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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

In this Management’s Discussion and Analysis, all references to “we,” “us,” and the “Partnership” refer to America First Multifamily Investors, L.P., its consolidated subsidiaries, and consolidated VIEs as of December 31, 2021 and 2020.

Executive Summary

The Partnership was formed in 1998 for the primary purpose of acquiring a portfolio of mortgage revenue bonds (“MRBs”) that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily, seniors housing and commercial properties. We also invest in governmental issuer loans (“GILs”), which are similar to MRBs, to provide construction financing for affordable multifamily properties. We expect and believe the interest received on our MRBs and GILs is excludable from gross income for federal income tax purposes. We may also invest in other types of securities and investments that may or may not be secured by real estate to the extent allowed by the Partnership Agreement.

The Partnership includes the assets, liabilities, and results of operations of the Partnership, our wholly owned subsidiaries and consolidated VIEs. All significant transactions and accounts between the Partnership and the consolidated VIEs have been eliminated in consolidation. See Note 2 to the Partnership’s consolidated financial statements for additional details.

Historically, we operated in four reportable segments: (1) Mortgage Revenue Bond Investments, (2) MF Properties, (3) Other Investments, and (4) Public Housing Capital Fund Trusts. However, effective as of December 1, 2021 we established a new reportable segment designated as Seniors and Skilled Nursing MRB Investments, which provides acquisition, construction and/or permanent financing for seniors housing and skilled nursing properties. Seniors housing consists of a combination of independent living, assisted living and memory care units. In addition, as of December 1, 2021, we renamed our Mortgage Revenue Bond Investments segment as “Affordable Multifamily MRB Investments”, and our Other Investments segment was renamed to “Market-Rate Joint Venture Investments”. Therefore, as of December 31, 2021, we had five reportable segments: (1) Affordable Multifamily MRB Investments, (2) Seniors and Skilled Nursing MRB Investments, (3) MF Properties, (4) Market-Rate Joint Venture Investments, and (5) Public Housing Capital Fund Trusts. All activity in the Public Housing Capital Fund Trusts segment ceased with the sale of the PHC Certificates in January 2020, as described further below. The Partnership separately reports its consolidation and elimination information because it does not allocate certain items to the segments. All comparisons and discussion throughout this “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” are based on the new segment presentation implemented during the fourth quarter of 2021, as discussed above. See Notes 2 and 25 to the Partnership’s consolidated financial statements for additional details.

Corporate Responsibility

The Partnership is committed to corporate responsibility and the importance of developing environmental, social and governance (“ESG”) policies and practices consistent with that commitment. We believe the implementation and maintenance of such policies and practices benefit the employees that serve the Partnership, support long-term performance for our Unitholders, and have a positive impact on society and the environment.

Environmental Responsibility

Achieving environmental and sustainability goals in connection with our affordable housing investment activity is important to us. Opportunities for positive environmental investments are open to us because private activity bond volume cap and LIHTC allocations are key components of the capital structure for most new construction or acquisition/rehabilitation affordable housing properties financed by our MRB and GIL investments. These resources are allocated by individual states to our property sponsors through a competitive application process under a state-specific qualified allocation plan (“QAP”) as required under Section 42 of the IRC. Each state implements its public policy objectives through an application scoring or ranking system that rewards certain project features. Some of the common features rewarded under individual state QAPs are transit amenities (proximity to various forms of public transportation), proximity to public services (parks, libraries, full scale supermarkets, or a senior center), and energy efficiency/sustainability. Some state-specific QAPs have minimum energy efficiency standards that must be met, such as use of low water need landscaping, Energy Star appliances and hot water heaters, and GREENGUARD Gold certified insulation. Since we can only finance properties with successful applications, we work with our sponsor clients to maximize these environmental features such that their applications can earn the most points possible under the individual state’s QAP. During 2021, properties related to our MRB investments in Jackson Manor Apartments and Residency at the Mayer and all our six new GIL investments were awarded both private activity bond cap and LIHTC allocations through state-specific QAPs. Our MRB investment in Meadow Valley received only private activity bond cap allocation but was done in conjunction with commercial property assessed clean energy financing from another lender.

We are committed to minimizing the overall environmental impact of our corporate operations. As only 13 employees of Greystone Manager are responsible for the Partnership’s operations, we have a relatively modest environmental impact and have adequate facilities to grow our employee base without acquiring additional physical space.

Social Responsibility

Our investment activity in MRBs and GILs directly supports the construction, rehabilitation, and stabilized operation of decent, safe, and sanitary affordable multifamily housing across the United States. Each of the properties securing our MRB and GIL investments is required to maintain a minimum percentage of units set-aside for low-income tenants in accordance with IRC guidelines, and the owners of the properties often agree to exceed the minimum IRC requirements. In addition, the rent charged to low-income tenants at MRB or GIL properties is often restricted to a certain percentage of the tenants’ income, making them more affordable. These properties provide valuable support to both low-income and market-rate tenants and create housing diversity in the geographic and social communities in which they are located.

Corporate Governance

Greystone Manager, as the general partner of the Partnership’s general partner, is committed to corporate governance that aligns with the interests of our Unitholders and stakeholders. The Board of Managers of Greystone Manager brings a diverse set of skills and experiences across industries in the public, private and not-for-profit sectors. The composition of the Greystone Manager Board of Managers is in compliance with the NASDAQ listing rules and SEC rules applicable to the Partnership. All the members of the Audit Committee of Greystone Manager are independent under the applicable SEC and NASDAQ independence requirements, two of whom qualify as “audit committee financial experts.” Of the seven Managers of Greystone Manager, one Manager is female.

Affordable Multifamily MRB Investments Segment

Effective December 2021, we renamed our Mortgage Revenue Bond Investments segment as "Affordable Multifamily MRB Investments". There was no change in the composition of investments within this segment upon the effective date of the name change. As of December 31, 2021, we owned 74 MRBs with aggregate outstanding principal of $697.6 million and nine GILs with aggregate outstanding principal of $184.8 million. Most of these MRBs and the GILs were issued by various state and local housing authorities to provide construction and/or permanent financing for 76 multifamily and seniors housing properties containing a total of 12,584 rental units located in 17 states in the United States.

As of December 31, 2020, we owned 77 MRBs with aggregate outstanding principal of $673.6 million and three GILs with aggregate outstanding principal of $64.9 million. Most of these MRBs and the GILs were issued by various state and local housing authorities to provide construction and/or permanent financing for 71 multifamily properties containing a total of 11,851 rental units located in 15 states in the United States.

Our MRBs, GILs and certain property loans are secured by a mortgage or deed of trust. One MRB is secured by ground, facility, and equipment of a commercial ancillary health care facility in Tennessee. Property loans related to multifamily properties are also included in this segment and may or may not be secured by a mortgage or deed of trust.

The following table compares operating results for the Affordable Multifamily MRB Investments segment for the periods indicated (dollar amounts in thousands):

For the Years Ended December 31,

Affordable Multifamily MRB Investments

Comparison of the years ended December 31, 2021 and 2020

Total revenues increased for 2021 as compared to the same period in 2020 due primarily to:

•

An increase of approximately $3.4 million in interest income from our various GIL investments;

•

Contingent interest income of approximately $1.8 million recognized in July 2021 upon the redemption of the Rosewood Townhomes – Series A and South Pointe Apartments – Series A MRBs at a premium to outstanding principal;

•

An increase of approximately $676,000 in interest income from new MRB investments; and

•

A decrease of approximately $1.7 million in interest income from MRB investments due to redemptions and principal paydowns.

Total interest expense increased for 2021 as compared to the same period in 2020 due primarily to:

•

The execution of the Secured Notes in September 2020;

•

An increase in the average outstanding principal of $175.2 million;

•

Offset by generally lower SIFMA index rates during 2021 resulting in lower interest expense on our variable rate debt financings. The SIFMA index averaged 0.04% and 0.55% during 2021 and 2020, respectively. See tables below for additional information regarding the impact of rate changes on the Partnership’s variable rate debt financings;

•

The termination of five fixed rate Term A/B financings with interest rates of approximately 4.50% that were replaced by five new TOB financings with an initial variable interest rate of approximately 2.09% in April 2020;

•

Approximately $454,000 of additional interest expense and approximately $285,000 of deferred financing costs that were written off during 2020 with the termination of the Deutsche Bank Term A/B trust financings in April 2020; and

•

Approximately $364,000 of previously unamortized deferred financing costs that were recognized as interest expense upon collapse of certain TOB financings in September 2020.

Segment net income for 2021 increased as compared to the same period in 2020 due to:

•

The changes in total revenues and total interest expense detailed in the tables below;

•

A decrease in the recognized provision for credit loss of approximately $2.0 million related to the Provision Center 2014-1 MRB and $3.5 million related to the Live 929 Apartments – Series A MRB;

•

A decrease in the recognized provision for loan loss of approximately $467,000 in 2021 as compared to 2020 related to the Live 929 Apartments property loan;

•

Offset by an increase in general and administrative expenses due to increases of approximately $461,000 related to administration fees paid to AFCA2 due to greater assets under management, approximately $241,000 related to salaries and benefits, approximately $260,000 related to restricted unit compensation expense, approximately $225,000 related to referral fees paid to an affiliate of Greystone on closing of new investments during 2021, and approximately $496,000 related to professional and consulting fees from increased transactional activity during 2021.

