GREYSTONE HOUSING IMPACT INVESTORS LP In this Management's Discussion and Analysis, all references to "we," "us," and the "Partnership" refer toAmerica First Multifamily Investors, L.P. , its consolidated subsidiaries, and consolidated VIEs for all periods presented. See Note 2 and Note 5 to the Partnership's condensed consolidated financial statements for further disclosure. All BUC and per BUC numbers reflect the 1-for-3 Reverse Unit Split effected onApril 1, 2022 and the BUCs Distribution completed onOctober 31, 2022 on a retrospective basis.
Critical Accounting Policies and Estimates
The Partnership's critical accounting policies and estimates are the same as those described in the Partnership's Annual Report on Form 10-K for the year endedDecember 31, 2021 . The preparation of financial statements in conformity with generally accepted accounting principles inthe United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the Partnership's condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates and assumptions include those used in determining (i) the fair value of MRBs; (ii) investment impairments; (iii) impairment of real estate assets; and (iv) loan loss allowances.
Partnership Summary
The Partnership was formed in 1998 primarily for the purpose of acquiring a
portfolio of mortgage revenue bonds ("MRBs") that are issued by state and local
housing authorities to provide construction and/or permanent financing for
affordable multifamily and commercial properties. We also invest in governmental
issuer loans ("GILs"), which are similar to MRBs, to provide construction
financing for affordable multifamily properties. We expect and believe the
interest received on these MRBs and GILs is excludable from gross income for
federal income tax purposes. We may also invest in other types of securities and
investments that may or may not be secured by real estate to the extent allowed
by the Partnership Agreement.
We also make noncontrolling equity investments in unconsolidated entities for
the construction, stabilization, and ultimate sale of market-rate multifamily
properties. The Partnership is entitled to distributions if, and when, cash is
available for distribution either through operations, a refinance or sale of the
property. In addition, the Partnership may acquire and hold interests in
multifamily, student and senior citizen residential properties ("MF Properties ")
until their "highest and best use" can be determined by management.
The Partnership includes the assets, liabilities, and results of operations of
the Partnership, our wholly owned subsidiaries and consolidated VIEs. All
significant transactions and accounts between us and the consolidated VIEs have
been eliminated in consolidation. See Note 2 to the Partnership's condensed
consolidated financial statements for additional details.
As of September 30, 2022 , we have four reportable segments: (1) Affordable
Multifamily MRB Investments, (2) Seniors and Skilled Nursing MRB Investments,
(3) Market-Rate Joint Venture Investments and (4) MF Properties . The Partnership
presented a fifth reportable segment, Public Housing Capital Fund Trusts, in its
quarterly and annual filings during 2021 and prior. All activity in the Public
Housing Capital Fund Trusts segment ceased with the sale of the Public Housing
Capital Trust Fund investments in January 2020 and information is not presented
for this segment as it had no operations during the periods presented. The
Partnership separately reports its consolidation and elimination information
because it does not allocate certain items to the segments. All "General and
administrative expenses" on the Partnership's condensed consolidated statements
of operations are reported within the Affordable Multifamily MRB Investments
segment. See Notes 2 and 23 to the Partnership's condensed consolidated
financial statements for additional details. The following table presents
summary information regarding activity of our segments for the three and nine
months ended September 30, 2022 and 2021 (dollar amounts in thousands):
52
--------------------------------------------------------------------------------
For the Three Months Ended September 30, For the Nine Months Ended September 30,
Percentage of Percentage of Percentage of Percentage of
2022 Total 2021 Total 2022 Total 2021 Total
Total revenues
Affordable Multifamily
MRB Investments $ 18,423 81.5 % $ 12,795 72.4 % $ 45,444 77.0 % $ 34,624 71.4 %
Seniors and Skilled
Nursing MRB
Investments 194 0.9 % - 0.0 % 665 1.1 % - 0.0 %
Market-Rate Joint
Venture Investments 2,073 9.2 % 3,075 17.4 % 7,150 12.1 % 8,557 17.7 %
MF Properties 1,914 8.5 % 1,812 10.2 % 5,786 9.8 % 5,294 10.9 %
Total revenues $ 22,604 $ 17,682 $ 59,045 $ 48,475
Net income (loss)
Affordable Multifamily
MRB Investments $ 6,375 34.4 % $ 3,454 26.6 % $ 16,099 25.8 % $ 7,294 24.1 %
Seniors and Skilled
Nursing MRB
Investments 188 1.0 % - 0.0 % 657 1.1 % - 0.0 %
Market-Rate Joint
Venture Investments 12,423 67.1 % 9,836 75.7 % 46,185 74.0 % 23,547 77.9 %
MF Properties (470 ) -2.5 % (301 ) -2.3 % (554 ) -0.9 % (595 ) -2.0 %
Net income $ 18,516 $ 12,989 $ 62,387 $ 30,246 Corporate Responsibility
The Partnership is committed to corporate responsibility and the importance of
developing environmental, social and governance ("ESG") policies and practices
consistent with that commitment. We believe the implementation and maintenance
of such policies and practices benefit the employees that serve the Partnership,
support long-term performance for our Unitholders, and have a positive impact on
society and the environment.
Environmental Responsibility
Achieving environmental and sustainability goals in connection with our
affordable housing investment activity is important to us. Opportunities for
positive environmental investments are open to us because private activity bond
volume cap and LIHTC allocations are key components of the capital structure for
most new construction or acquisition/rehabilitation affordable housing
properties financed by our MRB and GIL investments. These resources are
allocated by individual states to our property sponsors through a competitive
application process under a state-specific qualified allocation plan ("QAP") as
required under Section 42 of the IRC. Each state implements its public policy
objectives through an application scoring or ranking system that rewards certain
property features. Some of the common features rewarded under individual state
QAPs are transit amenities (proximity to various forms of public
transportation), proximity to public services (parks, libraries, full scale
supermarkets, or a senior center), and energy efficiency/sustainability. Some
state-specific QAPs have minimum energy efficiency standards that must be met,
such as the use of low water need landscaping, Energy Star appliances and hot
water heaters, and GREENGUARD Gold certified insulation. Since we can only
finance properties with successful applications, we work with our sponsor
clients to maximize these environmental features such that their applications
can earn the most points possible under the individual state's QAP. During 2022,
properties related to our MRB investments in Residency at the Entrepreneur and
our GIL investment in Magnolia Heights , Poppy Grove I, Poppy Grove II, and Poppy
Grove III were awarded both private activity bond cap and LIHTC allocations
through state-specific QAPs.
The Suites on Paseo MF Property, which is wholly owned by the Partnership, is
LEED Silver Certified. LEED provides a framework for healthy, efficient, carbon
and cost-saving green buildings. To achieve LEED certification, a property earns
points by adhering to prerequisites and credits that address carbon, energy,
water, waste, transportation, materials, health and indoor environmental
quality. In addition, the property has three rooftop solar panels arrays to
generate renewable energy for the local power system. Two of the arrays are
owned by the local utility provider on roof space leased by the property and the
third array is owned by the property.
We are committed to minimizing the overall environmental impact of our corporate
operations. As only 14 employees of Greystone Manager are responsible for the
Partnership's operations, we have a relatively modest environmental impact and
have adequate facilities to grow our employee base without acquiring additional
physical space.
53
--------------------------------------------------------------------------------Social Responsibility
Our investments in MRBs and GILs directly support the construction, rehabilitation, and stabilized operation of decent, safe, and sanitary affordable multifamily housing acrossthe United States . As ofSeptember 30, 2022 , our debt investments secured by affordable housing properties totaled$1.1 billion of principal and support a total of 12,756 rental units in 16 states. Each of the properties securing our MRB and GIL investments is required to maintain a minimum percentage of units set-aside for low-income tenants in accordance with IRC guidelines, and the owners of the properties often agree to exceed the minimum IRC requirements. The rent charged to low-income tenants at MRB or GIL properties is often restricted to a certain percentage of the tenants' income, making them more affordable. For any newly originated MRBs or GILs associated with a low-income housing tax credit property, restrictions regarding tenant incomes and rents charged to those low-income households are required. In addition, certain borrowers related to our MRB investments are non-profit entities that provide affordable multifamily housing consistent with their charitable purposes. These properties provide valuable support to both low-income and market-rate tenants and create housing diversity in the geographic and social communities in which they are located. Certain investments may be eligible for regulatory credit under the Community Reinvestment Act of 1977 ("CRA") to help meet the credit needs of the communities in which they exist, including low- and moderate-income (LMI) neighborhoods. See "Community Investments" in this Item 2 below for further information regarding assets of the Partnership the General Partner believes are eligible for regulatory credit under the CRA.
Corporate Governance
Greystone Manager, as the general partner of the Partnership's general partner, is committed to corporate governance that aligns with the interests of our Unitholders and stakeholders.The Board of Managers of Greystone Manager brings a diverse set of skills and experiences across industries in the public, private and not-for-profit sectors. The composition of the Greystone ManagerBoard of Managers complies with NASDAQ listing rules andSEC rules applicable to the Partnership. All the members of theAudit Committee of Greystone Manager are independent under the applicableSEC and NASDAQ independence requirements, two of whom qualify as "audit committee financial experts." Of the seven Managers of Greystone Manager, two Managers are female.
Recent Developments
Recent Investment Activity
The following table presents information regarding the investment activity of
the Partnership for the nine months ended
54
--------------------------------------------------------------------------------
Notes to the
Partnership's
Tier 2 income condensed
allocable to the consolidated
Amount Retired Debt General Partner financial
Investment Activity # (in 000's) (in 000's) (in 000's) (1) statements
For the Three Months Ended
September 30, 2022
Mortgage revenue bond advance 1 $ 1,623 N/A N/A 6
Mortgage revenue bond redemption
and paydown 2 11,577 $ 10,420 N/A 6
Governmental issuer loan
acquisition and advances 7 39,820 N/A N/A 7
Investments in unconsolidated
entities 2 2,524 N/A N/A 9
Return of investment in
unconsolidated entity upon sale 1 7,400 N/A $ - 9
Property loan acquisitions and
advances 6 22,742 N/A N/A 10
Property loan redemptions 3 27,081 N/A N/A 10
Taxable mortgage revenue bond
advance 1 2,300 N/A N/A 12
Taxable governmental issuer loan
acquisitions 3 3,000 N/A N/A 12
For the Three Months Ended June
30, 2022
Mortgage revenue bond
acquisitions and advances 3 $ 20,307 N/A N/A 6
Mortgage revenue bond redemption 1 7,100 $ 7,100 N/A 6
Governmental issuer loan
acquisition and advances 5 39,806 N/A N/A 7
Investments in unconsolidated
entities 4 7,824 N/A N/A 9
Return of investment in
unconsolidated entity upon sale 1 7,341 N/A $ 260 9
Property loan acquisitions and
advances 7 23,527 N/A N/A 10
Taxable mortgage revenue bond
acquisition and advance 2 2,000 N/A N/A 12
For the Three Months Ended March
31, 2022
Mortgage revenue bond
acquisitions and advances 3 $ 69,365 N/A N/A 6
Mortgage revenue bond
redemptions 4 70,479 $ 45,109 N/A 6
Governmental issuer loan
advances 6 16,882 N/A N/A 7
Investments in unconsolidated
entities 5 12,777 N/A N/A 9
Return of investment in
unconsolidated entity upon sale 1 12,240 N/A $ 2,646 9
Property loan advances 5 38,412 N/A N/A 10
Property loan redemptions and
principal paydowns 7 3,251 N/A N/A 10
Taxable mortgage revenue bond
acquisition and advance 2 6,325 N/A N/A 12
For the Three Months Ended
September 30, 2021
Mortgage revenue bond advances 2 $ 3,995 N/A N/A 6
Mortgage revenue bond
redemptions 4 32,380 $ 25,690 $ 462 6
Governmental issuer loan
advances 6 35,582 N/A N/A 7
Investments in unconsolidated
entities 3 6,112 N/A N/A 9
Return of investment in
unconsolidated entity upon sale 1 8,600 N/A 73 9
Property loan advances 4 14,420 N/A N/A 10
Taxable mortgage revenue bond
advance 1 1,000 N/A N/A 12
For the Three Months Ended June
30, 2021
Mortgage revenue bond
acquisition and advance 2 $ 6,880 N/A N/A 6
Governmental issuer loan
advances 5 26,474 N/A N/A 7
Land acquisition for future
development 1 1,054 N/A N/A 8
Investments in unconsolidated
entities 2 11,641 N/A N/A 9
Return of investment in
unconsolidated entity upon sale 1 10,736 N/A $ 1,366 9
Property loan advances 2 1,859 N/A N/A 10
For the Three Months Ended March
31, 2021
Mortgage revenue bond advance 1 $ 2,072 N/A N/A 6
Mortgage revenue bond
redemptions 2 7,385 N/A N/A 6
Governmental issuer loan
advances 6 39,068 N/A N/A 7
Investment in unconsolidated
entity 1 1,426 N/A N/A 9
Return of investment in
unconsolidated entity upon sale 1 10,425 N/A $ 702 9
Property loan advances 3 3,000 N/A N/A 10
Taxable governmental issuer loan
advance 1 1,000 N/A N/A 12
(1)See "Cash Available for Distribution" in this Item 2 below.
