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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 Greystone Housing Impact Investors LP, its consolidated subsidiaries, and consolidated VIEs for all periods presented. See Note 2 and Note 5 to the Partnership’s consolidated financial statements for further disclosure.

On April 1, 2022, the Partnership effected a one-for-three reverse unit split of its outstanding BUCs (the “Reverse Unit Split”). On October 31, 2022, the Partnership completed a distribution in the form of additional BUCs at a ratio of 0.01044 BUCs for each BUC outstanding as of September 30, 2022 (the “Third Quarter BUCs Distribution”). On January 31, 2023, the Partnership completed a distribution in the form of additional BUCs at a ratio of 0.0105 BUCs for each BUC outstanding as of December 30, 2022 (the “Fourth Quarter BUCs Distribution”, collectively with the Third Quarter BUCs Distribution, the “BUCs Distributions”). The amounts indicated in this Item 7 have been adjusted to reflect both the Reverse Unit Split and the BUCs Distributions on a retroactive basis.

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 housing, 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 housing properties. We expect and believe the interest received on these MRBs and GILs is excludable from gross income for federal income tax purposes. We also invest in other types of securities that may or may not be secured by real estate and may make property loans to multifamily properties which may or may not be financed by MRBs or GILs held by us and may or may not be secured by real estate.

We also make noncontrolling equity investments in unconsolidated entities for the construction, stabilization, and ultimate sale of market-rate multifamily properties. We are entitled to distributions if, and when, cash is available for distribution either through operations, a refinance or sale of the property. In addition, the Partnership may acquire and hold interests in multifamily, student and senior citizen residential properties (“MF Properties”) until their “highest and best use” can be determined by management.

As of December 31,2022, we had four reportable segments: (1) Affordable Multifamily MRB Investments, (2) Seniors and Skilled Nursing MRB Investments, (3) Market-Rate Joint Venture Investments and (4) MF Properties. We separately report our consolidation and elimination information because we do not allocate certain items to the segments. All “General and administrative expenses” on the consolidated statements of operations are reported within the Affordable Multifamily MRB Investments segment. See Notes 2 and 24 to the Partnership’s consolidated financial statements for additional details. The following table presents summary information regarding activity of our segments for the years ended December 31, 2022 and 2021 (dollar amounts in thousands):

For the Years Ended December 31,

2022 Percentage of Total 2021 Percentage of Total

Total revenues

Seniors and Skilled Nursing MRB Investments 713 0.9 % 78 0.1 %

Net income (loss)

Seniors and Skilled Nursing MRB Investments 705 1.1 % 72 0.2 %

Corporate Responsibility

We are 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 property 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 2022, we closed the following MRB and GIL investments related to properties that were awarded both private activity bond cap and LIHTC allocations through state-specific QAPs:

In 2021, we acquired an MRB investment secured by Meadow Valley, a to-be-constructed 154-unit seniors housing facility in Traverse City, MI. Part of the construction financing is provided through a Commercial Property Assessed Clean Energy (C-PACE) program, which is a state policy-enabled financing mechanism that allows developers to access the capital needed to make renewable energy accessible and cost-effective. In the case of Meadow Valley, C-PACE financing of $24.8 million will be provided to finance energy conservation features including high efficiency windows, roof, walls, heating, cooling, indoor and outdoor lighting, water heating and low-flow fixtures. The C-PACE financing is repaid through a property tax assessment over the life of the property. Many lenders are averse to financing properties with C-PACE financing as the tax assessment is a senior obligation of the property. We have developed underwriting procedures that allow for the borrower to obtain C-PACE financing and still meet our security and underwriting requirements. We will continue to evaluate investment opportunities related to properties that utilize C-PACE financing for future investment as we want to encourage our borrowers to utilize clean energy design and construction practices.

The Suites on Paseo MF Property, which is wholly owned by the Partnership, is a LEED Silver Certified property. LEED provides a framework for healthy, efficient, carbon and cost-saving green buildings. To achieve LEED certification, a property earns points by adhering to prerequisites and credits that address carbon, energy, water, waste, transportation, materials, health and indoor environmental quality. In addition, the property has three rooftop solar panels arrays to generate renewable energy for the local power system. Two of the arrays are owned by the local utility provider on roof space leased by the property and the third array is owned by the property.

We are committed to minimizing the overall environmental impact of our corporate operations. The Partnership’s operations are primarily managed by 14 employees of Greystone Manager, so we have a relatively modest environmental impact and have adequate facilities to grow our employee base without acquiring additional physical space.

Social Responsibility

Our MRB and GIL investments directly support the construction, rehabilitation, and stabilized operation of decent, safe, and sanitary affordable multifamily housing across the United States. The development of affordable multifamily housing has relatively broad legislative support at the federal and state levels. Each of the properties securing our MRB and GIL investments is required to maintain a minimum percentage of units set-aside for a combination of extremely low-income (30% of area median income or “AMI”), very low-income (50% of AMI), and low-income(80% of AMI) tenants in accordance with IRC guidelines, and the owners of the properties often agree to exceed the minimum IRC requirements. The rent charged to income qualified tenants at MRB or GIL properties is often restricted to a certain percentage of the tenants’ income, making them more affordable. For any newly originated MRBs or GILs associated with a low-income housing tax credit property, restrictions regarding tenant incomes and rents charged to those low-income households are required. In addition, certain borrowers related to our MRB investments are non-profit entities that provide affordable multifamily housing consistent with their charitable purposes. These properties provide valuable housing and support services to both low-income and market-rate tenants and create housing diversity in the geographic and social communities in which they are located.

The following table summarizes, by investment asset class, the number of residential rental units associated with the affordable multifamily properties financed by the Partnership that have some form of tenant income or rent restrictions as evidenced by a regulatory agreement recorded on the local government land records as of December 31, 2022:

Certain investments may be eligible for regulatory credit under the Community Reinvestment Act of 1977 (“CRA”) to help meet the credit needs of the communities in which they exist, including low- and moderate-income (LMI) neighborhoods. See “Community Investments” in this Item 7 below for further information regarding assets of the Partnership the General Partner believes are eligible for regulatory credit under the CRA.

We and Greystone are committed to supporting our workforce. Greystone has implemented evaluation and compensation policies designed to attract, retain, and motivate employees that provide services to the Partnership to achieve superior results. Greystone also provides formal and informal training programs to enhance the skills of employees providing services to the Partnership and to instill Greystone’s corporate policies and practices. We are also committed to ensuring the safety of personnel that work for third-party contractors that perform services at properties that underlie our investment assets. Specifically for properties under construction, we consider the safety record of contractors and monitor safety incidents through reviews of independent construction monitoring reports.

Greystone and the Partnership are committed to diversity, equity and inclusion (“DEI”). Specific Greystone DEI initiatives include formal diversity training and employee resources groups to support a diverse workforce as well as a formal DEI committee and DEI Leadership Council to lead and advise all DEI related work, events, and learning. Of the 14 employees of Greystone Manager responsible for the Partnership’s operations, three are women and one employee identifies as ethnically diverse.

