qualitative characteristics similar mortgage revenue bonds or other information from external sources, such asto those used by the third-party pricing services.service. The fair value estimates of the fair values of these mortgage revenue bonds,MRBs, whether estimated by the Partnershipthird-party pricing service or based on external sources,the Partnership, are based largely on unobservable inputs the Partnership believes would be used by market participants.  Additionally, the calculation methodology used by the external sourcesparticipants and the Partnership encompassesrequires the use of judgment in its application. To validate changes inon the fair valuepart of the Partnership’s investments in mortgage revenue bonds between reporting periods,third-party pricing service and management. Due to the Partnership looks at the key inputs such as changes in the ‘A’ rated municipal bond rates on similar mortgage revenue bonds as well as changes in the operating performance of the underlying property serving as collateral for each mortgage revenue bond.  The Partnership validates that the changes in the estimated fair value of the mortgage revenue bonds move with the changes in these monitored factors.  Given these factsjudgments involved, the fair value measurement of the Partnership’s investmentinvestments in mortgage revenue bondsMRBs and bond purchase commitments is categorized as a Level 3 input.

The fair value of the bond purchase commitments is determined in the same manner as the mortgage revenue bonds.

Investments in Public Housing Capital Fund Trust Certificates.  The fair value of the Partnership’s investment in Public Housing Capital Fund TrustPHC Certificates has beenis based onupon prices obtained from a yield to maturity analysis performed by the Partnership.third-party pricing service, which are indicative of market prices. There is no active trading market for the trusts’ certificates owned by the Partnership, but it will look at estimated values as determined by pricing services when available.Partnership. The estimatesvaluation methodology of the fair valuesPartnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of these trusts’ certificates begineach 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. The Partnership analyzes 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 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. Additionally, the calculation methodologyThe valuation methodologies used by externalthe third-party pricing servicesservice and the Partnership encompassesencompass the use of judgment in itstheir application. The Partnership validates thatDue to the changes in the estimated fair value of Public Housing Capital Fund Trust 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 factsjudgments involved, the fair value measurement of the Partnership’s investment in Public Housing Capital Fund TrustPHC Certificates is categorized as a Level 3 input.

Taxable bondsMRBs.. The fair valuesvalue of the Partnership’s investments in taxable bonds have each beenMRBs is based onupon prices obtained from a discounted cash flow or yield to maturity analysis.third-party pricing service, which are indicative of market prices. There is no active trading market for the taxable bondsMRBs and price quotes are not available. The estimatesvaluation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each taxable 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 taxable MRBs values are then estimated using a discounted cash flow and yield to maturity or call analysis. The Partnership analyzes 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 considers current market interest rates as well as quantitative and qualitative characteristics like those used by the third-party pricing service. The fair valuesvalue estimates of these taxable bonds,MRBs, whether estimated by the Partnershipthird-party pricing service or based on external sources,the Partnership, are based largely on unobservable inputs the Partnership believes would be used by market participants.  Additionally, the calculation methodology used by the external sourcesparticipants and the Partnership encompassesrequires the use of judgment in its application. To validate changes inon the fair valuepart of the Partnership’s investments in taxable bonds between reporting periods, management looks atthird-party pricing service and management. Due to 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 validates the changes in the estimated fair value of the taxable bonds move with the changes in these monitored factors.  Given these factsjudgments involved, the fair value measurement of the Partnership’s investmentinvestments in taxable bonds isMRBs are categorized as a Level 3 input.


Interest rate derivativesRate 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 isare not observable and therefore is categorized as a Level 3 input.  The inputs in the valuation model include three-month LIBORLondon Inter-bank Offered Rate (“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 calculates a fair value of each financial liability using a discounted cash flow model based on the debt amortization schedules at the effective rate of interest for each period represented.  This estimate of fair value is based on Level 3 inputs. 

Mortgage Revenue Bond, Taxable Mortgage Revenue Bonds and Bond Purchase Commitments Impairment

The Partnership accounts for its investments in MRBs, taxable MRBs and bond purchase commitments under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value of mortgage revenue bonds, taxable MRBs and bond purchase commitments.

The Partnership periodically reviews each of its mortgage revenue bonds,MRBs, taxable bondsMRBs and bond purchase commitments for impairment.  The Partnership evaluates whether unrealized losses are considered to be other-than-temporary based on a number ofvarious factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Adverse conditions specifically related to the security, its collateral, or both,

Volatility of the fair value of the security,

The likelihood of the borrower being able to make payments,

Failure of the issuer to make scheduled interest or principal payments, and

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost, if the Partnership has the intent to sell or may be required to sell the security prior to the time that theirthe value recovers or until maturity, and whether the Partnership expects to recover the securities’security’s entire amortized cost basis.  

The recognition of other-than-temporary impairment and the potential impairment analysis are subject to a considerable degree of judgment, the results of which when applied under different conditions or assumptions could have a material impact on the consolidated financial statements. If the Partnership experiences deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio whichthat could negatively impact the Partnership’s financial condition, cash flows, and reported earnings.

PHC Certificates Impairment

The Partnership accounts for its investments in PHC Certificates under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral.

The Partnership periodically reviews each class ofthe PHC Certificates for impairment. The Partnership evaluates whether a decline in the fair value of a PHC Certificatethe investments is below its amortized cost is other-than temporary based on a number ofvarious factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Downgrade in the security’s rating by S&P, and

Volatility of the fair value of the security.


Real Estate AssetsImpairment

The Partnership reviews real estate assets at least annuallyquarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of the real estate assets may not be recoverable, the Partnership compares the carrying amount to the undiscounted net cash flows expected to be generated from the use of the assets. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. See Note 9 for information on recognized impairment charges.

Recently Issued Accounting Pronouncements

For a discussion on recently issued accounting pronouncements, see Note 2 to the Company’s consolidated financial statements which are incorporated by reference.

 

 


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk exposures are interest rate risk and credit risk. Our exposure to market risks relates primarily to our investments in mortgage revenue bondsMRBs and PHC Certificates and our debt financing, mortgages payable and other secured financing.

Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.  The nature of our mortgage revenue bonds,MRBs, PHC Certificates and the debt financing used to finance these investments exposes us to financial risk due to fluctuations in market interest rates.  The mortgage revenue bondsMRBs and PHC Certificates bear base interest at fixed rates.  In addition, the mortgage revenue bondsMRBs may also pay contingent interest whichthat fluctuates based upon the cash flows of the underlying property and proceeds from the refinancing or sale of the property. 

Our primary credit risk is the risk of default on our investment in mortgage revenue bondsMRBs and taxable property loans collateralized by the Residential Properties. The mortgage revenue bondsMRBs are not direct obligations of the governmental authorities that issuedissue the bondsMRBs and are not guaranteed by such authorities, any insurer or other party. In addition, the mortgage revenue bondsMRBs and the associated taxable property loans are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments (including both base and contingent interest) on the mortgage revenue bondsMRBs and the taxable property loans is the net rental revenues generated by these properties or the net proceeds from anya sale or refinance of these properties.

If a property is unable to sustain net rental revenues at a level necessary to pay current debt service obligations on our mortgage revenue bondMRB or taxable property loan on such property,loans, a default may occur. A property’s ability to generate net rental income is subject to a wide variety of factors, including rental and occupancy rates of the property and the level of its operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, multifamily residential properties in the market area in which awhere the property is located. This is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (e.g. zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of a multifamily residential property.

We also have credit risk in itsour investment in PHC Certificates, which holdare custodial receipts evidencing loans made to a number of public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities solely out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.  If Congress fails to continue to makemaking annual appropriations for the Capital Fund Program at or near current levels, or there is a delay in the approval of appropriations, the public housing authorities may not have funds from which to pay principal and interest on the loans underlying the PHC Certificates.

Defaults on the mortgage revenue bonds,MRBs, taxable property loans, or the public housing authoritiesauthorities’ loans backing the PHC Certificates may reduce the amount of future cash available for distribution to Unitholders. In addition, if a property’s net rental income declines, it may affect the market value of the property. If the market value of a property deteriorates, the amount of net proceeds from the ultimate sale or refinancing of the property may be insufficient to repay the entire principal balance of the mortgage revenue bondMRB or taxable property loan secured by the property.  In the event of a default on a mortgage revenue bondMRB or taxable property loan, we will have the right to foreclose on the mortgage or deed of trust securing the property. If we take ownership of the property securing a defaulted mortgage revenue bond,MRB, we will be entitled to all net rental revenues generated by the property. If such an event occurs, these amounts will not provide tax-exempt income.

We actively manage the credit risks associated with our mortgage revenue bondsMRBs and taxable property loans by performing a complete due diligence and underwriting process of the properties securing these investments prior to investing.  In addition, we carefully monitor the performance of the properties underlying these investments subsequent to their purchase by the Partnership.  Our primary method of managing the credit risk associated with the PHC Certificates is to monitor the rating reportratings reports issued at least annually by a rating agency for each of three PHC Certificates.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

WeA third-party pricing service is used to value our mortgage revenue bonds usingMRBs. The pricing service uses a discounted cash flow and yield to maturity or call analyses which encompasses judgment in its application.  The key assumption in ourthe yield to maturity or call analysis is the range of effective yields of the individual mortgage revenue bonds.MRBs.  The effective yield analysis for each mortgage revenue bondMRB considers the current market yield on similar mortgage revenue bonds as well asMRBs, specific terms of the debt service coverage ratioMRB, and various characteristics of each underlying property serving as collateral for the mortgage revenue bond.MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We also value the PHC certificatesCertificates based onupon prices obtained from a yield to maturity analysisthird-party pricing service, which begins withare indicative of market prices. There is no active trading market for the currentPHC Certificates. The valuation methodology of our third-party pricing service incorporates commonly used market yield rate for a “AAA” rated tax-free municipal bond for a term consistent withpricing methods. It considers the weighted-average lifeunderlying 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. The fair value estimate by the Public Housing Capital Fund truststhird-party pricing service encompasses the use of judgment in its application.   


adjusted largely for unobservable inputs it believes would be used by market participants.  Our fair value estimates encompass judgment and are compared to external pricing services when available.   

We completed a sensitivity analysis which is hypothetical and is as of a specific point in time.  If available, we may also consider price quotes on similar mortgage revenue bonds or other information from external sources, such as pricing services.  Pricing services, broker quotes and our analyses provide indicative pricing only. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. 

The table below summarizes the sensitivity analysis metrics related to the investments in the mortgage revenue bondsMRBs and PHC Certificates at December 31, 2016:2017:

 

Description

 

Estimated Fair Value in 000's

 

 

Range of Effective Yields as Reported in Notes 6 and 7

 

Range of Effective Yields if 10% Adverse Applied

 

Additional Unrealized Losses with 10% Adverse Change in 000's

 

 

Estimated Fair Value in 000's

 

 

Range of Effective Yields used in Valuation

 

Range of Effective Yields if 10% Adverse Applied

 

Additional Unrealized Losses with 10% Adverse Change in 000's

 

Mortgage Revenue Bonds

 

$

680,211

 

 

 

4.9

%

-  12.4%

 

 

5.4

%

-  13.6%

 

$

35,868

 

 

$

788,839

 

 

 

2.9

%

-  8.4%

 

 

3.2

%

-    9.2%

 

$

21,342

 

PHC Certificates

 

 

57,158

 

 

 

4.3

%

-   6.0%

 

 

4.7

%

-    6.6%

 

 

1,863

 

 

 

49,642

 

 

 

5.1

%

-  5.8%

 

 

5.6

%

-    6.4%

 

 

1,556

 

 

Geographic Risk

The properties securing the Partnership’s mortgage revenue bondsMRBs are geographically dispersed throughout the United States, with significant concentrations (geographic risk) in Texas, California and Texas.South Carolina. At December 31, 2017, and 2016, the concentration in Texas as a percentage of principal outstanding was approximately 44% and 2015,45%, respectively. At December 31, 2017, and 2016, the concentration in California as a percentage of principal outstanding was approximately 20% and 8%20%, respectively. At December 31, 2016,2017, and 2015, the concentration in Texas as a percentage of principal outstanding was approximately 45% and 51%, respectively. At December 31, 2016, and 2015, the concentration in South Carolina as a percentage of principal outstanding was approximately 12%16% and 12%, respectively.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

At December 31, 2016,2017, the total costs of borrowing by investment type were as follows:

The unsecured LOCs range between 3.1%4.4% and 3.9%;

The secured LOC has a rate of 3.1%4.6%;

The M24, M31, and M33 TEBS facilities range between 2.1%2.9% and 2.6%3.6%;

The Term TOB Trusts securitized by mortgage revenue bondsMRBs range between 4.0% and 4.4%;

The Term A/B Trusts securitized by mortgage revenue bondsMRBs range between 3.6%  and 4.6%4.5%;

The TOB Trusts securitized by PHC Certificates range between 2.9%3.9% and 3.0%4.0%; and

The mortgages payable and other secured financings range between 3.5%3.9% and 4.8%4.7%.


We manage our interest rate risk on our debt financing by enteringenter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on the variable rate financing facilities. The following table sets forth certain information regarding the Partnership’s interest rate cap agreements at December 31, 2016:2017:

 

Purchase Date

 

Initial Notional Amount

 

 

Effective

Capped Rate

 

 

Maturity Date

 

Purchase Price

 

 

Fair Value - Asset (Liability) (1)

 

 

Variable Debt

Financing Facility

Hedged

 

Maximum

Potential

Cost of

Borrowing

 

 

Counterparty

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2017

 

Sept 2010

 

$

31,936,667

 

 

 

3.0

%

 

Sept 2017

 

$

921,000

 

 

$

2

 

 

M24 TEBS

 

 

5.0

%

 

Bank of New York Mellon

Sept 2010

 

 

31,936,667

 

 

 

3.0

%

 

Sept 2017

 

 

845,600

 

 

 

2

 

 

M24 TEBS

 

 

5.0

%

 

Barclays Bank PLC

Sept 2010

 

 

31,936,667

 

 

 

3.0

%

 

Sept 2017

 

 

928,000

 

 

 

2

 

 

M24 TEBS

 

 

5.0

%

 

Royal Bank of Canada

Aug 2013

 

 

93,305,000

 

 

 

1.5

%

 

Sept 2017

 

 

793,000

 

 

 

619

 

 

M24 TEBS

 

 

3.5

%

 

Deutsche Bank

Feb 2014

 

 

41,250,000

 

 

 

1.0

%

 

March 2017

 

 

230,500

 

 

 

2

 

 

PHC TOB Trusts

 

 

3.3

%

 

SMBC Capital Markets, Inc

July 2014

 

 

31,565,000

 

 

 

3.0

%

 

Aug 2019

 

 

315,200

 

 

 

34,614

 

 

M31 TEBS

 

 

4.4

%

 

Barclays Bank PLC

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

31,565,000

 

 

 

3.0

%

 

Aug 2019

 

 

343,000

 

 

 

34,614

 

 

M31 TEBS

 

 

4.4

%

 

Royal Bank of Canada

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

31,565,000

 

 

 

3.0

%

 

Aug 2019

 

 

333,200

 

 

 

34,614

 

 

M31 TEBS

 

 

4.4

%

 

SMBC Capital Markets, Inc

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

28,095,000

 

 

 

3.0

%

 

Aug 2020

 

 

210,000

 

 

 

93,045

 

 

M33 TEBS

 

 

4.3

%

 

Wells Fargo Bank

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

28,095,000

 

 

 

3.0

%

 

Aug 2020

 

 

187,688

 

 

 

93,045

 

 

M33 TEBS

 

 

4.3

%

 

Royal Bank of Canada

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

28,095,000

 

 

 

3.0

%

 

Aug 2020

 

 

174,900

 

 

 

93,045

 

 

M33 TEBS

 

 

4.3

%

 

SMBC Capital Markets, Inc

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

383,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) For additional details, see Note 25 to the Partnership's consolidated financial statements.

 

 

 

 

 

 

 

(1) For additional details, see Note 25 to the Partnership's condensed consolidated financial statements.


We have also contracted for two interest rate swaps with DB relatedDB. 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 Financings securitized by mortgage revenue bondsTrust 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 intended to mitigate interest rate risk for Decatur Angle and Bruton Apartments.the variable rate PHC TOB Trusts.  The following table summarizes the terms of the interest rate swaps at December 31, 2016 and 2015:2017:

 

Purchase Date

 

Initial Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2016 - Fair Value of Liability

 

 

December 31, 2015 - Fair Value of Liability

 

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

23,000,000

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

0.53

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(738,574

)

 

$

(737,219

)

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

$

18,126,731

 

 

April 2017

 

April 2022

 

 

2.06

%

 

N/A

 

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(600,709

)

 

 

(579,856

)

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,339,283

)

 

$

(1,317,075

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

 

These interest rate derivatives and interest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value with changes in fair value included in current period earnings as interest expense. See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements.

 

Interest Rates Risk – Change in Net Interest Income

 

The following table sets forth information regarding the impact on the Partnership’s net interest income assuming a change in interest rates:

 

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

(41,318

)

 

$

82,587

 

 

$

165,107

 

 

$

247,561

 

 

$

329,948

 

 

$

3,835

 

 

$

(17,272

)

 

$

(27,758

)

 

$

(37,116

)

 

$

(46,185

)

TEBS Debt Financings

 

 

338,758

 

 

 

(713,087

)

 

 

(1,096,654

)

 

 

(1,335,730

)

 

 

(1,574,959

)

 

 

319,966

 

 

 

(477,105

)

 

 

(697,116

)

 

 

(903,258

)

 

 

(1,107,202

)

Other Investment Financings

 

 

22,278

 

 

 

19,214

 

 

 

76,805

 

 

 

134,431

 

 

 

192,090

 

 

 

40,047

 

 

 

(83,818

)

 

 

(164,461

)

 

 

(244,900

)

 

 

(325,185

)

Total

 

$

319,718

 

 

$

(611,286

)

 

$

(854,742

)

 

$

(953,738

)

 

$

(1,052,921

)

 

$

363,848

 

 

$

(578,195

)

 

$

(889,335

)

 

$

(1,185,274

)

 

$

(1,478,572

)

 

The interest rate sensitivity table above(“Table”) represents the change in net interest income from investments net of interest on debt and CAD,interest rate derivative expenses over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve and the resulting implied forward rates are realized as a component of this shift


in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events would not occur that would affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.

As the above information incorporates only those material positions or exposures that existed as of December 31, 2016,2017, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigatingmitigation strategies at that time and the overall business and economic environment.

 

 

 


Item 8.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMVariable Interest Entities

ToUnder the Boardconsolidation guidance, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are variable interest entities (“VIEs”) and if the Partnership is the primary beneficiary. The entity that is deemed to have (1) the power to direct the activities of Directorsa VIE that most significantly impact the entity’s economic performance and Partners(2) the obligation to absorb losses of
America First Multifamily Investors, L.P.

the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in the consolidated financial statements.  The Company has consolidated all VIEs in which it has determined it is the primary beneficiary. In our opinion, the accompanyingCompany’s consolidated balance sheet as of December 31, 2016financial statements, all transactions and accounts between the Partnership and the related consolidated statementsConsolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates VIEs at each reporting date based on events and circumstances at the VIEs.  As a result, changes to the Consolidated VIEs may occur in the future based on changes in circumstances.  The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The General Partner does not believe that the consolidation of operations, comprehensive income (loss), partners’ capital and cash flowsVIEs for the year then ended present fairly, in all material respects, the financial position of America First Multifamily Investors, L.P. and its subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the year then ended in conformity withreporting under accounting principles generally accepted in the United States of America.  AlsoAmerica (“GAAP”) impacts the Partnership’s status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership, the treatment of the MRBs on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the MRBs secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to Unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs consists of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partner and Unitholders as such activity is not contemplated by, or addressed in, the Amended and Restated LP Agreement.

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.

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 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 analyzes 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 considers current market interest rates as well as quantitative and qualitative characteristics similar to those used by the third-party pricing service. The fair value estimates of these MRBs, whether estimated by the third-party pricing service or the Partnership, are based largely on unobservable inputs the Partnership believes would 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 bond purchase commitments is 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 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. The Partnership analyzes 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 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 valuation methodologies used by the third-party pricing service 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 MRBs. The fair value of the Partnership’s taxable MRBs 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 MRBs 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 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 taxable MRBs values are then estimated using a discounted cash flow and yield to maturity or call analysis. The Partnership analyzes 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 considers current market interest rates as well as quantitative and qualitative characteristics like those used by the third-party pricing service. The fair value estimates of these taxable MRBs, whether estimated by the third-party pricing service or the Partnership, are based largely on unobservable inputs the Partnership believes would 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 MRBs are 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 London Inter-bank Offered Rate (“LIBOR”) rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.

Mortgage Revenue Bond, Taxable Mortgage Revenue Bonds and Bond Purchase Commitments Impairment

The Partnership accounts for its investments in MRBs, taxable MRBs and bond purchase commitments under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value of mortgage revenue bonds, taxable MRBs and bond purchase commitments.

The Partnership periodically reviews each of its MRBs, taxable MRBs and bond purchase commitments for impairment.  The Partnership evaluates whether unrealized losses are considered other-than-temporary based on various factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Adverse conditions specifically related to the security, its collateral, or both,

Volatility of the fair value of the security,

The likelihood of the borrower being able to make payments,

Failure of the issuer to make scheduled interest or principal payments, and

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost, if the Partnership has the intent to sell or may be required to sell the security prior to the time that the value recovers or until maturity, and whether the Partnership expects to recover the security’s entire amortized cost basis.  

The recognition of other-than-temporary impairment and the potential impairment analysis are subject to a considerable degree of judgment, the results of which when applied under different conditions or assumptions could have a material impact on the consolidated financial statements. If the Partnership experiences deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings.

PHC Certificates Impairment

The Partnership periodically reviews the PHC Certificates for impairment. The Partnership evaluates whether a decline in the fair value of the investments is below its amortized cost is other-than temporary based on various factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Downgrade in the security’s rating by S&P, and

Volatility of the fair value of the security.


Real Estate AssetsImpairment

The Partnership reviews real estate assets at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of the real estate assets may not be recoverable, the Partnership compares the carrying amount to the undiscounted net cash flows expected to be generated from the use of the assets. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. See Note 9 for information on recognized impairment charges.

Recently Issued Accounting Pronouncements

For a discussion on recently issued accounting pronouncements, see Note 2 to the Company’s consolidated financial statements which are incorporated by reference.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk exposures are interest rate risk and credit risk. Our exposure to market risks relates primarily to our investments in MRBs and PHC Certificates and our debt financing, mortgages payable and other secured financing.

Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.  The nature of our MRBs, PHC Certificates and the debt financing used to finance these investments exposes us to financial risk due to fluctuations in market interest rates.  The MRBs and PHC Certificates bear base interest at fixed rates.  In addition, the MRBs may also pay contingent interest that fluctuates based upon the cash flows of the underlying property and proceeds from the refinancing or sale of the property. 

Our primary credit risk is the risk of default on our investment in MRBs and taxable property loans collateralized by the Residential Properties. The MRBs are not direct obligations of the governmental authorities that issue the MRBs and are not guaranteed by such authorities, any insurer or other party. In addition, the MRBs and the associated taxable property loans are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments (including both base and contingent interest) on the MRBs and the taxable property loans is the net rental revenues generated by these properties or the net proceeds from a sale or refinance of these properties.

If a property is unable to sustain net rental revenues at a level necessary to pay current debt service obligations on our MRB or taxable property loans, a default may occur. A property’s ability to generate net rental income is subject to a wide variety of factors, including rental and occupancy rates of the property and the level of its operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, multifamily residential properties in the market area where the property is located. This is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (e.g. zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of a multifamily residential property.

We also have credit risk in our opinion,investment in PHC Certificates, which are custodial receipts evidencing loans made to a number of public housing authorities.  Principal and interest on these loans are payable by the Company maintained,respective public housing authorities solely out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.  If Congress fails to continue making annual appropriations for the Capital Fund Program at or near current levels, or there is a delay in the approval of appropriations, the public housing authorities may not have funds to pay principal and interest on the loans underlying the PHC Certificates.

Defaults on the MRBs, taxable property loans, or the public housing authorities’ loans backing the PHC Certificates may reduce the amount of future cash available for distribution to Unitholders. In addition, if a property’s net rental income declines, it may affect the market value of the property. If the market value of a property deteriorates, the amount of net proceeds from the ultimate sale or refinancing of the property may be insufficient to repay the entire principal balance of the MRB or taxable property loan secured by the property.  In the event of a default on a MRB or taxable property loan, we will have the right to foreclose on the mortgage or deed of trust securing the property. If we take ownership of the property securing a defaulted MRB, we will be entitled to all net rental revenues generated by the property. If such an event occurs, these amounts will not provide tax-exempt income.

We actively manage the credit risks associated with our MRBs and taxable property loans by performing a complete due diligence and underwriting process of the properties securing these investments prior to investing.  In addition, we carefully monitor the performance of the properties underlying these investments subsequent to their purchase by the Partnership.  Our primary method of managing the credit risk associated with the PHC Certificates is to monitor the ratings reports issued at least annually by a rating agency for each of three PHC Certificates.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

A third-party pricing service is used to value our MRBs. The pricing service uses a discounted cash flow and yield to maturity or call analyses which encompasses judgment in its application.  The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRBs.  The effective yield analysis for each MRB considers the current market yield on similar MRBs, specific terms of the MRB, and various characteristics of underlying property serving as collateral for the MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We value the PHC Certificates based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates. The valuation methodology of our 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. The fair value estimate by the third-party pricing service encompasses the use of judgment in its application.   


We completed a sensitivity analysis which is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. 

The table below summarizes the sensitivity analysis metrics related to the investments in the MRBs and PHC Certificates at December 31, 2017:

Description

 

Estimated Fair Value in 000's

 

 

Range of Effective Yields used in Valuation

 

Range of Effective Yields if 10% Adverse Applied

 

Additional Unrealized Losses with 10% Adverse Change in 000's

 

Mortgage Revenue Bonds

 

$

788,839

 

 

 

2.9

%

-  8.4%

 

 

3.2

%

-    9.2%

 

$

21,342

 

PHC Certificates

 

 

49,642

 

 

 

5.1

%

-  5.8%

 

 

5.6

%

-    6.4%

 

 

1,556

 

Geographic Risk

The properties securing the Partnership’s MRBs are geographically dispersed throughout the United States, with significant concentrations (geographic risk) in Texas, California and South Carolina. At December 31, 2017, and 2016, the concentration in Texas as a percentage of principal outstanding was approximately 44% and 45%, respectively. At December 31, 2017, and 2016, the concentration in California as a percentage of principal outstanding was approximately 20% and 20%, respectively. At December 31, 2017, and 2016, the concentration in South Carolina as a percentage of principal outstanding was approximately 16% and 12%, respectively.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

At December 31, 2017, the total costs of borrowing by investment type were as follows:

The unsecured LOCs range between 4.4% and 4.6%;

The M24, M31, and M33 TEBS facilities range between 2.9% and 3.6%;

The Term TOB Trusts securitized by MRBs range between 4.0% and 4.4%;

The Term A/B Trusts securitized by MRBs range between 3.6%  and 4.5%;

The TOB Trusts securitized by PHC Certificates range between 3.9% and 4.0%; and

The mortgages payable and other secured financings range between 3.9% and 4.7%.

We enter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on the variable rate financing facilities. The following table sets forth certain information regarding the Partnership’s interest rate cap agreements at December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2017

 

July 2014

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

(1) For additional details, see Note 25 to the Partnership's condensed consolidated financial statements.


We have 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 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 December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

These interest rate derivatives and interest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value with changes in fair value included in current period earnings as interest expense. See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements.

Interest Rates Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s income assuming a change in interest rates:

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

3,835

 

 

$

(17,272

)

 

$

(27,758

)

 

$

(37,116

)

 

$

(46,185

)

TEBS Debt Financings

 

 

319,966

 

 

 

(477,105

)

 

 

(697,116

)

 

 

(903,258

)

 

 

(1,107,202

)

Other Investment Financings

 

 

40,047

 

 

 

(83,818

)

 

 

(164,461

)

 

 

(244,900

)

 

 

(325,185

)

Total

 

$

363,848

 

 

$

(578,195

)

 

$

(889,335

)

 

$

(1,185,274

)

 

$

(1,478,572

)

The interest rate sensitivity table (“Table”) represents the change in interest income from investments net of interest on debt and interest rate derivative expenses over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve and the resulting implied forward rates are realized as a component of this shift in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events would not occur that would affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.

As the above information incorporates only those material respects, effective internal control over financial reportingpositions or exposures that existed as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee2017, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report On Internal Control Over Financial Reporting appearing under Item 9A.  Our responsibility is to express opinions on these financial statements andmarket risks will depend on the Company's internal control over financial reporting based onexposures that arise during the period, our integrated audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards requirerisk mitigation strategies at that we plantime and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,business and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

March 3, 2017



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Partners of
America First Multifamily Investors, L.P.
Omaha, Nebraska

We have audited the accompanying consolidated balance sheet of America First Multifamily Investors, L.P. and subsidiaries (the "Company") as of December 31, 2015, and the related consolidated statements of operations, comprehensive income (loss), partners’ capital, and cash flows for each of the two years in the period ended December 31, 2015.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of America First Multifamily Investors, L.P. and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. 

As discussed in Notes 6, 7, and 25, the consolidated financial statements include total investments valued at approximately $655,000,000 (75% of total assets) and $521,000,000 (70% of total assets) as of December 31, 2015 and 2014, respectively, whose fair values have been estimated by management in the absence of readily determinable fair values.  At December 31, 2015, management’s estimates were based on discounted cash flows or yield to maturity analyses performed by management.

As discussed in Notes 17 and 26 to the consolidated financial statements, the accompanying 2015 consolidated financial statements have been retrospectively adjusted for a segment change and the adoption of guidance related to the presentation of deferred financing costs.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

March 3, 2016 (November 2, 2016 as to the effects of retrospective adjustment for a segment change and the presentation of deferred financing costs discussed in Notes 17 and 26)economic environment.

 

 

 


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED BALANCE SHEETS

 

 

December 31, 2016

 

 

December 31, 2015

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

20,748,521

 

 

$

17,035,782

 

Restricted cash

 

 

6,757,699

 

 

 

8,950,374

 

Interest receivable, net

 

 

6,983,203

 

 

 

5,220,859

 

Mortgage revenue bonds held in trust, at fair value (Note  6)

 

 

590,194,179

 

 

 

536,316,481

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

90,016,872

 

 

 

47,366,656

 

Public housing capital fund trusts, at fair value (Note 7)

 

 

57,158,068

 

 

 

60,707,290

 

Mortgage-backed securities, at fair value (Note 8)

 

 

-

 

 

 

14,775,309

 

Real estate assets: (Note 9)

 

 

 

 

 

 

 

 

Land and improvements

 

 

17,354,587

 

 

 

17,887,505

 

Buildings and improvements

 

 

113,089,041

 

 

 

139,153,699

 

Real estate assets before accumulated depreciation

 

 

130,443,628

 

 

 

157,041,204

 

Accumulated depreciation

 

 

(16,217,028

)

 

 

(16,023,814

)

Net real estate assets

 

 

114,226,600

 

 

 

141,017,390

 

Investment in unconsolidated entities (Note 10)

 

 

19,470,006

 

 

 

-

 

Property loans, net of loan loss allowance (Note 11)

 

 

29,763,334

 

 

 

22,775,709

 

Other assets (Note 13)

 

 

8,795,192

 

 

 

12,944,633

 

Total Assets

 

$

944,113,674

 

 

$

867,110,483

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

7,255,327

 

 

$

5,667,948

 

Distribution payable

 

 

8,017,950

 

 

 

8,759,343

 

Unsecured lines of credit (Note 15)

 

 

40,000,000

 

 

 

17,497,000

 

Secured line of credit, net (Note 16)

 

 

19,816,667

 

 

 

-

 

Debt financing, net (Note 17)

 

 

495,383,033

 

 

 

451,496,716

 

Mortgages payable and other secured financing, net (Note 18)

 

 

51,379,512

 

 

 

69,247,574

 

Derivative swaps, at fair value (Note 19)

 

 

1,339,283

 

 

 

1,317,075

 

Total Liabilities

 

 

623,191,772

 

 

 

553,985,656

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Series A preferred units, approximately $40.9 million redemption value, 10.0 million

   authorized, 4.1  million and 0.0 million issued and outstanding, respectively (Note 21)

 

 

40,788,034

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

102,536

 

 

 

399,077

 

Beneficial Unit Certificate holders

 

 

280,026,669

 

 

 

312,720,264

 

Total Partnersʼ Capital

 

 

280,129,205

 

 

 

313,119,341

 

Noncontrolling interest (Note 9)

 

 

4,663

 

 

 

5,486

 

Total Capital

 

 

280,133,868

 

 

 

313,124,827

 

Total Liabilities and Partnersʼ Capital

 

$

944,113,674

 

 

$

867,110,483

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

Item 8.  CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

17,404,439

 

 

$

17,789,125

 

 

$

14,250,572

 

Investment income

 

 

36,892,996

 

 

 

34,409,809

 

 

 

26,606,234

 

Contingent interest income

 

 

2,021,077

 

 

 

4,756,716

 

 

 

40,000

 

Other interest income

 

 

2,660,238

 

 

 

2,624,262

 

 

 

856,217

 

Other income

 

 

-

 

 

 

373,379

 

 

 

188,000

 

Total revenues

 

 

58,978,750

 

 

 

59,953,291

 

 

 

41,941,023

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

9,223,108

 

 

 

10,052,669

 

 

 

7,796,761

 

Provision for loan loss

 

 

-

 

 

 

-

 

 

 

75,000

 

Impairment charge

 

 

61,506

 

 

 

-

 

 

 

-

 

Depreciation and amortization

 

 

6,862,530

 

 

 

6,505,011

 

 

 

4,897,916

 

Amortization of deferred financing costs

 

 

1,862,509

 

 

 

1,622,789

 

 

 

1,183,584

 

Interest expense

 

 

15,469,639

 

 

 

14,826,217

 

 

 

11,165,911

 

General and administrative

 

 

10,837,188

 

 

 

8,660,889

 

 

 

5,547,208

 

Total expenses

 

 

44,316,480

 

 

 

41,667,575

 

 

 

30,666,380

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of MF Properties

 

 

14,072,317

 

 

 

4,599,109

 

 

 

-

 

Gain on sale of securities

 

 

8,097

 

 

 

-

 

 

 

3,701,772

 

Income before income taxes

 

 

28,742,684

 

 

 

22,884,825

 

 

 

14,976,415

 

Income tax expense

 

 

4,959,000

 

 

 

-

 

 

 

-

 

Income from continuing operations

 

 

23,783,684

 

 

 

22,884,825

 

 

 

14,976,415

 

Income from discontinued operations (including gain on sale of VIEs of

   approximately $3.2 million in 2015)

 

 

-

 

 

 

3,721,397

 

 

 

52,773

 

Net income

 

 

23,783,684

 

 

 

26,606,222

 

 

 

15,029,188

 

Net loss attributable to noncontrolling interest

 

 

(823

)

 

 

(2,801

)

 

 

(4,673

)

Partnership net income

 

 

23,784,507

 

 

 

26,609,023

 

 

 

15,033,861

 

Redeemable Series A preferred unit distributions and accretion

 

 

(583,407

)

 

 

-

 

 

 

-

 

Net income available to Partners

 

$

23,201,100

 

 

$

26,609,023

 

 

$

15,033,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to Partners and noncontrolling interest allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

2,992,106

 

 

$

2,474,274

 

 

$

1,056,316

 

Limited Partners - Unitholders

 

 

20,176,693

 

 

 

20,413,352

 

 

 

14,613,105

 

Limited Partners - Restricted Unitholders

 

 

32,301

 

 

 

-

 

 

 

-

 

Unallocated gain (loss) of Consolidated VIEs

 

 

-

 

 

 

3,721,397

 

 

 

(635,560

)

Noncontrolling interest

 

 

(823

)

 

 

(2,801

)

 

 

(4,673

)

 

 

$

23,200,277

 

 

$

26,606,222

 

 

$

15,029,188

 

Unitholdersʼ interest in net income per unit (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

Income from discontinued operations (Note 2)

 

 

-

 

 

 

-

 

 

 

-

 

Net income per unit, basic and diluted

 

$

0.34

 

 

$

0.34

 

 

$

0.25

 

Distributions declared, per unit

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

Weighted average number of units outstanding, basic

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

Weighted average number of units outstanding, diluted

 

 

60,182,264

 

 

 

60,252,928

 

 

 

59,431,010

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Net income

 

$

23,783,684

 

 

$

26,606,222

 

 

$

15,029,188

 

Reversal of net unrealized gain on sale of securities

 

 

(236,439

)

 

 

-

 

 

 

-

 

Unrealized gain (loss) on securities

 

 

(18,596,853

)

 

 

10,042,241

 

 

 

62,852,308

 

Net realized (loss) on securities

 

 

-

 

 

 

-

 

 

 

(1,658,166

)

Unrealized gain (loss) on bond purchase commitments

 

 

(3,234,911

)

 

 

(146,053

)

 

 

10,632,590

 

Comprehensive income

 

 

1,715,481

 

 

 

36,502,410

 

 

 

86,855,920

 

Comprehensive (loss) allocated to noncontrolling interest

 

 

(823

)

 

 

(2,801

)

 

 

(4,673

)

Partnership comprehensive income

 

$

1,716,304

 

 

$

36,505,211

 

 

$

86,860,593

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014

 

 

General Partner

 

 

# of Units - Restricted and Unrestricted

 

 

Beneficial Unit

Certificate Holders - Restricted and Unrestricted

 

 

Unallocated Deficit of Consolidated VIEs

 

 

Non-controlling

Interest

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance at January 1, 2014

 

$

16,671

 

 

 

51,052,928

 

 

$

223,573,312

 

 

$

(20,455,896

)

 

$

(11,322

)

 

$

203,122,765

 

 

$

(20,128,314

)

Sale of beneficial unit

   certificates

 

 

-

 

 

 

9,200,000

 

 

 

51,288,699

 

 

 

-

 

 

 

-

 

 

 

51,288,699

 

 

 

-

 

Redemption and sale of

   mortgage revenue bonds

 

 

(24,137

)

 

 

 

 

 

 

(2,389,576

)

 

 

-

 

 

 

-

 

 

 

(2,413,713

)

 

 

(2,413,713

)

Sale of MBS Securities

 

 

7,555

 

 

 

 

 

 

 

747,992

 

 

 

-

 

 

 

-

 

 

 

755,547

 

 

 

755,547

 

Distributions paid or accrued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(275,910

)

 

 

 

 

 

 

(27,315,146

)

 

 

-

 

 

 

-

 

 

 

(27,591,056

)

 

 

-

 

Distribution of Tier 2

  earnings (Note 3)

 

 

(937,106

)

 

 

 

 

 

 

(2,811,318

)

 

 

-

 

 

 

-

 

 

 

(3,748,424

)

 

 

-

 

Net income (loss)

 

 

1,056,316

 

 

 

 

 

 

 

14,613,105

 

 

 

(635,560

)

 

 

(4,673

)

 

 

15,029,188

 

 

 

-

 

Unrealized gain on securities

 

 

628,523

 

 

 

 

 

 

 

62,223,785

 

 

 

-

 

 

 

-

 

 

 

62,852,308

 

 

 

62,852,308

 

Unrealized gain on  bond

   purchase commitment

 

 

106,326

 

 

 

 

 

 

 

10,526,264

 

 

 

-

 

 

 

-

 

 

 

10,632,590

 

 

 

10,632,590

 

Balance at December 31, 2014

 

$

578,238

 

 

 

60,252,928

 

 

$

330,457,117

 

 

$

(21,091,456

)

 

$

(15,995

)

 

$

309,927,904

 

 

$

51,698,418

 

Bond redemption related to

   MF Property acquisition

 

 

(6,309

)

 

 

 

 

 

 

(624,610

)

 

 

 

 

 

 

 

 

 

 

(630,919

)

 

 

(630,919

)

Sale of MF Property

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

24,282

 

 

 

24,282

 

 

 

-

 

Deconsolidation of VIEs

 

 

(173,701

)

 

 

 

 

 

 

(17,196,359

)

 

 

17,370,059

 

 

 

-

 

 

 

-

 

 

 

-

 

Distributions paid or accrued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(233,430

)

 

 

 

 

 

 

(23,109,595

)

 

 

-

 

 

 

-

 

 

 

(23,343,025

)

 

 

-

 

Distribution of Tier 2

   earnings (Note 3)

 

 

(2,338,956

)

 

 

 

 

 

 

(7,016,869

)

 

 

-

 

 

 

-

 

 

 

(9,355,825

)

 

 

-

 

Net income (loss)

 

 

2,474,274

 

 

 

 

 

 

 

20,413,352

 

 

 

3,721,397

 

 

 

(2,801

)

 

 

26,606,222

 

 

 

-

 

Unrealized gain on securities

 

 

100,422

 

 

 

 

 

 

 

9,941,819

 

 

 

-

 

 

 

-

 

 

 

10,042,241

 

 

 

10,042,241

 

Unrealized loss on bond

   purchase commitment

 

 

(1,461

)

 

 

 

 

 

 

(144,592

)

 

 

-

 

 

 

-

 

 

 

(146,053

)

 

 

(146,053

)

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 on sale of securities

 

 

(2,364

)

 

 

 

 

 

 

(234,075

)

 

 

-

 

 

 

-

 

 

 

(236,439

)

 

 

(236,439

)

Distributions paid or accrued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(217,646

)

 

 

 

 

 

 

(21,546,966

)

 

 

-

 

 

 

-

 

 

 

(21,764,612

)

 

 

-

 

Distribution of Tier 2

  earnings (Note 3)

 

 

(2,858,650

)

 

 

 

 

 

 

(8,575,949

)

 

 

-

 

 

 

-

 

 

 

(11,434,599

)

 

 

-

 

Net income (loss) allocable to

   Partners

 

 

2,992,106

 

 

 

 

 

 

 

20,208,994

 

 

 

-

 

 

 

(823

)

 

 

23,200,277

 

 

 

-

 

Repurchase of Beneficial Unit

   Certificates

 

 

-

 

 

 

(272,307

)

 

 

(1,603,658

)

 

 

-

 

 

 

-

 

 

 

(1,603,658

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

272,307

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

8,331

 

 

 

-

 

 

 

824,811

 

 

 

-

 

 

 

-

 

 

 

833,142

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(28,390

)

 

 

(153,306

)

 

 

-

 

 

 

-

 

 

 

(153,306

)

 

 

-

 

Unrealized loss on securities

 

 

(185,969

)

 

 

-

 

 

 

(18,410,884

)

 

 

-

 

 

 

-

 

 

 

(18,596,853

)

 

 

(18,596,853

)

Unrealized loss on bond

   purchase commitment

 

 

(32,349

)

 

 

-

 

 

 

(3,202,562

)

 

 

-

 

 

 

-

 

 

 

(3,234,911

)

 

 

(3,234,911

)

Balance at December 31, 2016

 

$

102,536

 

 

 

60,224,538

 

 

$

280,026,669

 

 

$

-

 

 

$

4,663

 

 

$

280,133,868

 

 

$

38,895,484

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

23,783,684

 

 

$

26,606,222

 

 

$

15,029,188

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

6,862,530

 

 

 

6,505,011

 

 

 

5,837,973

 

Provision for loan loss

 

 

-

 

 

 

-

 

 

 

75,000

 

Gain on sale of MF Property

 

 

(14,072,317

)

 

 

(4,599,109

)

 

 

-

 

Gain on mortgage revenue bonds - redemption

 

 

-

 

 

 

-

 

 

 

(3,701,772

)

Gain on the sale of discontinued operations

 

 

-

 

 

 

(3,212,447

)

 

 

-

 

Contingent interest realized on investing activities

 

 

(1,379,466

)

 

 

(4,756,716

)

 

 

(40,000

)

Note interest income realized from the sale of Fairmont Oaks, Consolidated VIE

 

 

-

 

 

 

(1,454,621

)

 

 

-

 

Gain on sale of securities

 

 

(8,097

)

 

 

-

 

 

 

-

 

Non-cash (gain) loss on derivatives

 

 

(17,618

)

 

 

1,802,655

 

 

 

1,282,369

 

Restricted unit compensation expense

 

 

833,142

 

 

 

-

 

 

 

-

 

Bond premium/discount amortization

 

 

(153,922

)

 

 

238,996

 

 

 

(181,208

)

Amortization of deferred financing costs

 

 

1,862,509

 

 

 

1,622,789

 

 

 

1,183,584

 

Deferred income tax expense

 

 

366,000

 

 

 

-

 

 

 

-

 

Change in preferred return receivable from unconsolidated entities

 

 

(718,701

)

 

 

-

 

 

 

-

 

Changes in operating assets and liabilities, net of effect of acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

Increase in interest receivable

 

 

(1,762,344

)

 

 

(2,452,084

)

 

 

(1,074,623

)

(Increase) decrease in other assets

 

 

(112,174

)

 

 

(416,419

)

 

 

(24,276

)

(Decrease) increase in accounts payable and accrued expenses

 

 

(251,695

)

 

 

(496,859

)

 

 

(942,064

)

Net cash provided by operating activities

 

 

15,231,531

 

 

 

19,387,418

 

 

 

17,444,171

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(635,739

)

 

 

(3,282,107

)

 

 

(23,798,209

)

Restructure and acquisition of interest rate derivative

 

 

-

 

 

 

(562,088

)

 

 

(1,382,900

)

Proceeds from sale of MF Properties

 

 

45,850,000

 

 

 

16,196,510

 

 

 

-

 

Proceeds from sale of discontinued operations

 

 

-

 

 

 

22,900,000

 

 

 

-

 

Proceeds from sale of mortgage revenue bond

 

 

9,295,000

 

 

 

-

 

 

 

31,791,699

 

Proceeds from the sale of MBS Securities

 

 

14,997,069

 

 

 

-

 

 

 

28,606,311

 

Cash realized from the bond exchange for the Suites on Paseo property

 

 

-

 

 

 

514,095

 

 

 

-

 

Acquisition of mortgage revenue bonds

 

 

(130,620,000

)

 

 

(188,572,000

)

 

 

(142,794,827

)

Contributions to unconsolidated entities

 

 

(18,751,305

)

 

 

-

 

 

 

-

 

Acquisition of MF Property

 

 

(9,882,800

)

 

 

-

 

 

 

-

 

Restricted cash - debt collateral paid

 

 

(2,564,000

)

 

 

(4,815,000

)

 

 

(6,252,027

)

Restricted cash - debt collateral released

 

 

4,429,019

 

 

 

7,522,959

 

 

 

1,699,973

 

Decrease (increase) in restricted cash

 

 

342,609

 

 

 

(16,004

)

 

 

(475,208

)

Acquisition of taxable bonds

 

 

-

 

 

 

(500,000

)

 

 

-

 

Principal payments received on mortgage revenue bonds

 

 

7,630,638

 

 

 

21,932,563

 

 

 

1,172,831

 

Principal payments received on taxable bonds

 

 

551,162

 

 

 

153,821

 

 

 

145,000

 

Principal payments received on PHCs

 

 

2,014,120

 

 

 

963,526

 

 

 

5,956,305

 

Principal payments received on MBSs

 

 

-

 

 

 

-

 

 

 

85,000

 

Cash paid for land held for development and deposits on potentail purchases

 

 

(100,000

)

 

 

(2,889,400

)

 

 

-

 

Advances on property loans

 

 

(8,414,215

)

 

 

(11,208,763

)

 

 

(710,118

)

Principal payments received on property loans and related contingent interest

 

 

2,806,056

 

 

 

2,958,415

 

 

 

68,530

 

Net cash used in investing activities

 

 

(83,052,386

)

 

 

(138,703,473

)

 

 

(105,887,640

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid

 

 

(34,245,664

)

 

 

(31,556,898

)

 

 

(30,168,167

)

Proceeds from the sale of redeemable Series A Preferred Units

 

 

40,869,000

 

 

 

-

 

 

 

-

 

Payment of offering costs related to the sale of redeemable Series A preferred units

 

 

(86,814

)

 

 

-

 

 

 

-

 

Repurchase of beneficial unit certificates

 

 

(1,603,658

)

 

 

-

 

 

 

-

 

Proceeds from the sale of beneficial unit certificates

 

 

-

 

 

 

-

 

 

 

54,740,000

 

Payment of offering costs related to the sale of beneficial unit certificates

 

 

-

 

 

 

-

 

 

 

(3,451,301

)

Proceeds from debt financing

 

 

173,302,645

 

 

 

293,205,000

 

 

 

186,815,000

 

Principal payments on debt financing

 

 

(129,465,032

)

 

 

(182,132,712

)

 

 

(98,730,000

)

Principal payments on other secured financing

 

 

(7,500,000

)

 

 

-

 

 

 

-

 

Principal borrowing on mortgages payable

 

 

7,500,000

 

 

 

-

 

 

 

22,622,552

 

Principal payments on mortgages payable

 

 

(17,997,186

)

 

 

(8,415,981

)

 

 

(3,056,763

)

Principal borrowing on unsecured and secured lines of credit

 

 

87,487,639

 

 

 

74,071,261

 

 

 

-

 

Principal payments on unsecured lines of credit

 

 

(44,984,639

)

 

 

(55,149,000

)

 

 

-

 

Increase (decrease) in security deposit liability related to restricted cash

 

 

(44,984

)

 

 

16,004

 

 

 

475,208

 

Deferred costs related to future equity raises

 

 

-

 

 

 

(169,667

)

 

 

-

 

Debt financing and other deferred costs

 

 

(1,697,713

)

 

 

(2,709,513

)

 

 

(2,927,732

)

Net cash provided by financing activities

 

 

71,533,594

 

 

 

87,158,494

 

 

 

126,318,797

 

Net increase (decrease) in cash and cash equivalents

 

 

3,712,739

 

 

 

(32,157,561

)

 

 

37,875,328

 

Cash and cash equivalents at beginning of period, including cash and cash equivalents of assets held

   for sale and discontinued operations of $0, $35,772 and $25,976, respectively

 

 

17,035,782

 

 

 

49,193,343

 

 

 

11,318,015

 


Cash and cash equivalents at end of period, including cash and cash equivalents of discontinued

   operations of $0, $0 and $35,772,  respectively

 

$

20,748,521

 

 

$

17,035,782

 

 

$

49,193,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

15,175,628

 

 

$

12,866,079

 

 

$

9,112,063

 

Cash paid during the period for income taxes

 

$

4,615,000

 

 

$

-

 

 

$

-

 

Supplemental disclosure of non cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared but not paid for beneficial unit certificates and general partner

 

$

8,017,950

 

 

$

8,759,343

 

 

$

7,617,390

 

Distributions declared but not paid for Series A Preferred Units

 

$

271,518

 

 

$

-

 

 

$

-

 

Capital expenditures financed through accounts payable

 

$

46,528

 

 

$

26,368

 

 

$

137,759

 

Liabilities assumed in the acquisition of MF Property

 

$

135,326

 

 

$

-

 

 

$

-

 

Deferred financing costs financed through accounts payable

 

$

234,372

 

 

$

-

 

 

$

-

 

Beneficial unit certificates surrendered for tax withholding liabilities on restricted units

 

$

153,306

 

 

$

-

 

 

$

-

 

Exchange of Suites on Paseo assets held for the Suites on Paseo property

 

$

-

 

 

$

42,665,912

 

 

$

-

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014

1. Basis of Presentation

America First Multifamily Investors, L.P. (the “Company” or “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring, holding, sellingFinancial Statements and otherwise dealing with a portfolio of mortgage revenue bonds 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. The Partnership expects and believes the interest earned on these mortgage revenue bonds is excludable from gross income for federal income tax purposes.  Thus, most of the income earned by the Partnership is exempt from federal income taxes.  The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make property loans secured by multifamily residential properties which may or may not be financed by mortgage revenue bonds held by the Partnership.   The Partnership may acquire real estate securing its mortgage revenue bonds or property loans through foreclosure in the event of a default or through the receipt of a fee simple deed in lieu of foreclosure.  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 mortgage revenue bonds issued to finance these properties or to operate the MF Property until its “highest and best use” can be determined by management. The Partnership expects to sell its interest in these MF Properties in connection with the future syndication of low income housing tax credits under Section 42 of the Internal Revenue Code (“LIHTCs”) or to a tax-exempt organization and to acquire mortgage revenue bonds on these properties to provide debt financing to the new owners.Supplementary Data.

The general partner 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”). During 2016, the Partnership issued, in private placements, approximately 4.1 million units of non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”). The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership pursuant to a subscription agreement with four financial institutions resulting in approximately $40.9 million in gross aggregate proceeds to the Partnership (Note 21).

All disclosures of the number units for properties related to mortgage revenue bonds, taxable bonds and MF Properties are unaudited.

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P. and its wholly-owned subsidiaries. The “wholly-owned subsidiaries” include the MF Properties owned by various limited partnerships in which one of the wholly-owned subsidiaries (“The Greens Hold Co”) holds a 99% limited partner interest. All intercompany transactions are eliminated. The wholly-owned consolidated subsidiaries of the Partnership consist of:

ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold mortgage revenue bonds in order to facilitate the TEBS Financing, M24 TEBS Financing, with Freddie Mac (see Note 17).

ATAX TEBS II, LLC, a special purpose entity owned and controlled by the Partnership, created in 2014 to hold mortgage revenue bonds in order to facilitate the second TEBS financing, M31 TEBS Financing, with Freddie Mac (see Note 17).

ATAX TEBS III, LLC, a special purpose entity owned and controlled by the Partnership, created in 2015 to hold mortgage revenue bonds in order to facilitate the third TEBS Financing, M33 TEBS Financing, with Freddie Mac (see Note 17).

ATAX Vantage Holdings, LLC, a wholly owned subsidiary of the Partnership, committed to invest in the development of multifamily properties through property loans and equity contributions (see Notes 10 and 11).

Seven MF Properties which are either wholly or majority owned by the Partnership or subsidiaries of the Partnership (see Note 9).

Prior to January 1, 2016, the Partnership has consolidated two variable interest entities (“VIE”), Bent Tree and Fairmont Oaks properties (the “Consolidated VIEs”), in the consolidated financial statements. The Partnership did not hold an ownership interest in


the Consolidated VIEs but did own the mortgage revenue bonds that financed the Consolidated VIEs.  The Partnership was determined to be the primary beneficiary of these VIEs. The Consolidated VIEs are presented as discontinued operations for all periods presented and all significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation. The Company’s consolidated financial statements reported in this Form 10-K include the financial position and results of operations of the Partnership and the Consolidated VIEs. The Consolidated VIEs were sold in the fourth quarter of 2015.

Variable Interest Entities

Under the consolidation guidance, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are variable interest entities (“VIEs”) and if the Partnership is the primary beneficiary. The entity that is deemed to have (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in the consolidated financial statements.  The Company has consolidated all VIEs in which it has determined it is the primary beneficiary. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership and the Consolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates all VIEs at each reporting date based on events and circumstances at the VIEs.  As a result, changes to the Consolidated VIEs may occur in the future based on changes in circumstances.  The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The General Partner does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) impacts the Partnership’s status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership, the treatment of the mortgage revenue bondsMRBs on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the mortgage revenue bondsMRBs secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to Unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs was comprisedconsists of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partner and Unitholders as such activity is not contemplated by, or addressed in, the First Amended and Restated AgreementLP Agreement.

Fair Value of Limited Partnership dated September 15, 2015,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 amended (the “Amendedthe 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 Restated LP Agreement”).

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 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 sold its variable interests in Bent Treeanalyzes 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 considers current market interest rates as well as quantitative and Fairmont Oaks (the Consolidated VIEs) inqualitative characteristics similar to those used by the fourth quarterthird-party pricing service. The fair value estimates of 2015. The salethese MRBs, whether estimated by the third-party pricing service or the Partnership, are based largely on unobservable inputs the Partnership believes would be used by market participants and requires the use of judgment on the Consolidated VIEs met the criteria for discontinued operations presentation and have been classified as such in the Company’s consolidated financial statements for all periods presented. The gains and results of operations of the Consolidated VIEs are reported as part of the discontinued operations in net income for all periods presented (see Notes 14).

Acquisition Accounting

Pursuantthird-party pricing service and management. Due to the guidance on acquisition accounting,judgments involved, the fair value measurement of the Partnership’s investments in MRBs and bond purchase commitments is 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 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. The Partnership analyzes 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 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 allocatesbelieves would be used by market participants. The valuation methodologies used by the contractual purchase pricethird-party pricing service and the Partnership encompass the use of a property acquiredjudgment in their application. Due to the land, building, improvements and leases in existence asjudgments involved, the fair value measurement of the datePartnership’s investment in PHC Certificates is categorized as a Level 3 input.

Taxable MRBs. The fair value of acquisitionthe Partnership’s taxable MRBs is based on their relative fair values.upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the taxable MRBs and price quotes are not available. The building is valuedvaluation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each taxable MRB as if vacant.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 taxable MRBs values are then estimated valuation of in-place leases is calculatedusing a discounted cash flow and yield to maturity or call analysis. The Partnership analyzes pricing data received from the third-party pricing service by applying a risk-adjusted discount ratecomparing it to the projected cash flow deficit at each property during an assumed lease-up period forPartnership’s internal valuation methodology. The Partnership’s internal valuation methodology considers current market interest rates as well as quantitative and qualitative characteristics like those used by the third-party pricing service. The fair value estimates of these properties. This allocated cost is amortized overtaxable MRBs, whether estimated by the average remaining termthird-party pricing service or the Partnership, are based largely on unobservable inputs the Partnership believes would be used by market participants and requires the use of judgment on the part of the leasesthird-party pricing service and is included inmanagement. Due to the statementjudgments involved, the fair value measurement of operations under depreciation and amortization expense. The acquisition related costs to acquire a property are expensed as incurred.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid securities andthe Partnership’s investments in federally tax-exempt securities with maturities of three months or less when purchased.

Concentration of Credit Risk

The Partnership maintains the majority of its unrestricted cash balances at two financial institutions.  The balances insured by the Federal Deposit Insurance Corporationtaxable MRBs are equal to $250,000 at each institution.  At various times the cash balances exceeded the $250,000 limit.  The Partnership is also exposed to risk on its short-term investments in the event of non-performance bycategorized as a Level 3 input.


counterparties.Interest Rate Derivatives.  The Partnership does not anticipate any non-performance.  This risk is minimized significantly by the Partnership’s portfolio being restricted to investment grade securities.

Restricted Cash

Restricted cash is legally restricted to use and is comprisedeffect of resident security deposits, required maintenance reserves, escrowed funds, and property rehabilitation.  In addition, the Partnership is required to maintain restricted cash balances related to the TEBS Financing facilities and the Partnership’s interest rate derivatives.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 London Inter-bank Offered Rate (“LIBOR”) rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.

Investments in

Mortgage Revenue Bond, Taxable Mortgage Revenue Bonds and Bond Purchase Commitments Impairment

The Partnership accounts for its investments in mortgage revenue bonds,MRBs, taxable bondsMRBs and bond purchase commitments under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value of mortgage revenue bonds, taxable bondsMRBs and bond purchase commitments.

The Partnership periodically reviews each of its mortgage revenue bonds,MRBs, taxable bondsMRBs and bond purchase commitments for impairment.  The Partnership evaluates whether unrealized losses are considered to be other-than-temporary based on a number ofvarious factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Adverse conditions specifically related to the security, its collateral, or both,

Volatility of the fair value of the security,

The likelihood of the borrower being able to make payments,

Failure of the issuer to make scheduled interest or principal payments, and

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost, if the Partnership has the intent to sell or may be required to sell the security prior to the time that the value recovers or until maturity, and whether the Partnership expects to recover the security’s entire amortized cost basis.  

The recognition of other-than-temporary impairment and the potential impairment analysis are subject to a considerable degree of judgment, the results of which when applied under different conditions or assumptions could have a material impact on the consolidated financial statements. If the Partnership experiences deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio whichthat could negatively impact the Partnership’s financial condition, cash flows, and reported earnings. There were no

PHC Certificates Impairment

The Partnership periodically reviews the PHC Certificates for impairment. The Partnership evaluates whether a decline in the fair value of the investments is below its amortized cost is other-than temporary based on various factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Downgrade in the security’s rating by S&P, and

Volatility of the fair value of the security.


Real Estate AssetsImpairment

The Partnership reviews real estate assets at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment charges reportedsuggest that the carrying value of the real estate assets may not be recoverable, the Partnership compares the carrying amount to the undiscounted net cash flows expected to be generated from the use of the assets. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. See Note 9 for information on recognized impairment charges.

Recently Issued Accounting Pronouncements

For a discussion on recently issued accounting pronouncements, see Note 2 to the Company’s consolidated financial statements which are incorporated by reference.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk exposures are interest rate risk and credit risk. Our exposure to market risks relates primarily to our investments in MRBs and PHC Certificates and our debt financing, mortgages payable and other secured financing.

Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.  The nature of our MRBs, PHC Certificates and the debt financing used to finance these investments exposes us to financial risk due to fluctuations in market interest rates.  The MRBs and PHC Certificates bear base interest at fixed rates.  In addition, the MRBs may also pay contingent interest that fluctuates based upon the cash flows of the underlying property and proceeds from the refinancing or sale of the property. 

Our primary credit risk is the risk of default on our investment in MRBs and taxable property loans collateralized by the Residential Properties. The MRBs are not direct obligations of the governmental authorities that issue the MRBs and are not guaranteed by such authorities, any insurer or other party. In addition, the MRBs and the associated taxable property loans are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments (including both base and contingent interest) on the MRBs and the taxable property loans is the net rental revenues generated by these properties or the net proceeds from a sale or refinance of these properties.

If a property is unable to sustain net rental revenues at a level necessary to pay current debt service obligations on our MRB or taxable property loans, a default may occur. A property’s ability to generate net rental income is subject to a wide variety of factors, including rental and occupancy rates of the property and the level of its operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, multifamily residential properties in the market area where the property is located. This is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (e.g. zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of a multifamily residential property.

