10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the fiscal year ended December 31, 2024
OR
For the transition period from to
Commission File Number: 001-41564
GREYSTONE HOUSING IMPACT INVESTORS LP
(Exact name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
(402) 952-1235
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the registrant’s BUCs held by non-affiliates based on the final sales price of the BUCs on the last business day of the registrant’s most recently completed second fiscal quarter was $344,931,446.
DOCUMENTS INCORPORATED BY REFERENCE
None
INDEX
PART I
Item 1 Business 10
Item 1A Risk Factors 24
Item 1B Unresolved Staff Comments 44
Item 1C Cybersecurity 44
Item 2 Properties 45
Item 3 Legal Proceedings 46
Item 4 Mine Safety Disclosures 46
PART II
Item 6 [Reserved]
Item 7A Quantitative and Qualitative Disclosures About Market Risk 86
Item 8 Financial Statements and Supplementary Data 90
Item 9A Controls and Procedures 159
Item 9B Other Information 159
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 159
PART III
Item 10 Directors, Executive Officers and Corporate Governance 160
Item 11 Executive Compensation 163
Item 14 Principal Accountant Fees and Services 168
PART IV
Item 15 Exhibits and Financial Statement Schedules 170
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Defined Terms
The following acronyms and defined terms are used in various sections of this Report, including the Notes to Consolidated Financial Statements in Item 8 and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7. All references to “we,” “us,” “our” and the “Partnership” in this Report mean Greystone Housing Impact Investors LP, its wholly owned subsidiaries and our consolidated VIEs.
2022 BUCs Distributions - A distribution completed on October 31, 2022 in the form of additional BUCs at a ratio of 0.01044 BUCs for each BUC outstanding as of September 30, 2022, and a distribution completed on January 31, 2023 in the form of additional BUCs at a ratio of 0.0105 BUCs for each BUC outstanding as of December 30, 2022, collectively.
2023 BUCs Distributions - A distribution completed on July 31, 2023 in the form of additional BUCs at a ratio of 0.00448 BUCs for each BUC outstanding as of June 30, 2023, a distribution completed on October 31, 2023 in the form of additional BUCs at a ratio of 0.00418 BUCs for each BUC outstanding as of September 29, 2023, and a distribution completed on January 31, 2024 in the form of additional BUCs at a ratio of 0.00415 BUCs for each BUC outstanding as of December 29, 2023, collectively.
2024 PFA Securitization Transaction - A securitization transaction to finance credit-enhanced custodial receipts related to 14 MRBs through the Wisconsin Public Finance Authority.
2024 PFA Securitization Bonds - Fourteen MRBs associated with the 2024 PFA Securitization Transaction. Senior and residual custodial receipts were created for each of the MRBs representing partial interests in the MRBs. The senior custodial receipts were sold to the Wisconsin Public Finance Authority and cash flows from the senior custodial receipts will be used to pay debt service on the Affordable Housing Multifamily Certificates associated with the 2024 PFA Securitization Transaction. The residual custodial receipts were sold to the Wisconsin Public Finance Authority and cash flows from the residual custodial receipts will be used to pay debt service on the Affordable Housing Multifamily Certificates associated with the TEBS Residual Financing.
Acquisition LOC - The amended and restated credit agreement for a secured non-operating line of credit between the Partnership and Bankers Trust Company.
Affordable Housing Multifamily Certificates - Senior and/or residual interests in the 2024 PFA Securitization Transaction and the TEBS Residual Refinancing.
Agent(s) - JonesTrading Institutional Services LLC and BTIG, LLC as named agents under the Sales Agreement.
AMI - Area median income, as calculated by the United States Department of Housing and Urban Development.
ASC - Accounting standards codification of the Financial Accounting Standards Board.
ASU - Accounting standards update issued by the Financial Accounting Standards Board.
Audit Committee - The audit committee of the Board of Managers of Greystone Manager, which effectively serves as the audit committee of the Partnership.
BankUnited - BankUnited, N.A.
Barclays - Barclays Bank PLC.
Board of Managers - The Board of Managers of Greystone Manager, which acts as the directors of the Partnership.
BUC(s) - Beneficial Unit Certificate(s) representing assigned limited partnership interests of the Partnership.
BUCs Distributions - The 2022 BUCs Distributions, the 2023 BUCs Distributions, and the First Quarter 2024 BUCs Distribution, collectively.
BUC Holder(s) - A beneficial owner of BUCs.
CAD - Cash Available for Distribution, a non-GAAP measure reported by the Partnership.
C-PACE - Commercial Property Assessed Clean Energy.
CECL - Current expected credit losses as measured in accordance with ASC – Topic 326.
Class A TEBS Certificates - Class A Freddie Mac Multifamily Variable Rate Certificates or Class A Freddie Mac Multifamily Fixed Rate Certificates, which represent beneficial interests in the TEBS securitized assets. These are senior securities credit enhanced by Freddie Mac that are sold to unaffiliated investors and entitle the holders to cash flows from the TEBS securitized assets and are accounted for as debt financings of the Partnership.
Class B TEBS Certificates - Class B Freddie Mac Multifamily Variable Rate Certificates or Class B Freddie Mac Multifamily Fixed Rate Certificates, which represent beneficial interests in the TEBS securitized assets. These are residual interests retained by the TEBS
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Sponsors and grant the Partnership rights to certain cash flows from the securitized assets after payment to the Class A TEBS Certificates and related facility fees, as well as certain other rights to the TEBS securitized assets.
Committee - The Board of Managers or any such committee designated by the Board of Managers to administer the Equity Incentive Plan.
CRA - Community Reinvestment Act of 1977.
Construction Lending JV - A joint venture with BlackRock Impact Opportunities to invest in loans which will finance the construction and/or rehabilitation of affordable multifamily housing properties across the United States. The Partnership is the managing member of the joint venture.
DEI - Diversity, equity, and inclusion.
Equity Incentive Plan - The Amended and Restated Greystone Housing Impact Investors LP 2015 Equity Incentive Plan.
Fannie Mae - The Federal National Mortgage Association.
FASB - The Financial Accounting Standards Board.
FFIEC - The Federal Financial Institution Examination Council.
FHA - The Federal Housing Administration.
Financed Assets - Purchased investments funded by advances from the Acquisition LOC.
First Quarter 2024 BUCs Distribution - A distribution completed on April 30, 2024 in the form of additional BUCs at a ratio of 0.00417 BUCs for each BUC outstanding as of March 28, 2024.
Freddie Mac - The Federal Home Loan Mortgage Corporation.
GAAP - Accounting principles generally accepted in the United States of America.
General LOC- A general secured line of credit with three financial institutions where BankUnited serves as the sole lead arranger and administrative agent.
General Partner - America First Capital Associates Limited Partnership Two, which is the general partner of the Partnership.