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. We set high ethical standards for our related employees and partners. We regularly review and update, as appropriate, our policies governing ethical conduct and responsible behavior in order to support our sustainable and continued success. Our Code of Business Conduct and Ethics is applicable to all Greystone personnel that provide services to the Partnership and is available on the Partnership’s website. All employees are required to annually affirm that they have read and understood the Code of Business Conduct and Ethics. Employees are encouraged to share any ethics or compliance concerns with their supervisors or confidentially through our third-party managed hotline. We maintain a formal compliance policy to investigate ethics or compliance concerns and to protect whistleblowers. Our policy is designed to meet the requirements and standards of the Sarbanes Oxley Act of 2022 and the Securities and Exchange Act of 1934.

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 NYSE 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 NYSE independence requirements, two of whom qualify as “audit committee financial experts.” Of the six Managers of Greystone Manager, one Manager is female.

The Greystone Manager Board of Managers is highly engaged in the governance and operations of the Partnership. Our non-independent Managers are employees of Greystone that regularly monitor developments in our operating environment and capital markets and discuss such developments with management on a regular basis. One of our Managers is a member of our investment committee that pre-approves all new investments. We regularly monitor and assess risks to achieving our business objectives and such risk assessments are discussed with both the Audit Committee and the full Board of Managers at regularly held meetings and in regular informal discussions. The following table summarizes the number of meetings and attendance during 2022:

Number of Meetings Attendance Percentage

Board of Managers 4 100%

Audit Committee 4 100%

Affordable Multifamily MRB Investments Segment

The Partnership’s primary purpose is to acquire and hold as investments a portfolio of MRBs which have been issued to provide construction and/or permanent financing for residential properties and commercial properties in their market area. We have also invested in taxable MRBs, GILs, taxable GILs and property loans which are included within this segment. All “General and administrative expenses” on our consolidated statements of operations are reported within this segment. As of December 31, 2022, we owned 76 MRBs with aggregate outstanding principal of $766.3 million and 13 GILs with aggregate outstanding principal of $300.2 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 78 multifamily and seniors housing properties containing a total of 13,241 rental units located in 16 states in the United States.

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.

Our MRBs, taxable MRBs, GILs, taxable 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, 2022 and 2021

Total revenues increased for 2022 as compared to the same period in 2021 due primarily to:

•

An increase of approximately $6.0 million in interest income from recent MRB acquisitions, offset by a decrease of approximately $5.0 million in interest income from MRB investments due to redemptions and principal paydowns;

•

An increase of approximately $6.8 million in interest income from higher GIL investment balances and higher average interest rates;

•

An increase of approximately $5.1 million in other interest income due to additional property loan, taxable MRB and taxable GIL investments and higher average interest rates;

•

An increase of approximately $3.2 million in other interest income for payments received on redemption of the Ohio Properties, Live 929 Apartments, and Cross Creek property loans in 2022 that were previously in nonaccrual status;

•

An increase of approximately $1.5 million in interest income due to discount accretion on the Cross Creek MRB upon redemption at par in September 2022;

•

An increase of approximately $1.4 million of other interest income due to increasing interest earned on cash balances; and

•

A decrease of approximately $1.8 million in contingent interest income recognized in July 2021 upon the redemption of the Rosewood Townhomes – Series A and South Pointe Apartments – Series A MRBs.

Total interest expense increased for 2022 as compared to the same period in 2021 due primarily to:

•

An increase of approximately $3.0 million due to an increase in the average outstanding principal of approximately $206.9 million;

•

An increase of approximately $11.0 million due to higher average interest rates on variable-rate debt financing;

•

An increase of approximately $1.1 million in amortization of deferred financing costs, which includes approximately $719,000 of previously unamortized deferred financing costs that were recognized as interest expense upon the redemption and reissuance of certain TOB financings during 2022; and

•

A decrease of approximately $7.0 million due to an increase in the fair market value of interest rate derivative instruments attributable to rising market interest rates.

Segment net income for 2022 increased as compared to the same period in 2021 as a result of the following factors:

•

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

•

A decrease in the provision for credit loss of approximately $1.9 million related to the Provision Center 2014-1 MRB in 2021;

•

A decrease in the provision for loan loss of approximately $444,000 related to the Live 929 Apartments property loan in 2021; and

•

An increase in general and administrative expenses related to increases of approximately $1.2 million in administration fees paid to AFCA2 due to greater assets under management, approximately $899,000 in employee salaries, bonuses and benefits, approximately $254,000 in restricted unit award compensation, approximately $140,000 in travel expenses, and approximately $107,000 in annual insurance premiums.

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 2022 and 2021. 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

Interest-bearing liabilities:

Amortization of deferred finance costs N/A 2,078 N/A N/A 968 N/A

Derivative fair value adjustments N/A (7,006 ) N/A N/A (23 ) N/A

(1)

Interest income includes $1.5 million due to discount accretion on the Cross Creek MRB upon redemption at par during 2022. Excluding this item, the average interest rate was 5.7%.

(2)

Interest income includes $3.2 million for payments received on property loans that were previously in nonaccrual status during 2022. Excluding these items, the average interest rate was 5.2%.

(3)

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

(4)

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

The following tables summarize the changes in interest income and interest expense between 2022 and 2021, 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 interest-earning assets and interest-bearing liabilities. All dollar amounts are in thousands.

Total Change AverageVolume $ Change AverageRate $ Change

Interest-earning assets:

Interest-bearing liabilities:

Fixed Term TOB trust financing (103 ) (3 ) (100 )

Amortization of deferred finance costs 1,110 (4) N/A 1,110

Derivative fair value adjustments (6,983 ) N/A (6,983 )

(1)

The average change attributable to rate includes $1.5 million of discount accretion on the Cross Creek MRB upon redemption at par during 2022.

(2)

The average change attributable to rate includes $3.2 million for payments received on property loans that were previously in nonaccrual status during 2022.

(3)

Interest expense is reported net of income/loss on the Partnership's total return swap agreements.

(4)

Due in part to $719,000 of previously unamortized deferred financing costs that were recognized as interest expense upon the redemption and reissuance of certain TOB financings during 2022, respectively.

Operational Matters

The multifamily properties securing our MRBs were all current on contractual debt service payments on our MRBs and we have received no requests for forbearance of contractual debt service payments as of December 31, 2022. We continue to regularly discuss operations and potential lingering effect of COVID-19 with property owners and property management service providers of multifamily properties securing our MRBs. We have noted in conversations with certain property managers that rent payment relief programs were utilized by some of the tenant population during 2022. We did observe slight declines in occupancy and operating results at the multifamily properties securing our 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. If property operating results significantly decline in the future, we may choose to provide support to the properties through supplemental property loans to prevent defaults on the related MRBs.

Our sole student housing property securing an MRB, Live 929 Apartments, was 91% occupied as of December 31, 2022, which is lower than the average occupancy of 95% during the school term from September 2021 through May 2022. However, the borrower has leased units at higher rental rates for the 2022-2023 academic year such that overall revenues are expected to increase. In January 2022, the borrower completed a restructuring of all senior debt secured by the property and the borrower was current on all contractual MRB principal and interest payments as of December 31, 2022.

The proton therapy center securing the Provision Center 2014-1 MRB was successfully sold out of bankruptcy in July 2022 and a liquidation plan is being finalized by the debtor and the bankruptcy court. We are entitled to approximately 9.2% of proceeds to all MRB holders. Our reported net carrying value of the MRB, inclusive of accrued interest, was $4.6 million for GAAP purposes as of December 31, 2022, and is our estimate of the proceeds we will ultimately receive upon liquidation. We received partial liquidation proceeds of $3.7 million in January 2023 and expect the remaining proceeds to be received at final liquidation.

