Business context and reporting period
America First Multifamily Investors, L.P. filed this unaudited Form 10-Q for the quarter ended March 31, 2015. The filing describes a portfolio focused on mortgage revenue bonds financing affordable multifamily, student, senior housing and commercial properties, alongside property investments and certain securitized investments. The filing’s registrant is America First Multifamily Investors, L.P.; the supplied company metadata names Greystone Housing Impact Investors LP.
Key financial metrics
| Metric | Q1 2015 | Q1 2014 or prior date |
|---|---|---|
| Total revenue | $13.31 million | $13.20 million |
| Net income attributable to the Partnership | $2.52 million; $0.04 per unit | $6.05 million; $0.10 per unit |
| Comprehensive income | $0.89 million | $27.58 million |
| Cash available for distribution (CAD), non-GAAP | $5.38 million; $0.09 per unit | $7.07 million; $0.12 per unit |
| Cash and cash equivalents | $24.21 million | $49.19 million at Dec. 31, 2014 |
| Debt financing | $379.31 million | $345.36 million at Dec. 31, 2014 |
| Mortgages payable | $76.45 million | $76.71 million at Dec. 31, 2014 |
| Total assets / total capital | $772.73 million / $303.21 million | $744.24 million / $309.93 million at Dec. 31, 2014 |
Operating cash flow was $4.17 million, investing cash outflow was $55.07 million and financing cash inflow was $25.90 million. Cash decreased by $24.99 million during the quarter. Interest expense was $3.99 million, up from $2.17 million; the filing attributes the increase to higher borrowings, derivative fair-value changes and higher effective rates. The reported net margin was approximately 19%, versus approximately 46% in Q1 2014; prior-year earnings included a bond-redemption gain.
Material changes versus the prior comparable period
- Revenue was nearly flat as higher property revenue and investment income were largely offset by the absence of the prior-year $2.84 million mortgage revenue bond redemption gain.
- Net income fell by approximately $3.52 million. Expenses rose $3.63 million, including higher interest, real estate operating costs, depreciation and general and administrative costs.
- Investment income increased $1.77 million, reflecting additional bond investments, partly offset by reduced income from bonds and other securities sold, redeemed or paid down.
- Property revenue increased $1.16 million, mainly because The 50/50 student housing property began leasing in 2014. Stabilized financed properties’ economic occupancy was approximately 90%, versus 89%; stabilized MF Properties’ occupancy was approximately 87%, versus 86%.
- Q1 2015 CAD of $0.09 per unit was below the declared distribution of $0.125 per unit; the comparable 2014 figures were $0.12 and $0.125.
Outlook, risks and unusual items
- Management said it expects to continue supplementing distributions with unrestricted cash until planned investment and financing activity increases CAD. It believes the current annual distribution of $0.50 per unit may be supportable after those plans are completed, but cautioned that a continued CAD shortfall could require a distribution reduction. No formal earnings guidance was provided.
- Management identified prospective bond acquisitions and additional leverage as part of its plan, while noting that delays could affect results and liquidity. Reported leverage was approximately 61% under the Partnership’s stated measure, against a 65% overall constraint.
- Debt refinancing is a key liquidity risk: $84.17 million of debt financing and $9.13 million of mortgages were contractually due in 2015. Management expected to renew 2015-maturing TOB facilities and planned to extend or refinance the Eagle Village mortgage.
- The portfolio is exposed to short-term interest-rate changes, property performance, refinancing and credit-market access. Derivative fair-value changes increased Q1 interest expense by approximately $0.90 million; derivatives do not qualify for hedge accounting. Management reported compliance with financing covenants at quarter-end.
- Mortgage revenue bonds are valued using management’s discounted-cash-flow and yield analyses, largely with unobservable Level 3 inputs. A hypothetical 10% adverse change in the key valuation assumption would produce approximately $32.6 million of additional unrealized losses; this is a sensitivity estimate, not a forecast.
- The Partnership disclosed potential shortfall guarantees related to its TEBS and TOB financing, with maximum exposure of approximately $367.9 million before collateral proceeds; it had never been required to reimburse a facility for a shortfall. Other disclosed guarantees included Silver Moon construction-loan obligations and repurchase provisions for certain property transactions; no amounts were accrued where management considered a triggering event remote or funding sufficient.
- The Colonial property sale was expected to close before the end of Q2 2015 for approximately $10.7 million, above its stated asset value. A Fairmont Oaks sale listing was initiated after quarter-end, with completion expected by year-end. These are expected transactions, not completed sales as of the reporting date.
Most important facts for investors to verify
- Whether planned acquisitions and financing are completed on time, and whether resulting CAD covers the $0.50 annual distribution without cash supplementation.
- Near-term debt maturities, renewals and refinancing, including 2015 TOB facilities and the Eagle Village mortgage.
- Bond and property collateral performance, particularly properties with lower economic occupancy, and the status of property loans carrying substantial reserves or interest allowances.
- Valuation assumptions and sensitivity for Level 3 investments, including the possible effect of changes in yields and collateral operating results.
- Actual timing and net proceeds from The Colonial and Fairmont Oaks dispositions, and any contingent financing or guarantee obligations.