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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 subsidiaries, and consolidated VIEs for all periods presented. All significant transactions and accounts between the Partnership and its subsidiaries and consolidated VIEs have been eliminated in consolidation. See Note 2 and Note 5 to the Partnership’s consolidated financial statements for further disclosure.

Executive Summary

The Partnership was formed in 1998 for the primary purpose of acquiring a portfolio of mortgage revenue bonds (“MRBs”) that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily, seniors housing and commercial properties. We also invest in governmental issuer loans (“GILs”), which are similar to MRBs, to provide construction financing for affordable multifamily and seniors 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, also known as our JV Equity Investments, for the construction, stabilization, and ultimate sale of market-rate multifamily and seniors housing 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”).

As of December 31, 2023, 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 25 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, 2023 and 2022 (dollar amounts in thousands):

For the Years Ended December 31,

2023 Percentage of Total 2022 Percentage of Total

Total revenues

Seniors and Skilled Nursing MRB Investments 1,711 1.6 % 713 0.9 %

Net income (loss)

Seniors and Skilled Nursing MRB Investments 802 1.5 % 705 1.1 %

Our reported net income includes unrealized gains (losses) from derivatives, which are a result of changes in current and forward interest rates. Valuation changes can be significant in periods of high interest rate volatility, especially for our interest rate swap agreements. Such gains (losses) are reported within “Net result from derivative transactions” on our consolidated statements of operations. The unrealized gains (losses) are non-cash gains (losses) and can cause variability in reported net income from period-to-period. The following table summarizes unrealized gains (losses) from derivative transactions by segment for the years ended December 31, 2023 and 2022 (dollar amounts in thousands):

For the Years Ended December 31,

Unrealized gains (losses) from derivative fair value adjustments

Affordable Multifamily MRB Investments $ (3,018 ) $ 7,240

Seniors and Skilled Nursing MRB Investments (155 ) -

Market-Rate Joint Venture Investments - -

MF Properties - -

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 positive environmental and sustainability impacts 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 the 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. The following table summarizes total funding commitments related to properties that were awarded both private activity bond cap and LIHTC allocations through state-specific QAPs during the years ended December 31, 2023 and 2022:

In 2021, we acquired an MRB investment secured by Meadow Valley, a to-be-constructed 174 bed 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.

We are committed to minimizing the overall environmental impact of our corporate operations. The Partnership’s operations are primarily managed by 16 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 very low-income (50% or less of area median income or "AMI") and low-income(80% or less 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 new MRB or GIL investments 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, 2023:

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 16 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 2002 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. Beginning on August 1, 2023, a majority of the members of the Greystone Manager Board of managers meet the independence standards established by the New York Stock Exchange listing rules and the rules of the SEC. 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 seven 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 2023:

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.

Our MRBs, taxable MRBs, GILs, taxable GILs and certain property loans are secured by a mortgage or deed of trust. 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

Provision for credit losses (2,347 ) - (2,347 ) N/A

Comparison of the years ended December 31, 2023 and 2022

Total revenues increased for 2023 as compared to the same period in 2022 due primarily to:

•

An increase of approximately $10.3 million in interest income from higher GIL investment balances and higher average interest rates;

•

An increase of approximately $11.9 million in interest income from recent MRB advances, offset by a decrease of approximately $4.0 million in interest income due to MRB redemptions and principal repayments;

•

An increase of approximately $8.3 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 $2.2 million of other interest income due to increasing interest earned on cash balances; and

•

A decrease of approximately $3.6 million in other interest income for payments received in 2022 on loans that were previously in non-accrual status that did not recur.

Total interest expense increased for 2023 as compared to the same period in 2022 due primarily to:

•

An increase of approximately $20.3 million due to higher average interest rates on debt financing, net of cash receipts received on interest rate swaps;

•

An increase of approximately $4.3 million due to an increase in the average outstanding principal of our debt financing instruments of approximately $147.6 million; and

•

A decrease of approximately $134,000 in amortization of deferred financing costs.

Net result from derivative transactions consists of realized and unrealized gains (losses) from our derivative financial instruments. The following table summarizes the components of this line item for the years ended December 31, 2023 and 2022 (dollar amounts in thousands):

For the Years Ended December 31,

Realized gains on derivatives, net $ (10,311 ) $ (5,856 )

Unrealized (gains) losses on derivatives, net 3,005 (7,240 )

Net result from derivative transactions $ (7,306 ) $ (13,096 )

The Partnership adopted the CECL standard effective January 1, 2023 and we recorded a cumulative effect of accounting change of approximately $5.9 million directly to Partners’ Capital as of the effective date. The provision for credit losses for the year ended December 31, 2023 relates to declining expected credit losses for our portfolio of GIL, taxable GIL and property loan investments and is primarily due to GIL and property loan redemptions during 2023, a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in the Partnership’s model to estimate the allowance for credit losses. There was no provision for credit losses for the year ended December 31, 2022, which was prior to the effective date of the CECL standard.

Segment net income for 2023 decreased as compared to the same period in 2022 as a result of the following factors:

•

The changes in line items detailed above; and

•

An increase in general and administrative expenses primarily due to increases of approximately $1.1 million in administration fees paid to AFCA2 due to greater assets under management, approximately $764,000 in employee compensation related to higher transactional bonuses and salaries, approximately $605,000 related to professional and consulting fees from increased transactional activity, and approximately $482,000 in restricted unit compensation expense.

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 2023 and 2022. 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:

Other income 311 -

Interest-bearing liabilities:

Fixed TEBS Residual financing 9,456 734 7.8 % - - N/A

Realized gains on interest rate swaps, net N/A (5,809 ) N/A N/A (140 ) N/A

Amortization of deferred finance costs 1,944 2,078

(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 $3.6 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 realized gains on the Partnership’s total return swap agreements that are directly tied to the Secured Notes.

(4)

Net interest spread equals interest income less interest expense, excluding amortization of deferred finance costs, and adjusted for realized gains (losses) on derivative instruments.