Construction and rehabilitation activities continue at properties securing our GILs, taxable GILs and related property loans. Six of the 13 underlying affordable multifamily properties had commenced leasing operations as of December 31, 2022. To date, these properties have not experienced any material supply chain disruptions for either construction materials or labor or incurred material construction cost overruns.

As many of our GIL investments and certain MRB investments have variable interest rates, we regularly monitor interest costs in comparison to capitalized interest reserves in each property’s development budget, available construction budget contingency balances, and the funding of certain equity commitments by the owners of the underlying properties. Though original development budgets are sized to incorporate potential interest rate increases, the pace of recent interest rate increases has caused actual interest costs during construction to exceed original projections. We have noted that some properties that are complete or nearing completion have incurred interest costs that have exceeded capitalized interest reserves. In such instances, the developer has either reallocated other available reserves and contingencies, deferred their developer fees, or made direct cash payment during construction to ensure all interest is paid and avoid enforcement of our recourse guaranties against the developers and their affiliates. In addition, such projects have developer completion guaranties as well as capital contributed by LIHTC equity investors that will only receive their tax credits upon completion and stabilization of the projects.

Seniors and Skilled Nursing MRB Investments Segment

The Seniors and Skilled Nursing MRB Investments segment 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, 2022, we owned one MRB with aggregate outstanding principal of $4.7 million, with an outstanding commitment to provide additional funding of $39.3 million on a draw-down basis during construction. This 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 secured by a skilled nursing facility in Houston, TX, which was redeemed in September 2022.

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

Interest expense 6 - 6 N/A

Operations in this segment began in December 2021. The Meadow Valley property securing our MRB is currently drawing on our investment commitment to fund construction costs.

Market-Rate Joint Venture Investments Segment

The Market-Rate Joint Venture Investments segment consists of our noncontrolling joint venture equity investments in market-rate multifamily properties, also referred to as our investments in unconsolidated entities or JV Equity Investments, and property loans due from market-rate multifamily properties. Our joint venture equity investments are passive in nature. Operational oversight of each property is controlled by our joint venture partner according to the entity’s operating agreement. All properties are managed by a property management company affiliated with our joint venture partner. Decisions on when to sell an individual property are made by our joint venture partner based on its view of the local market conditions and current leasing trends.

An affiliate of our joint venture partner provides a guaranty of our preferred returns on our Vantage equity investments through a date approximately five years after commencement of construction. We account for our joint venture equity investments using the equity method and recognize our preferred returns during the hold period. Upon the sale of a property, net proceeds will be distributed according to the entity operating agreement. Sales proceeds distributed to us that represent previously unrecognized preferred return and gain on sale are recognized in net income upon receipt. Historically, the majority of income from our JV Equity Investments is recognized at the time of sale. As a result, we may experience significant income recognition in those quarters when a property is sold and our equity investment is redeemed.

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

Comparison of the years ended December 31, 2022 and 2021

The decrease in total revenues in 2022 as compared to 2021 was primarily due to the following factors:

•

An increase of approximately $2.2 million in investment income from equity contributed to JV Equity Investments during 2021 and 2022;

•

A net decrease of approximately $3.2 million in investment income due to preferred return distributions from Vantage at Stone Creek and Vantage at Coventry in November 2021;

•

Decreases of approximately $2.4 million, $1.4 million, and $862,000 of investment income recognized on the sales of Vantage at Powdersville, Vantage at Bulverde, and Vantage at Germantown in 2021; and

•

A decrease of approximately $222,000 of investment income due to the sale of Vantage at Murfreesboro in March 2022.

Interest expense for 2022 is related to our General LOC that is primarily secured by our JV Equity Investments.

The gain on sale of JV Equity Investments for 2022 primarily consisted of the following:

•

The sale of Vantage at Murfreesboro in March 2022 for a gain of approximately $16.5 million;

•

The sale of Vantage at Westover Hills in May 2022 for a gain of approximately $12.7 million; and

•

The sale of Vantage at O'Connor in July 2022 for a gain of approximately $10.6 million.

The gain on sale of JV Equity Investments for 2021 primarily consisted of the following:

•

The sale of Vantage at Germantown in March 2021 for approximately $2.8 million;

•

The sale of Vantage at Powdersville in May 2021 for approximately $5.5 million;

•

The sale of Vantage at Bulverde in August 2021 for approximately $7.0 million; and

•

Receipt 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 change in segment net income for 2022 as compared to 2021 was primarily due to the change in total revenues and gains on sales of unconsolidated entities discussed above.

Operational Matters

We have noted no material construction cost overruns to date, despite generally volatile market prices for construction materials, particularly lumber and commodities. In addition, we have noted no material issues in securing materials and labor needed to construct the properties underlying our JV Equity Investments, despite general supply chain constraints noted in the current business environment. The construction loans associated with our JV Equity Investments typically have variable interest rates, so we regularly monitor interest costs in comparison to capitalized interest reserves in each property’s development budget and available construction budget contingency balances. Though original development budgets were sized to incorporate potential interest rate increases, the pace of recent interest rate increases has caused actual interest costs during construction to exceed original projections. We have noted that some properties that are complete or nearing completion have incurred interest costs that have exceeded capitalized interest reserves, but there are either sufficient construction contingencies or the developer has deferred a portion of its developer fees until completion or there are otherwise funds to pay the earned developer fee. Such interest costs overrun may, absent other developments, result in lower returns on our JV Equity Investments.

As of December 31, 2022, three investments have stabilized occupancy of 90% or above: Vantage at Conroe, Vantage at Stone Creek, and Vantage at Coventry. Vantage at Stone Creek and Vantage at Coventry were sold in January 2023 with gains on sale totaling approximately $15.2 million that will be recognized in the first quarter of 2023. Vantage at Tomball and Vantage at Helotes have completed construction, are in the initial leasing phase, and are 79% and 57% occupied as of December 31, 2022, respectively.

In October and November 2022, we executed commitments for Freestone Greeley and Freestone Cresta Bella, each a to-be-constructed market-rate multifamily property. These are our first investments with the Freestone development group as managing member. The key principals of the Freestone development group were formerly affiliated with the Vantage development group and were closely involved in our 20 Vantage JV Equity Investments to date. The Freestone and Vantage development groups will work collaboratively together to bring the Partnership’s eight remaining Vantage branded JV Equity Investments to completion and ultimate sale. The remaining key principals of the Vantage development group may present future JV Equity Investment opportunities to the Partnership, as may the Freestone development group.

In February 2023, we executed a $8.2 million commitment for Valage Senior Living Carson Valley, a to-be-constructed seniors housing property in Minden, NV. The structure of this JV Equity Investment is substantially the same as our Vantage and Freestone JV Equity Investments. The managing member of the property is an experienced seniors housing developer and operator. We believe our initiation of JV Equity Investments for seniors housing properties diversifies the exposure of our portfolio of JV Equity Investment while offering risk-adjusted returns similar to our current portfolio.

We continue to look for other opportunities to deploy capital in this segment. We are evaluating opportunities to expand beyond our traditional multifamily investment footprint in Texas. We are seeking other experienced joint venture partners for potential expansion into other markets, or other asset classes, in order to achieve more scale in this segment.

MF Properties Segment

As of December 31, 2022 and 2021, the Partnership owned the Suites on Paseo MF Property containing a total of 384 rental units. As of December 31, 2021, the Partnership also owned The 50/50 MF Property which was sold to an unrelated non-profit organization in December 2022.