We also have credit risk in our investment in PHC Certificates, which are custodial receipts evidencing loans made to a number of public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities solely out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.  If Congress fails to continue making annual appropriations for the Capital Fund Program at or near current levels, or there is a delay in the approval of appropriations, the public housing authorities may not have funds to pay principal and interest on the loans underlying the PHC Certificates.

Defaults on the MRBs, taxable property loans, or the public housing authorities’ loans backing the PHC Certificates may reduce the amount of future cash available for distribution to Unitholders. In addition, if a property’s net rental income declines, it may affect the market value of the property. If the market value of a property deteriorates, the amount of net proceeds from the ultimate sale or refinancing of the property may be insufficient to repay the entire principal balance of the MRB or taxable property loan secured by the property.  In the event of a default on a MRB or taxable property loan, we will have the right to foreclose on the mortgage or deed of trust securing the property. If we take ownership of the property securing a defaulted MRB, we will be entitled to all net rental revenues generated by the property. If such an event occurs, these amounts will not provide tax-exempt income.

We actively manage the credit risks associated with our MRBs and taxable property loans by performing a complete due diligence and underwriting process of the properties securing these investments prior to investing.  In addition, we carefully monitor the performance of the properties underlying these investments subsequent to their purchase by the Partnership.  Our primary method of managing the credit risk associated with the PHC Certificates is to monitor the ratings reports issued at least annually by a rating agency for each of three PHC Certificates.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

A third-party pricing service is used to value our MRBs. The pricing service uses a discounted cash flow and yield to maturity or call analyses which encompasses judgment in its application.  The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRBs.  The effective yield analysis for each MRB considers the current market yield on similar MRBs, specific terms of the MRB, and various characteristics of underlying property serving as collateral for the MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We value the PHC Certificates based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates. The valuation methodology of our 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. The fair value estimate by the third-party pricing service encompasses the use of judgment in its application.   


We completed a sensitivity analysis which is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. 

The table below summarizes the sensitivity analysis metrics related to the investments in the MRBs and PHC Certificates at December 31, 2017:

Description

 

Estimated Fair Value in 000's

 

 

Range of Effective Yields used in Valuation

 

Range of Effective Yields if 10% Adverse Applied

 

Additional Unrealized Losses with 10% Adverse Change in 000's

 

Mortgage Revenue Bonds

 

$

788,839

 

 

 

2.9

%

-  8.4%

 

 

3.2

%

-    9.2%

 

$

21,342

 

PHC Certificates

 

 

49,642

 

 

 

5.1

%

-  5.8%

 

 

5.6

%

-    6.4%

 

 

1,556

 

Geographic Risk

The properties securing the Partnership’s MRBs are geographically dispersed throughout the United States, with significant concentrations (geographic risk) in Texas, California and South Carolina. At December 31, 2017, and 2016, the concentration in Texas as a percentage of principal outstanding was approximately 44% and 45%, respectively. At December 31, 2017, and 2016, the concentration in California as a percentage of principal outstanding was approximately 20% and 20%, respectively. At December 31, 2017, and 2016, the concentration in South Carolina as a percentage of principal outstanding was approximately 16% and 12%, respectively.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

At December 31, 2017, the total costs of borrowing by investment type were as follows:

The unsecured LOCs range between 4.4% and 4.6%;

The M24, M31, and M33 TEBS facilities range between 2.9% and 3.6%;

The Term TOB Trusts securitized by MRBs range between 4.0% and 4.4%;

The Term A/B Trusts securitized by MRBs range between 3.6%  and 4.5%;

The TOB Trusts securitized by PHC Certificates range between 3.9% and 4.0%; and

The mortgages payable and other secured financings range between 3.9% and 4.7%.

We enter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on the variable rate financing facilities. The following table sets forth certain information regarding the Partnership’s interest rate cap agreements at December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2017

 

July 2014

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

(1) For additional details, see Note 25 to the Partnership's condensed consolidated financial statements.


We have 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 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 December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

These interest rate derivatives and interest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value with changes in fair value included in current period earnings as interest expense. See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements.

Interest Rates Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s income assuming a change in interest rates:

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

3,835

 

 

$

(17,272

)

 

$

(27,758

)

 

$

(37,116

)

 

$

(46,185

)

TEBS Debt Financings

 

 

319,966

 

 

 

(477,105

)

 

 

(697,116

)

 

 

(903,258

)

 

 

(1,107,202

)

Other Investment Financings

 

 

40,047

 

 

 

(83,818

)

 

 

(164,461

)

 

 

(244,900

)

 

 

(325,185

)

Total

 

$

363,848

 

 

$

(578,195

)

 

$

(889,335

)

 

$

(1,185,274

)

 

$

(1,478,572

)

The interest rate sensitivity table (“Table”) represents the change in interest income from investments net of interest on debt and interest rate derivative expenses over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve and the resulting implied forward rates are realized as a component of this shift in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events would not occur that would affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.

As the above information incorporates only those material positions or exposures that existed as of December 31, 2017, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigation strategies at that time and the overall business and economic environment.


Item 8.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Managers and Partners of

America First Multifamily Investors, L.P.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of America First Multifamily Investors, L.P. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the two years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”).  We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017 based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management Report On Internal Control Over Financial Reporting appearing under Item 9A.  Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.  

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 28, 2018

We have served as the Company’s auditor since 2016.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Partners of

America First Multifamily Investors, L.P.

Omaha, Nebraska

We have audited the accompanying consolidated balance sheet of America First Multifamily Investors, L.P. and subsidiaries (the "Company") as of December 31, 2015, and the related consolidated statements of operations, comprehensive income (loss), partners’ capital, and cash flows for each of the two years in the period ended December 31, 2015.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of America First Multifamily Investors, L.P. and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.  

As discussed in Notes 6, 7, and 25, the consolidated financial statements include total investments valued at approximately $655,000,000 (75% of total assets) and $521,000,000 (70% of total assets) as of December 31, 2015 and 2014, respectively, whose fair values have been estimated by management in the absence of readily determinable fair values.  At December 31, 2015, management’s estimates were based on discounted cash flows or yield to maturity analyses performed by management.

As discussed in Notes 17 and 26 to the consolidated financial statements, the accompanying 2015 consolidated financial statements have been retrospectively adjusted for a segment change and the adoption of guidance related to the presentation of deferred financing costs.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

March 3, 2016 (November 2, 2016 as to the effects of retrospective adjustment for a segment change and the presentation of deferred financing costs discussed in Notes 17 and 26)


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED BALANCE SHEETS

 

 

December 31, 2017

 

 

December 31, 2016

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,597,699

 

 

$

20,748,521

 

Restricted cash

 

 

1,985,630

 

 

 

6,757,699

 

Interest receivable, net

 

 

6,541,132

 

 

 

6,983,203

 

Mortgage revenue bonds held in trust, at fair value (Note 6)

 

 

710,867,447

 

 

 

590,194,179

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

77,971,208

 

 

 

90,016,872

 

Public housing capital fund trusts, at fair value (Note 7)

 

 

49,641,588

 

 

 

57,158,068

 

Real estate assets: (Note 9)

 

 

 

 

 

 

 

 

Land and improvements

 

 

7,319,235

 

 

 

17,354,587

 

Buildings and improvements

 

 

78,953,488

 

 

 

113,089,041

 

Real estate assets before accumulated depreciation

 

 

86,272,723

 

 

 

130,443,628

 

Accumulated depreciation

 

 

(9,580,531

)

 

 

(16,217,028

)

Net real estate assets

 

 

76,692,192

 

 

 

114,226,600

 

Investment in unconsolidated entities (Note 10)

 

 

39,608,927

 

 

 

19,470,006

 

Property loans, net of loan loss allowance (Note 11)

 

 

29,513,874

 

 

 

29,763,334

 

Other assets (Note 13)

 

 

7,348,302

 

 

 

8,795,192

 

Total Assets

 

$

1,069,767,999

 

 

$

944,113,674

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

8,494,227

 

 

$

7,255,327

 

Distribution payable

 

 

8,423,803

 

 

 

8,017,950

 

Unsecured lines of credit (Note 15)

 

 

50,000,000

 

 

 

40,000,000

 

Secured line of credit, net (Note 16)

 

 

-

 

 

 

19,816,667

 

Debt financing, net (Note 17)

 

 

558,328,347

 

 

 

495,383,033

 

Mortgages payable and other secured financing, net (Note 18)

 

 

35,540,174

 

 

 

51,379,512

 

Derivative swaps, at fair value (Note 19)

 

 

826,852

 

 

 

1,339,283

 

Total Liabilities

 

 

661,613,403

 

 

 

623,191,772

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Series A preferred units, approximately $94.5 and $40.9 million redemption value,

   10.0 million authorized, 9.5 million and 4.1 million issued and outstanding, respectively (Note 21)

 

 

94,314,326

 

 

 

40,788,034

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

437,256

 

 

 

102,536

 

Beneficial Unit Certificate holders

 

 

313,403,014

 

 

 

280,026,669

 

Total Partnersʼ Capital

 

 

313,840,270

 

 

 

280,129,205

 

Noncontrolling interest

 

 

-

 

 

 

4,663

 

Total Capital

 

 

313,840,270

 

 

 

280,133,868

 

Total Liabilities and Partnersʼ Capital

 

$

1,069,767,999

 

 

$

944,113,674

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

13,499,645

 

 

$

17,404,439

 

 

$

17,789,125

 

Investment income

 

 

48,225,068

 

 

 

36,892,996

 

 

 

34,409,809

 

Contingent interest income

 

 

3,147,165

 

 

 

2,021,077

 

 

 

4,756,716

 

Other interest income

 

 

4,681,578

 

 

 

2,660,238

 

 

 

2,624,262

 

Other income

 

 

828,089

 

 

 

-

 

 

 

373,379

 

Total revenues

 

 

70,381,545

 

 

 

58,978,750

 

 

 

59,953,291

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

8,228,297

 

 

 

9,223,108

 

 

 

10,052,669

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Impairment charge on real estate assets

 

 

-

 

 

 

61,506

 

 

 

-

 

Depreciation and amortization

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Amortization of deferred financing costs

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Interest expense

 

 

22,155,443

 

 

 

15,469,639

 

 

 

14,826,217

 

General and administrative

 

 

12,769,757

 

 

 

10,837,188

 

 

 

8,660,889

 

Total expenses

 

 

51,452,851

 

 

 

44,316,480

 

 

 

41,667,575

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate assets, net

 

 

17,753,303

 

 

 

14,072,317

 

 

 

4,599,109

 

Gain on sale of securities

 

 

-

 

 

 

8,097

 

 

 

-

 

Income before income taxes

 

 

36,681,997

 

 

 

28,742,684

 

 

 

22,884,825

 

Income tax expense

 

 

6,019,146

 

 

 

4,959,000

 

 

 

-

 

Income from continuing operations

 

 

30,662,851

 

 

 

23,783,684

 

 

 

22,884,825

 

Income from discontinued operations (including gain on sale of VIEs of

   approximately $3.2 million in 2015)

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Net income

 

 

30,662,851

 

 

 

23,783,684

 

 

 

26,606,222

 

Net income (loss) attributable to noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

Partnership net income

 

 

30,591,198

 

 

 

23,784,507

 

 

 

26,609,023

 

Redeemable Series A preferred unit distributions and accretion

 

 

(1,982,538

)

 

 

(583,407

)

 

 

-

 

Net income available to Partners

 

$

28,608,660

 

 

$

23,201,100

 

 

$

26,609,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to Partners and noncontrolling interest allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

2,140,074

 

 

$

2,992,106

 

 

$

2,474,274

 

Limited Partners - Unitholders

 

 

26,293,975

 

 

 

20,176,693

 

 

 

20,413,352

 

Limited Partners - Restricted Unitholders

 

 

174,611

 

 

 

32,301

 

 

 

-

 

Unallocated gain of Consolidated VIEs

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

 

 

$

28,680,313

 

 

$

23,200,277

 

 

$

26,606,222

 

Unitholdersʼ interest in net income per Unit (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Income from discontinued operations (Note 2)

 

 

-

 

 

 

-

 

 

 

-

 

Net income per Unit, basic and diluted

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Distributions declared, per Unit

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

Weighted average number of Units outstanding, basic

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

Weighted average number of Units outstanding, diluted

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net income

 

$

30,662,851

 

 

$

23,783,684

 

 

$

26,606,222

 

Reversal of net unrealized gain on sale of securities

 

 

-

 

 

 

(236,439

)

 

 

-

 

Reversal of net unrealized gain on securities with other-than-temporary

   impairment

 

 

(672,097

)

 

 

-

 

 

 

-

 

Unrealized gain (loss) on securities

 

 

36,797,352

 

 

 

(18,596,853

)

 

 

10,042,241

 

Unrealized gain (loss) on bond purchase commitments

 

 

603,091

 

 

 

(3,234,911

)

 

 

(146,053

)

Comprehensive income

 

 

67,391,197

 

 

 

1,715,481

 

 

 

36,502,410

 

Comprehensive income (loss) allocated to noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

Partnership comprehensive income

 

$

67,319,544

 

 

$

1,716,304

 

 

$

36,505,211

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015

 

 

General Partner

 

 

# of Units - Restricted and Unrestricted

 

 

Beneficial Unit

Certificate Holders - Restricted and Unrestricted

 

 

Unallocated Deficit of Consolidated VIEs

 

 

Non-controlling

Interest

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance at January 1, 2015

 

$

578,238

 

 

 

60,252,928

 

 

$

330,457,117

 

 

$

(21,091,456

)

 

$

(15,995

)

 

$

309,927,904

 

 

$

51,698,418

 

Bond redemption related to

   MF Property acquisition

 

 

(6,309

)

 

 

 

 

 

 

(624,610

)

 

 

 

 

 

 

 

 

 

 

(630,919

)

 

 

(630,919

)

Sale of MF Property

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

24,282

 

 

 

24,282

 

 

 

-

 

Deconsolidation of VIEs

 

 

(173,701

)

 

 

 

 

 

 

(17,196,359

)

 

 

17,370,059

 

 

 

-

 

 

 

-

 

 

 

-

 

Distributions paid or accrued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(233,430

)

 

 

 

 

 

 

(23,109,595

)

 

 

-

 

 

 

-

 

 

 

(23,343,025

)

 

 

-

 

Distribution of Tier 2

   earnings (Note 3)

 

 

(2,338,956

)

 

 

 

 

 

 

(7,016,869

)

 

 

-

 

 

 

-

 

 

 

(9,355,825

)

 

 

-

 

Net income (loss)

 

 

2,474,274

 

 

 

 

 

 

 

20,413,352

 

 

 

3,721,397

 

 

 

(2,801

)

 

 

26,606,222

 

 

 

-

 

Unrealized gain on securities

 

 

100,422

 

 

 

 

 

 

 

9,941,819

 

 

 

-

 

 

 

-

 

 

 

10,042,241

 

 

 

10,042,241

 

Unrealized loss on bond

   purchase commitment

 

 

(1,461

)

 

 

 

 

 

 

(144,592

)

 

 

-

 

 

 

-

 

 

 

(146,053

)

 

 

(146,053

)

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 on sale of securities

 

 

(2,364

)

 

 

 

 

 

 

(234,075

)

 

 

-

 

 

 

-

 

 

 

(236,439

)

 

 

(236,439

)

Distributions paid or accrued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(217,646

)

 

 

 

 

 

 

(21,546,966

)

 

 

-

 

 

 

-

 

 

 

(21,764,612

)

 

 

-

 

Distribution of Tier 2 earnings (Note 3)

 

 

(2,858,650

)

 

 

 

 

 

 

(8,575,949

)

 

 

-

 

 

 

-

 

 

 

(11,434,599

)

 

 

-

 

Net income (loss) allocable to Partners

 

 

2,992,106

 

 

 

 

 

 

 

20,208,994

 

 

 

-

 

 

 

(823

)

 

 

23,200,277

 

 

 

-

 

Repurchase of Beneficial Unit Certificates

 

 

-

 

 

 

(272,307

)

 

 

(1,603,658

)

 

 

-

 

 

 

-

 

 

 

(1,603,658

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

272,307

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

8,331

 

 

 

 

 

 

 

824,811

 

 

 

-

 

 

 

-

 

 

 

833,142

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(28,390

)

 

 

(153,306

)

 

 

-

 

 

 

-

 

 

 

(153,306

)

 

 

-

 

Unrealized loss on securities

 

 

(185,969

)

 

 

 

 

 

 

(18,410,884

)

 

 

-

 

 

 

-

 

 

 

(18,596,853

)

 

 

(18,596,853

)

Unrealized loss on bond

   purchase commitment

 

 

(32,349

)

 

 

 

 

 

 

(3,202,562

)

 

 

-

 

 

 

-

 

 

 

(3,234,911

)

 

 

(3,234,911

)

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)

 

 

(1,994,518

)

 

 

 

 

 

 

(5,983,555

)

 

 

-

 

 

 

-

 

 

 

(7,978,073

)

 

 

-

 

Distribution of Tier 3

   earnings (Note 3)

 

 

-

 

 

 

 

 

 

 

(4,928,231

)

 

 

-

 

 

 

-

 

 

 

(4,928,231

)

 

 

-

 

Net income allocable to Partners

 

 

2,140,074

 

 

 

 

 

 

 

26,468,586

 

 

 

-

 

 

 

71,653

 

 

 

28,680,313

 

 

 

-

 

Sale of Beneficial Unit Certificates, net

   of issuance costs

 

 

-

 

 

 

161,383

 

 

 

805,890

 

 

 

-

 

 

 

-

 

 

 

805,890

 

 

 

-

 

Repurchase of Beneficial Unit

   Certificates

 

 

-

 

 

 

(254,656

)

 

 

(1,466,222

)

 

 

-

 

 

 

-

 

 

 

(1,466,222

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

283,046

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

16,152

 

 

 

 

 

 

 

1,599,090

 

 

 

-

 

 

 

-

 

 

 

1,615,242

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(40,637

)

 

 

(247,301

)

 

 

-

 

 

 

-

 

 

 

(247,301

)

 

 

-

 

Unrealized gain on securities

 

 

367,974

 

 

 

 

 

 

 

36,429,378

 

 

 

-

 

 

 

-

 

 

 

36,797,352

 

 

 

36,797,352

 

Unrealized gain on bond

   purchase commitment

 

 

6,031

 

 

 

 

 

 

 

597,060

 

 

 

-

 

 

 

-

 

 

 

603,091

 

 

 

603,091

 

Reversal of net unrealized gain on

   securities with other-than-temporary

   impairment

 

 

(6,721

)

 

 

 

 

 

 

(665,376

)

 

 

-

 

 

 

-

 

 

 

(672,097

)

 

 

(672,097

)

Balance at December 31, 2017

 

$

437,256

 

 

 

60,373,674

 

 

$

313,403,014

 

 

$

-

 

 

$

-

 

 

$

313,840,270

 

 

$

75,623,830

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

30,662,851

 

 

$

23,783,684

 

 

$

26,606,222

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Provision for loan loss

 

 

295,000

 

 

 

-

 

 

 

-

 

Gain on sale of real estate assets, net

 

 

(17,753,303

)

 

 

(14,072,317

)

 

 

(4,599,109

)

Gain on the sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

(3,212,447

)

Contingent interest realized on investing activities

 

 

(2,927,948

)

 

 

(1,379,466

)

 

 

(4,756,716

)

Note interest income realized from the sale of Fairmont Oaks, Consolidated VIE

 

 

-

 

 

 

-

 

 

 

(1,454,621

)

Gain on sale of securities

 

 

-

 

 

 

(8,097

)

 

 

-

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Loss (gain) on derivatives, net of cash paid

 

 

(170,031

)

 

 

(17,618

)

 

 

1,802,655

 

Restricted unit compensation expense

 

 

1,615,242

 

 

 

833,142

 

 

 

-

 

Bond premium/discount amortization

 

 

(320,382

)

 

 

(153,922

)

 

 

238,996

 

Amortization of deferred financing costs

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Deferred income tax expense (benefit)

 

 

(400,000

)

 

 

366,000

 

 

 

-

 

Change in preferred return receivable from unconsolidated entities

 

 

(2,922,158

)

 

 

(718,701

)

 

 

-

 

Changes in operating assets and liabilities, net of effect of acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in interest receivable

 

 

442,071

 

 

 

(1,762,344

)

 

 

(2,452,084

)

(Increase) decrease in other assets

 

 

245,564

 

 

 

(112,174

)

 

 

(416,419

)

Decrease in accounts payable and accrued expenses

 

 

73,267

 

 

 

(251,695

)

 

 

(496,859

)

Net cash provided by operating activities

 

 

17,139,527

 

 

 

15,231,531

 

 

 

19,387,418

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(441,790

)

 

 

(635,739

)

 

 

(3,282,107

)

Restructure and acquisition of interest rate derivative

 

 

-

 

 

 

-

 

 

 

(562,088

)

Proceeds from sale of MF Properties

 

 

46,525,000

 

 

 

45,850,000

 

 

 

16,196,510

 

Proceeds from sale of land held for development

 

 

3,000,000

 

 

 

-

 

 

 

-

 

Proceeds from sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

22,900,000

 

Proceeds from sale of mortgage revenue bond

 

 

-

 

 

 

9,295,000

 

 

 

-

 

Proceeds from the sale of MBS Securities

 

 

-

 

 

 

14,997,069

 

 

 

-

 

Cash realized from the bond exchange for the Suites on Paseo property

 

 

-

 

 

 

-

 

 

 

514,095

 

Acquisition of mortgage revenue bonds

 

 

(121,347,000

)

 

 

(130,620,000

)

 

 

(188,572,000

)

Contributions to unconsolidated entities

 

 

(14,096,478

)

 

 

(18,751,305

)

 

 

-

 

Acquisition of MF Property

 

 

-

 

 

 

(9,882,800

)

 

 

-

 

Restricted cash - debt collateral paid

 

 

(1,043,283

)

 

 

(2,564,000

)

 

 

(4,815,000

)

Restricted cash - debt collateral released

 

 

5,038,371

 

 

 

4,429,019

 

 

 

7,522,959

 

Increase (decrease) in restricted cash

 

 

776,981

 

 

 

342,609

 

 

 

(16,004

)

Acquisition of taxable mortgage revenue bonds

 

 

-

 

 

 

-

 

 

 

(500,000

)

Principal payments received on mortgage revenue bonds

 

 

52,964,448

 

 

 

7,630,638

 

 

 

21,932,563

 

Principal payments received on taxable mortgage revenue bonds

 

 

1,565,455

 

 

 

551,162

 

 

 

153,821

 

Principal payments received on PHCs

 

 

5,979,738

 

 

 

2,014,120

 

 

 

963,526

 

Cash paid for land held for development and deposits on potential purchases

 

 

(381,066

)

 

 

(100,000

)

 

 

(2,889,400

)

Advances on property loans

 

 

(2,712,816

)

 

 

(8,414,215

)

 

 

(11,208,763

)

Principal payments received on property loans

 

 

2,667,276

 

 

 

2,806,056

 

 

 

2,958,415

 

Net cash used in investing activities

 

 

(21,505,164

)

 

 

(83,052,386

)

 

 

(138,703,473

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid

 

 

(33,465,038

)

 

 

(34,245,664

)

 

 

(31,556,898

)

Proceeds from the sale of redeemable Series A Preferred Units

 

 

53,631,000

 

 

 

40,869,000

 

 

 

-

 

Payment of offering costs related to the sale of redeemable Series A Preferred Units

 

 

(8,875

)

 

 

(86,814

)

 

 

-

 

Acquisition of interest rate derivatives

 

 

(556,017

)

 

 

-

 

 

 

-

 

Repurchase of Beneficial Unit Certificates

 

 

(1,466,222

)

 

 

(1,603,658

)

 

 

-

 

Proceeds from the sale of Beneficial Unit Certificates

 

 

978,628

 

 

 

-

 

 

 

-

 

Payment of offering costs related to the sale of Beneficial Unit Certificates

 

 

(101,143

)

 

 

-

 

 

 

-

 

Payment of tax withholding related to restricted unit awards

 

 

(400,607

)

 

 

-

 

 

 

-

 

Distribution to noncontrolling interest

 

 

(76,316

)

 

 

-

 

 

 

-

 

Proceeds from debt financing

 

 

144,100,000

 

 

 

173,302,645

 

 

 

293,205,000

 

Principal payments on debt financing

 

 

(81,773,730

)

 

 

(129,465,032

)

 

 

(182,132,712

)

Principal payments on other secured financing

 

 

-

 

 

 

(7,500,000

)

 

 

-

 

Principal borrowing on mortgages payable

 

 

-

 

 

 

7,500,000

 

 

 

-

 

Principal payments on mortgages payable

 

 

(15,952,005

)

 

 

(17,997,186

)

 

 

(8,415,981

)

Principal borrowing on unsecured lines of credit

 

 

80,560,000

 

 

 

87,487,639

 

 

 

74,071,261

 

Principal payments on unsecured and secured lines of credit

 

 

(90,560,000

)

 

 

(44,984,639

)

 

 

(55,149,000

)

Decrease in security deposit liability related to restricted cash

 

 

(227,029

)

 

 

(44,984

)

 

 

16,004

 

Deferred costs related to future equity raises

 

 

-

 

 

 

-

 

 

 

(169,667

)

Debt financing and other deferred costs

 

 

(1,467,831

)

 

 

(1,697,713

)

 

 

(2,709,513

)

Net cash provided by financing activities

 

 

53,214,815

 

 

 

71,533,594

 

 

 

87,158,494

 

Net increase (decrease) in cash and cash equivalents

 

 

48,849,178

 

 

 

3,712,739

 

 

 

(32,157,561

)

Cash and cash equivalents at beginning of period

 

 

20,748,521

 

 

 

17,035,782

 

 

 

49,193,343

 

Cash and cash equivalents at end of period

 

$

69,597,699

 

 

$

20,748,521

 

 

$

17,035,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

21,558,593

 

 

$

15,175,628

 

 

$

12,866,079

 

Cash paid during the period for income taxes

 

$

5,890,835

 

 

$

4,615,000

 

 

$

-

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared but not paid for Beneficial Unit Certificates and general partner

 

$

8,423,803

 

 

$

8,017,950

 

 

$

8,759,343

 

Distributions declared but not paid for Series A Preferred Units

 

$

692,917

 

 

$

271,518

 

 

$

-

��

Land contributed as investment in an unconsolidated entity

 

$

3,091,023

 

 

$

-

 

 

$

-

 

Capital expenditures financed through accounts payable

 

$

72,390

 

 

$

46,528

 

 

$

26,368

 

Deferred financing and equity issuance costs financed through accounts payable

 

$

90,339

 

 

$

234,372

 

 

$

-

 

Liabilities assumed in the acquisition of MF Property

 

$

-

 

 

$

135,326

 

 

$

-

 

Beneficial Unit Certificates surrendered for tax withholding liabilities on restricted units

 

$

-

 

 

$

153,306

 

 

$

-

 

Exchange of Suites on Paseo assets held for the Suites on Paseo property

 

$

-

 

 

$

-

 

 

$

42,665,912

 


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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

1. Basis of Presentation

America First Multifamily Investors, L.P. (the “Company” or “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”) that have been issued to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. The Partnership expects and believes the interest earned on these mortgage revenue bonds is excludable from gross income for federal income tax purposes.  Thus, most of the income earned by the Partnership is exempt from federal income taxes.  The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make property loans secured by multifamily residential properties which may or may not be financed by mortgage revenue bonds held by the Partnership.   The Partnership may acquire real estate securing its mortgage revenue bonds or property loans through foreclosure in the event of a default or through the receipt of a fee simple deed in lieu of foreclosure.  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 mortgage revenue bonds 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 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”). During 2017 and 2016, the Partnership issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) in private placements. The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership pursuant to a subscription agreement with five financial institutions (Note 21).

All disclosures of the number of units for properties related to mortgage revenue bonds, taxable bondsMRBs and MF Properties are unaudited.

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes the Partnership and its consolidated subsidiaries. All intercompany transactions are eliminated. At December 31, 2017, the consolidated subsidiaries of the Partnership (“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 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 bond purchase commitments duringprovide equity for the yearsdevelopment of multifamily properties.

One MF Property is 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. The Greens Hold Co held 100% ownership interest in the Eagle Village, Residences of DeCordova and Residences of Weatherford MF Properties until their sale in November 2017.

Two MF Properties are owned directly by the Partnership.

Prior to January 1, 2016, the Partnership has consolidated two variable interest entities (“VIE”), Bent Tree and Fairmont Oaks properties (the “Consolidated VIEs”), in the consolidated financial statements. The Partnership did not hold an ownership interest in the Consolidated VIEs but did own the MRBs that financed the Consolidated VIEs.  The Partnership was determined to be the primary


beneficiary of these VIEs. The Consolidated VIEs are presented as discontinued operations for all periods presented and all significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation. The Company’s consolidated financial statements reported in this Form 10-K include the financial position and results of operations of the Partnership and the Consolidated VIEs. The Consolidated VIEs were sold in the fourth quarter of 2015.

Variable Interest Entities

Under the consolidation guidance, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are variable interest entities (“VIEs”) and if the Partnership is the primary beneficiary. The entity that is deemed to have (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in the consolidated financial statements.  The Company has consolidated all VIEs in which it has determined it is the primary beneficiary. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership and the Consolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates VIEs at each reporting date based on events and circumstances at the VIEs.  As a result, changes to the Consolidated VIEs may occur in the future based on changes in circumstances.  The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The General Partner does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) impacts the Partnership’s status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership, the treatment of the MRBs on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the MRBs secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to Unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs consists of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partner and Unitholders as such activity is not contemplated by, or addressed in, the First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as amended (the “Amended and Restated LP Agreement”).

The Partnership sold its variable interests in Bent Tree and Fairmont Oaks (the Consolidated VIEs) in the fourth quarter of 2015. The sale of the Consolidated VIEs met the criteria for discontinued operations presentation and have been classified as such in the Company’s consolidated financial statements for all periods presented. The gains and results of operations of the Consolidated VIEs are reported as part of the discontinued operations in net income for the year ended December 31, 2016, 2015 (see Notes 14).

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 2014.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.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid securities and investments in federally tax-exempt securities with maturities of three months or less when purchased.

Concentration of Credit Risk

The Partnership owns some mortgage revenue bonds which were purchasedmaintains the majority of its unrestricted cash balances at a discount or premium.three financial institutions.  The discount or premiumbalances insured by the Federal Deposit Insurance Corporation are equal to $250,000 at each institution.  At various times the cash balances exceeded the $250,000 limit.  The Partnership is also exposed to risk on anits short-term investments in the event of non-performance by counterparties.  The Partnership does not anticipate any non-performance.  This risk is minimized significantly by the Partnership’s portfolio being restricted to investment grade securities.


Restricted Cash

Restricted cash is amortized on an effective yield method over the term of the related mortgage revenue bondlegally restricted to use and is recognized as investment income incomprised of resident security deposits, required maintenance reserves, escrowed funds, and property rehabilitation.  In addition, the current period.

The Partnership eliminatesis required to maintain restricted cash balances related to the mortgage revenue bondsTEBS Financing facilities and the associatedPartnership’s interest incomerate derivatives.

Investments in Mortgage Revenue Bond, Taxable Mortgage Revenue Bonds and interest receivable when it consolidates the underlying real estate collateral in accordance with implementation of the consolidation guidance for variable interest entities.

Investment in PHC Certificates and MBS SecuritiesBond Purchase Commitments

The Partnership accounts for its investments in PHC CertificatesMRBs, taxable MRBs and MBS Securitiesbond purchase commitments under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value of mortgage revenue bonds, taxable MRBs and bond purchase commitments.

The Partnership periodically reviews each of its MRBs, taxable MRBs and bond purchase commitments for impairment.  The Partnership evaluates whether unrealized losses are considered other-than-temporary based on various factors including:


The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Adverse conditions specifically related to the security, its collateral, or both,

Volatility of the fair value of the security,

The likelihood of the borrower being able to make payments,

Failure of the issuer to make scheduled interest or principal payments, and

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost, if the Partnership has the intent to sell or may be required to sell the security prior to the time that the value recovers or until maturity, and whether the Partnership expects to recover the security’s entire amortized cost basis.  

The recognition of other-than-temporary impairment and the potential impairment analysis are subject to a considerable degree of judgment, the results of which when applied under different conditions or assumptions could have a material impact on the consolidated financial statements. If the Partnership experiences deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings. There were no impairment charges reported by the Partnership related to MRBs, taxable MRBs or bond purchase commitments during the years ended December 31, 2017, 2016 and 2015.

The Partnership owns some MRBs which were purchased at a discount or premium. The discount or premium on an investment is amortized on an effective yield method over the term of the related MRB and is recognized as investment income in the current period.

The Partnership eliminates the MRBs and the associated interest income and interest receivable when it consolidates the underlying real estate collateral in accordance with implementation of the consolidation guidance for VIEs.

Investment in PHC Certificates and MBS Securities

The Partnership accounts for its investments in PHC Certificates under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the underlying contractual payments, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value for the PHC Certificates and MBS Securities. The Partnership sold its remaining MBS Securities in the first quarter of 2016.


The Partnership periodically reviews each class ofthe PHC Certificates and MBS Securities for impairment. The Partnership evaluates whether a decline in the fair value of the investments is below its amortized cost is other-than temporary based on a number of factors including:temporary. Factors considered are:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Downgrade in the security’s rating by S&P, and

Volatility of the fair value of the security.

There were noSee Note 7 for information on recognized impairment charges reported by the Partnership related toof the PHC CertificatesCertificates.

The PHC Certificate Trust I was purchased at a premium and MBS SecuritiesPHC Certificate Trusts II and III were purchased at a discount. The discount or premium on an investment is amortized on an effective yield method over the term of the related PHC Certificate and is recognized as investment income in 2016, 2015 and 2014.the current period.

Real Estate Assets

The Partnership’s investments in real estate are carried at cost less accumulated depreciation. Depreciation of real estate is based on the estimated useful life of the related asset, generally 19-40 years on multifamily, student housing, and senior citizen residential apartment buildings and five to 15 years on capital improvements. Depreciation expenses is calculated using the straight-line method. Maintenance and repairs are charged to expense as incurred, while improvements, renovations, and replacements are capitalized. The Partnership also holds land held for investment and development which is reported at cost. The Partnership recognizes gaingains and losses equal to the difference between proceeds on sale and the net carrying value of the assets at the date of disposition.

The Partnership reviews real estate assets at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of the real estate assets may not be recoverable, the Partnership compares the carrying amount to the undiscounted net cash flows expected to be generated from the use of the assets. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. See Note 9 for information on recognized impairment charges.

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 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 interest under the equity method of accounting.  The Partnership earns a return on its investment accruing immediately on its contributed capital whichthat is guaranteed during the construction phase of the multifamily properties 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, during the construction phase, cash flows are expected to be sufficient to makepay the payments.Partnership its earned return. As a result, the Partnership records the return on the investment earned by the Partnership as investment income in the Partnership’s consolidated statements of operations (Note 10).

The Partnership reviews its investments in unconsolidated affiliates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be fully recoverable. Evidence of a loss in value that is other than temporary includes, but is not limited to, the absence of an ability to recover the carrying amount of the investment, the inability of the investee to sustain an earnings capacity which would justifythat justifies the carrying amount of the investment, or, where applicable, estimated sales proceeds whichthat are insufficient to recover the carrying amount of the investment. The Partnership’s assessment as to whether any decline in value is other than temporary is based on ourits ability and intent to hold the investment and whether evidence indicating the carrying value of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If the fair value of the investment is determined to be less than the carrying value and the decline in value is considered to be other than temporary, an appropriate write-downimpairment charge is recorded based onequal to the excess of the carrying value over the best estimate ofestimated fair value of the investment.


Property Loans, Net of Loan Loss Allowance  

In addition to the mortgage revenue bonds held by theThe Partnership invests in taxable property loans have been made to the owners of somecertain multifamily properties. Most of the property loans are with multifamily properties whichthat secure mortgage revenue bonds.MRBs owned by the Partnership. The Partnership recognizes interest income on the property loans as earned.earned and is reported within other interest income on the consolidated statements of operations. Interest income is not recognized for property loans that are deemed to be in nonaccrual status. The repayment of these taxable property loans is dependent


largely on the value of the property or its cash flows whichthat collateralize the loans.  The Partnership periodically evaluates these loans for potential losses by estimating the fair value of the property whichthat collateralizes the loans and comparing the fair value to the outstanding mortgage revenue bondsMRBs or senior financing plus any taxablethe Partnership’s property loans.  The Partnership utilizes a discounted cash flow model (“DCF”) that considers a number of different DCF models that contain varying assumptions.  The various modelsDCF analysis may assume multiple revenue and expense scenarios, various capitalization rates, and multiple discount rates.  The Partnership may also consider other information such as independent appraisals in estimating a property’s fair value.

If the estimated fair value of the property, after deducting the amortized cost basis of the MRB or senior mortgage revenue bondfinancing, exceeds the principal balance of the taxable property loan then no potential loss is indicated and no allowance for loan loss is recorded.  If a potential loss is indicated, an allowance for loan loss is recorded against the outstanding loan amount and a loss is realized.  The determination of the need for an allowance for loan loss is subject to considerable judgment. See Note 11 for additional information on the Partnership’s loan loss allowances.

Assets Held for Sale

The Partnership reports assets and related liabilities as held for sale on the consolidated balance sheet in the period that the Partnership has committed to a plan to dispose of an asset or asset group, the asset or asset group is being marketed for sale, and it is probable the sale will be completed within one year. Once an asset or asset group is determined to be held for sale, the Partnership discontinues depreciation of the asset or asset group.

Accounting for TEBS, Term A/B and TOB Financing Arrangements

The Partnership has evaluated the accounting guidance in regard to therelated its TOB, Term TOB, Term A/B and TEBS Financings (Note 17) and has determined that the securitization transactions do not meet the accounting criteria for a sale or transfer of financial assets and will, therefore, be accounted for as secured financing transactions.  More specifically, the guidance on transfers and servicing sets forth the conditions that must be met to de-recognize a transferred financial asset.  This guidance provides, in part, that the transferor has surrendered control over transferred assets if and only if the transferor does not maintain effective control over the transferred assets through any of the following:

1.

An agreement that both entitles and obligates the transferor to repurchase or redeem them before their maturity,

2.

The ability to unilaterally cause the holder to return specific assets, other than through a cleanup call, or

3.

An agreement that permits the transferee to require the transferor to repurchase the transferred financial assets at a price that is so favorable to the transferee that it is probable that the transferee will require the transferor to repurchase them.

assets. The Financingfinancing agreements contain certain provisions that allow the Partnership to controlunilaterally cause the holder to return the securitized assets, within the various securitization trusts. See Note 17 for additional terms on the Partnership’s secured financing arrangements.other than through a cleanup call. Based on these terms, the Partnership has concluded that the condition in item 2 above is present and, therefore,it has not transferred effective control over the transferred assets has not occurred.  As effective control has not been transferred,and, as such, the transaction doestransactions do not meet the conditions to de-recognize the transferred assets.

In addition, to evaluating the above securitization transactions as sales or transfers of financial assets, the Partnership has evaluated the securitization trusts associated with the TOB, Term TOB, Term A/B and TEBS Financings in accordance with guidance on consolidation of VIEs. See Note 5 for the consolidation analysis related to these secured financing arrangements. The Partnership is deemed to be the primary beneficiary of these securitization trusts and consolidates the assets, liabilities, income and expenses of the securitization trusts in the Partnership’s consolidated financial statements.

Deferred Financing Costs

Debt financing costs are capitalized and amortized utilizing the effective interest method overthrough either the stated maturity or the optional redemption of the related debt financing agreement. Debt financing costs associated with revolving line of credit arrangements are reported within other assets on the consolidated balance sheet.sheets. Debt financing costs for other debtsdebt financings are reported as reductions to the carrying value of the related debtsdebt financings on the consolidated balance sheet.sheets.


Bond issuance costs are capitalized and amortized utilizing the effective interest method over the stated maturity of the related mortgage revenue bonds.MRBs. Bond issuance costs are reported as an adjustment to the carrying cost of the related mortgage revenue bondMRB on the consolidated balance sheet.sheets. 

Income TaxesRecently Issued Accounting Pronouncements

No provision has been made for income taxes becauseFor a discussion on recently issued accounting pronouncements, see Note 2 to 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.  

Certain of the Consolidated VIEs and The Greens Hold Co are corporations 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 these entities on the Partnership’s consolidated financial statements.  

The Partnership evaluates its tax positions taken in the Partnership’sCompany’s consolidated financial statements which are incorporated by reference.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk exposures are interest rate risk and credit risk. Our exposure to market risks relates primarily to our investments in MRBs and PHC Certificates and our debt financing, mortgages payable and other secured financing.

Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.  The nature of our MRBs, PHC Certificates and the debt financing used to finance these investments exposes us to financial risk due to fluctuations in market interest rates.  The MRBs and PHC Certificates bear base interest at fixed rates.  In addition, the MRBs may also pay contingent interest that fluctuates based upon the cash flows of the underlying property and proceeds from the refinancing or sale of the property. 

Our primary credit risk is the risk of default on our investment in MRBs and taxable property loans collateralized by the Residential Properties. The MRBs are not direct obligations of the governmental authorities that issue the MRBs and are not guaranteed by such authorities, any insurer or other party. In addition, the MRBs and the associated taxable property loans are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments (including both base and contingent interest) on the MRBs and the taxable property loans is the net rental revenues generated by these properties or the net proceeds from a sale or refinance of these properties.

If a property is unable to sustain net rental revenues at a level necessary to pay current debt service obligations on our MRB or taxable property loans, a default may occur. A property’s ability to generate net rental income is subject to a wide variety of factors, including rental and occupancy rates of the property and the level of its operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, multifamily residential properties in the market area where the property is located. This is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (e.g. zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of a multifamily residential property.

We also have credit risk in our investment in PHC Certificates, which are custodial receipts evidencing loans made to a number of public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities solely out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.  If Congress fails to continue making annual appropriations for the interpretationCapital Fund Program at or near current levels, or there is a delay in the approval of appropriations, the public housing authorities may not have funds to pay principal and interest on the loans underlying the PHC Certificates.

Defaults on the MRBs, taxable property loans, or the public housing authorities’ loans backing the PHC Certificates may reduce the amount of future cash available for accounting for uncertainty indistribution to Unitholders. In addition, if a property’s net rental income taxes. As such,declines, it may affect the Partnershipmarket value of the property. If the market value of a property deteriorates, the amount of net proceeds from the ultimate sale or refinancing of the property may recognizebe insufficient to repay the entire principal balance of the MRB or taxable property loan secured by the property.  In the event of a tax benefit from an uncertain tax position only ifdefault on a MRB or taxable property loan, we will have the Partnership believes it is more likely than not thatright to foreclose on the tax positionmortgage or deed of trust securing the property. If we take ownership of the property securing a defaulted MRB, we will be sustained on examinationentitled to all net rental revenues generated by taxing authorities. The Partnership accrues interestthe property. If such an event occurs, these amounts will not provide tax-exempt income.

We actively manage the credit risks associated with our MRBs and penalties as incurred within income tax expense.

Deferred income tax expense, or benefit, is generallytaxable property loans by performing a functioncomplete due diligence and underwriting process of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes) andproperties securing these investments prior to investing.  In addition, we carefully monitor the utilization of tax net operating losses (“NOL”) generated in prior years that had been previously recognized as deferred income tax assets. The Partnership provides for a valuation allowance for deferred income tax assets if it believes all, or some portion,performance of the deferred income tax assetproperties underlying these investments subsequent to their purchase by the Partnership.  Our primary method of managing the credit risk associated with the PHC Certificates is to monitor the ratings reports issued at least annually by a rating agency for each of three PHC Certificates.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

A third-party pricing service is used to value our MRBs. The pricing service uses a discounted cash flow and yield to maturity or call analyses which encompasses judgment in its application.  The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRBs.  The effective yield analysis for each MRB considers the current market yield on similar MRBs, specific terms of the MRB, and various characteristics of underlying property serving as collateral for the MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We value the PHC Certificates based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates. The valuation methodology of our 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. The fair value estimate by the third-party pricing service encompasses the use of judgment in its application.   


We completed a sensitivity analysis which is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be realized. Any increase or decreaseindicative of actual changes in fair value and should be used with caution. 

The table below summarizes the sensitivity analysis metrics related to the investments 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 tax expense (Note 12).MRBs and PHC Certificates at December 31, 2017:

Revenue Recognition on Investments in Mortgage Revenue Bonds

Description

 

Estimated Fair Value in 000's

 

 

Range of Effective Yields used in Valuation

 

Range of Effective Yields if 10% Adverse Applied

 

Additional Unrealized Losses with 10% Adverse Change in 000's

 

Mortgage Revenue Bonds

 

$

788,839

 

 

 

2.9

%

-  8.4%

 

 

3.2

%

-    9.2%

 

$

21,342

 

PHC Certificates

 

 

49,642

 

 

 

5.1

%

-  5.8%

 

 

5.6

%

-    6.4%

 

 

1,556

 

Geographic Risk

The interest income received byproperties securing the Partnership from its mortgage revenue bonds is dependent uponPartnership’s MRBs are geographically dispersed throughout the net cash flow of the underlying properties. Base interest income on fully performing mortgage revenue bonds is recognized as it is earned. Base interest income on mortgage revenue bonds not fully performing is recognized as it is received. Past due base interest on mortgage revenue bonds previously not fully performing is recognized as it is received. The Partnership reinstates the accrual of base interest once the mortgage revenue bond’s ability to perform is adequately demonstrated. Certain mortgage revenue bonds contain contingent interest provisions that generate excess available cash flow. Contingent interest income is recognized when realized or realizable.  Past due contingent interest on mortgage revenue bonds, which are or were previously not fully performing, is recognized when realized or realizable.United States, with significant concentrations (geographic risk) in Texas, California and South Carolina. At December 31, 2017, and 2016, the concentration in Texas as a percentage of principal outstanding was approximately 44% and 2015,45%, respectively. At December 31, 2017, and 2016, the concentration in California as a percentage of principal outstanding was approximately 20% and 20%, respectively. At December 31, 2017, and 2016, the concentration in South Carolina as a percentage of principal outstanding was approximately 16% and 12%, respectively.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

At December 31, 2017, the total costs of borrowing by investment type were as follows:

The unsecured LOCs range between 4.4% and 4.6%;

The M24, M31, and M33 TEBS facilities range between 2.9% and 3.6%;

The Term TOB Trusts securitized by MRBs range between 4.0% and 4.4%;

The Term A/B Trusts securitized by MRBs range between 3.6%  and 4.5%;

The TOB Trusts securitized by PHC Certificates range between 3.9% and 4.0%; and

The mortgages payable and other secured financings range between 3.9% and 4.7%.

We enter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on the variable rate financing facilities. The following table sets forth certain information regarding the Partnership’s mortgage revenue bondsinterest rate cap agreements at December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2017

 

July 2014

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

(1) For additional details, see Note 25 to the Partnership's condensed consolidated financial statements.


We have 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 fully performing asnot needed to their base interest.

Revenue Recognitionmitigate interest rate risk on Investments in Real Estate, MBS, andfinancings related to the MRBs. The Partnership then determined that the interest rate swaps are intended to mitigate interest rate risk for the variable rate PHC Certificates

TOB Trusts.  The Partnership’s Consolidated VIEs andfollowing table summarizes the 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.interest rate swaps at December 31, 2017:

Interest income on the MBS

Purchase Date

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

These interest rate derivatives and PHC Certificates is recognized as it is earned.

Derivative Instruments and Hedging Activities

The Partnership reports all derivative instruments as assets or liabilities in the Company’s consolidated balance sheets at fair value. The Partnership’s derivative instrumentsinterest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value with changes in fair value are recognizedincluded in current period earnings as interest expense. See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements.

Interest Rates Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s income assuming a change in interest rates:

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

3,835

 

 

$

(17,272

)

 

$

(27,758

)

 

$

(37,116

)

 

$

(46,185

)

TEBS Debt Financings

 

 

319,966

 

 

 

(477,105

)

 

 

(697,116

)

 

 

(903,258

)

 

 

(1,107,202

)

Other Investment Financings

 

 

40,047

 

 

 

(83,818

)

 

 

(164,461

)

 

 

(244,900

)

 

 

(325,185

)

Total

 

$

363,848

 

 

$

(578,195

)

 

$

(889,335

)

 

$

(1,185,274

)

 

$

(1,478,572

)

The interest rate sensitivity table (“Table”) represents the change in interest income from investments net of interest on debt and interest rate derivative expenses over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve and the resulting implied forward rates are realized as a component of this shift in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events would not occur that would affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.

As the above information incorporates only those material positions or exposures that existed as of December 31, 2017, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigation strategies at that time and the overall business and economic environment.


Item 8.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Managers and Partners of

America First Multifamily Investors, L.P.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of America First Multifamily Investors, L.P. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the two years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”).  We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017 based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management Report On Internal Control Over Financial Reporting appearing under Item 9A.  Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.  

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 28, 2018

We have served as the Company’s auditor since 2016.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Partners of

America First Multifamily Investors, L.P.

Omaha, Nebraska

We have audited the accompanying consolidated balance sheet of America First Multifamily Investors, L.P. and subsidiaries (the "Company") as of December 31, 2015, and the related consolidated statements of operations, comprehensive income (loss), partners’ capital, and cash flows for each of the two years in the period ended December 31, 2015.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of America First Multifamily Investors, L.P. and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.  

As discussed in Notes 6, 7, and 25, the consolidated financial statements include total investments valued at approximately $655,000,000 (75% of total assets) and $521,000,000 (70% of total assets) as of December 31, 2015 and 2014, respectively, whose fair values have been estimated by management in the absence of readily determinable fair values.  At December 31, 2015, management’s estimates were based on discounted cash flows or yield to maturity analyses performed by management.

As discussed in Notes 17 and 26 to the consolidated financial statements, the accompanying 2015 consolidated financial statements have been retrospectively adjusted for a segment change and the adoption of guidance related to the presentation of deferred financing costs.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

March 3, 2016 (November 2, 2016 as to the effects of retrospective adjustment for a segment change and the presentation of deferred financing costs discussed in Notes 17 and 26)


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED BALANCE SHEETS

 

 

December 31, 2017

 

 

December 31, 2016

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,597,699

 

 

$

20,748,521

 

Restricted cash

 

 

1,985,630

 

 

 

6,757,699

 

Interest receivable, net

 

 

6,541,132

 

 

 

6,983,203

 

Mortgage revenue bonds held in trust, at fair value (Note 6)

 

 

710,867,447

 

 

 

590,194,179

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

77,971,208

 

 

 

90,016,872

 

Public housing capital fund trusts, at fair value (Note 7)

 

 

49,641,588

 

 

 

57,158,068

 

Real estate assets: (Note 9)

 

 

 

 

 

 

 

 

Land and improvements

 

 

7,319,235

 

 

 

17,354,587

 

Buildings and improvements

 

 

78,953,488

 

 

 

113,089,041

 

Real estate assets before accumulated depreciation

 

 

86,272,723

 

 

 

130,443,628

 

Accumulated depreciation

 

 

(9,580,531

)

 

 

(16,217,028

)

Net real estate assets

 

 

76,692,192

 

 

 

114,226,600

 

Investment in unconsolidated entities (Note 10)

 

 

39,608,927

 

 

 

19,470,006

 

Property loans, net of loan loss allowance (Note 11)

 

 

29,513,874

 

 

 

29,763,334

 

Other assets (Note 13)

 

 

7,348,302

 

 

 

8,795,192

 

Total Assets

 

$

1,069,767,999

 

 

$

944,113,674

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

8,494,227

 

 

$

7,255,327

 

Distribution payable

 

 

8,423,803

 

 

 

8,017,950

 

Unsecured lines of credit (Note 15)

 

 

50,000,000

 

 

 

40,000,000

 

Secured line of credit, net (Note 16)

 

 

-

 

 

 

19,816,667

 

Debt financing, net (Note 17)

 

 

558,328,347

 

 

 

495,383,033

 

Mortgages payable and other secured financing, net (Note 18)

 

 

35,540,174

 

 

 

51,379,512

 

Derivative swaps, at fair value (Note 19)

 

 

826,852

 

 

 

1,339,283

 

Total Liabilities

 

 

661,613,403

 

 

 

623,191,772

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Series A preferred units, approximately $94.5 and $40.9 million redemption value,

   10.0 million authorized, 9.5 million and 4.1 million issued and outstanding, respectively (Note 21)

 

 

94,314,326

 

 

 

40,788,034

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

437,256

 

 

 

102,536

 

Beneficial Unit Certificate holders

 

 

313,403,014

 

 

 

280,026,669

 

Total Partnersʼ Capital

 

 

313,840,270

 

 

 

280,129,205

 

Noncontrolling interest

 

 

-

 

 

 

4,663

 

Total Capital

 

 

313,840,270

 

 

 

280,133,868

 

Total Liabilities and Partnersʼ Capital

 

$

1,069,767,999

 

 

$

944,113,674

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

13,499,645

 

 

$

17,404,439

 

 

$

17,789,125

 

Investment income

 

 

48,225,068

 

 

 

36,892,996

 

 

 

34,409,809

 

Contingent interest income

 

 

3,147,165

 

 

 

2,021,077

 

 

 

4,756,716

 

Other interest income

 

 

4,681,578

 

 

 

2,660,238

 

 

 

2,624,262

 

Other income

 

 

828,089

 

 

 

-

 

 

 

373,379

 

Total revenues

 

 

70,381,545

 

 

 

58,978,750

 

 

 

59,953,291

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

8,228,297

 

 

 

9,223,108

 

 

 

10,052,669

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Impairment charge on real estate assets

 

 

-

 

 

 

61,506

 

 

 

-

 

Depreciation and amortization

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Amortization of deferred financing costs

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Interest expense

 

 

22,155,443

 

 

 

15,469,639

 

 

 

14,826,217

 

General and administrative

 

 

12,769,757

 

 

 

10,837,188

 

 

 

8,660,889

 

Total expenses

 

 

51,452,851

 

 

 

44,316,480

 

 

 

41,667,575

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate assets, net

 

 

17,753,303

 

 

 

14,072,317

 

 

 

4,599,109

 

Gain on sale of securities

 

 

-

 

 

 

8,097

 

 

 

-

 

Income before income taxes

 

 

36,681,997

 

 

 

28,742,684

 

 

 

22,884,825

 

Income tax expense

 

 

6,019,146

 

 

 

4,959,000

 

 

 

-

 

Income from continuing operations

 

 

30,662,851

 

 

 

23,783,684

 

 

 

22,884,825

 

Income from discontinued operations (including gain on sale of VIEs of

   approximately $3.2 million in 2015)

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Net income

 

 

30,662,851

 

 

 

23,783,684

 

 

 

26,606,222

 

Net income (loss) attributable to noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

Partnership net income

 

 

30,591,198

 

 

 

23,784,507

 

 

 

26,609,023

 

Redeemable Series A preferred unit distributions and accretion

 

 

(1,982,538

)

 

 

(583,407

)

 

 

-

 

Net income available to Partners

 

$

28,608,660

 

 

$

23,201,100

 

 

$

26,609,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to Partners and noncontrolling interest allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

2,140,074

 

 

$

2,992,106

 

 

$

2,474,274

 

Limited Partners - Unitholders

 

 

26,293,975

 

 

 

20,176,693

 

 

 

20,413,352

 

Limited Partners - Restricted Unitholders

 

 

174,611

 

 

 

32,301

 

 

 

-

 

Unallocated gain of Consolidated VIEs

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

 

 

$

28,680,313

 

 

$

23,200,277

 

 

$

26,606,222

 

Unitholdersʼ interest in net income per Unit (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Income from discontinued operations (Note 2)

 

 

-

 

 

 

-

 

 

 

-

 

Net income per Unit, basic and diluted

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Distributions declared, per Unit

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

Weighted average number of Units outstanding, basic

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

Weighted average number of Units outstanding, diluted

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net income

 

$

30,662,851

 

 

$

23,783,684

 

 

$

26,606,222

 

Reversal of net unrealized gain on sale of securities

 

 

-

 

 

 

(236,439

)

 

 

-

 

Reversal of net unrealized gain on securities with other-than-temporary

   impairment

 

 

(672,097

)

 

 

-

 

 

 

-

 

Unrealized gain (loss) on securities

 

 

36,797,352

 

 

 

(18,596,853

)

 

 

10,042,241

 

Unrealized gain (loss) on bond purchase commitments

 

 

603,091

 

 

 

(3,234,911

)

 

 

(146,053

)

Comprehensive income

 

 

67,391,197

 

 

 

1,715,481

 

 

 

36,502,410

 

Comprehensive income (loss) allocated to noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

Partnership comprehensive income

 

$

67,319,544

 

 

$

1,716,304

 

 

$

36,505,211

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015

 

 

General Partner

 

 

# of Units - Restricted and Unrestricted

 

 

Beneficial Unit

Certificate Holders - Restricted and Unrestricted

 

 

Unallocated Deficit of Consolidated VIEs

 

 

Non-controlling

Interest

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance at January 1, 2015

 

$

578,238

 

 

 

60,252,928

 

 

$

330,457,117

 

 

$

(21,091,456

)

 

$

(15,995

)

 

$

309,927,904

 

 

$

51,698,418

 

Bond redemption related to

   MF Property acquisition

 

 

(6,309

)

 

 

 

 

 

 

(624,610

)

 

 

 

 

 

 

 

 

 

 

(630,919

)

 

 

(630,919

)

Sale of MF Property

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

24,282

 

 

 

24,282

 

 

 

-

 

Deconsolidation of VIEs

 

 

(173,701

)

 

 

 

 

 

 

(17,196,359

)

 

 

17,370,059

 

 

 

-

 

 

 

-

 

 

 

-

 

Distributions paid or accrued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(233,430

)

 

 

 

 

 

 

(23,109,595

)

 

 

-

 

 

 

-

 

 

 

(23,343,025

)

 

 

-

 

Distribution of Tier 2

   earnings (Note 3)

 

 

(2,338,956

)

 

 

 

 

 

 

(7,016,869

)

 

 

-

 

 

 

-

 

 

 

(9,355,825

)

 

 

-

 

Net income (loss)

 

 

2,474,274

 

 

 

 

 

 

 

20,413,352

 

 

 

3,721,397

 

 

 

(2,801

)

 

 

26,606,222

 

 

 

-

 

Unrealized gain on securities

 

 

100,422

 

 

 

 

 

 

 

9,941,819

 

 

 

-

 

 

 

-

 

 

 

10,042,241

 

 

 

10,042,241

 

Unrealized loss on bond

   purchase commitment

 

 

(1,461

)

 

 

 

 

 

 

(144,592

)

 

 

-

 

 

 

-

 

 

 

(146,053

)

 

 

(146,053

)

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 on sale of securities

 

 

(2,364

)

 

 

 

 

 

 

(234,075

)

 

 

-

 

 

 

-

 

 

 

(236,439

)

 

 

(236,439

)

Distributions paid or accrued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(217,646

)

 

 

 

 

 

 

(21,546,966

)

 

 

-

 

 

 

-

 

 

 

(21,764,612

)

 

 

-

 

Distribution of Tier 2 earnings (Note 3)

 

 

(2,858,650

)

 

 

 

 

 

 

(8,575,949

)

 

 

-

 

 

 

-

 

 

 

(11,434,599

)

 

 

-

 

Net income (loss) allocable to Partners

 

 

2,992,106

 

 

 

 

 

 

 

20,208,994

 

 

 

-

 

 

 

(823

)

 

 

23,200,277

 

 

 

-

 

Repurchase of Beneficial Unit Certificates

 

 

-

 

 

 

(272,307

)

 

 

(1,603,658

)

 

 

-

 

 

 

-

 

 

 

(1,603,658

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

272,307

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

8,331

 

 

 

 

 

 

 

824,811

 

 

 

-

 

 

 

-

 

 

 

833,142

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(28,390

)

 

 

(153,306

)

 

 

-

 

 

 

-

 

 

 

(153,306

)

 

 

-

 

Unrealized loss on securities

 

 

(185,969

)

 

 

 

 

 

 

(18,410,884

)

 

 

-

 

 

 

-

 

 

 

(18,596,853

)

 

 

(18,596,853

)

Unrealized loss on bond

   purchase commitment

 

 

(32,349

)

 

 

 

 

 

 

(3,202,562

)

 

 

-

 

 

 

-

 

 

 

(3,234,911

)

 

 

(3,234,911

)

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)

 

 

(1,994,518

)

 

 

 

 

 

 

(5,983,555

)

 

 

-

 

 

 

-

 

 

 

(7,978,073

)

 

 

-

 

Distribution of Tier 3

   earnings (Note 3)

 

 

-

 

 

 

 

 

 

 

(4,928,231

)

 

 

-

 

 

 

-

 

 

 

(4,928,231

)

 

 

-

 

Net income allocable to Partners

 

 

2,140,074

 

 

 

 

 

 

 

26,468,586

 

 

 

-

 

 

 

71,653

 

 

 

28,680,313

 

 

 

-

 

Sale of Beneficial Unit Certificates, net

   of issuance costs

 

 

-

 

 

 

161,383

 

 

 

805,890

 

 

 

-

 

 

 

-

 

 

 

805,890

 

 

 

-

 

Repurchase of Beneficial Unit

   Certificates

 

 

-

 

 

 

(254,656

)

 

 

(1,466,222

)

 

 

-

 

 

 

-

 

 

 

(1,466,222

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

283,046

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

16,152

 

 

 

 

 

 

 

1,599,090

 

 

 

-

 

 

 

-

 

 

 

1,615,242

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(40,637

)

 

 

(247,301

)

 

 

-

 

 

 

-

 

 

 

(247,301

)

 

 

-

 

Unrealized gain on securities

 

 

367,974

 

 

 

 

 

 

 

36,429,378

 

 

 

-

 

 

 

-

 

 

 

36,797,352

 

 

 

36,797,352

 

Unrealized gain on bond

   purchase commitment

 

 

6,031

 

 

 

 

 

 

 

597,060

 

 

 

-

 

 

 

-

 

 

 

603,091

 

 

 

603,091

 

Reversal of net unrealized gain on

   securities with other-than-temporary

   impairment

 

 

(6,721

)

 

 

 

 

 

 

(665,376

)

 

 

-

 

 

 

-

 

 

 

(672,097

)

 

 

(672,097

)

Balance at December 31, 2017

 

$

437,256

 

 

 

60,373,674

 

 

$

313,403,014

 

 

$

-

 

 

$

-

 

 

$

313,840,270

 

 

$

75,623,830

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

30,662,851

 

 

$

23,783,684

 

 

$

26,606,222

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Provision for loan loss

 

 

295,000

 

 

 

-

 

 

 

-

 

Gain on sale of real estate assets, net

 

 

(17,753,303

)

 

 

(14,072,317

)

 

 

(4,599,109

)

Gain on the sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

(3,212,447

)

Contingent interest realized on investing activities

 

 

(2,927,948

)

 

 

(1,379,466

)

 

 

(4,756,716

)

Note interest income realized from the sale of Fairmont Oaks, Consolidated VIE

 

 

-

 

 

 

-

 

 

 

(1,454,621

)

Gain on sale of securities

 

 

-

 

 

 

(8,097

)

 

 

-

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Loss (gain) on derivatives, net of cash paid

 

 

(170,031

)

 

 

(17,618

)

 

 

1,802,655

 

Restricted unit compensation expense

 

 

1,615,242

 

 

 

833,142

 

 

 

-

 

Bond premium/discount amortization

 

 

(320,382

)

 

 

(153,922

)

 

 

238,996

 

Amortization of deferred financing costs

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Deferred income tax expense (benefit)

 

 

(400,000

)

 

 

366,000

 

 

 

-

 

Change in preferred return receivable from unconsolidated entities

 

 

(2,922,158

)

 

 

(718,701

)

 

 

-

 

Changes in operating assets and liabilities, net of effect of acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in interest receivable

 

 

442,071

 

 

 

(1,762,344

)

 

 

(2,452,084

)

(Increase) decrease in other assets

 

 

245,564

 

 

 

(112,174

)

 

 

(416,419

)

Decrease in accounts payable and accrued expenses

 

 

73,267

 

 

 

(251,695

)

 

 

(496,859

)

Net cash provided by operating activities

 

 

17,139,527

 

 

 

15,231,531

 

 

 

19,387,418

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(441,790

)

 

 

(635,739

)

 

 

(3,282,107

)

Restructure and acquisition of interest rate derivative

 

 

-

 

 

 

-

 

 

 

(562,088

)

Proceeds from sale of MF Properties

 

 

46,525,000

 

 

 

45,850,000

 

 

 

16,196,510

 

Proceeds from sale of land held for development

 

 

3,000,000

 

 

 

-

 

 

 

-

 

Proceeds from sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

22,900,000

 

Proceeds from sale of mortgage revenue bond

 

 

-

 

 

 

9,295,000

 

 

 

-

 

Proceeds from the sale of MBS Securities

 

 

-

 

 

 

14,997,069

 

 

 

-

 

Cash realized from the bond exchange for the Suites on Paseo property

 

 

-

 

 

 

-

 

 

 

514,095

 

Acquisition of mortgage revenue bonds

 

 

(121,347,000

)

 

 

(130,620,000

)

 

 

(188,572,000

)

Contributions to unconsolidated entities

 

 

(14,096,478

)

 

 

(18,751,305

)

 

 

-

 

Acquisition of MF Property

 

 

-

 

 

 

(9,882,800

)

 

 

-

 

Restricted cash - debt collateral paid

 

 

(1,043,283

)

 

 

(2,564,000

)

 

 

(4,815,000

)

Restricted cash - debt collateral released

 

 

5,038,371

 

 

 

4,429,019

 

 

 

7,522,959

 

Increase (decrease) in restricted cash

 

 

776,981

 

 

 

342,609

 

 

 

(16,004

)

Acquisition of taxable mortgage revenue bonds

 

 

-

 

 

 

-

 

 

 

(500,000

)

Principal payments received on mortgage revenue bonds

 

 

52,964,448

 

 

 

7,630,638

 

 

 

21,932,563

 

Principal payments received on taxable mortgage revenue bonds

 

 

1,565,455

 

 

 

551,162

 

 

 

153,821

 

Principal payments received on PHCs

 

 

5,979,738

 

 

 

2,014,120

 

 

 

963,526

 

Cash paid for land held for development and deposits on potential purchases

 

 

(381,066

)

 

 

(100,000

)

 

 

(2,889,400

)

Advances on property loans

 

 

(2,712,816

)

 

 

(8,414,215

)

 

 

(11,208,763

)

Principal payments received on property loans

 

 

2,667,276

 

 

 

2,806,056

 

 

 

2,958,415

 

Net cash used in investing activities

 

 

(21,505,164

)

 

 

(83,052,386

)

 

 

(138,703,473

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid

 

 

(33,465,038

)

 

 

(34,245,664

)

 

 

(31,556,898

)

Proceeds from the sale of redeemable Series A Preferred Units

 

 

53,631,000

 

 

 

40,869,000

 

 

 

-

 

Payment of offering costs related to the sale of redeemable Series A Preferred Units

 

 

(8,875

)

 

 

(86,814

)

 

 

-

 

Acquisition of interest rate derivatives

 

 

(556,017

)

 

 

-

 

 

 

-

 

Repurchase of Beneficial Unit Certificates

 

 

(1,466,222

)

 

 

(1,603,658

)

 

 

-

 

Proceeds from the sale of Beneficial Unit Certificates

 

 

978,628

 

 

 

-

 

 

 

-

 

Payment of offering costs related to the sale of Beneficial Unit Certificates

 

 

(101,143

)

 

 

-

 

 

 

-

 

Payment of tax withholding related to restricted unit awards

 

 

(400,607

)

 

 

-

 

 

 

-

 

Distribution to noncontrolling interest

 

 

(76,316

)

 

 

-

 

 

 

-

 

Proceeds from debt financing

 

 

144,100,000

 

 

 

173,302,645

 

 

 

293,205,000

 

Principal payments on debt financing

 

 

(81,773,730

)

 

 

(129,465,032

)

 

 

(182,132,712

)

Principal payments on other secured financing

 

 

-

 

 

 

(7,500,000

)

 

 

-

 

Principal borrowing on mortgages payable

 

 

-

 

 

 

7,500,000

 

 

 

-

 

Principal payments on mortgages payable

 

 

(15,952,005

)

 

 

(17,997,186

)

 

 

(8,415,981

)

Principal borrowing on unsecured lines of credit

 

 

80,560,000

 

 

 

87,487,639

 

 

 

74,071,261

 

Principal payments on unsecured and secured lines of credit

 

 

(90,560,000

)

 

 

(44,984,639

)

 

 

(55,149,000

)

Decrease in security deposit liability related to restricted cash

 

 

(227,029

)

 

 

(44,984

)

 

 

16,004

 

Deferred costs related to future equity raises

 

 

-

 

 

 

-

 

 

 

(169,667

)

Debt financing and other deferred costs

 

 

(1,467,831

)

 

 

(1,697,713

)

 

 

(2,709,513

)

Net cash provided by financing activities

 

 

53,214,815

 

 

 

71,533,594

 

 

 

87,158,494

 

Net increase (decrease) in cash and cash equivalents

 

 

48,849,178

 

 

 

3,712,739

 

 

 

(32,157,561

)

Cash and cash equivalents at beginning of period

 

 

20,748,521

 

 

 

17,035,782

 

 

 

49,193,343

 

Cash and cash equivalents at end of period

 

$

69,597,699

 

 

$

20,748,521

 

 

$

17,035,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

21,558,593

 

 

$

15,175,628

 

 

$

12,866,079

 

Cash paid during the period for income taxes

 

$

5,890,835

 

 

$

4,615,000

 

 

$

-

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared but not paid for Beneficial Unit Certificates and general partner

 

$

8,423,803

 

 

$

8,017,950

 

 

$

8,759,343

 

Distributions declared but not paid for Series A Preferred Units

 

$

692,917

 

 

$

271,518

 

 

$

-

��

Land contributed as investment in an unconsolidated entity

 

$

3,091,023

 

 

$

-

 

 

$

-

 

Capital expenditures financed through accounts payable

 

$

72,390

 

 

$

46,528

 

 

$

26,368

 

Deferred financing and equity issuance costs financed through accounts payable

 

$

90,339

 

 

$

234,372

 

 

$

-

 

Liabilities assumed in the acquisition of MF Property

 

$

-

 

 

$

135,326

 

 

$

-

 

Beneficial Unit Certificates surrendered for tax withholding liabilities on restricted units

 

$

-

 

 

$

153,306

 

 

$

-

 

Exchange of Suites on Paseo assets held for the Suites on Paseo property

 

$

-

 

 

$

-

 

 

$

42,665,912

 


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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

1. Basis of Presentation

America First Multifamily Investors, L.P. (the “Company” or “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”) that have been issued to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. The Partnership expects and believes the interest earned on these mortgage revenue bonds is excludable from gross income for federal income tax purposes.  Thus, most of the income earned by the Partnership is exempt from federal income taxes.  The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make property loans secured by multifamily residential properties which may or may not be financed by mortgage revenue bonds held by the Partnership.   The Partnership may acquire real estate securing its mortgage revenue bonds or property loans through foreclosure in the event of a default or through the receipt of a fee simple deed in lieu of foreclosure.  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 mortgage revenue bonds 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 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”). During 2017 and 2016, the Partnership issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) in private placements. The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership pursuant to a subscription agreement with five financial institutions (Note 21).