GIL(s) - Governmental issuer loan(s).
Greens Hold Co - Greens of Pine Glen - AmFirst LP Holding Corporation., a wholly owned corporation of the Partnership.
Greystone - Greystone & Co. II LLC, collectively with its affiliates.
Greystone Manager - Greystone AF Manager LLC, which is the general partner of the General Partner.
Greystone Select - Greystone Select Incorporated, an affiliate of the Partnership.
Greystone Servicing – Greystone Servicing Company LLC, an affiliate of the Partnership.
GSE(s) - U.S. Government-sponsored entities, such as Freddie Mac and Fannie Mae.
Initial Limited Partner - Greystone ILP, Inc., a Delaware corporation.
Investment Company Act - The Investment Company Act of 1940, as amended, that is administered and enforced by the SEC.
IRC - Internal Revenue Code.
ISDA - International Swaps and Derivatives Association.
JV Equity Investment(s) - A noncontrolling equity investment in an unconsolidated entity owned by the Partnership for the development of market rate multifamily properties, which excludes the Construction Lending JV.
Leverage Ratio - An overall 80% maximum leverage level, as established by the Board of Managers of Greystone Manager.
LIHTC(s) - Low income housing tax credit(s).
Liquidation Proceeds - All cash receipts of the Partnership (other than operating income and sale proceeds) arising from the liquidation of the Partnership’s assets in the course of the dissolution of the Partnership, as defined in the Partnership Agreement.
Managers - Members of the Board of Managers of Greystone Manager.
MF Property - A multifamily, student, or senior citizen residential property owned by the Partnership.
Mizuho - Mizuho Capital Markets LLC.
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MRB(s) - Mortgage revenue bond(s).
Net Interest Income - Income allocation as defined in the Partnership Agreement.
Net Residual Proceeds - Residual proceeds as defined in the Partnership Agreement.
NOLs - Net operating losses.
NYSE - New York Stock Exchange.
Partnership - Greystone Housing Impact Investors LP, its consolidated subsidiaries, and consolidated variable interest entities.
Partnership Agreement- Greystone Housing Impact Investors LP Second Amended and Restated Agreement of Limited Partnership dated as of December 5, 2022, as further amended.
Preferred Unit(s) - Collectively, the three series of non-cumulative, non-voting, non-convertible preferred units that represent limited partnership interests in the Partnership consisting of the Series A Preferred Units, the Series A-1 Preferred Units, and the Series B Preferred Units.
PwC - PricewaterhouseCoopers LLP, an independent registered public accounting firm.
QAP - Qualified allocation plan.
Report - This Annual Report on Form 10-K for the year ended December 31, 2024, unless otherwise specified.
RUA(s) - Restricted unit awards issued under the Equity Incentive Plan.
SEC - Securities and Exchange Commission.
Sales Agreement- The Amended and Restated Capital on DemandTM Sales Agreement with JonesTrading Institutional Services LLC and BTIG, LLC, as agents.
Secured Credit Agreement - The secured credit agreement executed in connection with the General LOC.
Secured Notes- Secured notes issued by ATAX TEBS Holdings, LLC to Mizuho Capital Markets LLC.
Shelf Registration Statement - The Partnership’s Registration Statement on Form S-3 for the issuance of up to $300.0 million of BUCs, Preferred Units, or debt securities, which was declared effective by the SEC in December 2022.
SIFMA - The SIFMA Municipal Swap Index, which is an index that measures short-term tax-exempt interest rates, as calculated and reported by the Securities Industry and Financial Markets Association.
SOFR - Secured Overnight Funding Rate as published by the Federal Reserve Bank of New York.
TEBS - Tax Exempt Bond Securitization financing with Freddie Mac.
TEBS Certificates - Class A and Class B Freddie Mac Multifamily Variable Rate Certificates or Class A and Class B Freddie Mac Multifamily Fixed Rate Certificates issued pursuant to a TEBS Financing.
TEBS Financing(s) - The M24 TEBS financing, the M31 TEBS financing, the M33 TEBS financing, and the M45 TEBS financing, individually or collectively.
TEBS Residual Financing - A securitization transaction to finance the Partnership’s residual interests in the M33 and M45 TEBS financings and the residual custodial receipts associated with the 2024 PFA Securitization Bonds.
TEBS Sponsor(s) - The special purpose entities ATAX TEBS I, LLC, ATAX TEBS II, LLC, ATAX TEBS III, LLC, and ATAX TEBS IV, LLC, individually or collectively.
TEL Financing(s) - Tax Exempt Loan financing product of Freddie Mac, which can be issued as an immediate funding or forward commitment.
Tier 2 income - Net Interest Income and Net Residual Proceeds characterized as Net Interest Income (Tier 2) and Net Residual Income (Tier 2) allocated 75% to the BUCs and 25% to the General Partner in accordance with the terms of the Partnership Agreement.
TOB - Tender option bond.
Term SOFR - The one-month forward looking term Secured Overnight Financing Rate as published by CME Group Benchmark Administration Limited.
UBTI - Unrelated business taxable income under the rules of the IRC.
Unitholder(s) - Holder(s) of BUCs and/or Preferred Units.
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Vantage Properties - JV Equity Investmentswhere the Vantage development group is the managing member.
VIE(s) - Variable interest entity (entities).
WARM - The Weighted Average Remaining Maturity method loss-rate model used by the Partnership to estimate the allowance for credit losses for certain investment assets and related unfunded commitments.
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PART I
Forward-Looking Statements
This Report (including, but not limited to, the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. When used, statements which are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements. We have based forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. This Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves several assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this report, and accordingly, we cannot guarantee their accuracy or completeness. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Risk Factors” in Item 1A of this report.
These forward-looking statements are subject, but not limited to, various risks and uncertainties, including those relating to:
•
defaults on the mortgage loans securing our MRBs and GILs
•
the competitive environment in which we operate;
•
risks associated with investing in multifamily, student, senior citizen residential properties and commercial properties;
•
general economic, geopolitical, and financial conditions, including the current and future impact of changing interest rates, inflation, and international conflicts (including the Russia-Ukraine war and the Israel-Hamas war) on business operations, employment, and financial conditions;
•
uncertain conditions within the domestic and international macroeconomic environment, including monetary and fiscal policy and conditions in the investment, credit, interest rate, and derivatives markets;
•
adverse reactions in U.S. financial markets related to actions of foreign central banks or the economic performance of foreign economies, including in particular China, Japan, the European Union, and the United Kingdom;
•
the general condition of the real estate markets in the regions in which we operate, which may be unfavorably impacted by pressures in the commercial real estate sector, incrementally higher unemployment rates, persistent elevated inflation levels, and other factors;
•
changes in interest rates and credit spreads, as well as the success of any hedging strategies we may undertake in relation to such changes, and the effect such changes may have on the relative spreads between the yield on our investments and our cost of financing;
•
the aggregate effect of elevated inflation levels over the past several years, spurred by multiple factors including expansionary monetary and fiscal policy, higher commodity prices, a tight labor market, and low residential vacancy rates, which may result in continued elevated interest rate levels and increased market volatility;
•
our ability to access debt and equity capital to finance our assets;
•
current maturities of our financing arrangements and our ability to renew or refinance such financing arrangements;
•
local, regional, national, and international economic and credit market conditions;
•
recapture of previously issued LIHTCs in accordance with Section 42 of the IRC;
•
geographic concentration of properties related to our investments; and
•
changes in the U.S. corporate tax code and other government regulations affecting our business.
Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
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All references to “we,” “us,” “our” and the “Partnership” in this Report mean Greystone Housing Impact Investors LP, its wholly owned subsidiaries and our consolidated VIEs. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Report for additional details.
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Item 1. Business.
Organization
The Partnership was formed in 1998 for the primary purpose of acquiring a portfolio of MRBs that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily housing, seniors housing and commercial properties. The Partnership has also invested in GILs, which, similar to MRBs, provide financing for affordable multifamily properties. We expect and believe the interest received on our MRBs and GILs is excludable from gross income for federal income tax purposes. We 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.
The Partnership also makes JV Equity Investments for the construction, stabilization, and ultimate sale of market-rate multifamily and seniors housing properties. The Partnership is entitled to distributions if, and when, cash is available for distribution either through operations, a refinance, or a sale of the property.
The Partnership previously held interests in market-rate multifamily MF Properties. The Partnership sold its last remaining MF Property investment in December 2023.
The conduct of the Partnership’s business and affairs is governed by the Partnership Agreement. Our sole general partner is the General Partner. The general partner of our General Partner is Greystone Manager, which is an affiliate of Greystone. Greystone is a real estate lending, investment, and advisory company with an established reputation as a leader in multifamily and healthcare finance, having ranked as a top FHA, Fannie Mae, and Freddie Mac lender in these sectors.
The Partnership has issued BUCs representing assigned limited partnership interests to BUC holders. Our BUCs are traded on the NYSE under the symbol “GHI.” The Partnership has designated three series of non-cumulative, non-voting, non-convertible preferred units that represent limited partnership interests in the Partnership consisting of the Series A, Series A-1, and Series B Preferred Units. The Partnership does not intend to issue additional Series A Preferred Units in the future. Our Unitholders will incur tax liability if any interest earned on our MRBs or GILs is determined to be taxable, for gains related to our MRBs or GILs and for income and gains related to our taxable investments such as our investments in unconsolidated entities and property loans. See Item 1A, “Risk Factors” in this Report for additional details.
Investment Types
Mortgage Revenue Bonds
We invest in MRBs that are issued by state and local governments, their agencies, and authorities to finance the construction or acquisition and rehabilitation of income-producing multifamily and seniors rental properties and skilled nursing facilities. An MRB does not constitute an obligation of any state or local government, agency or authority and no state or local government, agency or authority is liable on them, nor is the taxing power of any state or local government pledged to the payment of principal or interest on an MRB. An MRB is a non-recourse obligation of the property owner. Each MRB is collateralized by a mortgage on all real and personal property of the secured property, which it may share with a corresponding taxable MRB owned by the Partnership. Typically, the sole source of the funds to pay principal and interest on an MRB is the net cash flow or the sale or refinancing proceeds from the secured property. We may commit to provide funding for MRBs on a draw-down basis during construction and/or rehabilitation of the secured property, and we typically require recourse to the borrower during the construction or rehabilitation period.
We expect and believe that the interest received on our MRBs is excludable from gross income for federal income tax purposes. We primarily invest in MRBs that are senior obligations of the secured properties, though we may also invest in subordinate and/or taxable MRBs. Our MRBs predominantly bear interest at fixed interest rates and require regular principal and interest payments on a monthly basis. The majority of our MRBs have initial contractual terms of 15 years or more. Some MRBs have optional call dates that may be exercised by the borrower which may be at either par or a premium to par. Some MRBs have optional repurchase dates whereby we can require redemption prior to the contractual maturity, typically at par.
Our MRBs are either owned directly by us or are held in trusts created in connection with debt financing transactions that are consolidated VIEs. The following table summarizes our MRB investments as of December 31, 2024:
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(1)
Properties secured by our MRB investments consist of 70 multifamily properties, one seniors housing property, and one skilled nursing facility.
The four types of MRBs which we may acquire as investments are as follows:
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Private activity bonds issued under Section 142(d) of the IRC;
•
Bonds issued under Section 145 of the IRC on behalf of not-for-profit entities qualified under Section 501(c)(3) of the IRC;
•
Essential function bonds issued by a public instrumentality to finance a multifamily residential property owned by such public instrumentality; and
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Existing “80/20 bonds” that were issued under Section 103(b)(4)(A) of the IRC.
Each of these structures permit the issuance of MRBs under the IRC to finance the construction or acquisition and rehabilitation of affordable rental housing or other not-for-profit commercial property. Under applicable Treasury Regulations, any affordable multifamily or seniors residential project financed with tax-exempt MRBs (other than essential function bonds as described in the third bullet above) must set aside a percentage of its total rental units for occupancy by tenants whose incomes do not exceed stated percentages of the median income in the local area. Those rental units of the multifamily residential project not subject to tenant income restrictions may be rented at market rates (unless there are restrictions otherwise imposed by the bond issuer or a governmental entity). With respect to private activity bonds issued under Section 142(d) of the IRC, the owner of the residential project may elect, at the time the MRBs are issued, whether to set aside a minimum of 20% of the units for tenants making less than 50% of area median income (as adjusted for household size) or 40% of the units for tenants making less than 60% of the area median income (as adjusted for household size). State and local housing authorities may require additional tenant income or rent restrictions that are more restrictive than those minimum levels required by Treasury Regulations. There are no Treasury Regulations related to MRBs that are secured by a commercial property owned by a non-profit borrower.
The borrowers associated with our MRBs are either syndicated partnerships formed to receive allocations of LIHTCs, for-profit entities that have obtained non-LIHTC private activity bonds, or not-for-profit entities. We do not directly or indirectly invest in LIHTCs. We do invest in MRBs that are issued in association with federal LIHTC allocations because such MRBs bear interest that we expect and believe is exempt from federal income taxes. LIHTC-eligible projects are attractive to developers of affordable housing because it helps them raise equity and debt financing. Under the LIHTC program, developers that receive an allocation of private activity bonds will also receive an allocation of federal LIHTCs as a method to encourage the development of affordable multifamily housing. To be eligible for federal LIHTCs, a property must either be newly constructed or substantially rehabilitated, and therefore, may be less likely to become functionally obsolete in the near term as compared to an older property. There are various requirements to be eligible for federal LIHTCs, including rent and tenant income restrictions, which vary by property. Projects owned by for-profit entities that have obtained non-LIHTC private activity bonds are typically subject to rent and/or tenant income restrictions similar to LIHTC-associated borrowers.