The following tables summarize the segment’s net interest income, average balances, and related yields earned on interest-earning assets and incurred on interest-bearing liabilities, as well as other income included in total revenues for 2021 and 2020. The net of interest income from interest-earning assets and interest expense for interest-bearing liabilities is the segment’s net interest income. The average balances are based primarily on monthly averages during the respective periods. All dollar amounts are in thousands.

For the Years Ended December 31,

Interest-earning assets:

Contingent interest income 1,849 -

Non-investment income 112 76

Interest-bearing liabilities:

Amortization of deferred finance costs N/A 968 N/A N/A 1,334 N/A

Derivative fair value adjustments N/A (23 ) N/A N/A (117 ) N/A

(1)

Interest expense is reported net of income/loss on the Partnership’s two total return swaps.

(2)

The decrease in the average interest rate was due primarily to approximately $454,000 of additional interest expense related to termination of the Term A/B financings with Deutsche Bank in April 2020. Excluding such items, the average interest rate in 2020 was approximately 4.2%.

(3)

Net interest income equals the difference between total interest income from interest-earning assets minus total interest expense from interest-bearing assets. Net interest spread equals annualized net interest income divided by the average interest-bearing assets during the period.

The following tables summarize the changes in interest income and interest expense between 2021 and 2020, and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, or 2) changes in the interest rates of the assets and liabilities. All dollar amounts are in thousands.

Total Change AverageVolume $ Change AverageRate $ Change

Interest-earning assets:

Mortgage revenue bonds $ (1,587 ) $ (631 ) $ (956 )

Interest-bearing liabilities:

Lines of credit $ (226 ) $ (172 ) $ (54 )

Fixed TEBS financing (133 ) (141 ) 8

Variable TEBS financing (501 ) (26 ) (475 )

Fixed Term A/B & TOB financing (1,311 ) (922 ) (2) (389 )

Amortization of deferred finance costs (366 ) (3) N/A (366 )

Derivative fair value adjustments 94 N/A 94

Total interest-bearing liabilities $ 560 $ 3,203 $ (2,643 )

(1)

Interest expense is reported net of income/loss on the Partnership’s two total return swaps.

(2)

The Partnership terminated all Fixed Term A/B & TOB financings with Deutsche Bank in April 2020 and subsequently closed new variable TOB financings with Mizuho.

(3)

Due primarily to approximately $285,000 of deferred finance costs written off with the termination of the Deutsche Bank Term A/B trust financings in April 2020 and approximately $364,000 of previously unamortized deferred financing costs that were recognized as interest expense upon collapse of certain TOB financings in September 2020.

Operational Matters

We regularly discuss operations and the impacts of COVID-19 with property owners and property management service providers of multifamily properties securing our MRBs. We believe federal and state COVID-19 relief measures have helped certain tenants to stay current on their contractual rental payments. In addition, we have noted in conversations with certain property managers that rent payment relief programs are still being utilized by some of the tenant population. We have noted slight declines in occupancy and operating results at our multifamily properties securing MRBs due to COVID-19. However, operating results, plus the availability of reserves, have allowed all properties to be current on contractual debt service payments on our MRBs and we have received no requests for forbearance of contractual debt service payments. If property operating results significantly decline, we may choose to provide support to the properties through supplemental property loans to prevent defaults on the related MRBs.

During 2020 and the first half of 2021, COVID-19 had a significant impact on Live 929 Apartments, our sole student housing MRB property. As of December 31, 2021, Live 929 Apartments is 95% occupied, which is higher than occupancy levels prior to the onset of COVID-19. The nearby educational institution, Johns Hopkins University, substantially resumed in-person, on-campus classes beginning with the Fall 2021 semester. The property continued to operate under a forbearance agreement through December 2021. In January 2022, the borrower completed a restructuring of all senior debt secured by the property. The restructuring transaction provided additional funds to resolve certain payables, fund a debt service reserve, fund repairs and capital improvements, and improve the debt service coverage going forward. In the restructuring transaction, our Live 929 Apartments – Series A and Series B MRBs were redeemed at par plus accrued interest and we purchased a new MRB with principal of $66.4 million and a taxable MRB of $3.6 million, both with fixed interest rates of 4.30%. We believe the restructured debt and estimated results of property operations will eliminate the need for further forbearance.

COVID-19 has negatively impacted the performance of the commercial property associated with the Provision Center 2014-1 MRB in the form of lower patient volume and revenues. These results, in conjunction with declines in the general creditworthiness of proton therapy centers in the United States, have resulted in the reduction of the financial performance and support of the property. The borrower filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code in December 2020. In January 2022, the US Bankruptcy Court for the Middle District of Tennessee approved a sale of the Knoxville facility to Covenant Health, a Tennessee non-profit corporation, for a purchase price of $45.3 million. The net sale proceeds and funds held by the trustee will be distributed to bondholders upon closing of the sale. The Partnership owns approximately 9.2% of the outstanding senior MRBs, and we expect to receive approximately $4.6 million of net proceeds upon closing.

Properties securing our GILs and related property loans are currently under construction and have not yet commenced leasing operations. To date, these properties have not experienced any material supply chain disruptions for either construction materials or labor or incurred material construction cost overruns due to COVID-19.

Seniors and Skilled Nursing MRB Investments Segment

Effective December 1, 2021, we established a new reportable segment designated as Seniors and Skilled Nursing MRB Investments, which provides acquisition, construction and permanent financing for seniors housing and skilled nursing properties. Seniors housing consists of a combination of the independent living, assisted living and memory care units.

As of December 31, 2021, we owned one MRB with aggregate outstanding principal of $100,000, with an outstanding commitment to provide additional funding of $43.9 million on a draw-down basis during construction. This private placement MRB was issued to finance the construction and stabilization of a combined independent living, assisted living and memory care property in Traverse City, MI, with 154 total units. Furthermore, in 2021 we funded a property loan with outstanding principal of $13.4 million as of December 31, 2021, secured by a 128-bed skilled nursing facility in Houston, TX, to position ourselves for a future MRB investment.

The following table compares operating results for the Seniors and Skilled Nursing MRB Investments segment for the periods indicated (dollar amounts in thousands):

For the Years Ended December 31,

Seniors and Skilled Nursing Investments

Total revenues $ 78 $ - $ 78 N/A

Interest expense - - - N/A

Segment net income 72 - 72 N/A

Operations in this segment began in December 2021.

Market-Rate Joint Venture Investments Segment

Effective December 1, 2021, our Other Investments segment was renamed to “Market-Rate Joint Venture Investments”. There was no change in the composition of investments within this segment upon the effective date of the name change.

The Market-Rate Joint Venture Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which holds noncontrolling equity investments in certain market-rate multifamily projects and property loans due from market-rate multifamily projects.

The following table compares operating results for the Market-Rate Joint Venture Investments segment for the periods indicated (dollar amounts in thousands):

For the Years Ended December 31,

Market-Rate Joint Venture Investments

Gain on sale of investments in unconsolidated entities 15,521 - 15,521 N/A

Comparison of the years ended December 31, 2021 and 2020

The increase in total revenues in 2021 as compared to 2020 was due to the following factors:

•

An increase of approximately $862,000 in investment income recognized upon the sale of Vantage at Germantown in March 2021, partially offset by a decrease of approximately $680,000 in recurring investment income due to having reached the maximum guaranteed preferred return for Vantage at Germantown during 2020;

•

An increase of approximately $2.4 million in investment income from amounts recognized upon the sale of Vantage at Powdersville in May 2021;

•

An increase of approximately $1.0 million in investment income primarily from amounts recognized upon the sale of Vantage at Bulverde in August 2021;

•

A net increase of approximately $4.3 million in investment income due to preferred return distributions from Vantage at Stone Creek and Vantage at Coventry in November 2021;

•

A net increase of approximately $2.2 million in investment income due to additional investments in unconsolidated entities in 2021 and 2020; and

•

Offset by approximately $1.5 million in investment income from amounts recognized upon the sale of Vantage at Waco in June 2020.

Interest expense for 2021 is related to our secured line of credit with BankUnited, N.A. that is secured primarily by our investments in unconsolidated entities that was initiated in June 2021.

The gain on sale of investments in unconsolidated entities is related to the sale of the Vantage at Germantown property in March 2021 for a gain of approximately $2.8 million, the sale of the Vantage at Powdersville property in May 2021 for a gain of approximately $5.5 million and the sale of the Vantage at Bulverde property in August 2021 for a gain of approximately $7.0 million. In addition, the we received cash of approximately $294,000 in November 2021 upon the resolution of gain contingencies related to the sale of Vantage at Panama City Beach in September 2019.

The increase in net income in 2021 as compared to 2020 was due to the increases in total revenues, interest expense and gain on sale of investments in unconsolidated entities described above.

Operational Matters

Certain materials supply chains and labor needed to construct the properties underlying our investments in unconsolidated entities have been constrained in the current environment, but to date, projects under construction have not experienced any material supply chain disruptions. We have also noted volatile market prices for construction materials, particularly lumber and commodities, yet we have noted no material construction cost overruns to date. Despite leasing challenges from social distancing measures due to COVID-19, all properties that have completed construction are either stabilized or very near stabilization.