All disclosures of the number of units for properties related to mortgage revenue bonds, taxable MRBs and MF Properties are unaudited.

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes the Partnership and its consolidated subsidiaries. All intercompany transactions are eliminated. At December 31, 2017, the consolidated subsidiaries of the Partnership (“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 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.

One MF Property is 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. The Greens Hold Co held 100% ownership interest in the Eagle Village, Residences of DeCordova and Residences of Weatherford MF Properties until their sale in November 2017.

Two MF Properties are owned directly by the Partnership.

Prior to January 1, 2016, the Partnership has consolidated two variable interest entities (“VIE”), Bent Tree and Fairmont Oaks properties (the “Consolidated VIEs”), in the consolidated financial statements. The Partnership did not hold an ownership interest in the Consolidated VIEs but did own the MRBs that financed the Consolidated VIEs.  The Partnership was determined to be the primary


beneficiary of these VIEs. The Consolidated VIEs are presented as discontinued operations for all periods presented and all significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation. The Company’s consolidated financial statements reported in this Form 10-K include the financial position and results of operations of the Partnership and the Consolidated VIEs. The Consolidated VIEs were sold in the fourth quarter of 2015.

Variable Interest Entities

Under the consolidation guidance, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are variable interest entities (“VIEs”) and if the Partnership is the primary beneficiary. The entity that is deemed to have (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in the consolidated financial statements.  The Company has consolidated all VIEs in which it has determined it is the primary beneficiary. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership and the Consolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates VIEs at each reporting date based on events and circumstances at the VIEs.  As a result, changes to the Consolidated VIEs may occur in the future based on changes in circumstances.  The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The General Partner does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) impacts the Partnership’s status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership, the treatment of the MRBs on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the MRBs secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to Unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs consists of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partner and Unitholders as such activity is not contemplated by, or addressed in, the First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as amended (the “Amended and Restated LP Agreement”).

The Partnership sold its variable interests in Bent Tree and Fairmont Oaks (the Consolidated VIEs) in the fourth quarter of 2015. The sale of the Consolidated VIEs met the criteria for discontinued operations presentation and have been classified as such in the Company’s consolidated financial statements for all periods presented. The gains and results of operations of the Consolidated VIEs are reported as part of the discontinued operations in net income for the year ended December 31, 2015 (see Notes 14).

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.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid securities and investments in federally tax-exempt securities with maturities of three months or less when purchased.

Concentration of Credit Risk

The Partnership maintains the majority of its unrestricted cash balances at three financial institutions.  The balances insured by the Federal Deposit Insurance Corporation are equal to $250,000 at each institution.  At various times the cash balances exceeded the $250,000 limit.  The Partnership is also exposed to loss should a counterparty torisk on its derivative instruments default.short-term investments in the event of non-performance by counterparties.  The Partnership does not anticipate non-performanceany non-performance.  This risk is minimized significantly by any counterparty.the Partnership’s portfolio being restricted to investment grade securities.


Restricted Cash

Restricted cash is legally restricted to use and is comprised of resident security deposits, required maintenance reserves, escrowed funds, and property rehabilitation.  In addition, the Partnership is required to maintain restricted cash balances related to the TEBS Financing facilities and the Partnership’s interest rate derivatives.

Investments in Mortgage Revenue Bond, Taxable Mortgage Revenue Bonds and Bond Purchase Commitments

The Partnership accounts for its investments in MRBs, taxable MRBs and bond purchase commitments under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value of mortgage revenue bonds, taxable MRBs and bond purchase commitments.

The Partnership periodically reviews each of its MRBs, taxable MRBs and bond purchase commitments for impairment.  The Partnership evaluates whether unrealized losses are considered other-than-temporary based on various factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Adverse conditions specifically related to the security, its collateral, or both,

Volatility of the fair value of the security,

The likelihood of the borrower being able to make payments,

Failure of the issuer to make scheduled interest or principal payments, and

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost, if the Partnership has the intent to sell or may be required to sell the security prior to the time that the value recovers or until maturity, and whether the Partnership expects to recover the security’s entire amortized cost basis.  

The recognition of other-than-temporary impairment and the potential impairment analysis are subject to a considerable degree of judgment, the results of which when applied under different conditions or assumptions could have a material impact on the consolidated financial statements. If the Partnership experiences deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings. There were no impairment charges reported by the Partnership related to MRBs, taxable MRBs or bond purchase commitments during the years ended December 31, 2017, 2016 and 2015.

The Partnership owns some MRBs which were purchased at a discount or premium. The discount or premium on an investment is amortized on an effective yield method over the term of the related MRB and is recognized as investment income in the current period.

The Partnership eliminates the MRBs and the associated interest income and interest receivable when it consolidates the underlying real estate collateral in accordance with implementation of the consolidation guidance for VIEs.

Investment in PHC Certificates and MBS Securities

The Partnership accounts for its investments in PHC Certificates under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the underlying contractual payments, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value for the derivative instruments.PHC Certificates and MBS Securities. The Partnership sold its remaining MBS Securities in the first quarter of 2016.


The Partnership periodically reviews the PHC Certificates and MBS Securities for impairment. The Partnership evaluates whether a decline in the fair value of the investments is below its amortized cost is other-than temporary. Factors considered are:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Downgrade in the security’s rating by S&P, and

Volatility of the fair value of the security.

See Note 7 for information on recognized impairment of the PHC Certificates.

Redeemable Series A Preferred UnitsThe PHC Certificate Trust I was purchased at a premium and PHC Certificate Trusts II and III were purchased at a discount. The discount or premium on an investment is amortized on an effective yield method over the term of the related PHC Certificate and is recognized as investment income in the current period.

Real Estate Assets

The Partnership’s investments in real estate are carried at cost less accumulated depreciation. Depreciation of real estate is based on the estimated useful life of the related asset, generally 19-40 years on multifamily, student housing, and senior citizen residential apartment buildings and five to 15 years on capital improvements. Depreciation expenses is calculated using the straight-line method. Maintenance and repairs are charged to expense as incurred, while improvements, renovations, and replacements are capitalized. The Partnership also holds land held for investment and development which is reported at cost. The Partnership recognizes gains and losses equal to the difference between proceeds on sale and the net carrying value of the assets at the date of disposition.

The Partnership has issued Series A Preferred Unitsreviews real estate assets at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of the real estate assets may not be recoverable, the Partnership compares the carrying amount to various financial institutions., which representthe undiscounted net cash flows expected to be generated from the use of the assets. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. See Note 9 for information on recognized impairment charges.

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 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 interestsinterest under 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. InPartnership’s consolidated statements of operations (Note 10).

The Partnership reviews its investments in unconsolidated affiliates for impairment whenever events or changes in business circumstances indicate that the event of any liquidation, dissolution, or winding upcarrying amount of the Partnership,investments may not be fully recoverable. Evidence of a loss in value that is other than temporary includes, but is not limited to, the holdersabsence of an ability to recover the carrying amount of the Series A Preferred Units are entitled to a liquidation preference in connection with their investments.  With respect to anticipated quarterly distributions and rights upon liquidation, dissolution, orinvestment, the winding-upinability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment, or, where applicable, estimated sales proceeds that are insufficient to recover the carrying amount of the investment. The Partnership’s affairs,assessment as to whether any decline in value is other than temporary is based on its ability and intent to hold the Series A Preferred Units will rank senior to


investment and whether evidence indicating the Partnership’s BUCs and to any other class or seriescarrying value of Partnership interests or securities expressly designated as ranking juniorthe investment is recoverable within a reasonable period of time outweighs evidence to the Series A Preferred Units, and junior to any other class or series of Partnership interests or securities expressly designated as ranking senior tocontrary. If the Series A Preferred Units.  

The Series A Preferred Units have no stated maturity, are not subject to any sinking fund requirements, and will remain outstanding indefinitely unless repurchased or redeemed by the Partnership or holder. Upon the sixth anniversaryfair value of the closing of the sale of Series A Preferred Unitsinvestment is determined to a subscriber, and upon each anniversary thereafter, the Partnership and each holder of Series A Preferred Units will have the right to redeem, in whole or in part, the Series A Preferred Units held by such holder at a per unit redemption price equal to $10.00 per unit plus an amount equal to all declared and unpaid distributions. The Series A Preferred Units are recorded as mezzanine equity due to the holders’ redemption option which, if and when the units become subject to redemption, is outside the Partnership’s control. In addition, the costs of issuing the Series A Preferred Units are netted againstbe less than the carrying value and amortizedthe decline in value is considered other than temporary, an impairment charge is recorded equal to the first redemption date (Note 21).

Restricted Unit Awards (“RUAs”)

The Partnership’s 2015 Equity Incentive Plan (the “Plan”), as approved byexcess of the Unitholders in September 2015, permitscarrying value over 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.  Restricted unit awards are generally granted with vesting conditions ranging from three months to up to three years. RUAs currently provide for the payment of distributions during the restriction period. The RUAs provide for accelerated vesting if there is a change in control.

Theestimated fair value of each RUA is estimated on the grant date based oninvestment.

Property Loans, Net of Loan Loss Allowance  

The Partnership invests in taxable property loans made to the Partnership’s exchange-listed closing priceowners of certain multifamily properties. Most of the BUCs.property loans are with multifamily properties that secure MRBs owned by the Partnership. The Partnership recognizes compensation expense forinterest income on the RUAs on a straight-line basis over the requisite vesting period (Note 23).

Net Income per BUC

The Partnership has disclosed basicproperty loans as earned and diluted netis reported within other interest income per BUC on the consolidated statements of operations. Interest income is not recognized for property loans that are deemed to be in nonaccrual status. The unvested RUAs issued underrepayment of these taxable property loans is dependent


largely on the Plan are considered participating securities.value of the property or its cash flows that collateralize the loans.  The Partnership usedperiodically evaluates these loans for potential losses by estimating the two-class methodfair value of the property that collateralizes the loans and comparing the fair value to allocate net income availablethe outstanding MRBs or senior financing plus the Partnership’s property loans.  The Partnership utilizes a discounted cash flow model (“DCF”) that considers varying assumptions.  The DCF analysis may assume multiple revenue and expense scenarios, various capitalization rates, and multiple discount rates.  The Partnership may also consider other information such as independent appraisals in estimating a property’s fair value.

If the estimated fair value of the property, after deducting the amortized cost basis of the MRB or senior financing, exceeds the principal balance of the taxable property loan then no potential loss is indicated and no allowance for loan loss is recorded.  If a potential loss is indicated, an allowance for loan loss is recorded against the outstanding loan amount and a loss is realized.  The determination of the need for an allowance for loan loss is subject to BUCs andconsiderable judgment. See Note 11 for additional information on the unvested restricted units. Unvested restricted unit awards are included with BUCsPartnership’s loan loss allowances.

Assets Held for the calculation of diluted net income per BUC using the treasury stock method.

Use of Estimates in Preparation of Consolidated Financial StatementsSale

The preparationPartnership reports assets and related liabilities as held for sale on the consolidated balance sheet in the period that the Partnership has committed to a plan to dispose of an asset or asset group, the asset or asset group is being marketed for sale, and it is probable the sale will be completed within one year. Once an asset or asset group is determined to be held for sale, the Partnership discontinues depreciation of the accompanying consolidatedasset or asset group.

Accounting for TEBS, Term A/B and TOB Financing Arrangements

The Partnership has evaluated the accounting guidance related its TOB, Term TOB, Term A/B and TEBS Financings and has determined that the securitization transactions do not meet the accounting criteria for a sale or transfer of financial statementsassets and will, therefore, be accounted for as secured financing transactions.  More specifically, the guidance on transfers and servicing sets forth the conditions that must be met to de-recognize a transferred financial asset.  This guidance provides, in conformity with GAAP requirespart, that the transferor has surrendered control over transferred assets if and only if the transferor does not maintain effective control over the transferred assets. The financing agreements contain certain provisions that allow the Partnership to make estimates and assumptions that affectunilaterally cause the reported amounts ofholder to return the securitized assets, and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The most significant estimates and assumptions include those used in determining investment valuations, investment impairments, impairment of property assets, allocation of the purchase price for acquisition accounting and allowance for loan losses.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current period presentation.

In 2016, the Partnership began to classify its amortization of deferred financing costs asother than through a separate line within the Partnership’s consolidated statements of operations. Previously this amount had been classified within depreciation and amortization. Accordingly, for the years ended December 31, 2015 and 2014,cleanup call. Based on these terms, the Partnership has reclassifiedconcluded that it has not transferred effective control over the amortizationtransferred assets and, as such, the transactions do not meet the conditions to de-recognize the transferred assets.

In addition, the Partnership has evaluated the securitization trusts associated with the TOB, Term TOB, Term A/B and TEBS Financings in accordance with guidance on consolidation of deferred financing costs and has included them in conformityVIEs. See Note 5 for the periods presented herein. This reclassification has no effect onconsolidation analysis related to these secured financing arrangements. The Partnership is deemed to be the Partnership’s reported netprimary beneficiary of these securitization trusts and consolidates the assets, liabilities, income or partners’ capitaland expenses of the securitization trusts in the Partnership’s consolidated financial statements forstatements.

Deferred Financing Costs

Debt financing costs are capitalized and amortized utilizing the periods presented.

In 2016,effective interest method through either the Partnership began to classify its property loans, netstated maturity or the optional redemption of loan losses, as a separatethe related debt financing agreement. Debt financing costs associated with revolving line itemof credit arrangements are reported within other assets on the Partnership’s consolidated balance sheets. Previously this amount had been classified withinDebt financing costs for other assets. Accordingly,debt financings are reported as reductions to the Partnership has reclassifiedcarrying value of the property loans, net of loan loss reserves, forrelated debt financings on the consolidated balance sheet at December 31, 2015sheets.

Bond issuance costs are capitalized and has included them in conformity foramortized utilizing the periods presented herein. This reclassification has no effecteffective interest method over the stated maturity of the related MRBs. Bond issuance costs are reported as an adjustment to the carrying cost of the related MRB on the Partnership’s reported net income or partners’ capital in the Partnership’s consolidated financial statements for the periods presented.balance sheets. 


Recently Issued Accounting Pronouncements

For a discussion on recently issued accounting pronouncements, see Note 2 to the Company’s consolidated financial statements which are incorporated by reference.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk exposures are interest rate risk and credit risk. Our exposure to market risks relates primarily to our investments in MRBs and PHC Certificates and our debt financing, mortgages payable and other secured financing.

Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control.  The nature of our MRBs, PHC Certificates and the debt financing used to finance these investments exposes us to financial risk due to fluctuations in market interest rates.  The MRBs and PHC Certificates bear base interest at fixed rates.  In addition, the MRBs may also pay contingent interest that fluctuates based upon the cash flows of the underlying property and proceeds from the refinancing or sale of the property. 

Our primary credit risk is the risk of default on our investment in MRBs and taxable property loans collateralized by the Residential Properties. The MRBs are not direct obligations of the governmental authorities that issue the MRBs and are not guaranteed by such authorities, any insurer or other party. In addition, the MRBs and the associated taxable property loans are non-recourse obligations of the property owner. As a result, the sole source of principal and interest payments (including both base and contingent interest) on the MRBs and the taxable property loans is the net rental revenues generated by these properties or the net proceeds from a sale or refinance of these properties.

If a property is unable to sustain net rental revenues at a level necessary to pay current debt service obligations on our MRB or taxable property loans, a default may occur. A property’s ability to generate net rental income is subject to a wide variety of factors, including rental and occupancy rates of the property and the level of its operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, multifamily residential properties in the market area where the property is located. This is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (e.g. zoning laws), inflation, real estate and other taxes, labor problems, and natural disasters can affect the economic operations of a multifamily residential property.

We also have credit risk in our investment in PHC Certificates, which are custodial receipts evidencing loans made to a number of public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities solely out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.  If Congress fails to continue making annual appropriations for the Capital Fund Program at or near current levels, or there is a delay in the approval of appropriations, the public housing authorities may not have funds to pay principal and interest on the loans underlying the PHC Certificates.

Defaults on the MRBs, taxable property loans, or the public housing authorities’ loans backing the PHC Certificates may reduce the amount of future cash available for distribution to Unitholders. In addition, if a property’s net rental income declines, it may affect the market value of the property. If the market value of a property deteriorates, the amount of net proceeds from the ultimate sale or refinancing of the property may be insufficient to repay the entire principal balance of the MRB or taxable property loan secured by the property.  In the event of a default on a MRB or taxable property loan, we will have the right to foreclose on the mortgage or deed of trust securing the property. If we take ownership of the property securing a defaulted MRB, we will be entitled to all net rental revenues generated by the property. If such an event occurs, these amounts will not provide tax-exempt income.

We actively manage the credit risks associated with our MRBs and taxable property loans by performing a complete due diligence and underwriting process of the properties securing these investments prior to investing.  In addition, we carefully monitor the performance of the properties underlying these investments subsequent to their purchase by the Partnership.  Our primary method of managing the credit risk associated with the PHC Certificates is to monitor the ratings reports issued at least annually by a rating agency for each of three PHC Certificates.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

A third-party pricing service is used to value our MRBs. The pricing service uses a discounted cash flow and yield to maturity or call analyses which encompasses judgment in its application.  The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRBs.  The effective yield analysis for each MRB considers the current market yield on similar MRBs, specific terms of the MRB, and various characteristics of underlying property serving as collateral for the MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We value the PHC Certificates based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates. The valuation methodology of our 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. The fair value estimate by the third-party pricing service encompasses the use of judgment in its application.   


We completed a sensitivity analysis which is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. 

The table below summarizes the sensitivity analysis metrics related to the investments in the MRBs and PHC Certificates at December 31, 2017:

Description

 

Estimated Fair Value in 000's

 

 

Range of Effective Yields used in Valuation

 

Range of Effective Yields if 10% Adverse Applied

 

Additional Unrealized Losses with 10% Adverse Change in 000's

 

Mortgage Revenue Bonds

 

$

788,839

 

 

 

2.9

%

-  8.4%

 

 

3.2

%

-    9.2%

 

$

21,342

 

PHC Certificates

 

 

49,642

 

 

 

5.1

%

-  5.8%

 

 

5.6

%

-    6.4%

 

 

1,556

 

Geographic Risk

The properties securing the Partnership’s MRBs are geographically dispersed throughout the United States, with significant concentrations (geographic risk) in Texas, California and South Carolina. At December 31, 2017, and 2016, the concentration in Texas as a percentage of principal outstanding was approximately 44% and 45%, respectively. At December 31, 2017, and 2016, the concentration in California as a percentage of principal outstanding was approximately 20% and 20%, respectively. At December 31, 2017, and 2016, the concentration in South Carolina as a percentage of principal outstanding was approximately 16% and 12%, respectively.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

At December 31, 2017, the total costs of borrowing by investment type were as follows:

The unsecured LOCs range between 4.4% and 4.6%;

The M24, M31, and M33 TEBS facilities range between 2.9% and 3.6%;

The Term TOB Trusts securitized by MRBs range between 4.0% and 4.4%;

The Term A/B Trusts securitized by MRBs range between 3.6%  and 4.5%;

The TOB Trusts securitized by PHC Certificates range between 3.9% and 4.0%; and

The mortgages payable and other secured financings range between 3.9% and 4.7%.

We enter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on the variable rate financing facilities. The following table sets forth certain information regarding the Partnership’s interest rate cap agreements at December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2017

 

July 2014

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

(1) For additional details, see Note 25 to the Partnership's condensed consolidated financial statements.


We have 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 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 December 31, 2017:

Purchase Date

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

These interest rate derivatives and interest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value with changes in fair value included in current period earnings as interest expense. See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives and interest rate swap arrangements.

Interest Rates Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s income assuming a change in interest rates:

Description

 

- 25 basis points

 

 

+ 50 basis points

 

 

+ 100 basis points

 

 

+ 150 basis points

 

 

+ 200 basis points

 

TOB & Term A/B Debt Financings

 

$

3,835

 

 

$

(17,272

)

 

$

(27,758

)

 

$

(37,116

)

 

$

(46,185

)

TEBS Debt Financings

 

 

319,966

 

 

 

(477,105

)

 

 

(697,116

)

 

 

(903,258

)

 

 

(1,107,202

)

Other Investment Financings

 

 

40,047

 

 

 

(83,818

)

 

 

(164,461

)

 

 

(244,900

)

 

 

(325,185

)

Total

 

$

363,848

 

 

$

(578,195

)

 

$

(889,335

)

 

$

(1,185,274

)

 

$

(1,478,572

)

The interest rate sensitivity table (“Table”) represents the change in interest income from investments net of interest on debt and interest rate derivative expenses over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve and the resulting implied forward rates are realized as a component of this shift in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events would not occur that would affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.

As the above information incorporates only those material positions or exposures that existed as of December 31, 2017, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigation strategies at that time and the overall business and economic environment.


Item 8.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Managers and Partners of

America First Multifamily Investors, L.P.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of America First Multifamily Investors, L.P. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the two years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”).  We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017 based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management Report On Internal Control Over Financial Reporting appearing under Item 9A.  Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.  

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 28, 2018

We have served as the Company’s auditor since 2016.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Partners of

America First Multifamily Investors, L.P.

Omaha, Nebraska

We have audited the accompanying consolidated balance sheet of America First Multifamily Investors, L.P. and subsidiaries (the "Company") as of December 31, 2015, and the related consolidated statements of operations, comprehensive income (loss), partners’ capital, and cash flows for each of the two years in the period ended December 31, 2015.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of America First Multifamily Investors, L.P. and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.  

As discussed in Notes 6, 7, and 25, the consolidated financial statements include total investments valued at approximately $655,000,000 (75% of total assets) and $521,000,000 (70% of total assets) as of December 31, 2015 and 2014, respectively, whose fair values have been estimated by management in the absence of readily determinable fair values.  At December 31, 2015, management’s estimates were based on discounted cash flows or yield to maturity analyses performed by management.

As discussed in Notes 17 and 26 to the consolidated financial statements, the accompanying 2015 consolidated financial statements have been retrospectively adjusted for a segment change and the adoption of guidance related to the presentation of deferred financing costs.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

March 3, 2016 (November 2, 2016 as to the effects of retrospective adjustment for a segment change and the presentation of deferred financing costs discussed in Notes 17 and 26)


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED BALANCE SHEETS

 

 

December 31, 2017

 

 

December 31, 2016

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,597,699

 

 

$

20,748,521

 

Restricted cash

 

 

1,985,630

 

 

 

6,757,699

 

Interest receivable, net

 

 

6,541,132

 

 

 

6,983,203

 

Mortgage revenue bonds held in trust, at fair value (Note 6)

 

 

710,867,447

 

 

 

590,194,179

 

Mortgage revenue bonds, at fair value (Note 6)

 

 

77,971,208

 

 

 

90,016,872

 

Public housing capital fund trusts, at fair value (Note 7)

 

 

49,641,588

 

 

 

57,158,068

 

Real estate assets: (Note 9)

 

 

 

 

 

 

 

 

Land and improvements

 

 

7,319,235

 

 

 

17,354,587

 

Buildings and improvements

 

 

78,953,488

 

 

 

113,089,041

 

Real estate assets before accumulated depreciation

 

 

86,272,723

 

 

 

130,443,628

 

Accumulated depreciation

 

 

(9,580,531

)

 

 

(16,217,028

)

Net real estate assets

 

 

76,692,192

 

 

 

114,226,600

 

Investment in unconsolidated entities (Note 10)

 

 

39,608,927

 

 

 

19,470,006

 

Property loans, net of loan loss allowance (Note 11)

 

 

29,513,874

 

 

 

29,763,334

 

Other assets (Note 13)

 

 

7,348,302

 

 

 

8,795,192

 

Total Assets

 

$

1,069,767,999

 

 

$

944,113,674

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

8,494,227

 

 

$

7,255,327

 

Distribution payable

 

 

8,423,803

 

 

 

8,017,950

 

Unsecured lines of credit (Note 15)

 

 

50,000,000

 

 

 

40,000,000

 

Secured line of credit, net (Note 16)

 

 

-

 

 

 

19,816,667

 

Debt financing, net (Note 17)

 

 

558,328,347

 

 

 

495,383,033

 

Mortgages payable and other secured financing, net (Note 18)

 

 

35,540,174

 

 

 

51,379,512

 

Derivative swaps, at fair value (Note 19)

 

 

826,852

 

 

 

1,339,283

 

Total Liabilities

 

 

661,613,403

 

 

 

623,191,772

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Series A preferred units, approximately $94.5 and $40.9 million redemption value,

   10.0 million authorized, 9.5 million and 4.1 million issued and outstanding, respectively (Note 21)

 

 

94,314,326

 

 

 

40,788,034

 

 

 

 

 

 

 

 

 

 

Partnersʼ Capital

 

 

 

 

 

 

 

 

General Partner (Note 1)

 

 

437,256

 

 

 

102,536

 

Beneficial Unit Certificate holders

 

 

313,403,014

 

 

 

280,026,669

 

Total Partnersʼ Capital

 

 

313,840,270

 

 

 

280,129,205

 

Noncontrolling interest

 

 

-

 

 

 

4,663

 

Total Capital

 

 

313,840,270

 

 

 

280,133,868

 

Total Liabilities and Partnersʼ Capital

 

$

1,069,767,999

 

 

$

944,113,674

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Property revenues

 

$

13,499,645

 

 

$

17,404,439

 

 

$

17,789,125

 

Investment income

 

 

48,225,068

 

 

 

36,892,996

 

 

 

34,409,809

 

Contingent interest income

 

 

3,147,165

 

 

 

2,021,077

 

 

 

4,756,716

 

Other interest income

 

 

4,681,578

 

 

 

2,660,238

 

 

 

2,624,262

 

Other income

 

 

828,089

 

 

 

-

 

 

 

373,379

 

Total revenues

 

 

70,381,545

 

 

 

58,978,750

 

 

 

59,953,291

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operating (exclusive of items shown below)

 

 

8,228,297

 

 

 

9,223,108

 

 

 

10,052,669

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Impairment charge on real estate assets

 

 

-

 

 

 

61,506

 

 

 

-

 

Depreciation and amortization

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Amortization of deferred financing costs

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Interest expense

 

 

22,155,443

 

 

 

15,469,639

 

 

 

14,826,217

 

General and administrative

 

 

12,769,757

 

 

 

10,837,188

 

 

 

8,660,889

 

Total expenses

 

 

51,452,851

 

 

 

44,316,480

 

 

 

41,667,575

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate assets, net

 

 

17,753,303

 

 

 

14,072,317

 

 

 

4,599,109

 

Gain on sale of securities

 

 

-

 

 

 

8,097

 

 

 

-

 

Income before income taxes

 

 

36,681,997

 

 

 

28,742,684

 

 

 

22,884,825

 

Income tax expense

 

 

6,019,146

 

 

 

4,959,000

 

 

 

-

 

Income from continuing operations

 

 

30,662,851

 

 

 

23,783,684

 

 

 

22,884,825

 

Income from discontinued operations (including gain on sale of VIEs of

   approximately $3.2 million in 2015)

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Net income

 

 

30,662,851

 

 

 

23,783,684

 

 

 

26,606,222

 

Net income (loss) attributable to noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

Partnership net income

 

 

30,591,198

 

 

 

23,784,507

 

 

 

26,609,023

 

Redeemable Series A preferred unit distributions and accretion

 

 

(1,982,538

)

 

 

(583,407

)

 

 

-

 

Net income available to Partners

 

$

28,608,660

 

 

$

23,201,100

 

 

$

26,609,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to Partners and noncontrolling interest allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

2,140,074

 

 

$

2,992,106

 

 

$

2,474,274

 

Limited Partners - Unitholders

 

 

26,293,975

 

 

 

20,176,693

 

 

 

20,413,352

 

Limited Partners - Restricted Unitholders

 

 

174,611

 

 

 

32,301

 

 

 

-

 

Unallocated gain of Consolidated VIEs

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

 

 

$

28,680,313

 

 

$

23,200,277

 

 

$

26,606,222

 

Unitholdersʼ interest in net income per Unit (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Income from discontinued operations (Note 2)

 

 

-

 

 

 

-

 

 

 

-

 

Net income per Unit, basic and diluted

 

$

0.44

 

 

$

0.34

 

 

$

0.34

 

Distributions declared, per Unit

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

Weighted average number of Units outstanding, basic

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

Weighted average number of Units outstanding, diluted

 

 

59,895,229

 

 

 

60,182,264

 

 

 

60,252,928

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net income

 

$

30,662,851

 

 

$

23,783,684

 

 

$

26,606,222

 

Reversal of net unrealized gain on sale of securities

 

 

-

 

 

 

(236,439

)

 

 

-

 

Reversal of net unrealized gain on securities with other-than-temporary

   impairment

 

 

(672,097

)

 

 

-

 

 

 

-

 

Unrealized gain (loss) on securities

 

 

36,797,352

 

 

 

(18,596,853

)

 

 

10,042,241

 

Unrealized gain (loss) on bond purchase commitments

 

 

603,091

 

 

 

(3,234,911

)

 

 

(146,053

)

Comprehensive income

 

 

67,391,197

 

 

 

1,715,481

 

 

 

36,502,410

 

Comprehensive income (loss) allocated to noncontrolling interest

 

 

71,653

 

 

 

(823

)

 

 

(2,801

)

Partnership comprehensive income

 

$

67,319,544

 

 

$

1,716,304

 

 

$

36,505,211

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015

 

 

General Partner

 

 

# of Units - Restricted and Unrestricted

 

 

Beneficial Unit

Certificate Holders - Restricted and Unrestricted

 

 

Unallocated Deficit of Consolidated VIEs

 

 

Non-controlling

Interest

 

 

Total

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

Balance at January 1, 2015

 

$

578,238

 

 

 

60,252,928

 

 

$

330,457,117

 

 

$

(21,091,456

)

 

$

(15,995

)

 

$

309,927,904

 

 

$

51,698,418

 

Bond redemption related to

   MF Property acquisition

 

 

(6,309

)

 

 

 

 

 

 

(624,610

)

 

 

 

 

 

 

 

 

 

 

(630,919

)

 

 

(630,919

)

Sale of MF Property

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

24,282

 

 

 

24,282

 

 

 

-

 

Deconsolidation of VIEs

 

 

(173,701

)

 

 

 

 

 

 

(17,196,359

)

 

 

17,370,059

 

 

 

-

 

 

 

-

 

 

 

-

 

Distributions paid or accrued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(233,430

)

 

 

 

 

 

 

(23,109,595

)

 

 

-

 

 

 

-

 

 

 

(23,343,025

)

 

 

-

 

Distribution of Tier 2

   earnings (Note 3)

 

 

(2,338,956

)

 

 

 

 

 

 

(7,016,869

)

 

 

-

 

 

 

-

 

 

 

(9,355,825

)

 

 

-

 

Net income (loss)

 

 

2,474,274

 

 

 

 

 

 

 

20,413,352

 

 

 

3,721,397

 

 

 

(2,801

)

 

 

26,606,222

 

 

 

-

 

Unrealized gain on securities

 

 

100,422

 

 

 

 

 

 

 

9,941,819

 

 

 

-

 

 

 

-

 

 

 

10,042,241

 

 

 

10,042,241

 

Unrealized loss on bond

   purchase commitment

 

 

(1,461

)

 

 

 

 

 

 

(144,592

)

 

 

-

 

 

 

-

 

 

 

(146,053

)

 

 

(146,053

)

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 on sale of securities

 

 

(2,364

)

 

 

 

 

 

 

(234,075

)

 

 

-

 

 

 

-

 

 

 

(236,439

)

 

 

(236,439

)

Distributions paid or accrued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular distribution

 

 

(217,646

)

 

 

 

 

 

 

(21,546,966

)

 

 

-

 

 

 

-

 

 

 

(21,764,612

)

 

 

-

 

Distribution of Tier 2 earnings (Note 3)

 

 

(2,858,650

)

 

 

 

 

 

 

(8,575,949

)

 

 

-

 

 

 

-

 

 

 

(11,434,599

)

 

 

-

 

Net income (loss) allocable to Partners

 

 

2,992,106

 

 

 

 

 

 

 

20,208,994

 

 

 

-

 

 

 

(823

)

 

 

23,200,277

 

 

 

-

 

Repurchase of Beneficial Unit Certificates

 

 

-

 

 

 

(272,307

)

 

 

(1,603,658

)

 

 

-

 

 

 

-

 

 

 

(1,603,658

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

272,307

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

8,331

 

 

 

 

 

 

 

824,811

 

 

 

-

 

 

 

-

 

 

 

833,142

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(28,390

)

 

 

(153,306

)

 

 

-

 

 

 

-

 

 

 

(153,306

)

 

 

-

 

Unrealized loss on securities

 

 

(185,969

)

 

 

 

 

 

 

(18,410,884

)

 

 

-

 

 

 

-

 

 

 

(18,596,853

)

 

 

(18,596,853

)

Unrealized loss on bond

   purchase commitment

 

 

(32,349

)

 

 

 

 

 

 

(3,202,562

)

 

 

-

 

 

 

-

 

 

 

(3,234,911

)

 

 

(3,234,911

)

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)

 

 

(1,994,518

)

 

 

 

 

 

 

(5,983,555

)

 

 

-

 

 

 

-

 

 

 

(7,978,073

)

 

 

-

 

Distribution of Tier 3

   earnings (Note 3)

 

 

-

 

 

 

 

 

 

 

(4,928,231

)

 

 

-

 

 

 

-

 

 

 

(4,928,231

)

 

 

-

 

Net income allocable to Partners

 

 

2,140,074

 

 

 

 

 

 

 

26,468,586

 

 

 

-

 

 

 

71,653

 

 

 

28,680,313

 

 

 

-

 

Sale of Beneficial Unit Certificates, net

   of issuance costs

 

 

-

 

 

 

161,383

 

 

 

805,890

 

 

 

-

 

 

 

-

 

 

 

805,890

 

 

 

-

 

Repurchase of Beneficial Unit

   Certificates

 

 

-

 

 

 

(254,656

)

 

 

(1,466,222

)

 

 

-

 

 

 

-

 

 

 

(1,466,222

)

 

 

-

 

Restricted units awarded

 

 

-

 

 

 

283,046

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted units compensation

   expense

 

 

16,152

 

 

 

 

 

 

 

1,599,090

 

 

 

-

 

 

 

-

 

 

 

1,615,242

 

 

 

-

 

Beneficial Unit Certificates

   surrendered to pay tax

   withholding on vested

   restricted units

 

 

-

 

 

 

(40,637

)

 

 

(247,301

)

 

 

-

 

 

 

-

 

 

 

(247,301

)

 

 

-

 

Unrealized gain on securities

 

 

367,974

 

 

 

 

 

 

 

36,429,378

 

 

 

-

 

 

 

-

 

 

 

36,797,352

 

 

 

36,797,352

 

Unrealized gain on bond

   purchase commitment

 

 

6,031

 

 

 

 

 

 

 

597,060

 

 

 

-

 

 

 

-

 

 

 

603,091

 

 

 

603,091

 

Reversal of net unrealized gain on

   securities with other-than-temporary

   impairment

 

 

(6,721

)

 

 

 

 

 

 

(665,376

)

 

 

-

 

 

 

-

 

 

 

(672,097

)

 

 

(672,097

)

Balance at December 31, 2017

 

$

437,256

 

 

 

60,373,674

 

 

$

313,403,014

 

 

$

-

 

 

$

-

 

 

$

313,840,270

 

 

$

75,623,830

 

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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

30,662,851

 

 

$

23,783,684

 

 

$

26,606,222

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

5,212,859

 

 

 

6,862,530

 

 

 

6,505,011

 

Provision for loan loss

 

 

295,000

 

 

 

-

 

 

 

-

 

Gain on sale of real estate assets, net

 

 

(17,753,303

)

 

 

(14,072,317

)

 

 

(4,599,109

)

Gain on the sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

(3,212,447

)

Contingent interest realized on investing activities

 

 

(2,927,948

)

 

 

(1,379,466

)

 

 

(4,756,716

)

Note interest income realized from the sale of Fairmont Oaks, Consolidated VIE

 

 

-

 

 

 

-

 

 

 

(1,454,621

)

Gain on sale of securities

 

 

-

 

 

 

(8,097

)

 

 

-

 

Impairment of securities

 

 

761,960

 

 

 

-

 

 

 

-

 

Loss (gain) on derivatives, net of cash paid

 

 

(170,031

)

 

 

(17,618

)

 

 

1,802,655

 

Restricted unit compensation expense

 

 

1,615,242

 

 

 

833,142

 

 

 

-

 

Bond premium/discount amortization

 

 

(320,382

)

 

 

(153,922

)

 

 

238,996

 

Amortization of deferred financing costs

 

 

2,324,535

 

 

 

1,862,509

 

 

 

1,622,789

 

Deferred income tax expense (benefit)

 

 

(400,000

)

 

 

366,000

 

 

 

-

 

Change in preferred return receivable from unconsolidated entities

 

 

(2,922,158

)

 

 

(718,701

)

 

 

-

 

Changes in operating assets and liabilities, net of effect of acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in interest receivable

 

 

442,071

 

 

 

(1,762,344

)

 

 

(2,452,084

)

(Increase) decrease in other assets

 

 

245,564

 

 

 

(112,174

)

 

 

(416,419

)

Decrease in accounts payable and accrued expenses

 

 

73,267

 

 

 

(251,695

)

 

 

(496,859

)

Net cash provided by operating activities

 

 

17,139,527

 

 

 

15,231,531

 

 

 

19,387,418

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(441,790

)

 

 

(635,739

)

 

 

(3,282,107

)

Restructure and acquisition of interest rate derivative

 

 

-

 

 

 

-

 

 

 

(562,088

)

Proceeds from sale of MF Properties

 

 

46,525,000

 

 

 

45,850,000

 

 

 

16,196,510

 

Proceeds from sale of land held for development

 

 

3,000,000

 

 

 

-

 

 

 

-

 

Proceeds from sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

22,900,000

 

Proceeds from sale of mortgage revenue bond

 

 

-

 

 

 

9,295,000

 

 

 

-

 

Proceeds from the sale of MBS Securities

 

 

-

 

 

 

14,997,069

 

 

 

-

 

Cash realized from the bond exchange for the Suites on Paseo property

 

 

-

 

 

 

-

 

 

 

514,095

 

Acquisition of mortgage revenue bonds

 

 

(121,347,000

)

 

 

(130,620,000

)

 

 

(188,572,000

)

Contributions to unconsolidated entities

 

 

(14,096,478

)

 

 

(18,751,305

)

 

 

-

 

Acquisition of MF Property

 

 

-

 

 

 

(9,882,800

)

 

 

-

 

Restricted cash - debt collateral paid

 

 

(1,043,283

)

 

 

(2,564,000

)

 

 

(4,815,000

)

Restricted cash - debt collateral released

 

 

5,038,371

 

 

 

4,429,019

 

 

 

7,522,959

 

Increase (decrease) in restricted cash

 

 

776,981

 

 

 

342,609

 

 

 

(16,004

)

Acquisition of taxable mortgage revenue bonds

 

 

-

 

 

 

-

 

 

 

(500,000

)

Principal payments received on mortgage revenue bonds

 

 

52,964,448

 

 

 

7,630,638

 

 

 

21,932,563

 

Principal payments received on taxable mortgage revenue bonds

 

 

1,565,455

 

 

 

551,162

 

 

 

153,821

 

Principal payments received on PHCs

 

 

5,979,738

 

 

 

2,014,120

 

 

 

963,526

 

Cash paid for land held for development and deposits on potential purchases

 

 

(381,066

)

 

 

(100,000

)

 

 

(2,889,400

)

Advances on property loans

 

 

(2,712,816

)

 

 

(8,414,215

)

 

 

(11,208,763

)

Principal payments received on property loans

 

 

2,667,276

 

 

 

2,806,056

 

 

 

2,958,415

 

Net cash used in investing activities

 

 

(21,505,164

)

 

 

(83,052,386

)

 

 

(138,703,473

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid

 

 

(33,465,038

)

 

 

(34,245,664

)

 

 

(31,556,898

)

Proceeds from the sale of redeemable Series A Preferred Units

 

 

53,631,000

 

 

 

40,869,000

 

 

 

-

 

Payment of offering costs related to the sale of redeemable Series A Preferred Units

 

 

(8,875

)

 

 

(86,814

)

 

 

-

 

Acquisition of interest rate derivatives

 

 

(556,017

)

 

 

-

 

 

 

-

 

Repurchase of Beneficial Unit Certificates

 

 

(1,466,222

)

 

 

(1,603,658

)

 

 

-

 

Proceeds from the sale of Beneficial Unit Certificates

 

 

978,628

 

 

 

-

 

 

 

-

 

Payment of offering costs related to the sale of Beneficial Unit Certificates

 

 

(101,143

)

 

 

-

 

 

 

-

 

Payment of tax withholding related to restricted unit awards

 

 

(400,607

)

 

 

-

 

 

 

-

 

Distribution to noncontrolling interest

 

 

(76,316

)

 

 

-

 

 

 

-

 

Proceeds from debt financing

 

 

144,100,000

 

 

 

173,302,645

 

 

 

293,205,000

 

Principal payments on debt financing

 

 

(81,773,730

)

 

 

(129,465,032

)

 

 

(182,132,712

)

Principal payments on other secured financing

 

 

-

 

 

 

(7,500,000

)

 

 

-

 

Principal borrowing on mortgages payable

 

 

-

 

 

 

7,500,000

 

 

 

-

 

Principal payments on mortgages payable

 

 

(15,952,005

)

 

 

(17,997,186

)

 

 

(8,415,981

)

Principal borrowing on unsecured lines of credit

 

 

80,560,000

 

 

 

87,487,639

 

 

 

74,071,261

 

Principal payments on unsecured and secured lines of credit

 

 

(90,560,000

)

 

 

(44,984,639

)

 

 

(55,149,000

)

Decrease in security deposit liability related to restricted cash

 

 

(227,029

)

 

 

(44,984

)

 

 

16,004

 

Deferred costs related to future equity raises

 

 

-

 

 

 

-

 

 

 

(169,667

)

Debt financing and other deferred costs

 

 

(1,467,831

)

 

 

(1,697,713

)

 

 

(2,709,513

)

Net cash provided by financing activities

 

 

53,214,815

 

 

 

71,533,594

 

 

 

87,158,494

 

Net increase (decrease) in cash and cash equivalents

 

 

48,849,178

 

 

 

3,712,739

 

 

 

(32,157,561

)

Cash and cash equivalents at beginning of period

 

 

20,748,521

 

 

 

17,035,782

 

 

 

49,193,343

 

Cash and cash equivalents at end of period

 

$

69,597,699

 

 

$

20,748,521

 

 

$

17,035,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

21,558,593

 

 

$

15,175,628

 

 

$

12,866,079

 

Cash paid during the period for income taxes

 

$

5,890,835

 

 

$

4,615,000

 

 

$

-

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared but not paid for Beneficial Unit Certificates and general partner

 

$

8,423,803

 

 

$

8,017,950

 

 

$

8,759,343

 

Distributions declared but not paid for Series A Preferred Units

 

$

692,917

 

 

$

271,518

 

 

$

-

��

Land contributed as investment in an unconsolidated entity

 

$

3,091,023

 

 

$

-

 

 

$

-

 

Capital expenditures financed through accounts payable

 

$

72,390

 

 

$

46,528

 

 

$

26,368

 

Deferred financing and equity issuance costs financed through accounts payable

 

$

90,339

 

 

$

234,372

 

 

$

-

 

Liabilities assumed in the acquisition of MF Property

 

$

-

 

 

$

135,326

 

 

$

-

 

Beneficial Unit Certificates surrendered for tax withholding liabilities on restricted units

 

$

-

 

 

$

153,306

 

 

$

-

 

Exchange of Suites on Paseo assets held for the Suites on Paseo property

 

$

-

 

 

$

-

 

 

$

42,665,912

 


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


AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

1. Basis of Presentation

America First Multifamily Investors, L.P. (the “Company” or “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”) that have been issued to provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. The Partnership expects and believes the interest earned on these mortgage revenue bonds is excludable from gross income for federal income tax purposes.  Thus, most of the income earned by the Partnership is exempt from federal income taxes.  The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make property loans secured by multifamily residential properties which may or may not be financed by mortgage revenue bonds held by the Partnership.   The Partnership may acquire real estate securing its mortgage revenue bonds or property loans through foreclosure in the event of a default or through the receipt of a fee simple deed in lieu of foreclosure.  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 mortgage revenue bonds 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 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”). During 2017 and 2016, the Partnership issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) in private placements. The Series A Preferred Units are redeemable in the future and represent limited partnership interests in the Partnership pursuant to a subscription agreement with five financial institutions (Note 21).

All disclosures of the number of units for properties related to mortgage revenue bonds, taxable MRBs and MF Properties are unaudited.

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes the Partnership and its consolidated subsidiaries. All intercompany transactions are eliminated. At December 31, 2017, the consolidated subsidiaries of the Partnership (“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 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.

One MF Property is 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. The Greens Hold Co held 100% ownership interest in the Eagle Village, Residences of DeCordova and Residences of Weatherford MF Properties until their sale in November 2017.

Two MF Properties are owned directly by the Partnership.

Prior to January 1, 2016, the Partnership has consolidated two variable interest entities (“VIE”), Bent Tree and Fairmont Oaks properties (the “Consolidated VIEs”), in the consolidated financial statements. The Partnership did not hold an ownership interest in the Consolidated VIEs but did own the MRBs that financed the Consolidated VIEs.  The Partnership was determined to be the primary


beneficiary of these VIEs. The Consolidated VIEs are presented as discontinued operations for all periods presented and all significant transactions and accounts between the Partnership and the VIEs have been eliminated in consolidation. The Company’s consolidated financial statements reported in this Form 10-K include the financial position and results of operations of the Partnership and the Consolidated VIEs. The Consolidated VIEs were sold in the fourth quarter of 2015.

Variable Interest Entities

Under the consolidation guidance, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are variable interest entities (“VIEs”) and if the Partnership is the primary beneficiary. The entity that is deemed to have (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in the consolidated financial statements.  The Company has consolidated all VIEs in which it has determined it is the primary beneficiary. In the Company’s consolidated financial statements, all transactions and accounts between the Partnership and the Consolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates VIEs at each reporting date based on events and circumstances at the VIEs.  As a result, changes to the Consolidated VIEs may occur in the future based on changes in circumstances.  The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The General Partner does not believe that the consolidation of VIEs for reporting under accounting principles generally accepted in the United States of America (“GAAP”) impacts the Partnership’s status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership, the treatment of the MRBs on the properties owned by Consolidated VIEs as debt, the nature of the interest payments, which it believes to be tax-exempt, received on the MRBs secured by the properties owned by Consolidated VIEs or the manner in which the Partnership’s income is reported to Unitholders on IRS Form K-1.

The unallocated deficit of the Consolidated VIEs consists of the accumulated historical net losses of the Consolidated VIEs since the applicable consolidation date. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partner and Unitholders as such activity is not contemplated by, or addressed in, the First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as amended (the “Amended and Restated LP Agreement”).

The Partnership sold its variable interests in Bent Tree and Fairmont Oaks (the Consolidated VIEs) in the fourth quarter of 2015. The sale of the Consolidated VIEs met the criteria for discontinued operations presentation and have been classified as such in the Company’s consolidated financial statements for all periods presented. The gains and results of operations of the Consolidated VIEs are reported as part of the discontinued operations in net income for the year ended December 31, 2015 (see Notes 14).

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.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid securities and investments in federally tax-exempt securities with maturities of three months or less when purchased.

Concentration of Credit Risk

The Partnership maintains the majority of its unrestricted cash balances at three financial institutions.  The balances insured by the Federal Deposit Insurance Corporation are equal to $250,000 at each institution.  At various times the cash balances exceeded the $250,000 limit.  The Partnership is also exposed to risk on its short-term investments in the event of non-performance by counterparties.  The Partnership does not anticipate any non-performance.  This risk is minimized significantly by the Partnership’s portfolio being restricted to investment grade securities.


Restricted Cash

Restricted cash is legally restricted to use and is comprised of resident security deposits, required maintenance reserves, escrowed funds, and property rehabilitation.  In addition, the Partnership is required to maintain restricted cash balances related to the TEBS Financing facilities and the Partnership’s interest rate derivatives.

Investments in Mortgage Revenue Bond, Taxable Mortgage Revenue Bonds and Bond Purchase Commitments

The Partnership accounts for its investments in MRBs, taxable MRBs and bond purchase commitments under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value of mortgage revenue bonds, taxable MRBs and bond purchase commitments.

The Partnership periodically reviews each of its MRBs, taxable MRBs and bond purchase commitments for impairment.  The Partnership evaluates whether unrealized losses are considered other-than-temporary based on various factors including:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Adverse conditions specifically related to the security, its collateral, or both,

Volatility of the fair value of the security,

The likelihood of the borrower being able to make payments,

Failure of the issuer to make scheduled interest or principal payments, and

Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost, if the Partnership has the intent to sell or may be required to sell the security prior to the time that the value recovers or until maturity, and whether the Partnership expects to recover the security’s entire amortized cost basis.  

The recognition of other-than-temporary impairment and the potential impairment analysis are subject to a considerable degree of judgment, the results of which when applied under different conditions or assumptions could have a material impact on the consolidated financial statements. If the Partnership experiences deterioration in the values of its investment portfolio, the Partnership may incur impairments to its investment portfolio that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings. There were no impairment charges reported by the Partnership related to MRBs, taxable MRBs or bond purchase commitments during the years ended December 31, 2017, 2016 and 2015.

The Partnership owns some MRBs which were purchased at a discount or premium. The discount or premium on an investment is amortized on an effective yield method over the term of the related MRB and is recognized as investment income in the current period.

The Partnership eliminates the MRBs and the associated interest income and interest receivable when it consolidates the underlying real estate collateral in accordance with implementation of the consolidation guidance for VIEs.

Investment in PHC Certificates and MBS Securities

The Partnership accounts for its investments in PHC Certificates under the guidance for accounting for certain investments in debt and equity securities.  The Partnership’s investments in these instruments are classified as available-for-sale securities and are reported at estimated fair value. The net unrealized gains or losses on these investments is reflected in other comprehensive income. Unrealized gains and losses do not affect the cash flow of the underlying contractual payments, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral. See Note 25 for a description of the Partnership’s methodology for estimating fair value for the PHC Certificates and MBS Securities. The Partnership sold its remaining MBS Securities in the first quarter of 2016.


The Partnership periodically reviews the PHC Certificates and MBS Securities for impairment. The Partnership evaluates whether a decline in the fair value of the investments is below its amortized cost is other-than temporary. Factors considered are:

The duration and severity of the decline in fair value,

The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

Downgrade in the security’s rating by S&P, and

Volatility of the fair value of the security.

See Note 7 for information on recognized impairment of the PHC Certificates.

The PHC Certificate Trust I was purchased at a premium and PHC Certificate Trusts II and III were purchased at a discount. The discount or premium on an investment is amortized on an effective yield method over the term of the related PHC Certificate and is recognized as investment income in the current period.

Real Estate Assets

The Partnership’s investments in real estate are carried at cost less accumulated depreciation. Depreciation of real estate is based on the estimated useful life of the related asset, generally 19-40 years on multifamily, student housing, and senior citizen residential apartment buildings and five to 15 years on capital improvements. Depreciation expenses is calculated using the straight-line method. Maintenance and repairs are charged to expense as incurred, while improvements, renovations, and replacements are capitalized. The Partnership also holds land held for investment and development which is reported at cost. The Partnership recognizes gains and losses equal to the difference between proceeds on sale and the net carrying value of the assets at the date of disposition.

The Partnership reviews real estate assets at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of the real estate assets may not be recoverable, the Partnership compares the carrying amount to the undiscounted net cash flows expected to be generated from the use of the assets. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. See Note 9 for information on recognized impairment charges.

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 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 interest under 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 consolidated statements of operations (Note 10).

The Partnership reviews its investments in unconsolidated affiliates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be fully recoverable. Evidence of a loss in value that is other than temporary includes, but is not limited to, the absence of an ability to recover the carrying amount of the investment, the inability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment, or, where applicable, estimated sales proceeds that are insufficient to recover the carrying amount of the investment. The Partnership’s assessment as to whether any decline in value is other than temporary is based on its ability and intent to hold the investment and whether evidence indicating the carrying value of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If the fair value of the investment is determined to be less than the carrying value and the decline in value is considered other than temporary, an impairment charge is recorded equal to the excess of the carrying value over the estimated fair value of the investment.

Property Loans, Net of Loan Loss Allowance  

The Partnership invests in taxable property loans made to the owners of certain multifamily properties. Most of the property loans are with multifamily properties that secure MRBs owned by the Partnership. The Partnership recognizes interest income on the property loans as earned and is reported within other interest income on the consolidated statements of operations. Interest income is not recognized for property loans that are deemed to be in nonaccrual status. The repayment of these taxable property loans is dependent


largely on the value of the property or its cash flows that collateralize the loans.  The Partnership periodically evaluates these loans for potential losses by estimating the fair value of the property that collateralizes the loans and comparing the fair value to the outstanding MRBs or senior financing plus the Partnership’s property loans.  The Partnership utilizes a discounted cash flow model (“DCF”) that considers varying assumptions.  The DCF analysis may assume multiple revenue and expense scenarios, various capitalization rates, and multiple discount rates.  The Partnership may also consider other information such as independent appraisals in estimating a property’s fair value.