The following table summarizes the changes in interest income and interest expense between 2023 and 2022, 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 TEBS Residual financing 734 734 -

Fixed Term TOB trust financing (4 ) (2 ) (2 )

Realized gains on interest rate swaps, net (5,669 ) N/A (5,669 )

(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 $3.6 million for payments received on property loans that were previously in nonaccrual status during 2022.

(3)

Interest expense is reported net of realized gains on the Partnership's total return swap agreements that are directly tied to the Secured Notes.

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, 2023.

Our sole student housing property securing an MRB, Live 929 Apartments, was 67% occupied as of December 31, 2023, and is current on MRB debt service. Current occupancy is lower than in recent years due to on-site management issues during the Fall 2023 lease-up process. Certain personnel changes have been made and the property management team is focused on leasing to tenants at the nearby Johns Hopkins University medical campus.

The proton therapy center securing the Provision Center 2014-1 MRB was successfully sold out of bankruptcy in July 2022 and we received partial liquidation proceeds of approximately $3.7 million and approximately $729,000 in January 2023 and January 2024, respectively. We expect to recover additional liquidation of proceeds of approximately $199,000 at final liquidation in 2024.

Construction and rehabilitation activities continue at properties securing our GILs, taxable GILs and related property loans. Five of the nine underlying affordable multifamily properties had commenced leasing operations as of December 31, 2023. To date, these properties have not experienced any material supply chain disruptions for either construction materials or labor.

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 tax credits upon completion and stabilization of the projects. In certain instances, we may advance supplemental loans to the borrowers secured by the underlying properties if returns meet our requirements and/or if such loans are necessary to meet the 50% tax-exempt financing requirements under the LIHTC regulations. In the fourth quarter of 2023, the Partnership committed to fund additional supplemental loans to the Osprey Village and Willow Place Apartments properties up to $4.6 million and $3.3 million, respectively, to provide additional capitalized

interest reserves. In February 2024, all but $1.5 million of such supplemental loans were sold to an affiliate of the borrower for each loan at par plus accrued interest. We expect the remaining supplemental loans to be repaid from refinance proceeds at the same time as the existing GIL and property loan investments are redeemed.

Freddie Mac, through a servicer, has forward committed to purchase each GIL at maturity at par if the property has reached stabilization and other conditions are met. Each Freddie Mac forward commitment includes a forward committed interest rate that was set at the original closing of the GIL, with many committed rates being well below current market interest rates. Such forward committed rates significantly reduce refinance risk and incentivize borrowers to convert to the Freddie Mac loan to realize interest savings. During 2023, five of our GIL investments were purchased by Freddie Mac, through a servicer, and repaid in full. In addition, the Hope on Avalon GIL was purchased by Freddie Mac, through a servicer, and repaid in full in January 2024.

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 independent living, assisted living and memory care units.

As of December 31, 2023, we owned two MRBs with aggregate outstanding principal of $43.8 million, with an outstanding commitment to provide additional funding of $23.2 million on a draw-down basis during construction. The MRBs are secured by a new construction, combined independent living, assisted living and memory care property in Traverse City, MI, with 174 total beds and a skilled nursing facility in Monroe Township, NJ with 120 beds. Furthermore, in 2021 we funded a property loan secured by a skilled nursing facility in Houston, TX, that was redeemed in September 2022.

The following table compares the operating results for the Senior 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

Net result from derivative transactions (90 ) - (90 ) N/A

Comparison of the years ended December 31, 2023 and 2022

Total revenues increased for 2023 as compared to the same period in 2022 due primarily to:

•

An increase of approximately $1.7 million due to higher average principal balances; and

•

A decrease of approximately $654,000 due to the redemption of the Magnolia Crossing property loan in September 2022.

The increase in interest expense for 2023 as compared to the same period in 2022 is primarily due to approximately $957,000 in TOB interest expense during 2023 and approximately $41,000 of deferred financing costs amortization.

The net result from derivative transactions in 2023 is due to new derivative transactions entered into during 2023. There was no net result from derivative transactions for this segment in 2022.

The change in segment net income for the years ended December 31, 2023 and 2022 was primarily due to the change in the line items discussed above.

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. Our joint venture equity investments are passive in nature. Operational oversight of each property is controlled by our respective joint venture partners according to each respective entity’s operating agreement. The properties are predominately managed by property management companies affiliated with our joint venture partners. Decisions on when to sell an individual property are made by our respective joint venture partners based on their views of the local market conditions and current leasing trends.

We account for all our JV Equity Investments using the equity method and recognize our preferred returns during the hold period. Specifically for our Vantage JV Equity Investments, an affiliate of our Vantage joint venture partner provides a guaranty of our preferred returns through a date approximately five years after commencement of construction. 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 our 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

Earnings (losses) on investments in unconsolidated entities (18 ) - (18 ) N/A

Comparison of the years ended December 31, 2023 and 2022

The increase in total revenues in 2023 as compared to 2022 was primarily due to the following factors:

•

An increase of approximately $2.1 million of investment income related to preferred return received upon the sale of Vantage at Conroe in June 2023;

•

A net increase of approximately $1.5 million in investment income related to our various JV Equity Investments primarily from equity contributions during 2022 and 2023; and

•

A decrease of approximately $2.5 million of investment income related to the sales of Vantage at Murfreesboro in March 2022, Vantage at Westover Hills in May 2022, Vantage at O’Connor in July 2022, Vantage at Stone Creek in January 2023, and Vantage at Coventry in January 2023.

Interest expense for the years ended December 31, 2023 and 2022 was related to our General LOC that is primarily secured by our JV Equity Investments. The increase in interest expense is primarily due to a higher variable interest rate and a slight increase in average outstanding balances.

The gain on sale of JV Equity Investments for 2023 primarily consisted of the following:

•

The sale of Vantage at Stone Creek in January 2023 for a gain of approximately $9.1 million;

•

The sale of Vantage at Coventry in January 2023 for a gain of approximately $6.3 million; and

•

The sale of Vantage at Conroe in June 2023 for a gain of approximately $7.3 million.

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.

Earnings (losses) on investments in unconsolidated entities is the Partnership’s proportionate share of earnings (losses) using the equity method of accounting. Such investments typically incur losses during development and lease-up, consistent with development plans.