MF Properties Segment

As of December 31, 2021 and 2020, the Partnership owned the Suites on Paseo and The 50/50 MF Properties containing a total of 859 rental units.

The following table compares operating results for the MF Properties segment for the periods indicated (dollar amounts in thousands):

For the Years Ended December 31,

MF Properties

Comparison of the years ended December 31, 2021 and 2020

The increase in total revenues for 2021 as compared to 2020 is due primarily to higher occupancy at the Suites on Paseo MF Property. Higher occupancy is a result of the resumption of on-campus, in-person classes for the Fall 2021 semester at San Diego State University after having suspended on-campus, in-person classes for the Fall 2020 and Spring 2021 semesters due to COVID-19 concerns.

The decrease in interest expense for 2021 as compared to 2020 was due to the refinancing of The 50/50 Mortgage and TIF loans to lower interest rates in February 2020 and slightly lower average outstanding principal balances.

The decrease in segment net loss for 2021 as compared to 2020 was due to the changes in total revenues and interest expense described above and approximately $483,000 of net savings from closure of food service operations at the Suites on Paseo MF Property in 2020.

Operational Matters

Both MF Properties are adjacent to universities and serve primarily university students. Certain universities in the United States have reverted to temporary remote learning in early 2022 due to the spread of COVID-19. Currently, the universities near our MF Properties are holding on-campus classes, though further spread could cause the universities to implement remote learning.

The University of Nebraska-Lincoln, which is adjacent to The 50/50 MF Property, is currently holding on-campus, in-person classes. The property is 88% occupied as of December 31, 2021, which remains below occupancy levels prior to the onset of COVID-19. However, the property has generated sufficient operating cash flows to meet all mortgage payment and operational obligations through December 31, 2021.

San Diego State University, which is adjacent to the Suites on Paseo MF Property, resumed on-campus, in-person classes for the Fall 2021 semester. The university temporarily reverted to remote learning in January 2022 due to community spread of the omicron variant of COVID-19 but resumed in-person classes on February 7th. Physical occupancy at the Suites on Paseo MF Property was 97% as of December 31, 2021, which is higher than occupancy levels prior to the onset of COVID-19. There is currently no direct debt associated with the Suites on Paseo MF Property and the property’s operating cash flows have been sufficient to meet all operational obligations through December 31, 2021.

Public Housing Capital Fund Trusts Segment

The PHC Certificates within this segment consisted of custodial receipts evidencing loans made to public housing authorities. In January 2020, we sold all our PHC Certificates to an unrelated third party.

The following table compares operating results for the Public Housing Capital Fund Trustssegment for the periods indicated (dollar amounts in thousands):

For the Years Ended December 31,

Public Housing Capital Fund Trusts

Comparison of the years ended December 31, 2021 and 2020

There were no reported operations for 2021 due to the sale of the PHC Certificates in January 2020 and the collapse and payment in full of all principal and interest due on the TOB Trust financings secured by the PHC Certificates.

Discussion of Occupancy at Investment-Related Properties

The following tables outline information regarding the properties securing our MRB and GIL investments. The tables also contain information about the MF Properties and properties associated with our investments in unconsolidated entities. The narrative discussion that follows provides a brief operating analysis of each category as of and for the years ended December 31, 2021 and 2020.

Non-Consolidated Properties - Stabilized

The owners of the following properties either do not meet the definition of a VIE and/or we have evaluated and determined we are not the primary beneficiary of the VIE. As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis. For the years ended December 31, 2021 and 2020, these properties have met the stabilization criteria (see footnote 3 below the table). Debt service on our MRBs for the stabilized properties was current as of December 31, 2021. The amounts presented below were obtained from records provided by the property owners and their related property management service providers.

MRB Multifamily Properties-Stabilized (3)

Harmony Court Bakersfield CA 96 96 % 97 % 91 % 90 %

Lutheran Gardens (4) CA 76 96 % n/a 98 % n/a

Montecito at Williams Ranch Apartments CA 132 98 % 95 % 106 % 105 %

The Palms at Premier Park Apartments SC 240 100 % 97 % 92 % 92 %

Arbors at Hickory Ridge (6) TN 348 n/a n/a n/a n/a

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

(3)

A property is considered stabilized once it reaches 90% physical occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for a period after construction completion or completion of the rehabilitation.

(4)

Prior year occupancy data is not available as the related investment was acquired in 2021. The property was considered stabilized upon acquisition of the related MRB.

(5)

The Ohio Properties consist of Crescent Village, located in Cincinnati, Ohio, Willow Bend, located in Columbus (Hilliard), Ohio and Postwoods, located in Reynoldsburg, Ohio.

(6)

The MRB was defeased and the underlying property was sold during 2021. As such, the Partnership will not report property occupancy information.

Physical occupancy as of December 31, 2021 was slightly higher compared with the same period in 2020 due primarily to the large increase in physical occupancy at Live 929 Apartments. Economic occupancy for the year ended December 31, 2021 wasslightly lower compared with the same period in 2020 due primarily to lower economic occupancy at Live 929 Apartments and certain properties located in Texas during the first half of 2021. The Decatur Angle and Bruton Apartments properties experienced significant declines due to higher than historical bad debt reserve write-offs.

The Live 929 Apartments, a student housing property, was more significantly impacted by COVID-19 than affordable multifamily properties but has generally recovered from an occupancy standpoint for the Fall 2021 semester. The nearby educational institution, Johns Hopkins University, has resumed in-person, on-campus classes for the Fall 2021 semester. As of December 31, 2021, Live 929 Apartmentswas 95% occupied, which is higher than occupancy prior to the onset of COVID-19. Economic occupancy reported above remains low due to lower physical occupancy in Spring 2021, but we expect operations and economic occupancy to improve over the coming quarters as a result of increased occupancy.

Non-Consolidated Properties - Not Stabilized

The owners of the following properties do not meet the definition of a VIE and/or we have evaluated and determined we are not the primary beneficiary of each VIE. As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis. For the year ended December 31, 2021 these properties have not met the stabilization criteria (see footnote 3 below the table). As of December 31, 2021, debt service on the MRB and GILs for the non-stabilized properties was current. The amounts presented below were obtained from records provided by the property owners and their related property management service providers.

MRB Multifamily Properties-Non Stabilized (3)

Ocotillo Springs (4) CA 75 n/a n/a n/a n/a

Residency at the Mayer (4) CA 79 n/a n/a n/a n/a

Jackson Manor Apartments (5) MS 60 97 % n/a 86 % n/a

GIL Multifamily Properties-Non Stabilized (3)

Hope on Avalon (4) CA 88 n/a n/a n/a n/a

Hope on Broadway (4) CA 49 n/a n/a n/a n/a

Centennial Crossings (4) CO 209 n/a n/a n/a n/a

Osprey Village (4) FL 383 n/a n/a n/a n/a

Willow Place Apartments (4) GA 182 n/a n/a n/a n/a

Oasis at Twin Lakes (4) MN 228 n/a n/a n/a n/a

Legacy Commons at Signal Hills (4) MN 247 n/a n/a n/a n/a

Hilltop at Signal Hills (4) MN 146 n/a n/a n/a n/a

Scharbauer Flats Apartments (4) TX 300 n/a n/a n/a n/a

MRB Seniors Housing and Skilled Nursing Properties-Non Stabilized (3)

Meadow Valley (4) MI 154 n/a n/a n/a n/a

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

(3)

The property is not considered stabilized as it has not met the criteria for stabilization. A property is considered stabilized once it reaches 90% physical occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for a period after completion of the rehabilitation.

(4)

Physical and economic occupancy information is not available for the years ended December 31, 2021 and 2020 as the property is under construction.

(5)

Physical and economic occupancy information is not available for the year ended December 31, 2020 as the related investment was acquired during 2021.

As of December 31, 2021, all non-stabilized properties except for Jackson Manor were under construction and have no operating metrics to report. Jackson Manor has commenced an in-place rehabilitation that is nearing completion.

MF Properties

As of December 31, 2021, we owned two MF Properties that we report on a consolidated basis. The 50/50 MF Property is encumbered by mortgage loans with an aggregate principal balance of $25.1 million as of December 31, 2021. Debt service on our mortgages payable was current as of December 31, 2021.

MF Properties

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

The physical occupancy and economic occupancy as of and for the year ended December 31, 2021 increased as compared to the same period in 2020 due to an increase in occupancy at the Suites on Paseo MF Property. The University of Nebraska-Lincoln, which is adjacent to the 50/50 MF Property, is currently holding on-campus, in-person classes but occupancy is below occupancy levels prior to the onset of COVID-19. San Diego State University, which is adjacent to the Suites on Paseo MF Property, resumed on-campus, in-person classes in the Fall 2021 semester after having suspended on-campus, in-person classes for the Fall 2020 and Spring 2021 semesters due to COVID-19 concerns. Current occupancy at the Suites on Paseo MF Property is higher than occupancy levels prior to the onset of COVID-19.