55
--------------------------------------------------------------------------------Recent Financing Activity
The following table presents information regarding the debt financing, derivatives, Preferred Units and partners' capital activities of the Partnership for the nine months endedSeptember 30, 2022 and 2021, exclusive of retired debt amounts listed in the investment activity table above: Notes to the Partnership's condensed consolidated Financing, Derivative and Capital Amount financial Activity # (in 000's) Secured statements For the Three Months EndedSeptember 30, 2022 Net repayment on Acquisition LOC 4$ 8,512 Yes
14
Proceeds from TOB trust financings with Mizuho 4 24,930 Yes
15
Proceeds from TOB trust financing with Barclays 1 20,215 Yes
15
For the Three Months EndedJune 30, 2022 Net borrowing on Acquisition LOC 5$ 9,255 Yes
14
Proceeds from TOB trust financings with Mizuho 7 51,045 Yes
15
Proceeds from TOB trust financing with Barclays 1 11,875 Yes
15
Repayment of TOB Financings with Mizuho 2 5,079 Yes
15
Exchange of Series A Preferred Units for Series A-1 Preferred Units 1 20,000 N/A
19
For the Three Months EndedMarch 31, 2022 Net repayment on Acquisition LOC 1$ 15,515 Yes
14
Proceeds from TOB trust financings with Mizuho 8 108,530 Yes
15
Proceeds from TOB trust financing with Barclays 1 800 Yes
15
Unrestricted cash from total return swap 1 41,275 Yes 17 Interest rate swaps purchased 2 - N/A 17 For the Three Months EndedSeptember 30, 2021 Proceeds from TOB financings with Mizuho 7$ 46,223 Yes
15
Proceeds on issuance of BUCs, net of issuance costs 1 31,243 N/A
N/A
For the Three Months EndedJune 30, 2021 Net borrowing on secured LOC 1$ 6,500 Yes
14
Proceeds from TOB financings with Mizuho 5 30,983 Yes
15
Termination of unsecured operating LOC 1 - No
N/A
For the Three Months EndedMarch 31, 2021 Net repayment on unsecured LOCs 5$ 7,475 No
N/A
Proceeds from TOB trust financings with Mizuho 5 39,594 Yes 15
Affordable Multifamily MRB Investments Segment
The Partnership's primary purpose is to acquire and hold as investments a portfolio of MRBs which have been issued to provide construction and/or permanent financing forResidential Properties and commercial properties in their market areas. The Partnership has also invested in GILs, a taxable GIL and property loans which are included within this segment. All "General and administrative expenses" on the Partnership's condensed consolidated statements of operations are reported within this segment. The following table compares operating results for the Affordable Multifamily MRB Investments segment for the periods indicated (dollar amounts in thousands): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 $ Change % Change 2022 2021 $ Change % Change Affordable Multifamily MRB Investments Total revenues$ 18,423 $ 12,795 $ 5,628 44.0 %$ 45,444 $ 34,624 $ 10,820 31.3 % Interest expense 7,531 5,186 2,345 45.2 % 17,310 15,166 2,144 14.1 % Segment net income 6,375 3,454 2,921 84.6 % 16,099 7,294 8,805 120.7 % 56
--------------------------------------------------------------------------------
Comparison of the three months ended
Total revenues increased for the three months ended
•
An increase of approximately$1.7 million in other interest income for payments received on redemption of theCross Creek property loans that were previously in nonaccrual status;
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately$1.7 million in interest income from recent MRB acquisitions, offset by a decrease of approximately$1.1 million in interest income from MRB investments due to redemptions and principal paydowns; and
•
A decrease of approximately
Interest expense increased for the three months ended
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately$608,000 in amortization of deferred financing costs including approximately$510,000 of unamortized deferred financing costs that were recognized as interest expense upon the collapse of a TOB inSeptember 2022 ; and
•
A decrease of approximately
Segment net income increased for the three months ended
•
The changes in total revenue and total interest expense detailed in the tables below; and
•
An increase in general and administrative expenses due to an increase of
approximately
The following table summarizes the segment's net interest income, average balances, and related yields earned on interest-earning assets and incurred on interest-bearing liabilities, as well as other income included in total revenues for the three months endedSeptember 30, 2022 and 2021. The average balances are based primarily on monthly averages during the respective periods. All dollar amounts are in thousands. 57 --------------------------------------------------------------------------------
For the Three Months Ended September 30,
2022 2021
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
Interest-earning
assets:
Mortgage revenue bonds $ 688,308 $ 11,350 6.6 % (1) $ 646,288 $ 9,297 5.8 %
Governmental issuer
loans 256,984 3,134 4.9 % 147,950 1,248 3.4 %
Property loans 122,755 3,218 10.5 % (2) 24,672 302 4.9 %
Other investments 14,710 218 5.9 % 3,450 69 8.0 %
Total interest-earning
assets $ 1,082,757 $ 17,920 6.6 % $ 822,360 $ 10,916 5.3 %
Contingent interest
income - 1,849
Non-investment income 503 30
Total revenues $ 18,423 $ 12,795
Interest-bearing
liabilities:
Lines of credit $ 22,759 $ 249 4.4 % $ - $ 19 N/A
Fixed TEBS financing 256,981 2,539 4.0 % 286,371 2,776 3.9 %
Variable TEBS financing 76,139 561 2.9 % 77,498 266 1.4 %
Variable Secured Notes
(3) 102,838 1,685 6.6 % 103,216 594 2.3 %
Fixed Term TOB
financing 12,883 64 2.0 % 12,979 64 2.0 %
Variable TOB financing 508,637 4,317 3.4 % 268,799 1,198 1.8 %
Amortization of
deferred finance costs N/A 868 N/A N/A 260 N/A
Derivative fair value
adjustments N/A (2,752 ) N/A N/A 9 N/A
Total interest-bearing
liabilities $ 980,237 $ 7,531 3.1 % $ 748,863 $ 5,186 2.8 %
Net interest
income/spread (4) $ 10,389 3.8 % $ 5,730 2.8 %
(1)
Interest income includes $1.5 million of discount accretion on the Cross Creek
MRB upon redemption at par in the third quarter of 2022. Excluding this item,
the average interest rate was 5.7%.
(2)
Interest income includes $1.7 million for payments received in the third quarter
on Cross Creek property loans that were previously in nonaccrual status.
Excluding this item, the average interest rate was 4.9%.
(3)
Interest expense is reported net of income/loss on the Partnership's total
return swap agreements.
(4)
Net interest income equals the difference between total interest income from
interest-earning assets minus total interest expense from interest-bearing
assets. Net interest spread equals annualized net interest income divided by the
average interest-bearing assets during the period.
58
--------------------------------------------------------------------------------
The following table summarizes the changes in interest income and interest
expense for the three months ended September 30, 2022 and 2021, and the extent
to which these variances are attributable to 1) changes in the volume of
interest-earning assets and interest-bearing liabilities, or 2) changes in the
interest rates of the interest-earning assets and interest-bearing liabilities.
All dollar amounts are in thousands.
For the Three Months Ended September 30, 2022 vs. 2021
Total Volume Rate
Change $ Change $ Change
Interest-earning assets:
Mortgage revenue bonds $ 2,053 $ 604 $ 1,449 (1)
Governmental issuer loans 1,886 920 966
Property loans 2,916 1,201 1,715 (2)
Other investments 149 225 (76 )
Total interest-earning assets $ 7,004 $ 2,950 $ 4,054
Interest-bearing liabilities: Lines of credit $ 230 230 - Fixed TEBS financing (237 ) (285 ) 48 Variable TEBS financing 295 (5 ) 300 Variable Secured Notes (3) 1,091 (2 ) 1,093 Fixed Term TOB financing - - - Variable TOB financing 3,119 1,069 2,050 Amortization of deferred finance costs 608 (4) N/A 608 Derivative fair value adjustments (2,761 ) N/A (2,761 ) Total interest-bearing liabilities $ 2,345$ 1,007 $ 1,338 Net interest income $ 4,659$ 1,943 $ 2,716 (1) The average change attributable to rate includes$1.5 million of discount accretion on the Cross Creek MRB upon redemption at par in the third quarter of 2022. (2) The average change attributable to rate includes$1.7 million for payments received on theCross Creek property loans that were previously in nonaccrual. (3) Interest expense is reported net of income/loss on the Partnership's total return swap agreements. (4) Due to approximately$510,000 of unamortized deferred financing costs that were recognized as interest expense upon the collapse of a TOB inSeptember 2022 .
Comparison of the nine months ended
Total revenues increased for the nine months ended
•
An increase of approximately$3.3 million in other interest income for payments received on redemption of theOhio Properties , Live 929 Apartments, andCross Creek property loans in 2022 that were previously in nonaccrual status;
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately$4.3 million in interest income from recent MRB acquisitions, offset by a decrease of approximately$3.7 million in interest income from MRB investments due to redemptions and principal paydowns; and
•
A decrease of approximately
Interest expense increased for the nine months ended
•
An increase of approximately
•
An increase of approximately
59
--------------------------------------------------------------------------------•
An increase of approximately$891,000 in amortization of deferred financing costs including approximately$510,000 of unamortized deferred financing costs that were recognized as interest expense upon the collapse of a TOB inSeptember 2022 ; and
•
A decrease of approximately
Segment net income increased for the nine months ended
•
The changes in total revenue and total interest expense detailed in the tables below;
•
A decrease in the provision for credit loss of approximately
•
A decrease in the provision for loan loss of approximately
•
An increase in general and administrative expenses related to increases of
approximately
The following table summarizes the segment's net interest income, average balances, and related yields earned on interest-earning assets and incurred on interest-bearing liabilities, as well as other income included in total revenues for the nine months endedSeptember 30, 2022 and 2021. The average balances are based primarily on monthly averages during the respective periods. All dollar amounts are in thousands. For the Nine Months Ended September 30, 2022 2021 Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Interest-earning assets: Mortgage revenue bonds$ 689,745 $ 30,813 6.0 % (1)$ 659,006 $ 28,788 5.8 % Governmental issuer loans 223,362 6,820 4.1 % 118,217 2,961 3.3 % Property loans 99,306 6,679 9.0 % (2) 19,321 768 5.3 % Other investments 11,682 488 5.6 % 2,704 180 8.9 % Total interest-earning assets$ 1,024,095 $ 44,800 5.8 %$ 799,248 $ 32,697 5.5 % Contingent interest income - 1,849 Non-investment income 644 78 Total revenues$ 45,444 $ 34,624 Interest-bearing liabilities: Lines of credit$ 22,804 $ 687 4.0 %$ 4,447 $ 121 3.6 % Fixed TEBS financing 266,428 7,855 3.9 % 287,188 8,349 3.9 % Variable TEBS financing 76,470 1,269 2.2 % 77,809 826 1.4 % Variable Secured Notes (3) 102,934 3,675 4.8 % 103,306 1,765 2.3 % Fixed Term TOB financing 12,907 192 2.0 % 13,002 294 3.0 % Variable TOB financing 453,630 8,546 2.5 % 242,637 3,110 1.7 % Amortization of deferred finance costs N/A 1,581 N/A N/A 690 N/A Derivative fair value adjustments N/A (6,495 ) N/A N/A 11 N/A Total interest-bearing liabilities$ 935,173 $ 17,310 2.5 %$ 728,389 $ 15,166 2.8 % Net interest income/spread (4)$ 27,490 3.6 %$ 17,531 2.9 %
(1)
Interest income includes$1.5 million due to discount accretion on the Cross Creek MRB upon redemption at par in the third quarter of 2022. Excluding this item, the average interest rate was 5.7%. (2) Interest income includes$1.8 million and$1.7 million for payments received on property loans that were previously in nonaccrual status in the first and third quarters of 2022, respectively. Excluding these items, the average interest rate was 4.3%. (3) Interest expense is reported net of income/loss on the Partnership's total return swap agreements. (4) Net interest income equals the difference between total interest income from interest-earning assets minus total interest expense from interest-bearing assets. Net interest spread equals annualized net interest income divided by the average interest-bearing assets during the period. 60 -------------------------------------------------------------------------------- The following table summarizes the changes in interest income and interest expense for the nine months endedSeptember 30, 2022 and 2021, and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, or 2) changes in the interest rates of the interest-earning assets and interest-bearing liabilities. All dollar amounts are in thousands. For the Nine Months Ended
Average Average
Total Volume Rate
Change $ Change $ Change
Interest-earning assets:
Mortgage revenue bonds $ 2,025 $ 1,343 $ 682 (1)
Governmental issuer loans 3,859 2,634 1,225
Property loans 5,911 3,179 2,732 (2)
Other investments 308 598 (290 )
Total interest-earning assets $ 12,103 $ 7,754 $ 4,349
Interest-bearing liabilities: Lines of credit $ 566 $ 499 $ 67 Fixed TEBS financing (494 ) (604 ) 110 Variable TEBS financing 443 (14 ) 457 Variable Secured Notes (3) 1,910 (6 ) 1,916 Fixed Term TOB trust financing (102 ) (2 ) (100 ) Variable TOB financing 5,436 2,704 2,732 Amortization of deferred finance costs 891 (4) N/A 891 Derivative fair value adjustments (6,506 ) N/A (6,506 ) Total interest-bearing liabilities $ 2,144$ 2,577 $ (433 ) Net interest income $ 9,959$ 5,177 $ 4,782 (1) The average change attributable to rate includes$1.5 million of discount accretion on the Cross Creek MRB upon redemption at par in the third quarter of 2022. (2) The average change attributable to rate includes$1.8 million and$1.7 million for payments received on property loans that were previously in nonaccrual status in the first and third quarters of 2022, respectively. This amount has been offset by lower average interest rates on additional property loan investments made afterSeptember 30, 2021 . (3) Interest expense is reported net of income/loss on the Partnership's two total return swap agreements. (4) Due to approximately$510,000 of unamortized deferred financing costs that were recognized as interest expense upon the collapse of a TOB inSeptember 2022 .