If the estimated fair value of the property, after deducting the amortized cost basis of the MRB or senior financing, exceeds the principal balance of the taxable property loan then no potential loss is indicated and no allowance for loan loss is recorded.  If a potential loss is indicated, an allowance for loan loss is recorded against the outstanding loan amount and a loss is realized.  The determination of the need for an allowance for loan loss is subject to considerable judgment. See Note 11 for additional information on the Partnership’s loan loss allowances.

Assets Held for Sale

The Partnership reports assets and related liabilities as held for sale on the consolidated balance sheet in the period that the Partnership has committed to a plan to dispose of an asset or asset group, the asset or asset group is being marketed for sale, and it is probable the sale will be completed within one year. Once an asset or asset group is determined to be held for sale, the Partnership discontinues depreciation of the asset or asset group.

Accounting for TEBS, Term A/B and TOB Financing Arrangements

The Partnership has evaluated the accounting guidance related its TOB, Term TOB, Term A/B and TEBS Financings and has determined that the securitization transactions do not meet the accounting criteria for a sale or transfer of financial assets and will, therefore, be accounted for as secured financing transactions.  More specifically, the guidance on transfers and servicing sets forth the conditions that must be met to de-recognize a transferred financial asset.  This guidance provides, in part, that the transferor has surrendered control over transferred assets if and only if the transferor does not maintain effective control over the transferred assets. The financing agreements contain certain provisions that allow the Partnership to unilaterally cause the holder to return the securitized assets, other than through a cleanup call. Based on these terms, the Partnership has concluded that it has not transferred effective control over the transferred assets and, as such, the transactions do not meet the conditions to de-recognize the transferred assets.

In addition, the Partnership has evaluated the securitization trusts associated with the TOB, Term TOB, Term A/B and TEBS Financings in accordance with guidance on consolidation of VIEs. See Note 5 for the consolidation analysis related to these secured financing arrangements. The Partnership is deemed to be the primary beneficiary of these securitization trusts and consolidates the assets, liabilities, income and expenses of the securitization trusts in the Partnership’s consolidated financial statements.

Deferred Financing Costs

Debt financing costs are capitalized and amortized utilizing the effective interest method through either the stated maturity or the optional redemption of the related debt financing agreement. Debt financing costs associated with revolving line of credit arrangements are reported within other assets on the consolidated balance sheets. Debt financing costs for other debt financings are reported as reductions to the carrying value of the related debt financings on the consolidated balance sheets.

Bond issuance costs are capitalized and amortized utilizing the effective interest method over the stated maturity of the related MRBs. Bond issuance costs are reported as an adjustment to the carrying cost of the related MRB on the consolidated balance sheets. 

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.  

Certain of the Consolidated VIEs and The Greens Hold Co are corporations 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 these entities on the Partnership’s consolidated financial statements.  


The Partnership evaluates its tax positions taken in the Partnership’s 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 values its deferred tax assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse, and reflects changes to enacted rates contained in the Tax Cuts and Jobs Act of 2017 that was signed into law in December 2017. 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.

Revenue Recognition on Investments in Mortgage Revenue Bonds

The interest income received by the Partnership from its MRBs is dependent upon the net cash flow of the underlying properties. Base interest income on fully performing MRBs is recognized as it is earned. Base interest income on MRBs not fully performing is recognized as it is received. Past due base interest on MRBs previously not fully performing is recognized as it is received. The Partnership reinstates the accrual of base interest once the MRBs’ ability to perform is adequately demonstrated. Base interest income related to tax-exempt and taxable MRBs are disclosed within investment income and other interest income, respectively, on the consolidated statements of operations. Certain MRBs contain contingent interest provisions that generate excess available cash flow. Contingent interest income is recognized when realized or realizable.  Past due contingent interest on MRBs, which are or were previously not fully performing, is recognized when realized or realizable.  At December 31, 2017 and 2016, the Partnership’s MRBs were fully performing as to their base interest.

Revenue Recognition on Investments in Real Estate, MBS, and PHC Certificates

The Partnership’s Consolidated VIEs and the 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.

Interest income on the MBS and PHC Certificates is recognized as it is earned.

Derivative Instruments and Hedging Activities

The Partnership reports all derivative instrument assets or liabilities in the consolidated balance sheets at fair value. The Partnership’s derivative instruments are not designated as hedging instruments and changes in fair value are recognized in the consolidated statements of operations as interest expense.  The Partnership is exposed to loss should a counterparty to its derivative instruments default.  The Partnership does not anticipate non-performance by any counterparty.  

Redeemable Series A Preferred Units

The Partnership has issued Series A Preferred Units, which represent limited partnership interests in the Partnership, to various financial institutions.  The Series A Preferred Units are recorded as mezzanine equity due to the holders’ redemption option which, if and when the units become subject to redemption, is outside the Partnership’s control. In addition, the costs of issuing the Series A Preferred Units are netted against the carrying value and amortized to the first redemption date (Note 21).

Beneficial Unit Certificates (“BUCs”)

The Partnership has issued BUCs representing assigned limited partnership interests to investors. Costs related to the issuance of BUCs are recorded as a reduction to partners’ capital when issued.


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 Unit Awards (“RUA” or “RUAs”) 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 up to three years. RUAs currently provide for the payment of 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 accounts 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.

Net Income per BUC

The Partnership uses the two-class method to allocate net income available to BUCs and the unvested Restricted Units as the Restricted Units are participating securities. 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.

Use of Estimates in Preparation of Consolidated Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires the Partnership 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The most significant estimates and assumptions include those used in determining investment valuations, investment impairments, impairment of real estate assets, allocation of the purchase price for acquisition accounting and allowances for loan losses.

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 has determined adoption of the standard will not have a material impact on the consolidated financial statements.

In January 2017, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)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 of 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. The Partnership has not elected early adoption at December 31, 2016It is expected that the new standard would reduce the number of future real estate acquisitions that will be accounted for as business combinations and, is currently assessingtherefore, reduce the impactamount of the adoption of this pronouncement on the consolidated financial statements.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 also requires certain disclosure regarding the nature of restrictions on cash balances. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2017 and is applied retrospectively. The Partnership has not elected early adoption at December 31, 2016 and does not expect thedetermined adoption of this pronouncement tothe standard will not have a material impact on the 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 transaction.transactions. The ASU is effective for the Partnership for fiscal years beginning after December 15, 2017 and is applied retrospectively. The Partnership has not elected earlydetermined adoption at December 31, 2016 and is currently assessing the impact of the adoption of this pronouncementstandard will not have a material impact on the 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 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’sPartnership has four lessee arrangements are immaterial. As such,for which it is assessing the quantitative and qualitative impact of the standard. The Partnership has not elected early adoption of the ASUstandard and is not expected tocurrently evaluating the impact this standard will have a material impact on the Partnership’sits consolidated financial statements.

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 PartnershipsPartnership’s annual and interim periods beginning after December 15, 2017. The Partnership is currently assessing the impacthas determined adoption of the adoption of this pronouncementstandard will not have a material impact on the Partnership’s 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. ASU 2014-09 will become effective forThe Partnership expects to use the Partnership for the annual period beginning after December 15, 2017 and for interim periods within the annual period. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. The Partnership has not selected a transition method.method and will adopt the standard effective January 1, 2018. The Partnership has completed an evaluationassessment of its revenue-producing contractsrevenue streams and performance obligations and is currently evaluating the quantitative and qualitative impacts of the new standard on the business. The Partnership has determined they are primarily leases andthat revenues within investment agreements thatincome, contingent interest income, other interest income are not within the scope of this standard. As a result,Furthermore, the majority of property revenues are within the scope of the Lease ASU and outside the scope of the Revenue ASU. The Partnership does not expectbelieves the adoptionnew standard will only impact property revenues related to non-lease revenue streams, other income, 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 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 has determined adoption of the standard will not have a material impact toon the Partnership’s reported property revenues, investment income and other interest income. The Partnership is continuing to evaluate the impact on other revenue and income sources.consolidated financial statements.

 

 


3. Partnership Income, Expenses and Cash Distributions

The Amended and Restated LP Agreement of the Partnership contains provisions for the distribution of Net Interest Income, Net Residual Proceeds and Liquidation Proceeds, for the allocation of income or loss from operations and for the allocation of income and loss arising from a repayment, sale, or liquidation of investments.  Income and losses will be allocated to each Unitholder on a periodic basis, as determined by the General Partner, based on the number of BUCs held by each Unitholder as of the last day of the period for which such allocation is to be made. Distributions of Net Interest Income and Net Residual Proceeds will be made to each Unitholder of record on the last day of each distribution period based on the number of BUCs held by each Unitholder 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 (Note 9) 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 (Tier 1) is distributed 99% to the limited partners and Unitholders as a class and 1% to AFCA 22. Net Interest Income (Tier 2) and Net Residual Proceeds are distributed 100% to Unitholders except that Net Interest Income and Net Residual Proceeds(Tier 2) representing contingent interest in an amount equalup to 0.9% per annum of the principal amount of the mortgage revenue bondsMRBs on a cumulative basis (definedare distributed 75% to the limited partners and Unitholders as a class and 25% to AFCA 2. Net Interest Income (Tier 3) and Net Residual Proceeds (Tier 3) received by the Partnership in excess of any contingent interest included in Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2), respectively) are distributed 75%100% to the Unitholders and 25% to AFCA 2.

The unallocated deficit of the Consolidated VIEs is primarily comprised of the accumulated historical net losses of the Consolidated VIEs. The unallocated deficit of the Consolidated VIEs and the Consolidated VIEs’ net losses subsequent to that date are not allocated to the General Partnerlimited partners and Unitholders as such activity is not contemplated by, or addressed in, the Amended and Restated LP Agreement. The Consolidated VIEs were sold during 2015, therefore the unallocated deficit of the Consolidated VIEs is zero on December 31, 2016 and 2015.a class.

The distributions paid or accrued per BUC during the fiscal years ended December 31, 2017, 2016, 2015, and 20142015 were as follows:

 

 

 

For the Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Cash distributions

 

$

0.5000

 

 

$

0.5000

 

 

$

0.5000

 

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cash distributions

 

$

0.5000

 

 

$

0.5000

 

 

$

0.5000

 

 

 

4. Net income per BUC

 

The Partnership has disclosed basic and diluted net income per BUC on the Consolidated Statementconsolidated statements of Operations.operations. The unvested RUAs issued under the Plan are considered participating securities. The Partnership used the two-class method to allocate net income available to BUCs and the unvested restricted units. Unvested restricted unit awards 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. There were no dilutive unitsUnits for the years ended December 31, 2017, 2016 2015 and 2014.2015.

 

 

5. Variable Interest Entities

Consolidated VIEs

The capital structure of Bent Tree and Fairmont Oaks (the “Consolidated VIEs”) consisted of senior debt, subordinated debt, and equity capital. The senior debt was in the form of a mortgage revenue bondMRB and accounts for the majority of the total capital of each VIE. As the bondholder, the Partnership was entitled to principal and interest payments and has certain protective rights as established by the bondMRB documents. The equity ownership in these entities is ultimately held by corporations which are owned by three individuals, one of which is a related party to the Partnership. Additionally, each of these properties iswas managed by an affiliate of the Partnership, Properties Management, which is an affiliate of Burlington.

The Partnership determined it was the primary beneficiary of the Consolidated VIEs. The Consolidated VIEs were sold in the fourth quarter of 2015 with the gains and results of operations of the Consolidated VIEs reported as part of the discontinued operations in net income for all periods presented. No net income or loss from these properties’ operations or sale accrued to the Unitholders or the General Partner during 2017, 2016 2015 and 2014.2015.


The Partnership determined the TOB Trusts, Term A/B Trusts and TEBS Financings are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of these specific VIEs, the Partnership considered whowhich 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 Trust agreementsTrusts, Term A/B Trusts and TEBS Financings stipulate the Partnership has the sole right to cause the TOB Trusts to sell the underlying assets through its ownership of the LIFERs. 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, which results in the Partnership being identified as the primary beneficiary. As such, the Partnership reports the TOB Trusts as consolidated VIEs. The Partnership reports the senior floating-rate participation interests (“SPEARS”) related to the TOB Trusts as secured debt financings on the consolidated balance sheets (Note 17). The PHC Certificates secured by the TOB Trusts are reported as assets on the consolidated balance sheets (Note 7).

The Partnership determined the Term TOB Trusts are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of these specific VIEs, the Partnership considered who has the power to control the activities of the VIEs which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE.  The Term TOB Trust agreements stipulate the Partnership has the sole right to cause the TOB Trusts to sell the underlying assets through its ownership of the Class B Certificates. 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, which results in the Partnership being identified as the primary beneficiary. As such, the Partnership reports the Term TOB Trusts as consolidated VIEs. The Partnership reports the Class A Certificates related to the Term TOB Trusts as secured debt financings on the consolidated balance sheets (Note 17). The mortgage revenue bonds secured by the Term TOB Trusts are reported as assets on the consolidated balance sheets (Note 6).

The Partnership determined the Term A/B Trust are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of these specific VIEs, the Partnership considered who has the power to control the activities of the VIEs which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE.  The Term A/B Trust agreements stipulate the Partnership has the sole right to cause the Term A/B 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, which results in the Partnership being identified asPartnership.

As the primary beneficiary. As such,beneficiary, the Partnership reports the TOB Trusts, Term A/B Trusts asand TEBS Financings on a consolidated VIEs.basis. The Partnership reports the senior floating-rate participation interests (“SPEARS”) related to the TOB Trusts and the Class A certificates related toCertificates for both the Term A/B Trusts as secured debt financings on the consolidated balance sheets (Note 17). The mortgage revenue bonds secured by the Term A/B Trusts are reported as assets on the consolidated balance sheets (Notes 6).

The Partnership determined the TEBS Financings are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of these specific VIEs, the Partnership considered who has the power to control the activities of the VIEs which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE.  The TEBS Financing agreements stipulate the Partnership has the sole right to cause the TEBS Financings 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, which results in the Partnership being identified as the primary beneficiary. As such, the Partnership reports the TEBS Financings as consolidated VIEs. The Partnership reports the Class A certificates related to the TEBS Financings as secured debt financings on the consolidated balance sheets (Note 17). The mortgage revenue bondsMRBs secured by the TOB Trusts, Term A/B Trusts and TEBS Financings are reported as assets on the consolidated balance sheets (Notes(Note 6).


Non-Consolidated VIEs

The Partnership has variable interests in certain othervarious entities that have been determined to be VIEs, but for whichin the Partnership is not the primary beneficiary. The Partnership does not consolidate the financial statementsform of theseMRBs, property loans and investments in unconsolidated entities.

The Partnership has These variable interests in certain entities that aredo not allow the borrowers on the Partnership’s mortgage revenue bonds. The Partnership has no equity ownership interest in the entities, but the mortgage revenue bonds owned by the Partnership are considered variable interests. The entities are not consolidated as VIEs because 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 entities.

The Partnership has variable interests in certain entities throughis not considered the property loans issued toprimary beneficiary and does not consolidate the property owners. The Partnership has no equity ownership interestfinancial statements of these VIEs in the entities, but the property loans issued by the Partnership are considered variable interests. The entities are not consolidated as VIEs because the Partnership does not have the power to direct the activities that most significantly impact the economic performance of the entities.financial statements.

The Partnership’s investments in unconsolidated entities are considered variable interests in the unconsolidated entities. The entities are not consolidated as VIEs because the Partnership does not have the power to direct the activities that most significantly impact the economic performance of the entities.


The Partnership held variable interest in 2023 and 1520 non-consolidated VIEs at December 31, 20162017 and 2015,2016, respectively. The following table summarizes the Partnerships variable interests in these entities at December 31, 20162017 and 2015:2016:

 

 

Maximum Exposure to Loss

 

 

Maximum Exposure to Loss

 

 

December 31, 2016

 

 

December 31, 2015

 

 

December 31, 2017

 

 

December 31, 2016

 

Mortgage revenue bonds

 

$

137,921,000

 

 

$

103,483,793

 

 

$

146,344,195

 

 

$

137,921,000

 

Property loans

 

 

16,476,073

 

 

 

19,464,977

 

 

 

15,824,613

 

 

 

16,476,073

 

Investment in unconsolidated entities

 

 

19,470,006

 

 

 

-

 

 

 

39,608,927

 

 

 

19,470,006

 

 

$

173,867,079

 

 

$

122,948,770

 

 

$

201,777,735

 

 

$

173,867,079

 

 

 

The maximum exposure to loss for the mortgage revenue bondsMRBs is equal to the cost adjusted for paydowns at December 31, 20162017 and 2015.2016. The difference between the mortgage revenue bond’sa MRB’s carrying value on the consolidated balance sheets and the maximum exposure to loss is a function of the unrealized gains or losses on the mortgage revenue bonds.MRB. 

 

The maximum exposure to loss on the property loans at December 31, 20162017 and 20152016 is equal to the unpaid principal balance plus accrued interest. The difference between thea property loans’ carrying value and the maximum exposure is the value of loan loss allowances that have been previously recorded against the property loans.

 

 

6. Investments in Mortgage Revenue Bonds

Each of the mortgage revenue bondsThe Partnership owns MRBs that were issued by various state and local governments, their agencies and authorities to finance the construction or rehabilitation of income-producing real estate properties. However, the mortgage revenue bondsMRBs do not constitute an obligation of any state or local government, agency or authority and no state or local government, agency or authority is liable on them, nor is the taxing power of any state or local government pledged to the payment of principal or interest on the mortgage revenue bonds.MRBs. The mortgage revenue bondsMRBs are non-recourse obligations of the respective owners of the properties. The sole source of the funds to pay principal and interest on the mortgage revenue bondsMRBs is the net cash flow or the sale or refinancing proceeds from the properties. Each mortgage revenue bondMRB is collateralized by a mortgage on all real and personal property included in the related property. The mortgage revenue bondsMRBs bear interest at a fixed rate and two of the mortgage revenue bonds provide for the payment of additional contingent interest that is payable from available net cash flow generated by the related property.


The following tables present information regarding the mortgage revenue bonds owned by the Partnership as of December 31, 20162017 and 2015:2016:

 

 

December 31, 2016

 

 

December 31, 2017

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative Unrealized Gain

 

 

Cumulative Unrealized Loss

 

 

Estimated Fair Value

 

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Courtyard - Series A & B (2)

 

CA

 

$

16,458,000

 

 

$

1,226,192

 

 

$

-

 

 

$

17,684,192

 

Glenview Apartments - Series A (4)

 

CA

 

$

4,670,000

 

 

$

132,402

 

 

$

-

 

 

$

4,802,402

 

 

CA

 

 

4,627,228

 

 

 

523,464

 

 

 

-

 

 

 

5,150,692

 

Harmony Court Bakersfield - Series A (2)

 

CA

 

 

3,730,000

 

 

 

430,637

 

 

 

-

 

 

 

4,160,637

 

Harmony Terrace - Series A & B (2)

 

CA

 

 

14,300,000

 

 

 

-

 

 

 

-

 

 

 

14,300,000

 

 

CA

 

 

14,300,000

 

 

 

871,221

 

 

 

-

 

 

 

15,171,221

 

Harden Ranch - Series A (3)

 

CA

 

 

6,912,535

 

 

 

369,738

 

 

 

-

 

 

 

7,282,273

 

 

CA

 

 

6,845,985

 

 

 

1,182,914

 

 

 

-

 

 

 

8,028,899

 

Las Palmas II - Series A & B (2)

 

CA

 

 

3,465,000

 

 

 

193,418

 

 

 

-

 

 

 

3,658,418

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,530,000

 

 

 

108,608

 

 

 

-

 

 

 

2,638,608

 

 

CA

 

 

2,506,828

 

 

 

398,840

 

 

 

-

 

 

 

2,905,668

 

San Vicente - Series A & B (2)

 

CA

 

 

5,320,000

 

 

 

309,038

 

 

 

-

 

 

 

5,629,038

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

3,065,000

 

 

 

177,093

 

 

 

-

 

 

 

3,242,093

 

 

CA

 

 

3,036,928

 

 

 

535,673

 

 

 

-

 

 

 

3,572,601

 

Seasons at Simi Valley - Series A (2)

 

CA

 

 

4,376,000

 

 

 

308,335

 

 

 

-

 

 

 

4,684,335

 

 

CA

 

 

4,366,195

 

 

 

807,864

 

 

 

-

 

 

 

5,174,059

 

Seasons Lakewood - Series A & B (2)

 

CA

 

 

12,610,000

 

 

 

884,537

 

 

 

-

 

 

 

13,494,537

 

Seasons San Juan Capistrano - Series A & B (2)

 

CA

 

 

18,949,000

 

 

 

1,233,570

 

 

 

-

 

 

 

20,182,570

 

Summerhill - Series A & B (2)

 

CA

 

 

9,795,000

 

 

 

738,806

 

 

 

-

 

 

 

10,533,806

 

Sycamore Walk - Series A (2)

 

CA

 

 

3,632,000

 

 

 

130,431

 

 

 

-

 

 

 

3,762,431

 

 

CA

 

 

3,632,000

 

 

 

490,314

 

 

 

-

 

 

 

4,122,314

 

The Village at Madera - Series A & B (2)

 

CA

 

 

4,804,000

 

 

 

355,303

 

 

 

-

 

 

 

5,159,303

 

Tyler Park Townhomes - Series A (3)

 

CA

 

 

6,024,120

 

 

 

237,582

 

 

 

-

 

 

 

6,261,702

 

 

CA

 

 

5,965,475

 

 

 

807,688

 

 

 

-

 

 

 

6,773,163

 

Westside Village Market - Series A (3)

 

CA

 

 

3,936,750

 

 

 

102,641

 

 

 

-

 

 

 

4,039,391

 

 

CA

 

 

3,898,427

 

 

 

568,423

 

 

 

-

 

 

 

4,466,850

 

Lake Forest (1)

 

FL

 

 

8,639,000

 

 

 

899,694

 

 

 

-

 

 

 

9,538,694

 

 

FL

 

 

8,505,000

 

 

 

1,579,885

 

 

 

-

 

 

 

10,084,885

 

Ashley Square (1)

 

IA

 

 

5,039,000

 

 

 

338,556

 

 

 

-

 

 

 

5,377,556

 

Brookstone (1)

 

IL

 

 

7,462,678

 

 

 

1,457,340

 

 

 

-

 

 

 

8,920,018

 

 

IL

 

 

7,450,595

 

 

 

2,017,019

 

 

 

-

 

 

 

9,467,614

 

Copper Gate Apartments (3)

 

IN

 

 

5,145,000

 

 

 

528,855

 

 

 

-

 

 

 

5,673,855

 

 

IN

 

 

5,100,000

 

 

 

778,339

 

 

 

-

 

 

 

5,878,339

 

Renaissance - Series A (4)

 

LA

 

 

11,348,364

 

 

 

826,369

 

 

 

-

 

 

 

12,174,733

 

 

LA

 

 

11,239,441

 

 

 

2,096,328

 

 

 

-

 

 

 

13,335,769

 

Live 929 Apartments (2)

 

MD

 

 

40,687,425

 

 

 

3,587,993

 

 

 

-

 

 

 

44,275,418

 

 

MD

 

 

40,573,347

 

 

 

3,710,942

 

 

 

-

 

 

 

44,284,289

 

Woodlynn Village (1)

 

MN

 

 

4,310,000

 

 

 

294,976

 

 

 

-

 

 

 

4,604,976

 

 

MN

 

 

4,267,000

 

 

 

44,428

 

 

 

-

 

 

 

4,311,428

 

Greens Property - Series A (3)

 

NC

 

 

8,210,000

 

 

 

844,585

 

 

 

-

 

 

 

9,054,585

 

 

NC

 

 

8,126,000

 

 

 

1,113,852

 

 

 

-

 

 

 

9,239,852

 

Silver Moon - Series A (4)

 

NM

 

 

7,933,259

 

 

 

465,382

 

 

 

-

 

 

 

8,398,641

 

 

NM

 

 

7,879,590

 

 

 

1,140,448

 

 

 

-

 

 

 

9,020,038

 

Ohio Properties - Series A (1)

 

OH

 

 

14,215,000

 

 

 

2,327,468

 

 

 

-

 

 

 

16,542,468

 

 

OH

 

 

14,113,000

 

 

 

788,199

 

 

 

-

 

 

 

14,901,199

 

Bridle Ridge (1)

 

SC

 

 

7,535,000

 

 

 

517,881

 

 

 

-

 

 

 

8,052,881

 

 

SC

 

 

7,465,000

 

 

 

1,199

 

 

 

-

 

 

 

7,466,199

 

Columbia Gardens (2)

 

SC

 

 

15,214,223

 

 

 

-

 

 

 

(927,030

)

 

 

14,287,193

 

 

SC

 

 

13,396,856

 

 

 

1,413,831

 

 

 

-

 

 

 

14,810,687

 

Companion at Thornhill Apartments (2)

 

SC

 

 

11,500,000

 

 

 

645,552

 

 

 

-

 

 

 

12,145,552

 

 

SC

 

 

11,404,758

 

 

 

1,284,441

 

 

 

-

 

 

 

12,689,199

 

Cross Creek (1)

 

SC

 

 

6,122,312

 

 

 

2,655,730

 

 

 

-

 

 

 

8,778,042

 

 

SC

 

 

6,136,553

 

 

 

2,850,344

 

 

 

-

 

 

 

8,986,897

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

19,826,716

 

 

 

1,784,386

 

 

 

-

 

 

 

21,611,102

 

 

SC

 

 

19,238,297

 

 

 

2,712,429

 

 

 

-

 

 

 

21,950,726

 

Village at River's Edge (2)

 

SC

 

 

10,000,000

 

 

 

1,182,706

 

 

 

-

 

 

 

11,182,706

 

Willow Run (2)

 

SC

 

 

15,214,085

 

 

 

-

 

 

 

(917,852

)

 

 

14,296,233

 

 

SC

 

 

13,212,587

 

 

 

1,391,536

 

 

 

-

 

 

 

14,604,123

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,461,719

 

 

 

891,274

 

 

 

-

 

 

 

12,352,993

 

 

TN

 

 

11,342,234

 

 

 

1,693,626

 

 

 

-

 

 

 

13,035,860

 

Pro Nova 2014-1 (2)

 

TN

 

 

10,041,924

 

 

 

685,576

 

 

 

-

 

 

 

10,727,500

 

 

TN

 

 

10,038,889

 

 

 

133,878

 

 

 

-

 

 

 

10,172,767

 

Avistar at Chase Hill - Series A (3)

 

TX

 

 

9,844,994

 

 

 

589,023

 

 

 

-

 

 

 

10,434,017

 

Avistar at Copperfield - Series A (2)

 

TX

 

 

10,000,000

 

 

 

628,644

 

 

 

-

 

 

 

10,628,644

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,549,644

 

 

 

753,267

 

 

 

-

 

 

 

10,302,911

 

 

TX

 

 

9,456,384

 

 

 

1,187,142

 

 

 

-

 

 

 

10,643,526

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,709,040

 

 

 

563,138

 

 

 

-

 

 

 

8,272,178

 

 

TX

 

 

7,635,895

 

 

 

938,465

 

 

 

-

 

 

 

8,574,360

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,300,000

 

 

 

-

 

 

 

(78,749

)

 

 

13,221,251

 

 

TX

 

 

13,233,665

 

 

 

932,753

 

 

 

-

 

 

 

14,166,418

 

Avistar at Wilcrest - Series A (2)

 

TX

 

 

3,775,000

 

 

 

125,170

 

 

 

-

 

 

 

3,900,170

 

Avistar at Wood Hollow - Series A (2)

 

TX

 

 

31,850,000

 

 

 

1,865,826

 

 

 

-

 

 

 

33,715,826

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,656,458

 

 

 

359,562

 

 

 

-

 

 

 

7,016,020

 

 

TX

 

 

6,593,300

 

 

 

716,944

 

 

 

-

 

 

 

7,310,244

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

16,268,850

 

 

 

1,283,272

 

 

 

-

 

 

 

17,552,122

 

 

TX

 

 

16,109,972

 

 

 

1,947,465

 

 

 

-

 

 

 

18,057,437

 

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

 


 

 

December 31, 2017

 

Description of Mortgage Revenue Bonds Held in Trust

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,275,623

 

 

 

648,383

 

 

 

-

 

 

 

5,924,006

 

Bella Vista (1)

 

TX

 

 

6,295,000

 

 

 

42,718

 

 

 

-

 

 

 

6,337,718

 

Bruton Apartments (2)

 

TX

 

 

18,051,775

 

 

 

3,042,939

 

 

 

-

 

 

 

21,094,714

 

Concord at Gulfgate - Series A (2)

 

TX

 

 

19,185,000

 

 

 

2,759,654

 

 

 

-

 

 

 

21,944,654

 

Concord at Little York - Series A (2)

 

TX

 

 

13,440,000

 

 

 

1,999,572

 

 

 

-

 

 

 

15,439,572

 

Concord at Williamcrest - Series A (2)

 

TX

 

 

20,820,000

 

 

 

2,994,839

 

 

 

-

 

 

 

23,814,839

 

Crossing at 1415 - Series A (2)

 

TX

 

 

7,540,000

 

 

 

634,091

 

 

 

-

 

 

 

8,174,091

 

Decatur Angle (2)

 

TX

 

 

22,794,912

 

 

 

2,985,955

 

 

 

-

 

 

 

25,780,867

 

Heights at 515 - Series A (2)

 

TX

 

 

6,903,000

 

 

 

580,522

 

 

 

-

 

 

 

7,483,522

 

Heritage Square - Series A (4)

 

TX

 

 

11,063,027

 

 

 

993,609

 

 

 

-

 

 

 

12,056,636

 

Oaks at Georgetown - Series A & B (2)

 

TX

 

 

17,842,000

 

 

 

915,705

 

 

 

-

 

 

 

18,757,705

 

Runnymede (1)

 

TX

 

 

10,150,000

 

 

 

79,514

 

 

 

-

 

 

 

10,229,514

 

Southpark (1)

 

TX

 

 

11,693,138

 

 

 

2,960,294

 

 

 

-

 

 

 

14,653,432

 

Vantage at Judson -Series B (4)

 

TX

 

 

26,133,557

 

 

 

3,117,969

 

 

 

-

 

 

 

29,251,526

 

15 West Apartments (2)

 

WA

 

 

9,797,833

 

 

 

1,839,648

 

 

 

-

 

 

 

11,637,481

 

Mortgage revenue bonds held in trust

 

 

 

$

639,438,294

 

 

$

71,429,153

 

 

$

-

 

 

$

710,867,447

 

 

(1) Bonds owned by ATAX TEBS I, LLC (M24 TEBS), see Note 17

(2) Bond held by Deutsche Bank in a secured financing transaction, see Note 17

(3) Bonds owned by ATAX TEBS II, LLC (M31 TEBS), see Note 17

(4) Bonds owned by ATAX TEBS III, LLC (M33 TEBS), see Note 17

 

 


 

 

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

 

 

 

December 31, 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

 

 

$

1,111,807

 

 

$

-

 

 

$

13,582,807

 

Seasons at Simi Valley - Series B

 

CA

 

 

1,944,000

 

 

 

-

 

 

 

(466

)

 

 

1,943,534

 

Sycamore Walk - Series B

 

CA

 

 

1,815,000

 

 

 

-

 

 

 

(151

)

 

 

1,814,849

 

Vineyard Gardens - Series A & B

 

CA

 

 

6,841,000

 

 

 

-

 

 

 

-

 

 

 

6,841,000

 

Greens Property - Series B

 

NC

 

 

937,399

 

 

 

193,991

 

 

 

-

 

 

 

1,131,390

 

Ohio Properties - Series B

 

OH

 

 

3,536,060

 

 

 

149,630

 

 

 

-

 

 

 

3,685,690

 

Rosewood Townhomes - Series A & B

 

SC

 

 

9,750,000

 

 

 

-

 

 

 

-

 

 

 

9,750,000

 

South Pointe Apartments - Series A & B

 

SC

 

 

22,700,000

 

 

 

-

 

 

 

-

 

 

 

22,700,000

 

Avistar at Copperfield - Series B

 

TX

 

 

4,000,000

 

 

 

13,514

 

 

 

-

 

 

 

4,013,514

 

Avistar at the Crest - Series B

 

TX

 

 

749,455

 

 

 

58,871

 

 

 

-

 

 

 

808,326

 

Avistar at the Oaks - Series B

 

TX

 

 

548,202

 

 

 

41,286

 

 

 

-

 

 

 

589,488

 

Avistar at the Parkway - Series B

 

TX

 

 

124,861

 

 

 

30,715

 

 

 

-

 

 

 

155,576

 

Avistar at Wilcrest - Series B

 

TX

 

 

1,550,000

 

 

 

5,306

 

 

 

-

 

 

 

1,555,306

 

Avistar at Wood Hollow - Series B

 

TX

 

 

8,410,000

 

 

 

30,276

 

 

 

-

 

 

 

8,440,276

 

Avistar in 09 - Series B

 

TX

 

 

452,217

 

 

 

28,675

 

 

 

-

 

 

 

480,892

 

Avistar on the Boulevard - Series B

 

TX

 

 

445,328

 

 

 

33,232

 

 

 

-

 

 

 

478,560

 

Mortgage revenue bonds held by the Partnership

 

 

 

$

76,274,522

 

 

$

1,697,303

 

 

$

(617

)

 

$

77,971,208

 

 

 


 

December 31, 2015

 

 

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

 

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative

Unrealized Gain

 

 

Cumulative

Unrealized Loss

 

 

Estimated Fair Value

 

Glenview Apartments - Series A (4)

 

CA

 

$

4,670,000

 

 

$

210,572

 

 

$

-

 

 

$

4,880,572

 

 

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

 

 

6,960,000

 

 

 

668,981

 

 

 

-

 

 

 

7,628,981

 

 

CA

 

 

6,912,535

 

 

 

369,738

 

 

 

-

 

 

 

7,282,273

 

Montclair Apartments - Series A (4)

 

CA

 

 

2,530,000

 

 

 

114,079

 

 

 

-

 

 

 

2,644,079

 

 

CA

 

 

2,530,000

 

 

 

108,608

 

 

 

-

 

 

 

2,638,608

 

Santa Fe Apartments - Series A (4)

 

CA

 

 

3,065,000

 

 

 

154,067

 

 

 

-

 

 

 

3,219,067

 

 

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

 

 

6,075,000

 

 

 

487,209

 

 

 

-

 

 

 

6,562,209

 

 

CA

 

 

6,024,120

 

 

 

237,582

 

 

 

-

 

 

 

6,261,702

 

Westside Village Market - Series A (3)

 

CA

 

 

3,970,000

 

 

 

202,340

 

 

 

-

 

 

 

4,172,340

 

 

CA

 

 

3,936,750

 

 

 

102,641

 

 

 

-

 

 

 

4,039,391

 

Lake Forest (1)

 

FL

 

 

8,766,000

 

 

 

1,177,745

 

 

 

-

 

 

 

9,943,745

 

 

FL

 

 

8,639,000

 

 

 

899,694

 

 

 

-

 

 

 

9,538,694

 

Ashley Square (1)

 

IA

 

 

5,099,000

 

 

 

508,163

 

 

 

-

 

 

 

5,607,163

 

 

IA

 

 

5,039,000

 

 

 

338,556

 

 

 

-

 

 

 

5,377,556

 

Brookstone (1)

 

IL

 

 

7,468,668

 

 

 

1,436,203

 

 

 

-

 

 

 

8,904,871

 

 

IL

 

 

7,462,678

 

 

 

1,457,340

 

 

 

-

 

 

 

8,920,018

 

Copper Gate Apartments (3)

 

IN

 

 

5,185,000

 

 

 

616,341

 

 

 

-

 

 

 

5,801,341

 

 

IN

 

 

5,145,000

 

 

 

528,855

 

 

 

-

 

 

 

5,673,855

 

Renaissance - Series A (4)

 

LA

 

 

11,450,959

 

 

 

1,233,077

 

 

 

-

 

 

 

12,684,036

 

 

LA

 

 

11,348,364

 

 

 

826,369

 

 

 

-

 

 

 

12,174,733

 

Live 929 Apartments (2)

 

MD

 

 

40,801,557

 

 

 

5,829,855

 

 

 

-

 

 

 

46,631,412

 

 

MD

 

 

40,687,425

 

 

 

3,587,993

 

 

 

-

 

 

 

44,275,418

 

Woodlynn Village (1)

 

MN

 

 

4,351,000

 

 

 

466,471

 

 

 

-

 

 

 

4,817,471

 

 

MN

 

 

4,310,000

 

 

 

294,976

 

 

 

-

 

 

 

4,604,976

 

Greens Property - Series A (3)

 

NC

 

 

8,294,000

 

 

 

1,138,270

 

 

 

-

 

 

 

9,432,270

 

 

NC

 

 

8,210,000

 

 

 

844,585

 

 

 

-

 

 

 

9,054,585

 

Silver Moon - Series A (4)

 

NM

 

 

7,983,811

 

 

 

1,246,349

 

 

 

-

 

 

 

9,230,160

 

 

NM

 

 

7,933,259

 

 

 

465,382

 

 

 

-

 

 

 

8,398,641

 

Ohio Properties - Series A (1)

 

OH

 

 

14,311,000

 

 

 

2,690,867

 

 

 

-

 

 

 

17,001,867

 

 

OH

 

 

14,215,000

 

 

 

2,327,468

 

 

 

-

 

 

 

16,542,468

 

Bridle Ridge (1)

 

SC

 

 

7,595,000

 

 

 

817,222

 

 

 

-

 

 

 

8,412,222

 

 

SC

 

 

7,535,000

 

 

 

517,881

 

 

 

-

 

 

 

8,052,881

 

Columbia Gardens (2)

 

SC

 

 

15,224,597

 

 

 

-

 

 

 

-

 

 

 

15,224,597

 

 

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

 

 

6,101,605

 

 

 

2,932,689

 

 

 

-

 

 

 

9,034,294

 

 

SC

 

 

6,122,312

 

 

 

2,655,730

 

 

 

-

 

 

 

8,778,042

 

The Palms at Premier Park Apartments (3)

 

SC

 

 

20,001,272

 

 

 

2,505,091

 

 

 

-

 

 

 

22,506,363

 

 

SC

 

 

19,826,716

 

 

 

1,784,386

 

 

 

-

 

 

 

21,611,102

 

Willow Run (2)

 

SC

 

 

15,224,591

 

 

 

-

 

 

 

-

 

 

 

15,224,591

 

 

SC

 

 

15,214,085

 

 

 

-

 

 

 

(917,852

)

 

 

14,296,233

 

Arbors at Hickory Ridge (3)

 

TN

 

 

11,565,657

 

 

 

1,767,508

 

 

 

-

 

 

 

13,333,165

 

 

TN

 

 

11,461,719

 

 

 

891,274

 

 

 

-

 

 

 

12,352,993

 

Pro Nova 2014-1 and 2014-2 (2)

 

TN

 

 

19,379,489

 

 

 

1,182,900

 

 

 

-

 

 

 

20,562,389

 

Pro Nova 2014-1 (2)

 

TN

 

 

10,041,924

 

 

 

685,576

 

 

 

-

 

 

 

10,727,500

 

Avistar at Chase Hill - Series A (3)

 

TX

 

 

9,935,552

 

 

 

1,133,024

 

 

 

-

 

 

 

11,068,576

 

 

TX

 

 

9,844,994

 

 

 

589,023

 

 

 

-

 

 

 

10,434,017

 

Avistar at the Crest - Series A (3)

 

TX

 

 

9,637,485

 

 

 

1,301,224

 

 

 

-

 

 

 

10,938,709

 

 

TX

 

 

9,549,644

 

 

 

753,267

 

 

 

-

 

 

 

10,302,911

 

Avistar at the Oaks - Series A (3)

 

TX

 

 

7,777,936

 

 

 

840,159

 

 

 

-

 

 

 

8,618,095

 

 

TX

 

 

7,709,040

 

 

 

563,138

 

 

 

-

 

 

 

8,272,178

 

Avistar at the Parkway - Series A (4)

 

TX

 

 

13,300,000

 

 

 

330,251

 

 

 

-

 

 

 

13,630,251

 

 

TX

 

 

13,300,000

 

 

 

-

 

 

 

(78,749

)

 

 

13,221,251

 

Avistar in 09 - Series A (3)

 

TX

 

 

6,715,948

 

 

 

725,445

 

 

 

-

 

 

 

7,441,393

 

 

TX

 

 

6,656,458

 

 

 

359,562

 

 

 

-

 

 

 

7,016,020

 

Avistar on the Boulevard - Series A (3)

 

TX

 

 

16,418,497

 

 

 

1,872,323

 

 

 

-

 

 

 

18,290,820

 

 

TX

 

 

16,268,850

 

 

 

1,283,272

 

 

 

-

 

 

 

17,552,122

 

Avistar on the Hills - Series A (3)

 

TX

 

 

5,373,756

 

 

 

693,096

 

 

 

-

 

 

 

6,066,852

 

 

TX

 

 

5,326,157

 

 

 

423,496

 

 

 

-

 

 

 

5,749,653

 

Bella Vista (1)

 

TX

 

 

6,430,000

 

 

 

766,135

 

 

 

-

 

 

 

7,196,135

 

 

TX

 

 

6,365,000

 

 

 

500,162

 

 

 

-

 

 

 

6,865,162

 

Bruton Apartments (2)

 

TX

 

 

18,145,000

 

 

 

1,901,839

 

 

 

-

 

 

 

20,046,839

 

 

TX

 

 

18,145,000

 

 

 

349,886

 

 

 

-

 

 

 

18,494,886

 

Concord at Gulfgate - Series A (2)

 

TX

 

 

17,060,000

 

 

 

852,612

 

 

 

-

 

 

 

17,912,612

 

 

TX

 

 

19,185,000

 

 

 

1,200,246

 

 

 

-

 

 

 

20,385,246

 

Concord at Little York - Series A (2)

 

TX

 

 

12,480,000

 

 

 

688,441

 

 

 

-

 

 

 

13,168,441

 

 

TX

 

 

13,440,000

 

 

 

1,044,752

 

 

 

-

 

 

 

14,484,752

 

Concord at Williamcrest - Series A (2)

 

TX

 

 

18,020,000

 

 

 

1,182,543

 

 

 

-

 

 

 

19,202,543

 

 

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

 

 

23,000,000

 

 

 

1,582,083

 

 

 

-

 

 

 

24,582,083

 

 

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

 

 

11,185,000

 

 

 

273,488

 

 

 

-

 

 

 

11,458,488

 

 

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

 

 

10,350,000

 

 

 

1,600,938

 

 

 

-

 

 

 

11,950,938

 

 

TX

 

 

10,250,000

 

 

 

774,285

 

 

 

-

 

 

 

11,024,285

 

Southpark (1)

 

TX

 

 

11,799,874

 

 

 

3,990,882

 

 

 

-

 

 

 

15,790,756

 

Vantage at Harlingen - Series B (4)

 

TX

 

 

24,575,000

 

 

 

1,765,139

 

 

 

-

 

 

 

26,340,139

 

Vantage at Judson -Series B (4)

 

TX

 

 

26,540,000

 

 

 

2,613,606

 

 

 

-

 

 

 

29,153,606

 

Mortgage revenue bonds held in trust

 

 

 

$

484,817,254

 

 

$

51,499,227

 

 

$

-

 

 

$

536,316,481

 


 

 

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

 

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) Bonds owned by ATAX TEBS I, LLC (M24 TEBS), see Note 17

(2) Bond held by Deutsche Bank in a secured financing transaction, see Note 17

(3) Bonds owned by ATAX TEBS II, LLC (M31 TEBS), see Note 17

(4) Bonds owned by ATAX TEBS III, LLC (M33 TEBS), see Note 17

 


 

 

December 31, 2015

 

Description of Mortgage Revenue Bonds held by the Partnership

 

State

 

Cost Adjusted for

Paydowns

 

 

Cumulative Unrealized Gain

 

 

Cumulative Unrealized Loss

 

 

Estimated Fair Value

 

Glenview Apartments - Series B

 

CA

 

$

2,053,000

 

 

$

-

 

 

$

(7,329

)

 

$

2,045,671

 

Montclair Apartments - Series B

 

CA

 

 

928,000

 

 

 

-

 

 

 

(2,506

)

 

 

925,494

 

Santa Fe Apartments - Series B

 

CA

 

 

1,671,000

 

 

 

-

 

 

 

(5,965

)

 

 

1,665,035

 

Seasons at Simi Valley

 

CA

 

 

6,320,000

 

 

 

404,110

 

 

 

-

 

 

 

6,724,110

 

Sycamore Walk

 

CA

 

 

5,447,000

 

 

 

-

 

 

 

-

 

 

 

5,447,000

 

Greens Property - Series B

 

NC

 

 

943,214

 

 

 

142,442

 

 

 

-

 

 

 

1,085,656

 

Ohio Properties - Series B

 

OH

 

 

3,562,190

 

 

 

514,997

 

 

 

-

 

 

 

4,077,187

 

Avistar at Chase Hill - Series B

 

TX

 

 

961,981

 

 

 

109,878

 

 

 

-

 

 

 

1,071,859

 

Avistar at the Crest - Series B

 

TX

 

 

756,626

 

 

 

86,428

 

 

 

-

 

 

 

843,054

 

Avistar at the Oaks - Series B

 

TX

 

 

553,244

 

 

 

63,533

 

 

 

-

 

 

 

616,777

 

Avistar at the Parkway - Series B

 

TX

 

 

125,000

 

 

 

-

 

 

 

(979

)

 

 

124,021

 

Avistar in 09 - Series B

 

TX

 

 

456,376

 

 

 

52,409

 

 

 

-

 

 

 

508,785

 

Avistar on the Boulevard - Series B

 

TX

 

 

449,589

 

 

 

51,356

 

 

 

-

 

 

 

500,945

 

Concord at Gulfgate - Series B

 

TX

 

 

2,125,000

 

 

 

76,802

 

 

 

-

 

 

 

2,201,802

 

Concord at Little York - Series B

 

TX

 

 

960,000

 

 

 

-

 

 

 

(6,711

)

 

 

953,289

 

Concord at Williamcrest - Series B

 

TX

 

 

2,800,000

 

 

 

-

 

 

 

(19,573

)

 

 

2,780,427

 

Crossing at 1415

 

TX

 

 

7,925,000

 

 

 

214,091

 

 

 

-

 

 

 

8,139,091

 

Heights at 515

 

TX

 

 

6,945,000

 

 

 

185,268

 

 

 

-

 

 

 

7,130,268

 

Heritage Square - Series B

 

TX

 

 

520,000

 

 

 

6,185

 

 

 

-

 

 

 

526,185

 

Mortgage revenue bonds held by the

   Partnership

 

 

 

$

45,502,220

 

 

$

1,907,499

 

 

$

(43,063

)

 

$

47,366,656

 

 

 

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 25 for a description of the methodology and significant assumptions for determining the fair value of the mortgage revenue bonds.MRBs. Unrealized gains or losses on the mortgage revenue bondsMRBs are recorded in the 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 underlying properties.MRBs.


Bond Activity in 20162017

During 2016, the Partnership redeemed the following Series BAcquisitions:

Property Name

 

Month

Acquired

 

Property Location

 

Units

(Unaudited)

 

 

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

 

Village at River's Edge (1)

 

November

 

Columbia, SC

 

 

124

 

 

6/1/2033

 

 

6.00

%

 

 

10,000,000

 

Rosewood Townhomes - Series A

 

December

 

Goose Creek, SC

 

 

100

 

 

7/1/2055

 

 

5.75

%

 

 

9,280,000

 

Rosewood Townhomes - Series B

 

December

 

Goose Creek, SC

 

 

100

 

 

8/1/2055

 

 

12.00

%

 

 

470,000

 

South Pointe Apartments - Series A

 

December

 

Hanahan, SC

 

 

256

 

 

7/1/2055

 

 

5.75

%

 

 

21,600,000

 

South Pointe Apartments - Series B

 

December

 

Hanahan, SC

 

 

256

 

 

8/1/2055

 

 

12.00

%

 

 

1,100,000

 

Vineyard Gardens - Series A

 

December

 

Oxnard, CA

 

 

62

 

 

1/1/2035

 

 

5.50

%

 

 

3,995,000

 

Vineyard Gardens - Series B

 

December

 

Oxnard, CA

 

 

62

 

 

1/1/2020

 

 

5.50

%

 

 

2,846,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

121,347,000

 

(1) Previously reported bond purchase commitment that converted to a mortgage revenue bonds for approximately $5.2 million, whichbond in November 2017

Redemptions:

The following MRBs were redeemed at prices that approximated theirthe Partnership’s carrying value plus accrued interest.

 

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

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

(Unaudited)

 

 

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

 

Vantage at Harlingen - Series B

 

October

 

San Antonio, TX

 

 

288

 

 

9/1/2053

 

 

6.00

%

 

 

24,363,221

 

Ashley Square

 

November

 

Des Moines, IA

 

 

144

 

 

12/1/2025

 

 

6.25

%

 

 

4,982,000

 

Avistar at Chase Hill - Series A

 

November

 

San Antonio, TX

 

 

232

 

 

3/1/2050

 

 

6.00

%

 

 

9,757,084

 

Avistar at Chase Hill - Series B

 

November

 

San Antonio, TX

 

 

232

 

 

4/1/2050

 

 

9.00

%

 

 

953,278

 

Crossing at 1415 - Series B

 

November

 

San Antonio, TX

 

 

112

 

 

1/1/2053

 

 

12.00

%

 

 

335,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

42,387,583

 


In March 2016,Upon redemption of the Vantage at Harlingen – Series B, the Partnership soldrealized additional income for the Pro Nova 2014-2early redemption of the MRB of approximately $424,000. The additional income is reported within other income on the consolidated statements of operations.

Upon redemption of the Avistar at Chase Hill MRBs, the Partnership realized additional income for the early redemption of the MRB of approximately $200,000. The additional income is reported within other income on the consolidated statements of operations. The Partnership also realized additional interest related to the redemption of the Avistar at Chase Hill - Series B MRB of approximately $101,000. The additional interest income is reported within investment income on the consolidated statements of operations.

Upon redemption of the Ashley Square MRB, the Partnership realized contingent interest income of approximately $2.9 million.

Restructuring:

In December 2017, the Heights at 515 MRBs were restructured. The $510,000 of principal outstanding on the Heights at 515 - Series B MRB was collapsed into the Series A MRB and the Series B MRB was eliminated. No cash was paid or received on restructuring. The terms of the Series B MRB that was eliminated are as follows:

Property Name

 

Month

Restructured

 

Property Location

 

Units

(Unaudited)

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Restructuring

 

Heights at 515 - Series B

 

November

 

San Antonio, TX

 

 

97

 

 

1/1/2053

 

 

12.00

%

 

$

510,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bond Activity in 2016

Acquisitions:

Property Name

 

Month

Acquired

 

Property Location

 

Units

(Unaudited)

 

 

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

 

Harmony Court Bakersfield - Series A

 

November

 

Bakersfield, CA

 

96

 

 

12/1/2033

 

 

5.00

%

 

 

3,730,000

 

Harmony Court Bakersfield - Series B

 

November

 

Bakersfield, CA

 

96

 

 

12/1/2018

 

 

5.50

%

 

 

1,997,000

 

Summerhill - Series A

 

November

 

Bakersfield, CA

 

128

 

 

12/1/2033

 

 

5.00

%

 

 

6,423,000

 

Summerhill - Series B

 

November

 

Bakersfield, CA

 

128

 

 

12/1/2018

 

 

5.50

%

 

 

3,372,000

 

The Village at Madera - Series A

 

November

 

Madera, CA

 

75

 

 

12/1/2033

 

 

5.00

%

 

 

3,085,000

 

The Village at Madera - Series B

 

November

 

Madera, CA

 

75

 

 

12/1/2018

 

 

5.50

%

 

 

1,719,000

 

15 West Apartments (1)

 

December

 

Vancouver, WA

 

120

 

 

7/1/2054

 

 

6.25

%

 

 

9,850,000

 

Courtyard Apartments - Series A

 

December

 

Fullerton, CA

 

108

 

 

12/1/2033

 

 

5.00

%

 

 

10,230,000

 

Courtyard Apartments - Series B

 

December

 

Fullerton, CA

 

108

 

 

12/1/2018

 

 

5.50

%

 

 

6,228,000

 

Harmony Terrace - Series A

 

December

 

Simi Valley, CA

 

136

 

 

1/1/2034

 

 

5.00

%

 

 

6,900,000

 

Harmony Terrace - Series B

 

December

 

Simi Valley, CA

 

136

 

 

1/1/2019

 

 

5.50

%

 

 

7,400,000

 

Oaks at Georgetown - Series A

 

December

 

Georgetown, TX

 

192

 

 

1/1/2034

 

 

5.00

%

 

 

12,330,000

 

Oaks at Georgetown - Series B

 

December

 

Georgetown, TX

 

192

 

 

1/1/2019

 

 

5.50

%

 

 

5,512,000

 

Seasons Lakewood - Series A

 

December

 

Lakewood, CA

 

85

 

 

1/1/2034

 

 

5.00

%

 

 

7,350,000

 

Seasons Lakewood - Series B

 

December

 

Lakewood, CA

 

85

 

 

1/1/2019

 

 

5.50

%

 

 

5,260,000

 

Seasons San Juan Capistrano - Series A

 

December

 

San Juan Capistrano, CA

 

112

 

 

1/1/2034

 

 

5.00

%

 

 

12,375,000

 

Seasons San Juan Capistrano - Series B

 

December

 

San Juan Capistrano, CA

 

112

 

 

1/1/2019

 

 

5.50

%

 

 

6,574,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

130,620,000

 

(1) Previously reported bond for approximately $9.5 million, whichpurchase commitment that converted to a mortgage revenue bond in December 2016


Redemptions:

The following MRBs were redeemed at prices that approximated the mortgage revenue bond’sPartnership’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 Term TOB Trust securitizing this mortgage revenue bond (Note 17). The terms of the Pro Nova 2014-2 bonds are as follows:

 

Property Name

 

Month Sold

 

Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Sale

 

Pro Nova - 2014B 1

 

March

 

Knoxville, TN

 

 

-

 

 

5/1/2025

 

 

5.25

%

 

$

9,295,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 This is a commercial property. Accordingly, unit information is not applicable.

 

Property Name

 

Month

Redeemed

 

Property Location

 

Units

(Unaudited)

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,172,000

 


Restructurings:

During 2016, six of the Partnership’s mortgage revenue bondsMRBs 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.MRBs. No cash was paid or received on restructuring. The terms of the three Series B mortgage revenue bondsMRBs that were redeemed are as follows:

Property Name

 

Month

Restructured

 

Property Location

 

Units

 

 

Original

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

 

The following table includes the details of the mortgage revenue bond acquisitions during the year ended December 31, 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

 

Harmony Court Bakersfield - Series A

 

November

 

Bakersfield, CA

 

96

 

12/1/2033

 

 

5.00

%

 

 

3,730,000

 

Harmony Court Bakersfield - Series B

 

November

 

Bakersfield, CA

 

96

 

12/1/2018

 

 

5.50

%

 

 

1,997,000

 

Summerhill - Series A

 

November

 

Bakersfield, CA

 

128

 

12/1/2033

 

 

5.00

%

 

 

6,423,000

 

Summerhill - Series B

 

November

 

Bakersfield, CA

 

128

 

12/1/2018

 

 

5.50

%

 

 

3,372,000

 

The Village at Madera - Series A

 

November

 

Madera, CA

 

75

 

12/1/2033

 

 

5.00

%

 

 

3,085,000

 

The Village at Madera - Series B

 

November

 

Madera, CA

 

75

 

12/1/2018

 

 

5.50

%

 

 

1,719,000

 

15 West Apartments (1)

 

December

 

Vancouver, WA

 

120

 

7/1/2054

 

 

6.25

%

 

 

9,850,000

 

Courtyard Apartments - Series A

 

December

 

Fullerton, CA

 

108

 

12/1/2033

 

 

5.00

%

 

 

10,230,000

 

Courtyard Apartments - Series B

 

December

 

Fullerton, CA

 

108

 

12/1/2018

 

 

5.50

%

 

 

6,228,000

 

Harmony Terrace - Series A

 

December

 

Simi Valley, CA

 

136

 

1/1/2034

 

 

5.00

%

 

 

6,900,000

 

Harmony Terrace - Series B

 

December

 

Simi Valley, CA

 

136

 

1/1/2019

 

 

5.50

%

 

 

7,400,000

 

Oaks at Georgetown - Series A

 

December

 

Georgetown, TX

 

192

 

1/1/2034

 

 

5.00

%

 

 

12,330,000

 

Oaks at Georgetown - Series B

 

December

 

Georgetown, TX

 

192

 

1/1/2019

 

 

5.50

%

 

 

5,512,000

 

Seasons Lakewood - Series A

 

December

 

Lakewood, CA

 

85

 

1/1/2034

 

 

5.00

%

 

 

7,350,000

 

Seasons Lakewood - Series B

 

December

 

Lakewood, CA

 

85

 

1/1/2019

 

 

5.50

%

 

 

5,260,000

 

Seasons San Juan Capistrano - Series A

 

December

 

San Juan Capistrano, CA

 

112

 

1/1/2034

 

 

5.00

%

 

 

12,375,000

 

Seasons San Juan Capistrano - Series B

 

December

 

San Juan Capistrano, CA

 

112

 

1/1/2019

 

 

5.50

%

 

 

6,574,000

 

1 Previously reported Bond Purchase Commitment that converted to a mortgage revenue bond in December 2016.

 

Bond Activity in 2015

In September 2015, the owner of the Suites on Paseo property and the Partnership mutually agreed to exchange the deed for the Suites on Paseo property for approximately $41.0 million Series A and B mortgage revenue bonds plus accrued interest. These mortgage revenue bonds were subsequently collapsed.  At December 31, 2016 and December 31, 2015, the Partnership reported the Suites on Paseo property as an MF Property (Note 9).


During 2015, the Partnership redeemed the following Series B and Series C mortgage revenue bonds. The Series B mortgage revenue bonds were redeemed for approximately $5.8 million which approximated their carrying value plus accrued interest. The Series C mortgage revenue bonds were paid off with proceeds from the issuance of new mortgage revenue bonds included in the acquisitions table below for an amount that approximated their carrying value plus accrued interest:

Property Name

 

Month

Redeemed

 

Property Location

 

Units

 

 

Original

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Redemption

 

Vantage at Harlingen - Series C

 

June

 

San Antonio, TX

 

 

288

 

 

10/1/2053

 

 

9.00

%

 

$

6,692,000

 

Vantage at Judson - Series C

 

June

 

San Antonio, TX

 

 

288

 

 

2/1/2053

 

 

9.00

%

 

 

6,049,000

 

Harden Ranch - Series B

 

July

 

Salinas, CA

 

 

100

 

 

3/1/2016

 

 

8.00

%

 

 

2,340,000

 

Tyler Park - Series B

 

July

 

Greenfield, CA

 

 

88

 

 

1/1/2016

 

 

8.00

%

 

 

2,025,000

 

Westside Village - Series B

 

July

 

Shafter, CA

 

 

81

 

 

1/1/2016

 

 

8.00

%

 

 

1,430,000

 

During 2015, the mortgage revenue bonds associated with the Renaissance Gateway property were restructured. The restructuring combined the Series B mortgage revenue bond with a par value of approximately $1.3 million and the Series C mortgage revenue bond with a par value of approximately $1.7 million with the Series A mortgage revenue bond with a par value of approximately $8.5 million. The partnership received cash of approximately $1.2 million at restructuring. The terms of the mortgage revenue bond after restructuring is as follows:

Property Name

 

Month

Restructured

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Restructuring

 

 

Month

Restructured

 

Property Location

 

Units

(Unaudited)

 

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Restructuring

 

Renaissance

 

June

 

Baton Rouge, LA

 

208

 

6/1/2050

 

 

6.00

%

 

$

11,500,000

 

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

 

Sales:

During 2016, the Partnership sold the Pro Nova 2014-2 MRB at a price that approximated the MRB’s carrying value plus accrued interest. The following table provides the detailsPartnership used approximately $8.4 million of the mortgage revenue bond acquisitions duringproceeds from the year ended December 31, 2015:sale to pay in full and collapse the Term TOB Trust securitizing this MRB (Note 17). The terms of the Pro Nova 2014-2 MRB redeemed are as follows:

Property Name

 

Month

Exchanged

 

Property Location

 

Units

(Unaudited)

 

 

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

 

(1) This is a commercial property. Accordingly, unit information is not applicable.