Our borrowers that are non-profit entities typically have missions to provide affordable multifamily rental units to underserved populations in their market areas. The affordable housing properties securing 501(c)(3) bonds also must comply with the IRS safe harbors for tenant incomes and rents.
The following table summarizes the amount of our MRB investments with LIHTC-associated borrowers, borrowers that have received non-LIHTC private activity bonds, and non-profit borrowers based on principal outstanding as of December 31, 2024:
Borrower Type MRB Principal Outstanding Percentage of all MRB Investments
Non-LIHTC private activity bonds 57,415,000 6 %
We may also invest in taxable MRBs secured by the same properties as our MRBs. Interest earned on our taxable MRBs is taxable for federal income tax purposes. Our taxable MRBs may share senior mortgage interest in the property with the MRBs or may be subordinate to the MRBs. We owned 14 taxable MRBs with outstanding principal of $28.3 million as of December 31, 2024.
Governmental Issuer Loans
We invest in GILs that are issued by state or local governmental authorities to finance the construction and/or rehabilitation of affordable multifamily and seniors residential properties. A GIL does not constitute an obligation of any government, agency or authority and no government, agency or authority is liable for them, nor is the taxing power of any government pledged to the payment of principal or interest on the GIL. Each GIL is secured by a mortgage on all real and personal property of the to-be-constructed affordable
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multifamily property. The GILs may share first mortgage lien positions with property loans and/or taxable GILs also owned by us. Sources of the funds to pay principal and interest on a GIL consist of the net cash flow of the secured property, proceeds from the sale or refinancing of the secured property, and limited-to-full payment guaranties provided by the borrower or its affiliates. We typically commit to fund our GIL investment commitments on a draw-down basis during construction.
We expect and believe the interest earned on our GILs is excludable from gross income for federal income tax purposes. The GILs are senior obligations of the secured properties and bear interest at variable or fixed interest rates. The GILs have initial terms of two to four years, though the borrower typically may prepay all amounts due at any time without penalty. At the closing of each GIL, Freddie Mac, through a servicer, forward commits to purchase the GIL at maturity at par if and when the property has reached stabilization and other conditions are met. Upon stabilization, the servicer will purchase our GIL at par and then immediately sell the GIL to Freddie Mac pursuant to a financing commitment between the servicer and Freddie Mac. As of December 31, 2024, the servicer for nine of our GILs is an affiliate of Greystone.
Our GILs are held in trusts created in connection with debt financing transactions that are consolidated VIEs. The following table summarizes our GIL investments as of December 31, 2024:
Our GILs have been issued under Section 142(d) of the IRC and are subject to the same set aside and tenant income restrictions noted in the “Mortgage Revenue Bonds” description above. The borrowers associated with all our GILs are syndicated partnerships formed to receive allocations of LIHTCs.
We may also invest in taxable GILs secured by the same properties as our GILs. Interest earned on our taxable GILs is taxable for federal income tax purposes. Our taxable GILs share a senior mortgage interest in the property with the GILs. We owned four taxable GILs with outstanding principal of $14.2 million as of December 31, 2024.
In October 2024, we formed the Construction Lending JV to invest in loans to finance the construction and/or rehabilitation of affordable multifamily housing properties across the United States. The Construction Lending JV will invest in GIL, taxable GIL and property loan investments like those currently owned by the Partnership. The Partnership has agreed to provide 10% of the capital for the Construction Lending JV with the remainder to be funded by third-party investors with each party contributing its proportionate capital contributions upon funding of future investments. The Partnership’s current maximum capital contribution to the Construction Lending JV is approximately $8.3 million, which will be funded on a drawdown basis as called by the Construction Lending JV. As of December 31, 2024, there were no assets in the Construction Lending JV and the Partnership has not yet contributed any capital. A wholly owned subsidiary of the Partnership is the Construction Lending JV’s managing member responsible for identifying, evaluating, underwriting, and closing investments, subject to the conditions of the joint venture and third-party investor evaluation and approval. The Partnership will earn proportionate returns on its invested capital plus promote income if the joint venture meets certain earnings thresholds. The Partnership expects to account for its investment in the Construction Lending JV using the equity method.
Property Loans
We also invest in property loans provided to the owners of certain multifamily, student housing and skilled nursing properties, or other borrowers. Multifamily residential properties financed with property loans may or may not be properties securing our MRB and GIL investments. Such property loans may be secured by property, other collateral, or may be unsecured. As of December 31, 2024, we owned one property loan related to a GIL investment property, one property loan related to an MRB investment, and four property loans to other borrowers. The total outstanding principal of our property loans was approximately $57.1 million as of December 31, 2024.
JV Equity Investments
We invest in non-controlling membership interests in unconsolidated entities for the construction of market-rate multifamily and seniors residential properties. Our JV Equity Investments are passive in nature. Operational oversight of each property is controlled by our joint venture partner according to the entity’s operating agreement. The properties are predominately managed by a property management company affiliated with our joint venture partner. Decisions regarding 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 account for our JV Equity Investments using the equity method and recognize a preferred return on our contributed equity during the hold period. Our preferred returns are paid from distributable cash flow before any distributions are made to our joint venture partners. The accrued preferred return for our JV Equity Investments held through our wholly owned subsidiary, ATAX Vantage
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Holdings, LLC, is guaranteed by an unrelated third-party through the fifth anniversary of construction commencement up to a certain dollar amount on an individual project basis.
Our membership interests entitle us to shares of certain cash flows generated by the JV Equity Investments from operations and upon the occurrence of certain capital transactions, such as a refinancing or sale. Upon the sale of a property, net proceeds will be distributed according to the entity's operating agreement. Sales proceeds distributed to us that represent previously unrecognized preferred return and gain on sale are recognized as income upon receipt. Historically, the majority of our income from our JV Equity Investments has been recognized at the time of sale. As a result, we may experience significant income recognition for these investments in those quarters when a property is sold and our equity investment is redeemed.
As of December 31, 2024, we owned membership interests in 12 JV Equity Investments located in four states in the United States. Eight of the 12 JV Equity Investments are located in Texas. In addition, one JV Equity Investment in San Marcos, Texas is reported as a consolidated VIE.
MF Properties
The Partnership has previously owned controlling interests in multifamily, student or senior citizen residential properties. The MF Properties were managed to optimize property values. The Partnership sold its last remaining MF Property investment in December 2023 and we do not have plans to acquire additional MF Properties.
