Greystone Housing Impact Investors LP (ATAX) — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020; unaudited. The filing identifies the registrant as America First Multifamily Investors, L.P. (ATAX), rather than Greystone Housing Impact Investors LP. Investors should verify the entity and ticker.
Business context and financial results
The Partnership primarily invests in mortgage revenue bonds (MRBs) and governmental issuer loans (GILs) financing affordable multifamily housing, with additional property, real estate and unconsolidated investments.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $13.84m | $14.87m | $42.05m | $46.88m |
| Net income (loss) | $(1.16)m | $9.71m | $6.41m | $20.05m |
| Net income (loss) available to partners | $(1.88)m | $8.99m | $4.26m | $17.89m |
| Net income (loss) per BUC | $(0.03) | $0.13 | $0.07 | $0.26 |
| Cash from operating activities | Not separately presented for the quarter | $12.64m | $12.83m | |
| Cash distributions declared per BUC | $0.06 | $0.125 | $0.245 | $0.375 |
For the nine months, cash used in investing activities was $30.23m and cash provided by financing activities was $104.86m, producing an $87.28m increase in cash, cash equivalents and restricted cash. Comprehensive income was $37.82m for the nine months, including $31.91m of unrealized gains on securities; these gains are not equivalent to operating cash flow.
Net interest spread in the mortgage-bond investment segment improved to 3.1% for the nine months from 2.7% in 2019, and to 3.2% in Q3 from 2.6%. Management attributed this principally to lower funding costs and financing changes.
Balance sheet, debt and liquidity
At September 30, total assets were $1.175bn, total liabilities $719.1m and partners’ capital $361.2m. Cash and cash equivalents were $51.2m, with a further $79.3m restricted; cash, cash equivalents and restricted cash totaled $130.5m. Debt financing was $667.2m, unsecured lines of credit $11.8m, and mortgages and other secured financing $26.3m. Management reported an overall leverage ratio of approximately 66%.
Debt financing increased from $536.2m at year-end 2019. The Partnership issued $103.5m of secured notes in September, backed by residual certificates from TEBS financings, and entered total return swaps intended to reduce the notes’ net interest cost. The swaps require substantial cash collateral. Contractual debt-financing maturities include $187.2m in 2023 and $87.8m in 2024. The Partnership reported compliance with applicable financing covenants at quarter-end.
Management expected cash on hand and operating cash flows to meet liquidity needs over the next 12 months, while identifying refinancing, investment repayments, asset sales and potential capital issuance as longer-term sources. Outstanding investment funding commitments totaled approximately $143.6m. The $11.8m non-operating credit-line balance was due in December 2020 and March 2021, with an extension option for part of the balance subject to repayment conditions.
Material changes and unusual items
- Q3’s net loss reflected a $3.46m provision for credit loss on the Live 929 Apartments MRB and an $0.81m loan-loss provision related to its property loan. Nine-month provisions for credit loss totaled $5.29m, including Live 929 and Pro Nova 2014-1.
- Revenue and earnings comparisons were affected by asset sales and prior-year items: the Partnership sold its PHC Certificates in January 2020, recording a $1.42m gain; 2019 included a $10.48m gain on sale of an unconsolidated investment and $3.05m of contingent interest income.
- Interest expense declined 16.2% for the nine months to $16.01m, primarily due to lower rates and refinancing. General and administrative expense fell 24.5% to $9.26m, including lower restricted-unit compensation after a 2019 vesting event.
- COVID-19-related university restrictions reduced student-property occupancy. At September 30, Live 929 was 67% occupied, Suites on Paseo 64%, and The 50/50 property 86%. Management said most MRB-financed properties had not shown significant portfolio-wide occupancy or collection deterioration at that date.
- After quarter-end, the Pro Nova 2014-1 borrower did not make its November 1 contractual interest payment. The filing says the payment was not made after the majority senior bondholder directed the trustee not to draw on the debt-service reserve; the Partnership owned about 8% of the senior MRBs and was assessing options with other lenders.
Outlook, risks and contingencies
The filing provides no quantitative earnings or distribution guidance. Management said it would continue monitoring rent collections and work with borrowers requesting forbearance. It noted that government relief had supported tenant payments, but future results depend on the pandemic, employment, university attendance, rental collections and the duration of relief measures.
Key risks include credit deterioration or defaults on MRBs, GILs and property loans; student-housing weakness; refinancing and maturity exposure; variable interest rates; and collateral, covenant or liquidity demands under securitized financings and total return swaps. The Partnership also disclosed construction-loan guarantees and significant remaining investment commitments. No legal matter was expected by management to have a material financial-statement effect.
Important facts for investors to verify
- Confirm the filing entity and applicable ticker, given the discrepancy between the request’s company name and the registrant named in the filing.
- Track Live 929 and Pro Nova credit status, forbearance, collateral values, and any further missed payments or loss provisions.
- Review liquidity available after restricted cash, swap collateral requirements, credit-line repayments and the $143.6m of investment commitments.
- Assess refinancing capacity for the 2023–2024 maturities and the sensitivity of funding costs and collateral to market changes.
- Monitor student-property occupancy, tenant collections and the distribution level; the reported CAD is a non-GAAP measure and was $12.41m for the nine months versus $23.70m in 2019.