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

Concord at Gulfgate - Series A

 

January

 

Houston, TX

 

288

 

2/1/2032

 

 

6.00

%

 

$

17,060,000

 

Concord at Gulfgate - Series B

 

January

 

Houston, TX

 

288

 

3/1/2032

 

 

12.00

%

 

 

2,125,000

 

Concord at Little York - Series A

 

January

 

Houston, TX

 

276

 

2/1/2032

 

 

6.00

%

 

 

12,480,000

 

Concord at Little York - Series B

 

January

 

Houston, TX

 

276

 

3/1/2032

 

 

12.00

%

 

 

960,000

 

Concord at Williamcrest - Series A

 

January

 

Houston, TX

 

288

 

2/1/2032

 

 

6.00

%

 

 

18,020,000

 

Concord at Williamcrest - Series B

 

January

 

Houston, TX

 

288

 

3/1/2032

 

 

12.00

%

 

 

2,800,000

 

Suites on Paseo Series B

 

March

 

San Diego, CA

 

394

 

12/1/2033

 

 

9.00

%

 

 

5,500,000

 

Avistar at the Parkway

   Apartments - Series A

 

April

 

San Antonio, TX

 

236

 

5/1/2052

 

 

6.00

%

 

 

13,300,000

 

Avistar at the Parkway

   Apartments - Series B

 

April

 

San Antonio, TX

 

236

 

6/1/2052

 

 

12.00

%

 

 

125,000

 

Vantage at Harlingen

 

June

 

San Antonio, TX

 

288

 

9/1/2053

 

 

9.00

%

 

 

24,575,000

 

Vantage at Judson

 

June

 

San Antonio, TX

 

288

 

1/1/2053

 

 

9.00

%

 

 

26,540,000

 

Silver Moon - Series A

 

June

 

Albuquerque, NM

 

151

 

8/1/2055

 

 

6.00

%

 

 

8,000,000

 

Seasons at Simi Valley - Series A

 

August

 

Simi Valley, CA

 

69

 

9/1/2032

 

 

5.75

%

 

 

4,376,000

 

Seasons at Simi Valley - Series B

 

August

 

Simi Valley, CA

 

69

 

9/1/2017

 

 

5.50

%

 

 

1,944,000

 

Crossing at 1415 - Series A

 

November

 

San Antonio, TX

 

112

 

12/1/2052

 

 

6.00

%

 

 

7,590,000

 

Crossing at 1415 - Series B

 

November

 

San Antonio, TX

 

112

 

1/1/2053

 

 

12.00

%

 

 

335,000

 

Heights at 515 - Series A

 

November

 

San Antonio, TX

 

97

 

12/1/2052

 

 

6.00

%

 

 

6,435,000

 

Heights at 515 - Series B

 

November

 

San Antonio, TX

 

97

 

1/1/2053

 

 

12.00

%

 

 

510,000

 

Columbia Gardens

 

December

 

Columbia, SC

 

188

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

Sycamore Walk - Series A

 

December

 

Bakersfield, CA

 

112

 

1/1/2033

 

 

5.25

%

 

 

3,632,000

 

Sycamore Walk - Series B

 

December

 

Bakersfield, CA

 

112

 

1/1/2018

 

 

5.50

%

 

 

1,815,000

 

Willow Run

 

December

 

Columbia, SC

 

200

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

Geographic Concentrations

The properties securing the Partnership’s mortgage revenue bondsMRBs are geographically dispersed throughout the United States with significant concentrations in Texas, California and Texas. As ofSouth Carolina. At December 31, 2017, and 2016, the concentration in Texas as a percentage of principal outstanding was approximately 44% and 2015,45%, respectively. At December 31, 2017, and 2016, the concentration in California as a percentage of principal outstanding was approximately 20% and 8%, respectively. As of December 31, 2016, and 2015, the concentration in Texas as a percentage of principal outstanding was approximately 45%and 51%20%, respectively. At December 31, 2016,2017, and 2015,2016, the concentration in South Carolina as a percentage of principal outstanding was approximately 12%16% and 12%, respectively.


The following tables represent a description of certain terms of the mortgage revenue bonds owned by the Partnership as ofPartnership’s MRBs at December 31, 2016,2017, and 2015:2016:

 

Property Name

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2016

 

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2017

 

15 West Apartments - Series A (2)

 

2016

 

Vancouver, WA

 

7/1/2054

 

 

6.25

%

 

$

9,850,000

 

 

2016

 

Vancouver, WA

 

7/1/2054

 

 

6.25

%

 

$

9,797,833

 

Arbors at Hickory Ridge (3)

 

2012

 

Memphis, TN

 

1/1/2049

 

 

6.25

%

 

 

11,351,321

 

 

2012

 

Memphis, TN

 

1/1/2049

 

 

6.25

%

 

 

11,237,041

 

Ashley Square (1)

 

1999

 

Des Moines, IA

 

12/1/2025

 

 

6.25

%

 

 

5,039,000

 

Avistar at Copperfield - Series A (2)

 

2017

 

Houston, TX

 

5/1/2054

 

 

5.75

%

 

 

10,000,000

 

Avistar at Copperfield - Series B

 

2017

 

Houston, TX

 

6/1/2054

 

 

12.00

%

 

 

4,000,000

 

Avistar on the Boulevard - Series A (3)

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

16,268,850

 

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

16,109,972

 

Avistar at Chase Hill - Series A (3)

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,844,994

 

Avistar at the Crest - Series A (3)

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,549,644

 

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,456,384

 

Avistar (February 2013 Acquisition) - Series

B (3 Bonds)

 

2013

 

San Antonio, TX

 

4/1/2050

 

 

9.00

%

 

 

2,158,382

 

Avistar at the Oak - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

7,709,040

 

Avistar (February 2013 Acquisition) - Series

B (2 Bonds)

 

2013

 

San Antonio, TX

 

4/1/2050

 

 

9.00

%

 

 

1,194,783

 

Avistar at the Oaks - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

7,635,895

 

Avistar in 09 - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

6,656,458

 

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

6,593,300

 

Avistar on the Hill - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

5,326,157

 

Avistar on the Hills - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

5,275,623

 

Avistar (June 2013 Acquisition) - Series

B (2 Bonds)

 

2013

 

San Antonio, TX

 

9/1/2050

 

 

9.00

%

 

 

1,005,226

 

 

2013

 

San Antonio, TX

 

9/1/2050

 

 

9.00

%

 

 

1,000,419

 

Avistar at the Parkway - Series A (4)

 

2015

 

San Antonio, TX

 

5/1/2052

 

 

6.00

%

 

 

13,300,000

 

 

2015

 

San Antonio, TX

 

5/1/2052

 

 

6.00

%

 

 

13,233,665

 

Avistar at the Parkway - Series B

 

2015

 

San Antonio, TX

 

6/1/2052

 

 

12.00

%

 

 

125,000

 

 

2015

 

San Antonio, TX

 

6/1/2052

 

 

12.00

%

 

 

124,861

 

Avistar at Wilcrest - Series A (2)

 

2017

 

Houston, TX

 

5/1/2054

 

 

5.75

%

 

 

3,775,000

 

Avistar at Wilcrest - Series B

 

2017

 

Houston, TX

 

6/1/2054

 

 

12.00

%

 

 

1,550,000

 

Avistar at Wood Hollow - Series A (2)

 

2017

 

Austin, TX

 

5/1/2054

 

 

5.75

%

 

 

31,850,000

 

Avistar at Wood Hollow - Series B

 

2017

 

Austin, TX

 

6/1/2054

 

 

12.00

%

 

 

8,410,000

 

Bella Vista (1)

 

2006

 

Gainesville, TX

 

4/1/2046

 

 

6.15

%

 

 

6,365,000

 

 

2006

 

Gainesville, TX

 

4/1/2046

 

 

6.15

%

 

 

6,295,000

 

Bridle Ridge (1)

 

2008

 

Greer, SC

 

1/1/2043

 

 

6.00

%

 

 

7,535,000

 

 

2008

 

Greer, SC

 

1/1/2043

 

 

6.00

%

 

 

7,465,000

 

Brookstone (1)

 

2009

 

Waukegan, IL

 

5/1/2040

 

 

5.45

%

 

 

9,076,558

 

 

2009

 

Waukegan, IL

 

5/1/2040

 

 

5.45

%

 

 

8,979,174

 

Bruton (2)

 

2014

 

Dallas, TX

 

8/1/2054

 

 

6.00

%

 

 

18,145,000

 

 

2014

 

Dallas, TX

 

8/1/2054

 

 

6.00

%

 

 

18,051,775

 

Columbia Gardens (2)

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

13,193,000

 

Companion at Thornhill Apartments (2)

 

2016

 

Lexington, SC

 

1/1/2052

 

 

5.80

%

 

 

11,500,000

 

 

2016

 

Lexington, SC

 

1/1/2052

 

 

5.80

%

 

 

11,404,758

 

Concord at Gulfgate - Series A (2)

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

19,185,000

 

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

19,185,000

 

Concord at Little York - Series A (2)

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

13,440,000

 

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

13,440,000

 

Concord at Williamcrest - Series A (2)

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

20,820,000

 

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

20,820,000

 

Copper Gate Apartments (3)

 

2013

 

Lafayette, IN

 

12/1/2029

 

 

6.25

%

 

 

5,145,000

 

 

2013

 

Lafayette, IN

 

12/1/2029

 

 

6.25

%

 

 

5,100,000

 

Courtyard Apartments - Series A

 

2016

 

Fullerton, CA

 

12/1/2033

 

 

5.00

%

 

 

10,230,000

 

Courtyard Apartments - Series B

 

2016

 

Fullerton, CA

 

12/1/2018

 

 

5.50

%

 

 

6,228,000

 

Courtyard Apartments - Series A (2)

 

2016

 

Fullerton, CA

 

12/1/2033

 

 

5.00

%

 

 

10,230,000

 

Courtyard Apartments - Series B (2)

 

2016

 

Fullerton, CA

 

12/1/2018

 

 

8.00

%

 

 

6,228,000

 

Cross Creek (1)

 

2009

 

Beaufort, SC

 

3/1/2049

 

 

6.15

%

 

 

8,258,605

 

 

2009

 

Beaufort, SC

 

3/1/2049

 

 

6.15

%

 

 

8,168,529

 

Crossing at 1415 - Series A (2)

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

7,590,000

 

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

7,540,000

 

Crossing at 1415 - Series B

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

12.00

%

 

 

335,000

 

Decatur Angle (2)

 

2014

 

Fort Worth, TX

 

1/1/2054

 

 

5.75

%

 

 

22,950,214

 

 

2014

 

Fort Worth, TX

 

1/1/2054

 

 

5.75

%

 

 

22,794,912

 

Glenview - Series A (4)

 

2014

 

Cameron Park, CA

 

12/1/2031

 

 

5.75

%

 

 

4,670,000

 

 

2014

 

Cameron Park, CA

 

12/1/2031

 

 

5.75

%

 

 

4,627,228

 

Greens of Pine Glen - Series A (3)

 

2012

 

Durham, NC

 

10/1/2047

 

 

6.50

%

 

 

8,210,000

 

 

2012

 

Durham, NC

 

10/1/2047

 

 

6.50

%

 

 

8,126,000

 

Greens of Pine Glen - Series B

 

2012

 

Durham, NC

 

10/1/2047

 

 

9.00

%

 

 

940,479

 

 

2012

 

Durham, NC

 

10/1/2047

 

 

9.00

%

 

 

937,399

 

Harden Ranch - Series A (3)

 

2014

 

Salinas, CA

 

3/1/2030

 

 

5.75

%

 

 

6,912,535

 

 

2014

 

Salinas, CA

 

3/1/2030

 

 

5.75

%

 

 

6,845,985

 

Harmony Court Bakersfield - Series A

 

2016

 

Bakersfield, CA

 

12/1/2033

 

 

5.00

%

 

 

3,730,000

 

Harmony Court Bakersfield - Series B

 

2016

 

Bakersfield, CA

 

12/1/2018

 

 

5.50

%

 

 

1,997,000

 

Harmony Court Bakersfield - Series A (2)

 

2016

 

Bakersfield, CA

 

12/1/2033

 

 

5.00

%

 

 

3,730,000

 

Harmony Terrace - Series A (2)

 

2016

 

Simi Valley, CA

 

1/1/2034

 

 

5.00

%

 

 

6,900,000

 

 

2016

 

Simi Valley, CA

 

1/1/2034

 

 

5.00

%

 

 

6,900,000

 

Harmony Terrace - Series B (2)

 

2016

 

Simi Valley, CA

 

1/1/2019

 

 

5.50

%

 

 

7,400,000

 

 

2016

 

Simi Valley, CA

 

1/1/2019

 

 

5.50

%

 

 

7,400,000

 

Heights at 515 - Series A (2)

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

6,435,000

 

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

6,903,000

 

Heights at 515 - Series B

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

12.00

%

 

 

510,000

 

Heritage Square - Series A (4)

 

2014

 

Edinburg, TX

 

9/1/2051

 

 

6.00

%

 

 

11,161,330

 

 

2014

 

Edinburg, TX

 

9/1/2051

 

 

6.00

%

 

 

11,063,027

 

Lake Forest Apartments (1)

 

2001

 

Daytona Beach, FL

 

12/1/2031

 

 

6.25

%

 

 

8,639,000

 

 

2001

 

Daytona Beach, FL

 

12/1/2031

 

 

6.25

%

 

 

8,505,000

 

Las Palmas II - Series A

 

2016

 

Coachella, CA

 

11/1/2033

 

 

5.00

%

 

 

1,695,000

 

Las Palmas II - Series B

 

2016

 

Coachella, CA

 

11/1/2018

 

 

5.50

%

 

 

1,770,000

 

Las Palmas II - Series A (2)

 

2016

 

Coachella, CA

 

11/1/2033

 

 

5.00

%

 

 

1,695,000

 

Las Palmas II - Series B (2)

 

2016

 

Coachella, CA

 

11/1/2018

 

 

8.00

%

 

 

1,770,000

 

Live 929 (2)

 

2014

 

Baltimore, MD

 

7/1/2049

 

 

5.78

%

 

 

40,085,000

 

 

2014

 

Baltimore, MD

 

7/1/2049

 

 

5.78

%

 

 

39,995,000

 

Montclair - Series A (4)

 

2014

 

Lemoore, CA

 

12/1/2031

 

 

5.75

%

 

 

2,530,000

 

 

2014

 

Lemoore, CA

 

12/1/2031

 

 

5.75

%

 

 

2,506,828

 

Montecito at Williams Ranch - Series A

 

2017

 

Salinas, CA

 

10/1/2034

 

 

5.50

%

 

 

7,690,000

 

Montecito at Williams Ranch - Series B

 

2017

 

Salinas, CA

 

10/1/2019

 

 

5.50

%

 

 

4,781,000

 

Oaks at Georgetown - Series A (2)

 

2016

 

Georgetown, TX

 

1/1/2034

 

 

5.00

%

 

 

12,330,000

 

 

2016

 

Georgetown, TX

 

1/1/2034

 

 

5.00

%

 

 

12,330,000

 

Oaks at Georgetown - Series B (2)

 

2016

 

Georgetown, TX

 

1/1/2019

 

 

5.50

%

 

 

5,512,000

 

 

2016

 

Georgetown, TX

 

1/1/2019

 

 

5.50

%

 

 

5,512,000

 

Ohio Bond - Series A (1)

 

2010

 

Ohio

 

6/1/2050

 

 

7.00

%

 

 

14,215,000

 

 

2010

 

Ohio

 

6/1/2050

 

 

7.00

%

 

 

14,113,000

 

Ohio Bond - Series B

 

2010

 

Ohio

 

6/1/2050

 

 

10.00

%

 

 

3,549,780

 

 

2010

 

Ohio

 

6/1/2050

 

 

10.00

%

 

 

3,536,060

 

Pro Nova - 2014-1 (2)

 

2014

 

Knoxville, TN

 

5/1/2034

 

 

6.00

%

 

 

10,000,000

 

 

2014

 

Knoxville, TN

 

5/1/2034

 

 

6.00

%

 

 

10,000,000

 

Renaissance - Series A (4) (5)

 

2015

 

Baton Rouge, LA

 

6/1/2050

 

 

6.00

%

 

 

11,348,364

 

Runnymede (1)

 

2007

 

Austin, TX

 

10/1/2042

 

 

6.00

%

 

 

10,250,000

 


Property Name

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2016

 

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2017

 

Renaissance - Series A (4)

 

2015

 

Baton Rouge, LA

 

6/1/2050

 

 

6.00

%

 

 

11,239,441

 

Rosewood Townhomes - Series A

 

2017

 

Goose Creek, SC

 

7/1/2055

 

 

5.75

%

 

 

9,280,000

 

Rosewood Townhomes - Series B

 

2017

 

Goose Creek, SC

 

8/1/2055

 

 

12.00

%

 

 

470,000

 

Runnymede (1)

 

2007

 

Austin, TX

 

10/1/2042

 

 

6.00

%

 

 

10,150,000

 

San Vicente - Series A (2)

 

2016

 

Soledad, CA

 

11/1/2033

 

 

5.00

%

 

 

3,495,000

 

San Vicente - Series B (2)

 

2016

 

Soledad, CA

 

11/1/2018

 

 

8.00

%

 

 

1,825,000

 

Santa Fe - Series A (4)

 

2014

 

Hesperia, CA

 

12/1/2031

 

 

5.75

%

 

 

3,065,000

 

 

2014

 

Hesperia, CA

 

12/1/2031

 

 

5.75

%

 

 

3,036,928

 

San Vicente - Series A

 

2016

 

Soledad, CA

 

11/1/2033

 

 

5.00

%

 

 

3,495,000

 

San Vicente - Series B

 

2016

 

Soledad, CA

 

11/1/2018

 

 

5.50

%

 

 

1,825,000

 

Seasons at Simi Valley - Series A (2)

 

2015

 

Simi Valley, CA

 

9/1/2032

 

 

5.75

%

 

 

4,376,000

 

 

2015

 

Simi Valley, CA

 

9/1/2032

 

 

5.75

%

 

 

4,366,195

 

Seasons at Simi Valley - Series B

 

2015

 

Simi Valley, CA

 

9/1/2017

 

 

8.00

%

 

 

1,944,000

 

 

2015

 

Simi Valley, CA

 

9/1/2018

 

 

8.00

%

 

 

1,944,000

 

Seasons Lakewood - Series A

 

2016

 

Lakewood, CA

 

1/1/2034

 

 

5.00

%

 

 

7,350,000

 

Seasons Lakewood - Series B

 

2016

 

Lakewood, CA

 

1/1/2019

 

 

5.50

%

 

 

5,260,000

 

Seasons San Juan Capistrano - Series A

 

2016

 

San Juan Capistrano, CA

 

1/1/2034

 

 

5.00

%

 

 

12,375,000

 

Seasons San Juan Capistrano - Series B

 

2016

 

San Juan Capistrano, CA

 

1/1/2019

 

 

5.50

%

 

 

6,574,000

 

Seasons Lakewood - Series A (2)

 

2016

 

Lakewood, CA

 

1/1/2034

 

 

5.00

%

 

 

7,350,000

 

Seasons Lakewood - Series B (2)

 

2016

 

Lakewood, CA

 

1/1/2019

 

 

5.50

%

 

 

5,260,000

 

Seasons San Juan Capistrano - Series A (2)

 

2016

 

San Juan Capistrano, CA

 

1/1/2034

 

 

5.00

%

 

 

12,375,000

 

Seasons San Juan Capistrano - Series B (2)

 

2016

 

San Juan Capistrano, CA

 

1/1/2019

 

 

5.50

%

 

 

6,574,000

 

Silver Moon - Series A (4)

 

2015

 

Albuquerque, NM

 

8/1/2055

 

 

6.00

%

 

 

7,933,259

 

 

2015

 

Albuquerque, NM

 

8/1/2055

 

 

6.00

%

 

 

7,879,590

 

South Pointe - Series A

 

2017

 

Hanahan, SC

 

7/1/2055

 

 

5.75

%

 

 

21,600,000

 

South Pointe - Series B

 

2017

 

Hanahan, SC

 

8/1/2055

 

 

12.00

%

 

 

1,100,000

 

Southpark (1)

 

2009

 

Austin, TX

 

12/1/2049

 

 

6.13

%

 

 

13,435,000

 

 

2009

 

Austin, TX

 

12/1/2049

 

 

6.13

%

 

 

13,300,000

 

Summerhill - Series A

 

2016

 

Bakersfield, CA

 

12/1/2033

 

 

5.00

%

 

 

6,423,000

 

Summerhill - Series B

 

2016

 

Bakersfield, CA

 

12/1/2018

 

 

5.50

%

 

 

3,372,000

 

Summerhill - Series A (2)

 

2016

 

Bakersfield, CA

 

12/1/2033

 

 

5.00

%

 

 

6,423,000

 

Summerhill - Series B (2)

 

2016

 

Bakersfield, CA

 

12/1/2018

 

 

8.00

%

 

 

3,372,000

 

Sycamore Walk - Series A (2)

 

2015

 

Bakersfield, CA

 

1/1/2033

 

 

5.25

%

 

 

3,632,000

 

 

2015

 

Bakersfield, CA

 

1/1/2033

 

 

5.25

%

 

 

3,632,000

 

Sycamore Walk - Series B

 

2015

 

Bakersfield, CA

 

1/1/2018

 

 

5.50

%

 

 

1,815,000

 

 

2015

 

Bakersfield, CA

 

1/1/2018

 

 

8.00

%

 

 

1,815,000

 

The Palms at Premier Park (3)

 

2013

 

Columbia, SC

 

1/1/2050

 

 

6.25

%

 

 

19,826,716

 

 

2013

 

Columbia, SC

 

1/1/2050

 

 

6.25

%

 

 

19,238,297

 

Tyler Park Townhomes (3)

 

2013

 

Greenfield, CA

 

1/1/2030

 

 

5.75

%

 

 

6,024,120

 

 

2013

 

Greenfield, CA

 

1/1/2030

 

 

5.75

%

 

 

5,965,475

 

Vantage at Judson (4)

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

6.00

%

 

 

26,356,498

 

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

6.00

%

 

 

26,133,557

 

Vantage at Harlingen (4)

 

2015

 

San Antonio, TX

 

9/1/2053

 

 

6.00

%

 

 

24,529,580

 

The Village at Madera - Series A

 

2016

 

Madera, CA

 

12/1/2033

 

 

5.00

%

 

 

3,085,000

 

The Village at Madera - Series B

 

2016

 

Madera, CA

 

12/1/2018

 

 

5.50

%

 

 

1,719,000

 

The Village at Madera - Series A (2)

 

2016

 

Madera, CA

 

12/1/2033

 

 

5.00

%

 

 

3,085,000

 

The Village at Madera - Series B (2)

 

2016

 

Madera, CA

 

12/1/2018

 

 

8.00

%

 

 

1,719,000

 

Village at River's Edge (2)

 

2017

 

Columbia, SC

 

6/1/2033

 

 

6.00

%

 

 

10,000,000

 

Vineyard Gardens - Series A

 

2017

 

Oxnard, CA

 

1/1/2035

 

 

5.50

%

 

 

3,995,000

 

Vineyard Gardens - Series B

 

2017

 

Oxnard, CA

 

1/1/2020

 

 

5.50

%

 

 

2,846,000

 

Westside Village Market (3)

 

2013

 

Shafter, CA

 

1/1/2030

 

 

5.75

%

 

 

3,936,750

 

 

2013

 

Shafter, CA

 

1/1/2030

 

 

5.75

%

 

 

3,898,427

 

Willow Run (2)

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

13,009,000

 

Woodlynn Village (1)

 

2008

 

Maplewood, MN

 

11/1/2042

 

 

6.00

%

 

 

4,310,000

 

 

2008

 

Maplewood, MN

 

11/1/2042

 

 

6.00

%

 

 

4,267,000

 

 

 

 

 

 

 

 

 

 

 

 

$

648,439,860

 

 

 

 

 

 

 

 

 

 

 

 

$

719,750,361

 

 

(1) Bonds owned by ATAX TEBS I, LLC (M24 TEBS), see Note 17

(2) Bond held by Deutsche Bank AG in a secured financing transaction, see Note 17

(3) Bonds owned by ATAX TEBS II, LLC (M31 TEBS), see Note 17

(4) Bonds owned by ATAX TEBS III, LLC (M33 TEBS), see Note 17


 

Property Name

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2015

 

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2016

 

15 West Apartments - Series A (2)

 

2016

 

Vancouver, WA

 

7/1/2054

 

 

6.25

%

 

$

9,850,000

 

Arbors at Hickory Ridge (3)

 

2012

 

Memphis, TN

 

1/1/2049

 

 

6.25

%

 

$

11,450,000

 

 

2012

 

Memphis, TN

 

1/1/2049

 

 

6.25

%

 

 

11,351,321

 

Ashley Square (1)

 

1999

 

Des Moines, IA

 

12/1/2025

 

 

6.25

%

 

 

5,099,000

 

 

1999

 

Des Moines, IA

 

12/1/2025

 

 

6.25

%

 

 

5,039,000

 

Avistar on the Boulevard - Series A (3)

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

16,418,497

 

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

16,268,850

 

Avistar at Chase Hill - Series A (3)

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,935,552

 

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,844,994

 

Avistar at the Crest - Series A (3)

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,637,485

 

 

2013

 

San Antonio, TX

 

3/1/2050

 

 

6.00

%

 

 

9,549,644

 

Avistar (February 2013 Acquisition) - Series B (3 Bonds)

 

2013

 

San Antonio, TX

 

4/1/2050

 

 

9.00

%

 

 

2,168,196

 

 

2013

 

San Antonio, TX

 

4/1/2050

 

 

9.00

%

 

 

2,158,382

 

Avistar at the Oak - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

7,777,936

 

Avistar at the Oaks - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

7,709,040

 

Avistar in 09 - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

6,715,948

 

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

6,656,458

 

Avistar on the Hill - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

5,373,756

 

Avistar (June 2013 Acquisition) - Series B (3 Bonds)

 

2013

 

San Antonio, TX

 

9/1/2050

 

 

9.00

%

 

 

1,009,621

 

Avistar on the Hills - Series A (3)

 

2013

 

San Antonio, TX

 

8/1/2050

 

 

6.00

%

 

 

5,326,157

 

Avistar (June 2013 Acquisition) - Series

B (2 Bonds)

 

2013

 

San Antonio, TX

 

9/1/2050

 

 

9.00

%

 

 

1,005,226

 

Avistar at the Parkway - Series A (4)

 

2015

 

San Antonio, TX

 

5/1/2052

 

 

6.00

%

 

 

13,300,000

 

 

2015

 

San Antonio, TX

 

5/1/2052

 

 

6.00

%

 

 

13,300,000

 

Avistar at the Parkway - Series B

 

2015

 

San Antonio, TX

 

6/1/2052

 

 

12.00

%

 

 

125,000

 

 

2015

 

San Antonio, TX

 

6/1/2052

 

 

12.00

%

 

 

125,000

 

Bella Vista (1)

 

2006

 

Gainesville, TX

 

4/1/2046

 

 

6.15

%

 

 

6,430,000

 

 

2006

 

Gainesville, TX

 

4/1/2046

 

 

6.15

%

 

 

6,365,000

 

Bridle Ridge (1)

 

2008

 

Greer, SC

 

1/1/2043

 

 

6.00

%

 

 

7,595,000

 

 

2008

 

Greer, SC

 

1/1/2043

 

 

6.00

%

 

 

7,535,000

 

Brookstone (1)

 

2009

 

Waukegan, IL

 

5/1/2040

 

 

5.45

%

 

 

9,168,742

 

 

2009

 

Waukegan, IL

 

5/1/2040

 

 

5.45

%

 

 

9,076,558

 

Bruton (2)

 

2014

 

Dallas, TX

 

8/1/2054

 

 

6.00

%

 

 

18,145,000

 

 

2014

 

Dallas, TX

 

8/1/2054

 

 

6.00

%

 

 

18,145,000

 

Columbia Gardens (2)

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

Companion at Thornhill Apartments (2)

 

2016

 

Lexington, SC

 

1/1/2052

 

 

5.80

%

 

 

11,500,000

 

Concord at Gulfgate - Series A (2)

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

17,060,000

 

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

19,185,000

 

Concord at Gulfgate - Series B

 

2015

 

Houston, TX

 

3/1/2032

 

 

12.00

%

 

 

2,125,000

 

Concord at Little York - Series A (2)

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

12,480,000

 

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

13,440,000

 

Concord at Little York - Series B

 

2015

 

Houston, TX

 

3/1/2032

 

 

12.00

%

 

 

960,000

 

Concord at Williamcrest - Series A (2)

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

18,020,000

 

 

2015

 

Houston, TX

 

2/1/2032

 

 

6.00

%

 

 

20,820,000

 

Concord at Williamcrest - Series B

 

2015

 

Houston, TX

 

3/1/2032

 

 

12.00

%

 

 

2,800,000

 

Copper Gate Apartments (3)

 

2013

 

Lafayette, IN

 

12/1/2029

 

 

6.25

%

 

 

5,185,000

 

 

2013

 

Lafayette, IN

 

12/1/2029

 

 

6.25

%

 

 

5,145,000

 

Courtyard Apartments - Series A

 

2016

 

Fullerton, CA

 

12/1/2033

 

 

5.00

%

 

 

10,230,000

 

Courtyard Apartments - Series B

 

2016

 

Fullerton, CA

 

12/1/2018

 

 

5.50

%

 

 

6,228,000

 

Cross Creek (1)

 

2009

 

Beaufort, SC

 

3/1/2049

 

 

6.15

%

 

 

8,343,321

 

 

2009

 

Beaufort, SC

 

3/1/2049

 

 

6.15

%

 

 

8,258,605

 

Crossing at 1415 - Series A

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

7,590,000

 

Crossing at 1415 - Series A (2)

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

7,590,000

 

Crossing at 1415 - Series B

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

12.00

%

 

 

335,000

 

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

12.00

%

 

 

335,000

 

Decatur Angle (2)

 

2014

 

Fort Worth, TX

 

1/1/2054

 

 

5.75

%

 

 

23,000,000

 

 

2014

 

Fort Worth, TX

 

1/1/2054

 

 

5.75

%

 

 

22,950,214

 

Glenview - Series A (4)

 

2014

 

Cameron Park, CA

 

12/1/2031

 

 

5.75

%

 

 

4,670,000

 

 

2014

 

Cameron Park, CA

 

12/1/2031

 

 

5.75

%

 

 

4,670,000

 

Glenview - Series B

 

2014

 

Cameron Park, CA

 

12/1/2016

 

 

8.00

%

 

 

2,053,000

 

Greens of Pine Glen - Series A (3)

 

2012

 

Durham, NC

 

10/1/2047

 

 

6.50

%

 

 

8,294,000

 

 

2012

 

Durham, NC

 

10/1/2047

 

 

6.50

%

 

 

8,210,000

 

Greens of Pine Glen - Series B

 

2012

 

Durham, NC

 

10/1/2047

 

 

9.00

%

 

 

943,214

 

 

2012

 

Durham, NC

 

10/1/2047

 

 

9.00

%

 

 

940,479

 

Harden Ranch - Series A (3)

 

2014

 

Salinas, CA

 

3/1/2030

 

 

5.75

%

 

 

6,960,000

 

 

2014

 

Salinas, CA

 

3/1/2030

 

 

5.75

%

 

 

6,912,535

 

Heights at 515 - Series A

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

6,435,000

 

Harmony Court Bakersfield - Series A

 

2016

 

Bakersfield, CA

 

12/1/2033

 

 

5.00

%

 

 

3,730,000

 

Harmony Court Bakersfield - Series B

 

2016

 

Bakersfield, CA

 

12/1/2018

 

 

5.50

%

 

 

1,997,000

 

Harmony Terrace - Series A (2)

 

2016

 

Simi Valley, CA

 

1/1/2034

 

 

5.00

%

 

 

6,900,000

 

Harmony Terrace - Series B (2)

 

2016

 

Simi Valley, CA

 

1/1/2019

 

 

5.50

%

 

 

7,400,000

 

Heights at 515 - Series A (2)

 

2015

 

San Antonio, TX

 

12/1/2052

 

 

6.00

%

 

 

6,435,000

 

Heights at 515 - Series B

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

12.00

%

 

 

510,000

 

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

12.00

%

 

 

510,000

 

Heritage Square - Series A (4)

 

2014

 

Edinburg, TX

 

9/1/2051

 

 

6.00

%

 

 

11,185,000

 

 

2014

 

Edinburg, TX

 

9/1/2051

 

 

6.00

%

 

 

11,161,330

 

Heritage Square - Series B

 

2014

 

Edinburg, TX

 

10/1/2051

 

 

12.00

%

 

 

520,000

 

Lake Forest Apartments (1)

 

2001

 

Daytona Beach, FL

 

12/1/2031

 

 

6.25

%

 

 

8,766,000

 

 

2001

 

Daytona Beach, FL

 

12/1/2031

 

 

6.25

%

 

 

8,639,000

 

Las Palmas II - Series A

 

2016

 

Coachella, CA

 

11/1/2033

 

 

5.00

%

 

 

1,695,000

 

Las Palmas II - Series B

 

2016

 

Coachella, CA

 

11/1/2018

 

 

5.50

%

 

 

1,770,000

 

Live 929 (2)

 

2014

 

Baltimore, MD

 

7/1/2049

 

 

5.78

%

 

 

40,175,000

 

 

2014

 

Baltimore, MD

 

7/1/2049

 

 

5.78

%

 

 

40,085,000

 

Montclair - Series A (4)

 

2014

 

Lemoore, CA

 

12/1/2031

 

 

5.75

%

 

 

2,530,000

 

 

2014

 

Lemoore, CA

 

12/1/2031

 

 

5.75

%

 

 

2,530,000

 

Montclair - Series B

 

2014

 

Lemoore, CA

 

12/1/2016

 

 

8.00

%

 

 

928,000

 

Oaks at Georgetown - Series A (2)

 

2016

 

Georgetown, TX

 

1/1/2034

 

 

5.00

%

 

 

12,330,000

 

Oaks at Georgetown - Series B (2)

 

2016

 

Georgetown, TX

 

1/1/2019

 

 

5.50

%

 

 

5,512,000

 

Ohio Bond - Series A (1)

 

2010

 

Ohio

 

6/1/2050

 

 

7.00

%

 

 

14,311,000

 

 

2010

 

Ohio

 

6/1/2050

 

 

7.00

%

 

 

14,215,000

 

Ohio Bond - Series B

 

2010

 

Ohio

 

6/1/2050

 

 

10.00

%

 

 

3,562,190

 

 

2010

 

Ohio

 

6/1/2050

 

 

10.00

%

 

 

3,549,780

 

Pro Nova - 2014-1 (2)

 

2014

 

Knoxville, TN

 

5/1/2034

 

 

6.00

%

 

 

10,000,000

 

 

2014

 

Knoxville, TN

 

5/1/2034

 

 

6.00

%

 

 

10,000,000

 

Pro Nova - 2014-2 (2)

 

2014

 

Knoxville, TN

 

5/1/2025

 

 

5.25

%

 

 

9,295,000

 

Renaissance - Series A (4) (5)

 

2015

 

Baton Rouge, LA

 

6/1/2050

 

 

6.00

%

 

 

11,450,959

 

Renaissance - Series A (4)

 

2015

 

Baton Rouge, LA

 

6/1/2050

 

 

6.00

%

 

 

11,348,364

 

Runnymede (1)

 

2007

 

Austin, TX

 

10/1/2042

 

 

6.00

%

 

 

10,350,000

 

 

2007

 

Austin, TX

 

10/1/2042

 

 

6.00

%

 

 

10,250,000

 

Santa Fe - Series A (4)

 

2014

 

Hesperia, CA

 

12/1/2031

 

 

5.75

%

 

 

3,065,000

 

 

2014

 

Hesperia, CA

 

12/1/2031

 

 

5.75

%

 

 

3,065,000

 

Santa Fe - Series B

 

2014

 

Hesperia, CA

 

12/1/2016

 

 

8.00

%

 

 

1,671,000

 

Seasons at Simi Valley - Series A

 

2015

 

Simi Valley, CA

 

9/1/2032

 

 

5.75

%

 

 

4,376,000

 

San Vicente - Series A

 

2016

 

Soledad, CA

 

11/1/2033

 

 

5.00

%

 

 

3,495,000

 

San Vicente - Series B

 

2016

 

Soledad, CA

 

11/1/2018

 

 

5.50

%

 

 

1,825,000

 

Seasons at Simi Valley - Series A (2)

 

2015

 

Simi Valley, CA

 

9/1/2032

 

 

5.75

%

 

 

4,376,000

 

Seasons at Simi Valley - Series B

 

2015

 

Simi Valley, CA

 

9/1/2017

 

 

5.50

%

 

 

1,944,000

 

 

2015

 

Simi Valley, CA

 

9/1/2017

 

 

8.00

%

 

 

1,944,000

 

Seasons Lakewood - Series A

 

2016

 

Lakewood, CA

 

1/1/2034

 

 

5.00

%

 

 

7,350,000

 

Seasons Lakewood - Series B

 

2016

 

Lakewood, CA

 

1/1/2019

 

 

5.50

%

 

 

5,260,000

 

Seasons San Juan Capistrano - Series A

 

2016

 

San Juan Capistrano, CA

 

1/1/2034

 

 

5.00

%

 

 

12,375,000

 

Seasons San Juan Capistrano - Series B

 

2016

 

San Juan Capistrano, CA

 

1/1/2019

 

 

5.50

%

 

 

6,574,000

 

Silver Moon - Series A (4)

 

2015

 

Albuquerque, NM

 

8/1/2055

 

 

6.00

%

 

 

7,983,811

 

 

2015

 

Albuquerque, NM

 

8/1/2055

 

 

6.00

%

 

 

7,933,259

 

Southpark (1)

 

2009

 

Austin, TX

 

12/1/2049

 

 

6.13

%

 

 

13,560,000

 

 

2009

 

Austin, TX

 

12/1/2049

 

 

6.13

%

 

 

13,435,000

 

Sycamore Walk - Series A

 

2015

 

Bakersfield, CA

 

1/1/2033

 

 

5.25

%

 

 

3,632,000

 

Summerhill - Series A

 

2016

 

Bakersfield, CA

 

12/1/2033

 

 

5.00

%

 

 

6,423,000

 

Summerhill - Series B

 

2016

 

Bakersfield, CA

 

12/1/2018

 

 

5.50

%

 

 

3,372,000

 

Sycamore Walk - Series A (2)

 

2015

 

Bakersfield, CA

 

1/1/2033

 

 

5.25

%

 

 

3,632,000

 

Sycamore Walk - Series B

 

2015

 

Bakersfield, CA

 

1/1/2018

 

 

5.50

%

 

 

1,815,000

 

 

2015

 

Bakersfield, CA

 

1/1/2018

 

 

5.50

%

 

 

1,815,000

 

The Palms at Premier Park (3)

 

2013

 

Columbia, SC

 

1/1/2050

 

 

6.25

%

 

 

20,001,272

 

Tyler Park Townhomes (3)

 

2013

 

Greenfield, CA

 

1/1/2030

 

 

5.75

%

 

 

6,075,000

 

Vantage at Judson (4)

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

9.00

%

 

 

26,540,000

 

Vantage at Harlingen (4)

 

2015

 

San Antonio, TX

 

9/1/2053

 

 

9.00

%

 

 

24,575,000

 

Westside Village Market (3)

 

2013

 

Shafter, CA

 

1/1/2030

 

 

5.75

%

 

 

3,970,000

 

Willow Run (2)

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

Woodlynn Village (1)

 

2008

 

Maplewood, MN

 

11/1/2042

 

 

6.00

%

 

 

4,351,000

 

 

 

 

 

 

 

 

 

 

 

 

$

534,745,500

 


Property Name

 

Year Acquired

 

Location

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at December 31, 2016

 

The Palms at Premier Park (3)

 

2013

 

Columbia, SC

 

1/1/2050

 

 

6.25

%

 

 

19,826,716

 

Tyler Park Townhomes (3)

 

2013

 

Greenfield, CA

 

1/1/2030

 

 

5.75

%

 

 

6,024,120

 

Vantage at Judson (4)

 

2015

 

San Antonio, TX

 

1/1/2053

 

 

6.00

%

 

 

26,356,498

 

Vantage at Harlingen (4)

 

2015

 

San Antonio, TX

 

9/1/2053

 

 

6.00

%

 

 

24,529,580

 

The Village at Madera - Series A

 

2016

 

Madera, CA

 

12/1/2033

 

 

5.00

%

 

 

3,085,000

 

The Village at Madera - Series B

 

2016

 

Madera, CA

 

12/1/2018

 

 

5.50

%

 

 

1,719,000

 

Westside Village Market (3)

 

2013

 

Shafter, CA

 

1/1/2030

 

 

5.75

%

 

 

3,936,750

 

Willow Run (2)

 

2015

 

Columbia, SC

 

12/1/2050

 

 

5.50

%

 

 

15,000,000

 

Woodlynn Village (1)

 

2008

 

Maplewood, MN

 

11/1/2042

 

 

6.00

%

 

 

4,310,000

 

 

 

 

 

 

 

 

 

 

 

 

 

$

648,439,860

 

 

(1) Bonds owned by ATAX TEBS I, LLC (M24 TEBS), see Note 17

(2) Bonds held by Deutsche Bank AG in a secured financing transaction, see Note 17

(3) Bonds held by ATAX TEBS II, LLC (M31 TEBS), see Note 17

(4) Bonds owned by ATAX TEBS III, LLC (M33 TEBS), see Note 17

 


 

7. PHC Certificates

The Partnership owns 100% of the LIFERs of three TOB Trusts (“PHC Trusts”) sponsored by DB. The TOB Trusts are consolidated VIEs (Note 5) and the Partnership is the primary beneficiary. As a result, the Partnership consolidates the assets of the PHC Trusts in the consolidated financial statements. The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to a number ofnumerous 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. Underunder 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, nor guaranteed by the government of 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.

The Partnership had the following investments in the PHC Certificates on December 31, 20162017 and 2015:2016:

 

 

December 31, 2016

 

 

December 31, 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

 

 

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

 

 

 

7.31

 

 

AA-

 

5.39%

 

 

$

25,109,305

 

 

$

-

 

 

$

-

 

 

$

25,109,305

 

PHC Certificate Trust II

 

7.65

 

A+

 

 

4.31%

 

 

 

10,600,967

 

 

 

84,756

 

 

 

-

 

 

 

10,685,723

 

 

 

6.37

 

 

A+

 

4.32%

 

 

 

9,606,480

 

 

 

-

 

 

 

(248,189

)

 

 

9,358,291

 

PHC Certificate Trust III

 

8.79

 

BBB

 

 

5.42%

 

 

 

20,122,937

 

 

 

-

 

 

 

(399,847

)

 

 

19,723,090

 

 

 

7.61

 

 

BBB

 

5.23%

 

 

 

15,451,249

 

 

 

-

 

 

 

(277,257

)

 

 

15,173,992

 

 

 

 

 

 

 

 

 

 

$

56,801,062

 

 

$

756,853

 

 

$

(399,847

)

 

$

57,158,068

 

 

 

 

 

 

 

 

 

 

 

 

$

50,167,034

 

 

$

-

 

 

$

(525,446

)

 

$

49,641,588

 

 

 

December 31, 2015

 

 

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

 

 

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

 

9.25

 

AA-

 

 

5.33%

 

 

$

27,274,451

 

 

$

1,482,376

 

 

$

-

 

 

$

28,756,827

 

 

8.31

 

AA-

 

5.36%

 

 

$

26,077,158

 

 

$

672,097

 

 

$

-

 

 

$

26,749,255

 

PHC Certificate Trust II

 

8.67

 

A+

 

 

4.29%

 

 

 

11,081,987

 

 

 

365,443

 

 

 

-

 

 

 

11,447,430

 

 

7.65

 

A+

 

4.31%

 

 

 

10,600,967

 

 

 

84,756

 

 

 

-

 

 

 

10,685,723

 

PHC Certificate Trust III

 

9.81

 

BBB

 

 

5.42%

 

 

 

20,513,351

 

 

 

-

 

 

 

(10,318

)

 

 

20,503,033

 

 

8.79

 

BBB

 

5.42%

 

 

 

20,122,937

 

 

 

-

 

 

 

(399,847

)

 

 

19,723,090

 

 

 

 

 

 

 

 

 

 

$

58,869,789

 

 

$

1,847,819

 

 

$

(10,318

)

 

$

60,707,290

 

 

 

 

 

 

 

 

 

 

$

56,801,062

 

 

$

756,853

 

 

$

(399,847

)

 

$

57,158,068

 

 

See Note 25 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 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.

 

The Partnership recognized an impairment charge on PHC Certificate Trust I of approximately $762,000 during the year ended December 31, 2017. There were no impairment charges recorded for the years ended December 31, 2016 and 2015. See Note 2 for information considered in the Partnership’s evaluation of impairment of the PHC Certificates.


8. Mortgage-Backed Securities (“MBS Securities”)

At December 31, 2015,

In January 2016, the Partnership sold its three remaining MBS Securities for approximately $15.0 million, which approximated the amortized cost and accrued interest. The Partnership then collapsed the related three remaining MBS Trusts and paid all obligations in full from the proceeds of the sales.

The Partnership owned 100% of the LIFERs of TOB Trusts (“MBS Trusts”) sponsored by DB. The MBS Trusts are consolidated VIEs (Note 5) and the Partnership is the primary beneficiary. As a result, the Partnership consolidates the assets of the MBS Trusts in the consolidated financial statements. The MBS Securities are backed by residential mortgage loans and interest received is expected to be exempt from federal income taxation.

In January 2016, the Partnership sold its three remaining MBS Securities for approximately $15.0 million, which approximated the amortized cost plus interest. The Partnership then collapsed the related three remaining MBS Trusts and paid all obligations in full from the proceeds of the sales.


The carrying value of the Partnership’s MBS Securities as of December 31, 2016, was zero. The carrying values of the Partnerships MBS Securities at December 31, 2015 are as follows:

 

 

December 31, 2015

 

Agency Rating of MBS Securities (1)

 

Cost adjusted for

amortization of

premium

 

 

Cumulative Unrealized Gain

 

 

Cumulative Unrealized Loss

 

 

Estimated

Fair Value

 

“AAA”

 

$

5,052,348

 

 

$

-

 

 

$

(34,648

)

 

$

5,017,700

 

“AA”

 

 

9,900,682

 

 

 

-

 

 

 

(143,073

)

 

 

9,757,609

 

 

 

$

14,953,030

 

 

$

-

 

 

$

(177,721

)

 

$

14,775,309

 

(1) MBS Securities are reported based on the lowest rating issued by a Rating Agency, if more than one rating is issued on the security, at the date presented.

See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the MBS Securities. Unrealized gains or losses on the MBS Securities are recorded in the 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 MBS Securities.

A description of certain terms of the Partnership’s MBS Securities at December 31, 2015 is as follows:

Agency Rating of MBS Securities

 

Principal Outstanding December 31, 2015

 

 

Weighted Average Maturity Date

 

Weighted Average Coupon Interest Rate

 

“AAA”

 

$

5,000,000

 

 

7/1/2032

 

 

4.60

%

“AA”

 

 

9,765,000

 

 

7/9/2036

 

 

4.20

%

 

 

$

14,765,000

 

 

 

 

 

 

 

 

9. Real Estate Assets

To facilitate its investment strategy of acquiring additional mortgage revenue bonds that may be secured byThe Partnership owns the Jade Park and Suites on Paseo MF Properties directly. The Partnership owns all other MF Properties through the Partnership has acquired, through its subsidiary,Greens Hold Co, a wholly-owned subsidiary. The Greens Hold Co owns 100% of the MF Properties, except for Northern View for which it owned a 99% limited partner position in one limited partnership and 100% member positions in four limited liability companies that own MF Properties. The Partnership owns two of the MF Properties directly. The financial statements of these properties are consolidated with those of the Partnership.position. The general partnerspartner of the 99% owned MF PropertyNorthern View is an unaffiliated party and its 1% ownership interest is reflected in the Partnership’s consolidated financial statements as noncontrolling interest. The financial statements of the MF properties are consolidated with those of the Partnership.  

The Partnership also investmentsinvests in land with plans to develop into rental properties in the future. These investments are reported as “Land held for development” below.

The following tables represent information regarding the real estate assets owned by the Partnership at December 31, 20162017 and 2015:2016:

 

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 (f/k/a Meadowview)

 

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

 

Various

 

N/A

 

 

 

7,531,104

 

 

 

-

 

 

 

7,531,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

130,443,628

 

Less accumulated depreciation

 

 

 

(16,217,028

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

114,226,600

 


Real Estate Assets at December 31, 2015

 

Property Name

 

Location

 

Number of

Units

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value on

December 31, 2015

 

Arboretum

 

Omaha, NE

 

 

145

 

 

$

1,755,147

 

 

$

19,317,284

 

 

$

21,072,431

 

Eagle Village

 

Evansville, IN

 

 

511

 

 

 

567,880

 

 

 

12,594,935

 

 

 

13,162,815

 

Northern View (f/k/a Meadowview)

 

Highland Heights, KY

 

 

270

 

 

 

688,539

 

 

 

8,062,973

 

 

 

8,751,512

 

Residences of DeCordova

 

Granbury, TX

 

 

110

 

 

 

1,137,832

 

 

 

8,065,977

 

 

 

9,203,809

 

Residences of Weatherford

 

Weatherford, TX

 

 

76

 

 

 

1,942,229

 

 

 

5,738,697

 

 

 

7,680,926

 

Suites on Paseo

 

San Diego, CA

 

 

394

 

 

 

3,162,463

 

 

 

38,216,364

 

 

 

41,378,827

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,910,424

 

 

 

32,910,424

 

Woodland Park

 

Topeka, KS

 

 

236

 

 

 

1,265,160

 

 

 

14,247,045

 

 

 

15,512,205

 

Land held for development

 

Various

 

N/A

 

 

 

7,368,255

 

 

 

-

 

 

 

7,368,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

157,041,204

 

Less accumulated depreciation

 

 

 

(16,023,814

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

141,017,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate Assets at December 31, 2017

 

Property Name

 

Location

 

Number of

Units (Unaudited)

 

 

Land and Land

Improvements

 

 

Buildings and

Improvements

 

 

Carrying Value on

December 31, 2017

 

Suites on Paseo

 

San Diego, CA

 

 

394

 

 

$

3,166,463

 

 

$

38,454,894

 

 

$

41,621,357

 

The 50/50 MF Property

 

Lincoln, NE

 

 

475

 

 

 

-

 

 

 

32,932,981

 

 

 

32,932,981

 

Jade Park

 

Daytona, FL

 

 

144

 

 

 

2,292,035

 

 

 

7,565,613

 

 

 

9,857,648

 

Land held for development

 

(1)

 

(1)

 

 

 

1,860,737

 

 

 

-

 

 

 

1,860,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

86,272,723

 

Less accumulated depreciation

 

 

 

(9,580,531

)

Total real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

76,692,192

 

 

Recent Transactions

In December 2016, the Partnership executed a Purchase and Sale Agreement (“PSA”)(1) Land held for the saledevelopment consists of Northern View. See Note 28 for additional information.

In August and November 2016, the Partnership executed PSA’s to acquire two contiguous tractsparcels of land in Omaha, Nebraska. If these tractsJohnson County, KS and Richland County, SC and land development costs for a site in Douglas County, NE

Real Estate Assets at December 31, 2016

 

Property Name

 

Location

 

Number of

Units (Unaudited)

 

 

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 are successfully acquired, they will be classified as “Land heldin St. Petersburg, FL, Johnson County, KS, and Richland County, SC and land and development costs for development.”a site in Panama City Beach, FL.


In July and June 2016,Activity in 2017

During 2017, the Partnership sold the Woodland Park and Arboretumfour of its MF Properties for gross proceedsto unrelated third parties. The table below summarizes information related to the sales. The gains on sale, net of approximately $15.7 million and $30.2 million, respectively.income taxes, are considered either Tier 2 or Tier 3 income (See Note 3). The Partnership realized gains of approximately $1.7 million and $12.4 million before income taxes, respectively. The Greens Hold Co, which owned Woodland Park and Arboretum, applied its tax net operating loss carryforward to these gains and reported current tax expense of approximately $4.6 million related to these sales on the Partnership’s consolidated financial statements (Note 12).   Distributions were recorded in accordance with the Amended and Restated LP Agreement (Note 3), and 25% of Net Residual Proceeds (Tier 2) was distributed to the General Partner and 75% was distributed to the Unitholders. Management determined the Arboretum and Woodland Park sale transactions and the potential Northern View sale transactionsales did not meet the criteria for discontinued operation presentation.operations.

Property Name

 

Month Sold

 

Property Location

 

Units

(Unaudited)

 

Gross Proceeds

 

 

Gain on Sale before Income Taxes

 

Northern View

 

March

 

Highland Heights, KY

 

294

 

$

13,750,000

 

 

$

7,174,183

 

Eagle Village

 

November

 

Evansville, IN

 

511

 

 

12,775,000

 

 

 

2,782,107

 

Residences of DeCordova

 

November

 

Granbury, TX

 

110

 

 

12,100,000

 

 

 

5,174,645

 

Residences of Weatherford

 

November

 

Weatherford, TX

 

76

 

 

7,900,000

 

 

 

2,644,040

 

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 and the property is no longer listed for sale at December 31, 2017.

In December 2017, the Partnership executed a listing agreement with a broker to market the Jade Park MF Property for sale.

Activity in 2016

 

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 recorded an impairment expensecharge of approximately $62,000 in the second quarter of 2016.

During 2016, the Partnership sold two of its MF Properties to unrelated third parties. The sales of the Consolidated VIEs were closed in the fourth quarter of 2015 with the gains and results of operations of the Consolidated VIEs reported as part of the discontinued operations in net income for all periods presented. No net income or loss from these properties’ operations or sale accruedtable below summarizes information related to the Unitholders orsales. The gains on sale, net of income taxes, are considered Tier 2 income (See Note 3). The Partnership determined the General Partner duringsales did not meet the criteria for discontinued operations.

Property Name

 

Month Sold

 

Property Location

 

Units

(Unaudited)

 

Gross Proceeds

 

 

Gain on Sale before Income Taxes

 

Arboretum

 

June

 

Omaha, NE

 

145

 

$

30,200,000

 

 

$

12,410,444

 

Woodland Park

 

July

 

Topeka, KS

 

236

 

 

15,650,000

 

 

 

1,661,873

 

In August and November 2016, and 2015. For additional details see Note 2 to the Company’s consolidated financial statements.

During the fourth quarter of 2015, the Partnership purchasedexecuted PSA’s to acquire two contiguous tracts of land in Panama City, Florida, for approximately $2.9 million toOmaha, Nebraska. If these tracts of land are successfully acquired, they will be classified as “Land held for investment and development.

In AugustActivity in 2015

During 2015, the Partnership sold Glynn Place, antwo of its MF Property, for approximately $5.5 million and realized a gainProperties to unrelated third parties. The table below summarizes information related to the sales. The gains on sale, net of approximately $1.2 million, which wasincome taxes, are considered Tier 2 income.income (See Note 3). The Partnership determined the sales did not meet the criteria for discontinued operations.

In May 2015, the Partnership sold The Colonial property for approximately $10.7 million and realized a gain of approximately $3.4 million, which was considered Tier 2 income.

Property Name

 

Month Sold

 

Property Location

 

Units

(Unaudited)

 

Gross Proceeds

 

 

Gain on Sale before Income Taxes

 

The Colonial

 

May

 

Omaha, NE

 

258

 

$

10,696,510

 

 

$

3,427,044

 

Glynn Place

 

August

 

Brunswick, GA

 

128

 

 

5,500,000

 

 

 

1,172,065

 


Net income, exclusive of the gains on sale, related to the Arboretum, Woodland Park, Glynn Place and the Colonialsales of MF Properties for the years ended December 31, 2017, 2016 2015 and 20142015 are as follows:

 

 

 

For the Years Ended December 31,

 

 

 

 

2016

 

 

2015

 

 

2014

 

 

Net income (loss)

 

$

222,679

 

 

$

331,391

 

 

$

(370,231

)

 


Suites on Paseo Acquisition

In September 2015, the owner of the Suites on Paseo property and the Partnership mutually agreed to exchange the deed for the Suites on Paseo property, a California property, in exchange for approximately $41.0 million Series A and B mortgage revenue bonds plus accrued interest. The mortgage revenue bonds were subsequently collapsed (see Note 6).  The initial value of approximately $43.4 million represented the fair market value of the property plus the Suites on Paseo contributed approximately $200,000 in other current assets which resulted in a total of approximately $43.6 million.  

A condensed balance sheet at the date of acquisition for the Suites on Paseo acquisition is as follows:

 

 

Suites on Paseo 9/1/2015 (Date of Acquisition)

 

Cash

 

$

514,094

 

Restricted cash

 

 

187,715

 

In-place lease assets

 

 

1,227,770

 

Real estate assets

 

 

41,374,397

 

Other assets

 

 

259,633

 

Total assets

 

$

43,563,609

 

 

 

 

 

 

Accounts payable, accrued expenses and other

 

$

493,868

 

Net assets

 

 

43,069,741

 

Total liabilities and net assets

 

$

43,563,609

 

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net loss

 

$

(290,494

)

 

$

(457,201

)

 

$

(433,784

)

 

Jade Park Acquisition

 

InOn September 30, 2016, the Partnership closed onpurchased the purchase of Jade Park an MF Property. The propertyProperty for approximately $10.0 million. Jade Park is contiguous to the Lake Forest property, for which the Partnership owns a mortgage revenue bond investment of the Partnership.bond. The land improvements and buildings and improvements are being depreciated on a straight-line basis over a weighted average useful life of 22.7 years. The in-place lease assets are being amortized over a useful life of 6 months. The Partnership incurred approximately $135,000 of acquisition costs related to the purchase.

A condensed balance sheet at the date of acquisition for the Jade Park acquisition is as follows:

 

 

Jade Park 9/30/2016 (Date of Acquisition)

 

 

Jade Park 9/30/2016 (Date of Acquisition)

 

Land and improvements

 

$

2,292,035

 

Land

 

$

2,292,035

 

Buildings and improvements

 

 

7,244,534

 

 

 

7,244,534

 

In-place lease assets (included in other assets)

 

 

463,431

 

 

 

463,431

 

Other assets

 

 

18,126

 

 

 

18,126

 

Total assets

 

$

10,018,126

 

 

$

10,018,126

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other

 

$

135,326

 

 

$

135,326

 

Net assets

 

 

9,882,800

 

 

 

9,882,800

 

Total liabilities and net assets

 

$

10,018,126

 

 

$

10,018,126

 

 

Pro Forma Consolidated Results of Operations

 

The table below shows the unaudited pro forma condensed consolidated results of operations of the Partnership as if the Suites on Paseo and Jade Park had been acquired at January 1, 2015:

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Pro forma revenues

 

$

60,008,686

 

 

$

64,162,327

 

 

$

60,008,686

 

 

$

64,162,327

 

Pro forma net income

 

 

24,663,645

 

 

 

23,075,438

 

 

$

24,663,645

 

 

$

23,075,438

 

Pro forma net income allocated to Unitholders

 

 

21,047,854

 

 

 

16,917,875

 

 

$

21,047,854

 

 

$

16,917,875

 

Pro forma Unitholder's interest in net income per unit (basic and diluted)

 

$

0.35

 

 

$

0.28

 

Pro forma Unitholder's interest in net income per Unit (basic and diluted)

 

$

0.35

 

 

$

0.28

 

 


For the year ended December 31, 2015, the Suites on Paseo added approximately $1.8 million in total revenue and approximately $1.0 million in net loss to the Partnership since the bond exchange on September 1, 2015.

 

For the year ended December 31, 2016, Jade Park added approximately $0.4 million in total revenue and approximately $0.4 million in net loss to the Partnership since the acquisition on September 30, 2016.

 

 

10. Investment in Unconsolidated Entities

In 2016, ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, closed on threehas equity commitments and reported equity contributions as Investmentinvestment in unconsolidated entities on the consolidated balance sheet.sheets. The investments represent the Partnership’s maximum exposure to loss. ATAX Vantage Holdings, LLC is the only limited equity investor in these limited liability companies.the unconsolidated entities. An affiliate of the unconsolidated entities provides a guarantee forguarantees ATAX Vantage Holdings, LLC’s return on its investments duringthrough the second anniversary of construction period.completion. The return on these investments earned by the Partnership is reported as investment income.income on the consolidated statements of operations.


The following table provides the details of the investments in unconsolidated entities at December 31, 2016:2017 and 2016 and remaining equity commitment amounts at December 31, 2017:

 

Property Name

 

Month

Commitment

Executed

 

Location

 

Units

 

Carrying Value

 

 

Maximum

Remaining

Equity Commitment

 

 

Location

 

Units

(Unaudited)

 

Month

Commitment

Executed

 

Construction Completion Date

 

Carrying Value at December 31, 2017

 

 

Carrying Value at December 31, 2016

 

 

Maximum

Remaining

Equity Commitment at December 31, 2017

 

Vantage at Corpus Christi

 

March 2016

 

Corpus Christi, TX

 

288

 

$

8,447,343

 

 

$

1,550,000

 

 

Corpus Christi, TX

 

288

 

March 2016

 

August 2017

 

$

9,178,139

 

 

$

8,447,343

 

 

$

1,550,000

 

Vantage at Boerne

 

Boerne, TX

 

288

 

August 2016

 

December 2017

 

 

8,272,810

 

 

 

5,057,802

 

 

 

1,475,936

 

Vantage at Waco

 

August 2016

 

Waco, TX

 

288

 

 

5,964,861

 

 

 

3,572,133

 

 

Waco, TX

 

288

 

August 2016

 

N/A

 

 

8,748,091

 

 

 

5,964,861

 

 

 

1,592,039

 

Vantage at Boerne

 

August 2016

 

Boerne, TX

 

288

 

 

5,057,802

 

 

 

3,936,115

 

Vantage at Panama City Beach

 

Panama City Beach, FL

 

288

 

March 2017

 

N/A

 

 

10,349,416

 

 

 

-

 

 

 

1,996,500

 

Vantage at Powdersville

 

Powdersville, SC

 

288

 

November 2017

 

N/A

 

 

3,060,471

 

 

 

-

 

 

 

7,702,305

 

 

 

 

 

 

 

 

$

19,470,006

 

 

$

9,058,248

 

 

 

 

 

 

 

 

 

 

$

39,608,927

 

 

$

19,470,006

 

 

$

14,316,780

 

 

 

11. Property Loan, Net of Loan Loss Allowances

The Partnership hadfollowing table summarizes the following Property Loans, NetPartnership’s property loans, net of Loan Loss Allowances,loan loss allowances, at December 31, 20162017 and 2015:2016:

 

 

 

December 31, 2016

 

 

December 31, 2015

 

Property loans receivable

 

$

36,862,148

 

 

$

29,874,523

 

Less: Loan loss allowance

 

 

(7,098,814

)

 

 

(7,098,814

)

Total property loans receivable

 

$

29,763,334

 

 

$

22,775,709

 

 

 

December 31, 2017

 

 

 

Outstanding

Balance

 

 

Loan Loss

Allowances

 

 

Property Loan Principal, net of allowance

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

-

 

 

$

191,264

 

Avistar (February 2013 portfolio)

 

 

201,972

 

 

 

-

 

 

 

201,972

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

-

 

 

 

251,622

 

Cross Creek

 

 

11,101,887

 

 

 

(7,393,814

)

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

-

 

 

 

850,000

 

Lake Forest

 

 

4,995,884

 

 

 

-

 

 

 

4,995,884

 

Ohio Properties

 

 

2,390,446

 

 

 

-

 

 

 

2,390,446

 

Vantage at Brooks, LLC

 

 

8,417,635

 

 

 

-

 

 

 

8,417,635

 

Vantage at New Braunfels, LLC

 

 

7,406,978

 

 

 

-

 

 

 

7,406,978

 

Winston Group, Inc

 

 

1,100,000

 

 

 

-

 

 

 

1,100,000

 

Total

 

$

36,907,688

 

 

$

(7,393,814

)

 

$

29,513,874

 

 

 

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 New 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

 

Funds were received related to Ashley Square property loans when the associated property was sold in November 2017. The Partnership received approximately $1.1 million of principal and approximately $1.7 million of interest on the property loans. The interest received was not previously recognized as the property loans were on nonaccrual status. The interest realized is reported within other interest income on the consolidated statements of operations for the year ended December 31, 2017. Upon sale, the


remaining unpaid principal and interest on the Ashley Square property loans transferred to Cross Creek due to cross-collateralization provisions within the property loan documents. All such balances transferred are fully reserved as of December 31, 2017.