The change in segment net income for 2023 as compared to 2022 was primarily due to the change in the line items discussed above.

Operational Matters

We have noted no material construction cost overruns for securing materials and labor needed to construct the properties underlying our JV Equity Investments, despite general supply chain constraints noted in recent years. However, Vantage at McKinney Falls did experience cost overruns due to delayed utility connections to the site by the local municipality. The lack of water connections delayed vertical construction and caused the general contractor to incur additional general conditions costs to otherwise ensure progress in construction. In January 2024, we contributed additional equity of $1.0 million to cover cost overages related to these delays.

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 budgets. We have noted that some properties that are complete or nearing construction completion have incurred interest costs that have exceeded capitalized interest reserves, and such properties have utilized construction contingencies and developers have deferred a portion of their developer fee payments. In January 2024 and through the date of this report in February 2024, we advanced funds totaling $2.7 million across four Vantage JV Equity Investments to cover additional interest costs. We anticipate making additional investments in certain JV Equity Investments during the remainder of 2024 though the ultimate amount is uncertain. The amount of such additional funding will depend on various future developments, including, but not limited to, the pace of development, changes in interest rates, the pace of lease-up, and overall operating results of the underlying properties. Such additional equity may result in lower overall returns on our JV Equity Investments.

As of December 31, 2023, Vantage at Helotes, Vantage at Fair Oaks, and Vantage at Hutto have completed construction, are in the initial leasing phase, and are 86%, 66%, and 41% occupied as of December 31, 2023, respectively. Vantage at Tomball has achieved stabilization and been listed for sale as of December 31, 2023.

In February 2023, we executed an $8.2 million commitment for Valage Senior Living Carson Valley, a to-be-constructed seniors housing property in Minden, NV. The structure and terms of this JV Equity Investment are very similar to 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.

In July 2023, we executed a $16.5 million commitment for The Jessam at Hays Farms, a to-be-constructed 318 unit market rate multifamily housing property in Huntsville, AL, which is with a new, experienced developer partner. The terms of this JV Equity Investment are very similar to our Vantage and Freestone JV Equity Investments. This JV Equity Investment is held through ATAX Great Hill Holdings LLC, a wholly owned subsidiary of the Partnership, and diversifies our developer relationships for sourcing JV Equity Investments as well as our geographic areas of investment.

MF Properties Segment

As of December 31, 2023, the Partnership did not own any MF Properties. As of December 31, 2022, the Partnership owned the Suites on Paseo MF Property which was sold in December 2023. The Partnership sold The 50/50 MF Property to an unrelated non-profit organization in December 2022 in exchange for a seller financing property loan which is included in the MF Properties Segment.

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

Net result from derivative transactions 24 - 24 N/A

Gain on sale of real estate assets 10,363 - 10,363 N/A

Comparison of the years ended December 31, 2023 and 2022

The decrease in total revenues for the year ended December 31, 2023 as compared to the same period in 2022 is primarily due to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022. Revenues for The 50/50 MF Property were approximately $3.2 million for the year ended December 31, 2022.

The decrease in real estate operating expense for the year ended December 31, 2023 as compared to the same period in 2022 is due primarily to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022. Operating expenses for The 50/50 MF Property were approximately $1.6 million for the year ended December 31, 2022. In addition, operating expenses for the Suites on Paseo MF Property decreased approximately $429,000 due primarily to insurance proceeds from flood damage that offset expenses recognized in prior periods and lower management and marketing expenses.

The decrease in depreciation expense is primarily due to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022. Depreciation expense for The 50/50 MF Property was approximately $1.1 million for the year ended December 31, 2022.

The decrease in interest expense for the year ended December 31, 2023 as compared to the same period in 2022 is due primarily to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022 and the buyer's assumption of debt outstanding at the property. This was partially offset by interest from a variable rate mortgage on the Suites on Paseo MF Property that was executed in September 2023 and paid off with proceed from the sale of the property in December 2023.

The net result from derivative transactions in 2023 is due to a derivative transaction entered into during 2023. There was no net result from derivative transactions for this segment in 2022.

The gain on sale of real estate assets for 2023 was due to the sale of the Suites on Paseo MF Property in December 2023. In December 2022, we deferred the entire gain on sale of The 50/50 MF Property of approximately $6.6 million due to the Partnership receiving an unsecured property loan upon sale payable from future net cash flows of the property. The Partnership will recognize the deferred gain upon collection of principal of the unsecured property loan in future years.

The increase in segment net income (loss) for the year ended December 31, 2023 as compared to the same period in 2022 was due to the changes in the line items described above.

Operational Matters

In December 2023, the Partnership sold the Suites on Paseo MF Property for gross proceeds of approximately $40.7 million, resulting in a gain on sale of approximately $10.4 million, which represents a recovery of prior depreciation expense.

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. 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.

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, 2023 and 2022.

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, 2023. Debt service on our MRBs for the non-consolidated stabilized properties was current as of December 31, 2023. 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 CA 45 91 % 100 % 94 % 95 %

Harmony Court Bakersfield CA 96 95 % 96 % 93 % 90 %

Montecito at Williams Ranch Apartments CA 132 98 % 90 % 104 % 101 %

The Palms at Premier Park Apartments SC 240 97 % 98 % 86 % 88 %

Arbors at Hickory Ridge (4) 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)

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

Physical occupancy as of December 31, 2023 decreased from the same period in 2022 due primarily to occupancy declines at Live 929 Apartments and Avistar at the Parkway. Live 929 Apartments occupancy is lower than in recent years due to on-site management issues during the Fall 2023 lease-up process. Certain personnel changes have been made and the property management team is focused on leasing to tenants at the nearby Johns Hopkins University medical campus. Avistar at the Parkway's physical occupancy significantly declined during 2023 due to operational issues. The property owner made certain personnel changes and has indicated that leasing is improving in 2024. We will continue to monitor and discuss property operations with the individual borrowers for Live 929 Apartments and Avistar at the Parkway to ensure noted performance issues are addressed.