Investments in Unconsolidated Entities

We are the limited member investor in various unconsolidated entities formed for the purpose of constructing market-rate, multifamily real estate properties. The Partnership is the primary beneficiary of Vantage at San Marcos and reports this VIE on a consolidated basis as of December 31, 2021. For all other investments, the Partnership determined the unconsolidated entities are VIEs but that the Partnership is not the primary beneficiary. As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis. Our limited membership interests entitle us to shares of certain operating cash flows the unconsolidated entities and upon the occurrence of certain capital transactions, such as a refinancing or sale. The amounts presented below were obtained from records provided by the property management service providers.

Numberof Units as of December 31, Physical Occupancy (1) as of December 31,

Vantage at Powdersville (2) SC n/a n/a 95 %

Vantage at Bulverde (2) TX n/a n/a 88 %

Vantage at Germantown (2) TN n/a n/a 98 %

Vantage at Stone Creek NE 294 94 % 68 %

Vantage at Murfreesboro TN 288 97 % 75 %

Vantage at Coventry NE 294 94 % 40 %

Vantage at O'Connor TX 288 99 % 8 %

Vantage at Westover Hills TX 288 98 % 1 %

Vantage at Tomball (3) TX 288 n/a n/a

Vantage at Hutto (3) TX 288 n/a n/a

Vantage at San Marcos (3) (4) TX 288 n/a n/a

Vantage at Loveland (3) CO 288 n/a n/a

Vantage at Helotes (3) TX 288 n/a n/a

Vantage at Fair Oaks (3) TX 288 n/a n/a

Vantage at McKinney Falls (3) TX 288 n/a n/a

(1)

Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

(2)

Physical occupancy information is not available as of December 31, 2021as the property has been sold.

(3)

Physical occupancy information is not available as of December 31, 2021 and 2020 as the properties are currently under construction.

(4)

The property is reported as a consolidated VIE as of December 31, 2021 (Note 5).

The Vantage properties at Tomball, Hutto, San Marcos Loveland, Helotes, Fair Oaks and McKinney Falls are currently under construction and have yet to commence leasing activities as of December 31, 2021. All other properties are currently either stabilized or are near stabilization.

Results of Operations

The tables and following discussions of our changes in results of operations for the years ended December 31, 2021 and 2020 should be read in conjunction with the Partnership’s consolidated financial statements and notes thereto in Item 8 of this Report.

The following table compares revenue and other income for the Partnership for the periods presented (dollar amounts in thousands):

For the Years Ended December 31,

Revenues and Other Income:

Loss on sale of real estate asset (15 ) - (15 ) N/A

Gain on sale of investments in unconsolidated entities 15,521 - 15,521 N/A

Discussion of the Total Revenues for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Investment income. The increase in investment income in 2021 as compared to 2020 was due to the following factors:

•

An increase of approximately $8.5 million in investment income related to investments in unconsolidated entities. This increase consisted of:

An increase of approximately $862,000 for additional investment income recognized upon the sale of Vantage at Germantown in March 2021, partially offset by a decrease of approximately $680,000 in recurring investment income due to having reached the maximum guaranteed preferred return for Vantage at Germantown during 2020;

An increase of approximately $2.4 million in investment income from amounts recognized upon the sale of Vantage at Powdersville in May 2021;

An increase of approximately $1.0 million in investment income primarily from amounts recognized upon the sale of Vantage at Bulverde in August 2021;

A net increase of approximately $4.3 million in investment income due to preferred return distributions from Vantage at Stone Creek and Vantage at Coventry in November 2021;

A net increase of approximately $2.2 million in investment income due to additional investments in unconsolidated entities in 2021 and 2020; and

Offset by approximately $1.5 million in investment income from amounts recognized upon the sale of Vantage at Waco in June 2020;

•

An increase of approximately $3.4 million in investment income related to our GIL investments;

•

A decrease of approximately $1.6 million due to changes in the average volume and interest rates of our MRB investments. See discussion of volume and interest rate changes in the Affordable Multifamily MRB Investments segment discussion previously included in Item 7; and

•

A decrease of approximately $162,000 in investment income related to the PHC Certificates that were sold in January 2020.

Property revenues. Total revenues increased slightly in 2021 as compared to 2020 due to higher occupancy at the Suites on Paseo MF Property as the property recovers from the impacts of COVID-19. The University of Nebraska-Lincoln and San Diego State University are currently holding on-campus, in-person classes. The 50/50 MF Property occupancy is below and the Suites on Paseo MF Property occupancy is above levels prior to the onset of COVID-19.

Contingent interest income. Contingent interest income recognized in 2021 was realized upon the redemption of the Rosewood Townhomes – Series A and South Pointe Apartments – Series A MRBs in July 2021. There was minimal contingent interest income recognized in 2020.

Other interest income. Other interest income is comprised primarily of interest income on our property loans. The increase in other interest income in 2021 as compared to 2020 is primarily due to interest on approximately $55.7 million of property loan advances made during 2021.

Other income. Other income was minimal for 2021 and 2020.

Loss on sale of real estate asset. The loss on sale of real estate assets in 2021 related to the sale of land held for development in Gardner, KS in November 2021.

Gain on the sale of securities. The gain on sale of securities in 2020 related to the sale of the PHC Certificates in January 2020. There was no gain on sale of securities reported in 2021.

Gain on sale of investments in unconsolidated entities. The gain on sale of investments in unconsolidated entities is related to the sale of the Vantage at Germantown property in March 2021 for a gain of approximately $2.8 million, the sale of the Vantage at Powdersville property in May 2021 for a gain of approximately $5.5 million and the sale of the Vantage at Bulverde property in August 2021 for a gain of approximately $7.0 million. In addition, we received cash of approximately $294,000 in November 2021 upon the resolution of gain contingencies related to the sale of Vantage at Panama City Beach in September 2019. There was no gain on sale of investments in unconsolidated entities in 2020.

The following table compares Partnership expenses for the periods presented (dollar amounts in thousands):

For the Years Ended December 31,

Expenses:

Impairment charge on real estate assets - 25 (25 ) -100.0 %

Discussion of the Total Expenses for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Real estate operating expenses. Real estate operating expenses are related to MF Properties and are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. Real estate operating expenses decreased in 2021 as compared to 2020 primarily due to the closure of food service operations at the Suites on Paseo MF Property in 2020.

Provision for credit loss. The provision for credit loss in 2021 related to other-than-temporary impairments of approximately $1.9 million related to the Provision Center 2014-1. The provision for credit loss in 2020 consists of other-than-temporary impairments of approximately $3.5 million related to the Live 929 Apartments - Series A MRB and approximately $3.9 million related to the Provision Center 2014-1 MRB.

Provision for loan loss. The provisions for loan losses in 2021 and 2020 are related to the loan loss allowances established for the Live 929 Apartments property loan.

Impairment charge on real estate assets. There was no impairment charge recognized in 2021. The impairment charge in 2020 related to the land held for development in Gardner, KS.

Depreciation and amortization expense. Depreciation and amortization relate primarily to the MF Properties. The decrease in depreciation and amortization in 2021 as compared to 2020 was related to the Suites of Paseo MF Property due to real estate assets that became fully depreciated in 2020.

Interest expense. The net increase in interest expense in 2021 as compared to 2020 was due to the following factors:

•

A decrease of approximately $2.6 million due to a decrease in effective interest rates of the debt financing portfolio as a result of refinancing activities and generally lower market interest rates;

•

An increase of approximately $3.2 million due to higher average principal outstanding of approximately $171.3 million;

•

A net increase of approximately $94,000 related to fair value adjustments to interest rate derivatives, net of cash paid; and

•

A decrease of approximately $229,000 in amortization of deferred financings costs.

General and administrative expenses. The increase in general and administrative expenses in 2021 as compared to 2020 is primarily due to increases of approximately $461,000 related to administration fees paid to AFCA2 due to greater assets under management, approximately $241,000 related to salaries and benefits, approximately $260,000 related to restricted unit compensation expense, approximately $225,000 related to referral fees paid to an affiliate of Greystone on closing of new investments during 2021, and approximately $496,000 related to professional and consulting fees from increased transactional activity during 2021.

Discussion of Income Tax Expense for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

A wholly owned subsidiary of the Partnership, the Greens Hold Co, is a corporation subject to federal and state income tax. The Greens Hold Co owns The 50/50 MF Property and certain property loans. There was minimal taxable income for the Greens Hold Co in 2021 and 2020.

Cash Available for Distribution

The Partnership believes that Cash Available for Distribution (“CAD”) provides relevant information about the Partnership’s operations and is necessary, along with net income, for understanding its operating results. To calculate CAD, the Partnership begins with net income as computed in accordance with GAAP and adjusts for non-cash expenses consisting of depreciation expense, amortization expense related to deferred financing costs, amortization of premiums and discounts, non-cash interest rate derivative expense or income, provisions for credit and loan losses, impairments on MRBs, GILs, PHC Certificates, real estate assets and property loans, deferred income tax expense (benefit) and restricted unit compensation expense. The Partnership also deducts Tier 2 income (see Note 3 to the Partnership’s consolidated financial statements) distributable to the General Partner as defined in the Partnership Agreement and distributions and accretion for the Preferred Units. Net income is the GAAP measure most comparable to CAD. There is no generally accepted methodology for computing CAD, and the Partnership’s computation of CAD may not be comparable to CAD reported by other companies. Although the Partnership considers CAD to be a useful measure of the Partnership’s operating performance, CAD is a non-GAAP measure that should not be considered as an alternative to net income calculated in accordance with GAAP, or any other measures of financial performance presented in accordance with GAAP.