General Investment Matters
Our investments are categorized as either Mortgage Investments, Tax Exempt Investments or Other Investments as defined in our Partnership Agreement. Mortgage Investments, as defined, consist of MRBs, taxable MRBs, GILs, taxable GILs and property loans to borrowers associated with our MRBs and GILs. Tax Exempt Investments, as defined, are securities other than Mortgage Investments, for which the related interest income is exempt from federal income taxation and must be rated in one of the four highest rating categories by a nationally recognized statistical rating organization. Other Investments, as defined, are generally all other investments that are not Mortgage Investments or Tax Exempt Investments. We may acquire additional Tax Exempt Investments and Other Investments provided that the acquisition may not cause the aggregate book value of all Tax Exempt Investments plus Other Investments to exceed 25% of our total assets at the time of acquisition. We own no Tax Exempt Investments as of December 31, 2024. Our Other Investments primarily consist of real estate assets, JV Equity Investments and certain property loans.
We rely on an exemption from registration under the Investment Company Act of 1940, which has certain restrictions on the types and amounts of securities owned by the Partnership. See the “Regulatory Matters” section included within this Item 1 below for further information.
Business Objectives and Strategy
Investment Strategy
Our primary business objective is to manage our portfolio of investments to achieve the following:
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Generate attractive, risk-adjusted total returns for our Unitholders;
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Create streams of recurring income to support regular distributions to Unitholders;
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Pass through tax-advantaged income to Unitholders;
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Generate income from capital gains on asset dispositions;
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Use leverage effectively to increase returns on our investments; and
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Preserve and protect Partnership assets.
We are pursuing a strategy of acquiring additional MRBs, GILs and other investments on a leveraged basis to achieve our objective, as permitted by our Partnership Agreement. In allocating our capital and executing our strategy, we seek to balance the risks of owning specific investments with the earnings opportunity on the investment.
The Partnership believes there continues to be significant unmet demand for affordable multifamily and seniors residential housing in the United States. Government programs that provide direct rental support to residents have not kept up with demand. Therefore, investment programs that promote private sector development and support for affordable housing through MRBs, GILs, tax credits and grant funding to developers, have become more prominent. The types of MRBs and GILs in which we invest offer developers of
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affordable multifamily housing a low-cost source of construction and/or permanent debt financing. We plan to continue investing in additional MRBs and GILs issued to finance affordable multifamily and seniors residential rental housing properties.
We continue to evaluate opportunities for MRB investments to fund seniors housing properties and/or skilled nursing properties issued as private activity or 501(c)(3) bonds similar in legal structure to those issued for traditional affordable multifamily housing properties. We will continue to leverage the expertise of Greystone and its affiliates and other reputable third parties in evaluating independent living, assisted living, memory care and skilled nursing properties prior to our MRB acquisitions. To date, we acquired an MRB secured by a to-be-constructed seniors housing property in Michigan, and an MRB secured by an operating skilled nursing facility in New Jersey.
We continually assess opportunities to expand and/or reposition our existing portfolio of MRBs, GILs and other investments. Our principal objective is to improve the quality and performance of our portfolio of MRBs, GILs and other investments with the intent to ultimately increase the amount of cash available for distribution to our Unitholders. In certain circumstances, we may allow the borrowers of our MRBs to redeem the MRBs prior to the final maturity date. Such MRB redemptions will usually require a sale or refinancing of the underlying property. We may also elect to sell MRBs that have experienced significant appreciation in value. In other cases, we may elect to sell MRBs on properties that are in stagnant or declining real estate markets. The proceeds received from these transactions would be redeployed into other investments consistent with our investment objectives. We anticipate holding our GILs until maturity as the terms are typically for two to four years and have defined forward purchase commitments from Freddie Mac.
We also continue to make additional strategic JV Equity Investments for the development of market-rate multifamily and seniors residential properties, through noncontrolling membership interests. We currently have investments with four different joint venture partners. We believe the diversity of joint venture sponsors, geographic markets, and property types reduces risks from concentration while also providing attractive risk-adjusted returns for our Unitholders.
Financing Strategy
We finance our assets with what we believe to be a prudent amount of leverage, the level of which varies from time to time based upon the characteristics of our investment portfolio, availability of financing, cost of financing, and market conditions. This leverage strategy allows us to generate enhanced returns and lowers our net capital investment, allowing us to make additional investments. We currently obtain leverage on our investments and assets through various sources that include:
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Our secured line of credit facilities;
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TEBS Financings with Freddie Mac;
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TOB securitizations with Mizuho and Barclays; and
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Securitization transactions such as the TEBS Residual Financing and 2024 PFA Securitization Transaction through governmental issuers.
We may utilize other types of secured or unsecured borrowings in the future, including more complex financing structures and diversification of our leverage sources and counterparties.
We refer to our TEBS Financings, TOBs, term TOB, 2024 PFA Securitization Transaction and TEBS Residual Financing securitizations as our debt financings. These debt financing securitizations are accounted for as consolidated VIEs for reporting purposes. These arrangements are structured such that we transfer our investment assets to an entity, such as a trust or special purpose entity, which then issues senior securities and residual interests. The senior securities are sold to third-party investors in exchange for proceeds which are considered debt of the Partnership. We retain the residual interests which entitle us to certain rights to the investment assets and to residual cash proceeds. We generally structure our debt financings such that principal, interest, and any trust expenses are payable from the cash flows of the secured investment assets, and we are generally entitled to all residual cash flows for our general use. As the residual interest holder, we may be required to make certain payments or contribute certain assets to the VIEs if certain events occur. Such events include, but are not limited to, a downgrade in the investment rating of the senior securities issued by the VIEs, a ratings downgrade of the liquidity provider for the VIEs, increases in short term interest rates beyond pre-set maximums, an inability to re-market the senior securities or an inability to obtain liquidity support for the senior securities. If such an event occurs in an individual VIE, we may be required to deleverage the VIE by repurchasing some or all of the senior securities. Otherwise, the secured investment asset(s) will be sold and we will be required to fund any shortfall in funds available to pay the principal amount of the senior securities after payment of accrued interest and other trust expenses. If we do not fund the shortfall, default and liquidation provisions will be invoked against us. The TEBS financings, 2024 PFA Securitization Transaction, and TEBS Residual Financing are non-recourse to the Partnership such that our shortfall funding for each financing is limited to the stated amount of our residual interests. The TOB trust financings are recourse obligations of the Partnership.
The TOB trusts with Mizuho and Barclays are subject to respective ISDA master agreements with each counterparty that contain certain covenants and requirements. When we execute a TOB trust financing, we retain a residual interest that is pledged as our initial
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collateral under the ISDA master agreement based on the market value of the investment asset(s) at the time of initial closing. The counterparties require that our residual interests in each TOB trust maintain a certain value in relation to total asset(s) in each TOB trust. In addition, we are required to post collateral, typically cash, if the net aggregate valuation of our residual interests and derivative hedging positions with each counterparty fall below certain thresholds.