Economic occupancy for the year ended December 31, 2023 was consistent with the same period in 2022 overall. Decatur Angle and Bruton Apartments economic occupancies were much lower than past years due the removal of non-paying tenants upon the expiration of local COVID-related ordinances in mid-2023. The removals resulted in higher than historical bad debt write-offs, temporary declines in physical occupancy, and high repairs and maintenance costs to ready units to be leased to new tenants during

2023. Both properties made progress toward increasing occupancy in the fourth quarter of 2023 and we will continue to monitor and discuss property operations with the individual borrowers to ensure noted performance issues are addressed.

Restricted rents at affordable multifamily family properties are tied to changes in AMI, which has generally been increasing in the United States as overall wages increased significantly in 2021 through 2023. AMI is updated on a one-year lag, so restricted rental rates will increase on a similar lag and is realized upon annual lease renewals. On an overall basis, we noted same-property maximum rental income amounts increased 5.1% in 2023 as compared to 2022, which is higher than average historical annual rent increases. In addition, we observed an increase in same-property net rental revenue of 4.9% in 2023 as compared to 2022. As restricted rents adjust over time on a lag, increasing maximum rental income amounts may contribute to a temporary 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, 2023, these residential properties have not met the stabilization criteria (see footnote 3 below the table). As of December 31, 2023, the properties were current on debt service for the Partnership’s related MRBs, taxable MRBs, GILs, taxable GILs and property loans. 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)

MaryAlice Circle Apartments (4) GA 98 58 % n/a 39 % n/a

The Ivy Apartments (4) SC 212 76 % n/a 66 % n/a

The Park at Sondrio Apartments (5) SC 271 72 % 92 % 57 % n/a

The Park at Vietti Apartments (5) SC 204 82 % 92 % 60 % n/a

Windsor Shores Apartments (4) SC 176 93 % n/a 72 % n/a

The Safford (6) AZ 200 n/a n/a n/a n/a

40rty on Colony - Series P (6) CA 40 n/a n/a n/a n/a

Residency at Empire (6) CA 148 n/a n/a n/a n/a

Residency at the Entrepreneur (6) CA 200 n/a n/a n/a n/a

Residency at the Mayer (6) CA 79 n/a n/a n/a n/a

Village at Hanford Square (6) CA 100 n/a n/a n/a n/a

Handsel Morgan Village Apartments (6) GA 45 n/a n/a n/a n/a

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

Meadow Valley (6) MI 174 (8) n/a n/a n/a n/a

Village Point (4), (9) NJ 120 (9) 78 % (9) n/a n/a n/a

GIL Multifamily Properties-Non Stabilized (3)

Hope on Avalon (4), (7) CA 88 98 % n/a 79 % n/a

Poppy Grove I (6) CA 147 n/a n/a n/a n/a

Poppy Grove II (6) CA 82 n/a n/a n/a n/a

Poppy Grove III (6) CA 158 n/a n/a n/a n/a

Osprey Village (4) FL 383 9 % n/a 8 % n/a

Willow Place Apartments (6) GA 182 n/a n/a n/a n/a

Legacy Commons at Signal Hills MN 247 64 % 14 % 24 % 5 %

Sandy Creek Apartments (4) TX 140 82 % n/a 80 % 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 year ended December 31, 2022 as the related investment was under construction or rehabilitation. or was recently acquired.

(5)

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

(6)

Physical and economic occupancy information is not available for the years ended December 31, 2023 and 2022 as the property is under construction or rehabilitation or was recently acquired.

(7)

The physical occupancy and economic occupancy amounts are based on the latest available occupancy and financial information, which is as of September 30, 2023.

(8)

Meadow Valley is a seniors housing property with 174 beds in 154 units.

(9)

Village Point is a skilled nursing property with 120 beds in 92 units. Physical Occupancy is based on the daily average of beds occupied during the month of December 2023. Economic Occupancy is not applicable for skilled nursing properties.

As of December 31, 2023, seven MRB multifamily properties and one MRB seniors housing property were under construction and have no operating metrics to report. The Ivy Apartments, The Park at Sondrio Apartments, The Park at Vietti Apartments, and Windsor Shores Apartments MRB properties are currently undergoing tenant-in-place rehabilitations. The MaryAlice Circle Apartments MRB property is undergoing both rehabilitation and new construction phases.

As of December 31, 2023, four GIL properties were under construction and have no operating metrics to report. Sandy Creek Apartments recently began a significant rehabilitation while certain tenants remain in place. The remaining four GIL properties have substantially completed construction or rehabilitation and are in the lease-up phase.

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 serviceproviders.

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 Murfreesboro TN October 2020 n/a n/a n/a n/a March 2022 273,000

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

Operating Properties

Properties Under Construction

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

Vantage at McKinney Falls TX n/a 288 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

Valage Senior Living Carson Valley NV n/a 102 (4) n/a n/a n/a n/a n/a

The Jessam at Hays Farm AL n/a 318 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 Greenville TX n/a 300 n/a n/a n/a n/a n/a

Freestone Ladera TX n/a 288 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)

Valage Senior Living Carson Valley is a seniors housing property with 102 beds in 88 units.

(5)

The property is reported as a consolidated VIE as of December 31, 2023 (see Note 5 to the Partnership's consolidated financial statements).

Construction was completed on Vantage at Tomball and Vantage at Helotes during 2022 and both properties are considered stabilized. Both Vantage at Tomball and Vantage at Helotes previously achieved over 90% occupancy, though occupancy has declined slightly during the winter months due to seasonality. Vantage at Tomball was publicly listed for sale by its managing member in October 2023.

Vantage at Fair Oaks and Vantage at Hutto construction was completed in 2023. Both properties have commenced leasing activities and are leasing up in line with expectations.