Operational Matters
The multifamily properties securing our MRBs were all current on contractual debt service payments on our MRBs and we have received no requests for forbearance of contractual debt service payments as ofSeptember 30, 2022 . We continue to regularly discuss operations and the impacts of COVID-19 with property owners and property management service providers of multifamily properties securing our MRBs. We have noted in conversations with certain property managers that rent payment relief programs are still being utilized by some of the tenant population. We did observe slight declines in occupancy and operating results at our multifamily properties securing MRBs due to COVID-19. However, operating results, plus the availability of reserves, have allowed all properties to be current on contractual debt service payments. If property operating results significantly decline in the future, we may choose to provide support to the properties through supplemental property loans to prevent defaults on the related MRBs. Our sole student housing property securing an MRB, Live 929 Apartments, was 89% occupied as ofSeptember 30, 2022 , which is lower than the average occupancy of 95% during the school term fromSeptember 2021 throughMay 2022 . However, the borrower has leased units at higher rental rates for the 2022-2023 academic year such that overall revenues are expected to increase. InJanuary 2022 , the borrower completed a restructuring of all senior debt secured by the property and the borrower was current on all contractual MRB principal and interest payments as ofSeptember 30, 2022 . The proton therapy center securing the Provision Center 2014-1 MRB was successfully sold out of bankruptcy inJuly 2022 and a liquidation plan is being developed by the debtor and the bankruptcy court. Once a final accounting of bankruptcy proceeds is complete, we will receive our share of net proceeds. We own approximately 9.2% of the outstanding senior MRBs, and our reported net carrying value of the MRB, inclusive of accrued interest, was$4.6 million for GAAP purposes as ofSeptember 30, 2022 , and is our estimate of the proceeds we will ultimately receive upon liquidation of the bankruptcy and bond trust estate. Construction and rehabilitation activities continue at properties securing our GILs and related property loans. Four properties of the 13 properties had commenced leasing operations as ofSeptember 30, 2022 . To date, these properties have not experienced any material supply chain disruptions for either construction materials or labor or incurred material construction cost overruns. As many of our GIL investments and certain MRB investments have variable interest rates, we regularly monitor interest costs in comparison to 61 -------------------------------------------------------------------------------- capitalized interest reserves in each property's development budget, available construction cost contingencies balances, and the funding of certain equity commitments by the owners of the underlying properties. Though original development budgets are sized to incorporate potential interest rate increases, the pace of recent interest rate increases may cause actual interest costs during construction to exceed such reserves. However, we believe such project budgets have sufficient other reserves and contingencies to cover any such potential shortfalls. In addition, such projects have developer completion guaranties as well as capital contributed by LIHTC equity investors that will only receive their tax credits upon completion and stabilization of the projects. 62 --------------------------------------------------------------------------------
Seniors and Skilled Nursing MRB Investments Segment
The Seniors and Skilled Nursing MRB Investments segment provides acquisition, construction and permanent financing for seniors housing and skilled nursing properties. Seniors housing consists of a combination of the independent living, assisted living and memory care units. As ofSeptember 30, 2022 , we owned one MRB with aggregate outstanding principal of$1.7 million , with an outstanding commitment to provide additional funding of$42.3 million on a draw-down basis during construction. This MRB was issued to finance the construction and stabilization of a combined independent living, assisted living and memory care property inTraverse City, MI , with 154 total units. Furthermore, in 2021 we funded a property loan secured by a skilled nursing facility inHouston, TX , which was redeemed inSeptember 2022 . The following table compares the operating results for the Senior and Skilled Nursing MRB Investments segment for the periods indicated (dollar amounts in thousands): For the Three Months Ended September 30, For the Nine Months Ended September 30, % % 2022 2021 $ Change Change 2022 2021 $ Change Change Seniors and Skilled Nursing Investments Total revenues$ 194 $ -$ 194 N/A$ 665 $ -$ 665 N/A Interest expense 6 - 6 N/A 6 - 6 N/A Segment net income 188 - 188 N/A 657 - 657 N/A
Operations in this segment began in
Market-Rate Joint Venture Investments Segment
The Market-Rate Joint Venture Investments segment consists of our noncontrolling
joint venture equity investments in market-rate multifamily properties, also
referred to as our investments in unconsolidated entities, and property loans
due from market-rate multifamily properties. Our joint venture equity
investments are passive in nature. Operational oversight of each property is
controlled by our joint venture partner according to the entity's operating
agreement. All properties are managed by a property management company
affiliated with our joint venture partner. Decisions on when to sell an
individual property are made by our joint venture partner based on its view of
the local market conditions and current leasing trends.
An affiliate of our joint venture partner provides a guaranty of our preferred
returns on our equity investments through a date approximately five years after
commencement of construction. We account for our joint venture equity
investments using the equity method and recognize our preferred returns during
the hold period. Upon the sale of a property, net proceeds will be distributed
according to the entity operating agreement. Sales proceeds distributed to us
that represent previously unrecognized preferred return and gain on sale are
recognized in net income upon receipt. Historically, the majority of our income
from our joint venture equity investments is recognized at the time of sale. As
a result, we may experience significant income recognition in those quarters
when a property is sold and our equity investment is redeemed.
The following table compares operating results for the Market-Rate Joint Venture
Investments segment for the periods indicated (dollar amounts in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
Market-Rate Joint Venture
Investments
Total revenues $ 2,073 $ 3,075 $ (1,002 ) -32.6 % $ 7,150 $ 8,557 $ (1,407 ) -16.4 %
Interest expense 226 194 32 16.5 % 620 234 386 165.0 %
Gain on sale of investments
in unconsolidated entities 10,581 6,955 3,626 52.1 % 39,664 15,227 24,437 160.5 %
Segment net income 12,423 9,836 2,587 26.3 % 46,185 23,547 22,638 96.1 %
63--------------------------------------------------------------------------------
Comparison of the three months ended
The decrease in total revenues for the three months ended
•
A decrease of approximately
•
A decrease of approximately
•
A decrease of approximately
•
An increase of approximately
Interest expense for the three months ended
The gain on sale of investments in unconsolidated entities for the three months endedSeptember 30, 2022 is related to the sale of the Vantage at O'Connor property inJuly 2022 for a gain of approximately$10.6 million . The gain on sale of investments in unconsolidated entities for the three months endedSeptember 30, 2021 related to the sale of the Vantage atBulverde inAugust 2021 for a gain of approximately$7.0 million . The change in segment net income for the three months endedSeptember 30, 2022 as compared to the same period in 2021 was primarily due to the change in total revenues and gains on sales of unconsolidated entities discussed above.
Comparison of the nine months ended
The decrease in total revenues for the nine months ended
•
A decrease of approximately
•
A decrease of approximately
•
A decrease of approximately
•
An increase of approximately
•
An increase of approximately
Interest expense for the nine months ended
The gain on sale of investments in unconsolidated entities for the nine months
ended
•
The sale of Vantage at
•
The sale of Vantage at
•
The sale of Vantage at O'Connor in
The gain on sale of investments in unconsolidated entities for the nine months
ended
•
The sale of Vantage at
•
The sale of Vantage at Powdersville in
•
The sale of Vantage at
The change in segment net income for the nine months endedSeptember 30, 2022 as compared to the same period in 2021 was primarily due to the change in total revenues and gains on sales of unconsolidated entities discussed above.
Operational Matters
64
--------------------------------------------------------------------------------
We have noted no material construction cost overruns to date, despite generally
volatile market prices for construction materials, particularly lumber and
commodities. In addition, we have noted no material issues in securing materials
and labor needed to construct the properties underlying our investments in
unconsolidated entities, despite general supply chain constraints noted in the
current business environment. As of September 30, 2022 , three investments have
stabilized occupancy of 90% or above. Vantage at Tomball and Vantage at Helotes
have completed construction, are in the initial leasing phase, and are 67% and
40% occupied as of September 30, 2022 , respectively.
We continue to look for other opportunities to deploy capital in this segment.
We are evaluating opportunities to expand beyond our traditional multifamily
investment footprint in Texas . We are seeking other experienced joint venture
partners for potential expansion into other markets, or other asset classes, in
order to achieve more scale in this segment. In October 2022 , we executed a
$16.0 million commitment to fund the construction of Freestone at Greeley , a
306-unit market-rate multifamily property in Greeley, CO. This is our first
investment with the Freestone development group as managing member. The key
principals of the Freestone development group were formerly affiliated with the
Vantage development group and were closely involved in our 20 Vantage Joint
Venture Equity Investments to date. The Freestone and Vantage development groups
will work collaboratively together to bring the Partnership's 10 remaining
Vantage branded Joint Venture Equity Investments to completion and ultimate
sale. The remaining key principals of the Vantage development group may present
future Joint Venture Equity Investment opportunities to the Partnership, as may
the Freestone development group.
MF Properties Segment
As of
The following table compares operating results for the
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
MF Properties
Total revenues $ 1,914 $ 1,812 $ 102 5.6 % $ 5,786 $ 5,294 $ 492 9.3 %
Interest expense 273 283 (10 ) -3.5 % 815 847 (32 ) -3.8 %
Segment net loss (470 ) (301 ) (169 ) -56.1 % (554 ) (595 ) 41 6.9 %
Comparison of the three months ended
The increase in total revenues for the three months ended
The decrease in interest expense is due to a decrease in the average outstanding principal.
The increase in segment net loss for the three months endedSeptember 30, 2022 as compared to the same period in 2021 was due to the changes in total revenue and interest expense described above and an increase of approximately$280,000 in general real estate operating expenses and increasing variable costs as a result of higher occupancy, such as utilities and repairs & maintenance.
Comparison of the nine months ended
The increase in total revenues for the nine months endedSeptember 30, 2022 as compared to the same period in 2021 is due primarily to higher occupancy at the Suites on Paseo MF Property as on-campus enrollment recovers from declines caused by the COVID-19 pandemic.
The decrease in interest expense is due to a decrease in the average outstanding principal.
The improvement in segment net loss for the nine months endedSeptember 30, 2022 as compared to the same period in 2021 was due to the changes in total revenue and interest expense described above and an increase of approximately$556,000 in general operating expenses at the MF properties and increasing variable costs as a result of higher occupancy, such as utilities and repairs & maintenance. Operational Matters 65
-------------------------------------------------------------------------------- BothMF Properties have generated sufficient operating cash flows to meet all operational and mortgage payment obligations throughSeptember 30, 2022 . Both properties are adjacent to universities and are above average occupancy as compared to periods prior to COVID-19. The 50/50 MF Property, which is adjacent to theUniversity of Nebraska-Lincoln , was 97% occupied as ofSeptember 30, 2022 . The Suites on Paseo MF Property, which is adjacent toSan Diego State University , was 98% occupied as ofSeptember 30, 2022 .
Discussion of Occupancy at
The following tables summarize occupancy and other information regarding the properties underlying our various investment classes. The narrative discussion that follows provides a brief operating analysis of each investment class as of and for the nine months endedSeptember 30, 2022 and 2021.