 

During the year ended December 31, 2016, the Partnership advanced net funds to Cross Creek, Foundation for Affordable Housing (“FAH”) and the Winston Group, Inc., of approximately $83,500, $2,500, and $2.5 million, respectively.  In addition, the Partnership advanced funds to Vantage at Brooks, LLC and Vantage at Braunfels, LLC (collectively, the “Vantage Properties”) $3.7 million and $2.1 million, respectively.  In December 2016, the FAH property loan and all accrued interest were paid off in full. In addition, the Partnership received and recognized approximately $1.4 million of contingent interest from the net cash proceeds on the sale of the property underlying the FAH property loan. The contingent interest income is considered Tier 2 income (Note 3).

During the yearyears ended December 31, 2015, the Partnership advanced additional funds to Cross Creek of approximately $96,0002017 and received approximately $145,000 of principal for the FAH property loan. In June 2015, the Partnership executed a loan agreement with Silver Moon Lodge LLLP, owner of the Silver Moon Lodge Apartments, for approximately $2.8 million which was repaid from the limited partner capital contributed to Silver Moon Lodge LLLP in December 2015. In April 2015, the Partnership advanced approximately $567,000 to the Suites on Paseo for operations.  This amount was included as an investment in the Suites on Paseo in September 2015, which was eliminated upon consolidation. In addition, the Partnership entered in commitments to loan funds to the Vantage Properties in the fourth quarter of 2015.

During the year ended December 31, 2016, the Partnership placed interest to be earned on the Ashley Square, Cross Creek, and the Lake Forest operating property loans receivable onwas in nonaccrual status.  The discounted cash flow method used by management to establish the net realizable value of these property loans determined the collection of the interest earned since inception was not probable.  On December 31, 2015, the Partnership reported an interest allowance equal to the accrued interest on Ashley Square, Cross Creek, and the Lake Forest operating property loans.  In addition, the Partnership deferred less than 100% of the interest earned on the property loans on the Ohio Properties as, in management’s opinion, the remainder was considered collectible at December 31, 2015.


The following represents the net taxable property loans outstanding at December 31, 2016 and 2015:

 

 

December 31, 2016

 

 

 

Outstanding

Balance

 

 

Accrued Interest

 

 

Loan Loss

Allowances

 

 

Interest

Allowance

 

 

Net Taxable

Property Loans

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

54,742

 

 

$

-

 

 

$

-

 

 

$

246,006

 

Ashley Square

 

 

5,078,342

 

 

 

-

 

 

 

(3,596,342

)

 

 

-

 

 

 

1,482,000

 

Avistar (February 2013 portfolio)

 

 

274,496

 

 

 

90,491

 

 

 

-

 

 

 

-

 

 

 

364,987

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

82,951

 

 

 

-

 

 

 

-

 

 

 

334,573

 

Cross Creek

 

 

7,155,545

 

 

 

-

 

 

 

(3,447,472

)

 

 

-

 

 

 

3,708,073

 

Greens Property

 

 

850,000

 

 

 

467,511

 

 

 

-

 

 

 

-

 

 

 

1,317,511

 

Lake Forest

 

 

4,623,704

 

 

 

-

 

 

 

(55,000

)

 

 

-

 

 

 

4,568,704

 

Ohio Properties

 

 

2,390,446

 

 

 

1,021,723

 

 

 

-

 

 

 

-

 

 

 

3,412,169

 

Vantage at Brooks, LLC

 

 

7,199,424

 

 

 

743,928

 

 

 

-

 

 

 

-

 

 

 

7,943,352

 

Vantage at Braunfels, LLC

 

 

6,347,305

 

 

 

703,416

 

 

 

-

 

 

 

-

 

 

 

7,050,721

 

Winston Group, Inc

 

 

2,500,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,500,000

 

Total

 

$

36,862,148

 

 

$

3,164,762

 

 

$

(7,098,814

)

 

$

-

 

 

$

32,928,096

 

 

 

December 31, 2015

 

 

 

Outstanding

Balance

 

 

Accrued Interest

 

 

Loan Loss

Allowances

 

 

Interest

Allowance

 

 

Net Taxable

Property Loans

 

Arbors at Hickory Ridge

 

$

191,264

 

 

$

39,950

 

 

$

-

 

 

$

-

 

 

$

231,214

 

Ashley Square

 

 

5,078,342

 

 

 

2,864,130

 

 

 

(3,596,342

)

 

 

(2,864,130

)

 

 

1,482,000

 

Avistar (February 2013 portfolio)

 

 

274,496

 

 

 

51,386

 

 

 

-

 

 

 

-

 

 

 

325,882

 

Avistar (June 2013 portfolio)

 

 

251,622

 

 

 

47,104

 

 

 

-

 

 

 

-

 

 

 

298,726

 

Cross Creek

 

 

7,072,087

 

 

 

2,352,851

 

 

 

(3,447,472

)

 

 

(2,352,852

)

 

 

3,624,614

 

Foundation for Affordable Housing

 

 

1,415,590

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,415,590

 

Greens Property

 

 

850,000

 

 

 

343,600

 

 

 

-

 

 

 

-

 

 

 

1,193,600

 

Lake Forest

 

 

4,623,704

 

 

 

3,080,446

 

 

 

(55,000

)

 

 

(3,059,610

)

 

 

4,589,540

 

Ohio Properties

 

 

2,390,448

 

 

 

1,235,017

 

 

 

-

 

 

 

(441,795

)

 

 

3,183,670

 

Vantage at Brooks LLC

 

 

3,454,664

 

 

 

78,440

 

 

 

-

 

 

 

-

 

 

 

3,533,104

 

Vantage at Braunfels LLC

 

 

4,272,306

 

 

 

92,481

 

 

 

-

 

 

 

-

 

 

 

4,364,787

 

Total

 

$

29,874,523

 

 

$

10,185,405

 

 

$

(7,098,814

)

 

$

(8,718,387

)

 

$

24,242,727

 

There was no provision for loan loss recorded during the years ended December 31, 2016 and 2015. The Partnership recorded a provision for loan loss of $75,000 for the year ended December 31, 2014 related to the Cross Creek property loan.2017.

 

The following table summarizes the changes in the Partnership’s loan loss reserves for the years ended December 31, 2017, 2016 2015 and 2014:2015:

 

 

For the Year Ended December 31,

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

2014

 

 

2017

 

 

2016

 

 

2015

 

Balance, beginning of year

 

$

7,098,814

 

 

$

7,098,814

 

 

$

7,023,814

 

 

$

7,098,814

 

 

$

7,098,814

 

 

$

7,098,814

 

Provision for loan loss(1)

 

 

-

 

 

 

-

 

 

 

75,000

 

 

 

295,000

 

 

-

 

 

-

 

Balance, end of year

 

$

7,098,814

 

 

$

7,098,814

 

 

$

7,098,814

 

 

$

7,393,814

 

 

$

7,098,814

 

 

$

7,098,814

 

 

(1) See table below for a summary of terms for the individual Term A/B Trust securitizations. Activity for the year ended December 31, 2017 consists of the reversal of $55,000 allowance for loan loss related to Lake Forest and the increase of $350,000 allowance for loan loss related to Ashley Square. The net provision for loan loss for the year ended December 31, 2017 is recorded as a reduction to other interest income on the consolidated statements of operations.

 

 

12. Income Tax Provision

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by our taxable subsidiary, Thethe Greens Hold Co, which owns all the MF Properties except for the Suites on Paseo and Jade Park. For the year ended December 31, 2015, the Greens Hold Co reported  no income tax expense or benefit due to current net operating losses or the utilization of net operating loss carryforwards. The following table summarizes income tax expense for the years ended December 31, 2017, 2016 and 2015:

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Current income tax expense

 

$

6,419,146

 

 

$

4,593,000

 

 

$

-

 

Deferred income tax expense (benefit)

 

 

(400,000

)

 

 

366,000

 

 

 

-

 

Total income tax expense

 

$

6,019,146

 

 

$

4,959,000

 

 

$

-

 

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 deferred tax assets and liabilities are valued based on enacted tax rates, including consideration of the Jobs and Tax Cuts Act of 2017. This legislation reduced the maximum corporate income tax rate from 35% to 21% and resulted in a net deferred income tax benefit to the Partnership of approximately $15,000 for the year ended December 31, 2017. The net operating loss carryover reported on the Greens Hold Co 2015 tax return will bewas utilized in its entirety in 2016 due to the gain on sale of the Arboretum.  Accordingly, theall valuation allowance ofallowances, totaling $405,000, at December 31, 2015 waswere reversed and a tax provision has been recorded during the year ended December 31, 2016.


There was no income tax expense or benefit for

For the years ended December 31, 20152017, income taxes computed by applying the U.S. Federal statutory rates to income from continuing operations before income taxes for the Greens Hold Co differ from the provision for income taxes due primarily to state income taxes (net of the effect on federal income tax) and 2014. The following table summarizes ourthe impact of tax rate changes on deferred income tax expense forasset and liabilities. For the years ended December 31, 2016, 2015 and 2014:

 

 

For the Years Ended December 31,

 

 

 

2016

 

Current income tax expense:

 

 

 

 

Current income tax expense

 

$

-

 

Current income tax expense on dispositions

 

 

4,593,000

 

Deferred income tax expense:

 

 

 

 

Deferred income tax expense (benefit)

 

 

366,000

 

Total income tax expense

 

$

4,959,000

 

For the year ended December 31, 2016, income taxes computed by applying the U.S. Federal statutory rates to income from continuing operations before income taxes for the Greens Holdco are reconciled toHold Co differ from the provision for income taxes set forthdue primarily to state income taxes (net of the effect on federal income tax) and the impact of changes in the consolidated statements of operations as follows:NOL valuation allowances.

 

 

 

As of December 31,

 

 

 

2016

 

Expected tax expense at U.S. Federal statutory rate of 35%

 

$

4,684,431

 

State income taxes, net of federal income tax effect

 

 

733,038

 

Impact of changes in valuation allowances

 

 

(535,641

)

Other

 

 

77,172

 

Provision for income taxes

 

$

4,959,000

 


For the years ended December 31, 2015 and 2014, the Greens Hold Co reported no income tax expense or benefit due to current net operating losses or the utilization of net operating loss carryforwards.

The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

 

 

December 31, 2016

 

Deferred tax assets (liabilities):

 

 

 

 

Depreciation and amortization

 

$

(322,178

)

Prepaid expenses

 

 

(50,935

)

Accruals and reserves

 

 

7,113

 

Gross deferred tax liabilities

 

 

(366,000

)

Valuation allowance

 

 

-

 

Net deferred tax liabilities

 

$

(366,000

)

The Partnership accrues interest and penalties associated with uncertain tax positions as part of income tax expense. There was no accrued interest or penalties at December 31, 20162017 and 2015.2016.

The Company files U.S. Federal and state tax returns. The Partnership’s returns for years 20132014 through 20152016 remain subject to examination by the Internal Revenue Service.

 

 

13. Other Assets

The Partnership had the following Other Assets at December 31, 20162017 and 2015:2016:

 

 

December 31, 2016

 

 

December 31, 2015

 

 

December 31, 2017

 

 

December 31, 2016

 

Deferred financing costs - net

 

$

456,890

 

 

$

487,023

 

 

$

383,133

 

 

$

456,890

 

Fair value of derivative instruments (Note 19)

 

 

383,604

 

 

 

344,177

 

 

 

597,221

 

 

 

383,604

 

Taxable bonds at fair market value

 

 

4,084,599

 

 

 

4,824,060

 

Taxable mortgage revenue bonds at fair market value

 

 

2,422,459

 

 

 

4,084,599

 

Bond purchase commitments - fair value (Note 20)

 

 

2,399,449

 

 

 

5,634,360

 

 

 

3,002,540

 

 

 

2,399,449

 

Other assets

 

 

1,470,650

 

 

 

1,655,013

 

 

 

942,949

 

 

 

1,470,650

 

Total other assets

 

$

8,795,192

 

 

$

12,944,633

 

 

$

7,348,302

 

 

$

8,795,192

 

See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the derivative instruments, taxable bondsMRBs and bond purchase commitments. Unrealized gains or losses on these assets are recorded in the 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 assets.

The Partnership received approximately $500,000 uponfollowing table includes the redemptiondetails of the Silver Moon Series B taxable bondMRBs redeemed during the year ended December 31, 2016, which2017. The taxable MRBs were redeemed at prices that approximated the Partnership’s carrying value plus accrued interest. The Partnership also realized additional interest related to redemption of the Vantage at Harlingen Series D and Avistar at Chase Hill Series C MRBs of approximately $169,000 and $35,000, respectively. The additional interest income is reported within other interest income on the consolidated statements of operations.

Property Name

 

Redemption Date

 

Location

 

Units

(Unaudited)

 

 

Original Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at Date of Redemption

 

Vantage at Harlingen - Series D

 

October

 

San Antonio, TX

 

 

288

 

 

10/1/2053

 

 

9.00

%

 

$

1,278,117

 

Avistar at Chase Hill - Series C

 

November

 

San Antonio, TX

 

 

232

 

 

4/1/2050

 

 

9.00

%

 

 

232,145

 

The following table summarizesincludes the termsdetails of the taxable bond redeemed:

Property Name

 

2016 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

 

The Partnership purchased the Silver Moon Series B taxable bondMRB redeemed during the year ended December 31, 2015.2016. The following table summarizestaxable MRB was redeemed at a price that approximated the terms of the taxable bond acquired:Partnership’s carrying value plus accrued interest. 

 

Property Name

 

2015 Purchase Date

 

Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at Date of Purchase

 

 

Redemption Date

 

Location

 

Units

(Unaudited)

 

Original Maturity Date

 

Base Interest Rate

 

 

Principal Outstanding at Date of Redemption

 

Silver Moon - Series B

 

June

 

Albuquerque, NM

 

151

 

8/1/2055

 

 

12.00

%

 

$

500,000

 

 

August

 

Albuquerque, NM

 

151

 

8/1/2055

 

 

12.00

%

 

$

499,461

 

 

 

14. Discontinued Operations

The Partnership sold its variable interests in Bent Tree and Fairmont Oaks, the Consolidated VIEs, in the fourth quarter of 2015. The sale of the Consolidated VIEs meetsmet the criteria for discontinued operations presentation at the time they were disposed and have been classified as such in the Company’sPartnership’s consolidated financial statements for all periods presented. The gains and results of operations of the Consolidated VIEs are reported as part of the discontinued operations in net income for all periods presented. There are no assets or liabilities related to discontinued operations at December 31, 20162017 and 2015.2016.

 


The following presents the revenues, expenses and income from discontinued operations for the yearsyear ended December 31, 2015 and 2014:2015:

 

 

2015

 

 

2014

 

 

December 31, 2015

 

Rental revenues

 

$

2,952,383

 

 

$

3,180,680

 

 

$

2,952,383

 

Expenses

 

 

2,394,074

 

 

 

3,127,907

 

 

 

2,394,074

 

Net income from discontinued operations

 

 

558,309

 

 

 

52,773

 

 

 

558,309

 

Gain on sale of discontinued operations

 

 

3,163,088

 

 

 

-

 

 

 

3,163,088

 

Net income from discontinued operations

 

$

3,721,397

 

 

$

52,773

 

 

$

3,721,397

 

 

Depreciation and amortization expense related to discontinued operations was approximately $301,000 and $940,000 for the yearsyear ended December 31, 2015 and 2014, respectively.2015. Amortization of deferred financing costs related to discontinued operations was approximately $17,000 and $19,000 for the yearsyear ended December 31, 2015 and 2014, respectively.2015. Capital expenditures related to discontinued operations were approximately $201,000 and $360,000 for the yearsyear ended December 31, 2015 and 2014, respectively.2015.

 

 

 

15. Unsecured Lines of Credit

The following tables summarize the Partnership’s unsecured lines of credit (“LOC”) at December 31, 20162017 and 2015:2016:

 

Unsecured Lines of Credit

 

Outstanding on December 31, 2016

 

 

Total Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

 

Outstanding on December 31, 2017

 

 

Total Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust

 

$

40,000,000

 

 

$

40,000,000

 

 

May 2018

 

Variable

 

Monthly

 

 

3.13

%

 

$

50,000,000

 

 

$

50,000,000

 

 

May 2019

 

Variable (1)

 

Monthly

 

 

4.38

%

Bankers Trust operating

 

 

-

 

 

 

7,500,000

 

 

May 2018

 

Variable

 

Monthly

 

 

3.88

%

 

 

-

 

 

 

10,000,000

 

 

May 2019

 

Variable (1)

 

Monthly

 

 

4.62

%

Total unsecured lines of credit

 

$

40,000,000

 

 

$

47,500,000

 

 

 

 

 

 

 

 

 

 

 

 

$

50,000,000

 

 

$

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

 

 

 

 

 

 

 

 

 

 

 


Unsecured Lines of Credit

 

Outstanding on December 31, 2015

 

 

Total Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust

 

$

12,497,000

 

 

$

37,500,000

 

 

May 2017

 

Variable

 

Monthly

 

 

2.90

%

Bankers Trust operating

 

 

-

 

 

 

5,000,000

 

 

March 2016

 

Variable

 

Monthly

 

 

3.50

%

Five Points Bank operating

 

 

5,000,000

 

 

 

5,000,000

 

 

March 2016

 

Variable

 

Monthly

 

 

3.40

%

Total unsecured lines of credit

 

$

17,497,000

 

 

$

47,500,000

 

 

 

 

 

 

 

 

 

 

 

(2) The variable rate is indexed to LIBOR plus an applicable margin.

 

The Partnership has entered into an unsecured Credit Agreement (the “Credit Agreement”) for a Line of Credit (“non-operating LOC”) of up to $50.0 million with Bankers Trust, the Partnership’s sole lead arranger and administrative agent.  The Credit Agreement originated in March 2015 and was subsequently amended. In April 2017, the available commitment was increased $10.0 million to a total commitment of $50.0 million. The latest amendment in November 2016 extended the maturity from May 2017 to May 2018. Thenon-operating LOC bears interest at a variable rate equal to 2.5%3.0% plus the 30-day London Interbank Offered Rate (“LIBOR”). as of December 31, 2017. The principal amount of each acquisition advance is due on the 270th day following the advance date (the “Repayment Date”).  The Partnership may extend any Repayment Date for up to three additional 90-day periods. In order to extend the Repayment Date, the Partnership must make principal payments equal to 5% of the original advance for the first extension, 10% for the second extension, and 20% for the third extension. The Repayment Date may not be extended beyond the stated maturity of the non-operating LOC. The Repayment DateDates for the balance outstanding at December 31, 2016,2017, exclusive of available extensions, is inrange from June 2018 to September 2017.2018. The proceeds of the unsecurednon-operating LOC will be used by the Partnership for the purchase of multifamily real estate, taxable or mortgage revenue bonds, public housing capital fund trustMRBs, MRBs, PHC certificates, or mortgage backedmortgage-backed securities.  The Partnership intends to repay each advance either through alternative long-term debt or equity financing. The unsecurednon-operating LOC contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed a specified percentage of the market value of the Partnership’s assets, as defined in the Credit Agreement. The Partnership is in compliance with all covenants at December 31, 2016.2017.

During 20152017 and 2016, the Partnership had an unsecured operating LOC with Bankers Trust for up to $5.0 million.with a maturity date in May 2019. In March 2016, the operating LOC was amended to raise theavailable commitment to $7.5 million and extend the maturity to March 2017. In November 2016,on the operating LOC was again amendedincreased from $5.0 million to extend$7.5 million. In May 2017, the maturity to March 2018. The unsecuredavailable commitment on the operating LOC borewas further increased to $10 million. The operating LOC bears interest at a variable rate equal to 3.25% plus the 30-day LIBOR. The Partnership is required to make prepayments of the principal to reduce outstanding principal balance on the operating line to zero for fifteen consecutive days during each calendar quarter.  The Partnership fulfilled this requirement during the three months ended December 31, 2016.  

During 20152017 and early 2016, the Partnership had an unsecured operating LOC with Five Points Bank for up to $5.0 million. The unsecured LOC matured in March 2016 and all outstanding principal balances and accrued interest were paid.first quarter of 2018.  

 

 


16. Secured Line of Credit

In December 2016, the Partnership entered into a secured Credit Agreement for a secured Line of Credit (“secured LOC”) of up to $20.0 million with Bankers Trust. The secured LOC bears interest at a variable interest rate equal to 2.5% plus the 30-day LIBOR.  

The following table summarizes the secured LOC, net of deferred financing costs, at December 31, 2016:

 

Secured Lines of Credit

 

Outstanding on December 31, 2016, net

 

 

Total Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Unsecured Lines of Credit

 

Outstanding on December 31, 2016, net

 

 

Total Commitment

 

 

Maturity

 

Variable /

Fixed

 

Reset

Frequency

 

Period End

Rate

 

Bankers Trust

 

$

19,816,667

 

 

$

20,000,000

 

 

March 2017

 

Variable

 

Monthly

 

 

3.13

%

 

$

19,816,667

 

 

$

20,000,000

 

 

March 2017

 

Variable (1)

 

Monthly

 

 

3.13

%

(1) The variable rate is indexed to LIBOR plus 2.5%.

 

The secured LOC bears interest at a variable interest rate equal to 2.5% plusPartnership used the 30-day LIBOR. The proceeds offrom the secured LOC will be used byto purchase MRBs in December 2016, to which the Partnership for the purchase of mortgage revenue bonds.lender retained a security interest. The lender has a security interest in the mortgage revenue bonds purchased using the proceeds of the secured LOC. Furthermore, the lender hasfurther had a mortgage lien on the Northern View MF Property as additional collateral. The Partnership is required to repay the outstanding principal on the secured LOC whenwas paid in full in February 2017 and the mortgage revenue bonds that secure the LOC are collateralized into a long-term debt financing structure. Repayments on advances are not available for subsequent borrowing. The related Credit Agreement also contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed a specified percentage of the market value of assets of the Partnership, as definedmatured in the Credit Agreement. The Partnership is in compliance with all covenants at December 31, 2016.March 2017.

 

 


17. Debt Financing

The following table provides the details related to the total Debt Financing, net of deferred financing costs, at December 31, 20162017 and 2015:

 

 

Outstanding Debt

Financings on

December 31, 2016, net

 

 

Restricted

Cash

 

 

Years

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

 

Jul 2017 - Jul 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

171,778,950

 

 

 

1,373,695

 

 

2016

 

(1)

 

(1)

 

(1)

 

 

(1)

 

 

(1)

 

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 (2)

 

 

91,768,081

 

 

 

170,988

 

 

2014

 

July 2019

 

Weekly

 

 

0.75

%

 

 

1.62%

 

 

 

2.37%

 

Variable - TEBS III (2)

 

 

82,089,312

 

 

 

3,495,592

 

 

2015

 

July 2020

 

Weekly

 

 

0.75

%

 

 

1.39%

 

 

 

2.14%

 

Total Debt Financings

 

$

495,383,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See table below for a summary of terms for the individual Term A/B Trust securitizations

 

(2) Facility fees are variable

 

 

 

Outstanding Debt

Financings on

December 31,

2015, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturities

 

Reset

Frequency

 

SIFMA

Based Rates

 

 

Facility Fees

 

 

Period End

Rates

 

TOB Trusts

   Securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed - Term TOB

 

$

160,582,124

 

 

$

1,930,027

 

 

(3)

 

(3)

 

(3)

 

(3)

 

 

(3)

 

 

(3)

 

Variable - TOB

 

 

55,930,000

 

 

 

-

 

 

2012

 

April 2016 - June 2016

 

Weekly

 

0.16 - 0.68%

 

 

0.94 - 1.62%

 

 

1.1 - 2.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TEBS I

 

 

60,735,743

 

 

 

364,637

 

 

2010

 

September 2017

 

Weekly

 

 

0.04%

 

 

 

1.91%

 

 

 

1.95%

 

Variable - TEBS II (4)

 

 

92,280,069

 

 

 

163,418

 

 

2014

 

July 2019

 

Weekly

 

 

0.02%

 

 

 

1.42%

 

 

 

1.44%

 

Variable - TEBS III (4)

 

 

81,968,780

 

 

 

4,843,625

 

 

2015

 

July 2020

 

Weekly

 

 

0.02%

 

 

 

1.26%

 

 

 

1.28%

 

Total Debt Financings

 

$

451,496,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) See table below for a summary of terms for the individual Term TOB Trust securitizations

 

(4) Facility fees are variable

 

The fixed Term TOB Financings at December 31, 2016 are secured by the mortgage revenue bonds for Live 929 Apartments and Pro Nova 2014-1. The variable TOB Financings at December 31, 2016 are secured by three PHC Certificates (See Note 7).


The following table summarizes the individual Term A/B Trust securitizations at December 31, 2016:

 

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing at

December 31, 2016, net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Willow Run

 

$

11,564,852

 

 

$

-

 

 

2016

 

September 2026

 

 

3.64

%

Columbia Gardens

 

 

11,565,068

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Little York

 

 

11,301,031

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Williamscrest

 

 

17,504,186

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Gulfgate

 

 

16,133,987

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Companion at Thornhill Apartment

 

 

9,666,656

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Seasons at Simi Valley Apartments

 

 

3,678,770

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Sycamore Walk

 

 

3,050,786

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Decatur-Angle Apartments

 

 

21,387,126

 

 

 

755,489

 

 

2016

 

September 2026

 

 

3.64

%

Berrendo Square Apartments

 

 

5,409,361

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Laurel Crossings Apartments

 

 

6,378,482

 

 

 

-

 

 

2016

 

September 2026

 

 

3.64

%

Bruton Apartments

 

 

15,258,925

 

 

 

618,206

 

 

2016

 

September 2026

 

 

3.64

%

15 West Apartments

 

 

8,366,804

 

 

 

-

 

 

2016

 

December 2026

 

 

3.64

%

Oaks at Georgetown A

 

 

11,709,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace A

 

 

6,549,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Oaks at Georgetown B

 

 

5,229,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace B

 

 

7,024,479

 

 

 

-

 

 

2016

 

March 2017

 

 

4.56

%

Total A/B Trust

   Financing\ Weighted

   Average Period End Rate

 

$

171,778,950

 

 

 

 

 

 

 

 

 

 

 

3.80

%

 

 

Outstanding Debt

Financings on

December 31, 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

 

$

46,787,036

 

 

$

-

 

 

2014

 

October 2019

 

N/A

 

N/A

 

 

N/A

 

 

4.01% - 4.39%

 

Fixed - Term A/B

 

 

279,533,565

 

 

 

-

 

 

2016 - 2017

 

June 2018 - November 2027

 

N/A

 

N/A

 

 

N/A

 

 

3.64% - 4.52%

 

Variable - TOB

 

 

38,130,000

 

 

 

850,327

 

 

2012

 

May 2018

 

Weekly

 

2.24 - 2.29%

 

 

1.67%

 

 

3.91 - 3.96%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEBS Financings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable - TEBS I

 

 

55,468,000

 

 

 

372,222

 

 

2010

 

September 2020

 

Weekly

 

1.79%

 

 

1.85%

 

 

3.64%

 

Variable - TEBS II (1)

 

 

81,003,688

 

 

 

176,685

 

 

2014

 

July 2019

 

Weekly

 

1.77%

 

 

1.39%

 

 

3.16%

 

Variable - TEBS III (1)

 

 

57,406,058

 

 

 

57,364

 

 

2015

 

July 2020

 

Weekly

 

1.77%

 

 

1.16%

 

 

2.93%

 

Total Debt Financings

 

$

558,328,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The variable TOB Financings at December 31, 2015 are secured by three PHC Certificates (See Note 7) and three MBS Securities (See Note 8). The following table summarizes the individual fixed rate TOB Trust securitizations at December 31, 2015:

(1)

Facility fees have a variable component.

 

Term TOB Trusts Securitization

 

Outstanding Term TOB

Trust Financing at

December 31, 2015,  net

 

 

Restricted

Cash

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Decatur Angle

 

$

22,847,450

 

 

$

1,078,823

 

 

2014

 

October 2016

 

 

4.26

%

Live 929

 

 

37,935,981

 

 

 

-

 

 

2014

 

July 2019

 

 

4.39

%

Bruton Apartments

 

 

17,246,899

 

 

 

851,204

 

 

2014

 

July 2017

 

 

4.51

%

Pro Nova 2014-1

 

 

9,006,899

 

 

 

-

 

 

2014

 

July 2017

 

 

4.01

%

Pro Nova 2014-2

 

 

8,371,899

 

 

 

-

 

 

2014

 

July 2017

 

 

4.01

%

Concord at Gulfgate

 

 

14,936,685

 

 

 

-

 

 

2015

 

February 2018

 

 

2.76

%

Concord at Little York

 

 

11,231,685

 

 

 

-

 

 

2015

 

February 2018

 

 

2.76

%

Concord at Williamcrest

 

 

15,606,685

 

 

 

-

 

 

2015

 

February 2018

 

 

2.76

%

Columbia Gardens

 

 

11,699,209

 

 

 

-

 

 

2015

 

December 2017

 

 

2.76

%

Willow Run

 

 

11,698,732

 

 

 

-

 

 

2015

 

December 2017

 

 

2.76

%

Total TOB Trust

   Financing\Weighted

   Average Period End Rate

 

$

160,582,124

 

 

 

 

 

 

 

 

 

 

 

3.68

%

 

 

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

 

 

171,778,950

 

 

 

1,373,695

 

 

2016

 

March 2017 - December 2026

 

N/A

 

N/A

 

 

N/A

 

 

3.64% - 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 have a variable component.


Tender Option Bond (“TOB”), Term TOB and Term A/B Trust Financings

 

The Partnership executed a Master Trust Agreement with DB which allows the Partnership to execute multiple TOB, Term TOB and Term A/B Trust (collectively, “Trusts”) structures upon the approval and agreement of terms by DB. Under each TOB Trust structure, issued through the Master Trust Agreement, the TOB trustee issues SPEARS and LIFERS whichthat represent beneficial interests in the securitized asset held by the TOB Trusts. Under each Term TOB and Term A/B Trust structure, the trustee issues Class A and Class B Certificates that represent beneficial interests in the securitized asset held by the Term TOB or Term A/B Trusts. DB has purchased the SPEARS and Class A Certificates and the Partnership has retained the LIFERS and Class B Certificates of each TOB Trust. Pursuant to the terms of the TOB Trusts, the Partnership is required to reimburse DB for any shortfall realized on the contractual cash flows on the SPEARS. The LIFERS grant the Partnership certain rights to the securitized assets. The TOB Trusts are considered VIEs and the Partnership’s rights are such that it is the primary beneficiary and consolidates the TOB Trusts in the consolidated financial statements. At December 31, 2016, the Partnership consolidated TOB Trusts securitized by the PHC Certifications. At December 31, 2015, the Partnership consolidated TOB Trusts securitized by the PHC Certificates and MBS Securities.  


The three MBS TOB Trusts were paid in full and collapsed in January 2016.  The Partnership expects to renew each TOB financing facility maturing in 2017 for additional six-month terms as it has the discretion to renew for six month periods per the terms of the agreement with DB.

In July 2015, due to certain restrictions imposed by the Volcker Rule, the Partnership and DB restructured eight of the existing TOB Trust structures by entering into a new Master Trust Agreement and creating new Term TOB Trusts. Similar to the TOB Trusts, the Partnership transferred assets to the Term TOB Trusts and the Term TOB Trusts issued Class A and Class B Certificates, which represent beneficial interests in the securitized assets.  DB purchased the Class A Certificates and the Partnership retained the Class B Certificates. Pursuant to the terms of the Term TOB Trusts, the Partnership is required to reimburse DB for any shortfall realized on the contractual cash flows on theSPEARS or Class A Certificates. The LIFERS and Class B Certificates grant the Partnership certain rights to the securitized assets. The Term TOB Trusts are considered VIEs, and the Partnership’ rights are such that itPartnership is the primary beneficiary anddue to its rights to the underlying assets. The Partnership consolidates the Term TOB Trusts in the consolidated financial statements.  statements accordingly.

The Term TOB Trust collateralized by the Pro Nova 2014-2 mortgage revenue bond was paid in full and collapsed March 2016. The Partnership expects to renew each Term TOB financing facility maturing in 2017 for an additional term.

The Master Trust Agreement with DB has covenants with which the Partnership is required to maintain compliance.meet certain covenants under the Master Trust Agreement. At December 31, 2016,2017, the most restrictive covenant wasrequiring that cash available to distribute plus interest expense for the trailing twelve months must be at least two timestwice the trailing twelve-month interest expense. On December 31, 20162017, the Partnership was in compliance with all of these covenants. If the Partnership were to be out of compliance with any of these covenants, it would trigger a termination event of the financing facilities.

At December 31, 2015, the Partnership had two interest rate swap arrangements related to the Decatur Angle and Bruton Apartments mortgage revenue bonds that were securitized in Term

The variable TOB Trusts. The Partnership posted approximately $1.9 million of cash collateral related to the interest rate swap agreements, which is reported as restricted cash in the consolidated balance sheetFinancings at December 31, 2015. See2017 and 2016 are secured by three PHC Certificates (See Note 19 for additional information on interest rate swap7).


The following table summarizes the individual Term TOB and cap arrangements.

Term A/B Trust Financingssecuritizations at December 31, 2017:

Beginning in September 2016,

 

 

Outstanding Financing at

December 31, 2017, net

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Fixed - Term TOB Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Live 929

 

$

37,777,036

 

 

2014

 

October 2019

 

 

4.39

%

Pro Nova 1

 

 

9,010,000

 

 

2014

 

October 2019

 

 

4.01

%

Total Fixed Term TOB

   Financing\ Weighted

   Average Period End Rate

 

$

46,787,036

 

 

 

 

 

 

 

4.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Term A/B Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Willow Run

 

$

10,029,289

 

 

2016

 

September 2026

 

 

3.64

%

Columbia Gardens

 

 

10,172,857

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Little York

 

 

11,315,538

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Williamscrest

 

 

17,526,516

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Gulfgate

 

 

16,154,584

 

 

2016

 

September 2026

 

 

3.64

%

Companion at Thornhill Apartment

 

 

9,608,733

 

 

2016

 

September 2026

 

 

3.64

%

Seasons at Simi Valley Apartments

 

 

3,675,323

 

 

2016

 

September 2026

 

 

3.64

%

Sycamore Walk

 

 

3,054,841

 

 

2016

 

September 2026

 

 

3.64

%

Decatur-Angle Apartments

 

 

21,276,657

 

 

2016

 

September 2026

 

 

3.64

%

Heights at 515

 

 

5,380,814

 

 

2016

 

September 2026

 

 

3.64

%

Crossing at 1415

 

 

6,344,418

 

 

2016

 

September 2026

 

 

3.64

%

Bruton Apartments

 

 

15,199,181

 

 

2016

 

September 2026

 

 

3.64

%

15 West Apartments

 

 

8,326,731

 

 

2016

 

December 2026

 

 

3.64

%

San Vicente - Series A

 

 

3,112,976

 

 

2017

 

February 2022

 

 

3.89

%

San Vicente - Series B

 

 

1,545,930

 

 

2017

 

June 2018

 

 

3.76

%

Las Palmas - Series A

 

 

1,507,389

 

 

2017

 

February 2022

 

 

3.89

%

Las Palmas - Series B

 

 

1,494,702

 

 

2017

 

June 2018

 

 

3.76

%

The Village at Madera - Series A

 

 

2,746,364

 

 

2017

 

February 2022

 

 

3.89

%

The Village at Madera - Series B

 

 

1,455,570

 

 

2017

 

July 2018

 

 

3.76

%

Harmony Court Bakersfield - Series A

 

 

3,322,157

 

 

2017

 

February 2022

 

 

3.89

%

Summerhill - Series A

 

 

5,730,185

 

 

2017

 

February 2022

 

 

3.89

%

Summerhill - Series B

 

 

2,855,809

 

 

2017

 

July 2018

 

 

3.76

%

Courtyard - Series A

 

 

9,131,896

 

 

2017

 

February 2022

 

 

3.89

%

Courtyard - Series B

 

 

5,272,090

 

 

2017

 

July 2018

 

 

3.76

%

Seasons Lakewood - Series A

 

 

6,555,646

 

 

2017

 

February 2022

 

 

3.89

%

Seasons Lakewood - Series B

 

 

4,453,076

 

 

2017

 

August 2018

 

 

3.76

%

Seasons San Juan Capistrano - Series A

 

 

11,047,869

 

 

2017

 

February 2022

 

 

3.89

%

Seasons San Juan Capistrano - Series B

 

 

5,564,539

 

 

2017

 

August 2018

 

 

3.76

%

Avistar at Wood Hollow - Series A

 

 

26,838,000

 

 

2017

 

February 2027

 

 

4.46

%

Avistar at Wilcrest - Series A

 

 

3,168,088

 

 

2017

 

February 2027

 

 

4.46

%

Avistar at Copperfield - Series A

 

 

8,414,834

 

 

2017

 

February 2027

 

 

4.46

%

Oaks at Georgetown - Series A

 

 

11,087,478

 

 

2017

 

March 2022

 

 

3.89

%

Oaks at Georgetown - Series B

 

 

4,686,120

 

 

2017

 

August 2018

 

 

3.76

%

Harmony Terrace - Series A

 

 

6,199,955

 

 

2017

 

March 2022

 

 

3.89

%

Harmony Terrace - Series B

 

 

6,284,318

 

 

2017

 

August 2018

 

 

3.76

%

Village at River's Edge

 

 

8,993,092

 

 

2017

 

November 2027

 

 

4.52

%

Total Fixed A/B Trust

   Financing\ Weighted

   Average Period End Rate

 

$

279,533,565

 

 

 

 

 

 

 

3.85

%

In February 2017, the Partnership and DB began creating a series ofentered into 19 new Term A/B TrustsTrust 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 means to securitize the Partnership’s mortgage revenue bonds for longer terms and at fixed interest rates. Similar to the Term TOB Trusts described above,related party (Note 24).

In March 2017, the Partnership transferred assets torefinanced the Term A/B Trusts associated with Oaks at Georgetown and theHarmony Terrace into new Term A/B Trusts issued Class A and Class B Certificates, which represent beneficial interests in the securitized assets. DB purchased the Class A Certificates and the Partnership retained the Class B Certificates. Pursuant towith longer stated terms. Based on the terms of the new and old Term A/B Trusts, the Partnership is required to reimburse DBrefinancing was accounted for any shortfall realized on the contractual cash flows on the Class A Certificates. The Class B Certificates grant the Partnership certain rights to the securitized assets. The Term A/B Trusts are considered VIEs and the Partnership’s rights are such that it is the primary beneficiary and consolidatesas a modification, with approximately $47,000 capitalized as deferred financing costs.


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.

The following table summarizes the individual Term TOB and Term A/B Trust securitizations at December 31, 2016:

 

 

Outstanding Financing at

December 31, 2016, net

 

 

Year

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

Fixed - Term TOB Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Live 929

 

$

37,851,960

 

 

2014

 

July 2019

 

 

4.39

%

Pro Nova 1

 

 

9,008,739

 

 

2014

 

July 2017

 

 

4.01

%

Total Fixed Term TOB

   Financing\ Weighted

   Average Period End Rate

 

$

46,860,699

 

 

 

 

 

 

 

4.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Term A/B Trusts Securitization

 

 

 

 

 

 

 

 

 

 

 

 

Willow Run

 

$

11,564,852

 

 

2016

 

September 2026

 

 

3.64

%

Columbia Gardens

 

 

11,565,068

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Little York

 

 

11,301,031

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Williamscrest

 

 

17,504,186

 

 

2016

 

September 2026

 

 

3.64

%

Concord at Gulfgate

 

 

16,133,987

 

 

2016

 

September 2026

 

 

3.64

%

Companion at Thornhill Apartment

 

 

9,666,656

 

 

2016

 

September 2026

 

 

3.64

%

Seasons at Simi Valley Apartments

 

 

3,678,770

 

 

2016

 

September 2026

 

 

3.64

%

Sycamore Walk

 

 

3,050,786

 

 

2016

 

September 2026

 

 

3.64

%

Decatur-Angle Apartments

 

 

21,387,126

 

 

2016

 

September 2026

 

 

3.64

%

Heights at 515

 

 

5,409,361

 

 

2016

 

September 2026

 

 

3.64

%

Crossing at 1415

 

 

6,378,482

 

 

2016

 

September 2026

 

 

3.64

%

Bruton Apartments

 

 

15,258,925

 

 

2016

 

September 2026

 

 

3.64

%

15 West Apartments

 

 

8,366,804

 

 

2016

 

December 2026

 

 

3.64

%

Oaks at Georgetown A

 

 

11,709,479

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace A

 

 

6,549,479

 

 

2016

 

March 2017

 

 

4.56

%

Oaks at Georgetown B

 

 

5,229,479

 

 

2016

 

March 2017

 

 

4.56

%

Harmony Terrace B

 

 

7,024,479

 

 

2016

 

March 2017

 

 

4.56

%

Total Fixed A/B Trust

   Financing\ Weighted

   Average Period End Rate

 

$

171,778,950

 

 

 

 

 

 

 

3.80

%

In January 2016, the three MBS TOB Trusts were paid in full and collapsed upon sale of the consolidated financial statements.related MBSs.  

In March 2016, the Term TOB Trust collateralized by the Pro Nova 2014-2 mortgage revenue bond was paid in full and collapsed.

During the third quarter of 2016, the Partnership paid off and collapsed seven of its nine Term TOB Trusts, and simultaneously executingexecuted twelve new Term A/B Trust agreements secured by mortgage revenue bonds.MRBs.  Based on the terms of the Term A/B Trust,Trusts, 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 24).

In December 2016, the Partnership entered into four new short-term Term A/B Trusts with an original maturity date in March 2017. The Partnership intends to either extend the term of these Term A/B Trusts or create new Term A/B Trusts with a longer term.

At December 31, 2016, the Partnership had two interest rate swap arrangements related to the Decatur Angle and Bruton Apartments mortgage revenue bonds that were securitized in Term A/B Trusts. The Partnership posted approximately $1.4 million of cash collateral related to the interest rate swap agreements, which is reported as restricted cash in the consolidated balance sheet at December 31, 2016. See Note 19 for additional information on the interest rate swap and cap arrangements

Tax Exempt Bond Securitization (“TEBS”) Financings

At December 31, 20162017 and 2015,2016, the Partnership, through three wholly-owned subsidiaries (collectively, the “Sponsors”), sponsored three separate TEBS Financings – the M24 TEBS Financing (“TEBS I”), M31 TEBS Financing (“TEBS II”) and M33 TEBS Financing M31 (“TEBS Financing and M24 TEBS Financing.III”). The TEBS Financings are structured such that the Partnership transfers mortgage revenue bondsMRBs to Freddie Mac to be securitized into the TEBS Trusts.Financings. Freddie Mac then issues Class A and Class B Freddie Mac Multifamily Variable Rate Certificates (collectively, the “TEBS Certificates”), which represent beneficial interests in the securitized assets. The Class A TEBS Certificates are sold to unaffiliated investors and entitle the holders to cash flows from the securitized assets. The Class B TEBS Certificates are retained by the Sponsors and grant the


Partnership rights to certain cash flows from the securitized assets after payment to the Class A Certificates and related facility fees, as well as certain other rights to the securitized assets. The TEBS


Financings are considered VIEs, and the Partnership’s rights are such that itPartnership is the primary beneficiary anddue to its rights to the underlying assets. The Partnership consolidates the TEBS Financings in the consolidated financial statements.statements accordingly. See Note 6 for information regarding the MRBs securitized within each TEBS Financing.

Under the terms of TEBS Financings, the Sponsors have one extension option for each TEBS to extend the term for a set additional period. At the end of the original term of TEBS I in September 2017, the Partnership elected to extend the term of the financing for an additional three-year period through September 2020. At the end of the original term of TEBS II in July 2019, the Partnership may elect to extend the financing for an additional five-year period through July 2024. At the end of the original term of TEBS III in July 2020, the Partnership may elect to extend the financing for an additional five-year period through July 2025. Should the Sponsors elect not to extend the terms of TEBS II and TEBS III, the Sponsor must pay all remaining amounts due to the Class A Certificates plus any unpaid trust fees.

The terms of the TEBS Financings require the Partnership to fund cash into certain escrow accounts. Balances in the escrow accounts are reported as restricted cash on the consolidated balance sheets at December 31, 20162017 and 2015.2016.

The interest rates on theThere were three unscheduled paydowns during 2017, one each for TEBS Financings have variable components. In order to mitigate exposure to interest rate fluctuations on the variable rates, the Sponsors entered into interest rate cap agreements (Note 19).

M33I, TEBS Financing

In July 2015, the Partnership, through its wholly-owned subsidiary of ATAXII and TEBS III, LLC (“Sponsor”),due to redemptions of MRBs held by the respective TEBS. The following table summarizes the MRBs redeemed and Freddie Mac entered into a numberthe amount of agreements relating to a new long-term debt financing facility referred to as the M33 TEBS Financing. The Sponsor securitized nine mortgage revenue bonds with an aggregate par value of approximately $105.4 million into the M33 TEBS Financing. See Note 6 for information on the mortgage revenue bonds securitized in the M33 TEBS Financing.    Class A Certificates redeemed upon redemption:

 

The M33 Class A TEBS Certificates were issued in an initial principal amount of approximately $84.3 million and were sold through a placement agent to unaffiliated investors. After payment of transaction expenses, the Partnership received net proceeds from the M33 TEBS Financing of approximately $82.2 million.  

The term of the M33 TEBS financing coincides with the terms of the assets securing the M33 TEBS Certificates, except the Sponsor may elect to purchase all (but not less than all) of the securitized mortgage revenue bonds from Freddie Mac on either July 15, 2020 or July 15, 2025.  Should the Partnership not elect to terminate the M33 TEBS Financing on these dates, the full term of the M33 TEBS Financing will run through the final principal payment date associated with the securitized mortgage revenue bonds, or August 1, 2055.

M31 TEBS Financing

The M31 TEBS Financing was initiated in July 2014. The term of the M31 TEBS Financing coincides with the terms of the assets securing the M31 TEBS Certificates, except ATAX TEBS II, LLC, a wholly-owned subsidiary of the Partnership, may elect to purchase all (but not less than all) of the Bonds from Freddie Mac on either July 15, 2019 or July 15, 2024. Should the Partnership not elect to terminate the M31 TEBS Financing on these dates, the full term of the M31 TEBS Financing will run through the final principal payment date associated with the securitized bonds, or August 1, 2050.  

M24 TEBS Financing

The M24 TEBS Financing was initiated in September 2011. The term of the M24 TEBS Financing coincides with the terms of the assets securing the M24 TEBS Certificates, except that ATAX TEBS I, LLC, a wholly-owned subsidiary of the Partnership, may terminate the M24 TEBS Financing at its option on either September 15, 2017 or September 15, 2020. Should the Partnership not elect to terminate the M24 TEBS Financing on these dates, the full term of the M24 TEBS Financing will run through the final principal payment date associated with the securitized bonds, or July 15, 2050. The Partnership plans to renew the M24 TEBS Financing when it matures in 2017.

In November and December of 2015, the Fairmont Oaks and Bent Tree properties were sold and the mortgage revenue bond investments in the M24 Financing were paid off in full. The Partnership received approximately $14.1 million for the mortgage revenue bond principal plus base interest which was used to retire a portion of the M24 TEBS Financing facility.

During the first quarter of 2016, the Partnership implemented Accounting Standards Update (“ASU”) 2015-03, “Interest – Imputation of Interest (Subtopic 835-30)”. The new accounting guidance changed the presentation of debt issuance costs in the financial statements to present them as a direct deduction from the related debt liability rather than classified as Other Assets, applied retrospectively. This new ASU did not change the presentation of debt issuance costs related to revolving LOCs as these continue to be reported as Other Assets. Adoption of the standard resulted in decreases in reported Other Assets of approximately $5.4 million, reported Debt Financings of approximately $4.9 million and reported Mortgages Payable and Other Secured Financing of approximately $470,000.  


Mortgage Revenue Bond

 

TEBS Facility

 

Month

 

Paydown Applied

 

Vantage at Harlingen

 

TEBS III

 

October 2017

 

$

24,363,221

 

Ashley Square

 

TEBS I

 

November 2017

 

 

4,472,000

 

Avistar at Chase Hill

 

TEBS II

 

November 2017

 

 

9,757,084

 

 

The Partnership’s contractual maturities of borrowings for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

 

2017

 

$

148,105,926

 

2018

 

 

3,117,845

 

 

$

75,557,815

 

2019

 

 

130,608,707

 

 

 

130,870,901

 

2020

 

 

82,404,547

 

 

 

113,134,225

 

2021

 

 

1,381,375

 

 

 

2,357,601

 

2022

 

 

61,282,111

 

Thereafter

 

 

134,650,501

 

 

 

179,392,519

 

Total

 

$

500,268,901

 

 

 

562,595,172

 

Deferred financing costs

 

 

(4,266,825

)

Total debt financing, net

 

$

558,328,347

 

 

Certain Term A/B Trusts mature in 2018. The Partnership expects these Term A/B Trusts to be settled upon redemption of the related MRBs prior to maturity. If the MRBs are not redeemed prior to maturity of the Term A/B Trusts, the Partnership expects to refinance the Term A/B Trusts with the current lender.

The Partnership expects to renew each TOB financing facility maturing in 2018 for an additional one-year term with DB.

 

 


18. Mortgages Payable and Other Secured Financing

The Partnership reports the mortgage loans and other secured financings secured by certain MF Properties on its consolidated financial statements as Mortgages payable and other secured financing. The following is a summary of the Mortgages payable and other secured financing on the MF Properties, net of deferred financing costs, at December 31, 2017 and 2016:

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable at

December 31, 2017, net

 

 

Year

Acquired or Refinanced

 

Stated Maturity

 

Variable / Fixed

 

Reset Frequency

 

Variable

Based Rate

 

 

Facility Fees

 

Period End

Rate

 

The 50/50 MF Property--TIF

   Loan

 

$

3,358,370

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

4.65

%

The 50/50 MF

   Property--Mortgage

 

 

24,713,256

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

4.25

%

(1)

N/A

 

 

4.25

%

Jade Park

 

 

7,468,548

 

 

2016

 

October 2021

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

3.85

%

Total Mortgage

   Payable\Weighted

   Average Period End Rate

 

$

35,540,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Variable rate is based on Wall Street Journal Prime Rate

MF Property Mortgage Payables

 

Outstanding Mortgage

Payable at

December 31, 2016, net

 

 

Year

Acquired or Refinanced

 

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

 

 

2015

 

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

Activity in 2017

In September 30, 2016,June 2017, the Partnership acquiredrefinanced the Jade Park mortgages payable for the Residences of DeCordova and Residences of 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.

The Partnership sold the Residences of DeCordova, Residences of Weatherford and Eagle Village MF Property. Concurrent withProperties in November 2017. At the purchase,closing of the sales, the Partnership entered into apaid all of the outstanding mortgage payable arrangement to partially fund the acquisition price.payables and accrued interest associated with these MF Properties.

Activity in 2016

The Partnership sold the Arboretum and Woodland Park MF Properties in June and July 2016, respectively. At the closing of the sales, the Partnership paid all of the outstanding mortgage payables and accrued interest associated with these MF Properties.

In November 2015,September 2016, the Partnership refinancedacquired the Eagle VillageJade Park MF Property. Concurrent with the purchase, the Partnership entered into a mortgage and extendedpayable arrangement to partially fund the stated maturity date to September 2018.acquisition price.

The following is a summary of the Mortgages payable and other secured financing on the MF Properties, net of deferred financing costs:

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

 

Eagle Village (1)

 

$

7,845,711

 

 

2010

 

September 2018

 

Variable

 

Monthly

 

 

0.63

%

 

 

3.00

%

 

 

3.63

%

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

%

The 50/50 MF

   Property--Mortgage (2)

 

 

25,082,636

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

3.50

%

 

N/A

 

 

 

3.50

%

The 50/50 MF Property--TIF

   Loan

 

 

3,656,090

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

 

4.65

%

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 LIBOR

 

(2) Variable rate is based on Wall Street Journal Prime Rate

 


MF Property Mortgage Payables

 

Outstanding Mortgage

Payable at

December 31, 2015, net

 

 

Year

Acquired

 

Stated Maturity

 

Variable / Fixed

 

Reset Frequency

 

Variable

Based Rate

 

 

Facility Fees

 

 

Period End

Rate

 

Arboretum

 

$

16,683,146

 

 

2011

 

March 2017

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

 

3.75

%

Eagle Village (1)

 

 

8,037,133

 

 

2010

 

September 2018

 

Variable

 

Monthly

 

 

0.25

%

 

 

3.00

%

 

 

3.25

%

Residences of DeCordova

 

 

1,807,246

 

 

2012

 

June 2017

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

 

4.75

%

Residences of Weatherford

 

 

5,820,623

 

 

2011

 

June 2017

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

 

4.75

%

The 50/50 MF

   Property--Mortgage (2)

 

 

25,363,647

 

 

2013

 

March 2020

 

Variable

 

Monthly

 

 

3.25

%

 

N/A

 

 

 

3.25

%

The 50/50 MF Property--TIF

   Loan

 

 

4,035,779

 

 

2014

 

December 2019

 

Fixed

 

N/A

 

N/A

 

 

N/A

 

 

 

4.65

%

Woodland Park (1)

 

 

7,500,000

 

 

2014

 

August 2017

 

Variable

 

Monthly

 

 

0.19

%

 

 

2.75

%

 

 

2.94

%

Total Mortgage Payable\Weighted

   Average Period End Rate

 

$

69,247,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.60

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Variable rate is based on LIBOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Variable rate is based on Wall Street Journal Prime Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Partnership’s contractual maturities of borrowings for the twelve-month periods ending December 31st for the next five years and thereafter are asfollows:

 

2017

 

$

8,270,379

 

2018

 

 

8,475,223

 

 

$

763,246

 

2019

 

 

4,166,034

 

 

 

3,989,951

 

2020

 

 

23,949,298

 

 

 

24,155,733

 

2021

 

 

6,858,994

 

 

 

6,858,994

 

Total mortgages payable and other secured financings

 

$

51,719,928

 

2022

 

 

-

 

Thereafter

 

 

-

 

Total

 

 

35,767,924

 

Deferred financing costs

 

 

(227,750

)

Total mortgages payable and other secured financings, net

 

$

35,540,174

 

The Partnership expects to refinance the mortgages payable of Residences of DeCordova and Residences at Weatherford prior to their scheduled maturities in June 2017.

 

 

19. Interest Rate Derivatives

The following table summarizes the Partnership’s interest rate derivatives, except for interest rate swaps, at December 31, 2017 and 2016:

 

Purchase Date

 

Initial Notional Amount

 

 

Effective

Capped Rate

 

 

Maturity Date

 

Purchase Price

 

 

Fair Value - Asset (Liability) (1)

 

 

Variable Debt

Financing Facility

Hedged

 

Maximum

Potential

Cost of

Borrowing

 

 

Counterparty

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2017

 

Sept 2010

 

$

31,936,667

 

 

 

3.0

%

 

Sept 2017

 

$

921,000

 

 

$

2

 

 

M24 TEBS

 

 

5.0

%

 

Bank of New York Mellon

Sept 2010

 

 

31,936,667

 

 

 

3.0

%

 

Sept 2017

 

 

845,600

 

 

 

2

 

 

M24 TEBS

 

 

5.0

%

 

Barclays Bank PLC

Sept 2010

 

 

31,936,667

 

 

 

3.0

%

 

Sept 2017

 

 

928,000

 

 

 

2

 

 

M24 TEBS

 

 

5.0

%

 

Royal Bank of Canada

Aug 2013

 

 

93,305,000

 

 

 

1.5

%

 

Sept 2017

 

 

793,000

 

 

 

619

 

 

M24 TEBS

 

 

3.5

%

 

Deutsche Bank

Feb 2014

 

 

41,250,000

 

 

 

1.0

%

 

March 2017

 

 

230,500

 

 

 

2

 

 

PHC TOB Trusts

 

 

3.3

%

 

SMBC Capital Markets, Inc

July 2014

 

 

31,565,000

 

 

 

3.0

%

 

Aug 2019

 

 

315,200

 

 

 

34,614

 

 

M31 TEBS

 

 

4.4

%

 

Barclays Bank PLC

 

$

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

$

169

 

July 2014

 

 

31,565,000

 

 

 

3.0

%

 

Aug 2019

 

 

343,000

 

 

 

34,614

 

 

M31 TEBS

 

 

4.4

%

 

Royal Bank of Canada

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

169

 

July 2014

 

 

31,565,000

 

 

 

3.0

%

 

Aug 2019

 

 

333,200

 

 

 

34,614

 

 

M31 TEBS

 

 

4.4

%

 

SMBC Capital Markets, Inc

 

 

30,652,294

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

169

 

July 2015

 

 

28,095,000

 

 

 

3.0

%

 

Aug 2020

 

 

210,000

 

 

 

93,045

 

 

M33 TEBS

 

 

4.3

%

 

Wells Fargo Bank

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

3,213

 

July 2015

 

 

28,095,000

 

 

 

3.0

%

 

Aug 2020

 

 

187,688

 

 

 

93,045

 

 

M33 TEBS

 

 

4.3

%

 

Royal Bank of Canada

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

3,213

 

July 2015

 

 

28,095,000

 

 

 

3.0

%

 

Aug 2020

 

 

174,900

 

 

 

93,045

 

 

M33 TEBS

 

 

4.3

%

 

SMBC Capital Markets, Inc

 

 

27,666,739

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

3,213

 

June 2017

 

 

91,956,883

 

 

Aug 2019

 

 

1.5

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

160,174

 

June 2017

 

 

83,000,217

 

 

Aug 2020

 

 

1.5

%

 

SIFMA

 

M33 TEBS

 

Barclays Bank PLC

 

 

425,978

 

Sept 2017

 

 

59,935,000

 

 

Sept 2020

 

 

4.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

383,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

597,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) For additional details, see Note 25 to the Partnership's consolidated financial statements.

 

 

 

 

 

 

Purchase Date

 

Notional Amount

 

 

Maturity Date

 

Effective

Capped

Rate (1)

 

 

Index

 

Variable Debt

Financing Facility

Hedged (1)

 

Counterparty

 

Fair Value as of December 31, 2016

 

Sept 2010

 

$

29,855,000

 

 

Sept 2017

 

 

3.0

%

 

SIFMA

 

M24 TEBS

 

Bank of New York Mellon

 

$

2

 

Sept 2010

 

 

29,855,000

 

 

Sept 2017

 

 

3.0

%

 

SIFMA

 

M24 TEBS

 

Barclays Bank PLC

 

 

2

 

Sept 2010

 

 

29,855,000

 

 

Sept 2017

 

 

3.0

%

 

SIFMA

 

M24 TEBS

 

Royal Bank of Canada

 

 

2

 

Aug 2013

 

 

89,565,000

 

 

Sept 2017

 

 

1.5

%

 

SIFMA

 

M24 TEBS

 

Deutsche Bank

 

 

619

 

Feb 2014

 

 

41,250,000

 

 

March 2017

 

 

1.0

%

 

SIFMA

 

PHC TOB Trusts

 

SMBC Capital Markets, Inc

 

 

2

 

July 2014

 

 

31,028,195

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Barclays Bank PLC

 

 

34,614

 

July 2014

 

 

31,028,195

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

Royal Bank of Canada

 

 

34,614

 

July 2014

 

 

31,028,195

 

 

Aug 2019

 

 

3.0

%

 

SIFMA

 

M31 TEBS

 

SMBC Capital Markets, Inc

 

 

34,614

 

July 2015

 

 

27,940,701

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Wells Fargo Bank

 

 

93,045

 

July 2015

 

 

27,940,701

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

Royal Bank of Canada

 

 

93,045

 

July 2015

 

 

27,940,701

 

 

Aug 2020

 

 

3.0

%

 

SIFMA

 

M33 TEBS

 

SMBC Capital Markets, Inc

 

 

93,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

383,604

 

(1) For additional details, see Note 25 to the Partnership's condensed consolidated financial statements.

 

In January 2016,June 2017, the Partnership soldpurchased two interest rate derivatives to roll down the $11.0 millioneffective 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 relatedon the M24 TEBS Financing to cap the MBS TOB Trusts. Thevariable interest rate derivative was soldat 4.0%. The Partnership paid approximately $59,000 for its current value and resulted in no cash proceeds to the Partnership and no gain or loss was recognized.interest rate derivative.