Results of Operations

The tables and following discussions of our changes in results of operations for the years ended December 31, 2023 and 2022 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:

Gain on sale of real estate assets 10,363 - 10,363 N/A

Earnings (losses) from investments in unconsolidated entities (18 ) - (18 ) N/A

Discussion of Total Revenues and Other Income for the Year Ended December 31, 2023 and 2022

Investment income. The increase in investment income for the year ended December 31, 2023 as compared to the same period in 2022 was due to the following factors:

•

An increase of approximately $10.3 million in interest income from higher GIL investment balances and higher average interest rates;

•

An increase of approximately $13.6 million in interest income from recent MRB advances, offset by a decrease of approximately $4.0 million in interest income due to MRB redemptions;

•

An increase of approximately $1.0 million of investment income related to JV Equity Investments consisting of:

An increase of approximately $2.1 million related to preferred return received upon the sale of Vantage at Conroe in June 2023;

A net increase of approximately $1.5 million related to our various JV Equity Investments primarily from equity contributions during 2022 and 2023; and

A decrease of approximately $2.5 million related to the sales of Vantage at Murfreesboro in March 2022, Vantage at Westover Hills in May 2022, Vantage at O’Connor in July 2022, Vantage at Stone Creek in January 2023, and Vantage at Coventry in January 2023.

Property revenues. The decrease in property revenues for the year ended December 31, 2023 as compared to the same period in 2022 is primarily due to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022. Revenues for The 50/50 MF Property were approximately $3.2 million for the year ended December 31, 2022.

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 the year ended December 31, 2023 as compared to the same period in 2022 was due to the following:

•

An increase of approximately $8.3 million from higher average property loan, taxable MRB and taxable GIL investment balances of $45.8 million and higher average interest rates, partially offset by a decrease of approximately $1.0 million due to property loan redemptions in 2022 and 2023;

•

An increase of approximately $2.2 million due to increasing interest earned on cash balances; and

•

A decrease of approximately $3.6 million in other interest income for payments received in 2022 on loans that were previously in non-accrual status that did not recur.

Other income. Other income for the year ended December 31, 2023 related primarily to the receipt of non-refundable fees for the extension or conversion of various GIL, property loan and MRB investments. There was no other income for the year ended December 31, 2022.

Gain on sale of real estate assets. The gain on sale of real estate assets for the year ended December 31, 2023 related to the sale of the Suites on Paseo MF Property in December 2023. There was no gain on sale of real estate assets for the year ended December 31, 2022.

Gain on sale of investments in unconsolidated entities. The gain on sale of JV Equity Investments for the year ended December 31, 2023 primarily consisted of the following:

•

The sale of Vantage at Stone Creek in January 2023 for a gain of approximately $9.1 million;

•

The sale of Vantage at Coventry in January 2023 for a gain of approximately $6.3 million; and

•

The sale of Vantage at Conroe in June 2023 for a gain of approximately $7.3 million.

The gain on sale of JV Equity Investments for the year ended December 31, 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.

Earnings (losses) on investments in unconsolidated entities. The Partnership reports its share of earnings (losses) on investments in unconsolidated entities using the equity method of accounting. Such investments typically incur losses during development and lease-up, consistent with development plans.

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

For the Years Ended December 31,

Expenses:

Provision for credit losses (2,347 ) - (2,347 ) N/A

Discussion of the Total Expenses for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Real estate operating expenses. Real estate operating expenses are related to MF Properties and are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. Real estate operating expenses decreased for year ended December 31, 2023 as compared to the same period in 2022 primarily due to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022. Operating expenses for The 50/50 MF Property were approximately $1.6 million for the year ended December 31, 2022. Operating expenses for the Suites on Paseo MF Property decreased approximately $429,000 due primarily to insurance proceeds from flood damage that offset expenses recognized in prior periods and lower management and marketing expenses.

Provision for credit losses. The Partnership adopted the CECL standard effective January 1, 2023 and we recorded a cumulative effect of accounting change of approximately $5.9 million directly to Partners’ Capital as of the effective date. The provision for credit losses for the year ended December 31, 2023 relates to declining expected credit losses for our portfolio of GIL, taxable GIL and property loan investments and is primarily due to GIL and property loan redemptions during 2023, a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in the Partnership’s model to estimate the allowance for credit losses. There was no provision for credit losses for the year ended December 31, 2022, which was prior to the effective date of the CECL standard.

Depreciation and amortization expense. Depreciation and amortization relate primarily to the MF Properties. Depreciation and amortization expense decreased for the year ended December 31, 2023 as compared to the same period in 2022 due primarily to the sale of the Partnership's ownership interest in The 50/50 MF Property in December 2022. Depreciation expense for The 50/50 MF Property was approximately $1.1 million for the year ended December 31, 2022.

Interest expense. The increase in interest expense for the year ended December 31, 2023 as compared to the same period in 2022 was due to the following factors:

•

An increase of approximately $20.7 million due to higher average interest rates on variable-rate debt financing, net of receipts on interest rate swaps; and

•

An increase of approximately $4.7 million due to higher average principal outstanding of $151.7 million.

Net result from derivative transactions. Net result from derivative transactions consists of realized and unrealized gains (losses) from our derivative financial instruments. The following table summarizes the components of this line item for the years ended December 31, 2023 and 2022 (dollar amounts in thousands):

For the Years Ended December 31,

Realized gains on derivatives, net $ (10,545 ) $ (5,856 )

Unrealized (gains) losses on derivatives, net 3,173 (7,240 )

Net result from derivative transactions $ (7,372 ) $ (13,096 )

General and administrative expenses. The increase in general and administrative expenses for the year ended December 31, 2023 as compared to the same period in 2022 was primarily due to increases of approximately $1.1 million in administration fees paid to AFCA2 due to greater assets under management, approximately $764,000 in employee compensation related to higher transactional bonuses and salaries, approximately $605,000 related to professional and consulting fees from increased transactional activity, and approximately $482,000 in restricted unit compensation expense.

Discussion of Income Tax Expense for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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, 2023 and 2022.