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. These properties have met the stabilization criteria (see footnote 3 below the table) as ofSeptember 30, 2022 . Debt service on our MRBs for the non-consolidated stabilized properties was current as ofSeptember 30, 2022 . The amounts presented below were obtained from records provided by the property owners and their related property management service providers. 66 --------------------------------------------------------------------------------
Number
of Units as of Physical Occupancy (1) Economic Occupancy (2)
September 30, as of September 30, for the nine months ended September 30,
Property Name State 2022 2022 2021 2022 2021
MRB Multifamily Properties-Stabilized (3)
CCBA Senior Garden
Apartments (4) CA 45 98 % n/a 96 % n/a
Courtyard CA 108 99 % 100 % 96 % 92 %
Glenview Apartments CA 88 94 % 95 % 89 % 96 %
Harden Ranch CA 100 96 % 95 % 96 % 97 %
Harmony Court
Bakersfield CA 96 98 % 97 % 91 % 90 %
Harmony Terrace CA 136 96 % 99 % 132 % 117 %
Las Palmas II CA 81 100 % 100 % 98 % 98 %
Lutheran Gardens (4) CA 76 92 % n/a 90 % n/a
Montclair Apartments CA 80 98 % 99 % 94 % 95 %
Montecito at Williams
Ranch Apartments CA 132 98 % 98 % 105 % 104 %
Montevista CA 82 94 % 94 % 95 % 108 %
San Vicente CA 50 100 % 100 % 89 % 94 %
Santa Fe Apartments CA 89 94 % 100 % 91 % 94 %
Seasons at Simi Valley CA 69 99 % 97 % 118 % 109 %
Seasons Lakewood CA 85 99 % 98 % 99 % 98 %
Seasons San Juan
Capistrano CA 112 97 % 97 % 100 % 96 %
Solano Vista CA 96 98 % 97 % 87 % 100 %
Summerhill CA 128 98 % 98 % 91 % 90 %
Sycamore Walk CA 112 98 % 99 % 88 % 89 %
The Village at Madera CA 75 96 % 100 % 99 % 101 %
Tyler Park Townhomes CA 88 99 % 100 % 97 % 97 %
Vineyard Gardens CA 62 100 % 98 % 100 % 96 %
Westside Village Market CA 81 99 % 98 % 89 % 93 %
Brookstone IL 168 99 % 96 % 100 % 96 %
Copper Gate Apartments IN 129 98 % 98 % 101 % 93 %
Renaissance LA 208 94 % 93 % 91 % 90 %
Live 929 Apartments MD 575 89 % 95 % 75 % 72 %
Gateway Village (5) NC 64 n/a n/a n/a n/a
Greens Property NC 168 99 % 99 % 80 % 92 %
Lynnhaven Apartments (5) NC 75 n/a n/a n/a n/a
Silver Moon (6) NM 151 98 % 94 % 96 % 93 %
Village at Avalon (6) NM 240 95 % 98 % 96 % 97 %
Columbia Gardens SC 188 88 % 89 % 98 % 99 %
Companion at Thornhill
Apartments SC 179 99 % 99 % 83 % 89 %
The Palms at Premier
Park Apartments SC 240 98 % 97 % 88 % 93 %
Village at River's Edge
(7) SC 124 90 % 98 % 94 % 101 %
Willow Run SC 200 90 % 92 % 100 % 99 %
Arbors at Hickory Ridge
(8) TN 348 n/a n/a n/a n/a
Avistar at Copperfield TX 192 98 % 98 % 85 % 83 %
Avistar at the Crest TX 200 98 % 98 % 84 % 77 %
Avistar at the Oaks TX 156 98 % 96 % 89 % 88 %
Avistar at the Parkway TX 236 94 % 97 % 83 % 84 %
Avistar at Wilcrest TX 88 92 % 83 % 78 % 72 %
Avistar at Wood Hollow TX 409 97 % 95 % 87 % 85 %
Avistar in 09 TX 133 100 % 99 % 93 % 89 %
Avistar on the Boulevard TX 344 97 % 96 % 84 % 81 %
Avistar on the Hills TX 129 96 % 97 % 85 % 86 %
Bruton Apartments TX 264 91 % 85 % 62 % 71 %
Concord at Gulfgate TX 288 94 % 95 % 86 % 81 %
Concord at Little York TX 276 88 % 93 % 76 % 81 %
Concord at Williamcrest TX 288 94 % 96 % 83 % 87 %
Crossing at 1415 TX 112 97 % 99 % 87 % 87 %
Decatur Angle TX 302 92 % 84 % 67 % 73 %
Esperanza at Palo Alto TX 322 85 % 93 % 76 % 87 %
Heights at 515 TX 96 97 % 95 % 89 % 89 %
Heritage Square TX 204 98 % 98 % 83 % 76 %
Oaks at Georgetown TX 192 92 % 97 % 92 % 93 %
Runnymede TX 252 100 % 98 % 96 % 95 %
Southpark TX 192 98 % 98 % 90 % 95 %
15 West Apartments (6) WA 120 99 % 99 % 98 % 99 %
9,923 95 % 96 % 87 % 88 %
(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% physical occupancy for
90 days and an achievement of 1.15 times debt service coverage ratio on
amortizing debt service for a period after construction completion or completion
of the rehabilitation.
(4)
Prior year occupancy data is not available as the related investment was
recently acquired and not owned by the Partnership during the prior year.
(5)
The MRB was redeemed at par in October 2022 and as such, the Partnership will
not report property occupancy information.
(6)
The physical occupancy and economic occupancy amounts are based on the latest
available occupancy and financial information, which is as of June 30, 2022 .
(7)
The physical occupancy is based on the latest available financial information,
which is as of June 30, 2022 . Economic occupancy is as of September 30, 2022 .
(8)
The MRB is defeased and as such, the Partnership will not report property
occupancy information.
Physical occupancy as of September 30, 2022 is consistent with the same period
in 2021. Economic occupancy for the nine months ended September 30, 2022
decreased slightly from the same period in 2021. The Decatur Angle and Bruton
Apartments properties experienced significant declines due to higher than
historical bad debt reserve write-offs, though physical occupancy is improving.
The Gateway Village and Lynnhaven Apartments properties experienced significant
declines as part of a transition to new property management and higher than
historical bad debt expenses. The MRBs associated with the Gateway Village and
Lynnhaven Apartments properties were redeemed in October 2022 . These declines
were offset with improving economic occupancy at other properties recovering
from the effects of the COVID-19 pandemic.
67
--------------------------------------------------------------------------------The owners of the followingResidential Properties do not meet the definition of a VIE and/or we have evaluated and determined we are not the primary beneficiary of each VIE. As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis. As ofSeptember 30, 2022 , theseResidential Properties have not met the stabilization criteria (see footnote 3 below the table). As ofSeptember 30, 2022 , debt service on the Partnership's MRBs and GILs for the non-consolidated, non-stabilized properties was current. The amounts presented below were obtained from records provided by the property owners and their related property management service providers. Number Economic Occupancy (2) of Units as of Physical Occupancy (1) for the nine months ended September September 30, as of September 30, 30, Property Name State 2022 2022 2021 2022 2021 MRB Multifamily Properties-Non Stabilized (3) Ocotillo Springs (5) CA 75 99 % n/a 88 % n/a Residency at the Entrepreneur (4) CA 200 n/a n/a n/a n/a Residency at the Mayer (4) CA 79 n/a n/a n/a n/aJackson Manor Apartments (5) MS 60 100 % n/a 96 % n/a 414 GIL Multifamily Properties-Non Stabilized (3) Hope on Avalon (4) CA 88 n/a n/a n/a n/a Hope on Broadway (4) CA 49 n/a n/a n/a n/a Centennial Crossings (5) CO 209 80 % n/a 48 % n/a Poppy Grove I (4) CA 147 n/a n/a n/a n/a Poppy Grove II (4) CA 82 n/a n/a n/a n/a Poppy Grove III (4) CA 158 n/a n/a n/a n/a Osprey Village (4) FL 383 n/a n/a n/a n/a Magnolia Heights (5) GA 200 56 % n/a 56 % n/aWillow Place Apartments (4) GA 182 n/a n/a n/a n/a Oasis at Twin Lakes (5) MN 228 100 % n/a 71 % n/aLegacy Commons at Signal Hills (5) MN 247 4 % n/a 0 % n/a Hilltop atSignal Hills (5) MN 146 79 % n/a 35 % n/a Scharbauer Flats Apartments (5) TX 300 8 % n/a 2 % n/a 2,419
MI 154 n/a n/a n/a n/a
Grand total 2,987
(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)
The property is not considered stabilized as it has not met the criteria for
stabilization. A property is considered stabilized once it reaches 90% physical
occupancy for 90 days and an achievement of 1.15 times debt service coverage
ratio on amortizing debt service for a period after completion of the
rehabilitation.
(4)
Physical and economic occupancy information is not available for the nine months
ended September 30, 2022 and 2021 as the property is under construction or
rehabilitation.
(5)
Physical and economic occupancy information is not available for the nine months
ended September 30, 2021 as the related investment was under construction or
rehabilitation.
As of September 30, 2022 , all non-stabilized properties except for Ocotillo
Springs , Jackson Manor , Centennial Crossings, Magnolia Heights , Oasis at Twin
Lakes , Legacy Commons at Signal Hills , Hilltop at Signal Hills , and Scharbauer
Flats Apartments were under construction and have no operating metrics to
report. Jackson Manor and Magnolia Heights have commenced a tenant-in-place
rehabilitation. Ocotillo Springs , Centennial Crossings, Oasis at Twin Lakes ,
Legacy Commons at Signal Hills , Hilltop at Signal Hills and Scharbauer Flats
Apartments have substantially completed construction and are in lease-up.
68
--------------------------------------------------------------------------------Investments in Unconsolidated Entities
We are the only noncontrolling equity investor in various unconsolidated entities formed for the purpose of constructing market-rate, multifamily real estate properties. The Partnership determined the unconsolidated entities are VIEs but that the Partnership is not the primary beneficiary. As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis. The one exception is Vantage atSan Marcos , for which the Partnership is deemed the primary beneficiary and reports the entity's assets and liabilities on a consolidated basis. Our noncontrolling equity investments entitle us to shares of certain cash flows generated by the entities from operations and upon the occurrence of certain capital transactions, such as a refinance or sale. The amounts presented below were obtained from records provided by the property management service providers. Physical Occupancy (1) as of September 30, Revenue for the Construction Planned Three Months Ended Property Completion Number of September 30, 2022 Per-unit Name State Date Units 2022 2021 (2) Sale Date Sale Price Sold Properties Vantage at Germantown TN March 2020 n/a n/a n/a n/a March 2021$ 149,000 Vantage at February Powdersville SC 2020 n/a n/a n/a n/a May 2021 170,000 Vantage at Bulverde TX August 2019 n/a n/a n/a n/a August 2021 170,000 Vantage at Murfreesboro TN October 2020 n/a n/a 98 % n/a March 2022 273,000 Vantage at Westover Hills TX July 2021 n/a n/a 100 % n/a May 2022 (3) Vantage at O'Connor TX June 2021 n/a n/a 99 % n/a July 2022 201,000 Operating Properties Vantage at Stone Creek NE April 2020 294 97 % 89 % $ 1,246,508 n/a n/a Vantage at February Coventry NE 2021 294 96 % 96 % 1,200,046 n/a n/a Vantage at Conroe TX January 2021 288 91 % 85 % 1,069,379 n/a n/a Vantage at Tomball TX April 2022 288 67 % n/a 768,084 n/a n/a Properties Under Construction Vantage at Hutto TX n/a 288 n/a n/a n/a n/a n/a Vantage at Loveland CO n/a 288 n/a n/a n/a n/a n/a Vantage at Helotes (4) TX n/a 288 40 % n/a $ 183,867 n/a n/a Vantage at Fair Oaks TX n/a 288 n/a n/a n/a n/a n/a Vantage at McKinney Falls TX n/a 288 n/a n/a n/a n/a n/a Properties in Planning Vantage at San Marcos (5) TX n/a 288 n/a n/a n/a n/a n/a 2,892 (1) Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement. (2) Revenue is attributable to the property underlying the Partnership's equity investment and is not included in the Partnership's income. (3) Disclosure of the per-unit sale price is not permitted according to provisions in the purchase agreement executed by the entity's managing member and the buyer. (4) Information as ofSeptember 30, 2022 is provided as the property has commenced leasing operations prior to construction completion. (5) The property is reported as a consolidated VIE as ofSeptember 30, 2022 (see Note 5 to the Partnership's condensed consolidated financial statements). 69 -------------------------------------------------------------------------------- The Vantage properties atHutto ,Loveland ,Fair Oaks andMcKinney Falls are currently under construction and have yet to commence leasing activities as ofSeptember 30, 2022 . Construction was completed on Vantage atTomball during 2022 and Vantage atHelotes is nearing construction completion and both properties are leasing up in line with expectations. Vantage at San Macros remains in the planning phase. The Vantage properties atStone Creek , Coventry andConroe are considered stabilized as ofSeptember 30, 2022 .
As ofSeptember 30, 2022 , we owned twoMF Properties . The Partnership reports the assets, liabilities, and results of operations of these properties on a consolidated basis. The 50/50 MF property is encumbered by mortgage loans with an aggregate principal balance of approximately$24.5 million as ofSeptember 30, 2022 . Debt service on our mortgage payables was current as ofSeptember 30, 2022 . Number of Units as of Physical Occupancy (1) Economic Occupancy (2) September 30, as of September 30, for the year ended September 30, Property Name State 2022 2022 2021 2022 2021MF Properties Suites on Paseo CA 384 98 % 97 % 85 % 77 % The 50/50 Property NE 475 97 % 88 % 83 % 83 % 859 98 % 92 % 84 % 80 % (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.
The physical occupancy and economic occupancy as of and for the nine months
ended
Results of Operations
The tables and following discussions of our changes in results of operations for the three and nine months endedSeptember 30, 2022 and 2021 should be read in conjunction with the Partnership's condensed consolidated financial statements and notes thereto included in Item 1 of this report, as well as the Partnership's Annual Report on Form 10-K for the year endedDecember 31, 2021 .
The following table compares our revenue and other income for the periods indicated (dollar amounts in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
Revenues and Other
Income:
Investment income $ 16,564 $ 13,620 $ 2,944 21.6 % $ 44,792 $ 40,306 $ 4,486 11.1 %
Property revenues 1,914 1,812 102 5.6 % 5,786 5,294 492 9.3 %
Contingent interest
income - 1,849 (1,849 ) -100.0 % - 1,849 (1,849 ) -100.0 %
Other interest income 4,127 401 3,726 929.2 % 8,466 1,027 7,439 724.3 %
Gain on sale of
investments in
unconsolidated
entities 10,581 6,955 3,626 52.1 % 39,664 15,227 24,437 160.5 %
Total Revenues and
Other
Income $ 33,186 $ 24,637 $ 8,549 34.7 % $ 98,708 $ 63,703 $ 35,005 55.0 %
Discussion of Total Revenues and Other Income for the Three Months Ended
Investment income. The increase in investment income for the three months ended
•
An increase of approximately
•
A decrease of approximately
70
--------------------------------------------------------------------------------•
An increase of approximately
•
A decrease of approximately
o
A decrease of approximately
o
A decrease of approximately
o
A decrease of approximately
o
An increase of approximately
Property revenues. The increase in total revenues for the three months endedSeptember 30, 2022 as compared to the same period in 2021 is due to improved occupancy at the Suites on Paseo and 50/50MF Properties , Contingent interest income. There was no contingent interest income recognized for the three months endedSeptember 30, 2022 . Contingent interest income recognized for the three months endedSeptember 30, 2021 was realized upon the redemption of the Rosewood Townhomes - Series A andSouth Pointe Apartments - Series A MRBs inJuly 2021 . Other interest income. Other interest income is comprised primarily of interest income on our property loan, taxable MRB, and taxable GIL investments. The increase in other interest income for the three months endedSeptember 30, 2022 as compared to the same period in 2021 was due to the following factors:
•
An increase of approximately$1.7 million in other interest income for payments received on redemption of theCross Creek property loans that were previously in nonaccrual status;
•
An increase of approximately$1.7 million from higher average property loan, taxable MRB and taxable GIL investment balances of$119.6 million and higher average interest rates; and
•
An increase of approximately
Gain on sale of investments in unconsolidated entities. The gain on sale of investments in unconsolidated entities for the three months endedSeptember 30, 2022 is related to the sale of Vantage at O'Connor inJuly 2022 for a gain of approximately$10.6 million . The gain on sale of investments in unconsolidated entities for the three months endedSeptember 30, 2021 related to the sale of Vantage atBulverde inAugust 2021 for a gain of approximately$7.0 million .