The Partnership has contracted for two interest rate swaps with DB relatedDB. 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 Financings securitized by mortgage revenue bondsTrust 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 intended to mitigate interest rate risk for Decatur Angle and Bruton Apartments.the variable rate PHC TOB Trusts. The following table summarizes the terms of the interest rate swaps at December 31, 20162017 and 2015:2016:

 

Purchase Date

 

Initial Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2016 - Fair Value of Liability

 

 

December 31, 2015 - Fair Value of Liability

 

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2017 - Fair Value of Liability

 

Sept 2014

 

$

23,000,000

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

0.53

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(738,574

)

 

$

(737,219

)

 

$

22,821,429

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(402,261

)

Sept 2014

 

$

18,126,731

 

 

April 2017

 

April 2022

 

 

2.06

%

 

N/A

 

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(600,709

)

 

 

(579,856

)

 

 

18,051,775

 

 

April 2017

 

April 2022

 

 

2.06

%

 

 

1.08

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(424,591

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,339,283

)

 

$

(1,317,075

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(826,852

)

Purchase Date

 

Notional Amount

 

 

Effective Date

 

Termination Date

 

Fixed Rate Paid

 

 

Period End Variable Rate Received

 

 

Variable Rate & Index

 

Counterparty

 

December 31, 2016 - Fair Value of Liability

 

Sept 2014

 

$

22,975,228

 

 

Oct 2016

 

Oct 2021

 

 

1.96

%

 

 

0.53

%

 

70% 30-day LIBOR

 

Deutsche Bank

 

$

(738,574

)

Sept 2014

 

 

18,126,731

 

 

April 2017

 

April 2022

 

 

2.06

%

 

N/A

 

 

70% 30-day LIBOR

 

Deutsche Bank

 

 

(600,709

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,339,283

)

The Partnership is required to fund a cash collateral account at DB for an amount greater than or equal to the fair value of the interest rate swaps. Such cash balances were approximately $850,000 and $1.4 million at December 31, 2017 and 2016, respectively, and are reported within restricted cash on the consolidated balance sheets.

 

These interest rate derivatives and interest rate swaps are not designated as hedging instruments and, accordingly, they are recorded at fair value with changes in fair value included in current period earnings as interest expense. See Note 25 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 consolidated balance sheet.sheets.  

 

 

20. 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 to occur, the estimated amount of the loss is accrued in the consolidated financial statements. While the resolution of these matters cannot be predicted with certainty, the Partnership believes the outcome of such matters will not have a material effect on the Company’s consolidated financial statements.

Bond Purchase Commitments

As part of the Partnership’s strategy of acquiring mortgage revenue bonds,MRBs, the Partnership will enter into bond purchase commitments related to mortgage revenue bondsMRBs to be issued and secured by properties under construction.  Upon execution of the bond purchase commitment, the proceeds from the mortgage revenue bonds issuedMRBs will be used to pay off the construction related debt and mortgage revenue bonds.debt.  The Partnership bears no construction or stabilization risk during the commitment period. The Partnership accounts for the followingits 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 summarizes the Partnership’s bond purchase commitments at December 31, 20162017 and 2015:2016:

 

Bond Purchase Commitments

 

Commitment Date

 

Maximum

Committed

Amounts for

2017

 

 

Maximum

Committed

Amounts for

2018

 

 

Rate

 

 

Closing

Date (1)

 

Fair Value at

December 31, 2016

 

 

Fair Value at December 31,

2015

 

 

Commitment Date

 

Maximum

Committed

Amounts for

2018

 

 

Rate

 

 

Closing

Date (1)

 

Fair Value at

December 31, 2017

 

 

Fair Value at

December 31, 2016

 

15 West Apartments

 

July 2014

 

$

-

 

 

$

-

 

 

 

6.25

%

 

Q4 2016

 

$

-

 

 

$

945,009

 

Villas at Plano Gateway Apartments

 

December 2014

 

 

20,000,000

 

 

 

-

 

 

 

6.00

%

 

Q2 2017

 

 

838,200

 

 

 

1,469,213

 

 

December 2014

 

$

-

 

 

 

6.00

%

 

N/A

 

$

-

 

 

$

838,200

 

Village at Rivers Edge

 

May 2015

 

 

11,000,000

 

 

 

-

 

 

 

6.00

%

 

Q2 2017

 

 

467,720

 

 

 

636,560

 

 

May 2015

 

 

-

 

 

 

6.00

%

 

Q4 2017

 

 

-

 

 

 

467,720

 

Palo Alto

 

July 2015

 

 

19,540,000

 

 

 

-

 

 

 

5.80

%

 

Q3 2017

 

 

627,429

 

 

 

1,439,600

 

 

July 2015

 

 

19,540,000

 

 

 

5.80

%

 

Q2 2018

 

 

1,616,143

 

 

 

627,429

 

Village at Avalon

 

November 2015

 

 

-

 

 

 

16,400,000

 

 

 

5.80

%

 

Q2 2018

 

 

466,100

 

 

 

1,143,978

 

 

November 2015

 

 

16,400,000

 

 

 

5.80

%

 

Q4 2018

 

 

1,386,397

 

 

 

466,100

 

Total

 

 

 

$

50,540,000

 

 

$

16,400,000

 

 

 

 

 

 

 

 

$

2,399,449

 

 

$

5,634,360

 

 

 

 

$

35,940,000

 

 

 

 

 

 

 

 

$

3,002,540

 

 

$

2,399,449

 

(1) The closing date is actual or 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. The bond purchase commitment for Village at Rivers Edge was executed in November 2017. The terms of the Village at Rivers Edge MRB issued upon execution are summarized in Note 6.

Property Loan Commitments

In October 2015, ATAX Vantage Holdings, LLC, a newly formed wholly owned subsidiary of the Partnership, has committed to loan approximately $17.0 million to an unrelated third party to build two new multifamily residential properties. The Partnership’s remaining maximum commitments totaled approximately $3.4$1.2 million at December 31, 2016.2017. See Note 11 for additional information related to the property loans.  


Investment Commitments

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has outstanding commitments to contribute equity to unconsolidated entities. See Note 10 for additional information.

Other Guarantees

In connection withMarch 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. The outstanding balance on the construction loan was approximately $8.6 million at December 31, 2017, which is the Partnership’s current exposure under the guarantee. No amount has been accrued for this contingent liability because the likelihood of a guarantee claim is remote.  The Partnership is also required to maintain minimum cash and net worth requirements, which were met at December 31, 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 the 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 December 31, 2016,2017, under the guarantee provision of the repurchase clause is approximately $2.8$2.6 million and represents 75% of the equity contributed by BC PartnersPartners. The term of the guarantee agreement ends in 2027.

Pursuant to date.

In connection with 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 the 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 December 31, 2016,2017, under the guarantee provision of the repurchase clause is approximately $4.4$4.1 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 regular payments, when


cash is available at the property, to the University of Nebraska-Lincoln based on its revenues.  At December 31, 2016,2017, the minimum aggregate annual payment due under the agreement is approximately $122,000.$127,000. The minimum aggregate annual payment increases 2% annually until July 31, 2034 and increases of 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 50/50 MF PropertyPartnership reported accounts payable related to this agreement of approximately $125,000 and $21,000 at December 31, 2017 and 2016, respectively. The Partnership reported expenses related to the agreement of approximately $123,000,$168,000, $168,000 and $120,000 and $50,000 for the years ended December 31, 2017, 2016 and 2015, and 2014, respectively.

As the holder of residual interests issued in connection with its TOB Term TOB,Trust, Term A/B Trust and TEBS Financings,Financing arrangements, the Partnership is required to guarantee certain losses that can be incurred by the underlying trusts created in connection with these financings.  These guarantees may result from a downgrade in the investment rating of mortgage revenue bondsPHCs 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 trusts.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. In each of these cases,If the Partnership does not remedy, the trust will be collapsed.  If the proceeds from the sale ofsuch 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 withplus accrued interest and the other trust expenses, of the trusts, 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 $500.3$562.6 million prior to the consideration of the proceeds from the sale of the trust collateral. To date, theThe Partnership has never been, and does not beenexpect in the future, to be required to reimburse the financing facilities for any shortfalls.shortfall.

 

 

21. Redeemable Series A Preferred Units

During 2016, theThe Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units via private placements. placements to five financial institutions. The Series A Preferred Units have no stated maturity, are redeemablenot subject to any sinking fund requirements, and will remain outstanding indefinitely unless repurchased or redeemed by the Partnership or holder. Upon the sixth anniversary of the closing of the sale of Series A Preferred Units to a subscriber, and upon each anniversary thereafter, the Partnership and each holder of Series A Preferred Units will have the right to redeem, in whole or in part, the futureSeries A Preferred Units held by such holder at a per unit redemption price equal to $10.00 per unit plus an amount equal to all declared and represent limited partnershipunpaid distributions.

In the event of any liquidation, dissolution, or winding up of the Partnership, the holders of the Series A Preferred Units are entitled to a liquidation preference in connection with their investments.  With respect to anticipated quarterly distributions and rights upon liquidation, dissolution, or the winding-up of the Partnership’s affairs, the Series A Preferred Units will rank senior to the Partnership’s BUCs and to any other class or series of Partnership interests inor securities expressly designated as ranking junior to the Partnership.  Series A Preferred Units, and junior to any other class or series of Partnership interests or securities expressly designated as ranking senior to the Series A Preferred Units.

The following table summarizes the issuances of Series A Preferred Units during the year endedoutstanding at December 31, 2016:2017:

 

December 31, 2016

Month Issued

 

Units

 

 

Purchase Price

 

 

Distribution Rate

 

 

Redemption Price per Unit

 

 

Earliest Redemption Date

 

Units

 

 

Purchase Price

 

 

Distribution Rate

 

 

Redemption Price per Unit

 

 

Earliest Redemption Date

Preferred Units at January 1, 2016

 

 

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

March 2016

 

 

1,000,000

 

 

$

10,000,000

 

 

 

3.00

%

 

$

10.00

 

 

March 2022

 

 

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

 

 

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

 

 

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

 

 

700,000

 

 

 

7,000,000

 

 

 

3.00

%

 

 

10.00

 

 

December 2022

 

 

4,086,900

 

 

$

40,869,000

 

 

 

 

 

 

 

 

 

 

 

Preferred Units at December 31, 2016

 

 

4,086,900

 

 

$

40,869,000

 

 

 

 

 

 

 

 

 

 

 

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

October 2017

 

 

1,750,000

 

 

 

17,500,000

 

 

 

3.00

%

 

 

10.00

 

 

October 2023

Preferred Units at December 31, 2017

 

 

9,450,000

 

 

$

94,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 


22. Issuances of Additional Beneficial Unit Certificates

In November 2016, a Registration Statement on Form S-3 was declared effective by the SEC under which the Partnership may offer up to $225.0 million of additional BUCs from time to time. The Registration Statement will expire in November 2019.


In December 2017, the Partnership initiated an “at the market offering” to sell up to $75.0 million of BUCs at market prices on the date of sale. The Partnership sold 161,383 BUCs under the program for net proceeds of approximately $806,000, net of issuance costs, during the year ended December 31, 2017.

 

 

23. 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 distributions during the restriction period. The RUA’sRUAs provide for accelerated vesting if there is a change in control.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 $1.6 million and $833,000 for the yearyears ended December 31, 2017 and 2016. No compensation expense for RUAs was recognized for the yearsyear ended December 31, 2015 and 2014.2015.

The following table summarizes the RUA activity for the year ended December 31, 2016:2017:

 

 

Restricted Units Awarded

 

 

Weighted-average Grant-date Fair Value

 

 

Restricted Units Awarded

 

 

Weighted-average Grant-date Fair Value

 

Nonvested at January 1, 2016

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

Granted

 

 

272,307

 

 

 

6.03

 

 

 

272,307

 

 

 

6.03

 

Vested

 

 

(114,003

)

 

 

6.03

 

 

 

(114,003

)

 

 

6.03

 

Nonvested at December 31, 2016

 

 

158,304

 

 

$

6.03

 

 

 

158,304

 

 

$

6.03

 

Granted

 

 

283,046

 

 

 

5.74

 

Vested

 

 

(199,281

)

 

 

5.85

 

Nonvested at December 31, 2017

 

 

242,069

 

 

$

5.83

 

 

At December 31, 2016,2017, there was approximately $808,000$817,000 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 1.51.3 years. The total intrinsic value of nonvested RUAs was approximately $855,000$1.5 million at December 31, 2016.2017.

 

 

24. Transactions with Related Parties

A substantial portion of the Partnership’s general and administrative expenses and certain costs capitalized by the Partnership are paid by AFCA 2 or an affiliate and are reimbursed by the Partnership. The capitalizedAdditionally, costs are typically incurred in connection with the acquisition or reissuance of certain mortgage revenue bonds,MRBs, acquisition of PHC Certificates and MBS Securities, debt financing transactions, and other capital transactions. The amounts in the following table represent amounts reimbursable to AFCA 2 or an affiliate for such expenses.expenses:

 

 

2016

 

 

2015

 

 

2014

 

 

2017

 

 

2016

 

 

2015

 

Reimbursable salaries and benefits

 

$

2,921,762

 

 

$

1,744,855

 

 

$

1,599,294

 

 

$

3,350,267

 

 

$

2,921,762

 

 

$

1,744,855

 

Other expenses

 

 

5,883

 

 

 

6,819

 

 

 

975

 

 

 

143,350

 

 

 

5,883

 

 

 

6,819

 

Insurance

 

 

204,357

 

 

 

224,946

 

 

 

227,265

 

 

 

216,263

 

 

 

204,357

 

 

 

224,946

 

Professional fees and expenses

 

 

390,961

 

 

 

284,767

 

 

 

208,648

 

 

 

191,177

 

 

 

390,961

 

 

 

284,767

 

Consulting and travel expenses

 

 

11,634

 

 

 

15,372

 

 

 

1,697

 

 

 

3,554

 

 

 

11,634

 

 

 

15,372

 

 

$

3,534,597

 

 

$

2,276,759

 

 

$

2,037,879

 

 

$

3,904,611

 

 

$

3,534,597

 

 

$

2,276,759

 

 

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 mortgage revenue bonds, taxableMRBs, 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 $3.6 million, $2.8 million, $2.6 million, and $2.0$2.6 million for the years ended December 31, 2017, 2016, 2015, and 2014,2015, 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 mortgage revenue bondsMRBs held by the Partnership.  These administrative fees also equal 0.45% per annum of the outstanding principal balance of these mortgage revenue bondsMRBs and totaled approximately $173,000, $95,000, $53,000, and $138,000$53,000 for the years ended December 31, 2017, 2016, 2015, and 2014,2015, respectively. Additionally, in connection with the sale of Bent Tree, a Consolidated VIE, the property paid accrued and deferred administrative fees to AFCA2 totaling approximately $635,000 for the year ended December 31, 2015. Although these third party administrative fees are not Partnership expenses, they have been reflected


in the accompanying consolidated financial statements of


the Company as a result of the consolidation of the VIEs.  Such fees are payable by the financed property prior to the payment of any contingent interest on the mortgage revenue bondsMRBs secured by these properties.  If the Partnership were to acquire any of these properties in foreclosure, it would assume the obligation to pay the administrative fees relating to mortgage revenue bondsMRBs on these properties.  

AFCA 2 earns mortgage placement fees in connection with the acquisition of mortgage revenue bondsMRBs and other investments by the Partnership.  These mortgage placement fees and other investmentsinvestment fees were paid by the owners of the respective property or the third-party seller of the respective bonds and, accordingly, have not been reflected in the accompanying consolidated financial statements because these properties are not consolidated VIEs.   Investment/mortgage placement fees earned by AFCA 2 totaled approximately $1.8 million, $2.1 million, $1.9 million, and $1.7$1.9 million for the years ended December 31, 2017, 2016, and 2015, respectively. AFCA 2 received a one-time administrative fee of $300,000 related to early redemption of the Avistar at Chase Hill Series A, B and 2014, respectively. In addition,C MRBs in November 2017. The payment of the one-time administrative fee was paid directly by the property owner. 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 ofyear ended December 31, 2016. In addition, duringDuring the year ended December 31, 2015, approximately $300,000 in mortgage placement fees were paid by the Partnership to AFCA2 related to two mortgage revenue bondMRB acquisitions, which waswere recorded into the cost basis of the mortgage revenue bondsMRBs and are being amortized against interest income on an effective yield basis over the term of the mortgage revenue bonds. There were no such transactions during the year ended December 31, 2016.MRBs.

An affiliate of AFCA 2, Properties Management, was retained to provideprovided property management, administrative and marketing services for Ashley Square,   Arboretum (MF Property sold in 2016)all MF Properties (excluding Suites on Paseo), Bent Tree (Consolidated VIE sold in 2015), Lake Forest, Fairmont Oaks (Consolidated VIE sold in 2015), DeCordova, Eagle Village, The Colonial (MF Property sold in 2015), Meadowview, Crescent Village, Willow Bend, Post Woods, Glynn Place (MF Property sold in 2015), Greens at Pine Glen, Cross Creek, Weatherford, Jade Parkseven of the properties collateralizing MRBs, and Woodland Park (MF Property sold in 2016). The management fees paid totwo Consolidated VIEs.  Properties Management amountedearned total fees related to the MF Properties and Consolidated VIEs of approximately $1.1 million, $1.2 million,$390,000, $555,000 and $1.3 million$881,000 for the years ended December 31, 2017, 2016 2015 and 2014,2015, respectively. For MF Properties, the Consolidated VIEs, theseproperty 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 recordedpaid in each case by each applicable VIE entity and, accordingly, have been reflected in the accompanying consolidated financial statements. Suchowner of the Residential Properties. These property management fees are paid out of the revenues generated by the properties owned by the Consolidated VIEsrespective property prior to the payment of any interestdebt service on the mortgage revenue bondsPartnership's MRBs and taxable property loans, held byif applicable.

During the year ended December 31, 2017, the Partnership performed due diligence services for Properties Management related to the sales of the Residences of Weatherford, Residences of DeCordova and Eagle Village MF properties and the sale of the property collateralizing the Ashley Square MRB. The Partnership received fees totaling approximately $128,000, which is recorded in other income on these properties. For the MF Properties, these management fees are considered real estate operating expenses.consolidated statements of operations.

An affiliate of AFCA 2, FCA, acts as an origination advisor and consultant to the borrowers when mortgage revenue bondsMRBs and financing facilities are acquired by the Partnership. Origination fees paid to this affiliate by the borrower of certain acquired bonds were approximately $705,000, $1.0 million, $1.8 million, and $1.4$1.8 million for the years ended December 31, 2017, 2016 2015 and 2014,2015, respectively. These origination fees have not been reflected in the accompanying consolidated financial statements. In addition, the Partnership paid consulting and origination fees to this affiliate related to mortgage revenue bondMRB acquisitions of approximately $150,000 and $300,000 for the years ended December 31, 2015 and 2014. No such fees were paid to the affiliate during the year ended December 31, 2016.2015. The fees paid to the affiliate were recorded into the cost basis of the mortgage revenue bondsMRBs and are being amortized against interest income on an effective yield basis. During the year ended December 31, 2016, approximately $1.2 million inThe Partnership paid consulting fees were paid byto the Partnership to this affiliate for services related to establishment of Term A/B Trusts. In addition, Farnam Capital Advisors, LLCthe partnership’s debt financing transactions that totaled approximately $921,000 and $1.2 million for the years ended December 31, 2017 and 2016. The affiliate received a $125,000 origination fee for work performed related to a transaction that did not materialize during the second quarteryear ended December 31, 2016.

An affiliate of 2016.AFCA 2, Burlington Capital Construction Services, LLC, is the general contractor for certain exterior rehabilitation services for the Jade Park MF Property during the year ended December 31, 2017.  The Partnership paid approximately $63,000 for services to this affiliate during the year ended December 31. 2017.

The Partnership had outstanding liabilities due to related parties totaling approximately $415,000$391,000 and $241,000$415,000 at December 31, 20162017 and 2015,2016, respectively. All amounts due are reported within accounts payable, accrued expenses and other liabilities on the Partnership’s consolidated balance sheets.

One of the owners of two limited-purpose corporations which owned multifamily residential properties (the Consolidated VIEs) financed with mortgage revenue bondsMRBs and taxable property loans held by the Partnership were employees of Burlington whoBurlington. They were not involved in the operation or management of the Partnership and who were not executive officers or managersManagers of Burlington.

 

 


25. 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 as ofon 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 Mortgage Revenue Bonds and Bond Purchase Commitments.Commitments  

The fair valuesvalue of the Partnership’s investments in mortgage revenue bondsMRBs and mortgage bond purchase commitments have each beenat December 31, 2017 is based onupon prices obtained from a discounted cash flow or yield to maturity analysis.third-party pricing service, which are indicative of market prices. There is no active trading market for the mortgage revenue bondsMRBs and price quotes for the mortgage revenue bondsMRBs 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 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 bond purchase commitments is categorized as a Level 3 input. At December 31, 2017, the range of effective yields on the individual MRBs and bond purchase commitments was 2.9% to 8.8% per annum.

Prior to the second quarter of 2017, the fair value of the Partnership’s investments in MRBs and bond purchase commitments were based on a discounted cash flow and yield to maturity analysis performed by the Partnership. If available, the Partnership may also considerconsidered price quotes on similar mortgage revenue bondsMRBs or other information from external sources, such as pricing services.  The estimates of the fair values of these mortgage revenue bonds,MRBs, whether estimated by the Partnership or based on external sources, arewere based largely on unobservable inputs the Partnership believesbelieved would be used by market participants.  Additionally, the calculation methodology used by the external sources and the Partnership encompassesencompassed the use of judgment in its application. To validate changes in the fair value of the Partnership’s investments in mortgage revenue bondsMRBs between reporting periods, the Partnership lookslooked at the key inputs such as changes in the ‘A’ rated municipal bond rates on similar mortgage revenue bondsMRBs as well as changes in the operating performance of the underlying property serving as collateral for each mortgage revenue bond.MRB.  The Partnership validatesvalidated that the changes in the estimated fair value of the mortgage revenue bondsMRBs move with the changes in these monitored factors.  Given these facts, the fair value measurement of the Partnership’s investment in mortgage revenue bonds isMRBs was categorized as a Level 3 input. At December 31, 2016, the range of effective yields on the individual mortgage revenue bonds was 4.9% to 12.4% per annum. At December 31, 2015, the range of effective yields on the individual mortgage revenue bonds was 4.2% to 12.1% per annum.


The fair value of the bond purchase commitments is determined in the same manner as the mortgage revenue bonds.

Investments in PHC Certificates.Certificates

The fair value of the Partnership’s investment in PHC Certificates has beenat December 31, 2017 is based onupon prices obtained from a yield to maturity analysis performed by the Partnership.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 butanalyzed pricing data received from the third-party pricing service by comparing it will look at estimatedto 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 as determineddeveloped 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 when available. The estimatesand 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. At December 31, 2017, the range of effective yields on the PHC Certificates was 5.1% to 5.8% per annum.

The fair valuesvalue of these trusts’ certificates beginthe 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. Additionally, the calculation methodology used by external pricing services and the Partnership encompasses the use of judgment in its application. 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.  At December 31, 2015, the range of effective yields on the PHC Certificates was 3.9% to 5.7% per annum.

Investment in MBS Securities. At December 31, 2015, theTaxable Bonds

The fair value of the Partnership’s investment in MBS Securities wastaxable bonds at December 31, 2017 is based upon prices obtained from a third-party pricing service, which are indicative of market activity.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 partythird-party pricing service incorporates commonly used market pricing methods, incorporates trading activity observed in the marketplace, and other data inputs. The methodology also consideredmethods. It considers the underlying characteristics of each security, which were also observable inputs, including: coupon;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 date; loan age; reset date; collateral type; geography; and prepayment speeds.or call analysis. The Partnership analyzesevaluates pricing data received from the third-party pricing service, by comparing it to valuationincluding consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information obtained from at least one other third partyeither the third-party pricing service ensuring they were within a tolerable rangeor public sources. The fair value estimates of difference whichthese taxable bonds are based largely on unobservable inputs believed to be used by market participants and requires the Partnership estimates as 7.5%. The Partnership also looked at observationsuse of trading activity injudgment on the marketplace when available.  Given these facts,part of the third-party pricing service and management. Due to the judgments involved, the fair value measurementsmeasurement of the Partnership’s investmentinvestments in MBS Securities weretaxable bonds is categorized as a Level 2 inputs.3 input. At December 31, 2017, the range of effective yields on the individual taxable bonds was 7.9% to 9.2% per annum

Taxable bonds. ThePrior to the second quarter of 2017, the fair values of the Partnership’s investments in taxable bonds have each beenwere based on a discounted cash flow orand yield to maturity analysis.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, arewere based largely on unobservable inputs the Partnership believesbelieved would be used by market participants.  Additionally, the calculation


methodology used by the external sources and the Partnership encompassesencompassed 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 lookslooked 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 validatesvalidated that the changes in the estimated fair value of the taxable bonds movemoved with the changes in these monitored factors.  Given these facts, the fair value measurement of the Partnership’s investment in taxable bonds iswas categorized as a Level 3 input.


Interest rate derivatives. 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 is 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 December 31, 2017 are summarized as follows:

 

 

Fair Value Measurements at December 31, 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

 

$

710,867,447

 

 

$

-

 

 

$

-

 

 

$

710,867,447

 

Mortgage revenue bonds

 

 

77,971,208

 

 

 

-

 

 

 

-

 

 

 

77,971,208

 

Bond purchase commitments (reported within

   other assets)

 

 

3,002,540

 

 

 

-

 

 

 

-

 

 

 

3,002,540

 

PHC Certificates

 

 

49,641,588

 

 

 

-

 

 

 

-

 

 

 

49,641,588

 

Taxable mortgage revenue bonds

   (reported within other assets)

 

 

2,422,459

 

 

 

-

 

 

 

-

 

 

 

2,422,459

 

Derivative contracts (reported within other

   assets)

 

 

597,221

 

 

 

-

 

 

 

-

 

 

 

597,221

 

Derivative swap liability

 

 

(826,852

)

 

 

-

 

 

 

-

 

 

 

(826,852

)

Total Assets and Liabilities at Fair Value, net

 

$

843,675,611

 

 

$

-

 

 

$

-

 

 

$

843,675,611

 

The following tables summarizes the activity related to Level 3 assets and liabilities for the year ended December 31, 2017:

 

 

For the Years Ended December 31, 2017

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase Commitments

 

 

PHC Certificates

 

 

Taxable Mortgage Revenue 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)

 

 

212,712

 

 

 

-

 

 

 

(654,290

)

 

 

-

 

 

 

(240,091

)

 

 

(681,669

)

Included in other

   comprehensive (loss) income

 

 

37,104,392

 

 

 

603,091

 

 

 

(882,452

)

 

 

(96,685

)

 

 

-

 

 

 

36,728,346

 

Purchases

 

 

121,347,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

556,017

 

 

 

121,903,017

 

Settlements

 

 

(50,036,500

)

 

 

-

 

 

 

(5,979,738

)

 

 

(1,565,455

)

 

 

410,122

 

 

 

(57,171,571

)

Ending Balance December 31, 2017

 

$

788,838,655

 

 

$

3,002,540

 

 

$

49,641,588

 

 

$

2,422,459

 

 

$

(229,631

)

 

$

843,675,611

 

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 December 31, 2017

 

$

-

 

 

$

-

 

 

$

(761,960

)

 

$

-

 

 

$

(240,091

)

 

$

(1,002,051

)

(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.


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

 

 

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 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 held in trust

 

$

590,194,179

 

 

$

-

 

 

$

-

 

 

$

590,194,179

 

Mortgage revenue bonds

 

 

90,016,872

 

 

 

-

 

 

 

-

 

 

 

90,016,872

 

 

 

90,016,872

 

 

 

-

 

 

 

-

 

 

 

90,016,872

 

Bond purchase commitments (reported within

other assets)

 

 

2,399,449

 

 

 

-

 

 

 

-

 

 

 

2,399,449

 

 

 

2,399,449

 

 

 

-

 

 

 

-

 

 

 

2,399,449

 

PHC Certificates

 

 

57,158,068

 

 

 

-

 

 

 

-

 

 

 

57,158,068

 

 

 

57,158,068

 

 

 

-

 

 

 

-

 

 

 

57,158,068

 

Taxable bonds (reported within other

assets)

 

 

4,084,599

 

 

 

-

 

 

 

-

 

 

 

4,084,599

 

Taxable mortgage revenue bonds

(reported within other assets)

 

 

4,084,599

 

 

 

-

 

 

 

-

 

 

 

4,084,599

 

Derivative contracts (reported within other

assets)

 

 

383,604

 

 

 

-

 

 

 

-

 

 

 

383,604

 

 

 

383,604

 

 

 

-

 

 

 

-

 

 

 

383,604

 

Derivative swap liability

 

 

(1,339,283

)

 

 

-

 

 

 

-

 

 

 

(1,339,283

)

Total Assets and Liabilities at Fair Value, net

 

$

742,897,488

 

 

$

-

 

 

$

-

 

 

$

742,897,488

 

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 year ended December 31, 2016:

 

 

For Twelve Months Ended December 31, 2016

 

 

For Twelve Months Ended December 31, 2016

 

 

Fair Value Measurements Using Significant

 

 

Fair Value Measurements Using Significant

 

 

Unobservable Inputs (Level 3)

 

 

Unobservable Inputs (Level 3)

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase Commitments

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate Derivatives (2)

 

 

Total

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase Commitments

 

 

PHC Certificates

 

 

Taxable Mortgage Revenue 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

 

 

$

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

 

 

175,769

 

 

 

-

 

 

 

(54,605

)

 

 

-

 

 

 

17,618

 

 

 

138,782

 

Included in earnings (interest expense)

 

 

175,769

 

 

 

-

 

 

 

(54,605

)

 

 

-

 

 

 

17,618

 

 

 

138,782

 

Included in other

comprehensive (loss) income

 

 

(17,342,217

)

 

 

(3,234,911

)

 

 

(1,480,497

)

 

 

(188,299

)

 

 

-

 

 

 

(22,245,924

)

 

 

(17,342,217

)

 

 

(3,234,911

)

 

 

(1,480,497

)

 

 

(188,299

)

 

 

-

 

 

 

(22,245,924

)

Purchases

 

 

130,620,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,620,000

 

 

 

130,620,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,620,000

 

Sale of securities

 

 

(9,295,000

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(399

)

 

 

(9,295,399

)

 

 

(9,295,000

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(399

)

 

 

(9,295,399

)

Settlements

 

 

(7,630,638

)

 

 

-

 

 

 

(2,014,120

)

 

 

(551,162

)

 

 

-

 

 

 

(10,195,920

)

 

 

(7,630,638

)

 

 

-

 

 

 

(2,014,120

)

 

 

(551,162

)

 

 

-

 

 

 

(10,195,920

)

Ending Balance December 31, 2016

 

$

680,211,051

 

 

$

2,399,449

 

 

$

57,158,068

 

 

$

4,084,599

 

 

$

(955,679

)

 

$

742,897,488

 

 

$

680,211,051

 

 

$

2,399,449

 

 

$

57,158,068

 

 

$

4,084,599

 

 

$

(955,679

)

 

$

742,897,488

 

Total amount of losses for the period

included in earnings attributable to

the change in unrealized losses

relating to assets or liabilities held on

December 31, 2016

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

17,618

 

 

$

17,618

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

17,618

 

 

$

17,618

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

 

 

(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.


Assets and liabilities measured at fair value on a recurring basis at December 31, 2015 are summarized as follows:

 

Fair Value Measurements at December 31, 2015

 

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

 

$

536,316,481

 

 

$

-

 

 

$

-

 

 

$

536,316,481

 

Mortgage revenue bonds

 

 

47,366,656

 

 

 

-

 

 

 

-

 

 

 

47,366,656

 

Bond purchase commitments (reported within

   other assets)

 

 

5,634,360

 

 

 

-

 

 

 

-

 

 

 

5,634,360

 

PHC Certificates

 

 

60,707,290

 

 

 

-

 

 

 

-

 

 

 

60,707,290

 

MBS Securities

 

 

14,775,309

 

 

 

-

 

 

 

14,775,309

 

 

 

-

 

Taxable bonds (reported within other

   assets)

 

 

4,824,060

 

 

 

-

 

 

 

-

 

 

 

4,824,060

 

Derivative contracts (reported within other

   assets)

 

 

344,177

 

 

 

-

 

 

 

-

 

 

 

344,177

 

Interest swap liability

 

 

(1,317,075

)

 

 

-

 

 

 

-

 

 

 

(1,317,075

)

Total Assets and Liabilities at Fair Value

 

$

668,651,258

 

 

$

-

 

 

$

14,775,309

 

 

$

653,875,949

 

 

The following tables summarizes the activity related to Level 3 assets and liabilities for the year ended December 31, 2015:

 

 

For Twelve Months Ended December 31, 2015

 

 

For Twelve Months Ended December 31, 2015

 

 

Fair Value Measurements Using Significant

 

 

Fair Value Measurements Using Significant

 

 

Unobservable Inputs (Level 3)

 

 

Unobservable Inputs (Level 3)

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase Commitments

 

 

PHC Certificates

 

 

Taxable Bonds

 

 

Interest Rate Derivatives (2)

 

 

Total

 

 

Mortgage

Revenue Bonds (1)

 

 

Bond Purchase Commitments

 

 

PHC Certificates

 

 

Taxable Mortgage Revenue Bonds

 

 

Interest Rate Derivatives (2)

 

 

Total

 

Beginning Balance January 1, 2015

 

$

449,024,137

 

 

$

5,780,413

 

 

$

61,263,123

 

 

$

4,616,565

 

 

$

267,669

 

 

$

520,951,907

 

 

$

449,024,137

 

 

$

5,780,413

 

 

$

61,263,123

 

 

$

4,616,565

 

 

$

267,669

 

 

$

520,951,907

 

Total gains (losses)

(realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

expense)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,802,655

)

 

 

(1,802,655

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,802,655

)

 

 

(1,802,655

)

Included in other

comprehensive income

 

 

9,370,264

 

 

 

(146,053

)

 

 

462,297

 

 

 

(138,682

)

 

 

-

 

 

 

9,547,826

 

Included in other comprehensive

(loss) income

 

 

9,370,264

 

 

 

(146,053

)

 

 

462,297

 

 

 

(138,682

)

 

 

-

 

 

 

9,547,826

 

Purchases

 

 

188,572,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

188,572,000

 

 

 

188,572,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

188,572,000

 

Mortgage revenue bond exchanged

for MF Property

 

 

(41,580,919

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(41,580,919

)

 

 

(41,580,919

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(41,580,919

)

Purchase interest rate derivative

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

562,088

 

 

 

562,088

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

562,088

 

 

 

562,088

 

Settlements

 

 

(21,702,345

)

 

 

-

 

 

 

(1,018,130

)

 

 

346,177

 

 

 

-

 

 

 

(22,374,298

)

 

 

(21,702,345

)

 

 

-

 

 

 

(1,018,130

)

 

 

346,177

 

 

 

-

 

 

 

(22,374,298

)

Ending Balance December 31, 2015

 

$

583,683,137

 

 

$

5,634,360

 

 

$

60,707,290

 

 

$

4,824,060

 

 

$

(972,898

)

 

$

653,875,949

 

 

$

583,683,137

 

 

$

5,634,360

 

 

$

60,707,290

 

 

$

4,824,060

 

 

$

(972,898

)

 

$

653,875,949

 

Total amount of losses for the period

included in earnings attributable to

the change in unrealized losses

relating to assets or liabilities held on

December 31, 2015

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(1,802,655

)

 

$

(1,802,655

)

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(1,802,655

)

 

$

(1,802,655

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

 

 

The following tables summarizes(1) Mortgage revenue bonds includes both bonds held in trust as well as those held by the activity related to Level 3Partnership.

(2) Interest rate derivatives include derivative contracts reported in other assets and liabilities for the year ended December 31, 2014:as well as derivative swap liabilities.

 

 

For Twelve Months Ended December 31, 2014

 

 

 

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, 2014

 

$

285,318,171

 

 

$

(4,852,177

)

 

$

62,056,379

 

 

$

4,075,953

 

 

$

888,120

 

 

$

347,486,446

 

Total gains (losses)

   (realized/unrealized)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (interest

   expense)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,003,351

)

 

 

(2,003,351

)

Included in other

   comprehensive (loss) income

 

 

52,272,236

 

 

 

10,632,590

 

 

 

5,219,937

 

 

 

685,612

 

 

 

-

 

 

 

68,810,375

 

Purchases

 

 

142,794,827

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

142,794,827

 

Purchase interest rate derivative

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,382,900

 

 

 

1,382,900

 

Mortgage revenue bond and MBS

   Securities sales and redemption

 

 

(30,464,798

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(30,464,798

)

Settlements

 

 

(896,299

)

 

 

-

 

 

 

(6,013,193

)

 

 

(145,000

)

 

 

-

 

 

 

(7,054,492

)

Ending Balance December 31, 2014

 

$

449,024,137

 

 

$

5,780,413

 

 

$

61,263,123

 

 

$

4,616,565

 

 

$

267,669

 

 

$

520,951,907

 

Total amount of losses for the period

   included in earnings attributable to

   the change in unrealized losses

   relating to assets or liabilities held on

   December 31, 2014

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(2,003,351

)

 

$

(2,003,351

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

 

 

Income and losses included in earnings for the periods shown above are included in interest expense.

TheAt December 31, 2017, the Partnership calculatesutilized a third-party pricing service to determine the fair value of the Partnership’s financial liabilities, which are indicative of market prices. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each financial liabilityliabilities as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure, seniority to other obligations, operating results of the underlying assets, and asset quality. The financial liabilities values are then estimated using a discounted cash flow modeland 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 financial liabilities are based largely on unobservable inputs believed to be used by market participants and requires the use of judgment on the debt amortization schedules atpart of the effective rate of interest for each period represented.  This estimate ofthird-party pricing service and management. Due to the judgments involved, the fair value is based onmeasurements of the Partnership’s financial liabilities are categorized as a Level 3 inputs.input. The TEBS and variable-rate TOB debt financings are credit enhanced by Freddie Mac and DB, respectively. The table below representssummarizes the fair value of the Partnership’s financial liabilities held on the Consolidated Balance Sheets at December 31, 20162017 and 2015:2016:

 

 

December 31, 2016

 

 

December 31, 2015

 

 

December 31, 2017

 

 

December 31, 2016

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt financing and LOCs

 

$

555,199,700

 

 

$

553,083,924

 

 

$

468,993,716

 

 

$

475,415,345

 

 

$

608,328,347

 

 

$

618,412,150

 

 

$

555,199,700

 

 

$

553,083,924

 

Mortgages payable and other secured financing

 

$

51,379,512

 

 

$

51,595,281

 

 

$

69,247,574

 

 

$

67,735,213

 

 

 

35,540,174

 

 

 

35,767,924

 

 

 

51,379,512

 

 

 

51,595,281

 

 

 

26. Segments

Due to the increased investments in ATAX Vantage Holdings, LLC, the Partnership added a new segment during the second quarter of 2016 named “Other Investments.” The Partnership consists ofhas 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 the MBS Securities Investments 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.

Mortgage Revenue Bond Investments Segment

The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of mortgage revenue bondsMRBs and related property loans whichthat have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.  Such mortgage revenue bondsMRBs are held as investments and the related property loans, net of loan loss, are reported as such on the Partnership’s consolidated balance sheets.  At December 31, 2016,2017, the Partnership held 83 mortgage revenue bonds.87 MRBs. The Residential Properties financed by 83 mortgage revenue bondsthe MRBs contain a total of  9,96810,666 rental units.units (unaudited). In addition,


one bondMRB (Pro Nova 2014-1) is collateralized by commercial real estate (Note 6).estate. All general and administrative expenses on the consolidated statements of operations are allocated to 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 December 31, 2016,2017, the Partnership consolidated the results of sevenconsolidates three MF Properties containing a total of 2,0041,013 rental units (see(unaudited, see Note 9). Income tax expense for the Greens Hold Co is reported within this segment.

Other Investments under the Amended and Restated LP Agreement

The Amended and Restated LP Agreement authorizes the Partnership to make investments other than in mortgage revenue bonds provided that these other investments are rated in one of the four highest rating categories by a national securities rating agency and do not constitute more than 25% of the Partnership’s 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 other investments are separated out into two separate segments – Public Housing Capital Fund Trust and Other Investments.

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).

 

Other Investments Segment

The Other investments segment consists of the operations of ATAX Vantage Holdings, LLC, which is invested in unconsolidated entities (Note 10) and has issued property loans due from Vantage at Brooks LLC and Vantage at New Braunfels LLC (Note 11).  


The following table details certain key financial information for the Partnership’s reportable segments for the three years ended December 31:

 

 

For the Years Ended December 31,

 

 

2016

 

 

2015

 

 

2014

 

 

2017

 

 

2016

 

 

2015

 

Total revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

36,673,232

 

 

$

38,772,872

 

 

$

23,227,674

 

 

$

49,100,423

 

 

$

36,673,232

 

 

$

38,772,872

 

MF Properties

 

 

17,404,439

 

 

 

17,789,125

 

 

 

14,250,572

 

 

 

13,677,635

 

 

 

17,404,439

 

 

 

17,789,125

 

Public Housing Capital Fund Trust

 

 

2,888,035

 

 

 

2,994,482

 

 

 

3,038,819

 

 

 

2,951,735

 

 

 

2,888,035

 

 

 

2,994,482

 

MBS Securities Investments

 

 

17,921

 

 

 

225,890

 

 

 

1,423,958

 

 

 

-

 

 

 

17,921

 

 

 

225,890

 

Other Investments

 

 

1,995,123

 

 

 

170,922

 

 

 

-

 

 

 

4,651,752

 

 

 

1,995,123

 

 

 

170,922

 

Total revenues

 

$

58,978,750

 

 

$

59,953,291

 

 

$

41,941,023

 

 

$

70,381,545

 

 

$

58,978,750

 

 

$

59,953,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

11,904,616

 

 

$

10,787,252

 

 

$

7,147,092

 

 

$

18,705,398

 

 

$

11,904,616

 

 

$

10,787,252

 

MF Properties

 

 

2,200,531

 

 

 

2,659,350

 

 

 

2,319,928

 

 

 

2,099,840

 

 

 

2,200,531

 

 

 

2,659,350

 

Public Housing Capital Fund Trust

 

 

1,349,800

 

 

 

1,221,713

 

 

 

1,295,238

 

 

 

1,350,205

 

 

 

1,349,800

 

 

 

1,221,713

 

MBS Securities Investments

 

 

14,692

 

 

 

157,902

 

 

 

403,653

 

 

 

-

 

 

 

14,692

 

 

 

157,902

 

Other Investments

 

 

-

 

 

 

-

 

 

 

-

 

Total interest expense

 

$

15,469,639

 

 

$

14,826,217

 

 

$

11,165,911

 

 

$

22,155,443

 

 

$

15,469,639

 

 

$

14,826,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

MF Properties

 

 

5,980,483

 

 

 

5,888,973

 

 

 

4,801,533

 

 

 

4,949,935

 

 

 

5,980,483

 

 

 

5,888,973

 

Public Housing Capital Fund Trust

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

MBS Securities Investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Other Investments

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation expense

 

$

5,980,483

 

 

$

5,888,973

 

 

$

4,801,533

 

 

$

4,949,935

 

 

$

5,980,483

 

 

$

5,888,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

11,755,639

 

 

$

17,924,037

 

 

$

13,181,961

 

 

$

15,438,583

 

 

$

11,755,639

 

 

$

17,924,037

 

MF Properties

 

 

8,442,704

 

 

 

2,964,297

 

 

 

(938,151

)

 

 

9,739,704

 

 

 

8,442,704

 

 

 

2,964,297

 

Public Housing Capital Fund Trust

 

 

1,538,234

 

 

 

1,758,022

 

 

 

1,714,968

 

 

 

839,570

 

 

 

1,538,234

 

 

 

1,758,022

 

MBS Securities Investments

 

 

51,984

 

 

 

67,547

 

 

 

1,017,637

 

 

 

-

 

 

 

51,984

 

 

 

67,547

 

Other Investments

 

 

1,995,123

 

 

 

170,922

 

 

 

-

 

 

 

4,644,994

 

 

 

1,995,123

 

 

 

170,922

 

Income from continuing operations

 

$

23,783,684

 

 

$

22,884,825

 

 

$

14,976,415

 

 

$

30,662,851

 

 

$

23,783,684

 

 

$

22,884,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Partnership Net income

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

11,755,639

 

 

$

17,924,037

 

 

$

13,181,961

 

 

$

15,438,583

 

 

$

11,755,639

 

 

$

17,924,037

 

MF Properties

 

 

8,443,527

 

 

 

2,967,098

 

 

 

(933,478

)

 

 

9,668,051

 

 

 

8,443,527

 

 

 

2,967,098

 

Public Housing Capital Fund Trust

 

 

1,538,234

 

 

 

1,758,022

 

 

 

1,714,968

 

 

 

839,570

 

 

 

1,538,234

 

 

 

1,758,022

 

MBS Securities Investments

 

 

51,984

 

 

 

67,547

 

 

 

1,017,637

 

 

 

-

 

 

 

51,984

 

 

 

67,547

 

Other Investments

 

 

1,995,123

 

 

 

170,922

 

 

 

-

 

 

 

4,644,994

 

 

 

1,995,123

 

 

 

170,922

 

Discontinued Operations

 

 

-

 

 

 

3,721,397

 

 

 

52,773

 

 

 

-

 

 

 

-

 

 

 

3,721,397

 

Partnership net income

 

$

23,784,507

 

 

$

26,609,023

 

 

$

15,033,861

 

 

$

30,591,198

 

 

$

23,784,507

 

 

$

26,609,023

 

 

The following table details total assets for the Company’s reportable segments for the two years ended December 31:

 

 

December 31, 2017

 

 

December 31, 2016

 

Total assets

 

December 31, 2016

 

 

December 31, 2015 (1)

 

 

 

 

 

 

 

 

 

Mortgage Revenue Bond Investments

 

$

764,995,675

 

 

$

658,846,881

 

 

$

937,565,390

 

 

$

764,995,675

 

MF Properties

 

 

129,895,112

 

 

 

141,704,103

 

 

 

83,514,758

 

 

 

129,895,112

 

Public Housing Capital Fund Trust Certificates

 

 

57,461,268

 

 

 

61,021,462

 

 

 

49,918,434

 

 

 

57,461,268

 

MBS Securities Investments

 

 

-

 

 

 

15,035,061

 

Other Investments

 

 

34,540,280

 

 

 

7,726,970

 

 

 

55,573,834

 

 

 

34,540,280

 

Consolidation/eliminations

 

 

(42,778,661

)

 

 

(17,223,994

)

 

 

(56,804,417

)

 

 

(42,778,661

)

Total assets

 

$

944,113,674

 

 

$

867,110,483

 

 

$

1,069,767,999

 

 

$

944,113,674

 

(1) The Partnership has reduced the reported assets of the Mortgage Revenue Bond Investments segment and the consolidation and eliminations amount by approximately $182.7 million to eliminate intercompany activity within the Mortgage Revenue Bond Investments segment. 

 


27. Summary of Unaudited Quarterly Results of Operations

 

2016

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

2017

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

Revenues and other income

 

$

14,927,956

 

 

$

27,376,050

 

 

$

14,855,912

 

 

$

15,899,246

 

 

$

23,208,975

 

 

$

16,218,225

 

 

$

16,234,830

 

 

$

32,472,818

 

Income from continuing operations

 

 

2,531,688

 

 

 

11,005,829

 

 

 

4,622,874

 

 

 

5,623,293

 

 

 

7,360,515

 

 

 

4,109,400

 

 

 

3,545,483

 

 

 

15,647,453

 

Income from discontinuing operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income - America First Multifamily Investors, L.P.

 

$

2,531,700

 

 

$

11,005,930

 

 

$

4,623,542

 

 

$

5,623,335

 

 

$

7,360,515

 

 

$

4,109,400

 

 

$

3,545,483

 

 

$

15,647,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, per unit

 

$

0.04

 

 

$

0.15

 

 

$

0.06

 

 

$

0.09

 

Income from discontinued operations, per unit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income, basic and diluted, per unit

 

$

0.04

 

 

$

0.15

 

 

$

0.06

 

 

$

0.09

 

Income from continuing operations, per Unit

 

$

0.10

 

 

$

0.06

 

 

$

0.05

 

 

$

0.23

 

Income from discontinued operations, per Unit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income, basic and diluted, per Unit

 

$

0.10

 

 

$

0.06

 

 

$

0.05

 

 

$

0.23

 

 

2015

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

Revenues and other income

 

$

12,506,625

 

 

$

17,119,567

 

 

$

14,084,872

 

 

$

20,841,336

 

Income from continuing operations

 

 

2,499,160

 

 

 

7,983,295

 

 

 

2,286,383

 

 

 

10,115,987

 

Income (loss) from discontinued operations

 

 

24,428

 

 

 

238,287

 

 

 

253,894

 

 

 

3,204,788

 

Net income - America First Multifamily Investors, L.P.

 

$

2,524,479

 

 

$

8,221,271

 

 

$

2,540,649

 

 

$

13,322,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, per unit

 

$

0.04

 

 

$

0.12

 

 

$

0.03

 

 

$

0.15

 

Income from discontinued operations, per unit

 

 

-

 

 

 

-

 

 

 

0.01

 

 

 

(0.01

)

Net income, basic and diluted, per unit

 

$

0.04

 

 

$

0.12

 

 

$

0.04

 

 

$

0.14

 

2016

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

Revenues and other income

 

$

14,927,956

 

 

$

27,376,050

 

 

$

14,855,912

 

 

$

15,899,246

 

Income from continuing operations

 

 

2,531,688

 

 

 

11,005,829

 

 

 

4,622,874

 

 

 

5,623,293

 

Income from discontinuing operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income - America First Multifamily Investors, L.P.

 

$

2,531,700

 

 

$

11,005,930

 

 

$

4,623,542

 

 

$

5,623,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, per Unit

 

$

0.04

 

 

$

0.15

 

 

$

0.06

 

 

$

0.09

 

Income from discontinued operations, per Unit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income, basic and diluted, per Unit

 

$

0.04

 

 

$

0.15

 

 

$

0.06

 

 

$

0.09

 

 

 

28. Subsequent Events

 

The following table summarizes the Term A/B Trust Financings thatIn February 2018, the Partnership entered into subsequentexecuted a PSA to December 31, 2016:acquire a tract of land in Douglas County, NE. If the land is successfully acquired, it will be classified as “Land held for development.”

Term A/B Trusts Securitization

 

Outstanding Term A/B

Trust Financing

 

 

Acquired

 

Stated Maturity

 

Fixed Interest

Rate

 

San Vicente - Series A

 

$

3,150,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

San Vicente - Series B

 

 

1,555,000

 

 

Feb 2017

 

June 2018

 

 

3.76

%

Las Palmas - Series A

 

 

1,530,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

Las Palmas - Series B

 

 

1,505,000

 

 

Feb 2017

 

June 2018

 

 

3.76

%

The Village at Madera - Series A

 

 

2,780,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

The Village at Madera - Series A

 

 

1,465,000

 

 

Feb 2017

 

July 2018

 

 

3.76

%

Harmony Court Bakersfield - Series A

 

 

3,360,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

Harmony Court Bakersfield - Series A

 

 

1,700,000

 

 

Feb 2017

 

July 2018

 

 

3.76

%

Summerhill - Series A

 

 

5,785,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

Summerhill - Series B

 

 

2,870,000

 

 

Feb 2017

 

July 2018

 

 

3.76

%

Courtyard - Series A

 

 

9,210,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

Courtyard - Series B

 

 

5,295,000

 

 

Feb 2017

 

July 2018

 

 

3.76

%

Seasons Lakewood - Series A

 

 

6,615,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

Seasons Lakewood - Series B

 

 

4,475,000

 

 

Feb 2017

 

August 2022

 

 

3.76

%

Seasons San Juan Capistrano - Series A

 

 

11,140,000

 

 

Feb 2017

 

February 2022

 

 

3.89

%

Seasons San Juan Capistrano - Series B

 

 

5,590,000

 

 

Feb 2017

 

August 2022

 

 

3.76

%

Avistar at Wood Hollow - Series A

 

 

27,075,000

 

 

Feb 2017

 

February 2027

 

 

4.46

%

Avistar at Copperfield  - Series A

 

 

3,210,000

 

 

Feb 2017

 

February 2027

 

 

4.46

%

Avistar at Wilcrest  - Series A

 

 

8,500,000

 

 

Feb 2017

 

February 2027

 

 

4.46

%

 

In February 2017, a portion of2018, the proceeds from the Term A/B Trust Financings in the table above were used to pay principal, in full, and accrued interest duePartnership closed on the Partnership’s $40 million unsecured linepurchase of credit and $20 million secured linetwo contiguous tracks of credit.land for future development in Douglas County, NE. The purchase price totaled approximately $2.6 million.

 


The following table summarizes the mortgage revenue bonds acquired by the Partnership subsequent to December 31, 2016:

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Base Interest Rate

 

 

Principal

Outstanding at Date

of Acquisition

 

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

 

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

 

The Partnership funded portions of the purchase price for the mortgage revenue bonds from the proceeds of the related Term A/B Trust Financing in the table above and approximately $14.0 million drawn from the Partnership’s unsecured line of credit.

In February 2017, the Northern View MF Property met the criteria for classification as assets held for sale (See policy in Note 2). The Partnership expects to complete the sale of its 99% interest in the entity that owns the MF Property in March 2017.

The table below summarizes the assets and liabilities of the Northern View MF Property included in the Partnership’s consolidated financial statements at December 31, 2016:

 

 

December 31, 2016

 

Cash and cash equivalents

 

$

62,386

 

Restricted cash

 

 

203,893

 

Land and improvements

 

 

688,539

 

Buildings and improvements

 

 

8,088,059

 

Real estate assets before accumulated depreciation

 

 

8,776,598

 

Accumulated depreciation

 

 

(2,386,626

)

Net real estate assets

 

 

6,389,972

 

Other assets

 

 

33,534

 

Total assets held for sale

 

$

6,689,785

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

225,007

 

In March 2017, the Partnership entered into a subscription agreement and issued to a financial institution 613,100 units of Series A Preferred Units for gross proceeds of approximately $6.1 million.


Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable

Item 9A.  Controls and Procedures.

Evaluation of disclosure controls and procedures.  The Chief Executive Officer (“CEO”) ofand the Company and Chief Financial Officer (“CFO”) of Burlington Capital LLC (in its capacity as the general partner of the General Partner of the Partnership)Company have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that, as of December 31, 2016,2017, the Company’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.  There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter ended December 31, 20162017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management Report On Internal Control Over Financial Reporting

The Company’s management (including officers of Burlington Capital LLC in its capacity as the general partner of the General Partner of the Partnership) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f). The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s CEO and CFO of Burlington Capital LLC of the effectiveness of the Company’s internal control over financial reporting.  The Company’s management used the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) to perform this evaluation.  Based on that evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2016.2017.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2016,2017, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report in Item 8.


Item 9B.  Other Information.

 

None.


PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

The Partnership is managed by its general partner, AFCA 2 which in turn is managed by its general partner, Burlington.  Accordingly, the executive officers and Board of Managers of Burlington act as the executive officers and directors of the Partnership. In addition, Chad L. Daffer holds the position of Chief Executive Officer and Craig S. Allen holds the position of Chief Financial Officer of the Partnership.  Mr. Daffer isand Mr. Allen are the only executive officerofficers of the Partnership, but isare employed by Burlington.

The Partnership’s General Partner is not elected by the Unitholders and is not subject to re-election on an annual or other continuing basis in the future.  In addition, our Unitholders are not entitled to elect the managersManagers or executive officers of Burlington or take part in the management or control of the business of the Partnership.

The Board of Managers of Burlington has nine members.  The NASDAQ listing rules do not require a listed limited partnership, such as the Partnership, to have a majority of independent directors on the Board of Managers of the general partner of our General Partner or to establish a compensation committee or a nominating and corporate governance committee. We are, however, required to have an audit committee of at least three members, all of whom are required to meet the independence and experience standards established by the NASDAQ listing rules and SEC rules.  In this regard, a majority of the members of Burlington’s Board of Managers and all the members of the Burlington Audit Committee have been determined to be independent under the applicable SEC and NASDAQ independence requirements.

The following table sets forth certain information regarding the current executive officers and managersManagers of Burlington and the sole executive officerofficers of the Partnership, each of whom servesPartnership. Managers serve for a term of one year.year and are elected annually. All positions are held with Burlington unless otherwise noted.

 

Name

 

Position Held with Burlington

 

Position Held Since

Michael B. Yanney

 

Chairman Emeritus of the Board / Manager

 

2008 / 1984

Lisa Y. Roskens

 

Chairman of the Board / Manager

 

2008 / 1999

Chad L. Daffer

 

Chief Executive Officer

 

2015

Craig S. Allen

 

Chief Financial Officer

 

2015

Mariann Byerwalter

 

Manager (2)

 

1997

Dr. William S. Carter

 

Manager (2)

 

2003

Walter K. Griffith

 

Manager (1) (2)

 

2015

Patrick J. Jung

 

Manager (1) (2)

 

2003

Michael O. Johanns

 

Manager (1) (2)

 

2015

George H. Krauss

 

Manager

 

2001

Dr. Gail Walling Yanney

 

Manager

 

1996

 

(1)

Member of the Burlington Audit Committee.  The Board of Managers has designated Mr. Jung as the “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of SEC Regulation S-K.

(2)

(1) Member of the Burlington Audit Committee.  The Board of Managers has designated Mr. Jung as the “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of SEC Regulation S-K.

(2) Determined to be independent under both Section 10A of the Exchange Act and the NASDAQ Marketplace Rules.

Following is the biographical information for each of the managers and executive officersManagers of Burlington disclosed above, and information for the Chief Executive Officer and Chief Financial Officer of the Partnership:

Michael B.Mike Yanney, 83,84,is Chairman Emeritus served as Chairman of the Board of Managers of Burlington and its predecessors from 1984 through 2008.Capital LLC, formerly America First Companies, which has managed public investment funds.  From 1977 until the organization of the first such fund in 1984, Mr. Yanney was principally engaged in the ownership and management of commercial banks.  From 1961 to 1977, Mr. Yanney was employed by Omaha National Bankserved as a director and Omaha National Corporation (now part of U.S. Bank), where he held various positions, including the position of Executive Vice President and Treasurermember of the Executive Committee of FirsTier Financial, Inc., the largest bank holding company.company in Nebraska, from 1985 until his resignation in 1991.  Mr. Yanney also serves as the chairmanis a member of the board of directors offor Burlington Capital LLC, America First Apartment Investors, Inc.Tax Exempt Fund, and iswas formerly a memberdirector of the boards of directors ofTetrad, Core Bank Holding Co.,   Level 3 Communications, Inc., Burlington Northern Santa Fe Corporation, Freddie Mac Advisory Board, Durham Resources, Inc., Freedom Communications, Inc., Forest Oil Corporation, MFS Communications, Inc., PKS Information Services, Inc., Omaha Steaks, MFA, and Magnum Resources,Streck Inc. Mr. Yanney is the husband of Dr. Gail Walling Yanney and the father of Lisa Y. Roskens.

Lisa Y. Roskens, 50,51, is Chief Executive Officer and President of Burlington, as well as being Chairman of the Board of Managers. From 1999 to 2000, Ms. Roskens was managing Director of Twin Compass, LLC. From 1997 to 1999, Ms. Roskens was employed by Inacom Corporation where she held the position of Director of Business Development and Director of Field Services Development.


From 1995 to 1997, Ms. Roskens served as Finance Director for the U.S. Senate campaign of Senator Charles Hagel of Nebraska. From 1992 to 1995, Ms. Roskens was an attorney with the Kutak Rock LLP law firm in Omaha, Nebraska, specializing in commercial


litigation. Ms. Roskens is the daughter of Michael B. Yanney and Gail Walling Yanney. Ms. Roskens also serves on the Board of Directors of America First Apartment Investors, Inc.

Chad LL. Daffer, 52,53, is the Chief Executive Officer of the Partnership. Mr. Daffer has been employed by Burlington Capital LLC since 2005 where he served as the Partnership’s Fund Manager.   Prior to joining Burlington, Mr. Daffer served as an Investment Banker from 1996 to 2004 with Kirkpatrick Pettis and from 1992 to 1996 he was employed in Fixed Income Institutional Sales with Paine Webber.  Mr. Daffer has a Bachelor of Science in Accounting from the University of Nebraska.  

Craig S. Allen, 58,59, is Chief Financial Officer of Burlington, and in that capacity also serves as the Chief Financial Officer of the Company.Partnership. Mr. Allen was appointedhas been employed by the Board of Managers of Burlington Capital, LLC as Chief Financial Officer on January 8,since 2015.  Mr. Allen brings 20over 25 years of experience working with public and privately traded companies with over 1720 years in the financial services industry.  From December 2010 to November 2014, he was previously Senior Vice President and Chief Financial Officer at ECMC Holdings, Oakdale, Minnesota, an $80 million privately held financial services company. Prior to that, from January 2001 to December 2010, Mr. Allen was Chief Financial Officer with XO Group, Inc. (NYSE: XOXO), a publicly traded global multi-media and technology company.  Mr. Allen has a Bachelor of Science degree in Accounting from Northern Illinois University, DeKalb, Illinois.  He also holds designations as a Certified Public Accountant (CPA), Chartered Global Management Accountant (CGMA), Certified Management Accountant (CMA) and International Financial Report Standards Certificate (IFRS).

Mariann Byerwalter, 56,57, is Chairman of JDN Corporate Advisory LLC and the InterimPresidentandCEOofStanfordHealthCare.Sheisalso Chairman of the Board of Directors of SRI International. Prior to this, Ms. Byerwalter servedasChairmanoftheBoardofDirectorsofStanfordHospitalandClinicsfrom2006- 2013. She currently serves as a Director on the following Boards: Pacific Life Insurance Company, Franklin Resources, Inc., WageWorks, Inc., Redwood Trust, Inc., the Stanford Hospital and Clinics, and the Lucile Packard Children'sChildren’s Hospital.  Ms. ByerwalterisaTrusteeEmeritaoftheStanfordUniversityBoardofTrustees,having served three terms as a Trustee between 1992and 2012.2012. Ms. Byerwalter was Chief Financial Officer and Vice President for Business Affairs of Stanford University (1996 (1996 - 2000), and Special Assistant to the President through 2001. Prior to this she was an entrepreneur. She was a partner and co-founder of America First Financial Corporation, which raised funds to purchase and turn-around failed savings and loans from the government. Before this she was Vice President for Strategic Planningand Corporate Development at BankAmerica Corporation, managing acquisitions and divestitures forBankAmerica. Ms. Byerwalter earned her Master’s Degree in Business Administration from Harvard Business School and her Bachelor’s Degree in Economics and Political Science/Public Policy from Stanford University.