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, 2022 and 2021

The increase in total revenues for 2022 as compared to 2021 is primarily the result of an increase in revenue at the Suite on Paseo of approximately $760,000 due to higher occupancy as on-campus enrollment recovers from declines caused by the COVID-19 pandemic. This was partially offset by a reduction in revenue of approximately $116,000 due to the sale of the Partnership's ownership interest in The 50/50 MF property in December 2022.

The increase in real estate operating expense for 2022 as compared to 2021 is due primarily to an increase in general operating expenses and increasing variable costs as a result of higher occupancy, such as utilities and repairs and maintenance.

The decrease in interest expense is due to a decrease in the average outstanding principal.

The improvement in segment net loss for 2022 as compared to 2021 was due to the changes in total revenue and interest expense described above. Included in segment net loss is depreciation expense of $2.7 million for 2022 and 2021.

Operational Matters

In December 2022, we sold 100% of our ownership interest in The 50/50 MF Property to an unrelated non-profit organization. We received an unsecured property loan in return upon sale payable from future net cash flows of the property. The buyer assumed two mortgages payable associated with the property and we agreed to provide certain recourse support for the assumed mortgages. As a

result of the sale, we deconsolidated The 50/50 MF Property in our consolidated financial statements as of the date of sale. We have deferred a gain on sale of approximately $6.6 million and will recognize the gain upon collection of principal of the unsecured property loan.

The Suites on Paseo has generated sufficient operating cash flows to meet all operational obligations through December 31, 2022. The Suites on Paseo MF Property, which is adjacent to San Diego State University, was 98% occupied as of December 31, 2022.

Discussion of Occupancy at Investment-Related Properties

The following tables summarize occupancy and other information regarding the properties underlying our various investment assets. The narrative discussion that follows provides a brief operating analysis of each investment asset class as of and for the years ended December 31, 2022 and 2021.

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. These properties have met the stabilization criteria (see footnote 3 below the table) as of December 31, 2022. Debt service on our MRBs for the non-consolidated stabilized properties was current as of December 31, 2022. 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)

CCBA Senior Garden Apartments (4) CA 45 100 % n/a 95 % n/a

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

Montecito at Williams Ranch Apartments CA 132 90 % 98 % 101 % 106 %

The Palms at Premier Park Apartments SC 240 98 % 100 % 88 % 92 %

Arbors at Hickory Ridge (5) 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 recently acquired and not owned by the Partnership during the prior year.

(5)

The MRB is defeased and as such, the Partnership does not report property occupancy information.

Physical occupancy as of December 31, 2022 decreased slightly from the same period in 2021 due to slight declines across various properties in the portfolio.

Economic occupancy for the year ended December 31, 2022 decreased slightly from the same period in 2021 in line with the decrease in physical occupancy. Significant property performance declines were noted at Decatur Angle and Bruton Apartments due to higher than historical bad debt reserve write-offs and decreased physical occupancy during certain months within 2022. Esperanza at Palo Alto and the Greens Property experienced significant economic occupancy declines due to increased loss to lease and decreased physical occupancy at Esperanza at Palo Alto. We will continue to monitor and discuss property operations with the individual borrowers. On an overall basis, we noted same-property maximum rental income amounts increased 7.2% in 2022 as compared to 2021, which is higher than historical annual rent increases. Net rental revenue will typically increase similarly though on a lag as rent increases will be realized upon annual lease renewals. This is consistent with our observed increase in same-property net rental revenue of 5.9%

in 2022 as compared to 2021. In the meantime, increasing maximum rental income amounts will contribute to a decline in economic occupancy even though property rental revenues are increasing overall.

Non-Consolidated Properties - Not Stabilized

The owners of the following residential 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. As of December 31, 2022, these residential properties have not met the stabilization criteria (see footnote 3 below the table). As of December 31, 2022, debt service on the Partnership’s MRBs and GILs for the non-consolidated, 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 (5) CA 75 100 % n/a 93 % n/a

Residency at Empire (4) CA 148 n/a n/a n/a n/a

Residency at the Entrepreneur (4) CA 200 n/a n/a n/a n/a

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

The Park at Sondrio Apartments (6) SC 271 92 % n/a n/a n/a

The Park at Vietti Apartments (6) SC 204 92 % n/a n/a 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 (5) CO 209 97 % n/a 65 % n/a

Poppy Grove I (4) CA 147 n/a n/a n/a n/a

Poppy Grove II (4) CA 82 n/a n/a n/a n/a

Poppy Grove III (4) CA 158 n/a n/a n/a n/a

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

Magnolia Heights (5) GA 200 50 % n/a 51 % n/a

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

Oasis at Twin Lakes (5) MN 228 99 % n/a 75 % n/a

Legacy Commons at Signal Hills (5) MN 247 14 % n/a 5 % n/a

Hilltop at Signal Hills (5) MN 146 94 % n/a 59 % n/a

Scharbauer Flats Apartments (5) TX 300 26 % n/a 4 % 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 construction and/or rehabilitation is complete, it reaches 90% physical occupancy for 90 days, and it achieves 1.15 times debt service coverage ratio on amortizing debt service for a certain period.

(4)

Physical and economic occupancy information is not available for the years ended December 31, 2022 and 2021 as the property is under construction or rehabilitation.

(5)

Physical and economic occupancy information is not available for the year ended December 31, 2021 as the related investment was under construction or rehabilitation.

(6)

Economic occupancy information is not available for the years ended December 31, 2022 and 2021 and physical occupancy information is not available as of December 31, 2021 as the related MRB was acquired in December 2022.

As of December 31, 2022, three MRB multifamily properties and our sole MRB seniors housing property were under construction and have no operating metrics to report. The Ocotillo Springs MRB property has completed construction and is nearing stabilization. The Jackson Manor, The Park at Sondrio Apartments, and The Park at Vietti Apartments MRB properties are currently undergoing tenant-in-place rehabilitation.

As of December 31, 2022, seven GIL properties were under construction and have no operating metrics to report. The remaining six GIL properties have substantially completed construction and are leasing units.

JV Equity Investments

We are the noncontrolling equity investor in various unconsolidated entities formed for the purpose of constructing market-rate, multifamily real estate properties. The Partnership determined the JV Equity Investments 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. The one exception is Vantage at San Marcos, for which the Partnership is deemed the primary beneficiary and reports the entity's assets and liabilities on a consolidated basis. Our JV Equity Investments entitle us to shares of certain cash flows generated by the entities from operations and upon the occurrence of certain capital transactions, such as a refinance or sale. The amounts presented below were obtained from records provided by the property management service providers.

Physical Occupancy (1) as of December 31,

Sold Properties

Vantage at Germantown TN March 2020 n/a n/a n/a n/a March 2021 $ 149,000

Vantage at Powdersville SC February 2020 n/a n/a n/a n/a May 2021 170,000

Vantage at Westover Hills TX July 2021 n/a n/a 98 % n/a May 2022 (3)

Operating Properties

Properties Under Construction

Vantage at Hutto TX n/a 288 n/a n/a n/a n/a n/a

Vantage at Loveland CO n/a 288 n/a n/a n/a n/a n/a

Vantage at Fair Oaks (4) TX n/a 288 2 % n/a $ 12,007 n/a n/a

Vantage at McKinney Falls TX n/a 288 n/a n/a n/a n/a n/a

Properties in Planning

Vantage at San Marcos (5) TX n/a 288 n/a n/a n/a n/a n/a

Freestone Greeley CO n/a 296 n/a n/a n/a n/a n/a

Freestone Cresta Bella TX n/a 296 n/a 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)

Revenue is attributable to the property underlying the Partnership's equity investment and is not included in the Partnership's income.

