Business context and reporting period
This is the Form 10-K for America First Multifamily Investors, L.P. (NASDAQ: ATAX), for the fiscal year ended December 31, 2016, with fourth-quarter results also disclosed. The filing is not under the name Greystone Housing Impact Investors LP shown in the request metadata.
The Partnership invests primarily in mortgage revenue bonds financing affordable multifamily and student housing, alongside public-housing certificates, property loans, and directly owned multifamily properties. At year-end it held 83 mortgage revenue bonds with $648.4 million of principal outstanding, financing 58 residential properties with 9,968 units, plus one bond secured by commercial property.
Financial performance and condition
| Metric | 2016 | 2015 |
|---|---|---|
| Total revenues, GAAP statement | $59.0 million | $60.0 million |
| Gain on MF property sales | $14.1 million | $4.6 million |
| Income from continuing operations | $23.8 million | $22.9 million |
| Net income attributable to Partnership | $23.8 million | $26.6 million |
| Net income per BUC | $0.34 | $0.34 |
| Cash Available for Distribution (CAD), per BUC | $0.50 | $0.53 |
| BUC distributions, per unit | $0.50 | $0.50 |
| Cash from operating activities | $15.2 million | $19.4 million |
Fourth-quarter 2016 revenue and other income were $15.9 million; net income attributable to the Partnership was $5.6 million, or $0.09 per BUC.
At December 31, 2016, total assets were $944.1 million, including $20.7 million cash and $6.8 million restricted cash. Total liabilities were $623.2 million. Reported debt comprised $40.0 million unsecured lines of credit, $19.8 million secured line of credit, $495.4 million debt financing, and $51.4 million mortgages and other secured financing. Preferred units had a $40.8 million redemption value. The reported leverage ratio was approximately 65% against the then-current target constraint.
Investing activities used $83.1 million and financing activities provided $71.5 million; cash increased $3.7 million. Mortgage revenue bonds had a reported fair value of approximately $680.2 million, and PHC Certificates were valued at $57.2 million. The filing provides no single consolidated operating-margin measure.
Material changes versus the prior comparable period
- GAAP revenue declined about 1.6%, while continuing-operations income increased about 3.9%. Net income fell from 2015, which included $3.7 million of discontinued-operations income from the sale of Bent Tree and Fairmont Oaks.
- Mortgage revenue bond segment net income fell 34% to $11.8 million. Management cited lower contingent interest and bond redemptions, partially offset by interest income from new bond acquisitions; interest expense also increased with higher debt.
- MF Properties segment net income rose to $8.4 million, supported by $14.1 million of property-sale gains, principally from the Arboretum and Woodland Park. The Partnership sold those properties and acquired Jade Park during 2016.
- Cash from operations decreased by $4.2 million. CAD per BUC declined from $0.53 to $0.50, matching the annual distribution rate in 2016; distributions were therefore not covered by CAD on a per-unit basis in 2015, but equaled CAD in 2016.
- The Partnership sold its remaining mortgage-backed securities in January 2016 and eliminated that investment segment. It added an Other Investments segment as investments in multifamily development entities grew.
- Series A preferred-unit issuance raised $40.9 million gross in 2016. These units carry a 3% stated distribution rate and rank ahead of BUCs for distributions and liquidation preferences.
Outlook, management commentary, risks and unusual items
- Management said cash and expected cash sources were sufficient to meet liquidity needs over the next 12 months, and expected to refinance or renew 2017 maturities. It also expected to maintain the $0.50 annual BUC distribution while implementing investment plans, but cautioned that distributions are discretionary and may be reduced.
- At year-end, contractual obligations included $60.0 million of lines of credit due within one year, $148.1 million of debt-financing maturities due within one year, and $8.3 million of mortgage obligations due within one year. In February 2017, subsequent Term A/B financings were used to repay the $40 million unsecured and $20 million secured credit lines.
- After year-end, the Board increased the leverage constraint from 65% to 70%. The filing identifies refinancing availability and cost, variable interest rates, property performance and occupancy, and securitization termination or collateral shortfalls as significant risks. A 100-basis-point rate increase was estimated to reduce next-12-month net interest income and CAD by approximately $0.9 million.
- Credit exposure is concentrated geographically: Texas represented approximately 45% and California 20% of bond principal outstanding. Mortgage revenue bonds are non-recourse and are not obligations or tax-backed guarantees of the issuing governments; repayment depends principally on property cash flow and sale or refinancing proceeds.
- PHC Certificate payments depend on annual Congressional HUD Capital Fund Program appropriations. Tax-exempt treatment of bond interest could be challenged, potentially creating tax liability for Unitholders. The Partnership also disclosed potential guarantees tied to securitizations, with maximum exposure of approximately $500.3 million before collateral-sale proceeds, though no shortfalls had required reimbursement.
- Unusual items included $14.1 million in MF-property sale gains and $5.0 million of income-tax expense, largely associated with those sales. A $62,000 impairment was recorded on land held for development. Bond, certificate, and derivative fair values rely substantially on Level 3, unobservable inputs.
- Stabilized residential-property economic occupancy was approximately 86%, versus 87% in 2015; stabilized MF Property economic occupancy was approximately 85%, versus 89%. Management cited weaker occupancy at The 50/50 and the addition of Jade Park, and described marketing and pricing changes intended to improve occupancy.
- The independent auditor issued an unqualified opinion on the 2016 financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective.
Important facts for investors to verify
- Confirm the issuer identity and ticker: the supplied filing is for America First Multifamily Investors, L.P. (ATAX), not the company named in the request metadata.
- Review the 2017 refinancing and subsequent financing disclosures, including maturities, rates, collateral, covenants, and the effect on leverage and liquidity.
- Assess whether recurring cash generation can sustain the $0.50 per-unit distribution, given CAD was exactly $0.50 per unit in 2016 and declined from 2015.
- Examine property-level occupancy and debt-service coverage, particularly The 50/50 MF Property, Jade Park, and newly stabilized or non-stabilized bond collateral.
- Evaluate exposure to Texas and California, HUD appropriations supporting PHC Certificates, and the consequences of any bond-interest tax challenge or securitization shortfall.
- Consider valuation sensitivity: most bond and PHC Certificate fair values use Level 3 inputs; the filing estimates an additional $35.9 million bond loss and $1.9 million PHC Certificate loss under its specified 10% adverse-yield scenario.