Dr. William S. Carter, 90,91, is retired from medical practice. He is a graduate of Butler University and Kansas University School of Medicine. He was appointed a diplomat of the American Board of Otorhinolaryngology. He was in private practice in Omaha, Nebraska and was Managing Partner for the Midwest ENT Group until his retirement in 1993.

 

Walter K. (Kimball) Griffith, 67, has been68, is of counsel to Norris George & Ostrow PLLC since October 2017, a law firm that specializes in providing finance solutions to affordable housing and community development.  Prior to that he was an affordable housing consultant since retiring from Federal Home Loan Mortgage Corporation (Freddie Mac) in February 2015.  From 2003 to February 2015, he served as director (2003-2007) and vice president (2007-2015) in its Multifamily Division in charge of mortgage and investment products for affordable properties with federal, state or local financial support.  During the period that he was vice president, Freddie Mac affordable housing investments annually approximated $3 to 4 billion, working with 10 to 15 affordable mortgage lenders and investors and supervising 8 production staff as well as working with 15 underwriting staff.  From 1974 to 2003, he practiced law, including with Kutak Rock LLP and its predecessor firms, from 1976 until 1999, where he served in numerous management roles, and with Ballard Spahr LLP from 1999 to 2003.  Mr. Griffith currently serves on the Board of Directors of Enterprise Community Investors, Inc., a national nonprofit that seeks to end housing insecurity through investments in equity and debt as well as supporting local nonprofits serving affordable housing residents and communities.  He also serves as a non-executive chair ofon the Board of Housing Up, formerly Transitional Housing Corporation (chair 2015-2017), a Washington DC-based non-profit that provides housing and supportive services to homeless and at-risk families.  He also serves on the board of Community Preservation Development Corporation, a Washington DC-based nonprofit that develops and owns affordable multifamily properties and workforce housing in the Washington DC region from Baltimore MD to Richmond VA and Newport News VA.


Patrick J. Jung, CPA, 69,70, currently serves as the Chief Operating Officer of Surdell & Partners, LLC, an advertising company in Omaha, Nebraska. Prior to his position with Surdell & Partners LLC, Mr. Jung was a practicing certified public accountant with KPMG LLC for thirty years. During that period, he served as a Partner for twenty years and as the Managing Partner of the Nebraska business unit for the last six years. Mr. Jung is also a member of the board of directors of Werner Enterprises, Inc., and serves on its audit and compensation committees. Werner, headquartered in Omaha, Nebraska, is a publicly traded transportation and logistics company engaged primarily in hauling truckload shipments of general commodities. Mr. Jung is a director and officer at the Omaha Zoological Society.

George H. Krauss, 75, was a consultant to Burlington from 1996 until 2010. From 2010 until present Mr. Krauss has been a Managing Director of Burlington. From 1972 to 1997, Mr. Krauss practiced law with Kutak Rock LLP, serving as such firm’s managing partner from 1983 to 1993, and, from 1997 to 2006, was Of Counsel to such firm.  Mr. Krauss currently serves as the Chairman of the board of directors of MFA Mortgage Investments, Inc and serves on the board of directors of Core Bank and its predecessor Omaha State Bank. Mr. Krauss previously served on the board of directors of Gateway, Inc., from 1991 to October 2007, West Corporation, from


January 2001 to October 2006, America First Apartment Investors, Inc., from January 2003 to September 2007, and infoGROUP, Inc., from December 2007 to July 2010.  Mr. Krauss received a Juris Doctorate degree and a Masters of Business Administration degree from the University of Nebraska.Society

Michael O. Johanns, 66,67, was elected to the U.S. Senate in 2008. Senator Johanns served in the 111th through 113th Congresses as a member of the following committees: Appropriations, Agriculture, Banking, Commerce, Environment & Public Works, Indian Affairs and Veterans’ Affairs (varied by Congress). As the 28th Secretary of the U.S. Department of Agriculture, Senator Johanns directed 18 agencies employing 90,000 staff worldwide and managed a $93 billion budget. Senator Johanns served as Governor of Nebraska from 1999 to 2005. Senator Johanns’ public service began on the Lancaster County Board in Nebraska from 1983 to 1987, followed by the Lincoln City Council from 1989 to 1991. He was elected Mayor of Lincoln in 1991and reelected without opposition in 1995. He is a graduate of St. Mary’s University of Minnesota and holds a law degree from Creighton University in Omaha. He clerked for the Nebraska Supreme Court before practicing law in O’Neill and Lincoln, Nebraska.

George H. Krauss, 76, was a consultant to Burlington from 1996 until 2010. From 2010 until present Mr. Krauss has been a Managing Director of Burlington. From 1972 to 1997, Mr. Krauss practiced law with Kutak Rock LLP, serving as such firm’s managing partner from 1983 to 1993, and, from 1997 to 2006, was Of Counsel to such firm.  Mr. Krauss currently serves as the Chairman of the board of directors of MFA Mortgage Investments, Inc.  Mr. Krauss previously served on the board of directors of Gateway, Inc., from 1991 to October 2007, West Corporation, from January 2001 to October 2006, America First Apartment Investors, Inc., from January 2003 to September 2007, infoGROUP, Inc., from December 2007 to July 2010 and Core Bank and its predecessor Omaha State Bank from 1987 to 2017.  Mr. Krauss received a Juris Doctorate degree and a Master’s of Business Administration degree from the University of Nebraska.

Dr. Gail Walling Yanney,, 80,81, is a retired physician.  Dr. Walling Yanney practiced anesthesiology andanesthesiology.  She was the Executive Director of the Clarkson Foundation from 1993 until October of 1995.  In addition, she was athe director of FirsTier Bank, N.A., Omaha, Nebraska, prior to its merger with First Bank, N.A.  Dr. Yanney is the wife of Michael B. Yanney and the mother of Lisa Y. Roskens.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the managersManagers of Burlington and executive officers of Burlingtonthe Partnership and persons who own more than 10% of the Partnership’s BUCs to file reports of their ownership of BUCs with the SEC.  Such officers, managersManagers and Unitholders are required by SEC regulations to furnish the Partnership with copies of all Section 16(a) reports they file.  Based solely upon review of the copies of such reports received by the Partnership and written representations from each such person who did not file an annual report with the SEC (Form 5) that no other reports were required, the Partnership believes that two members of the board of managers, Mariann Byerwalter and Dr. William S. Carter, each filed one Form 4 late. Each instance involved only a single transaction and was filed as soon as practical.  The Partnership believes all other Section 16(a) filing requirements applicable to the executive officers, managers,Managers, and beneficial owners of BUCs were satisfied in a timely manner during the year ended December 31, 2016.2017.

Code of Ethical Conduct and Code of Conduct

Burlington has adopted the Code of Ethical Conduct for its senior executive and financial officers as required by Section 406 of the Sarbanes-Oxley Act of 2002.  As such, this Code of Ethical Conduct covers all executive officers of Burlington, who perform such duties for the Partnership.  Burlington has also adopted the Code of Conduct applicable to all Board managers,Managers, officers, and employees which is designed to comply with the listing requirements of the NASDAQ Stock Market.  Both the Code of Ethical Conduct and the Code of Conduct are available on the Partnership’s website at www.ataxfund.com.

Audit Committee

Burlington’s Board of Managers has an Audit Committee.  The Audit Committee charter is posted under the “Investors & Brokers” section of our website at www.ataxfund.com.  The Partnership does not have a compensation committee or a nominating and corporate governance committee.  The NASDAQ listing rules do not require a listed limited partnership to establish a compensation committee or a nominating and corporate governance committee.  We are, however, required to have an audit committee with a majority of members that are “independent” under the NASDAQ listing standards.


The Audit Committee consists of Patrick J. Jung, Walter K. Griffith, and Michael O. Johanns.  The Board of Managers has affirmatively determined that each member of the Audit Committee meets the independence and experience standards established by the NASDAQ listing rules and the rules of the SEC.  The Board of Managers has also reviewed the financial expertise of Mr. Jung and affirmatively determined that he is an “audit committee financial expert,” as determined by the rules of the SEC.  Mr. Jung is “independent” as defined by the rules of the SEC and the NASDAQ listing standards.

The Audit Committee held ninefour meetings in 2016.2017.  The Audit Committee assists the Board of Managers in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and partnership policies and controls.  The Audit Committee has the sole authority to (1) retain and terminate our independent registered public accounting firm, (2) approve all auditing services and related fees and the terms thereof performed by our independent registered public accounting firm, and (3) pre-approve any non-audit services and tax services to be rendered by our independent registered public accounting firm.  The Audit Committee is also responsible for confirming the independence and objectivity of our independent registered public accounting firm.  


Our independent registered public accounting firm is given unrestricted access to the Audit Committee and Burlington’s management, as necessary.

Item 11.  Executive Compensation.

Compensation Discussion and Analysis

This section discusses the material elements of the compensation of the individuals who served as the Partnership’s executive officers as of December 31, 2016,2017, whom we refer to as our “named executive officers.”  For 2016,2017, the Partnership’s named executive officers consisted of Chad L. Daffer, the Chief Executive Officer, of the Partnership, and Craig S. Allen, the Chief Financial Officer of Burlington who, in that capacity, also serves as the Chief Financial Officer of the Partnership.Officer.  Mr. Daffer and Mr. Allen are both employees, but not executive officers, of Burlington rather than the Partnership.Burlington.  Based on the standards for determining “executive officers” set forth in Exchange Act Rule 3b-7, and consistent with the Partnership’s management structure, the Partnership has determined that, as of December 31, 2016,2017, Mr. Daffer and Mr. Allen were the only individuals who served as executive officers of the Partnership.

Under the terms of its Amended and Restated LP Agreement, other than pursuant to awards under equity plans sponsored by the Partnership or its affiliates, the Partnership is not permitted to provide any compensation to executive officers of Burlington or to any limited partners of AFCA 2. In this connection,regard, the compensation of the named executive officers of the Partnership is determined exclusively by Burlington. The Partnership reimburses AFCA 2 for services provided by the Partnership’s named executive officers. Accordingly, the Partnership does not have an executive compensation program for the named executive officers for whichthat is controlled by the Partnership controls.Partnership.

Set forth below is information about all compensation paid by the Partnership, pursuant to awards under equity plans sponsored by the Partnership or its affiliates,to the named executive officers for the year ended December 31, 2016.2017.

Compensation Committee Report

The Partnership does not have a separate compensation committee.  We, as the Board of Managers of Burlington, have reviewed and discussed the foregoing Compensation Discussion and Analysis with management.  Based on this review and discussion with management, we have recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the year ended December 31, 2016.2017.

 

Respectfully Submitted,

 

Lisa Y. Roskens, ChairmanPatrick J. Jung

Michael B. Yanney, Chairman EmeritusMichael O. Johanns

Mariann ByerwalterGeorge H. Krauss

William S. CarterGail Walling Yanney

Patrick J. Jung

Michael B. Yanney, Chairman Emeritus

Michael O. Johanns

Mariann Byerwalter

George H. Krauss

William S. Carter

Gail Walling Yanney

Walter K. Griffith

 


Summary Compensation Table for 2016For 2017

The following table sets forth information regarding compensation paid by the Partnership, pursuant to awards under equity plans sponsored by the Partnership or its affiliates, to our named executive officers for the year ended December 31, 2017 and 2016.  No such compensation was paid in 2015, and 2014, therefore no amounts are provided for those years.that year.

 

Name and Principal Position

 

Year

 

Unit Awards (1) ($)

 

 

Total

($)

 

 

Year

 

Unit Awards (1) ($)

 

 

Total

($)

 

Chad L. Daffer

 

2016

 

 

330,670

 

 

 

330,670

 

 

2017

 

 

325,679

 

 

 

325,679

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

330,670

 

 

 

330,670

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Craig S. Allen

 

2016

 

 

267,088

 

 

 

267,088

 

 

2017

 

 

268,290

 

 

 

268,290

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

267,088

 

 

 

267,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) This column reflects grants of restricted unit awards under the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (the “Plan”) as approved by the Unitholders in 2015.  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 million BUCs.  Restricted unit awards are generally granted with vesting conditions ranging from three months to up to three years.  Restricted unit awards granted to Managers and executive officers during 2016 provide for the payment of distributions during the restriction period.  The restricted unit awards provide for accelerated vesting if there is a change in control.  The value of the restricted unit awards to the named executives in the


table above represents the aggregate grant date fair value of each award computed in accordance with FASB ASC Topic 718.  The values were computed by multiplying the number of units underlying the unit award by the closing price per unit of the Partnership’s BUCs on the NASDAQ Global Select Market on the grant date.  The Partnership awarded the named executive officers a total of 87,021 restricted units on September 26, 2016 and 12,154 restricted units on November 17, 2016, with grant date fair values of $6.08 and $5.65

(1)

This column reflects grants of restricted unit awards under ATAX’s 2015 Equity Incentive Plan (the “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 million BUCs.  Restricted unit awards are generally granted with vesting conditions ranging from three months to up to three years.  Restricted unit awards granted to Managers and executive officers during 2016 and 2017 provide for the payment of distributions during the restriction period.  The restricted unit awards provide for accelerated vesting if there is a change in control.  The value of the restricted unit awards to the named executives in the table above represents the aggregate grant date fair value of each award computed in accordance with FASB ASC Topic 718.  The values were computed by multiplying the number of units underlying the unit award by the closing price per Unit of the Partnership’s BUCs on the NASDAQ Global Select Market on the grant date.  The Partnership awarded the named executive officers a total of 63,311 restricted units on March 21, 2017 and 40,189 restricted units on May 24, 2017, with grant date fair values of $5.70 and $5.80 per unit, respectively.

Grants of Plan-Based Awards Table for 20162017

 

Name

 

Grant Date

 

All other stock awards: Number of shares of stock or units (1)

(#)

 

 

Grant date fair value of stock and option awards (2)

($)

 

 

Grant Date

 

All other stock awards: Number of shares of stock or units (1)

(#)

 

 

Grant date fair value of stock and option awards (2)

($)

 

Chad L. Daffer

 

9/26/2016

 

 

48,139

 

 

 

292,685

 

 

3/21/2017

 

 

34,714

 

 

 

197,870

 

 

11/17/2016

 

 

6,723

 

 

 

37,985

 

 

5/24/2017

 

 

22,036

 

 

 

127,809

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Craig S. Allen

 

9/26/2016

 

 

38,882

 

 

 

236,403

 

 

3/21/2017

 

 

28,597

 

 

 

163,003

 

 

11/17/2016

 

 

5,431

 

 

 

30,685

 

 

5/24/2017

 

 

18,153

 

 

 

105,287

 

(1)

For each award disclosed in this column, one-third of the aggregate number of restricted units vest on each of November 30, 2017, 2018, and 2019.

(2)

(1) For each award disclosed in this column, one-third of the aggregate number of restricted units vest on each of December 31, 2016, 2017, and 2018.

(2) The amounts reflected in this column show the grant date fair value of the restricted unit awards calculated in accordance with FASB ASC Topic 718.  The grant date fair value was computed by multiplying the number of units underlying the unit award by the closing price per unit awards calculated in accordance with FASB ASC Topic 718.  The grant date fair value was computed by multiplying the number of units underlying the unit award by the closing price per Unit of the Partnership’s BUCs on the NASDAQ Global Select Market on the grant date.

 

2015 Equity Incentive Plan

 

On June 24, 2015, Burlington’s Board of Managers approved the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan, which was subsequently approved by the Partnership’s Unitholders on September 15, 2015.  The purpose of the Plan is to promote the interests of the Partnership and its Unitholders by providing incentive compensation awards that encourage superior performance.  The Plan is also intended to attract and retain the services of individuals who are essential for the Partnership’s growth and profitability and to encourage those individuals to devote their best efforts to advancing the Partnership’s business.

 

The maximum number of BUCs that may be delivered with respect to awards under the Plan are 3,000,000. The Plan willis generally be administered by Burlington’s Board, or any compensation committee of Burlington’s Board, if appointed, or any other committee as may be appointed by the Board to administer the Plan (the Board or any such committee is referred to herein as the “Committee”).  The Committee has the full authority, subject to the terms of the Plan, to establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan, to designate participants under the Plan, to determine the number of BUCs to be covered by awards, to determine the type or types of awards to be granted to a participant, and to determine the terms and conditions of any award.  All of Burlington’s employees and members of the Board, and employees of Burlington’s affiliates, including the Partnership, that perform services for Burlington, the Partnership, or an affiliate of either are eligible to be selected to participate in the Plan.  The selection of which eligible individuals will receive awards is within the sole discretion of the Committee.


 

The Plan provides that the Committee may grant any or all of the following types of awards to eligible participants: (i) unit options; (ii) unit appreciation rights; (iii) restricted units; (iv) phantom units; (v) unit awards; and (vi) other unit-based awards.  The Committee has full authority, subject to the terms of the Plan, to determine the types and amount of awards granted and the participants eligible to receive awards.

 

Upon the occurrence of any distribution (whether in cash, units, other securities, or other property), recapitalization, units split, reorganization or liquidation, merger, consolidation, split-up, spin-off, separation, combination, repurchase, acquisition of property or securities, or exchange of units or other securities of the Partnership, issuance of warrants or other rights to purchase units or other securities of the Partnership, or other similar transaction or event affects the units, then the Committee will equitably adjust any or all of (i) the number and type of units (or other securities or property) with respect to which awards may be granted, (ii) the number and type of units (or other securities or property) subject to outstanding awards, (iii) the grant or exercise price with respect to any award, (iv) any performance criteria for performance-based awards, except for awards based on continued service as an employee or manager, (v) the appropriate fair market value and other price determinations for such awards, and (vi) any other limitations in the Plan or, subject to Section 409A of the Internal Revenue Code of 1986, as amended, make provision for a cash payment to the holder of an outstanding award.

 

The effective date of the Plan is June 24, 2015 (the “Effective Date”), which is the date the Burlington Board approved the Plan.  The term of the Plan will expire on the earlier of (i) the date it is terminated by the Board; (ii) the date units are no longer available under


the plan for delivery pursuant to awards; or (iii) the tenth anniversary of the Effective Date (which is June 24, 2025).  The Board may amend the Plan at any time; provided, however, that Unitholder approval will be obtained for any amendment to the plan to the extent necessary to comply with any applicable law, regulation, or securities exchange rule.  The Committee may also amend any award agreement evidencing an award made under the Plan, provided that no change in any outstanding award may be made that would adversely affect the rights of the participant under any previously granted award without the consent of the affected participant.  Repricing of unit options and unit appreciation rights is prohibited under the Plan without the approval of our Unitholders, except in the case of adjustments implemented to reflect certain Partnership transactions, as described above.  

 

During 2016, 272,307 restrictedRestricted units were granted under the Plan.Plan totaled 283,026 and 272,307 for the years ended December 31, 2017 and 2016, respectively.  No other types of awards have been granted under the Plan as of December 31, 2016.2017.  There are 2,727,6932,513,674 BUCs available for future issuance under the Plan.

Outstanding Equity Awards at Fiscal Year-End 20162017

 

Name

 

Number of Shares or Units of Stock That Have Not Vested (1)

(#)

 

 

Market Value of Shares or Units of Stock That Have Not Vested

($)

 

 

Number of Shares or Units of Stock That Have Not Vested (1)

(#)

 

 

Market Value of Shares or Units of Stock That Have Not Vested

($)

 

Chad L. Daffer

 

 

36,575

 

 

 

197,505

 

 

 

56,122

 

 

 

339,538

 

Craig S. Allen

 

 

29,543

 

 

 

159,532

 

 

 

45,940

 

 

 

277,937

 

(1)

Represents restricted units granted under the Plan.  The remaining unvested restricted units vest in varying amounts on November 30 and December 31, 2018 and November 30, 2019.

(2)

(1) Represents restricted units granted under the Plan.  The remaining unvested restricted units vest in equal shares over a two-year period on December 31, 2017 and 2018.

(2) The market value of the restricted units set forth in this column was computed by multiplying $6.05, the closing market price of the BUCs on December 29, 2017, which was the last trading day of 2017, by the number of units.

Units Vested Table For 2017

Name

 

Number of Units

Acquired on Vesting

(#)

 

 

Value Realized

On Vesting (1)

($)

 

Chad L. Daffer

 

 

37,203

 

 

 

226,970

 

Craig S. Allen

 

 

30,353

 

 

 

185,194

 

(1)

The value was computed by multiplying the number of units vested by the closing price of the BUCs on the last trading day before the vesting date.

Pay Ratio Disclosure

Section 953(b) of the units set forth in this column was computed by multiplying $5.40,Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K require disclosures pertaining to the closing market pricerelationship of annual total compensation of employees of the BUCs on December 30, 2016, which wasregistrant and its principal executive officer (“CEO Pay Ratio”). The term “employees” within the last trading day of 2016,final rule includes full-time, part-time, seasonal, and temporary employees


employed by the numberregistrant or any of units.

2016 Units Vested Table

Name

 

Number of Units

Acquired on Vesting

(#)

 

 

Value Realized

On Vesting (1)

($)

 

Chad L. Daffer

 

 

18,287

 

 

 

98,750

 

Craig S. Allen

 

 

14,770

 

 

 

79,758

 

(1) The value was computed by multiplyingits consolidated subsidiaries.  Item 402(u) affords the number of units vested by $5.40,Partnership flexibility in selecting the closing price ofmethodology for determining the BUCsCEO Pay Ratio, including widely recognized legal tests such as U.S. federal income tax laws. Based on December 30, 2016, which was the last trading day beforemethodology employed, the vesting date of December 31, 2016.Partnership and its consolidated subsidiaries are not considered to have any employees. Accordingly, the pay ratio disclosures are not applicable to the Partnership.

Manager Compensation for 20162017

 

The Board of Managers of Burlington effectively acts as the Partnership’s board of directors.  Although Burlington is not a public company and its securities are not listed on any stock market or otherwise publicly traded, its Board of Managers is constituted in a manner that complies with rules of the Securities and Exchange Commission and the NASDAQ Stock Market related to public companies with securities listed on the NASDAQ Global Select Market in order for the Company and its BUCs to comply with these rules.  Among other things, a majority of the Board of Managers of Burlington consists of managersManagers who meet the definitions of independence under the rules of the SEC and the NASDAQ Stock Market.  These independent managersManagers are Mariann Byerwalter, William S. Carter, Walter K. Griffith, Patrick J. Jung, and Michael O. Johanns.  During 2016,2017, the Partnership paid Burlington a total of $335,689$131,000 as reimbursement for a portion of the fees it paysservices provided to the Partnership by independent managers for their services on Partnership matters.Managers.  We did not pay any other compensation of any nature to any of the managersManagers of Burlington or reimburse Burlington for any other amounts representing compensation to its Board of Managers.Managers, other than what is disclosed in the table below.

 


The following table sets forth the total compensation paid to the Managers of Burlington for the year ended December 31, 20162017 for their services to the Partnership.

 

Name

 

Total Fees Earned or Paid in Cash

 

 

Restricted Unit Awards (1)

 

 

Total Compensation

 

 

Total Fees Earned or Paid in Cash

 

 

Restricted Unit Awards (1)

 

 

Total Compensation

 

Michael B. Yanney (2)

 

$

-

 

 

$

193,645

 

 

$

193,645

 

 

$

-

 

 

$

187,947

 

 

$

187,947

 

Lisa Y. Roskens (3)

 

 

-

 

 

 

233,459

 

 

 

233,459

 

 

 

-

 

 

 

226,684

 

 

 

226,684

 

Mariann Byerwalter

 

 

52,813

 

 

 

38,707

 

 

 

91,520

 

 

 

27,625

 

 

 

39,925

 

 

 

67,550

 

Dr. William S. Carter

 

 

56,875

 

 

 

38,707

 

 

 

95,582

 

 

 

26,000

 

 

 

39,925

 

 

 

65,925

 

Walter K. Griffith

 

 

51,188

 

 

 

30,414

 

 

 

81,602

 

 

 

31,875

 

 

 

34,932

 

 

 

66,807

 

Patrick J. Jung

 

 

68,438

 

 

 

41,468

 

 

 

109,906

 

 

 

22,750

 

 

 

42,416

 

 

 

65,166

 

Michael O. Johanns

 

 

42,250

 

 

 

30,414

 

 

 

72,664

 

 

 

22,750

 

 

 

34,932

 

 

 

57,682

 

George H. Krauss (4)

 

 

-

 

 

 

55,295

 

 

 

55,295

 

 

 

-

 

 

 

53,084

 

 

 

53,084

 

Dr. Gail Walling Yanney

 

 

-

 

 

 

30,414

 

 

 

30,414

 

 

 

-

 

 

 

29,940

 

 

 

29,940

 

Dr. Martin A. Massengale

 

 

33,250

 

 

 

-

 

 

 

33,250

 

Clayton K. Yeutter

 

 

30,875

 

 

 

-

 

 

 

30,875

 

 

(1)Refers to restricted unit awards granted under the Plan. The value of restricted unit awards to Managers in the table above represents the aggregate grant date fair value of each award computed in accordance with FASB ASC Topic 718.  The value was computed by multiplying the number of units underlying the unit award by the closing price per unit of the Partnership’s BUCs on the NASDAQ Global Select Market on the grant date.  The Partnership awarded the Managers a total of 100,817 restricted units on September 26, 2016 and 14,081 restricted units on November 17, 2016, with grant date fair values of $6.08 and $5.65 per unit, respectively.

(2) As of December 31, 2016, Mr. Yanney held 21,420 outstanding unvested restricted unit awards.

(3) As of December 31, 2016, Ms. Roskens held 25,824 outstanding unvested restricted unit awards.

(4) As of December 31, 2016, Mr. Krauss held 6,117 outstanding unvested restricted unit awards

Refers to restricted unit awards granted under the Plan. The value of restricted unit awards to Managers in the table above represents the aggregate grant date fair value of each award computed in accordance with FASB ASC Topic 718.  The value was computed by multiplying the number of units underlying the unit award by the closing price per Unit of the Partnership’s BUCs on the NASDAQ Global Select Market on the grant date.  The Partnership awarded the Managers a total of 73,523 restricted units on March 21, 2017 and 46,673 restricted units on May 24, 2017, with grant date fair values of $5.70 and $5.80 per unit, respectively.

(2)

Of the 32,750 Restricted Unit Awards granted to Mr. Yanney during 2017, 21,834 are unvested as of December 31, 2017.

(3)

Of the 39,500 Restricted Unit Awards granted to Ms. Roskens during 2017, 26,334 are unvested as of December 31, 2017.

(4)

Of the 9,250 Restricted Unit Awards granted to Mr. Krauss during 2017, 6,167 are unvested as of December 31, 2017.

 

Compensation Committee Interlocks and Insider Participation

 

Since we do not have a standing compensation committee, governance and compensation decisions are made by the entire Burlington Board of Managers.  The members of Burlington’s Board of Managers are disclosed above under the caption “Item 10.  Directors, Executive Officers and Corporate Governance.”  During the year ended December 31, 2016,2017, none of our executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served as a manager or member of Burlington’s Board of Managers.


Item 12.  Security Ownership of CertainCertain Beneficial Owners and Management.

(a)  No person is known by the Partnership to own beneficially more than 5% of the Partnership’s BUCs.

(b)  Chad L. Daffer and Craig S. Allen are the only executive officers of the Partnership.Partnership, but they are employed by Burlington. The other persons constituting management of the Partnership are employees of Burlington.Burlington as well.  The following table and notes set forth information with respect to the beneficial ownership of the Partnership’s BUCs by Mr. Daffer, Mr. Allen and each of the Managers of Burlington and by such persons as a group.  Unless otherwise indicated, the information is as of March 2, 2017,February 27, 2018, and is based upon information furnished to us by such persons.  Unless otherwise noted, all persons listed in the following table have sole voting and investment power over the BUCs they beneficially own and own such BUCs directly.  For purposes of this table, the term “beneficially


“beneficially owned” means any person who, directly or indirectly, has the power to vote or to direct the voting of a BUC or the power to dispose or to direct the disposition of a BUC or has the right to acquire BUCs within 60 days. The percentages in the table below are based on 60,224,53860,373,674 issued and outstanding BUCs and unvested restricted units at December 31, 2016.2017.

 

Name

 

Number of BUCs Beneficially Owned

 

 

Percent of Class

 

 

Number of BUCs Beneficially Owned

 

 

Percent of Class

 

Michael B. Yanney, Chairman Emeritus and Manager of Burlington

 

 

521,822

 

(1)

*

 

 

 

542,200

 

(1)

*

 

Lisa Y. Roskens, Chairman, President, Chief Executive Officer and Manager of Burlington

 

 

499,549

 

(2)

*

 

 

 

539,935

 

(2)

*

 

Chad L. Daffer, Chief Executive Officer

 

 

162,378

 

(3)

*

 

 

 

227,391

 

(3)

*

 

Craig S. Allen, Chief Financial Officer

 

 

40,934

 

(4)

*

 

 

 

83,290

 

(4)

*

 

Mariann Byerwalter, Manager of Burlington

 

 

6,422

 

 

*

 

 

 

13,379

 

 

*

 

Dr. William S. Carter, Manager of Burlington

 

 

6,422

 

 

*

 

 

 

13,886

 

 

*

 

Walter K. Griffith, Manager of Burlington

 

 

30,046

 

 

*

 

 

 

36,133

 

 

*

 

Patrick J. Jung, Manager of Burlington

 

 

36,680

 

(5)

*

 

 

 

44,671

 

(5)

*

 

Michael O. Johanns, Manager of Burlington

 

 

5,046

 

 

*

 

 

 

11,133

 

 

*

 

George H. Krauss, Manager of Burlington

 

 

272,566

 

(6)

*

 

 

 

284,677

 

(6)

*

 

Dr. Gail Walling Yanney, Manager of Burlington

 

 

498,205

 

(7)

*

 

 

 

503,422

 

(7)

*

 

All current executive officers and Managers of Burlington as a group (11 persons)

 

 

1,137,873

 

 

 

1.9

%

 

 

1,370,133

 

 

 

2.3

%

 

*

denotes ownership of less than 1%.

(1)

Amount includes 464,992 BUCs held by Burlington Capital LLC.  Mr. Yanney has a beneficial ownership interest in and is a Manager and Chairman Emeritus of Burlington Capital LLC and is deemed to have a pecuniary interest in the Beneficial Unit Certificates due to his ownership interest in Burlington Capital LLC. Amount includes 32,546 restricted units with respect to which Mr. Yanney has voting rights.

(2)

Amount includes 464,992 BUCs held by Burlington Capital LLC.  Ms. Roskens has a beneficial ownership interest in, and is a Manager, Chairman, President, and Chief Executive Officer of Burlington Capital LLC and is deemed to have a pecuniary interest in the Beneficial Unit Certificates due to her ownership interest in Burlington Capital LLC. Amount includes 5,374 BUCs held in trust for the benefit of Ms. Roskens’ two children. Amount includes 39,248 restricted units with respect to which Ms. Roskens has voting rights.

(3)

Amount includes 7,260 BUCs held in trust for the benefit of Mr. Daffer’s two children. Amount includes 56,122 restricted units with respect to which Mr. Daffer has voting rights.

(4)

Amount includes 45,940 restricted units with respect to which Mr. Allen has voting rights.

(5)

Amount includes 30,000 BUCs owned by Mr. Jung’s spouse.

(6)

Amount includes 172,785 BUCs owned by Mr. Krauss’ spouse. Amount includes 9,227 restricted units with respect to which Mr. Krauss has voting rights.

(7)

* denotes ownership of less than 1%.

(1) Amount includes 464,992 BUCs held by Burlington Capital LLC.  Mr. Yanney has a beneficial ownership interest in, and is a Manager and Chairman Emeritus of Burlington Capital LLC and is deemed to have a pecuniary interest in the Beneficial Unit Certificates due to his ownership interest in Burlington Capital LLC. Amount includes 21,420 restricted units with respect to which Mr. Yanney has voting rights.

(2) Amount includes 464,992 BUCs held by Burlington Capital LLC.  Ms. Roskens has a beneficial ownership interest in, and is a Manager, Chairman, President, and Chief Executive Officer of Burlington Capital LLC and is deemed to have a pecuniary interest in the Beneficial Unit Certificates due to her ownership interest in Burlington Capital LLC. Amount includes 25,824 restricted units with respect to which Ms. Roskens has voting rights.

(3) Amount includes 7,260 BUCs held in trust for the benefit of Mr. Daffer’s two children. Amount includes 36,575 restricted units with respect to which Mr. Daffer has voting rights.

(4) Amount includes 29,543 restricted units with respect to which Mr. Allen has voting rights.

(5) Amount includes 29,800 BUCs owned by Mr. Jung’s spouse.

(6) Amount includes 172,785 BUCs owned by Mr. Krauss’ spouse. Amount includes 6,117 restricted units with respect to which Mr. Krauss has voting rights.

(7) Amount includes 464,992 BUCs held by Burlington Capital LLC.  Dr. Yanney has a beneficial ownership interest in and is a Manager of Burlington Capital LLC and is deemed to have a pecuniary interest in the Beneficial Unit Certificates due to her ownership interest in Burlington Capital LLC. Amount also includes 28,167 BUCs held in Dr. Yanney’s retirement account.

(c)  There are no arrangements known to the Partnership, the operation of which may at any subsequent date result in a change in control of the Partnership.

(d)  For information regarding the compensation plan under which equity securities of the Partnership are currently authorized for issuance, see “Equity Compensation Plan Information” in Part II, Item 5, of this report on FromForm 10-K, which is incorporated by reference herein.

 

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

The general partner of the Partnership is AFCA 2 and the sole general partner of AFCA 2 is Burlington.

Except as described in Note 24 to the Partnership’s Financial Statements filed in response to Item 8 of this report, the Partnership is not a party to any transaction or proposed transaction with AFCA 2, Burlington or with any person who is: (i) a manager or executive


officer of Burlington or any general partner of AFCA 2; (ii) a nominee for election as a manager of Burlington; (iii) an owner of more than five percent of the BUCs; or, (iv) a member of the immediate family of any of the foregoing persons. The disclosures set forth in Note 24 of the Partnership’s financial statements filed in response to Item 8 of this report are incorporated by reference herein.

For the identification of the members of Burlington’s Board of Managers who are independent under the applicable SEC and NASDAQ requirements, see the disclosures in “Item 10.  Directors, Executive Officers and Corporate Governance” of this report on Form 10-K, which are incorporated by reference herein.


Item 14.Principal AccountantAccountant Fees and Services.

The Audit Committee of Burlington has engaged PricewaterhouseCoopers LLP (“PwC”) as the independent registered public accounting firm for the Company for 2016.2017. The Audit Committee regularly reviews and determines whether any non-audit services provided by PricewaterhouseCoopers LLP potentially affects their independence with respect to the Company. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by PricewaterhouseCoopers LLP. Pre-approval is generally provided by the Audit Committee for up to one year, is detailed as to the particular service or category of services to be rendered and is generally subject to a specific budget. The Audit Committee may also pre-approve additional services or specific engagements on a case-by-case basis. Management provides annual updates to the Audit Committee regarding the extent of any services provided in accordance with this pre-approval, as well as the cumulative fees for all non-audit services incurred to date. During 2016,2017, all services performed by PricewaterhouseCoopers LLP, with respect to the Partnership, were pre-approved by the Audit Committee in accordance with this policy.

Prior to 2016, the Audit Committee had engaged Deloitte & Touche LLP (“Deloitte”) as the independent registered public accounting firm for the Company. As previously disclosed, on November 19, 2015 the Audit Committee recommended and authorized a change in independent registered public accounting firm from Deloitte to PricewaterhouseCoopers LLP, which became effective upon the issuance by Deloitte of its reports on the consolidated financial statements as of and for the year ended December 31, 2015 and the effectiveness of internal control over financial reporting as of December 31, 2015 which were included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  Deloitte’s audit reports on the Partnership’s financial statements as of and for the fiscal year’syear ended December 31, 2015 and 2014 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.  During the Partnership’s fiscal years ended December 31, 2015 and 2014 and the subsequent interim period in 2016 before the change in auditors became effective, there were no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the matter in their reports included in the Partnership’s filings with the Securities and Exchange Commission.  In addition, there were no “reportable events” (as that term is described in Item 304(a)(1)(v) of Regulation S-K) during the fiscal years ended December 31, 2015, and 2014, or during the subsequent interim period in 2016 before the change in auditors became effective. During 2015, all services performed by Deloitte, with respect to the Partnership, were pre-approved by the Audit Committee in accordance with policy.

The following table sets forth the aggregate fees billed by PricewaterhouseCoopers LLP with respect to audit and non-audit services for the Company during the yearyears ended December 31, 2017 and 2016, and the aggregate fees billed by Deloitte with respect to audit and non-audit services for the Company during the year ended December 31, 2015 and the subsequent interim period in 2016 before the change in auditors became effective:

 

2016 (PwC)

 

 

2016 (Deloitte)

 

 

2015

 

 

2017

 

 

2016 (PwC) (4)

 

 

2016 (Deloitte)

 

Audit Fees (1)

 

$

610,042

 

 

$

75,000

 

 

$

472,200

 

 

$

1,082,277

 

 

$

960,042

 

 

$

75,000

 

Audit-Related Fees (2)

 

 

26,766

 

 

 

14,000

 

 

 

91,000

 

 

 

-

 

 

 

26,766

 

 

 

14,000

 

Tax Fees (3)

 

 

201,647

 

 

 

-

 

 

 

3,900

 

 

 

193,663

 

 

 

201,647

 

 

 

-

 

All Other Fees

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

(1)

Audit Fees- Includes fees and expenses for professional services rendered for the audit of the Company’s annual financial statements and internal control over financial reporting, reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q during 2017 and 2016, and other services provided in connection with regulatory filings that generally only the principal auditor can reasonably provide.

(2)

Audit-Related Fees - Includes services that are reasonably related to the performance of the audit or review of the financial statements, including audit and attestation services related to financial reporting that are not required by statute or regulation.

(3)

(1) Audit Fees- Includes fees and expenses for professional services rendered for the audit of the Company’s annual financial statements and internal control over financial reporting and reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q during 2016 and 2015.

(2) Audit-Related Fees - Includes services associated with registration statements, periodic reports and other documents filed with the Securities and Exchange Commission or other documents issued in connection with securities offerings, such as consents.

(3) Tax Fees - Includes fees and expenses for the professional services rendered for the preparation and review of tax returns and K-1’s.

(4)

The Audit Fees for 2016 services provided by PwC include additional billings related to the 2016 audit that were not determined until after filing of the 2016 Form 10-K. The amount disclosed above has been adjusted accordingly to reflect the additional billings.

 


PART IV

 

 

Item 15.  Exhibits and Financial Statement Schedules.

 

(a)   The following documents are filed as part of this report:

1.    Financial Statements. The following financial statements of the Company are included in response to Item 8 of this report:

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets of the Company as of December 31, 20162017 and 2015.2016.

Consolidated Statements of Operations of the Company for the years ended December 31, 2017, 2016 2015 and 2014.2015.

Consolidated Statements of Comprehensive Income (Loss) of the Company for the years ended December 31, 2017, 2016 2015 and 2014.2015.

Consolidated Statements of Partners’ Capital of the Company for the years ended December 31, 2017, 2016 2015 and 2014.2015.

Consolidated Statements of Cash Flows of the Company for the years ended December 31, 2017, 2016 2015 and 2014.2015.

Notes to Consolidated Financial Statements of the Company.

2.    Financial Statement Schedules.  The information required to be set forth in the financial statement schedules is included in the notes to consolidated financial statements of the Company filed in response to Item 8 of this report.

3.    Exhibits.  The following exhibits are filed as required by Item 15(a)(3) of this report.  Exhibit numbers refer to the paragraph numbers under Item 601 of Regulation S-K:

3.1   America First Multifamily Investors, L.P. First Amended and Restated Agreement of Limited Partnership dated as of September 15, 2015 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 18, 2015).

3.2   First Amendment to First Amended and Restated Agreement of Limited Partnership of America First Multifamily Investors, L.P. dated March 30, 2016 (incorporated herein by reference to Exhibit 3.1   to Form 8-K (No. 000-24843), filed by the Partnership on March 31, 2016).

3.3   Second Amendment to First Amended and Restated Agreement of Limited Partnership of America First Multifamily Investors, L.P. dated May 19, 2016 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 19, 2016).

3.4   Certificate of Limited Partnership of America First Tax Exempt Investors, L.P. (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 12, 2013).

3.5   Amendment to the Certificate of Limited Partnership, effective November 12, 2013 (incorporated herein by reference to Exhibit 3.2 to Form 8-K (No. 000-24843), filed by the Partnership on November 12, 2013).

3.6   Articles of Incorporation and Bylaws of America First Fiduciary Corporation Number Five (incorporated herein by reference to Registration Statement on Form S-11 (No. 2-99997) filed by America First Tax Exempt Mortgage Fund Limited Partnership on August 30, 1985).

4.1   Form of Beneficial Unit Certificate of the Partnership (incorporated herein by reference to Exhibit 4.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 12, 2013).

America First Multifamily Investors, L.P. First Amended and Restated Agreement of Limited Partnership dated as of September 15, 2015 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 18, 2015).

3.2   

First Amendment to First Amended and Restated Agreement of Limited Partnership of America First Multifamily Investors, L.P. dated March 30, 2016 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on March 31, 2016).

3.3   

Second Amendment to First Amended and Restated Agreement of Limited Partnership of America First Multifamily Investors, L.P. dated May 19, 2016 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 19, 2016).

3.4  

Third Amendment to First Amended and Restated Agreement of Limited Partnership of America First Multifamily Investors, L.P. dated August 7, 2017 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on August 7, 2017).

3.5   

Certificate of Limited Partnership of America First Tax Exempt Investors, L.P. (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 12, 2013).

3.6   

Amendment to the Certificate of Limited Partnership, effective November 12, 2013 (incorporated herein by reference to Exhibit 3.2 to Form 8-K (No. 000-24843), filed by the Partnership on November 12, 2013).

3.7   

Articles of Incorporation and Bylaws of America First Fiduciary Corporation Number Five (incorporated herein by reference to Registration Statement on Form S-11 (No. 2-99997) filed by America First Tax Exempt Mortgage Fund Limited Partnership on August 30, 1985). (P)

4.1   

Form of Beneficial Unit Certificate of the Partnership (incorporated herein by reference to Exhibit 4.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 12, 2013).

4.2   

Amended Agreement of Merger, dated June 12, 1998, between the Partnership and America First Tax Exempt Mortgage Fund Limited Partnership (incorporated herein by reference to Exhibit 4.3 to Amendment No. 3 to Registration Statement on Form S-4 (No. 333-50513) filed by the Partnership on September 14, 1998).

10.1  

America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 18, 2015).


10.2   

Form of Restricted Unit Award Agreement under the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.8 to the Registration Statement on Form S-8 (No. 333-209811), filed by the Partnership on February 29, 2016).

10.3   

Form of Restricted Unit Award Agreement under the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.9 to the Registration Statement on Form S-8 (No. 333-209811), filed by the Partnership on February 29, 2016).

10.4   

Sale, Contribution and Assignment Agreement dated July 1, 2015 between America First Multifamily Investors, L.P. and ATAX TEBS III, LLC (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.5   

Subordinate Bonds Custody Agreement dated July 1, 2015 by and among The Bank of New York Mellon Trust Company, N.A., as custodian for the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS III, LLC (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.6   

Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2015 between the Federal Home Loan Mortgage Corporation and ATAX TEBS III, LLC (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.7   

Series Certificate Agreement dated July 1, 2015 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator (incorporated herein by reference to Exhibit 10.4 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.8   

Limited Support Agreement dated July 1, 2015 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.9   

Rate Cap Agreement dated July 8, 2015 between ATAX TEBS III, LLC and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.6 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.10   

Rate Cap Agreement dated July 8, 2015 between ATAX TEBS III, LLC and the Royal Bank of Canada (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.11   

Rate Cap Agreement dated July 8, 2015 between ATAX TEBS III, LLC and Sumitomo Mitsui Banking Corporation (incorporated herein by reference to Exhibit 10.8 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.12   

Sale, Contribution and Assignment Agreement dated July 10, 2014 between America First Multifamily Investors, L.P. and ATAX TEBS II, LLC (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.13   

Subordinate Bonds Custody Agreement dated July 1, 2014 by and among The Bank of New York Mellon Trust Company, N.A., the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS II, LLC (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.14   

Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation and ATAX TEBS II, LLC (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.15   

Series Certificate Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator (incorporated herein by reference to Exhibit 10.4 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.16   

Limited Support Agreement dated July 1, 2014 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.17   

Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.6 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).


10.18   

Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and the Royal Bank of Canada (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.19   

Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Sumitomo Mitsui Banking Corporation (incorporated herein by reference to Exhibit 10.8 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.20   

Sale and Assignment Agreement by and between the Registrant and ATAX TEBS I, LLC, dated September 1, 2010 (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.21   

Custody Agreement by and between ATAX TEBS I, LLC and The Bank of New York Mellon Trust, N.A., dated September 1, 2010 (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.22   

Bond Exchange, Reimbursement, Pledge and Security Agreement by and between ATAX TEBS I, LLC and Federal Home Loan Mortgage Corporation, dated September 1, 2010 (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.23   

Series Certificate Agreement by and between Federal Home Loan Mortgage Corporation, in its corporate capacity, and Federal Home Loan Mortgage Corporation, in its capacity as Administrator, dated September 1, 2010 with respect to Freddie Mac Multifamily Variable Rate Certificates Series M024 (incorporated herein by reference to Exhibit 10.4 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.24   

The Limited Support Agreement between the Registrant and Federal Home Loan Mortgage Corporation, dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.25   

Rate Cap Agreement between ATAX TEBS I, LLC and Barclays Bank, PLC, dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.6 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.26   

Rate Cap Agreement between ATAX TEBS I, LLC and Bank of The New York Mellon dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.27 

Rate Cap Agreement between ATAX TEBS I, LLC and Royal Bank of Canada, dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.8 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.28   

Investment Placement Agreement, dated June 15, 2012, between the Company and America First Capital Associates Limited Partnership Two (incorporated by reference herein to Exhibit 10.1 to Form 10-Q (No. 000-24843), filed by the Partnership on August 8, 2012).

10.29   

Investment Placement Agreement, dated June 29, 2012, between the Company and America First Capital Associates Limited Partnership Two (incorporated by reference herein to Exhibit 10.1 to Form 10-Q (No. 000-24843), filed by the Partnership on November 9, 2012).

10.30   

Investment Placement Agreement, dated October 1, 2012, between the Company and America First Capital Associates Limited Partnership Two (incorporated by reference herein to Exhibit 10.11 to Form 10-K (No. 000-24843), filed by the Partnership on March 8, 2013).

10.31   

Developer and Construction Manager Agreement dated April 2, 2013 by and among America First Real Estate Group, LLC, America First Construction Services, LLC, and AF-18R-Lincoln, LLC (incorporated herein by reference to Exhibit 10.1 to Form 10-Q (No. 000-24843), filed by the Partnership on August 9, 2013).

10.32   

Underwriting Agreement dated May 30, 2012, among Deutsche Bank Securities Inc. and RBC Capital Markets, LLC, as representatives of the underwriters named therein, and the Partnership (incorporated herein by reference to Exhibit 1.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 31, 2012).

10.33   

Underwriting Agreement dated November 26, 2013 between Deutsche Bank Securities Inc., as representative of the underwriters named therein, and the Partnership (incorporated herein by reference to Exhibit 1.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 26, 2013).


10.34   

Underwriting Agreement dated January 28, 2014 between Deutsche Bank Securities Inc., as representative of the underwriters named therein, and the Partnership (incorporated herein by reference to Exhibit 1.1 to Form 8-K (No. 000-24843), filed by the Partnership on January 28, 2014).

10.35   

Credit Agreement dated May 14, 2015 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 20, 2015).

10.36   

Revolving Line of Credit Note dated May 14, 2015 executed by America First Multifamily Investors, L.P. and payable to the order of Bankers Trust Company (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on May 20, 2015).

10.37   

First Amendment to Credit Agreement dated January 7, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on January 13, 2016).

10.38   

Waiver Letter dated January 7, 2016 (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on January 13, 2016).

10.39   

Second Amendment to Credit Agreement dated February 10, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on February 17, 2016).

10.40   

Third Amendment to Credit Agreement dated November 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 18, 2016).

10.41  

Fourth Amendment to Credit Agreement dated May 22, 2017 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 25, 2017).

10.42  

Credit Agreement dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.41 to the Annual Report on Form 10-K (No. 000-24843), filed by the Partnership on March 3, 2017).

10.43  

Promissory Note dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.42 to the Annual Report on Form 10-K (No. 000-24843), filed by the Partnership on March 3, 2017).

10.44  

Security Agreement dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.43 to the Annual Report on Form 10-K (No. 000-24843), filed by the Partnership on March 3, 2017).

10.45  

Collateral Account Control Agreement dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.44 to the Annual Report on Form 10-K (No. 000-24843), filed by the Partnership on March 3, 2017).

10.46  

Mortgage with Assignment of Rents, Security Agreement and Fixture Filing dated December 14, 2016 between Meadowbrook Apartments Limited Partnership and Bankers Trust Company (incorporated herein by reference to Exhibit 10.45 to the Annual Report on Form 10-K (No. 000-24843), filed by the Partnership on March 3, 2017).

10.47   

Series A Preferred Units Subscription Agreement dated March 30, 2016 (incorporated herein by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on May 2, 2016).

10.48   

Series A Preferred Units Subscription Agreement dated May 19, 2016 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on August 5, 2016).

10.49   

Series A Preferred Units Subscription Agreement dated September 30, 2016 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on November 7, 2016).

10.50   

Series A Preferred Units Subscription Agreement dated December 1, 2016 (incorporated herein by reference to Exhibit 10.49 to the Annual Report on Form 10-K (No. 000-24843), filed by the Partnership on March 3, 2017).

10.51  

Series A Preferred Units Subscription Agreement dated March 3, 2017 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on May 5, 2017).


10.52  

Series A Preferred Units Subscription Agreement dated March 31, 2017 (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on May 5, 2017).

10.53  

Series A Preferred Units Subscription Agreement dated August 7, 2017 (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 6, 2017).

10.54  

Series A Preferred Units Subscription Agreement dated October 2, 2017.

10.55  

Series A Preferred Units Subscription Agreement dated October 25, 2017.

10.56  

Regulatory Margin Self-Disclosure Letter dated June 30, 2017 between ATAX TEBS II, LLC and the International Swaps and Derivative Association, Inc. (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on August 7, 2017).

10.57  

Rate Cap Agreement dated June 28, 2017 between ATAX TEBS II, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on August 7, 2017).

10.58  

Regulatory Margin Self-Disclosure Letter dated June 30, 2017 between ATAX TEBS III, LLC and the International Swaps and Derivative Association, Inc. (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on August 7, 2017).

10.59  

Rate Cap Agreement dated June 28, 2017 between ATAX TEBS III, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on August 7, 2017).

10.60  

Amended and Restated Rate Cap Agreement dated August 10, 2017 between ATAX TEBS II, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on November 6, 2017).

10.61  

Amended and Restated Rate Cap Agreement dated August 10, 2017 between ATAX TEBS III, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on November 6, 2017).

10.62  

Capital on DemandTM Sales Agreement, dated December 7, 2017, by and between America First Multifamily Investors, L.P. and JonesTrading Institutional Services, LLC (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on December 7, 2017).

16.1    

Letter to Securities and Exchange Commission from Deloitte & Touche LLP dated November 24, 2015 (incorporated herein by reference to Exhibit 16.1 to Form 8-K (No. 000-24843) filed by the Partnership on November 24, 2015).

21     

Listing of Subsidiaries

23.1   

Consent of Deloitte & Touche LLP.

23.2   

Consent of PricewaterhouseCoopers LLP.

24.1   

Powers of Attorney.

31.1   

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2   

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1   

Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2   

Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101    

The following materials from the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2017 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016, (ii) the  Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii) the  Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015, (iv) the Consolidated Statements of Partners’ Capital for the years ended December 31, 2017, 2016 and 2015, (v) the  Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 and (vi) Notes to  Consolidated Financial Statements. Such materials are presented with detailed tagging of notes and financial statement schedules.

 

4.2   Amended Agreement of Merger, dated June 12, 1998, between the Partnership and America First Tax Exempt Mortgage Fund Limited Partnership (incorporated herein by reference to Exhibit 4.3 to Amendment No. 3 to Registration Statement on Form S-4 (No. 333-50513) filed by the Partnership on September 14, 1998).

10.1  America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 18, 2015).

10.2   Form of Restricted Unit Award Agreement under the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.8 to the Registration Statement on Form S-8 (No. 333-209811), filed by the Partnership on February 29, 2016).

10.3   Form of Restricted Unit Award Agreement under the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.9 to the Registration Statement on Form S-8 (No. 333-209811), filed by the Partnership on February 29, 2016).


10.4   Sale, Contribution and Assignment Agreement dated July 1, 2015 between America First Multifamily Investors, L.P. and ATAX TEBS III, LLC (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.5   Subordinate Bonds Custody Agreement dated July 1, 2015 by and among The Bank of New York Mellon Trust Company, N.A., as custodian for the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS III, LLC (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.6   Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2015 between the Federal Home Loan Mortgage Corporation and ATAX TEBS III, LLC (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.7   Series Certificate Agreement dated July 1, 2015 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator (incorporated herein by reference to Exhibit 10.4 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.8   Limited Support Agreement dated July 1, 2015 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.9   Rate Cap Agreement dated July 8, 2015 between ATAX TEBS III, LLC and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.6 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.10   Rate Cap Agreement dated July 8, 2015 between ATAX TEBS III, LLC and the Royal Bank of Canada (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.11   Rate Cap Agreement dated July 8, 2015 between ATAX TEBS III, LLC and Sumitomo Mitsui Banking Corporation (incorporated herein by reference to Exhibit 10.8 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2015).

10.12   Sale, Contribution and Assignment Agreement dated July 10, 2014 between America First Multifamily Investors, L.P. and ATAX TEBS II, LLC (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.13   Subordinate Bonds Custody Agreement dated July 10, 2014 by and among The Bank of New York Mellon Trust Company, N.A., the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS II, LLC (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.14   Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation and ATAX TEBS II, LLC (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.15   Series Certificate Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator (incorporated herein by reference to Exhibit 10.4 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.16   Limited Support Agreement dated July 1, 2014 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.17   Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.6 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.18   Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and the Royal Bank of Canada (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.19   Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Sumitomo Mitsui Banking Corporation (incorporated herein by reference to Exhibit 10.8 to Form 8-K (No. 000-24843), filed by the Partnership on July 16, 2014).

10.20   Sale and Assignment Agreement by and between the Registrant and ATAX TEBS I, LLC, dated September 1, 2010 (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.21   Custody Agreement by and between ATAX TEBS I, LLC and The Bank of New York Mellon Trust, N.A., dated September 1, 2010 (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.22   Bond Exchange, Reimbursement, Pledge and Security Agreement by and between ATAX TEBS I, LLC and Federal Home Loan Mortgage Corporation, dated September 1, 2010 (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).


10.23   Series Certificate Agreement by and between Federal Home Loan Mortgage Corporation, in its corporate capacity, and Federal Home Loan Mortgage Corporation, in its capacity as Administrator, dated September 1, 2010 with respect to Freddie Mac Multifamily Variable Rate Certificates Series M024 (incorporated herein by reference to Exhibit 10.4 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.24   The Limited Support Agreement between the Registrant and Federal Home Loan Mortgage Corporation, dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.25   Rate Cap Agreement between ATAX TEBS I, LLC and Barclays Bank, PLC, dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.6 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.26   Rate Cap Agreement between ATAX TEBS I, LLC and Bank of The New York Mellon dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.27 Rate Cap Agreement between ATAX TEBS I, LLC and Royal Bank of Canada, dated as of September 1, 2010 (incorporated herein by reference to Exhibit 10.8 to Form 8-K (No. 000-24843), filed by the Partnership on September 8, 2010).

10.28   Investment Placement Agreement, dated June 15, 2012, between the Company and America First Capital Associates Limited Partnership Two (incorporated by reference herein to Exhibit 10.1 to Form 10-Q (No. 000-24843), filed by the Partnership on August 8, 2012).

10.29   Investment Placement Agreement, dated June 29, 2012, between the Company and America First Capital Associates Limited Partnership Two (incorporated by reference herein to Exhibit 10.1 to Form 10-Q (No. 000-24843), filed by the Partnership on November 9, 2012).

10.30   Investment Placement Agreement, dated October 1, 2012, between the Company and America First Capital Associates Limited Partnership Two (incorporated by reference herein to Exhibit 10.11 to Form 10-K (No. 000-24843), filed by the Partnership on March 8, 2013).

10.31   Developer and Construction Manager Agreement dated April 2, 2013 by and among America First Real Estate Group, LLC, America First Construction Services, LLC, and AF-18R-Lincoln, LLC (incorporated herein by reference to Exhibit 10.1 to Form 10-Q (No. 000-24843), filed by the Partnership on August 9, 2013).

10.32   Underwriting Agreement dated May 30, 2012, among Deutsche Bank Securities Inc. and RBC Capital Markets, LLC, as representatives of the underwriters named therein, and the Partnership (incorporated herein by reference to Exhibit 1.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 31, 2012).

10.33   Underwriting Agreement dated November 26, 2013 between Deutsche Bank Securities Inc., as representative of the underwriters named therein, and the Partnership (incorporated herein by reference to Exhibit 1.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 26, 2013).

10.34   Underwriting Agreement dated January 28, 2014 between Deutsche Bank Securities Inc., as representative of the underwriters named therein, and the Partnership (incorporated herein by reference to Exhibit 1.1 to Form 8-K (No. 000-24843), filed by the Partnership on January 28, 2014).

10.35   Credit Agreement dated May 14, 2015 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on May 20, 2015).

10.36   Revolving Line of Credit Note dated May 14, 2015 executed by America First Multifamily Investors, L.P. and payable to the order of Bankers Trust Company (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on May 20, 2015).

10.37   First Amendment to Credit Agreement dated January 7, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on January 13, 2016).

10.38   Waiver Letter dated January 7, 2016 (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on January 13, 2016).

10.39   Second Amendment to Credit Agreement dated February 10, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on February 17, 2016).

10.40   Third Amendment to Credit Agreement dated November 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on November 18, 2016).


10.41  Credit Agreement dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company.

10.42  Promissory Note dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company.

10.43  Security Agreement dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company.

10.44  Collateral Account Control Agreement dated December 14, 2016 between America First Multifamily Investors, L.P. and Bankers Trust Company.

10.45  Mortgage with Assignment of Rents, Security Agreement and Fixture Filing dated December 14, 2016 between Meadowbrook Apartments Limited Partnership and Bankers Trust Company.

10.46   Series A Preferred Units Subscription Agreement dated March 30, 2016 (incorporated herein by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on May 2, 2016).

10.47   Series A Preferred Units Subscription Agreement dated May 19, 2016 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on August 5, 2016).

10.48   Series A Preferred Units Subscription Agreement dated September 30, 2016 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (No. 000-24843), filed by the Partnership on November 7, 2016).

10.49   Series A Preferred Units Subscription Agreement dated December 1, 2016.

16.1    Letter to Securities and Exchange Commission from Deloitte & Touche LLP dated November 24, 2015 (incorporated herein by reference to Exhibit 16.1 to Form 8-K (No. 000-24843) filed by the Partnership on November 24, 2015).

21     Listing of Subsidiaries

23.1   Consent of Deloitte & Touche LLP.

23.2   Consent of PricewaterhouseCoopers LLP.

24.1   Powers of Attorney.

31.1   Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2   Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1   Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2   Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101    The following materials from the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015, (ii) the  Consolidated Statements of Operations for the years ended December 31, 2016, 2015, and 2014, (iii) the  Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015, and 2014, (iv) the Consolidated Statements of Partners’ Capital for the years ended December 31, 2016, 2015,and 2014, (v) the  Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014 and (vi) Notes to  Consolidated Financial Statements. Such materials are presented with detailed tagging of notes and financial statement schedules.

(P) Paper exhibits

 


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

 

Date:

 

March 3, 2017February 28, 2018

 

By

 

/s/ Chad L. Daffer

 

 

 

Chad L. Daffer

 

 

 

Chief Executive Officer

 

 

 

America First Multifamily Investors, L.P.

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Michael B. Yanney*

 

 

 

 

Michael B. Yanney,

 

 

 

 

Chairman Emeritus of the Board and

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Lisa Y. Roskens*

 

 

 

 

Lisa Y. Roskens

 

 

 

 

Chairman of the Board, President, Chief Executive Offer and Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Chad L. Daffer

 

 

 

 

Chad L. Daffer,

 

 

 

 

Chief Executive Officer of the Registrant

 

 

 

 

(Principal Executive Officer)

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Craig S. Allen

 

 

 

 

Craig S. Allen

 

 

 

 

Chief Financial Officer of Burlington Capital LLCthe Registrant

 

 

 

 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Mariann Byerwalter*

 

 

 

 

Mariann Byerwalter,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ William S. Carter*

 

 

 

 

William S. Carter,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Walter K. Griffith*

 

 

 

 

Walter K. Griffith,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Patrick J. Jung*

 

 

 

 

Patrick J. Jung,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Michael O. Johanns*

 

 

 

 

Michael O. Johanns,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 


Date:

March 3, 2017February 28, 2018

 

By

/s/ George H. Krauss*

 

 

 

 

George H. Krauss,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

Date:

March 3, 2017February 28, 2018

 

By

/s/ Gail Walling Yanney*

 

 

 

 

Gail Walling Yanney,

 

 

 

 

Manager of Burlington Capital LLC

 

 

 

 

 

 

*By

Craig S. Allen,

 

 

Attorney-in-Fact

 

 

 

 

By

/s/ Craig S. Allen

 

 

Craig S. Allen

 

 

 

125131