(3)

Disclosure of the per-unit sale price is not permitted according to the provisions in the purchase agreement executed by the entity's managing member and the buyer.

(4)

Information as of December 31, 2022 is provided as the property has commenced leasing operations prior to construction completion.

(5)

The property is reported as a consolidated VIE as of December 31, 2022 (see Note 5 to the Partnership's consolidated financial statements).

The Vantage properties at Hutto, Loveland, and McKinney Falls are currently under construction and have yet to commence leasing activities as of December 31, 2022. Construction was completed on Vantage at Tomball and Vantage at Helotes during 2022 and both properties are leasing up in line with expectations. Vantage at Fair Oaks is nearing construction completion. Freestone Greeley, Freestone Cresta Bella and Vantage at San Macros are in the planning phase. Vantage at Conroe is considered stabilized as of December 31, 2022.

MF Properties

As of December 31, 2022, we owned one MF Property. The Partnership reports the assets, liabilities, and results of operations of the property on a consolidated basis.

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, 2022 increased as compared to the same period in 2021 due to strong demand and lease-up efforts for the 2022-2023 academic year.

Results of Operations

The tables and following discussions of our changes in results of operations for the years ended December 31, 2022 and 2021 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 periods indicated (dollar amounts in thousands):

For the Years Ended December 31,

Revenues and Other Income:

Loss on sale of real estate asset - (15 ) 15 -100.0 %

Discussion of Total Revenues and Other Income for the Year Ended December 31, 2022 and 2021

Investment income. The increase in investment income in 2022 as compared to 2021 was due to the following factors:

•

An increase of approximately $6.1 million in interest income from higher MRB investment balances and higher average interest rates, offset by a decrease of approximately $5.0 million in interest income from MRB investments due to redemptions and principal paydowns;

•

An increase of approximately $6.8 million in interest income from higher GIL investment balances and higher average interest rates;

•

An increase of approximately $1.5 million in interest income due to discount accretion on the Cross Creek MRB upon redemption at par in September 2022; and

•

A decrease of approximately $5.8 million of investment income related to JV Equity Investments. This decrease consisted of:

An increase of approximately $2.2 million in investment income from equity contributed to JV Equity Investments during 2021 and 2022;

A net decrease of approximately $3.2 million in investment income due to preferred return distributions from Vantage at Stone Creek and Vantage at Coventry in November 2021;

Decreases of approximately $2.4 million. $1.4 million, and $862,000 of investment income recognized on the sales of Vantage at Powdersville, Vantage at Bulverde, and Vantage at Germantown in 2021; and

A decrease of approximately $222,000 of investment income due to the sale of Vantage at Murfreesboro in March 2022.

Property revenues. The increase in total revenues for 2022 as compared to 2021 is primarily the result of an increase in revenue at the Suites on Paseo of approximately $760,000 due to higher occupancy as on-campus enrollment recovers from declines caused by the COVID-19 pandemic. This was partially offset by a reduction in revenue of approximately $116,000 due to the sale of the Partnership's ownership interest in The 50/50 MF property in December 2022.

Contingent interest income. There was no contingent interest income recognized for 2022. Contingent interest income recognized for 2021 was realized upon the redemption of the Rosewood Townhomes – Series A and South Pointe Apartments – Series A MRBs in July 2021.

Other interest income. Other interest income is comprised primarily of interest income on our property loan, taxable MRB, and taxable GIL investments. The increase in other interest income for 2022 as compared to 2021 was due to the following:

•

An increase of approximately $5.7 million from higher average property loan, taxable MRB and taxable GIL investment balances of $103.1 million and higher average interest rates;

•

An increase of approximately $3.2 million for payments received on redemption of the Ohio Properties, Live 929 Apartments and Cross Creek property loans in 2022 that were previously in nonaccrual status; and

•

An increase of approximately $1.4 million of other interest income due to increasing interest earned on cash balances.

Gain on sale of investments in unconsolidated entities. The gain on sale of JV Equity Investments for 2022 primarily consisted of the following:

•

The sale of Vantage at Murfreesboro in March 2022 for a gain of approximately $16.5 million;

•

The sale of Vantage at Westover Hills in May 2022 for a gain of approximately $12.7 million; and

•

The sale of Vantage at O'Connor in July 2022 for a gain of approximately $10.6 million.

The gain on sale of JV Equity Investments for 2021 primarily consisted of the following:

•

The sale of Vantage at Germantown in March 2021 for approximately $2.8 million;

•

The sale of Vantage at Powdersville in May 2021 for approximately $5.5 million;

•

The sale of Vantage at Bulverde in August 2021 for approximately $7.0 million; and

•

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

For the Years Ended December 31,

Expenses:

Discussion of the Total Expenses for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

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 increased for 2022 as compared to 2021 primarily due to general real estate operating expenses and increasing variable costs as a result of higher occupancy, such as utilities and repairs & maintenance.

Provision for credit loss. There was no provision for credit loss recognized for 2022. The provision for credit loss for 2021 related to an other-than-temporary impairment of the Provision Center 2014-1 MRB.

Provision for loan loss. There was no provision for loan loss recognized for 2022. The provision for loan loss for 2021 related to an increase in the loan loss allowance for the Live 929 Apartments property loan.

Depreciation and amortization expense. Depreciation and amortization relate primarily to the MF Properties. Depreciation and amortization expense was relatively consistent for 2022 as compared to 2021.

Interest expense. The decrease in interest expense for 2022 as compared to 2021 was due to the following factors:

•

An increase of approximately $3.1 million due to higher average principal outstanding of $208.1 million;

•

An increase of approximately $11.1 million due to higher average interest rates on variable-rate and fixed-rate debt financing;

•

An increase of approximately $1.3 million in amortization of deferred financing costs, which includes approximately $719,000 of previously unamortized deferred financing costs that were recognized as interest expense upon the redemption and reissuance of certain TOB financings during 2022; and

•

A decrease of approximately $7.0 million due to an increase in the fair market value of the Partnership's interest rate derivative instruments attributable to rising market interest rates.

General and administrative expenses. The increase in general and administrative expenses for 2022 as compared to 2021 was primarily a result of the following factors:

•

An increase of approximately $1.2 million in administration fees paid to AFCA2 due to greater assets under management;

•

An increase of approximately $897,000 in employee salaries, bonuses and benefits due to higher headcount and greater transactional bonuses;

•

An increase of approximately $253,000 in restricted unit award compensation expense;

•

An increase of approximately $140,000 in travel expenses as employees have recommenced traveling post-COVID-19; and

•

An increase of approximately $107,000 in annual insurance premiums.

Discussion of Income Tax Expense for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

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 certain property loans. The Greens Hold Co sold its ownership interest in The 50/50 MF Property to an unrelated non-profit organization in December 2022 and deferred a gain on sale of approximately $6.6 million. There was minimal taxable income for the Greens Hold Co for the years ended December 31, 2022 and 2021.