The Mizuho and Barclays ISDA master agreements contain covenants that require the Partnership’s partners’ capital, as defined, to maintain a certain threshold and that the BUCs remain listed on a national securities exchange. The ISDA master agreement with Barclays also requires that the Partnership’s Leverage Ratio (as defined by the Partnership below) remain below a certain threshold. In addition, both the Mizuho and Barclays ISDA master agreements have cross-default provisions whereby default(s) on the Partnership’s other senior debts above a specified dollar amount, in the aggregate, will constitute a default under the ISDA master agreements. If the Partnership is not in compliance with any of these covenants, a termination event of the financing facilities would be triggered.
The willingness of leverage providers to extend financing is dependent on various factors such as their underwriting standards, regulatory requirements, available lending capacity, and existing credit exposure to the Partnership. An inability to access debt financing at an acceptable cost may result in adverse effects on our financial condition and results of operations. There can be no assurance that we will be able to finance additional acquisitions of MRBs, GILs and other investments through additional debt financing.
We set target constraints for each type of debt financing utilized. Those constraints are dependent upon several factors, including the characteristics of the investment assets being leveraged, the tenor of the leverage program, whether the financing is subject to mark-to-market collateral posting requirements, and the liquidity and marketability of the financed assets. The Board of Managers has established an overall maximum Leverage Ratio of 80% and retains the right to change the 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, 2024, our overall Leverage Ratio was approximately 75%.
Hedging Strategy
We actively manage both our portfolio of fixed and variable rate debt financings and our exposure to changes in market interest rates. When possible, we attempt to obtain fixed-rate debt financing for our fixed-rate investment assets such that our net interest spread is not exposed to changes in market interest rates. Similarly, we attempt to obtain variable-rate debt financing for our variable-rate investment assets such that we are largely hedged against rising interest rates without the need for separate hedging instruments.
We leverage certain fixed-rate investment assets with variable-rate debt financings, primarily with our TOB trust financings. When deemed appropriate, we will enter into derivative based hedging transactions in connection with our risk management activities for these assets to hedge against rising interest rates, which may include interest rate caps, interest rate swaps, total return swaps, swaptions, futures, options or other available hedging instruments. As of December 31, 2024, we had interest rate swap positions with notional amounts totaling $417.0 million.
Preferred Units and BUCs Issuances
In addition to leverage, we may obtain additional capital through the issuance of Series A-1 Preferred Units, Series B Preferred Units or other Partnership securities which may be issued in, among other things, one or more additional series of preferred units, and/or BUCs.
The Partnership has designated three series of non-cumulative, non-voting, non-convertible Preferred Units that represent limited partnership interests in the Partnership consisting of the Series A Preferred Units, the Series A-1 Preferred Units, and the Series B Preferred Units. The Preferred Units have no stated maturity, are not subject to any sinking fund requirements, and will remain outstanding indefinitely unless redeemed by the Partnership or by the holder. If declared by the General Partner, distributions to the holders of Series A Preferred Units, Series A-1 Preferred Units, and Series B Preferred Units, are paid quarterly at annual fixed rates of 3.0%, 3.0% and 5.75%, respectively. Upon the sixth anniversary of the closing of the sale or issuance of Preferred Units to a subscriber, and upon each anniversary thereafter, the Partnership and each holder have the right to redeem, in whole or in part, the 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. Each holder desiring to exercise its redemption rights must provide written notice of its intent to so exercise no less than 180 calendar days prior to any such redemption date.
In the event of any liquidation, dissolution, or winding up of the Partnership, the holders of the Series A Preferred Units, Series A-1 Preferred Units and Series B Preferred Units are entitled to a liquidation preference in connection with their investments. With respect to anticipated quarterly distributions and rights upon liquidation, dissolution, or the winding-up of the Partnership’s affairs, the Series A Preferred Units and Series A-1 Preferred Units will rank: (a) senior to the Partnership's BUCs, the Series B Preferred Units, and to any other class or series of Partnership interests or securities expressly designated as ranking junior to the Series A Preferred
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Units or Series A-1 Preferred Units; (b) junior to the Partnership's existing indebtedness (including indebtedness outstanding under the Partnership's senior bank credit facility) and other liabilities with respect to assets available to satisfy claims against the Partnership; and (c) junior to any other class or series of Partnership interests or securities expressly designated as ranking senior to the Series A Preferred Units or Series A-1 Preferred Units. The Series B Preferred Units will rank: (a) senior to the BUCs and to any other class or series of Partnership interests or securities that is not expressly designated as ranking senior or on parity with the Series B Preferred Units; (b) junior to the Series A Preferred Units and Series A-1 Preferred Units and to each other class or series of Partnership interests or securities with terms expressly made senior to the Series B Preferred Units; and (c) junior to all the Partnership's existing indebtedness (including indebtedness outstanding under the Partnership's senior bank credit facility) and other liabilities with respect to assets available to satisfy claims against the Partnership.
The Partnership is able to issue Series A Preferred Units and 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. As of December 31, 2024, we had $55 million of Series A-1 Preferred Units outstanding and no Series A Preferred Units outstanding. We do not expect to issue any new Series A Preferred Units in the future.
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. As of December 31, 2024, we had $22.5 million of Series B Preferred Units outstanding.
We filed a registration statement on Form S-3 for the registration of up to 10,000,000 of Series B Preferred Units, which was declared effective by the SEC on September 27, 2024. We have not yet issued any Series B Preferred Units under this offering as of December 31, 2024.
We may also obtain capital through the issuance of additional BUCs, Preferred Units or debt securities pursuant to our Shelf Registration Statement, which was declared effective by the SEC in December 2022. Under the Shelf Registration Statement we may offer up to $300.0 million of BUCs, Preferred Units or debt securities for sale from time to time. The Shelf Registration Statement will expire in December 2025.
In March 2024, we entered into a Sales Agreement with JonesTrading Institutional Services LLC and BTIG, LLC, as Agents, pursuant to which the Partnership may offer and sell, from time to time through or to the Agents, BUCs having an aggregate offering price of up to $50,000,000. As of December 31, 2024, we have sold 92,802 BUCs for gross proceeds of $1.5 million under the Sales Agreement. We will continue to assess if and when to issue BUCs under this program going forward.
In April 2024, we commenced a registered offering of up to $25.0 million of BUCs which are being offered and sold pursuant to the effective Shelf Registration Statement and a prospectus supplement filed with the SEC relating to this offering. As of the date of this filing, we have not issued any BUCs in connection with this offering.
Reportable Segments
As of December 31, 2024, we had four reportable segments: (1) Affordable Multifamily Investments, (2) Seniors and Skilled Nursing Investments, (3) Market-Rate Joint Venture Investments, and (4) MF Properties. The Partnership separately reports its consolidation and elimination information because it does not allocate certain items to the segments.