The following table shows the calculation of CAD (and a reconciliation of the Partnership’s net income as determined in accordance with GAAP to CAD) for the years ended December 31, 2021 and 2020:

For the Years Ended December 31,

Change in fair value of derivatives (23,214 ) (116,899 )

Reversal of impairment on securities (3) - (1,902,979 )

Impairment charge on real estate assets - 25,200

Reversal of impairment charge on real estate assets (4) (250,200 ) -

Redeemable Preferred Unit distributions and accretion (2,871,051 ) (2,871,051 )

Net income per BUC, basic $ 0.52 $ 0.07

Total CAD per BUC, basic $ 0.64 $ 0.26

Distributions declared, per BUC $ 0.50 $ 0.305

(1)

The provision for credit loss for 2021 related to other-than-temporary impairments of approximately $1.9 million related to the Provision Center 2014-1 MRB. The provision for credit loss for 2020 consists of other-than-temporary impairments of approximately $3.5 million related to the Live 929 Apartments - Series A MRB and approximately $3.9 million related to the Provision Center 2014-1 MRB.

(2)

The provision for loan loss relates to impairment of the Live 929 Apartments property loan.

(3)

This amount represents previous impairments recognized as adjustments to CAD in prior periods related to the PHC Certificates. Such adjustments were reversed in the first quarter of 2020 upon the sale of the PHC Certificates in January 2020.

(4)

This amount represents previous impairments recognized as adjustments to CAD in prior periods related to land held for development in Gardner, KS. Such adjustments were reversed in the fourth quarter of 2021 upon the sale of the land.

(5)

As described in Note 3 to the Partnership’s consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the limited partners and BUC holders, as a class, and 25% to the General Partner, up to a maximum amount as defined in the Partnership Agreement. Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest in excess of the maximum threshold (Tier 3 income) is allocated 100% to the limited partners and BUC holders, as a class. The adjustment represents the 25% of Tier 2 income due to the General Partner.

For the year ended December 31, 2021, Tier 2 income allocable to the general partner consisted of approximately $702,000 related to the gain on sale of Vantage at Germantown in March 2021, approximately $1.4 million related to the gain on sale of Vantage at Powdersville in May 2021, approximately $462,000 related to the redemption of Rosewood Townhomes – Series A and South Pointe Apartments – Series A MRBs in July 2021, and approximately $119,000 related to the gain on sale of Vantage at Bulverde in August 2021. This was offset by the loss on the sale of land held for development in Gardner, KS and reversal of prior impairments. For the year ended December 31, 2020, Tier 2 loss related to the sale of the PHC Certificates.

Liquidity and Capital Resources

We continually evaluate our potential sources and uses of liquidity. The information below is based on the Partnership’s current expectations and projections about future events and financial trends, which could materially differ from actual results. See the discussion of Risk Factors in Item 1A of this Report for further information.

Our short-term liquidity requirements over the next 12 months will be primarily operational expenses, investment commitments, debt service (principal and interest payments) related to our debt financings, the potential exercise of redemption rights by the holders of the Series A Preferred Units, and distribution payments. We expect to meet these liquidity requirements primarily using cash on hand, operating cash flows from our investments and MF Properties, and potentially additional debt financing issued in the normal course of business. In addition, we will consider the issuance of additional BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests in the Partnership based on needs and opportunities for executing our strategy.

Our long-term liquidity requirements will be primarily for maturities of debt financings and mortgages payable, the potential exercise of redemption rights by the holders of the Series A Preferred Units and additional investments in MRBs, GILs, property loans

and unconsolidated entities. We expect to meet these liquidity requirements primarily through refinancing of maturing debt financings with the same or similar lenders, principal and interest proceeds from investments in MRBs and GILs, and proceeds from asset sales and redemptions. In addition, we will consider the issuance of additional BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests in the Partnership based on needs and opportunities for executing our strategy.

Sources of Liquidity

The Partnership’s principal sources of liquidity consist of:

•

Unrestricted cash on hand;

•

Operating cash flows from investments in MRBs, GILs, property loans and investments in unconsolidated entities;

•

Net operating cash flows from MF Properties;

•

Secured lines of credit;

•

Proceeds from our total return swap transactions associated with our Secured Notes;

•

Proceeds from obtaining additional debt;

•

Issuances of BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests; and

•

Proceeds from the sale of assets.

Unrestricted Cash on Hand

As of December 31, 2021, the Partnership had unrestricted cash on hand of approximately $68.3 million. The Partnership is required to keep a minimum of $5.0 million of unrestricted cash on hand under the terms of certain guaranty obligations. There are no other contractual restrictions of the Partnership’s ability to use cash on hand.

Operating Cash Flows from Investments

Cash flows from operations are primarily comprised of regular interest payments received on our MRBs, GILs and property loans that provide consistent cash receipts throughout the year. All MRBs, GILs and property loans are current on contractual debt service payments as of January 31, 2022, except for the Provision Center 2014-1 MRB. Receipts, net of interest expense on related debt financings and lines of credit balances, are available for general use by the Partnership. The Partnership also receives distributions from investments in unconsolidated entities if, and when, cash is available for distribution at the unconsolidated entities.

Receipt of cash from our investments in MRBs and investments in unconsolidated entities is dependent upon the generation of net cash flows at multifamily properties that underlie our investments. These properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses. Receipt of cash from GILs and property loans is dependent on the availability of construction funding and the execution of certain equity commitments by the owners of the secured properties.

Net Operating Cash Flows from MF Properties

Cash flows generated by MF Properties, net of operating expenses and mortgage debt service payments, are unrestricted for use by the Partnership. The MF properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses.

Secured Lines of Credit

We maintain a secured line of credit (“General LOC”) with two financial institutions of up to $40.0 million, to purchase additional investments and to meet general working capital and liquidity requirements. The Partnership may borrow, prepay and reborrow amounts at any time through the maturity date, subject to the limitations of a borrowing base. The aggregate available commitment cannot exceed a borrowing base calculation, that is equal to 40% multiplied by the aggregate value of a pool of eligible encumbered assets. Eligible encumbered assets consist of (i) the net book value of the Suites on Paseo MF Property, and (ii) 100% of the Partnership’s capital contributions to unconsolidated entities, subject to certain restrictions. The General LOC is secured by first priority security interests in the Partnership’s investments in unconsolidated entities, a mortgage and assignment of leases and rents of the Suites on Paseo MF Property, and a security interest in a bank account at BankUnited, N.A., in which the Partnership must maintain a balance of not less than $5.0 million. The Partnership is subject to various affirmative and negative covenants that, among others, require the Partnership

to maintain a minimum liquidity of not less than $5.0 million, maintain a minimum consolidated tangible net worth of $100.0 million, and to notify BankUnited, N.A. if the Partnership’s consolidated net worth declines by (a) more than 20% from the immediately preceding quarter, or (b) more than 35% from the date at the end of two consecutive calendar quarters ending immediately thereafter. The Partnership was in compliance with all covenants as of December 31, 2021. The balance of the General LOC was $6.5 million with the ability to draw an additional $33.5 million as of December 31, 2021. The General LOC has a maturity date of June 2023, with options to extend for up to two additional years.

We maintain a secured non-operating line of credit (“Acquisition LOC”) with a maximum commitment of $50 million to fund purchases of multifamily real estate, MRBs, taxable MRBs, or loans issued to finance the acquisition, rehabilitation, or construction of affordable housing or which are otherwise secured by real estate or mortgage-backed securities (i.e., GILs and property loans). Advances on the Acquisition LOC are due on the 270th day following the advance date but may be extended for up to an additional 270 days by making certain payments. The Acquisition LOC contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed a specified percentage of the market value of the Partnership’s assets, as defined in the Credit Agreement. The Partnership was in compliance with all covenants as of December 31, 2021. The balance of the Acquisition LOC was $39.2 million with the ability to draw an additional $10.8 million as of December 31, 2021. The Acquisition LOC has a maturity date of June 2023.

Proceeds from our Total Return Swap Transactions associated with our Secured Notes

In September 2020, we issued Secured Notes to Mizuho totaling $103.5 million. Concurrent with the issuance of the Secured Notes, we entered into two total return swap transactions with Mizuho to reduce the net interest cost related to the Secured Notes. The combined notional amount of the total return swaps is $103.1 million, which is the same as the outstanding principal balance of the Secured Notes.

The first total return swap has a notional amount of approximately $39.6 million as of December 31, 2021. The interest rate on the notional amount is equal to 3-month LIBOR plus 3.75%, with an interest rate floor of 4.25%. We are required to maintain minimum cash collateral with Mizuho equal to 35% of the notional amount, which was approximately $14.0 million as of December 31, 2021. The remaining $26.0 million was received as cash proceeds by the Partnership during 2020.