Discussion of Total Revenues and Other Income for the Nine Months Ended
Investment income. The increase in investment income for the nine months ended
•
An increase of approximately
•
An increase of approximately$4.3 million in interest income from higher MRB investment balances and higher average interest rates, offset by a decrease of approximately$3.7 million in interest income from MRB investments due to redemptions and principal paydowns;
•
An increase of approximately
71
--------------------------------------------------------------------------------•
A decrease of approximately
o
A decrease of approximately
o
A decrease of approximately
o
A decrease of approximately
o
An increase of approximately
o
An increase of approximately
Property revenues. The increase in total revenues for the nine months endedSeptember 30, 2022 as compared to the same period in 2021 is due to improved occupancy at the Suites on Paseo and 50/50MF Properties as on-campus enrollment recovers from declines caused by the COVID-19 pandemic. Contingent interest income. There was no contingent interest income recognized for the nine months endedSeptember 30, 2022 . Contingent interest income recognized for the nine months endedSeptember 30, 2021 was realized upon the redemption of the Rosewood Townhomes - Series A andSouth Pointe Apartments - Series A MRBs inJuly 2021 . Other interest income. Other interest income is comprised primarily of interest income on our property loan, taxable MRB and taxable GIL investments. The increase in other interest income for the nine months endedSeptember 30, 2022 as compared to the same period in 2021 was due to the following:
•
An increase of approximately$3.3 million for payments received on redemption of theOhio Properties , Live 929 Apartments andCross Creek property loans in 2022 that were previously in nonaccrual status;
•
An increase of approximately
•
An increase of approximately
Gain on sale of investments in unconsolidated entities. The gain on sale of
investments in unconsolidated entities for the nine months ended
•
The sale of Vantage at
•
The sale of Vantage at
•
The sale of Vantage at O'Connor in
The gain on sale of investments in unconsolidated entities for the nine months
ended
•
The sale of Vantage at
•
The sale of Vantage at Powdersville in
•
The sale of Vantage at
72
--------------------------------------------------------------------------------The following table compares our expenses for the periods indicated (dollar amounts in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
Expenses:
Real estate operating
(exclusive of items
shown below) $ 1,521 $ 1,240 $ 281 22.7 %
- - -
loss -100.0 % - 900 (900 ) -100.0 %
Provision for loan - - -
loss -100.0 % - 330 (330 ) -100.0 %
Depreciation and 688 681 7
amortization 1.0 % 2,057 2,049 8 0.4 %
Interest expense 8,036 5,663 2,373 41.9 % 18,750 16,248 2,502 15.4 %
General and 4,505 4,145 360
administrative 8.7 % 11,996 10,895 1,101 10.1 %
Total Expenses $ 14,750 $ 11,729 $ 3,021 25.8 % $ 36,367 $ 33,430 $ 2,937 8.8 %
Discussion of Total Expenses for the Three Months Ended
Real estate operating expenses. Real estate operating expenses are related toMF Properties and are 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. Real estate operating expenses increased for the three months endedSeptember 30, 2022 as compared to the same period in 2021 primarily due to general real estate operating expenses and increasing variable costs as a result of higher occupancy, such as utilities and repairs & maintenance.
Depreciation and amortization expense. Depreciation and amortization relate
primarily to the
Interest expense. The increase in interest expense for the three months ended
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately$608,000 in amortization of deferred financing costs including approximately$510,000 of unamortized deferred financing costs that were recognized as interest expense upon the collapse of a TOB inSeptember 2022 ; and
•
A decrease of approximately
General and administrative expenses. The increase in general and administrative expenses for the three months endedSeptember 30, 2022 as compared to the same period in 2021 was primarily due an increase in general and administrative expenses of approximately$326,000 in administration fees paid to AFCA2 due to greater assets under management.
Discussion of Total Expenses for the Nine Months Ended
Real estate operating expenses. Real estate operating expenses are related toMF Properties and are 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. Real estate operating expenses increased for the nine months endedSeptember 30, 2022 as compared to 73 -------------------------------------------------------------------------------- the same period in 2021 primarily due to general real estate operating expenses and increasing variable costs as a result of higher occupancy, such as utilities and repairs & maintenance. Provision for credit loss. There was no provision for credit loss recognized for the nine months endedSeptember 30, 2022 . The provision for credit loss for the nine months endedSeptember 30, 2021 is related to the other-than-temporary impairment of the Provision Center 2014-1 MRB. Provision for loan loss. There was no provision for loan loss recognized for the nine months endedSeptember 30, 2022 . The provision for loan loss for the nine months endedSeptember 30, 2021 is related to an increase in the loan loss allowance for the Live 929 Apartments property loan.
Depreciation and amortization expense. Depreciation and amortization relate
primarily to the
Interest expense. The decrease in interest expense for the nine months ended
•
An increase of approximately
•
An increase of approximately
•
An increase of approximately$1.1 million in amortization of deferred financing costs including approximately$510,000 of unamortized deferred financing costs that were recognized as interest expense upon the collapse of a TOB inSeptember 2022 ; and
•
A decrease of approximately$6.5 million due to an increase in the fair market value of the Partnership's interest rate derivative instruments attributable to rising market interest rates. General and administrative expenses. The increase in general and administrative expenses for the nine months endedSeptember 30, 2022 as compared to the same period in 2021 was primarily due to increases of approximately$853,000 in administration fees paid to AFCA2 due to greater assets under management, approximately$108,000 related to increased insurance premiums, and approximately$94,000 related to increased travel expenses.
Discussion of Income Tax Expense for the Three and Nine Months Ended
A wholly owned subsidiary of the Partnership, the Greens Hold Co, is a corporation subject to federal and state income tax. The Greens Hold Co owns The 50/50 MF Property and certain property loans. There was minimal taxable income for the Greens Hold Co for the three and nine months endedSeptember 30, 2022 and 2021.
Cash Available for Distribution
The Partnership believes that Cash Available for Distribution ("CAD") provides
relevant information about the Partnership's operations and is necessary, along
with net income, for understanding its operating results. To calculate CAD, the
Partnership begins with net income as computed in accordance with GAAP and
adjusts for non-cash expenses consisting of depreciation expense, amortization
expense related to deferred financing costs, amortization of premiums and
discounts, non-cash interest rate derivative expense or income, provisions for
credit and loan losses, impairments on MRBs, GILs, real estate assets and
property loans, deferred income tax expense (benefit) and restricted unit
compensation expense. The Partnership also deducts Tier 2 income (see Note 3 to
the Partnership's condensed consolidated financial statements) distributable to
the General Partner as defined in the Partnership Agreement and distributions
and accretion for the Preferred Units. 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 the 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 calculated in
accordance with GAAP, or any other measures of financial performance presented
in accordance with GAAP.
The following table shows the calculation of CAD (and a reconciliation of the
Partnership's net income, as determined in accordance with GAAP, to CAD) for the
three and nine months ended September 30, 2022 and 2021 (all per BUC amounts are
presented giving effect to the one-for-three Reverse Unit Split and the BUCs
Distribution on a retroactive basis for all periods presented):
74
--------------------------------------------------------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net income $ 18,516,593 $ 12,988,384 $ 62,387,292 $ 30,245,918
Change in fair value of
derivatives (2,871,716 ) 9,261 (6,579,280 ) 11,304
Depreciation and amortization
expense 688,488 680,925 2,056,512 2,049,269
Provision for credit loss (1) - - - 900,080
Provision for loan loss (2) - - - 330,116
Reversal of impairment on
securities (3) (5,712,230 ) - (5,712,230 ) -
Reversal of provision for loan
loss (4) (593,000 ) - (593,000 ) -
Amortization of deferred financing
costs 982,388 368,829 1,926,580 823,212
Restricted unit compensation
expense 580,156 570,467 919,563 839,551
Deferred income taxes (42,543 ) (42,011 ) (49,250 ) (77,681 )
Redeemable Preferred Unit
distributions and accretion (716,490 ) (717,762 ) (2,150,734 ) (2,153,288 )
Tier 2 Income allocable to the
General Partner (5) (70,200 ) (534,873 ) (2,905,748 ) (2,603,020 )
Recovery of prior credit loss (6) (17,345 ) - (39,968 ) -
Bond premium, discount and
origination fee amortization, net
of cash received 957,343 (17,846 ) 819,627 (54,552 )
Total CAD $ 11,701,444 $ 13,305,374 $ 50,079,364 $ 30,310,909
Weighted average number of BUCs
outstanding, basic 22,247,781 20,426,559 22,247,336 20,423,679
Net income per BUC, basic $ 0.79 $ 0.57 $ 2.56 $ 1.24
Total CAD per BUC, basic $ 0.53 $ 0.65 $ 2.25 $ 1.48
Cash Distributions declared, per
BUC (7) $ 0.366 $ 0.327 $ 1.257 $ 0.921
BUCs Distribution declared, per
BUC (8) $ 0.20 $ - $ 0.20 $ -
(1)
The provision for credit loss for the nine months ended
(2)
The provision for loan loss for the nine months ended
(3)
This amount represents previous impairments recognized as adjustments to CAD in prior periods related to the Provision Center 2014-1 MRB. The property securing the MRB was sold inJuly 2022 with cash proceeds contributed to the bankruptcy estate. The borrower and the bankruptcy court are developing a liquidation plan for the settlement of all remaining, receivables, payable and expenses such that the Partnership's share of the proceeds can be distributed. Substantially all the assets of the borrower were liquidated in the third quarter such that the Partnership's loss was effectively realized.
(4)
This amount represents previous impairments recognized as adjustments to CAD in prior periods related to theCross Creek property loans. Such adjustments were reversed in the third quarter of 2022 upon the settlement of the outstanding balances.
(5)
As described in Note 3 to the Partnership's condensed 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 limited partners and BUC holders, as a class, and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner. For the nine months endedSeptember 30, 2022 , Tier 2 income allocable to the General Partner consisted of approximately$2.6 million related to the gain on sale of Vantage atMurfreesboro inMarch 2022 , and approximately$260,000 related to the gain on sale of Vantage atWestover Hills inJune 2022 . For the nine months endedSeptember 30, 2021 , Tier 2 income allocable to the General Partner consisted of approximately$703,000 related to the gain on sale of Vantage atGermantown inMarch 2021 , approximately$1.4 million related to the gain on sale of Vantage at Powdersville inMay 2021 , approximately$462,000 related to the redemption of Rosewood Townhomes - Series A andSouth Pointe Apartments - Series A MRBs inJuly 2021 , and approximately$73,000 related to the gain on sale of Vantage atBulverde inAugust 2021 .
(6)
The Partnership compared the present value of cash flows expected to be collected to the amortized cost basis of the Live 929 Apartments Series 2022A MRB as ofMarch 31, 2022 , which indicated a recovery of value. The Partnership will accrete the recovery of prior credit loss into investment income over the term of the MRB. The accretion of recovery of value is presented as a reduction to current CAD as the original provision for credit loss was an addback for CAD calculation purposes in the period recognized.
(7)
OnSeptember 14, 2022 , the Partnership declared the BUCs Distribution payable in the form of additional BUCs at a ratio of 0.01044 BUCs for each issued and outstanding BUC as of the record date ofSeptember 30, 2022 . All cash distributions per BUC amounts above have been retroactively adjusted for the BUCs Distribution.
(8)
OnSeptember 14, 2022 , the Partnership declared the BUCs Distribution payable in the form of additional BUCs equal to$0.20 per BUC. The BUCs Distribution was paid at a ratio of 0.01044 BUCs for each issued and outstanding BUC as of the record date ofSeptember 30, 2022 , which represents an amount per BUC based on the closing price of the BUCs on theNasdaq Stock Market LLC onSeptember 13, 2022 . The BUCs Distribution was completed onOctober 31, 2022 . 75 --------------------------------------------------------------------------------
Liquidity and Capital Resources
We continually evaluate our potential sources and uses of liquidity, including current and potential future developments related to COVID-19, market interest rates, and the general economic and geopolitical environment. The information below is based on the Partnership's current expectations and projections about future events and financial trends, which could materially differ from actual results. Our short-term liquidity requirements over the next 12 months will be primarily operational expenses, investment commitments net of leverage secured by the investments, debt service (principal and interest payments) related to our debt financings, the potential exercise of redemption rights by the holders of the Series A Preferred Units, and distribution payments to Unitholders. We expect to meet these liquidity requirements primarily using cash on hand, operating cash flows from our investments andMF Properties , and potentially additional debt financing issued in the normal course of business. In addition, we will consider the issuance of additional BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests in the Partnership based on needs and opportunities for executing our strategy. Our long-term liquidity requirements will be primarily for maturities of debt financings and mortgages payable; the potential exercise of redemption rights by the holders of the Series A Preferred Units; additional investments in MRBs, GILs, property loans, net of leverage secured by the investments; and additional investments in unconsolidated entities. We expect to meet these liquidity requirements primarily through refinancing of maturing debt financings with the same or similar lenders; contractual principal and interest payments from investments in MRBs, GILs and property loans; and proceeds from asset sales and redemptions. In addition, we will consider the issuance of additional BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests in the Partnership based on needs and opportunities for executing our strategy. Sources of Liquidity
The Partnership's principal sources of liquidity consist of:
•
Unrestricted cash on hand;
•
Operating cash flows from investments in MRBs, GILs, property loans and investments in unconsolidated entities;
•
Net operating cash flows from
•
Secured lines of credit;
•
Proceeds from the sale or redemption of assets;
•
Proceeds from obtaining additional debt; and
•
Issuances of BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests.