Competition
We compete with private investors, lending institutions, trust funds, investment partnerships, Freddie Mac, Fannie Mae and other entities with objectives similar to ours for the acquisition of MRBs, GILs and other investments. These competitors often have greater access to capital and can acquire investments with interest rates and terms that do not meet our return requirements. This competition may reduce the availability of investments for acquisition by us and may reduce the interest rate that issuers are willing to pay on our future investments.
Through our various investments, we may be in competition with other real estate investments in the same geographic areas. Multifamily residential rental properties also compete with single-family housing that is either owned or leased by potential tenants. To compete effectively, the properties underlying our investments must offer quality rental units at competitive rental rates. To maintain occupancy rates and attract quality tenants, the properties may offer rental concessions, such as reduced rent to new tenants for a stated period. These properties also compete by offering quality apartments in attractive locations and provide tenants with amenities such as recreational facilities, garages, services and pleasant landscaping.
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Recent Developments
Recent Investment Activities
The following table presents information regarding the investment activities of the Partnership for the years ended December 31, 2024 and 2023:
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For the Three Months Ended December 31, 2024
Mortgage revenue bond advances(2) 5 $ 29,318 N/A N/A 4
Governmental issuer loan acquisition and advances 3 19,500 N/A N/A 5
Property loan acquisition and advance 2 1,542 N/A N/A 6
Investments in unconsolidated entities 4 11,156 N/A N/A 7
Taxable mortgage revenue bond advances 3 7,450 N/A N/A 9
Taxable governmental issuer loan acquisition and advance 2 11,000 N/A N/A 9
For the Three Months Ended September 30, 2024
Mortgage revenue bond acquisition and advances 5 $ 36,503 N/A N/A 4
Mortgage revenue bond redemptions 3 21,980 $ 9,840 N/A 4
Governmental issuer loan advances 3 16,842 N/A N/A 5
Governmental issuer loan redemption and paydown 2 24,697 19,750 N/A 5
Property loan advance 1 500 N/A N/A 6
Investments in unconsolidated entities 4 10,443 N/A N/A 7
Taxable mortgage revenue bond advances 2 4,000 N/A N/A 9
Taxable mortgage revenue bond redemption 1 1,000 825 N/A 9
Taxable governmental issuer loan advance 1 158 N/A N/A 9
For the Three Months Ended June 30, 2024
Mortgage revenue bond acquisitions and advances 8 $ 78,375 N/A N/A 4
Mortgage revenue bond sale 1 8,221 N/A N/A 4
Governmental issuer loan advances 3 9,000 N/A N/A 5
Property loan acquisition and advance 2 9,321 N/A N/A 6
Property loan redemptions 2 454 N/A N/A 6
Investments in unconsolidated entities 5 11,669 N/A N/A 7
Taxable mortgage revenue bond acquisition and advance 2 5,077 N/A N/A 9
For the Three Months Ended March 31, 2024
Mortgage revenue bond acquisition and advances 5 $ 26,298 N/A N/A 4
Governmental issuer loan advances 3 6,000 N/A N/A 5
Property loan advances 2 3,073 N/A N/A 6
Investments in unconsolidated entities 7 6,960 N/A N/A 7
Taxable mortgage revenue bond advance 1 1,000 N/A N/A 9
Taxable mortgage revenue bond paydown 1 11,500 9,480 N/A 9
Taxable governmental issuer loan redemption 1 10,573 9,515 N/A 9
For the Three Months Ended December 31, 2023
Mortgage revenue bond acquisition and advances 4 $ 21,575 N/A N/A 4
Mortgage revenue bond paydown 1 2,072 $ 1,765 N/A 4
Governmental issuer loan acquisition and advances 4 7,000 N/A N/A 5
Property loan acquisitions and advances 5 18,252 N/A N/A 6
Investments in unconsolidated entities 6 16,104 N/A N/A 7
Taxable mortgage revenue bond advance 1 3,000 N/A N/A 9
For the Three Months Ended September 30, 2023
Mortgage revenue bond advances 3 $ 7,665 N/A N/A 4
Mortgage revenue bond paydown 1 7,590 $ 9,980 N/A 4
Governmental issuer loan acquisition and advances 5 22,573 N/A N/A 5
Property loan advances 2 11,950 N/A N/A 6
Investments in unconsolidated entities 4 10,194 N/A N/A 7
Taxable mortgage revenue bond advance 1 4,000 N/A N/A 9
Taxable mortgage revenue bond redemption 1 7,000 5,770 N/A 9
For the Three Months Ended June 30, 2023
Mortgage revenue bond acquisitions and advance 6 $ 51,150 N/A N/A 4
Governmental issuer loan advances 4 20,402 N/A N/A 5
Property loan advances 3 9,608 N/A N/A 6
Investments in unconsolidated entities 2 3,744 N/A N/A 7
Return of investment in unconsolidated entities upon sale 1 9,025 N/A $ 813 7
Taxable mortgage revenue bond acquisitions and advance 3 4,500 N/A N/A 9
Taxable governmental issuer loan advance 1 2,573 N/A N/A 9
For the Three Months Ended March 31, 2023
Mortgage revenue bond advances 6 $ 60,547 N/A N/A 4
Governmental issuer loan advances 4 17,377 N/A N/A 5
Property loan advances 4 7,581 N/A N/A 6
Investments in unconsolidated entities 2 5,698 N/A N/A 7
Return of investment in unconsolidated entities upon sale 2 12,283 N/A 3,843 7
Taxable mortgage revenue bond advances 2 1,805 N/A N/A 9
Taxable governmental issuer loan advance 1 3,000 N/A N/A 9
(1)
See “Cash Available for Distribution” in Item 7 of this Report.
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(2)
Excludes $89.2 million of MRBs that were sold and subsequently repurchased during the quarter related to temporary bridge financing to facilitate the termination of the M31 TEBS Financing and subsequent closings of alternative financing.