The second total return swap has a notional amount of $63.5 million as of December 31, 2021. The Partnership’s interest rate on the notional amount is equal to 3-month LIBOR plus 0.50%, with an interest rate floor of 1.00%. We are required to maintain cash collateral with Mizuho equal to 100% of the notional amount as of December 31, 2021. Through March 2022, we have the option to reallocate notional amounts from the second total return swap to the first total return swap, in minimum increments of $10.0 million. Upon such a reallocation, cash equal to 35% of the notional amount reallocated will be posted as collateral for the first total return swap and 65% of the notional amount reallocated will be advanced as net proceeds to the Partnership for its general use. As of December 31, 2021, we have the option to reallocate up to $63.5 million of notional amount, which if fully reallocated will generate additional net cash proceeds of approximately $41.3 million for our general use.

Proceeds from Obtaining Additional Debt

We hold certain investments that are not associated with our debt financings, mortgages payable, or secured LOCs. The Partnership may obtain leverage for these investments by posting the investments as security. As of December 31, 2021, the Partnership’s primary unleveraged assets were certain MRBs with outstanding principal totaling approximately $19.3 million. Of these MRBs, approximately $10.0 million is principal outstanding on the Provision Center 2014-1 MRB, for which the borrower has declared Chapter 11 bankruptcy, and which could limit our ability to obtain leverage related to this MRB.

Issuances of BUCs, Series A-1 Preferred Units or Series B Preferred Units

We may, from time to time, issue additional BUCs in the public market. In December 2019, the Partnership’s Registration Statement on Form S-3 (“Registration Statement”) was declared effective by the SEC under which the Partnership may offer up to $225.0 million of BUCs for sale from time to time. The Registration Statement will expire in December 2022.

In September 2021, we completed an underwritten public offering of 5,462,500 BUCs. The offering resulted in net cash proceeds of approximately $31.2 million for the Partnership, after the payment of underwriting discounts, commissions and offering expenses.

In July 2021, the Partnership entered into a Capital on DemandTM Sales Agreement to offer and sell, from time to time at market prices on the date of sale, BUCs up to an aggregate offering price of $30 million via an “at the market offering.” As of December 31, 2021, the Partnership has not sold any BUCs under this program. We will continue to assess if and when to issue BUCs under this program going forward.

The Partnership is authorized to issue various series of Preferred Units under the Partnership Agreement. In September 2021, our registration statement on Form S-3 for the registered offering and issuance of up to 3,500,000 of Series A-1 Preferred Units was declared effective by the SEC. The Partnership is able to issue Series A-1 Preferred Units so long as the aggregate market capitalization of the BUCs, based on the closing price on the trading day prior to issuance of the Series A-1 Preferred Units, is no less than three times the aggregate book value of all Series A Preferred Units and Series A-1 Preferred Units, inclusive of the amount to be issued. No Series A-1 Preferred Units had been sold as of December 31, 2021.

In September 2021, our registration statement on Form S-3 for the registered offering and issuance of up to 10,000,000 of a newly-created series of limited partnership interests designated as Series B Preferred Units was declared effective by the SEC. The Partnership is able to issue Series B Preferred Units so long as the aggregate market capitalization of the BUCs, based on the closing price on the trading day prior to issuance of the Series B Preferred Units, is no less than two times the aggregate book value of all Series A Preferred Units, Series A-1 Preferred Units and Series B Preferred Units, inclusive of the amount to be issued. No Series B Preferred Units had been sold as of December 31, 2021.

We may also designate and issue additional series of preferred units representing limited partnership interests in the Partnership in accordance with the terms of the Partnership Agreement.

Proceeds from the Sale of Assets

We may, from time to time, sell our investments in MRBs, GILs, property loans, investments in unconsolidated entities and MF Properties consistent with our strategic plans. Our MRB portfolio is marked at a significant premium to cost, adjusted for paydowns, primarily due to higher stated interest rates when compared to current market interest rates for similar investments. We may consider selling certain MRBs in exchange for cash at prices that approximate our currently reported fair value. However, we are contractually prevented from selling the MRBs included in our TEBS financings.

Our ability to dispose of investments on favorable terms is dependent upon several factors including, but not limited to, the availability of credit to potential buyers to purchase investments at prices we consider acceptable. In addition, potential adverse changes to general market and economic conditions may negatively impact our ability to sell our investments in the future.

Three of our investments in unconsolidated entities were redeemed upon the sales of the underlying properties during 2021. We received cash of approximately $16.1 million from the sale of Vantage at Germantown in March 2021, approximately $20.1 million from the sale of Vantage at Powdersville in May 2021, and approximately $18.9 million from the sale of Vantage at Bulverde in August 2021.

Uses of Liquidity

Our principal uses of liquidity consist of:

•

General and administrative expenses;

•

Investment funding commitments;

•

Debt service on secured lines of credit, debt financings, Secured Notes, and mortgages payable;

•

Distributions paid to holders of Preferred Units and BUCs;

•

Potential redemptions of Series A Preferred Units; and

•

Other contractual obligations.

General and Administrative Expenses

We use cash to pay general and administrative expenses of the Partnership’s operations and real estate operating expenses of our MF Properties. For additional details, see Item 1A, “Risk Factors” in this report, and the section captioned “Cash flows from operating activities” in the Partnership’s consolidated statements of cash flows set forth in Item 8 of this Report. General and administrative expenses are typically paid from unrestricted cash on hand and operating cash flows.

Included in general and administrative expenses is operating lease expenses for our MF Properties, of which the most significant is a ground lease associated with The 50/50 MF Property. Such expenses are paid from operating cash flows. The following table summarizes our outstanding contractual lease obligations by year as of December 31, 2021:

Investments in Additional MRBs, GILs, Property Loans and Unconsolidated Entities

Our overall strategy is to continue to invest in quality multifamily properties through either the acquisition of MRBs, GILs, property loans or equity investments in both existing and new markets. We evaluate investment opportunities based on, but not limited to, our market outlook, including general economic conditions, development opportunities and long-term growth potential. Our ability to make future investments is dependent upon identifying suitable acquisition and development opportunities, access to long-term financing sources, and the availability of investment capital. We may commit to fund additional investments on a draw-down or forward basis. The following table summarizes our outstanding investment commitments as of December 31, 2021:

Projected Funding by Year (1)

Mortgage Revenue Bonds

Taxable Mortgage Revenue Bonds

Governmental Issuer Loans

Taxable Governmental Issuer Loans

Property Loans

Equity Investments

Bond Purchase Commitments

(1)

Projected fundings by year are based on current estimates and the actual funding schedule may differ materially due to, but not limited to, the pace of construction, adverse weather conditions, delays in governmental approvals or permits, the availability of materials and contractors, and labor disputes.

(2)

The Partnership has securitized the indicated assets in TOB financing facilities that allow for additional principal proceeds as the remaining investment commitments are funded by the Partnership. See Note 16 for further details on debt financing.

(3)

The borrower may elect to extend the maturity date for a period ranging between six and twelve months upon meeting certain conditions, including payment of a non-refundable extension fee.

(4)

The variable index interest rate component is subject to a floor.

(5)

The Partnership funded the initial $100,000 draw on this MRB using available cash. We expect to fund portions of future draws with proceeds from a variable TOB financing facility.

(6)

The remaining loan commitment will be used to cover debt service over the twelve month term of the property loan.

(7)

The Partnership increased its equity commitment from $10.5 million to $11.2 million in December 2021.

(8)

The property became a consolidated VIE effective during the fourth quarter of 2021 (Note 5). A development site has been identified for this project but construction had not commenced as of December 31, 2021.

(9)

This is the estimated closing date of the associated bond purchase commitment.

Debt Service on Secured Lines of Credit, Debt Financings, Secured Notes and Mortgages Payable

As previously discussed, we maintain a General LOC and Acquisition LOC that provide flexibility in managing our liquidity. Debt service on our General LOC consists of monthly interest payments and principal repayment due upon maturity in June 2023, before consideration of extension options. Principal payments may be accelerated if the balance exceeds the borrowing base calculation. Debt service on our Acquisition LOC consists of monthly interest and principal repayments due on the 270th day following the advance date but may be extended for up to an additional 270 days by making certain payments.

Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of MRBs, taxable MRBs, GILs, a taxable GIL and certain property loans. The financing arrangements generally involve the securitization of these investment assets into trusts whereby we retain beneficial interests in the trusts that provide us certain rights to the underlying investment assets. The senior beneficial interests are sold to unaffiliated parties in exchange for debt proceeds. The senior beneficial interests require periodic interest payments that may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments. The Partnership is required to fund any shortfall in principal and interest payable to the senior beneficial interests of the TEBS financings in the case of non-payment, forbearance or default of the borrowers’ contractual debt service payments of the related MRBs, up to the value of our residual interests. In the case of forbearance or default on an underlying investment asset in a Term TOB or TOB financing, we may be required to fund shortfalls in principal and interest payable to the senior beneficial interests, repurchase a portion of the outstanding senior beneficial interests, or repurchase the underlying investment asset and seek alternative financing. We anticipate that cash flows from the securitized investment assets will fund normal, recurring principal and interest payments to the senior beneficial interests and all trust-related fees.

Our Secured Notes are secured by the Partnership’s cash flows from the residual certificates of our TEBS financings. Interest due on the Secured Notes, net of amounts due to us on the related total return swap transactions, will be paid from receipts related to the TEBS financing residual certificates. Future receipts of principal related to the TEBS financing residual certificates will be used to pay down the principal of the Secured Notes. The Partnership has guaranteed the payment and performance of the responsibilities under the Secured Notes and related documents.