Cash Available for Distribution - Non-GAAP Financial Measures

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 adjusts net income for the Partnership’s share of (earnings) losses of investments in unconsolidated entities as such amounts are primarily depreciation expenses and development costs that are expected to be recovered upon an exit event. 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, 2023 and 2022 (all per BUC amounts are presented giving effect to the BUCs Distributions described in Note 3 of the consolidated financial statements on a retroactive basis for all periods presented):

For the Years Ended December 31,

Provision for credit losses (1) (2,347,000 ) -

Realized impairment of securities (2) - (5,712,230 )

Realized provision for loan loss (3) - (593,000 )

Reversal of gain on sale of real estate assets (4) (10,363,363 ) -

Redeemable Preferred Unit distributions and accretion (2,868,578 ) (2,866,625 )

(Earnings) losses from investments in unconsolidated entities 17,879 -

Net income per BUC, basic $ 2.07 $ 2.59

Total CAD per BUC, basic $ 1.93 $ 2.34

Cash Distributions declared, per BUC $ 1.466 $ 1.687

BUCs Distributions declared, per BUC (7) $ 0.21 $ 0.40

(1)

The adjustment for the year ended December 31, 2023 reflects the change in allowances for credit losses under the CECL standard that was effective for the Partnership as of January 1, 2023 which requires the Partnership to update estimates of expected credit losses for our investments portfolio at each reporting date. The accounting for credit losses for the year ended December 31, 2022 was subject to previous accounting guidance that was generally applied incurred loss model rather than expected credit losses. There were no credit losses incurred using prior accounting guidance for the year ended December 31, 2022.

(2)

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 liquidation of the estate and the settlement of all remaining, receivables, payable and expenses such that the Partnership’s share of the proceeds can be distributed. Substantially all the assets of the borrower were liquidated in the third quarter of 2022 such that the Partnership’s loss was effectively realized.

(3)

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

(4)

The gain on sale of real estate assets from the sale of the Suites on Paseo MF Property represented a recovery of prior depreciation expense that was not reflected in the Partnership’s previously reported CAD, so the gain on sale was deducted from net income in determining CAD for 2023.

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

For the year ended December 31, 2023, Tier 2 income allocable to the General Partner consisted of approximately $3.8 million related to the gains on sale of Vantage at Stone Creek and Vantage at Coventry in January 2023 and approximately $813,000 related to the gain on sale of Vantage at Conroe in June 2023, offset by a $1.4 million Tier 2 loss allocable to the General Partner related to the Provision Center 2014-1 MRB realized in January 2023 upon receipt of the majority of expected bankruptcy liquidation proceeds.

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.

(6)

The Partnership determined there was a recovery of previously recognized impairment recorded for the Live 929 Apartments Series 2022A MRB prior to the adoption of the CECL standard effective January 1, 2023. The Partnership is accreting the recovery of prior credit loss for this MRB into investment income over

the term of the MRB consistent with applicable guidance. 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)

The Partnership declared three separate distributions during 2023 payable in the form of additional BUCs equal to $0.07 per BUC for outstanding BUCs as of the record dates of June 30, September 29, and December 29, 2023.

The Partnership declared two separate distributions during 2022 payable in the form of additional BUCs equal to $0.20 per BUC for outstanding BUCs as of the record dates of September 30 and December 30, 2022.

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 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, redemptions of various investment assets at the stated maturity dates, 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 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 our investments; and proceeds from asset redemptions and sales 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.

Sources of Liquidity

The Partnership’s principal sources of liquidity consist of:

•

Unrestricted cash on hand;

•

Operating cash flows from investment assets;

•

Secured lines of credit;

•

Proceeds from the redemption or sale 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, 2023, we reported unrestricted cash on hand of approximately $37.9 million. There are no contractual restrictions on our ability to use unrestricted cash on hand. The Partnership has a financial covenant to maintain a minimum consolidated liquidity of $5.0 million under the terms of our various financing arrangements.

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, 2023, except for the Provision Center 2014-1 MRB. Investment receipts, net of interest expense on related debt financing 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 dependent upon the generation of net cash flows at multifamily properties that underlie these investments. These 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 capitalized 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 property. The developers may also make cash payments to pay interest due to avoid claims under their payment and completion guaranties.

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 35% multiplied by the aggregate value of a pool of eligible encumbered assets. Eligible encumbered assets consist of 100% of our equity capital contributions to JV Equity Investments, subject to certain limits and restrictions. The General LOC is secured by first priority security interests in our JV Equity Investments. We have the ability to increase the total maximum commitment by $20.0 million to $60.0 million, subject to the identification of lenders to provide the additional commitment, the payment of certain fees, and other conditions. We will evaluate whether to increase the commitment based on the size of the borrowing base, liquidity needs and costs of such additional commitments. We are subject to various affirmative and negative covenants that, among others, require us to maintain consolidated liquidity of not less than $5.0 million (which will increase up to a maximum of $7.5 million if the maximum available commitment is fully increased to $60.0 million) and maintain a consolidated tangible net worth of not less than $200.0 million. We were in compliance with all covenants as of December 31, 2023. The balance of the General LOC was $16.5 million with the ability to draw an additional $22.6 million as of December 31, 2023. The General LOC has a maturity date of June 2025, with options to extend for up to two additional years, subject to certain terms and conditions.

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, 2023. There was $16.9 million outstanding on the Acquisition LOC, which was entirely repaid in January 2024. Approximately $50.0 million was available as of January 31, 2024. 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 Redemption or Sale of Assets

We may, from time to time, experience redemptions of or execute sales of our investments in MRBs, GILs, property loans, JV Equity Investments and MF Properties consistent with our strategic plans. Borrowers on certain of our MRBs, GILs, and property loans have the right to prepay amounts outstanding prior to contractual maturity which would result in the return of our capital, net of repayment of leverage on the related asset.

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 investments with similar terms. 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 assets.

Our JV Equity Investments are passive in nature and 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. We are entitled to proceeds upon the sales of JV Equity Investments in accordance with the terms of the entity operating agreement. The following table summarizes the proceeds from sales of our JV Equity Investments during 2023, inclusive of the return of our initial equity investments:

Property Name Location Units Month Sold Gross Proceeds to the Partnership

In February 2023, the Greens of Pine Glen MRBs and property loans were redeemed. We received approximately $10.9 million of cash proceeds upon redemption of the MRBs and property loan. Related TEBS financing principal of $7.6 million was paid down upon redemption.

In December 2023, we completed the sale of the Suites on Paseo MF Property for gross proceeds of approximately $40.7 million. A portion of the proceeds were used to pay closing costs and to repay $25.0 million of principal on our mortgage payable.

