Greystone Housing Impact Investors LP (ATAX) — Form 10-Q Summary
Filing entity: The filing is for America First Multifamily Investors, L.P. (ticker ATAX). It reports the quarter and six months ended June 30, 2021; financial statements are unaudited.
Business context
The Partnership primarily invests in mortgage revenue bonds (MRBs), governmental issuer loans (GILs), and related property loans financing affordable housing, with additional market-rate multifamily investments and two owned multifamily properties. It reported 76 MRBs and seven GILs at quarter-end.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenues | $16.4 million | $14.5 million | $30.8 million | $28.2 million |
| Gain on sale of unconsolidated investments | $5.5 million | — | $8.3 million | — |
| Net income | $10.3 million | $4.6 million | $17.3 million | $7.6 million |
| Net income available to partners | $9.5 million | $3.9 million | $15.8 million | $6.1 million |
| Net income per BUC | $0.13 | $0.06 | $0.22 | $0.10 |
| Cash provided by operating activities | — | — | $15.6 million | $8.9 million |
Q2 revenue rose 13%; first-half revenue rose 9%. Investment income growth reflected higher GIL balances and income from property investment sales. Earnings also benefited materially from $5.5 million of Q2 gains on the sale of Vantage at Powdersville; first-half gains included Powdersville and Vantage at Germantown. For the first half, reported net income was also affected by lower credit-loss provisions than in 2020. Q2 interest expense increased 10% year over year, while first-half interest expense declined 3%. The filing does not provide a single consolidated operating-margin measure.
Cash Available for Distribution (CAD), a non-GAAP measure, was $10.5 million, or $0.17 per BUC, in Q2, versus $5.7 million, or $0.09 per BUC, a year earlier. First-half CAD was $17.0 million, or $0.28 per BUC, versus $8.5 million, or $0.14. The Partnership cautions that CAD is not a substitute for GAAP results and may not be comparable across companies.
Balance sheet, debt and liquidity
- At June 30, total assets were $1.234 billion, total liabilities $793.7 million, and partners’ capital $345.8 million. Redeemable Series A Preferred Units had approximately $94.5 million of redemption value.
- Cash and cash equivalents were $52.1 million, with a further $83.8 million classified as restricted cash. First-half cash, cash equivalents and restricted cash increased $12.9 million to $135.9 million.
- Debt financing, net, was $741.5 million, up from $674.0 million at year-end 2020. Mortgages and other secured financing totaled $27.0 million. The Partnership also had $6.5 million outstanding on a new secured line of credit; its stated commitment is up to $40 million, subject to borrowing-base limits. The $50 million unsecured non-operating line was undrawn.
- Management reported an overall leverage ratio of approximately 68% and stated that it expected available cash and other sources to meet liquidity needs over the next 12 months. Restricted cash is not freely available; $77.5 million was associated with collateral for the Secured Notes’ total-return swaps.
- First-half operating cash flow was $15.6 million; investing activities used $56.3 million, primarily for GIL, bond, property-loan and equity advances; financing activities provided $53.6 million. The Partnership had $255.8 million in outstanding investment funding commitments at June 30.
Material changes and distributions
- GILs increased to $130.4 million from $64.9 million at year-end, mainly due to construction-loan advances. Unconsolidated investments fell to $91.8 million from $106.9 million, including proceeds from sales of two Vantage investments.
- The Partnership established a $330,000 loan-loss provision for the Live 929 property loan and recorded a $900,000 MRB credit-loss provision related to Provision Center 2014-1. General and administrative expenses rose 22% in Q2 and 18% in the first half, including higher compensation, consulting and related-party administration fees.
- The Q2 distribution was declared at $0.11 per BUC, compared with $0.06 in Q2 2020. First-half declared distributions totaled $0.20 per BUC, versus $0.185 in the prior-year period. A $1.4 million repurchase of 222,459 BUCs occurred in Q2; the program was terminated in June.
Outlook, risks and unusual items
- No numeric earnings or distribution guidance was provided. Management described its investment and refinancing plans and said it expected liquidity sources to cover near-term needs; these expectations are subject to uncertainty.
- COVID-19 effects remained a risk. Management reported average rent collections of 93% within 30 days of billing at MRB residential properties for May and June, but noted occupancy and operating pressure at some assets. Live 929 was 59% occupied at June 30, under a forbearance agreement with MRB principal deferrals through December 2021; it was approximately 87% pre-leased for fall by mid-July.
- Provision Center 2014-1’s borrower filed for Chapter 11 bankruptcy and ceased contractual payments. The Partnership’s MRB principal was $10.0 million at June 30; the filing reported an $8.2 million allowance for credit losses related to Provision Center and Live 929. Certain property-loan interest was also on non-accrual status.
- Fair values for MRBs and other specified assets rely on significant unobservable inputs and are classified as Level 3. A hypothetical 10% adverse change in MRB effective yields indicated an additional unrealized loss of approximately $16.1 million.
- Debt and funding risks include variable rates, refinancing and maturity exposure, collateral and covenant requirements, and potential Series A Preferred Unit redemptions beginning in 2022. The filing also identifies geographic concentration in Texas (43% of MRB principal), California (17%) and South Carolina (17%).
- Subsequent to quarter-end, July redemptions of Rosewood Townhomes and South Pointe MRBs totaled $32.4 million; the Partnership expected approximately $1.8 million of contingent interest income in Q3. Associated TOB financings were repaid, with a $187,000 termination fee. In July, it also registered an exchange offering for up to 9.45 million Series A-1 Preferred Units and entered into an at-the-market BUC sales agreement for up to $30 million.
Important facts for investors to verify
- Whether the Live 929 forbearance and deferred principal payments end as scheduled, and whether fall occupancy and collections support debt service.
- Developments in the Provision Center 2014-1 bankruptcy, collateral recovery and credit-loss estimates.
- Availability of liquidity after accounting for restricted cash, borrowing-base limits, collateral requirements and the $255.8 million of investment commitments.
- Debt maturities, refinancing progress and sensitivity to interest-rate changes; the filing’s modeled 100-basis-point increase reduced estimated next-12-month net interest income by approximately $2.9 million.
- Series A Preferred Unit redemption elections, the Series A-1 exchange offering, and any BUC issuance under the $30 million at-the-market program.
- Whether asset-sale gains and elevated CAD are repeatable; reported first-half results included $8.3 million of gains on unconsolidated investment sales.