We may be required to post collateral with Mizuho or Barclays if the value of investment assets securitized in TOB financings and Secured Notes drop below a threshold in the aggregate. We were not required to post collateral due to declines in the value of the securitized assets in 2021.

We actively manage both our fixed and variable rate debt financings and our exposure to changes in market interest rates. The following table summarizes our fixed and variable rate debt financings as of December 31, 2021 and 2020:

(1)

The securitized asset and related debt financing both have variable interest rates, though the variable rate indices may differ. As such, the Partnership is at least partially hedged against rising interest rates.

In October 2021, we executed our first TOB financing with Barclays as the lender. The addition of Barclays provides an alternative financing source and diversification of our lender relationships.

Our mortgages payable financing arrangements are used to leverage The 50/50 MF Property. The mortgages are entered into with financial institutions and are secured by the MF Property. The mortgages bear interest at fixed rates and include scheduled principal payments. The mortgages mature in March 2025 and April 2027. We anticipate that cash flows from The 50/50 MF Property will be sufficient to pay all normal, recurring principal and interest payments.

The following table summarizes contractual maturities by year for our secured lines of credit, debt financings, Secured Notes and mortgages payable as of December 31, 2021:

Secured Lines of Credit Debt Financing and Secured Notes Mortgages Payable Total

We expect to refinance maturing debts with existing lenders or obtain new debt from other lenders under similar terms. Certain debt financings will be repaid either entirely or partially from redemption proceeds of the secured investment assets.

See Item 7a, “Quantitative and Qualitative Disclosures about Market Risk” of this Report and Notes 15 (secured lines of credit), 16 (debt financing and Secured Notes), and 17 (mortgages payable) to the Partnership’s consolidated financial statements for additional details.

Distributions Paid to Holders of Preferred Units and BUCs

Distributions to the holders of Series A Preferred Units, if declared by the General Partner, are paid quarterly at an annual fixed rate of 3.0%. If the Partnership were to issue Series A-1 Preferred Units or Series B Preferred Units, holders of such units will be paid quarterly distributions, if declared by the General Partner, at annual fixed rates of 3.0% and 3.4%, respectively. The Series A Preferred Units, Series A-1 Preferred Units and Series B Preferred Units are non-cumulative, non-voting and non-convertible.

On December 14, 2021, we announced that the Board of Managers of Greystone Manager, which is the general partner of the General Partner, declared a quarterly distribution of $0.11 per BUC and a special distribution of $0.08 per BUC to unitholders of record on December 31, 2021 and was paid on January 31, 2022.

The Partnership and its General Partner continually assess the level of distributions for the Preferred Units and BUCs based on cash available for distribution, financial performance and other factors considered relevant, including the effects of COVID-19.

Potential Redemptions of Series A Preferred Units

Upon the sixth anniversary of the closing of the sale of Series A Preferred Units to a subscriber, and upon each anniversary thereafter, each holder of Series A Preferred Units has the right to redeem, in whole or in part, the Series A Preferred Units held by such holder at a per unit redemption price equal to $10.00 per unit plus an amount equal to all declared and unpaid distributions through the date of the redemption. The next optional redemption dates for the currently outstanding Series A Preferred Units range from September 2022 through October 2023 and the holders must provide notice of the election to redeem no less than 180 days prior to such redemption dates. No Unitholders have given notice of their election to redeem Series A Preferred Units as of December 31, 2021. If the holders of the Series A Preferred Units elect to redeem, we will be required, subject to certain restrictions, to secure funds to redeem from unrestricted cash on hand, proceeds from our General LOC, additional borrowings or through additional capital raising options.

In July 2021, our registration statement on Form S-4 to register the offering and issuance of up to 9,450,000 of Series A-1 Preferred Units under a shelf registration process was declared effective by the SEC. Under this offering, the Partnership may issue up to 9,450,000 Series A-1 Preferred Units in exchange for the Partnership’s outstanding Series A Preferred Units. If unitholders elect to exchange Series A Preferred Units for Series A-1 Preferred Units, the new Series A-1 Preferred Units will not be eligible for redemption until the sixth anniversary of the date of the exchange, except in certain limited circumstances.

Other Contractual Obligations

We are subject to various guarantee obligations in the normal course of business, and, in most cases, do not anticipate these obligations to result in significant cash payments by the Partnership.

Cash Flows

In 2021, we generated $28.9 million of cash, which was the net result of $33.9 million provided by operating activities, $187.5 million used in investing activities, and $182.5 million provided by financing activities.

Cash provided by operating activities totaled $33.9 million in 2021 compared to $15.8 million generated in 2020. The change was due to the following factors:

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An increase of $30.9 million in net income, offset by the $15.5 million related to the gain on sale of unconsolidated entities that is cash from investing activities and $5.5 million decrease related to the provision for credit loss; and

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An increase of $8.1 million related to changes in the preferred return receivable from unconsolidated entities.

Cash used in investing activities totaled $187.5 million in 2021 compared to cash used of $38.1 million in 2020. The change was due to the following factors:

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A decrease of $43.3 million of cash proceeds from the sale of the PHC Certificates;

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A decrease of $55.0 million and $49.9 million of cash due to continued advances on GIL and property loan investment commitments, respectively;

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A decrease of $60.2 million of cash due to MRB acquisitions and draw-down funding;

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A decrease of $13.5 million of cash due to continued contributions to unconsolidated entities;

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An increase of $37.5 million of cash proceeds from the sale of investments in unconsolidated entities; and

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An increase of $36.1 million in cash received for principal payments on MRBs, primarily due to MRB redemptions.

Cash provided by financing activities totaled $182.5 million in 2021 compared to cash provided of $102.1 million in 2020. The change was due to the following factors:

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An increase of $45.7 million in net cash proceeds from borrowing on the secured lines of credit;

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An increase of $31.2 million in net cash proceeds from the sale of BUCs;

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A net increase of $8.7 million in net cash proceeds from debt financing;

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A decrease of $1.8 million of net cash payments on the unsecured lines of credit; and

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A decrease of approximately $3.2 million in cash from an increase in distributions paid;

We believe our cash balance and cash provided by the sources discussed herein will be sufficient to pay, or refinance, our debt obligations and to meet our liquidity needs over the next 12 months.

Leverage Ratio

We set target constraints for each type of financing utilized by us. Those constraints are dependent upon several factors, including the assets being leveraged, the tenor of the leverage program, whether the financing is subject to margin collateral calls, and the liquidity and marketability of the financed collateral. We use target constraints for each type of financing to manage to an overall maximum 75% leverage level (the “Leverage Ratio”), as established by the Board of Managers of Greystone Manager. The Board of Managers of Greystone Manager retains the right to change the maximum Leverage Ratio in the future based on the consideration of factors the Board of Managers considers relevant. We calculate our Leverage Ratio as total outstanding debt divided by total assets using cost adjusted for paydowns for MRBs, GILs, property loans, taxable MRBs and taxable GILs, and initial cost for deferred financing costs and real estate assets. As of December 31, 2021, our overall Leverage Ratio was approximately 69%.

Off Balance Sheet Arrangements

As of December 31, 2021 and 2020, we held MRBs GILs and property loans that are secured by affordable multifamily and seniors housing properties and one commercial property, which are owned by entities that are not controlled by us. We have no equity interest in these entities and do not guarantee any obligations of these entities.

We do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

We do not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with us or our related parties, other than what is disclosed in Note 23 to the Partnership’s consolidated financial statements.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in Note 2 and 24 to the Partnership’s consolidated financial statements, which are incorporated by reference. The preparation of financial statements in accordance with GAAP requires us to make judgments, assumptions, and estimates. The application of these judgments, assumptions, and estimates can affect the amounts of assets, liabilities, revenues, and expenses reported by us. We consider the following to be our critical accounting policies and estimates because they involve our judgments, assumptions and estimates that significantly affect the Partnership’s consolidated financial statements. If these estimates differ significantly from actual results, the impact on the Partnership’s consolidated financial statements may be material.

Variable Interest Entities

Under the accounting guidance for consolidation, the Partnership must evaluate entities in which it holds a variable interest to determine if the entities are VIEs and if the Partnership is the primary beneficiary. The entity that is deemed to have: (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE, is considered the primary beneficiary. If the Partnership is deemed to be the primary beneficiary, then it must consolidate the VIEs in its consolidated financial statements. The Partnership has consolidated all VIEs in which it has determined it is the primary beneficiary. In the Partnership’s consolidated financial statements, all transactions and accounts between the Partnership and the consolidated VIEs have been eliminated in consolidation.

The Partnership re-evaluates VIEs at each reporting date based on events and circumstances at the VIEs. As a result, changes to the consolidated VIEs may occur in the future based on changes in circumstances. The accounting guidance on consolidations is complex and requires significant analysis and judgment.

The Partnership does not believe that the consolidation of VIEs for reporting under GAAP impacts its status as a partnership for federal income tax purposes or the status of Unitholders as partners of the Partnership. In addition, the consolidation of VIEs is not expected to impact the treatment of the MRBs, GILs and property loans owned by consolidated VIEs, the tax-exempt nature of the interest payments on secured debt financings, or the manner in which the Partnership’s income is reported to Unitholders on IRS Schedule K-1.