Unrestricted Cash on Hand
As ofSeptember 30, 2022 , the Partnership had unrestricted cash on hand of approximately$103.2 million . The Partnership is required to keep a minimum of$5.0 million of unrestricted cash on hand under the terms of certain guaranty obligations. There are no other contractual restrictions of the Partnership's ability to use cash on hand.
Operating Cash Flows from Investments
Cash flows from operations are primarily comprised of regular principal and interest payments received on our MRBs, GILs and property loans that provide consistent cash receipts throughout the year. All MRBs, GILs and property loans are current on contractual debt service payments as ofSeptember 30, 2022 , except for the Provision Center 2014-1 MRB. Investment receipts, net of interest expense on related debt financings and lines of credit, are available for our general use. We also receive distributions from investments in unconsolidated entities if, and when, cash is available for distribution at the unconsolidated entities. Receipt of cash from our investments in MRBs and investments in unconsolidated entities is dependent upon the generation of net cash flows at multifamily properties that underlie our investments. These underlying properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses. Receipt of cash from GILs and construction financing property loans is dependent on the availability of funds in the original development budgets. The current rising interest rate environment is resulting in higher interest costs for variable rate construction 76 --------------------------------------------------------------------------------
financing properties. We regularly monitor capitalized interest costs in comparison to capitalized interest reserves in the property's development budget, available construction cost contingencies balances, and the funding of certain equity commitments by the owners of the underlying properties.
Net Operating Cash Flows from
Cash flows generated by
Secured Lines of Credit
We maintain a secured line of credit ("General LOC") with two financial
institutions of up to $40.0 million to purchase additional investments and to
meet general working capital and liquidity requirements. We may borrow, prepay
and reborrow amounts at any time through the maturity date, subject to the
limitations of a borrowing base. The aggregate available commitment cannot
exceed a borrowing base calculation, which is equal to 40% multiplied by the
aggregate value of a pool of eligible encumbered assets. Eligible encumbered
assets consist of (i) the net book value of the Suites on Paseo MF Property, and
(ii) 100% of our equity capital contributions to unconsolidated entities,
subject to certain limits and restrictions. The General LOC is secured by first
priority security interests in the Partnership's investments in unconsolidated
entities, a mortgage and assignment of leases and rents of the Suites on Paseo
MF Property, and a security interest in a bank account at BankUnited, N.A. , in
which the Partnership must maintain a balance of not less than $5.0 million . We
are subject to various affirmative and negative covenants that, among others,
require the Partnership to maintain liquidity of not less than $5.0 million ,
maintain a consolidated tangible net worth of not less than $100.0 million , and
to notify BankUnited, N.A. if our consolidated net worth declines by (a) more
than 20% from the immediately preceding quarter, or (b) more than 35% from the
date at the end of two consecutive calendar quarters ending immediately
thereafter. We were in compliance with all covenants as of September 30, 2022 .
The balance of the General LOC was $6.5 million with the ability to draw an
additional $33.5 million as of September 30, 2022 . The General LOC has a
maturity date of June 2023 , with options to extend for up to two additional
years.
We maintain a secured non-operating line of credit ("Acquisition LOC") with a
financial institution of up to $50 million . The Acquisition LOC may be used to
fund purchases of MRBs, taxable MRBs, or loans issued to finance the
acquisition, rehabilitation, or construction of affordable housing or which are
otherwise secured by real estate or mortgage-backed securities (i.e., GILs and
property loans). Advances on the Acquisition LOC are due on the 270th day
following the advance date but may be extended for up to an additional 270 days
by making certain payments. The Acquisition LOC contains a covenant, among
others, that the Partnership's senior debt will not exceed a specified
percentage of the market value of the Partnership's assets to be consistent with
the Leverage Ratio (as defined by the Partnership). We were in compliance with
all covenants as of September 30, 2022 . There was an approximately $24.4 million
outstanding balance on the Acquisition LOC and approximately $25.6 million was
available as of September 30, 2022 . The Acquisition LOC has a maturity date of
June 2024 , with two one-year extension options, subject to certain terms and
conditions.
Proceeds from the Sale or Redemption of Assets
We may, from time to time, sell or redeem our investments in MRBs, GILs, property loans, investments in unconsolidated entities andMF Properties consistent with our strategic plans. Our MRB portfolio is marked at a premium to cost, adjusted for paydowns, primarily due to higher stated interest rates when compared to current market interest rates for similar investments. We may consider selling certain MRBs in exchange for cash at prices that approximate our currently reported fair value. However, we are contractually prevented from selling the MRBs included in our TEBS financings. Our ability to dispose of investments on favorable terms is dependent upon several factors including, but not limited to, the number of potential buyers and the availability of credit to such potential buyers to purchase investments at prices we consider acceptable. Recent volatility in market interest rates, recent inflation and the potential for an economic recession may negatively impact the potential prices we could realize upon the disposition of our various assets. The following table summarizes the proceeds from sales of our investments in unconsolidated entities during 2022, inclusive of the return of our initial equity investments: Gross Proceeds to Property Name Location Units Month Sold the Partnership Vantage at Murfreesboro Murfreesboro, TN 288 March 2022$ 29,258,279 Vantage at Westover Hills San Antonio, TX 288 May 2022 20,923,784 Vantage at O'Connor San Antonio, TX 288 July 2022 19,381,976$ 69,564,039 77
-------------------------------------------------------------------------------- InMarch 2022 , theOhio Properties property loans were repaid in full. We received approximately$2.4 million of principal and approximately$4.3 million of accrued interest upon redemption.The Ohio Properties - Series A MRB was redeemed inMarch 2022 , though all principal proceeds were applied as a paydown of our M24 TEBS financing.The Ohio Properties - Series B MRB was redeemed and we received approximately$3.5 million of principal and approximately$29,000 of accrued interest upon redemption. InSeptember 2022 , the Cross Creek MRB and property loans were redeemed. We received approximately$771,000 of cash proceeds upon redemption of the MRB, with the remaining redemption proceeds used to pay down the outstanding principal balance of the M24 TEBS financing. We received additional proceeds of approximately$5.3 million upon redemption of the originalCross Creek property loans principal and accrued interest.
Proceeds from Obtaining Additional Debt
We hold certain investments that are not associated with our debt financings, mortgages payable, or secured LOCs. We may obtain leverage for these investments by posting the investments as security. As ofSeptember 30, 2022 , our primary unleveraged assets were certain MRBs with outstanding principal totaling approximately$23.6 million . Of these MRBs, approximately$10.0 million is principal outstanding on the Provision Center 2014-1 MRB, for which the borrower has declared Chapter 11 bankruptcy, and which could limit our ability to obtain leverage related to this MRB.
Issuances of BUCs, Series A-1 Preferred Units or Series B Preferred Units
We may, from time to time, issue additional BUCs in the public market at prices or quantities that are consistent with our strategic goals. InDecember 2019 , the Partnership's Registration Statement on Form S-3 ("Registration Statement") was declared effective by theSEC under which the Partnership may offer up to$225.0 million of BUCs for sale from time to time. The Registration Statement will expire inDecember 2022 , and the Partnership expects to file a new shelf registration statement with theSEC prior to the expiration of the current Registration Statement, which will allow the Partnership to issue BUCs thereunder for an additional three-year period. InJuly 2021 , we entered into a Capital on DemandTM Sales Agreement to offer and sell, from time to time at market prices on the date of sale, BUCs up to an aggregate offering price of$30 million via an "at the market offering." As ofSeptember 30, 2022 , we have not sold any BUCs under this program. We will continue to assess if and when to issue BUCs under this program going forward. InSeptember 2021 , we completed an underwritten public offering of 5,462,500 BUCs. The offering resulted in net cash proceeds of approximately$31.2 million for the Partnership, after the payment of underwriting discounts, commissions and offering expenses.
We have two registration statements on Form S-3 covering the offering of
Preferred Units that have been declared effective by the
Initial Units Available
Preferred Registration Unit Optional to Issue as of
Unit Effectiveness Offering
Redemption
Series Date Expiration Date Price Distribution Rate Date
2022 September 30, 2022
September Sixth -
Series A-1 2021 September 2024 $ 10.00 3.00% anniversary 3,500,000 (1)
September Eighth -
Series B 2021 September 2024 10.00 3.40% anniversary 10,000,000 (2)
Total 13,500,000 -
(1)
The Partnership is able to issue Series A-1 Preferred Units so long as the
aggregate market capitalization of the BUCs, based on the closing price on the
trading day prior to issuance of the Series A-1 Preferred Units, is no less than
three times the aggregate book value of all Series A Preferred Units and Series
A-1 Preferred Units, inclusive of the amount to be issued.
(2)
The Partnership is able to issue Series B Preferred Units so long as the aggregate market capitalization of the BUCs, based on the closing price on the trading day prior to issuance of the Series B Preferred Units, is no less than two times the aggregate book value of all Series A Preferred Units, Series A-1 Preferred Units and Series B Preferred Units, inclusive of the amount to be issued.
We may also designate and issue additional series of preferred units representing limited partnership interests in the Partnership in accordance with the terms of the Partnership Agreement.
Uses of Liquidity
Our principal uses of liquidity consist of:
•
General and administrative expenses;
•
Investment funding commitments;
•
Debt service on debt financings, Secured Notes, mortgages payable, and secured lines of credit;
78
--------------------------------------------------------------------------------•
Distributions paid to holders of Preferred Units and BUCs;
•
Potential redemptions of Series A Preferred Units; and
•
Other contractual obligations.
