Business context and reporting period
America First Multifamily Investors, L.P. (ATAX; Nasdaq: ATAX) reported unaudited results for the three months ended March 31, 2019. Its business centers on mortgage revenue bonds (MRBs) financing affordable multifamily and student housing, public housing capital fund certificates, owned properties, and investments in multifamily developments. The filing identifies the registrant as America First Multifamily Investors, L.P.; the request metadata uses Greystone Housing Impact Investors LP, so confirm the entity and any name or succession relationship.
Financial results and position
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Total revenue | $17.7 million | $16.5 million; up 7.3% |
| Net income | $6.45 million | $6.00 million; up 7.5% |
| Net income available to partners | $5.73 million | $5.29 million |
| BUC earnings per unit, basic and diluted | $0.08 | $0.09 |
| Interest expense | $6.39 million | $5.35 million; up 19.6% |
| Operating cash flow | $3.57 million | $2.87 million |
| Cash, including restricted cash | $39.0 million at March 31 | $33.3 million at December 31, 2018 |
- Cash available for distribution (CAD), a non-GAAP measure, was $6.57 million, or $0.11 per BUC, versus $5.90 million, or $0.10, a year earlier. The declared quarterly distribution was $0.125 per BUC.
- Comprehensive income was $14.6 million, including an $8.1 million unrealized securities gain; Q1 2018 had a $16.8 million comprehensive loss, including a $21.9 million unrealized securities loss.
- Total assets were $993.2 million; total liabilities were $588.7 million. MRBs held in trust and directly totaled approximately $739.0 million at fair value. Total debt financing and lines of credit were $543.9 million net of financing costs; mortgages and other secured financing were $27.4 million.
- Management reported an overall leverage ratio of approximately 60%. Unsecured credit lines totaled $60 million, of which $35.7 million was drawn; cash and cash equivalents, excluding restricted cash, were $38.2 million.
Changes versus the prior comparable period
- Revenue increased mainly because of $3.0 million of contingent interest recognized when the Vantage at Brooks property loan was repaid. Without this unusual receipt, the reported revenue increase would not have occurred on the same basis.
- MRB segment net income fell 52.5% to $2.0 million: revenue declined 13.5% and interest expense increased 14.0%. Management attributed the revenue decline to lower bond balances and yields, and higher interest expense principally to derivative fair-value adjustments and financing costs.
- Other Investments segment revenue rose to $4.6 million from $1.4 million, primarily because of the Vantage at Brooks contingent interest. MF Properties revenue declined 14.7%, mainly following the September 2018 sale of Jade Park.
- Interest expense company-wide increased by $1.05 million, including approximately $1.3 million of higher net derivative fair-value expense. Management noted that derivative fair-value movements are not equivalent to current-period cash outlays.
- Operating cash flow improved by $0.7 million. Investing cash flow was $8.3 million provided, compared with $0.8 million used in Q1 2018, largely reflecting the Vantage at Brooks repayment and contingent interest. Financing cash outflow was $6.1 million, mainly distributions and debt principal payments.
Outlook, risks, contingencies and unusual items
- Management said it expected cash on hand and operating cash flows to meet liquidity needs over the next 12 months and expected to refinance or replace debt and mortgage maturities due within that period. The filing does not provide earnings or distribution guidance.
- Contractual debt financing maturities were $175.7 million for the remainder of 2019, including financing facilities scheduled to mature in May, July, October and other months. The $19.3 million and $16.4 million portions of the non-operating credit line were due in June and September 2019, respectively. The Partnership could extend certain balances subject to agreement terms.
- In April 2019, after quarter-end, the Partnership extended the variable-rate TOB Trust maturities to April 2020, redeemed the Courtyard Series B MRB, and committed $9.0 million to Vantage at Conroe, contributing approximately $4.1 million at execution.
- Interest-rate exposure is material: management’s sensitivity analysis estimated a $746,619 reduction in net interest income over the next 12 months under an immediate 100-basis-point increase, assuming the stated model assumptions and no management actions. Variable-rate borrowings and refinancing availability remain important risks.
- MRBs and PHC certificates are Level 3 fair-value assets, valued using significant unobservable inputs. A hypothetical 10% adverse change in MRB valuation yields was estimated to produce $22.1 million of additional unrealized losses; the comparable PHC certificate estimate was $1.3 million.
- Geographic concentrations in MRB principal were Texas 43%, California 17%, and South Carolina 17%. Other disclosed risks include property performance and occupancy, borrower defaults, availability and cost of financing, HUD appropriations supporting PHC certificates, and guarantees. Construction-loan guarantees had a maximum exposure of about $20.1 million for the listed projects; management had accrued no liability, citing remote likelihood of claims.
- Cross Creek property-loan interest remained on nonaccrual, with a $7.4 million loan-loss allowance against $11.1 million principal. Management reported debt-service payments on MRBs and owned-property mortgages were current at quarter-end.
- The Partnership adopted lease accounting guidance in January 2019, recording a $1.7 million right-of-use asset and $2.2 million lease liability. Management reported no material change to previously disclosed risk factors, effective disclosure controls, and no material quarterly change in internal control over financial reporting.
Investor verification priorities
- Confirm the registrant identity and relationship between the filing’s America First Multifamily Investors, L.P. name and the Greystone Housing Impact Investors LP name in the request.
- Review refinancing progress and actual repayment or extension of the significant 2019 maturities, especially the TEBS and other securitization facilities.
- Separate recurring earnings and cash generation from the $3.0 million Vantage at Brooks contingent-interest item; assess CAD methodology and the distribution coverage implied by $0.11 CAD per BUC versus $0.125 distributed.
- Monitor variable-rate funding costs, derivatives, fair-value assumptions for Level 3 assets, and the potential impact of borrower or property deterioration.
- Track property occupancy and rehabilitation performance, the Cross Creek nonaccrual exposure, HUD funding risk, and contingent guarantee commitments.