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 or income consisting of depreciation expense, amortization expense related to deferred financing costs, amortization of premiums and discounts, fair value adjustments to derivative instruments, provisions for credit and loan losses, impairments on MRBs, GILs, 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 year ended December 31, 2022 and 2021 (all per BUC amounts are presented giving effect to the one-for-three Reverse Unit Split and the BUCs Distributions on a retroactive basis for all periods presented):

For the Years Ended December 31,

Change in fair value of derivative instruments (7,239,736 ) (23,214 )

Provision for credit loss (1) - 1,856,893

Provision for loan loss (2) - 444,302

Realized impairment of securities (3) (5,712,230 ) -

Realized provision for loan loss (4) (593,000 ) -

Realized impairment charge on real estate assets - (250,200 )

Redeemable Preferred Unit distributions and accretion (2,866,625 ) (2,871,051 )

Recovery of prior credit loss (6) (57,124 ) -

Net income per BUC, basic $ 2.62 $ 1.53

Total CAD per BUC, basic $ 2.37 $ 1.88

Cash Distributions declared, per BUC $ 1.709 $ 1.469

BUCs Distributions declared, per BUC (7) $ 0.40 $ -

(1)

The provision for credit loss for 2021 relates to impairment of the Provision Center 2014-1 MRB.

(2)

The provision for loan loss for 2021 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 Provision Center 2014-1 MRB. The property securing the MRB was sold in July 2022 with cash proceeds contributed to the bankruptcy estate. The borrower and the bankruptcy court are finalizing the liquidation plan for the settlement of all remaining assets and liabilities of the bankruptcy estate. Substantially all the assets of the borrower were liquidated in the third quarter of 2022 such that the Partnership’s previously recognized impairments were effectively realized.

(4)

This amount represents previous impairments recognized as adjustments to CAD in prior periods related to the Cross Creek property loans. Such impairments were realized in the third quarter of 2022 upon the settlement of the outstanding balances.

(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. This adjustment represents the 25% of Tier 2 income due to the General Partner.

For the year ended December 31, 2022, Tier 2 income allocable to the General Partner consisted of approximately $3.2 million related to the gain on sale of Vantage at Murfreesboro in March 2022. 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 realization of losses for prior impairments.

(6)

The Partnership compared the present value of cash flows expected to be collected to the amortized cost basis of the Live 929 Apartments Series 2022A MRB as of March 31, 2022, which indicated a recovery of value. The Partnership will accrete the recovery of prior credit loss into investment income over the term of the MRB. The accretion of recovery of value is presented as a reduction to current CAD as the original provision for credit loss was an addback for CAD calculation purposes in the period recognized.

(7)

During 2022, the Partnership declared the Third Quarter BUCs Distribution and the Fourth Quarter BUCs Distribution, each payable in the form of additional BUCs equal to $0.20 per BUC for outstanding BUC as of the respective record dates.

Liquidity and Capital Resources

We continually evaluate our potential sources and uses of liquidity, including current and potential future developments related to market interest rates and the general economic and geopolitical environment. The information below is based on our 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, net of leverage secured by the investment assets; debt service (principal and interest payments) related to our debt financings; repayments of our secured lines of credit balances; the potential exercise of redemption rights by the holders of the Series A Preferred Units; and distribution payments to Unitholders. We expect to meet these liquidity requirements primarily using cash on hand, operating cash flows from our investments and an MF Property, 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; funding and purchase of additional investment assets, net of leverage secured by the investment assets. We expect to meet these liquidity requirements primarily through refinancing of maturing debt financings with the same or similar lenders; contractual principal and interest payments from investments in MRBs, GILs and property loans; 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 investment assets;

•

Net operating cash flows from our MF Property;

•

Secured lines of credit;

•

Proceeds from the sale or redemption of assets.

•

Proceeds from obtaining additional debt; and

•

Issuances of debt securities, BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests.

Unrestricted Cash on Hand

As of December 31, 2022, we reported unrestricted cash on hand of approximately $51.2 million. We are 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 our ability to use cash on hand.

Operating Cash Flows from Investments

Cash flows from operations are primarily comprised of regular principal and interest payments received on our investment assets that provide consistent cash receipts throughout the year. All MRBs, taxable MRBs, GILs, taxable GILs and property loans are current on contractual debt service payments as of December 31, 2022, except for the Provision Center 2014-1 MRB. Investment receipts, net of interest expense on related debt financings and lines of credit, are available for our general use. We also receive distributions from JV Equity Investments if, and when, cash is available for distribution.

Receipt of cash from our investments in MRBs, taxable MRBs, and JV Equity Investments is primarily dependent upon the generation of net cash flows at multifamily properties that underlie these investments. The underlying 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 our investments in GILs, taxable GILs, and construction financing and mezzanine property loans is dependent on the availability of funds in the original development budgets. The current rising interest rate environment is resulting in higher interest costs for properties with variable rate construction financing. We regularly monitor interest costs in comparison to capitalized interest reserves in the property’s development budget, available construction cost contingencies balances, and the funding of certain equity commitments by the owners of the underlying properties. The developers may also make cash payments to pay interest due to avoid claims under their payment and completion guaranties.

Net Operating Cash Flows from our MF Property

Cash flows generated by the Suites on Paseo MF Property, net of operating expenses, are unrestricted for our use. Such cash flows are subject to risks usually associated with direct investments in student 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. We 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, which 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 our equity capital contributions to Vantage JV Equity Investments, subject to certain limits and restrictions. The General LOC is secured by first priority security interests in our Vantage JV Equity Investments, 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 we must maintain a balance of not less than $5.0 million. We are subject to various affirmative and negative covenants that, among others, require us to maintain liquidity of not less than $5.0 million, maintain a consolidated tangible net worth of not less than $100.0 million, and to notify BankUnited, N.A. if our 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. We were in compliance with all covenants as of December 31, 2022. The balance of the General LOC was $6.5 million with the ability to draw an additional $33.5 million as of December 31, 2022. 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 financial institution of up to $50 million. The Acquisition LOC may be used to fund purchases of 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, taxable 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 our senior debt will not exceed a specified percentage of the market value of our assets to be consistent with the Leverage Ratio (as defined by the Partnership). We were in compliance with all covenants as of December 31, 2022. There was an approximately $49.0 million outstanding balance on the Acquisition LOC and approximately $1.0 million was available as of December 31, 2022. The outstanding balance on the Acquisition LOC was entirely repaid in January 2023. The Acquisition LOC has a maturity date of June 2024, with two one-year extension options, subject to certain terms and conditions.

Proceeds from the Sale or Redemption of Assets

We may, from time to time, sell or redeem our investments in MRBs, GILs, property loans, JV Equity Investments and MF Properties consistent with our strategic plans. Our MRB portfolio is marked at a 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 MRB investments in exchange for cash at prices that approximate our currently reported fair value. However, we are contractually prevented from selling the MRB investments included in our TEBS financings.

Our ability to dispose of investment assets on favorable terms is dependent upon several factors including, but not limited to, the number of potential buyers and the availability of credit to such potential buyers to purchase investment assets at prices we consider acceptable. Recent volatility in market interest rates, recent inflation and the potential for an economic recession may negatively impact the potential prices we could realize upon the disposition of our various investment assets.

