Business context and reporting period
The supplied filing is America First Multifamily Investors, L.P.’s Form 10-K for the fiscal year ended December 31, 2014, filed March 5, 2015—not a filing under the name Greystone Housing Impact Investors LP. The requested “2014 Q4” is covered within this annual filing; fourth-quarter results are also disclosed. The Partnership primarily invests in mortgage revenue bonds financing affordable multifamily and student housing, alongside public housing certificates, mortgage-backed securities and owned multifamily properties. It reported 55 mortgage revenue bonds with approximately $424.2 million of principal outstanding at year-end.
Financial and operating performance
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Total revenue | $48.8 million | $47.3 million |
| Income from continuing operations | $15.0 million | $14.5 million |
| Net income attributable to the Partnership | $15.0 million | $17.7 million |
| Unitholder net income per unit | $0.25 | $0.40 |
| Cash available for distribution (CAD), non-GAAP | $23.6 million; $0.40 per unit | $18.4 million; $0.42 per unit |
| Cash distributions per unit | $0.50 | $0.50 |
| Cash from operating activities | $17.4 million | $14.2 million |
FY 2014 revenue growth reflected new bond investments and higher property revenue, including The 50/50 student housing project. Continuing income rose modestly, but net income attributable to the Partnership and per-unit earnings declined from 2013, which included discontinued-operation gains and approximately $6.5 million of contingent interest from the Iona Lakes bond redemption. FY 2014 included approximately $3.7 million in gains from the Lost Creek redemption and Autumn Pines sale.
For Q4 2014, revenue was $12.5 million, income from continuing operations was $2.0 million, net income attributable to the Partnership was $2.0 million, and net income per unit was $0.04. The filing does not provide a clear fourth-quarter CAD figure.
At December 31, 2014, total assets were $744.2 million, total liabilities $434.3 million, and total capital $309.9 million. Cash and cash equivalents were $49.2 million, with an additional $11.7 million of restricted cash. Debt financing was $345.4 million and mortgages payable were $76.7 million, or approximately $422.1 million combined. Management reported leverage of approximately 59% under its defined measure, below its 65% operating limit. FY 2014 investing cash outflow was $105.9 million and financing cash inflow was $126.3 million.
Material changes versus the prior comparable period
- Mortgage revenue bonds outstanding increased from approximately $314.7 million at year-end 2013 to $424.2 million at year-end 2014; the portfolio grew to 55 bonds from 42.
- Total debt financing rose from $257.3 million to $345.4 million, while mortgage debt increased from $57.1 million to $76.7 million. Interest expense increased to $11.4 million from $7.2 million, reflecting increased average borrowings and a larger derivative fair-value charge.
- Cash from operations increased to $17.4 million from $14.2 million. Cash and cash equivalents at year-end increased to $49.2 million from $11.3 million.
- The Partnership issued 9.2 million BUCs in early 2014, receiving approximately $51.3 million net. The weighted-average units outstanding increased to 59.4 million from 43.5 million, contributing to lower earnings per unit.
- The Company closed a $94.7 million Freddie Mac M31 TEBS financing and several TOB financings; it also sold or redeemed bonds and sold portions of its MBS portfolio. MBS fair value declined to $14.8 million from $37.8 million.
- Economic occupancy at stabilized bond-financed properties was approximately 91% versus 90%; stabilized MF Properties reached approximately 86% versus 82%.
Outlook, commentary, risks and unusual items
Management said it had identified a pipeline of bonds for acquisition in 2015 and was pursuing further financing, including additional TEBS financing. It expects completed investment and leverage plans may allow CAD to support the $0.50 annual distribution without drawing on unrestricted cash, but cautioned that there is no assurance; distributions may be reduced if CAD remains below the payout. FY 2014 CAD was $0.40 per unit, leaving approximately $0.10 per unit of the distribution unsupported by current-period CAD. Management characterized that shortfall as a return of capital and reported using approximately $6.0 million of unrestricted cash to supplement distributions in 2014.
- Refinancing and leverage: Approximately $84.3 million of debt financing and $9.1 million of mortgage obligations were scheduled to mature within one year at year-end. The Partnership intended to refinance maturing short-term debt, including through TEBS financing. Availability and terms are not assured.
- Interest-rate and securitization exposure: Variable-rate TEBS, TOB and property debt exposes cash available for distribution to rate increases. Interest-rate caps mitigate but do not eliminate exposure. TOB trusts may require collateral, collapse or replacement financing; the filing cites the Volcker Rule as a potential constraint on bank participation, with conformance timing extended into 2017.
- Credit and property risk: Bond repayment depends principally on property cash flows or sale/refinancing proceeds; bonds are generally non-recourse and not government-guaranteed. Construction, lease-up, occupancy, rent restrictions, weather, and local market performance may affect repayment. Three Texas-financed properties were under construction.
- Valuation and tax: Most investments lack active markets. Approximately $521.0 million, or 70% of assets, was valued using management estimates and significant unobservable inputs. A hypothetical 10% adverse change in the key bond-yield assumption would imply approximately $26.2 million of additional unrealized losses. The Partnership expects most investment income to be tax-exempt, but tax treatment is not assured.
- Other unusual items: Unrealized gains on securities and bond-purchase commitments contributed substantially to FY 2014 comprehensive income of $86.9 million, despite GAAP net income of approximately $15.0 million. Derivative fair-value changes are recorded in earnings and increased FY 2014 interest expense by approximately $2.0 million. The filing also reports a prior-period correction to the presentation of interest receivable and other assets that did not affect total assets or reported earnings.
- The auditor gave an unqualified opinion on the financial statements and internal controls. Management and the auditor reported effective internal control over financial reporting.
Most important facts for investors to verify
- Confirm the registrant identity and requested issuer: this source names America First Multifamily Investors, L.P., not Greystone Housing Impact Investors LP.
- Review distribution coverage and liquidity: CAD was $0.40 per unit against a $0.50 distribution, with a cash supplement; assess whether the 2015 investment and financing plans were completed.
- Confirm refinancing of the near-term maturities and the terms, availability and covenants of TEBS/TOB facilities; track Volcker Rule developments and collateral requirements.
- Assess the sensitivity of Level 3 bond valuations and property-level credit quality, particularly construction and lease-up assets and the concentration of bond principal in Texas.
- Reconcile reported cash-flow and asset figures across the filing: selected financial data reports FY 2014 operating cash flow of $16.9 million and assets of $743.9 million, while the audited statements report $17.4 million and $744.2 million, respectively.
- Review the tax-exempt status assumptions, related-party fees and guarantees, and any changes in subsequent filings or audited disclosures.