General and Administrative Expenses
We use cash to pay general and administrative expenses of the Partnership's operations. For additional details, see Item 1A, "Risk Factors" in the Partnership's Annual Report on Form 10-K for the year endedDecember 31, 2021 and the section captioned "Cash flows from operating activities" in the Partnership's condensed consolidated statements of cash flows set forth in Item 1 of this report. General and administrative expenses are typically paid from unrestricted cash on hand and operating cash flows. Included in general and administrative expenses is operating lease expenses for ourMF Properties , of which the most significant is a ground lease associated with The 50/50 MF Property. Such expenses are expected to be paid from operating cash flows. The following table summarizes our outstanding contractual lease obligations by year as ofSeptember 30, 2022 : Remainder of 2022$ 35,657 2023 143,561 2024 144,706 2025 147,598 2026 150,548 Thereafter 4,219,127 Total$ 4,841,197
Investment Funding Commitments
Our overall strategy is to invest in quality multifamily properties through either the acquisition of MRBs, GILs, property loans and equity investments in both existing and new markets. We evaluate investment opportunities based on, but not limited to, our market outlook, including general economic conditions, development opportunities and long-term growth potential. Our ability to make future investments is dependent upon identifying suitable acquisition and development opportunities, access to long-term financing sources, and the availability of investment capital. We may commit to fund additional investments on a draw-down or forward basis. The following table summarizes our outstanding investment commitments as ofSeptember 30, 2022 : 79 --------------------------------------------------------------------------------
Projected Funding by Year (1)
Remaining
Commitment
as of
Maturity Total Initial September 30, Remainder of Interest Related Debt
Property Name Commitment Date Date Commitment 2022 2022 2023 2024 2025 Rate (2) Financing (3)
Mortgage Revenue Bonds
Residency at the Mayer SOFR +
- Series A October 2021 April 2039 $ 29,500,000 $ 4,500,000 $ 4,500,000 $ - $ - $ - 3.60% Variable TOB
Meadow Valley December
December 2021 2029 44,000,000 42,276,563 3,600,000 18,500,000 20,176,563
- 6.25% (6)
Residency at the
Entrepreneur- Series
J-3 April 2022 March 2040 26,080,000 26,080,000 8,000,000 18,080,000 - - 6.00% Variable TOB
Residency at the
Entrepreneur- Series SOFR +
J-4 April 2022 March 2040 16,420,000 16,420,000 1,000,000 10,400,000 5,020,000
- 3.60% (4) Variable TOB
Subtotal 116,000,000 89,276,563 17,100,000 46,980,000 25,196,563
-
Taxable Mortgage Revenue Bonds Residency at the Mayer April 2024 SOFR + Series A-T October 2021 (5)$ 12,500,000 $ 11,500,000 $ 11,500,000 $ - $ - $ - 3.70% Variable TOB Residency at the Entrepreneur Series April 2025 SOFR + J-T April 2022 (5) 13,000,000 12,000,000 - - 12,000,000 - 3.65% Variable TOB Subtotal 25,500,000 23,500,000 11,500,000 - 12,000,000 - Governmental Issuer Loans Hope on Broadway February SIFMA + January 2021 2023 (5)$ 12,105,623 $ 1,414,378 $ 1,414,378 $ - $ - $ - 3.75% Variable TOB Osprey Village August SOFR + July 2021 2024 (5) 60,000,000 29,351,561 6,506,629 22,844,932 - - 3.07% Variable TOB Willow Place October SOFR + Apartments September 2021 2024 (5) 25,000,000 12,641,729 4,604,816 8,036,913 - - 3.30% Variable TOB Poppy Grove I April 2025 September 2022 (5) 35,688,328 28,942,328 5,600,000 23,342,328 - - 6.78% (6) Poppy Grove II April 2025 September 2022 (5) 22,250,000
18,708,700 3,910,000 13,790,000 1,008,700
- 6.78% (6)
Poppy Grove III April 2025
September 2022 (5) 39,119,507 31,769,507 6,300,000 24,460,000 1,009,507
- 6.78% (6)
Subtotal 194,163,458 122,828,203 28,335,823 92,474,173 2,018,207
-
Taxable Governmental Issuer Loans
Hope on Avalon February SOFR +
January 2021 2023 (5) $ 10,573,000 $ 9,573,000 $ 9,573,000 $ - $ - $ - 3.55% Variable TOB
Poppy Grove I April 2025
September 2022 (5) 21,157,672 20,157,672 - - 20,157,672 - 6.78% (6)
Poppy Grove II April 2025
September 2022 (5) 10,941,300 9,941,300 - - 9,941,300 - 6.78% (6)
Poppy Grove III April 2025
September 2022 (5) 24,480,493 23,480,493 - - 19,980,493 3,500,000 6.78% (6)
Subtotal 67,152,465 63,152,465 9,573,000 - 50,079,465 3,500,000
Property Loans
Oasis at Twin Lakes August LIBOR +
July 2020 2023 (5) $ 27,704,180 $ 3,685,523 $ 3,685,523 $ - $ - $ - 2.50% Variable TOB
Hilltop at Signal August SOFR +
Hills January 2021 2023 (5) 21,197,939 2,229,605 2,229,605 - - - 3.07% Variable TOB
Legacy Commons at February SOFR +
Signal Hills January 2021 2024 (5) 32,233,972 4,067,067 4,067,067 - - - 3.07% Variable TOB
Osprey Village August SOFR +
July 2021 2024 (5) 25,500,000 24,500,000 - 24,500,000 - - 3.07% Variable TOB
Willow Place October SOFR +
Apartments September 2021 2024 (5) 21,351,328 20,351,328 - 20,351,328 - - 3.30% Variable TOB
Magnolia Heights July 2024 SOFR +
June 2022 (5) 10,300,000 9,300,000 3,286,266 6,013,734 - - 3.85% Variable TOB
Subtotal 138,287,419 64,133,523 13,268,461 50,865,062 - -
Equity Investments
Vantage at San Marcos
(7) November 2020 N/A $ 9,914,529 $ 8,943,914 $ 8,943,914 $ - $ - $ - N/A N/A
Subtotal 9,914,529 8,943,914 8,943,914 - - -
Bond Purchase
Commitments
Anaheim & Walnut Q3 2024
September 2021 (8) $ 3,900,000 $ 3,900,000 $ - $ - $ 3,900,000 $ - 4.85% N/A
Subtotal 3,900,000 3,900,000 - - 3,900,000 -
Total Commitments $ 554,917,871 $ 375,734,668 $ 88,721,198 $ 190,319,235 $ 93,194,235 $ 3,500,000 (1) Projected fundings by year are based on current estimates and the actual funding schedule may differ materially due to, but not limited to, the pace of construction, adverse weather conditions, delays in governmental approvals or permits, the availability of materials and contractors, and labor disputes. (2) The variable index interest rate components are typically subject to floors that range from 0% to 0.85%. (3) The Partnership has securitized the indicated assets in TOB trust financing facilities that allow for additional principal proceeds as the remaining investment commitments are funded by the Partnership. See Note 15 for further details on debt financing. (4) Upon stabilization, the MRB will convert to a fixed rate of 8.0% and become subordinate to the other senior MRBs. (5) The borrower may elect to extend the maturity date for a period ranging between six and twelve months upon meeting certain conditions, including payment of a non-refundable extension fee. (6) The initial draw on this investment was funded with available cash or proceeds from the Acquisition LOC. InOctober 2022 , the Poppy Grove I, Poppy Grove II and Poppy Grove III GILs and property loans assets were securitized in TOB trust financing facilities that allow for additional principal proceeds as the remaining investment commitments are funded by the Partnership. (7) The property became a consolidated VIE effective during the fourth quarter of 2021 (Note 5). A development site has been identified for this property but construction had not commenced as ofSeptember 30, 2022 . (8) This is the estimated closing date of the associated bond purchase commitment.
Debt Service on Debt Financings, Secured Notes, Mortgages Payable, and Secured Lines of Credit
Our debt financing arrangements consist of various secured financing
transactions to leverage our portfolio of MRBs, taxable MRBs, GILs, a taxable
GIL and certain property loans. The financing arrangements generally involve the
securitization of these investment assets into trusts whereby we retain
beneficial interests in the trusts that provide us certain rights to the
underlying investment assets. The senior beneficial interests are sold to
unaffiliated parties in exchange for debt proceeds. The senior beneficial
interests require
80
--------------------------------------------------------------------------------
periodic interest payments that may be fixed or variable, depending on the terms
of the arrangement, and scheduled principal payments. We are required to fund
any shortfall in principal and interest payable to the senior beneficial
interests of the TEBS financings in the case of non-payment, forbearance or
default of the borrowers' contractual debt service payments of the related MRBs,
up to the value of our residual interests. In the case of forbearance or default
on an underlying investment asset in a Term TOB or TOB trust financing, we may
be required to fund shortfalls in principal and interest payable to the senior
beneficial interests, repurchase a portion of the outstanding senior beneficial
interests, or repurchase the underlying investment asset and seek alternative
financing. We anticipate that cash flows from the securitized investment assets
will fund normal, recurring principal and interest payments to the senior
beneficial interests and all trust-related fees.
Our debt financing arrangements include various fixed and variable debt
arrangements. Recent increases in short-term interest rates have resulted in
increases in the interest costs associated with our variable debt financing
arrangements. We actively manage our portfolio of fixed and variable rate debt
financings and our exposure to changes in market interest rates. The following
table summarizes our fixed and variable rate debt financings as of September 30,
2022 and December 31, 2021 :
September 30, 2022 December 31, 2021
Related Debt
Securitized Assets - Financing - Fixed % of Total % of Total
Fixed or Variable or Variable Outstanding Debt
Outstanding Debt
Interest Rates Interest Rates Principal Financing
Principal Financing
Fixed Fixed $ 263,991,914 27.3 % $ 293,999,683 35.8 %
Variable (1) Variable (1) 376,920,000 39.0 % 242,204,000 29.4 %
Fixed Variable 220,605,819 22.9 % 286,567,660 34.8 %
Variable - Hedged 103,840,000 -
Fixed (2) 10.8 % 0.0 %
Total $ 965,357,733 $ 822,771,343 (1)
The securitized assets and related debt financings each have variable interest rates, though the variable rate indices may differ on individual transactions. As such, the Partnership is largely hedged against rising interest rates. (2) As ofSeptember 30, 2022 , we have two interest rate swaps indexed to SOFR with notional amounts totaling$103.8 million with terms through 2024 and 2027. Though the variable rate indices may differ, these interest rate swaps have effectively synthetically fixed the interest rate of the related debt financing. InOctober 2022 , we deposited the fixed rate GILs and property loans forPoppy Grove I, Poppy Grove II and Poppy Grove III into variable rate TOB trust financings. To hedge our interest expense exposure, we entered into an interest rate swap agreement with a term beginning inApril 2023 and ending inApril 2025 , which is the original stated maturity date of the GILs and property loans. The interest rate swap agreement was structured with an initial notional value of$34.4 million that increases over time up to$99.6 million to hedge our increasing net interest exposure as we fund our investment commitments during construction. These new TOB trust financings and the related interest rate swap agreement are not reflected in the table above as the transactions occurred afterSeptember 30, 2022 . We may be required to post collateral if the value of investment assets securitized in TOB trust financings, plus our net exposure on our interest rate derivatives, drops below a threshold in the aggregate. We posted collateral totaling$4.4 million during the nine months endedSeptember 30, 2022 , net of collateral returned, due to volatility in asset pricing. We were able to meet all collateral posting requirements with unrestricted cash on hand. Continuing volatility in market interest rates and potential deterioration of general economic conditions may cause the value of our investment assets to decline and result in the posting of additional collateral in the future. Our Secured Notes are secured by the cash flows from the residual certificates of our TEBS financings. Interest due on the Secured Notes, net of amounts due to the Partnership on the related total return swap transactions, will be paid from receipts related to the TEBS financing residual certificates. Future receipts of principal related to the TEBS financing residual certificates will be used to pay down the principal of the Secured Notes. The Partnership has guaranteed the payment and performance of the responsibilities under the Secured Notes and related documents. Our mortgages payable financing arrangements are used to leverage The 50/50 MF Property. The mortgages are entered into with financial institutions and are secured by the MF Property. The mortgages bear interest at fixed rates and include scheduled principal payments. The mortgages mature inMarch 2025 andApril 2027 . We anticipate that cash flows from The 50/50 MF Property will be sufficient to pay all normal, recurring principal and interest payments. Our General LOC and Acquisition LOC require monthly interest payments on outstanding balances and certain quarterly commitment fees. Such obligations are paid primarily from operating cash flows. The Acquisition LOC requires principal payments as previously described in this Item 2. The General LOC does not require principal payments until maturity inJune 2023 as long as the outstanding principal does not exceed the borrowing base calculation. 81 --------------------------------------------------------------------------------
Distributions Paid to Holders of Preferred Units and BUCs
Distributions to the holders of Series A Preferred Units and Series A-1 Preferred, if declared by the General Partner, are paid quarterly at an annual fixed rate of 3.0%. If the Partnership were to issue Series B Preferred Units, holders of such units will be paid quarterly distributions, if declared by the General Partner, at an annual fixed rate of 3.4%. The Series A Preferred Units, Series A-1 Preferred Units and Series B Preferred Units are non-cumulative, non-voting and non-convertible. OnSeptember 14, 2022 , we announced that theBoard of Managers of Greystone Manager, which is the general partner of the General Partner, declared a quarterly cash distribution of$0.366 per BUC to unitholders of record onSeptember 30, 2022 and payable onOctober 31, 2022 .The Board of Managers of Greystone AF Manager also declared a supplemental distribution payable in the form of additional BUCs equal to$0.20 per BUC. All fractional BUCs resulting from the BUCs Distribution received cash for such fraction based on the market value of the BUCs on the record date.
The Partnership and its
Potential Redemptions of Series A Preferred Units
Upon the sixth anniversary of the closing of the sale of Series A Preferred Units to a subscriber, and upon each anniversary thereafter, each holder of Series A Preferred Units has 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 through the date of the redemption. The next optional redemption dates for the currently outstanding Series A Preferred Units range fromMarch 2023 throughDecember 2023 and the holders must provide notice of the election to redeem no less than 180 days prior to such redemption dates. No Unitholders have given notice of their election to redeem Series A Preferred Units as ofSeptember 30, 2022 . If the holders of the Series A Preferred Units elect to redeem, we will be required, subject to certain restrictions, to secure funds to redeem from unrestricted cash on hand, proceeds from our General LOC, additional borrowings or through additional capital raising options. InJuly 2021 , our registration statement on Form S-4 to register the offering and issuance of up to 9,450,000 of Series A-1 Preferred Units under a shelf registration process was declared effective by theSEC . Under this offering, the Partnership may issue up to 9,450,000 Series A-1 Preferred Units in exchange for the Partnership's outstanding Series A Preferred Units. If unitholders elect to exchange Series A Preferred Units for Series A-1 Preferred Units, the new Series A-1 Preferred Units will not be eligible for redemption until the sixth anniversary of the date of the exchange, except in certain limited circumstances. InApril 2022 andOctober 2022 , we issued 2,000,000 and 1,000,000 Series A-1 Preferred Units, respectively, in exchange for 2,000,000 and 1,000,000 outstanding Series A Preferred Units held by two financial institutions, respectively. These Series A-1 Preferred Units were issued in a registered offering pursuant to a registration statement on Form S-4, which was declared effective by theSecurities and Exchange Commission (the "Commission") onJuly 6, 2021 , and subsequently amended pursuant to a Post-Effective Amendment to the Form S-4, which was declared effective by the Commission onApril 13, 2022 (as amended, the "Form S-4"). The remaining 6,450,000 of outstanding Series A Preferred Units are eligible for exchange under the registration statement on Form S-4 throughJuly 2023 . Other Contractual Obligations We are subject to various guaranty obligations in the normal course of business, and, in most cases, do not anticipate these obligations to result in significant cash payments by the Partnership.
Cash Flows
For the nine months ended
Cash provided by operating activities totaled$19.7 million for the nine months endedSeptember 30, 2022 , as compared to$23.3 million generated for the nine months endedSeptember 30, 2021 . The change between periods was primarily due to the following factors:
•
An increase of
•
A decrease of
82
--------------------------------------------------------------------------------•
A decrease of
•
A total decrease of
•
A decrease of
•
An increase of
•
An increase of
•
An increase of
Cash used in investing activities totaled$110.4 million for the nine months endedSeptember 30, 2022 , as compared to cash used of$64.6 million for the nine months endedSeptember 30, 2021 . The change between periods was primarily due to the following factors:
•
A decrease of
•
A decrease of$65.4 million of cash due to continued advances on property loans, offset by an increase of$4.6 million of cash due to less advances on GILs and increase of$30.1 million due to property loan principal payments received;
•
A decrease of
•
A decrease of
•
A decrease of
•
An increase of
•
An increase of
Cash provided by financing activities totaled$87.8 million for the nine months endedSeptember 30, 2022 , as compared to cash provided of$93.1 million for the nine months endedSeptember 30, 2021 . The change between periods was primarily due to the following factors:
•
A decrease of
•
A net decrease of
•
A decrease of
•
A net increase of
•
A net increase of
•
An increase of
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.
