Business context and reporting period
Filing entity: America First Multifamily Investors, L.P. (Nasdaq: ATAX), managed by Greystone affiliates. The filing covers the unaudited quarter ended March 31, 2022; the filing’s legal registrant is not named Greystone Housing Impact Investors, LP.
The Partnership invests primarily in mortgage revenue bonds (MRBs), governmental issuer loans (GILs), property loans, affordable-housing properties and equity interests in market-rate multifamily developments.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $19.2 million | $14.4 million; up 33% |
| Gain on sale of unconsolidated investments | $16.4 million | $2.8 million |
| Net income | $26.3 million | $7.0 million |
| Net income available to partners | $25.5 million | $6.3 million |
| Net income per BUC | $1.03 | $0.27; split-adjusted |
| Operating cash flow | $9.3 million | $7.5 million |
| Cash, cash equivalents and restricted cash | $162.5 million | $151.9 million at Dec. 31, 2021; includes $118.3 million unrestricted cash |
| Total assets | $1.396 billion | $1.386 billion at Dec. 31, 2021 |
| Total liabilities | $961.6 million | $919.0 million at Dec. 31, 2021 |
| Debt financing, secured lines and mortgages | $939.3 million | Debt financing alone was $882.5 million |
Investment income rose 16% to $14.4 million and property revenues increased 14% to $1.9 million. Interest expense fell 25% to $3.9 million, including a favorable $2.5 million derivative fair-value change. The affordable multifamily segment reported a 4.4% net interest spread, compared with 3.0% a year earlier. The filing does not present a conventional consolidated profit-margin measure.
Comprehensive loss was $22.3 million, versus a $9.4 million loss a year earlier, primarily reflecting a $47.8 million unrealized loss on securities and an $0.8 million unrealized loss on bond purchase commitments. These fair-value changes did not directly affect bond cash flows.
Cash used in investing activities was $31.6 million, chiefly reflecting investment and loan advances, partly offset by principal receipts and proceeds from investment sales. Financing activities provided $32.9 million. Cash Available for Distribution (CAD), a non-GAAP measure, was $21.7 million, or $0.98 per BUC, compared with $6.5 million, or $0.32, in Q1 2021. The quarter’s declared distribution was $0.33 per BUC.
Material changes versus the prior comparable period
- Net income increased substantially, but the largest driver was the $16.4 million gain on the March sale of Vantage at Murfreesboro, compared with a $2.8 million gain on Vantage at Germantown in Q1 2021.
- Other interest income rose to $2.9 million from $0.3 million, including approximately $1.8 million of payments on Ohio Properties and Live 929 loans previously in nonaccrual status.
- GIL and property-loan balances expanded; property loans, net of allowances, increased to $104.4 million from $68.1 million at year-end.
- MRB fair values declined amid rising market rates. Total MRB carrying value fell to $735.0 million from $793.5 million at year-end, while cumulative unrealized gains on trust-held MRBs narrowed materially.
- In January, the Partnership restructured Live 929 debt: it replaced redeemed bonds with a $66.4 million fixed-rate MRB and acquired a $3.6 million taxable MRB. The property was 98% occupied at quarter-end.
- On April 1, 2022, the Partnership completed a one-for-three reverse BUC split. Per-unit amounts in the filing are adjusted retroactively.
Outlook, risks and unusual items
- Liquidity and debt: Management said cash and expected cash sources should meet liquidity needs and debt obligations over the next 12 months. The reported leverage ratio was approximately 69%, against a board-set maximum target of 75%. Secured credit facilities totaled $90 million, with $30.2 million outstanding at quarter-end, subject to borrowing-base limits and covenants.
- Commitments: Remaining investment and bond-purchase commitments totaled $276.3 million, including $85.0 million for GILs, $91.6 million for property loans and $48.4 million for MRBs. Projected funding schedules are estimates and may change.
- Debt maturities and rates: Contractual debt-financing maturities included $228.2 million in 2023 and $290.1 million in 2024. About 68% of debt financing bore short-term floating rates. Management’s sensitivity analysis estimated that an immediate 100-basis-point increase in short-term rates would reduce net interest income by approximately $1.1 million over the next 12 months.
- Market and credit risks: The Federal Reserve’s rate increases, inflation and geopolitical uncertainty contributed to fixed-income volatility; higher short-term rates can raise variable-rate borrowing costs. Management reported geographic concentration in Texas (42% of MRB principal), California (23%) and South Carolina (12%). The filing also identifies risks from property defaults, occupancy, operating costs, refinancing and reinvestment.
- Credit exposures: Provision Center 2014-1’s borrower was in Chapter 11; a court-approved property sale was being pursued, with the Partnership expecting about $4.6 million in net proceeds upon closing. Property-loan loss allowances were $7.9 million, and MRB credit-loss allowances were $10.0 million. The filing states debt service was current on MRBs, GILs and property loans except Provision Center 2014-1.
- Preferred units and contingencies: $94.5 million of Series A Preferred Units were outstanding, with holder redemption rights beginning on dates from late 2022 onward; no redemption notices had been received by March 31. The Partnership disclosed construction-loan guarantees and other guarantees but had accrued no amount, citing remote likelihood of claims. Management reported no pending legal proceeding expected to materially affect results.
- Operations and guidance: Management reported modest COVID-related occupancy effects at some financed properties, while noting recovery at Live 929 and improved occupancy at Suites on Paseo. Some Vantage developments faced material-price volatility and supply-chain constraints, but no material cost overruns or disruptions were reported to date. No quantitative earnings guidance was provided.
- Subsequent events: In April, 2.0 million Series A Preferred Units were exchanged for Series A-1 units, with no net proceeds. The Partnership also extended certain TOB maturities and disclosed new MRB and taxable-MRB commitments.
Important facts for investors to verify
- How much of the quarter’s earnings and CAD reflects realized investment-sale gains and one-time receipts rather than recurring income?
- Whether the $276.3 million of remaining commitments can be funded on schedule and with adequate leverage and liquidity.
- Refinancing plans and lender terms for the substantial 2023–2024 debt maturities, including variable-rate exposure and collateral requirements.
- Resolution and recovery prospects for Provision Center 2014-1 and the collectability of impaired property loans.
- Timing and potential extent of Series A Preferred Unit redemptions, and the effect of the subsequent exchange into Series A-1 units.
- How rising rates and fair-value assumptions affect reported MRB values, given the portfolio’s Level 3 valuation inputs.