The following table summarizes the proceeds from sales of our JV Equity Investments during 2022, inclusive of the return of our initial equity investments:

Property Name Location Units Month Sold Gross Proceeds to the Partnership

In March 2022, the Ohio Properties property loans were repaid in full. We received approximately $2.4 million of principal and approximately $4.3 million of accrued interest upon redemption. The Ohio Properties – Series A MRB was redeemed in March 2022, though all principal proceeds were applied as a paydown of our M24 TEBS financing. The Ohio Properties – Series B MRB was redeemed and we received approximately $3.5 million of principal and approximately $29,000 of accrued interest upon redemption.

In September 2022, the Cross Creek MRB and property loans were redeemed. We received approximately $771,000 of cash proceeds upon redemption of the MRB, with the remaining redemption proceeds used to pay down the outstanding principal balance of the M24 TEBS financing. We received additional proceeds of approximately $5.3 million upon redemption of the original Cross Creek property loans principal and accrued interest.

In October 2022, the Gateway Village and Lynnhaven Apartments MRBs were redeemed. We received approximately $6.0 million of cash proceeds upon redemption of the MRBs. Related TOB trust financings principal of $5.1 million was paid down in May 2022.

Proceeds from Obtaining Additional Debt

We hold certain investments that are not associated with our debt financings, mortgages payable, or secured LOCs. We may obtain leverage for these investments by posting the investments as security. As of December 31, 2022, our primary unleveraged assets were certain MRBs and taxable MRBs with outstanding principal totaling approximately $18.4 million.

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

We may, from time to time, issue additional BUCs, Preferred Units, or debt securities, in one or more offerings, at prices or quantities that are consistent with our strategic goals. In December 2022, the Partnership’s Registration Statement on Form S-3 (“Registration Statement”) was declared effective by the SEC under which the Partnership may, from time to time, offer and sell BUCs, Preferred Units, or debt securities, in one or more offerings, with a maximum aggregate offering price of $300.0 million. Debt securities issued under the Registration Statement may be senior or subordinate obligations of the Partnership. The Registration Statement will expire in December 2025.

We are currently party to 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, 2022, we have not sold any BUCs under this program. We will continue to assess if and when to issue BUCs under this program going forward.

We have two registration statements on Form S-3 covering the offering of Preferred Units that have been declared effective by the SEC. The following table summarizes the Partnership's current Preferred Unit offerings:

(1)

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.

(2)

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.

In February 2023, we sold 800,000 Series A-1 Preferred Units under the offering referenced in the table above for gross proceeds of $8.0 million.

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.

Uses of Liquidity

Our principal uses of liquidity consist of:

•

General and administrative expenses;

•

Investment funding commitments;

•

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

•

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 our 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 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.

Investment Funding Commitments

Our overall strategy is to invest in quality multifamily properties through the acquisition of MRBs, GILs, property loans and JV 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, 2022:

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 variable index interest rate components are typically subject to floors that range from 0% to 0.85%.

(3)

We have securitized the indicated assets in TOB financing facilities that allow for additional principal proceeds as the remaining investment commitments are funded by us. See Note 15 for further details on debt financing.

(4)

Upon stabilization, the MRB will convert to a fixed rate of 8.0% and become subordinate to the other senior MRBs of the borrower.

(5)

The borrower may elect to extend the maturity date for up to six months upon meeting certain conditions, which may include payment of a non-refundable extension fee.

(6)

The initial draw on this investment was funded with available cash or proceeds from the Acquisition LOC. In January 2023, the Residency at Empire MRBs were securitized in a TOB trust financing facility that allow for additional principal proceeds as the remaining investment commitments are funded by us.

(7)

The property became a consolidated VIE effective during the fourth quarter of 2021.

(8)

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

(9)

In December 2029, the interest rate will reset to the greater of (i) 3.25% over the then 10-Year SOFR Swap rate, or (ii) 6.00%.

(10)

A development site has been identified for this property but construction had not commenced as of December 31, 2022.

(11)

Upon stabilization, the MRB will resize to an amount not to exceed $3.3 million and become subordinate to the other senior MRBs of the borrower. In December 2029, the interest rate will convert to a fixed rate of 10.0%.

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

Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of MRB, taxable MRB, GIL, taxable GIL, and certain property loan investment assets. 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 securities are sold to unaffiliated parties in exchange for debt proceeds. The senior securities require periodic interest payments that may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments. We are required to fund any shortfall in principal and interest payable to the senior securities 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 trust financing, we may be required to fund shortfalls in principal and interest payable to the senior securities, repurchase a portion of the outstanding securities, 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 securities and all trust-related fees.

Our debt financing arrangements include various fixed and variable debt arrangements. Recent increases in short-term interest rates have resulted in increases in the interest costs associated with our variable debt financing arrangements. We actively manage our portfolio of 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, 2022 and 2021:

(1)

The securitized assets and related debt financings each have variable interest rates, though the variable rate indices may differ on individual transactions. As such, the Partnership is largely hedged against rising interest rates.

(2)

The variable-rate debt financing is hedged through our interest rate swap agreements. Though the variable rate indices may differ, these interest rate swaps have effectively synthetically fixed the interest rate of the related debt financing. See further discussion of our interest rate hedging activities below.

The interest rate paid on our variable debt financings are generally determined by the senior trust certificate remarketing agent as the rate necessary to remarket any senior trust securities tendered by holders thereof for remarketing that week at a price of par. Interest on the senior securities is either taxable or tax-exempt to the holders based on the structure of the TOB financing. The senior securities rate on TOB financings structured as tax-exempt to the senior securities holders are typically correlated to tax-exempt municipal short-term securities indices, such as SIFMA. The senior securities rate on TOB financings structured as taxable to the senior securities holders are typically correlated to taxable short-term securities indices, such as SOFR.

We have hedged a portion of our overall exposure to changes in market interest rates on our variable-rate debt financings through five interest rate swaps. Our interest rate swaps are subject to monthly settlements whereby we pay a stated fixed rate and our counterparty pays a variable rate equal to the compounded SOFR rate for the settlement period.

The majority of our variable-rate debt financings that are hedged through interest rate swaps have interest that is tax-exempt to the senior securities holders. In order to account for the differential between our interest rate swaps which are indexed to SOFR (a taxable rate) and our debt financing rate (which is correlated to short-term tax-exempt municipal securities rates), we assume that, over the term of our debt financing, the tax-exempt senior securities interest rate will approximate 70% of the SOFR rate. This assumption aligns with common market assumptions and the historical correlation between taxable and tax-exempt municipal short-term securities rates. However, such ratio may not be accurate in the short term or long term in the future. We apply a 70% conversion ratio when determining the notional amount of our interest rate swaps such that, as an example, a $7.0 million notional amount indexed to SOFR is the equivalent to $10.0 million notional amount for tax-exempt debt financing. As such, the reported amount of variable debt financing in the table above exceeds the stated notional amount of the SOFR-indexed interest rate swaps as of December 31, 2022. The following

table summarizes the average stated SOFR-denominated notional amount by year for our existing interest rate swaps (does not consider our assumed 70% ratio of tax-exempt municipal securitiesrates to SOFR):

Year Average Notional

The table above includes three interest rate swaps with forward starting dates in 2023. These interest rate swaps were executed in December 2022 to hedge variable rate TOB financing costs beginning in January 2023.

