Business context and reporting period
Filing identity: The supplied 10-K is for America First Multifamily Investors, L.P. (NASDAQ: ATAX), for the fiscal year ended December 31, 2017; it does not identify the registrant as Greystone Housing Impact Investors LP. The Partnership primarily invests in mortgage revenue bonds (MRBs) financing affordable multifamily and student housing, alongside public housing certificates, property loans, and multifamily properties. At year-end it held 87 MRBs with approximately $719.8 million principal, financing 63 residential properties with 10,666 units across 14 states.
Key financial metrics
| Metric | 2017 | 2016 |
|---|---|---|
| Total revenues | $70.4 million | $59.0 million |
| Gain on sale of real estate, net | $17.8 million | $14.1 million |
| Net income | $30.7 million | $23.8 million |
| Net income per BUC | $0.44 | $0.34 |
| Cash flow from operations | $17.1 million | $15.2 million |
| Cash flow from investing | $(21.5) million | $(83.1) million |
| Cash flow from financing | $53.2 million | $71.5 million |
| Cash and cash equivalents at year-end | $69.6 million | $20.7 million |
| Total assets | $1.070 billion | $944.1 million |
| Total liabilities | $661.6 million | $623.2 million |
Interest expense increased 43.2% to $22.2 million; total expenses rose 16.1% to $51.5 million. Income tax expense was $6.0 million, primarily associated with taxable subsidiary operations and property sales. The filing reports a 64% leverage ratio against a 75% operating limit. Debt and credit-line balances totaled approximately $643.9 million, including $50.0 million on unsecured lines, $558.3 million of debt financing, and $35.5 million of property mortgages and other secured financing.
Quarterly BUC distributions remained $0.125 per quarter, or $0.50 annually. Management’s non-GAAP Cash Available for Distribution (CAD) was $0.60 per unit, versus $0.50 in 2016; CAD is not a GAAP measure and may not be comparable with other issuers’ measures.
Material changes versus prior comparable period
- Total revenues increased 19.3%, driven mainly by MRB acquisitions and higher investment income. Investment income rose to $48.2 million from $36.9 million.
- Net income increased by $6.9 million, while interest expense rose by $6.7 million, reflecting higher average debt and borrowing rates. Management attributed about $5.1 million of the interest-expense increase to an approximately 81-basis-point rise in the weighted-average rate.
- The Partnership acquired $121.3 million of MRBs in 2017 and redeemed approximately $42.4 million of MRBs. The portfolio’s stated principal rose from approximately $648.4 million at 2016 year-end to $719.8 million.
- Four multifamily properties were sold in 2017, generating $17.8 million in reported net gains; property revenue declined 22.4% as properties were sold. The portfolio of owned multifamily properties fell from 2,004 units to 1,013.
- The 50/50 property’s physical occupancy improved to 97% from 72% at year-end 2016. The filing says management expects revenue to increase as occupancy improves.
- Fair-value gains on securities and bond purchase commitments contributed to comprehensive income of $67.3 million, compared with $1.7 million in 2016. These largely unrealized gains are distinct from net income and cash flows.
Outlook, risks, contingencies, and unusual items
Management believed cash balances and other cash sources would be sufficient to meet liquidity needs and pay or refinance obligations over the next 12 months. It expected to refinance or renew financing coming due in 2018, including certain Term A/B and TOB facilities, and anticipated paying off revolving-line advances with longer-term financing. These expectations are not guarantees. Contractual obligations included $75.6 million of debt financing due within one year, $50.0 million of secured and unsecured line-of-credit obligations, and $35.9 million of forward bond purchase commitments scheduled for 2018. The Partnership stated it was in compliance with debt covenants at year-end.
- Credit and collateral: MRBs are non-recourse obligations of property owners, not obligations of issuing authorities or backed by taxing power. Repayment depends principally on property cash flows and sale or refinancing proceeds; balloon balances and property defaults could cause losses.
- Interest-rate and financing exposure: Fixed-rate investments are partly funded by variable-rate debt. Management’s sensitivity analysis estimated that a 100-basis-point rate increase would reduce annual net interest income by approximately $889,000, assuming its stated conditions. Derivatives provide only partial protection.
- Concentration and government-program exposure: MRB principal was concentrated in Texas (44%), California (20%), and South Carolina (16%). PHC Certificate payments depend on HUD Capital Fund appropriations; the Partnership recorded a $762,000 impairment on a PHC Certificate in 2017.
- Unusual credit item: Cross Creek property loans had a $7.4 million allowance against $11.1 million principal at year-end. Ashley Square property loans were in non-accrual status; following sale of the property, remaining balances transferred to Cross Creek and were fully reserved. The filing also records a $295,000 net loan-loss provision in 2017.
- Guarantees and commitments: The Partnership guaranteed a construction loan for Vantage at Panama City Beach; its exposure was approximately $8.6 million at year-end, with no liability accrued because a claim was considered remote. It also disclosed possible repurchase guarantees related to other properties and guarantees supporting securitization trusts; maximum stated exposure on the latter was approximately $562.6 million before collateral proceeds.
- Tax and governance: Management expects MRB interest to be federally tax-exempt, but a tax challenge or loss of partnership tax status could adversely affect the Partnership and unitholders. Related-party administrative, financing, and placement fees are disclosed; the General Partner and affiliates manage the Partnership.
The independent auditor gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective. The filing reports no material pending legal proceedings expected to adversely affect financial condition or results.
Important facts for investors to verify
- Confirm the registrant and ticker: this filing identifies America First Multifamily Investors, L.P. (ATAX), notwithstanding the request metadata naming Greystone Housing Impact Investors LP.
- Review the detailed 2018 maturity, refinancing, and covenant schedule, especially the $50.0 million line balance and near-term securitization maturities.
- Assess whether CAD of $0.60 per unit is sustainable, how much reflected asset-sale or contingent income, and whether the $0.50 annual distribution remains covered by recurring cash flows.
- Examine property-level occupancy, debt-service coverage, rehabilitation progress, and collateral valuations, particularly in concentrated states and less-stabilized projects.
- Review PHC Certificate impairment assumptions and ratings, HUD appropriation exposure, and the significant property-loan allowance and guarantee disclosures.
- Evaluate sensitivity of funding costs and residual securitization income to further rate increases, and the extent and counterparty risk of derivative protection.