Many of our GIL and property loan investments have maturity dates within the next 12 months, which will be purchased by Freddie Mac, through a servicer, or repaid by the borrower on or before the maturity at prices equal to the principal outstanding plus accrued interest. Such proceeds will be primarily used to repay our related debt financing. We regularly monitor the progress of the underlying properties and the likelihood of redemption upon maturity and currently have no concerns regarding repayment. Borrowers of certain GIL and property loan investments may request an extension of the maturity dates up to six months, subject to meeting various conditions, obtaining an approval of Freddie Mac to extend the maturity date of the forward purchase commitment, and payment of an extension fee to us.

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, 2023, our primary unleveraged assets were certain MRBs and taxable MRBs with outstanding principal totaling approximately $51.7 million, of which approximately $27.3 million of assets were securitized into a TOB financing for gross proceeds of $21.8 million in February 2024.

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 (the “Shelf 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 Shelf Registration Statement may be senior or subordinate obligations of the Partnership. The Shelf 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, 2023, 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.

During the year ended December 31, 2023, we issued a total of 1,800,000 Series A-1 Preferred Units to two financial institutions under the registration statement for the Series A-1 Preferred Units offering referenced in the table above for gross proceeds of $18.0 million.

Additionally, in February 2024, we issued 500,000 Series B Preferred Units to a new investor under the registration statement on Form S-3 for the Series B Preferred Units offering referenced in the table above for gross proceeds of $5.0 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, the TEBS Residual Financing, mortgages payable, and secured lines of credit;

•

Distributions paid to holders of Preferred Units and BUCs;

•

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. 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, 2023:

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 16 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 TOB trust financing facility was created in February 2024.

(7)

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%.

(8)

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%.

(9)

All draws to date on this investment, if applicable, were funded with available cash or proceeds from the Acquisition LOC. The Partnership intends to securitize the assets in TOB financing facilities for additional principal proceeds. See Note 16 for further details on debt financing.

(10)

The interest rate will convert to a variable rate of Term SOFR + 3.35% on February 1, 2025.

(11)

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

(12)

A development site has been identified for this property but construction had not commenced as of December 31, 2023.

(13)

In July 2023, the Partnership's initial commitment of $16.3 million was increased by $1.9 million upon meeting certain conditions as outlined in the original agreement.

(14)

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

We will consider providing additional financing to borrowers on our debt investments or additional equity to our JV Equity Investments above our original commitments if requested by the borrowers and managing members, respectively, on a case-by-case basis. When considering whether to fund such requests, we will consider various factors including, but not limited to, the economic

return on additional investments in the entity, the impact to the Partnership’s credit and investment risk from either funding or withholding funding, and the requesting entity’s other available sources of funding.

In January 2024 and through the date of this report in February 2024, we advanced additional capital totaling $2.7 million across four Vantage JV Equity Investments. The additional capital was used to cover development costs overruns, primarily due to higher than anticipated interest costs. We anticipate making additional investments in certain JV Equity Investments during 2024 though the ultimate amount is uncertain. The amount of such additional funding will depend on various future developments, including, but not limited to, the pace of development, changes in interest rates, the pace of lease-up, and overall operating results of the underlying properties.

Debt Service on Debt Financings, the TEBS Residual Financing, 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 senior 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.

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.

Our debt financing arrangements include various fixed and variable rate debt arrangements. Recent increases in short-term interest rates have resulted in increases in the interest costs associated with our variable rate 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, 2023 and 2022:

(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 rate debt financings are generally determined by the senior securities remarketing agent as the rate necessary to remarket any senior 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 various 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. We are currently a net receiver on our portfolio of interest rate swaps and received net settlement proceeds totaling $5.6 million during the year ended December 31, 2023.

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, 2023. The following table summarizes the average stated SOFR-denominated notional amount by year for our existing interest rate swaps (before applying our assumed 70% ratio of tax-exempt municipal securitiesrates to SOFR):

Year Average Notional

The table above does not include an additional interest rate swap executed in January 2024 with a notional amount of approximately $38.7 million through February 2027 to hedge variable rate TOB financings.

When we execute a TOB trust financing, we retain a residual interest that is pledged as our initial collateral under the ISDA master agreement based on the market value of the investment asset(s) at the time of initial closing. If the net aggregate value of our investment assets in TOB trust financings and our interest rate swap agreements decline below a certain threshold, then we are required to post additional collateral with our counterparties. We posted approximately $9.4 million of net cash collateral with Mizuho during the year ended December 31, 2023 due to declines in the value of our fixed interest rate investment assets funded with TOB trusts resulting from generally rising market interest rates. In addition, we posted additional cash collateral of approximately $5.8 million in January 2024 and through the date of this report in February 2024 due to further valuation declines on our fixed rate investment assets funded with TOB trusts. We satisfied all collateral calls using 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. The valuation of our interest rate swaps move inversely with the change in valuation of our investment assets, so the change in valuation of our interest rate swaps partially offset the change in value of our investment assets when determining the amount of collateral posting requirements.

Our TEBS Residual Financing is secured by the cash flows from the residual certificates of our TEBS financings. Interest due on the TEBS Residual Financing is at a fixed rate of 7.125% per annum and 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 TEBS Residual Financing. The TEBS Residual Financing is non-recourse financing to the Partnership and is not subject to mark-to-market collateral posting.

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 7. The General LOC does not require principal payments until maturity in June 2025 so 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, 2023:

Secured Lines of Credit Debt Financing Mortgages Payable Total

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 Units, if declared by the General Partner, are paid quarterly at an annual fixed rate of 3.0%. Distributions to the holders of Series B Preferred Units, if declared by the General Partner, are paid quarterly at an annual fixed rate of 5.75%. 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 13, 2023, we announced that the Board of Managers of Greystone Manager, which is the general partner of the General Partner, declared a quarterly cash distribution of $0.37 per BUC to unitholders of record on December 29, 2023 and payable on January 31, 2024. The Board of Managers of Greystone AF Manager also declared a supplemental distribution payable in the form of additional BUCs equal to $0.07 per BUC, which was paid on January 31, 2024 at a ratio of 0.00415 BUCs for each BUC outstanding as of December 29, 2023. All fractional BUCs resulting from the BUCs Distribution received cash for such fraction based on the market value of the BUCs on the record date.