Leverage Ratio
We set target constraints for each type of financing utilized by us. Those constraints are dependent upon several factors, including the assets being leveraged, the tenor of the leverage program, whether the financing is subject to margin collateral calls, and the liquidity and marketability of the financed collateral. We use target constraints for each type of financing to manage to an overall maximum 75% leverage level (the "Leverage Ratio"), as established by theBoard of Managers of Greystone Manager.The Board of Managers of Greystone Manager retains the right to change the maximum Leverage Ratio in the future based on the consideration of factors theBoard of Managers considers relevant. We calculate our Leverage Ratio as total outstanding debt divided by total assets using cost adjusted for paydowns for MRBs, GILs, property loans, taxable MRBs and taxable GILs, and initial cost for deferred financing costs and real estate assets. As ofSeptember 30, 2022 , our overall Leverage Ratio was approximately 70%. 83 --------------------------------------------------------------------------------
Off Balance Sheet Arrangements
As ofSeptember 30, 2022 andDecember 31, 2021 , we held MRBs, GILs, taxable MRBs, a taxable GIL and certain property loans that are secured by affordable multifamily and seniors housing properties and one commercial property, which are owned by entities that are not controlled by us. We have no equity interest in these entities and do not guaranty any obligations of these entities.
The Partnership has entered into various commitments and guaranties. For additional discussions related to commitments and guaranties, see Note 18 to the Partnership's condensed 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 those disclosed in Note 21 to the Partnership's condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements that will be adopted in future periods, see Note 2 to the Partnership's condensed consolidated financial statements.
Community Investments
The Partnership has invested and intends to invest in assets which are and will be purchased in order to support underlying community development activities targeted to low- and moderate-income individuals, such as affordable housing, small business lending, and job creating activities in areas ofthe United States . These investments may be eligible for regulatory credit under the Community Reinvestment Act of 1977 ("CRA") and available for allocation to holders of our Preferred Units (see Note 19 to Partnership's condensed consolidated financial statements). The following table sets forth the assets of the Partnership the General Partner believes are eligible for regulatory credit under the CRA and are available for allocation to Preferred Unit investors as ofSeptember 30, 2022 : 84 --------------------------------------------------------------------------------
Senior
Investment Bond
Available for Maturity
Property Name Allocation Date (1) Street City County State Zip
CCBA Senior
Garden Apartments $ 3,807,000 7/1/2037 438 3rd Ave San Diego San Diego CA 92101
Courtyard 4127 W. Valencia
Apartments 5,000,000 12/1/2033 Dr Fullerton Orange CA 92833
Glenview
Apartments 670,000 12/1/2031 2361 Bass Lake Rd Cameron Park El Dorado CA 95682
Harden Ranch 1907 Dartmouth
Apartments 460,000 3/1/2030 Way Salinas Monterey CA 93906
Harmony Court 5948 Victor
Apartments 3,730,000 12/1/2033 Street Bakersfield Kern CA 93308
Harmony Terrace 941 Sunset Garden
Apartments 3,400,000 1/1/2034 Lane Simi Valley Ventura CA 93065
12225-12227 South Los
Hope on Avalon 14,390,000 2/1/2023 Avalon Blvd Los Angeles Angeles CA 90061
5138 South Los
Hope on Broadway 10,691,245 2/1/2023 Broadway Los Angeles Angeles CA 90037
Lutheran Gardens 2347 E. El Los
Apartments 10,352,000 2/1/2025 Segundo Boulevard Compton Angeles CA 90222
Montclair
Apartments 1,630,000 12/1/2031 150 S 19th Ave Lemoore Kings CA 93245
Montecito at
Williams Ranch 7,690,000 10/1/2034 1598 Mesquite Dr Salinas Monterey CA 93905
13728 San Pablo Contra
Montevista 6,720,000 7/1/2036 Avenue San Pablo Costa CA 94806
Ocotillo Springs
(2) 18,090,000 8/1/2037 1615 I St Brawley Imperial CA 92227
10149 Bruceville
Poppy Grove I 7,746,000 4/1/2025 Road ElkGrove Sacramento CA 95624
10149 Bruceville
Poppy Grove II 4,541,300 4/1/2025 Road Elk Grove Sacramento CA 95624
10149 Bruceville
Poppy Grove III 8,350,000 4/1/2025 Road Elk Grove Sacramento CA 95624
Residency at the 1657-1661 North Los
Entrepreneur (3) 17,500,000
5500 Hollywood Los
Mayer (4) 26,000,000 4/1/2039 Boulevard Hollywood Angeles CA 90028
San Vicente 250 San Vicente
Townhomes 495,000 11/1/2033 Road Soledad Monterey CA 93960
Santa Fe San
Apartments 265,000 12/1/2031 16576 Sultana St Hesperia Bernardino CA 92345
Seasons Lakewood 21309 Bloomfield Los
Apartments 5,000,000 1/1/2034 Ave Lakewood Angeles CA 90715
Seasons At Simi
Valley 4,376,000 9/1/2032 1606 Rory Ln Simi Valley Ventura CA 93063
Solano Vista 40 Valle Vista
Apartments 2,655,000 1/1/2036 Avenue Vallejo Solano CA 94590Summerhill Family 6200 Victor Apartments 3,623,000 12/1/2033 Street Bakersfield Kern CA 93308 Sycamore Walk 632,000 1/1/2033 380 Pacheco Road Bakersfield Kern CA 93307Tyler Park Townhomes 75,000 1/1/2030 1120 Heidi Drive Greenfield Monterey CA 93927 Village at Madera Apartments 85,000 12/1/2033 501 Monterey St Madera Madera CA 93637 2800 E Vineyard Vineyard Gardens 3,995,000 1/1/2035 Ave Oxnard Ventura CA 93036 Westside Village Apartments 1,970,000 1/1/2030 595 Vera Cruz Way Shafter Kern CA 93263 Centennial Crossings Senior 15475 East Fair Apartments 57,330,000 9/1/2023 Place Centennial Arapahoe CO 80016 151 N. Osprey Osprey Village 31,648,439 8/1/2024 Village Road Kissimmee Osceola FL 34758 10156 Magnolia Magnolia Heights 21,400,000 7/1/2024 Heights Circle Covington Newton GA 30014 Willow Place 150 South Zack Apartments 13,358,271 10/1/2024 Hinton Parkway McDonough Henry GA 30253 Brookstone 4200 Hickory Apartments 7,351,468 5/1/2040 Hills Drive Waukegan Lake IL 60087 Copper Gate 3140 Copper Gate Apartments 5,220,000 12/1/2029 Circle Lafayette Tippecanoe IN 47909 Renaissance East Baton Gateway 650 N. Ardenwood Rouge Apartments 11,500,000 6/1/2050 Drive Baton Rouge Parish LA 70806 Hilltop at Signal 50 Signal Hills Hills 43,418,334 8/1/2023 Center West Saint Paul Dakota MN 55118 Legacy Commons at 50 Signal Hills Signal Hills 62,786,905 2/1/2024 Center West Saint Paul Dakota MN 55118 Oasis at Twin 2705,2725, & 2745 Lakes 58,018,657 8/1/2023 Herschel St. N Roseville Ramsey MN 55113 Jackson Manor 332 Josanna Apartments (5) 6,900,000 5/1/2038 Street Jackson Hinds MS 39202 Greens of Pine 6201 Pine Glen Glen 10,315,000 10/1/2047 Trail Durham Durham NC 27713 Silver Moon 901 Park Avenue Apartments 8,500,000 8/1/2055 SW Albuquerque Bernalillo NM 87102 Village at Avalon 16,400,000 1/1/2059 915 Park SW Albuquerque Bernalillo NM 87102 Columbia Gardens Apartments 15,000,000 12/1/2050 4000 Plowden Road Columbia Richland SC 29205 Companion at Thornhill 930 East Main Apartments 11,500,000 1/1/2052 Street Lexington Lexington SC 29072 The Palms at 1155 ClemsonPremier Park 20,152,000 1/1/2050 Frontage Road Columbia Richland SC 29229 Village at Gibson & Macrae River's Edge 10,000,000 6/1/2033 Streets Columbia Richland SC 29203 Willow Run 15,000,000 12/18/2050 511 Alcott Drive Columbia Richland SC 29203 Arbors of Hickory 6296 Lake View Ridge Apartments 11,581,925 1/1/2049 Trail Memphis Shelby TN 38115 4250 Old Decatur Angle Apartments 23,000,000 1/1/2054 Rd Fort Worth Tarrant TX 76106 Avistar at Copperfield 6416 York Meadow (Meadow Creek) 14,000,000 5/1/2054 Drive Houston Harris TX 77084 Avistar at the Crest Apartments 11,211,961 3/1/2050 12660 Uhr Lane San Antonio Bexar TX 78217 Avistar at the 3935 Thousand Oaks 8,985,774 8/1/2050 Oaks Drive San Antonio Bexar TX 78217 Avistar at Wilcrest (Briar 1300 South Creek) 3,470,000 5/1/2054 Wilcrest Drive Houston Harris TX 77042 Avistar at Wood Hollow (Oak 7201 Wood Hollow Hollow) 40,260,000 5/1/2054 Circle Austin Travis TX 78731 Avistar in 09 6700 North Apartments 7,808,622 8/1/2050 Vandiver Road San Antonio Bexar TX 78209 Avistar on 9511 Perrin Parkway 13,425,000 5/1/2052 Beitel Rd San Antonio Bexar TX 78217 Avistar on the 5100 USAA Blvd 17,559,976 3/1/2050 Boulevard San Antonio Bexar TX 78240 Avistar on the 4411 Callaghan Hills 5,769,327 8/1/2050 Road San Antonio Bexar TX 78228 Crossing at 1415 7,590,000 12/1/2052 1415 Babcock Road San Antonio Bexar TX 78201 Concord at Gulf Gate Apartments 19,185,000 2/1/2032 7120 Village Way Houston Harris TX 77087 Concord at Little 301 W Little York York Apartments 13,440,000 2/1/2032 Rd Houston Harris TX 77076 Concord at Williamcrest 10965 S Gessner Apartments 20,820,000 2/1/2032 Rd Houston Harris TX 77071 SWC of Loop 410 Esperanza at Palo and Highway 16 Alto Apartments 19,540,000 7/1/2058 South San Antonio Bexar TX 78224 Heights at 515 6,435,000 12/1/2052 515 Exeter Road San Antonio Bexar TX 78209 Heritage Square Apartments 11,185,000 9/1/2051 515 S. Sugar Rd Edinburg Hidalgo TX 78539 Oaks at Georgetown Apartments 12,330,000 1/1/2034 550 W 22nd St Georgetown Williamson TX 78626 Runnymede 1101 Rutland Apartments 10,825,000 10/1/2042 Drive Austin Travis TX 78758 Scharbauer Flats 2300 N. Apartments 64,160,000 1/1/2023 Fairgrounds Road Midland Midland TX 79705 South Park Ranch Apartment Homes 11,919,860 12/1/2049 9401 S 1st Street Austin Travis TX 78748 15 West Apartments 9,850,000 7/1/2054 401 15th Street Vancouver Clark WA 98660$ 964,090,064 (1) The date reflects the stated contractual maturity of the Partnership's senior debt investment in the property. For various reasons, including, but not limited to, call provisions that can be exercised by both the borrower and the Partnership, such debt investments may be redeemed prior to the stated maturity date. The Partnership may also elect to sell certain debt investments prior to the contractual maturity, consistent with its strategic purposes. (2) The Partnership has committed to provide funding of an MRB up to$15.0 million and of a taxable MRB up to$7.0 million during construction and lease-up of the property on a drawdown basis. The taxable MRB has a maturity date of8/1/2023 with an option to extend the maturity up to one year. Upon stabilization of the property, the MRB will be partially repaid and the maximum balance of the MRB after stabilization is approximately$3.5 million and will have a maturity date of 8/1/2037. (3) The Partnership committed to provide total funding of MRBs up to$59.0 million and a taxable MRB up to$13.0 million during the acquisition and rehabilitation phase of the property on a draw-down basis. The taxable MRB has a maturity date of4/1/2025 with an option to extend the maturity six months if stabilization has not occurred. Upon stabilization of the property, the MRB will be partially repaid and the maximum balance of the MRB after stabilization will not exceed$44.1 million and will have a maturity date of 3/31/2040. (4) The Partnership committed to provide total funding of an MRB up to$29.5 million and a taxable MRB up to$12.5 million during the acquisition and rehabilitation phase of the property on a draw-down basis. The taxable MRB has a maturity date of4/1/2024 with an option to extend the maturity six months if stabilization has not occurred. Upon stabilization of the property, the MRB will be partially repaid and the maximum balance of the MRB after stabilization will not exceed$18.1 million and will have a maturity date of 4/1/2039. 85 --------------------------------------------------------------------------------
(5)
The Partnership committed to provide total funding of the MRB up to$6.9 million during the acquisition and rehabilitation phase of the property on a draw-down basis. Upon stabilization of the property, the MRB will be partially repaid and the maximum balance of the MRB after stabilization will not exceed$4.8 million and will have a maturity date of 5/1/2038.
© Edgar Online, source
