Business context and reporting period
Annual report for the fiscal year ended December 31, 2020, filed February 25, 2021. The filing identifies the registrant as America First Multifamily Investors, L.P. (NASDAQ: ATAX); this differs from the company name in the request metadata. The Partnership invests primarily in mortgage revenue bonds (MRBs) and governmental issuer loans (GILs) financing affordable housing, alongside multifamily properties and equity investments in market-rate developments. It expects MRB and GIL interest to be federally tax-exempt, but this treatment is not assured.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenues | $55.5 million | $62.3 million |
| Net income | $7.2 million | $30.5 million |
| Net income per BUC | $0.07 | $0.42 |
| Operating cash flow | $15.8 million | $18.0 million |
| Cash Available for Distribution (non-GAAP), per BUC | $0.26 | $0.57 |
| Distributions declared per BUC | $0.305 | $0.50 |
- Total assets were $1.175 billion; total debt, net, was $707.4 million. The Partnership’s stated leverage ratio was approximately 67%, against a Board-set overall constraint of 75%.
- Unrestricted cash was $44.5 million and restricted cash was $78.5 million at year-end. Debt financing was $674.0 million, unsecured lines of credit were $7.5 million, and mortgages and other secured financing were $26.0 million.
- MRBs had estimated fair value of $794.4 million and aggregate outstanding principal of approximately $673.6 million. Three GILs had outstanding principal of approximately $64.9 million.
- Net cash increased by $79.8 million: operating activities provided $15.8 million, investing activities used $38.1 million, and financing activities provided $102.1 million.
Material changes versus 2019
- Revenue fell 10.9%; net income declined 76.4%. The comparison reflects, among other factors, the absence of $16.1 million in 2019 gains from sales of unconsolidated investments and reduced contingent interest, partly offset by new GIL income and lower interest expense.
- 2020 included $7.3 million of MRB credit-loss provisions and a $0.9 million property-loan loss provision, principally related to Live 929 Apartments and Provision Center 2014-1. 2019 had no provision for credit or loan losses.
- Interest expense decreased to $21.2 million from $24.7 million, primarily following refinancing and lower market rates. Total debt increased from $576.2 million to $707.4 million.
- CAD per BUC fell to $0.26 from $0.57, while declared distributions declined to $0.305 from $0.50 per BUC.
- The Partnership sold its PHC Certificates in January 2020, recognizing a $1.4 million gain and repaying the related financing. It also issued $103.5 million of Secured Notes and replaced Deutsche Bank facilities with Mizuho TOB financings.
Outlook, risks and unusual items
- Management said it believed cash and expected sources would be sufficient to meet liquidity needs over the next 12 months, including operations, debt service, distributions and investment commitments. This is not earnings or distribution guidance; future distributions remain discretionary.
- Outstanding investment funding commitments totaled approximately $154.5 million at year-end. Debt maturities include approximately $195.5 million in 2023 and $87.8 million in 2024; refinancing and access to financing are important to the liquidity outlook.
- COVID-19 affected student housing and commercial-property performance. Live 929 was 69% occupied at year-end; principal payments were deferred through December 2021 under forbearance. Provision Center 2014-1 missed a scheduled interest payment in November 2020 and its borrower filed for Chapter 11 bankruptcy protection; the Partnership was evaluating restructuring and forbearance options.
- Management reported average rental collections at MRB residential properties of 92% in November 2020 and 91% in December 2020 and January 2021. The two owned multifamily properties had combined year-end physical occupancy of 80%, versus 94% a year earlier; Suites on Paseo was 68% occupied.
- MRB fair values rely on Level 3 estimates with no active trading market. The auditor identified valuation of these bonds as a critical audit matter; MRBs represented about 68% of total assets. Changes in valuation assumptions can affect reported comprehensive income, though unrealized changes do not themselves affect cash flows.
- Interest-rate, credit, construction, refinancing, geographic concentration, tax-exemption and LIBOR-transition risks remain material. A 100-basis-point increase in rates was estimated to reduce net interest income by about $2.5 million over 12 months, based on year-end positions and stated assumptions.
- Greystone affiliates manage the Partnership and receive administrative fees, reimbursements and placement fees. Related-party transactions and potential conflicts warrant attention. The Partnership reported no material pending legal proceedings and said management’s disclosure controls and internal control over financial reporting were effective; the external auditor did not attest to internal-control effectiveness.
- Kenneth C. Rogozinski was appointed permanent CEO effective February 10, 2021. In January 2021, the Partnership also committed to and initially funded additional construction GILs and property loans.
Important facts for investors to verify
- Track Live 929 occupancy, debt-service performance, deferred principal and recoverability of the MRB and related loan; monitor the Provision Center bankruptcy, missed payments and restructuring outcome.
- Reconcile liquidity available for the $154.5 million of commitments, near-term line-of-credit repayment, financing maturities and possible collateral calls; distinguish unrestricted from restricted cash.
- Review the assumptions and sensitivity of Level 3 MRB valuations, credit-loss estimates and the reported $33.6 million unrealized gain on securities.
- Assess whether CAD supports the current distribution rate: 2020 CAD was $0.26 per BUC versus $0.305 declared, and CAD is a non-GAAP measure not necessarily comparable across issuers.
- Evaluate leverage, variable-rate funding, Mizuho and Freddie Mac financing dependence, related-party economics, and the effect of the LIBOR transition on contracts and borrowing costs.