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. On December 13, 2023, the Partnership announced that the Board intends to declare an additional supplemental distribution of $0.07 per BUC payable in the form of additional BUCs during the first quarter of 2024.

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 Partnership redeemed $30.0 million of Series A Preferred Units during the year ended December 31, 2023. We previously received notice from a holder of Series A Preferred Units of its intent to redeem $10.0 million of Series A Preferred Units in March 2024. After this redemption, there will be no Series A Preferred Units outstanding.

As of December 31, 2023, we have issued $55.0 million of Series A-1 Preferred Units. Upon the sixth anniversary of the closing of the sale of Series A-1 Preferred Units to a subscriber, and upon each anniversary thereafter, each holder of Series A-1 Preferred Units has the right to redeem, in whole or in part, the Series A-1 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 earliest redemption dates for the outstanding Series A-1 Preferred Units range from April 2028 to June 2029.

In January 2024, we issued 1,750,000 Series B Preferred Units in exchange for 1,750,000 outstanding Series A Preferred Units, held by a financial institution pursuant to a Form S-4 registration statement which we previously filed to register the offering of up to 1,750,000 of Series B Preferred Units in exchange for the Partnership’s outstanding Series A Preferred Units. The new Series B Preferred Units will not be eligible for redemption until the sixth anniversary of the date of the exchange in January 2030, except in certain limited circumstances.

The Preferred Unit holders must provide notice of their election to redeem no less than 180 days prior to such optional redemption dates. If the holders of the 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.

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 2023, we used cash of $44.9 million, which was the net result of $24.9 million provided by operating activities, $53.6 million provided by investing activities, and $123.4 million used in financing activities.

Cash provided by operating activities totaled $24.9 million in 2023 compared to $21.1 million generated in 2022. The change was due to the following factors:

•

A decrease of $11.6 million in net income and $10.4 million adjustment for the gain on sale of real estate assets in 2023, offset by the decrease of $17.1 million adjustment for the gain on sale of unconsolidated entities that are both considered cash from investing activities;

•

An increase of $10.2 million related to a reduction in the net unrealized gains on interest rate derivatives.

•

An increase of $3.2 million of cash related to changes in the Partnership's net operating assets and liabilities;

•

An increase of $1.7 million related to the amortization of bond premium, discount and acquisition fees;

•

A decrease of $4.0 million related to changes in the preferred return receivable from unconsolidated entities; and

•

A decrease of $2.3 million in non-cash provisions for credit loss.

Cash provided by investing activities totaled $53.6 million in 2023 compared to cash used of $278.6 million in 2022. The change was due to the following factors:

•

An increase of $40.0 million of cash due to proceeds for the sale of the Suites on Paseo MF Property in December 2023;

•

A net increase of $174.0 million of cash due to lower advances on MRBs, taxable MRBs, GILs, taxable GILs and property loans;

•

A net increase of $141.2 million of cash due to overall higher paydowns and redemptions of MRBs, taxable MRBs, GILs and property loans; and

•

A decrease of $22.7 million of cash due to less proceeds from the sale of investments in unconsolidated entities.

Cash used in financing activities totaled $123.4 million in 2023 compared to cash provided of $198.2 million in 2022. The change was primarily due to the following factors:

•

A net decrease of $282.2 million of cash due to principal payments on debt financing;

•

A net decrease of $31.9 million of cash due to an increase in payments on the secured lines of credit;

•

A decrease of $30.0 million of cash paid for the redemption of Series A Preferred Units, offset by an increase of $18.0 million of cash related to proceeds from the issuance of Series A-1 Preferred Units; and

•

An increase of $4.1 million of cash due to lower distributions paid.

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

Leverage Ratio

We set target constraints for each type of financing utilized by us. Those constraints are dependent upon several factors, including the assets being leveraged, the tenor of the leverage program, whether the financing is subject to mark-to-market 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 80% maximum leverage level (the “Leverage Ratio”), as established by the Board of Managers of Greystone Manager. The Board of Managers of Greystone Manager retains the right to change the maximum Leverage Ratio in the future based on the consideration of factors the Board of Managers considers relevant. We calculate our Leverage Ratio as total outstanding debt divided by total assets using cost adjusted for paydowns for MRBs, GILs, property loans, taxable MRBs and taxable GILs, and initial cost for deferred financing costs and real estate assets. As of December 31, 2023, our overall Leverage Ratio was approximately 72%.

Off Balance Sheet Arrangements

As of December 31, 2023 and 2022, 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.

As of December 31, 2023, we own noncontrolling equity interests in various unconsolidated entities for the development of market rate multifamily and seniors housing properties. We account for these equity interests using the equity method of accounting and the assets, liabilities, and operating results of the underlying entities are not included in our consolidated financial statements.

We have entered into various financial commitments and guaranties. For additional discussions related to commitments and guaranties, see Note 19 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 23 to the consolidated financial statements.

Critical Accounting Estimates

Our significant accounting policies are more fully described in Note 2 and 24 to the Partnership’s consolidated financial statements, which are incorporated by reference. The preparation of financial statements in 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 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 evaluate entities in which we hold a variable interest to determine if the entities are VIEs and if we are the primary beneficiary. There is a significant amount of judgment required to determine if an entity is considered a VIE and if we are the primary beneficiary. We first perform a qualitative analysis, which requires certain subjective decisions regarding our assessment, including, but not limited to, which interests create or absorb variability, the contractual terms, the key decision-making powers, impact on the VIE’s economic performance and related party relationships. In certain cases, the analysis requires evaluations of quantitative matters such as the investment equity at risk and shares of voting rights. We reevaluate VIEs at each reporting date based on events and circumstances at the VIEs, which may change over time. As a result, changes to the consolidated VIEs may occur in the future based on changes in circumstances.

Greystone Housing Impact Investors LP GHI US Equity

GHI · 10-K · period ended 2023-12-31

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 2023-12-31

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

Greystone Housing Impact Investors LP GHI US Equity