We may be required to post collateral if the value of investment assets securitized in TOB trust financings, plus our net exposure on our interest rate derivatives, drops below a threshold level in the aggregate. We experienced 23 separate collateral calls totaling $12.1 million during the year ended December 31, 2022 due to volatility in asset and derivative pricing. All collateral was subsequently returned to us as of December 31, 2022 due to recoveries in asset and derivative valuations. We were able to meet all collateral posting requirements with unrestricted cash on hand. Continuing volatility in market interest rates and potential deterioration of general economic conditions may cause the value of our investment assets to decline and result in the posting of additional collateral in the future. Our Secured Notes are secured by the cash flows from the residual certificates of our TEBS financings. Interest due on the Secured Notes, net of amounts due to the Partnership 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 required under the Secured Notes and related documents.

Our General LOC and Acquisition LOC require monthly interest payments on outstanding balances and certain quarterly commitment fees. Such obligations are paid primarily from operating cash flows. The Acquisition LOC requires principal payments as previously described in this Item 2. The General LOC does not require principal payments until maturity in June 2023 as long as the outstanding principal does not exceed the borrowing base calculation.

The following table summarizes contractual maturities by year for our secured lines of credit, debt financings, and mortgages payable as of December 31, 2022:

Secured Lines of Credit Debt Financing Mortgages Payable Total

When possible, we structure the debt financing maturity dates associated with our GIL, taxable GIL, and property loan investments to match the investment maturity dates such that investment redemption proceeds will paydown the outstanding debt financing.

See Item 7a, “Quantitative and Qualitative Disclosures about Market Risk” of this Report for additional details.

Distributions Paid to Holders of Preferred Units and BUCs

Distributions to the holders of Series A Preferred Units and Series A-1 Preferred, if declared by the General Partner, are paid quarterly at an annual fixed rate of 3.0%. If the Partnership were to issue Series B Preferred Units, holders of such units will be paid quarterly distributions, if declared by the General Partner, at an annual fixed rate of 3.4%. 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 19, 2022, we announced that the Board of Managers of Greystone Manager, which is the general partner of the General Partner, declared a regular quarterly cash distribution of $0.37 per BUC and a supplemental cash distribution of $0.10 per BUC to unitholders of record on December 30, 2022 and payable on January 31, 2023. In addition, we distributed $0.20 per BUC in the form of additional BUCs.

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.

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 August 2023 through March 2024 and the holders must provide notice of the election to redeem no less than 180 days prior to such redemption dates. 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.

No holders had given notice of their election to redeem Series A Preferred Units as of December 31, 2022. However, in February 2023, we received notice from a holder of 2,000,000 Series A Preferred Units of its intent to redeem all its Series A Preferred Units. We anticipate paying redemption proceeds of $20.0 million in August 2023.

In July 2021, our registration statement on Form S-4 (the “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. The Form 4 was subsequently amended pursuant to a Post-Effective Amendment to the Form S-4, which was declared effective by the Commission on April 13, 2022. 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. In April 2022 and October 2022, we issued 2,000,000 and 1,000,000 Series A-1 Preferred Units in exchange for 2,000,000 and 1,000,000 outstanding Series A Preferred Units, respectively, held by two financial institutions pursuant to the Form S-4 offering.

In February 2023, we issued 700,000 Series A-1 Preferred Units in exchange for 700,000 outstanding Series A Preferred Units held by a financial institution pursuant to the Form S-4 offering. The remaining 5,750,000 of outstanding Series A Preferred Units are eligible for exchange under the registration statement on the Form S-4 through July 2023.

Other Contractual Obligations

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

Cash Flows

In 2022, we used cash of $59.3 million, which was the net result of $21.1 million provided by operating activities, $278.6 million used in investing activities, and $198.2 million provided by financing activities.

Cash provided by operating activities totaled $21.1 million in 2022 compared to $33.9 million generated in 2021. The change was due to the following factors:

•

An increase of $27.5 million in net income, offset by the $24.3 million adjustment for the gain on sale of unconsolidated entities that is considered cash from investing activities;

•

A decrease of $7.2 million related to the unrealized gain on interest rate derivatives;

•

A decrease of $7.1 million related to changes in the preferred return receivable from unconsolidated entities;

•

A decrease of $1.7 million related to the amortization of bond premium, discount and origination fees;

•

A total decrease of $2.3 million in non-cash provisions for credit loss and loan loss;

•

An increase of $1.8 million adjustment for contingent interest that is considered cash from investing activities; and

•

An increase of $1.3 million related to the amortization of deferred financing costs.

Cash used in investing activities totaled $278.6 million in 2022 compared to cash used of $187.5 million in 2021. The change was due to the following factors:

•

A decrease of $113.1 million of cash due to MRB acquisitions and draw-down funding, offset by an increase of $57.3 million of cash due to MRB paydowns and redemptions;

•

A decrease of $75.4 million of cash due to continued advances on property loans, offset by an increase of $30.1 million due to property loan principal payments received;

•

A decrease of $11.7 million of cash due to taxable MRB acquisitions and draw-down funding;

•

A decrease of $6.0 million of cash due to advances on taxable GILs;

•

An decrease of $1.7 million of cash due to capital expenditures;

•

An increase of $21.5 million of cash due to greater proceeds from the sale of JV Equity Investments;

•

An increase of $4.4 million of cash due to lower fundings on GILs; and

•

An increase of $3.7 million of cash due to lower contributions to unconsolidated entities.

Cash provided by financing activities totaled $198.2 million in 2022 compared to cash provided of $182.5 million in 2021. The change was primarily due to the following factors:

•

A decrease of $31.2 million of cash related to proceeds from the sale of BUCs in September 2021;

•

A net decrease of $35.9 million of cash due to an increase in payments on the secured lines of credit;

•

A decrease of $18.0 million of cash due to greater distributions paid;

•

A net increase of $92.3 million of cash due to proceeds from debt financing;

•

A net increase of $7.5 million of cash due to a decrease in payments on the terminated unsecured line of credit; and

•

An increase of $1.4 million of cash related to the repurchase of BUCs in May 2021.

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 mark-to-market with 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 leverage level (the “Leverage Ratio”), as established by the Board of Managers of Greystone Manager. In February 2023, the Board of Managers of Greystone Manager approved an increase in the maximum Leverage Ratio from 75% to 80%. 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, 2022, our overall Leverage Ratio was approximately 73%.

Off Balance Sheet Arrangements

As of December 31, 2022 and 2021, we held MRB, GIL, taxable MRB, taxable GIL, and certain property loan investments 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 have entered into various commitments and guaranties. For additional discussions related to commitments and guaranties, see Note 18 to the consolidated financial statements.

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 those disclosed in Note 22 to the consolidated financial statements.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in Note 2 and 23 to the Partnership’s consolidated financial statements, which are incorporated by reference. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. 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, we must evaluate entities in which we hold a variable interest to determine if the entities are VIEs and if we are the primary beneficiary. A VIE’s primary beneficiary is 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. If we are deemed to be the primary beneficiary, then we must consolidate the VIEs in its consolidated financial statements. We have consolidated all VIEs where we are deemed the primary beneficiary. All transactions and accounts between the Partnership and the consolidated VIEs have been eliminated in consolidation when preparing the consolidated financial statements.

We reevaluate 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.

We do 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 our investment assets 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.

Greystone Housing Impact Investors LP GHI US Equity

GHI · 10-K · period ended 2022-12-31

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

Greystone Housing Impact Investors LP GHI US Equity☆

GHI · 10-K · period ended 2022-12-31

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

Greystone Housing Impact Investors LP GHI US Equity