Fair Value of Financial Instruments

Current accounting guidance on fair value measurements establishes a framework for measuring fair value and provides for expanded disclosures about fair value measurements. The guidance:

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Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and

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Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy

prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:

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Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

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Level 2 - inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

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Level 3 - inputs are unobservable inputs for asset or liabilities.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

Investments in Mortgage Revenue Bonds

The fair value of the Partnership’s investments in MRBs as of December 31, 2021 and 2020, is based upon prices obtained from a third-party pricing service, which are estimates of market prices. There is no active trading market for these securities, and price quotes for the securities are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. The valuation methodology considers the underlying characteristics of each security as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, illiquidity, legal structure of the borrower, collateral, seniority to other obligations, operating results of the underlying property, geographic location, and property quality. These characteristics are used to estimate an effective yield for each security. The security fair value is estimated using a discounted cash flow and yield to maturity or call analysis by applying the effective yield to contractual cash flows. Significant increases (decreases) in the effective yield would have resulted in a significantly lower (higher) fair value estimate. Changes in fair value due to an increase or decrease in the effective yield do not impact the Partnership’s cash flows.

See the Partnership's Mortgage Revenue Bonds Sensitivity Analysis in Item 7A for further analysis on the impact of hypothetical changes in effective yield on the fair value of our MRBs.

The Partnership evaluates pricing data received from the third-party pricing service by evaluating consistency with information from either the third-party pricing service or public sources. The fair value estimates of the MRBs are based largely on unobservable inputs believed to be used by market participants and requires the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s investments in MRBs are categorized as Level 3 assets.

Mortgage Revenue Bond Impairment

The Partnership accounts for its investments in MRBs under the accounting guidance for certain investments in debt and equity securities. The Partnership’s investments in these instruments are classified as available-for-sale debt securities and are reported at their estimated fair value. The net unrealized gains or losses on these investments are reflected in the Partnership’s consolidated statements of comprehensive income. Unrealized gains and losses do not affect the cash flow of the bonds, distributions to Unitholders, or the characterization of the interest income of the financial obligation of the underlying collateral.

The Partnership periodically reviews its MRBs for impairment. The Partnership evaluates whether unrealized losses are considered other-than-temporary impairments based on various factors including, but not necessarily limited to, the following:

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The duration and severity of the decline in fair value;

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The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers;

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Adverse conditions specifically related to the security, its collateral, or both;

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Volatility of the fair value of the security;

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The likelihood of the borrower being able to make scheduled interest or principal payments;

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Failure of the issuer to make scheduled interest or principal payments; and

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Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost. If a MRB’s estimated fair value is below amortized cost, and the Partnership has the intent to sell or may be required to sell the MRB prior to the time that its value recovers or until maturity, the Partnership will record an other-than-temporary impairment through earnings equal to the difference between the MRB’s carrying value and its fair value. If the Partnership does not expect to sell an other-than-temporarily impaired MRB, only the portion of the other-than-temporary impairment related to credit losses is recognized through earnings as a provision for credit loss, with the remainder recognized as a component of other comprehensive income (loss). In determining the provision for credit loss, the Partnership compares the present value of cash flows expected to be collected to the MRB’s amortized cost basis.

The recognition of other-than-temporary impairment, provision for credit loss, and the potential impairment analysis are subject to a considerable degree of judgment, the results of which, when applied under different conditions or assumptions, could have a material impact on the Partnership’s consolidated financial statements. If the Partnership experiences deterioration in the values of its MRB portfolio, the Partnership may incur other-than-temporary impairments or provision for credit losses that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings.

Governmental Issuer Loan Impairment

The Partnership accounts for its investment in governmental issuer loans (“GILs”) under the accounting guidance for certain investments in debt and equity securities. The Partnership’s investment in these instruments are classified as held-to-maturity debt securities and are reported at amortized cost.

The Partnership periodically reviews its GILs for impairment. The Partnership evaluates whether unrealized losses are considered other-than-temporary impairments based on various factors including, but not necessarily limited to, the following:

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The duration and severity of the decline in fair value;

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The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers;

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Adverse conditions specifically related to the security, its collateral, or both;

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Volatility of the fair value of the security;

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The likelihood of the borrower being able to make scheduled interest or principal payments;

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The failure of the borrower to make scheduled interest or principal payments; and

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Recoveries or additional declines in fair value after the balance sheet date.

While the Partnership evaluates all available information, it focuses specifically on whether the security’s estimated fair value is below amortized cost. If a GIL’s estimated fair value is below amortized cost, and the Partnership does not expect to recover its entire amortized cost, only the portion of the other-than-temporary impairment related to credit losses is recognized through earnings as a provision for credit loss, with the remainder recognized as a component of other comprehensive income (loss).

The recognition of other-than-temporary impairment, provision for credit loss, and the potential impairment analysis are subject to a considerable degree of judgment, the results of which, when applied under different conditions or assumptions, could have a material impact on the Partnership’s consolidated financial statements. If the Partnership experiences deterioration in the value of its GILs, the Partnership may incur other-than-temporary impairments or provision for credit losses that could negatively impact the Partnership’s financial condition, cash flows, and reported earnings.

Impairment of Investments in Unconsolidated Entities

The Partnership reviews its investments in unconsolidated affiliates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be fully recoverable. Factors considered include:

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The absence of an ability to recover the carrying amount of the investment;

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The inability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment; or

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Estimated sales proceeds that are insufficient to recover the carrying amount of the investment.

The Partnership’s assessment of whether a decline in value is other than temporary is based on the Partnership’s ability and intent to hold the investment and whether evidence indicating the carrying value of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If the fair value of the investment is determined to be less than the carrying value and the decline in value is considered other than temporary, an impairment charge would be recorded equal to the excess of the carrying value over the estimated fair value of the investment.

Property Loans, Net of Loan Loss Allowance

The Partnership invests in taxable property loans made to the owners of certain multifamily, student housing and skilled nursing properties. Most of the property loans have been made to multifamily properties that secure MRBs and GILs owned by the Partnership. The Partnership recognizes interest income on the property loans as earned and the interest income is reported within “Other interest income” on the Partnership’s consolidated statements of operations. Interest income is not recognized for property loans that are deemed to be in nonaccrual status. The repayment of these property loans and accrued interest is dependent largely on the cash flows or proceeds upon sale or refinancing of the related property. The Partnership periodically evaluates these loans for potential impairment by estimating the fair value of the related property and comparing the fair value to the outstanding MRBs, GILs or other senior financing, plus the Partnership’s property loans. The Partnership utilizes a discounted cash flow model that considers varying assumptions. The discounted cash flow analysis may assume multiple revenue and expense scenarios, various capitalization rates, and multiple discount rates. The Partnership may also consider other information such as independent appraisals in estimating a property’s fair value.

If the estimated fair value of the related property, after deducting the amortized cost basis of the MRB, GIL or other senior financing, exceeds the principal balance of the taxable property loan then no potential loss is indicated and no allowance for loan loss is recorded. If a potential loss is indicated, an allowance for loan loss is recorded against the outstanding loan amount and a loss is recognized. The determination of the need for an allowance for loan loss is subject to considerable judgment.

Real Estate AssetsImpairment

The Partnership reviews real estate assets for impairment periodically and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of a real estate asset may not be recoverable, the Partnership compares the carrying amount of the real estate asset to the undiscounted net cash flows expected to be generated from the use of the asset. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

Recently Issued Accounting Pronouncements

For a discussion on recently issued accounting pronouncements, see Note 2 to the Partnership’s consolidated financial statements which is incorporated by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The primary components of our market risk at December 31, 2021 are related to interest rate risk and credit risk. Our exposure to market risks relates primarily to our investments in MRBs, GILs, property loans and our debt financing and mortgages payable. We seek to actively manage these and other risks and to acquire and hold assets that we believe justify bearing those risks, and to maintain capital levels consistent with those risks.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. The nature of our MRBs, GILs, property loans and the debt financing used to finance these investments, exposes us to financial risk due to fluctuations in market interest rates. The majority of our MRBs bear interest at fixed rates. The GILs and property loans predominantly bear interest at variable rates, noting all are subject to interest rate floors with the exception of Scharbauer Flats Apartments GIL (Note 7).

We are subject to interest rate risk on the debt we’ve obtained to finance our investments. At December 31, 2021, our stated costs of borrowing by type of facility were as follows:

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The M31 TEBS facility has a variable interest rate of 1.5%;

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The M24 and M33 TEBS facilities have fixed interest rates that range between 3.1% and 3.2%;

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The M45 TEBS facility has a fixed interest rate of 3.8% through July 31, 2023 and 4.4% thereafter;

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The Term TOB Trust securitized by an MRB has a fixed interest rate of 2.0%;

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The TOB Trusts securitized by MRBs, GILs and property loans have variable interest rates that range between 1.1% and 2.0%;

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The Secured Notes have a variable interest rate of 9.2%; and

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Greystone Housing Impact Investors LP GHI US Equity

GHI · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Greystone Housing Impact Investors LP GHI US Equity☆

GHI · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Greystone Housing Impact Investors LP GHI US Equity