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Recent Financing Activities
The following table presents information regarding the debt financing, derivatives, Preferred Units and partners’ capital activities of the Partnership for the years ended December 31, 2024 and 2023, exclusive of retired debt amounts listed in the investment activities table above:
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For the Three Months Ended December 31, 2024
Net borrowing on Acquisition LOC 10 $ 14,952 Yes 12
Borrowing on General LOC 1 9,500 Yes 12
Proceeds from TOB trust financings 12 82,752 Yes 13
Repayment of TOB trust financings 6 36,553 Yes 13
Repayment of term TOB trust financing 1 12,654 Yes 13
Net paydown of TEBS Residual Financing 1 8,600 Yes 13
Proceeds from 2024 PFA Securitization Transaction 1 75,393 Yes 13
Interest rate swaps executed 2 - N/A 15
For the Three Months Ended September 30, 2024
Net paydown on Acquisition LOC 3 $ 10,850 Yes 12
Proceeds from TOB trust financings 9 47,985 Yes 13
Interest rate swap executed 1 - N/A 15
For the Three Months Ended June 30, 2024
Net borrowing on Acquisition LOC 6 $ 14,750 Yes 12
Net borrowing on General LOC 1 10,000 Yes 12
Proceeds from TOB trust financings 10 75,360 Yes 13
Interest rate swap executed 2 - N/A 15
Redemption of Series A Preferred Units 1 10,000 N/A 17
Proceeds on issuance of BUCs, net of issuance costs 1 439 N/A N/A
For the Three Months Ended March 31, 2024
Net paydown on Acquisition LOC 2 $ 16,900 Yes 12
Net activity on General LOC 2 - Yes 12
Proceeds from TOB trust financings 11 63,250 Yes 13
Interest rate swap executed 1 - N/A 15
Issuance of Series B Preferred Units 1 5,000 N/A 17
Proceeds on issuance of BUCs, net of issuance costs 1 1,055 N/A N/A
For the Three Months Ended December 31, 2023
Net borrowing on Acquisition LOC 4 $ 16,900 Yes 12
Proceeds from TOB trust financings 9 33,980 Yes 13
Proceeds from TEBS Residual Financing 1 61,500 Yes 13
Redemption of M24 TEBS financing 1 7,407 Yes 13
Return of restricted cash upon termination of total return swap 1 30,716 Yes 15
Interest rate swap executed 1 - N/A 15
Redemption of Series A Preferred Units 1 10,000 N/A 17
For the Three Months Ended September 30, 2023
Net repayment on Acquisition LOC 3 $ 6,000 Yes 12
Net borrowing on General LOC 1 10,000 Yes 12
Proceeds from TOB trust financings 12 41,520 Yes 13
Proceeds from mortgage payable 1 25,000 Yes 14
Interest rate swaps executed 3 - N/A 15
Redemption of Series A Preferred Units 1 20,000 N/A 17
For the Three Months Ended June 30, 2023
Net borrowing on Acquisition LOC 5 $ 6,000 Yes 12
Net activity on General LOC 2 - Yes 12
Proceeds from TOB trust financings 11 68,391 Yes 13
Interest rate swaps executed 3 - N/A 15
Issuance of Series A-1 Preferred Units 1 10,000 N/A 17
For the Three Months Ended March 31, 2023
Net repayment on Acquisition LOC 6 $ 49,000 Yes 12
Proceeds from TOB trust financings 11 110,061 Yes 13
Interest rate swaps executed 3 - N/A 15
Issuance of Series A-1 Preferred Units 1 8,000 N/A 17
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Regulatory Matters
We conduct our operations in reliance on an exemption from registration as an investment company under the Investment Company Act. In this regard, we believe that we and our wholly owned subsidiaries will not be considered investment companies under either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is not deemed to be an “investment company” if it neither is, nor holds itself out as being, engaged primarily, nor proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is not deemed to be an “investment company” if it neither is engaged, nor proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and does not own or propose to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis. For these purposes, “investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company for private funds under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. In addition, we and our wholly owned subsidiaries operate our business under an exclusion from the definition of investment company pursuant to Section 3(c)(5)(C) of the Investment Company Act. Under Section 3(c)(5)(C), as interpreted by the SEC staff, a company is required to invest at least 55% of its assets in mortgages and other liens on and interests in real estate, and other real estate-related interests, which are deemed to be “qualifying interests,” and at least 80% of its assets in qualifying interests plus a broader category of “real estate-related assets” in order to qualify for this exception. We monitor our compliance with the foregoing provisions and the holdings of our subsidiaries to ensure that we and each of our subsidiaries are in compliance with an applicable exemption or exclusion from registration as an investment company under the Investment Company Act.
Environmental Matters
We believe each of the properties related to our investment assets comply, in all material respects, with federal, state and local regulations regarding hazardous waste and other environmental matters. We are not aware of any environmental contamination at any of these properties that would require any material capital expenditure by the underlying properties, and therefore the Partnership, for the remediation thereof.
Management
We are managed by our General Partner, which is controlled by its general partner, Greystone Manager. The members of the Board of Managers act as the managers (and effectively as the directors) of the Partnership, in compliance with all NYSE listing rules and SEC rules applicable to the Partnership. In addition, certain employees of Greystone Manager act as executive officers of the Partnership. Certain services are provided to the Partnership by employees of Greystone Manager and the Partnership reimburses Greystone Manager for its allocated share of their salaries and benefits. The Partnership’s Initial Limited Partner has the obligation to perform certain actions on behalf of the BUC holders under the Partnership Agreement.
The General Partner is entitled to an administrative fee equal to 0.45% per annum of the average outstanding principal balance of any MRBs, GILs, property loans, Tax Exempt Investments or Other Investments for which an unaffiliated party is not obligated to pay. When the administrative fee is payable by a property owner, it is subordinated to the payment of all interest due to us for the MRB, GIL or property loan associated with the property. The Partnership Agreement provides that the administrative fee will be paid directly by us with respect to any investments for which the administrative fee is not payable by the property owner or a third-party. In addition, the Partnership Agreement provides that we will pay the administrative fee to the General Partner with respect to any foreclosed MRBs.
The General Partner also earns mortgage and investment placement fees resulting from the identification and evaluation of additional investments that are acquired by the Partnership. Any fees related to the acquisition of our investment assets are paid by the property owner. The fees, if any, will be subject to negotiation between the General Partner and such property owners.
Human Capital Resources
As of December 31, 2024, the Partnership had no employees. Sixteen employees of Greystone Manager are responsible for the Partnership’s operations, inclusive of the Partnership’s chief executive officer and chief financial officer. Such employees are subject to the policies and compensation practices of Greystone.
Greystone has implemented evaluation and compensation policies designed to attract, retain, and motivate employees that provide services to the Partnership to achieve superior results. Such policies are designed to balance both short-term and long-term performance of the Partnership. Annual incentive compensation is based on defined performance metrics and certain employees earn discretionary bonuses based upon various quantitative and qualitative metrics. Employees providing services to the Partnership are eligible for awards under the Equity Incentive Plan, which is designed to provide incentive compensation awards that encourage superior performance. The Equity Incentive Plan is also intended to attract and retain the services of individuals who are essential for the Partnership’s growth and profitability and to encourage those individuals to devote their best efforts to advancing the Partnership’s business. Greystone also supports employees with an annual confidential employee survey, an Employee Assistance Program and an ethics hotline.
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Greystone 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. The Partnership also reimburses the cost of formal training for those programs that are directly related to the tasks and responsibilities of the employees who perform the operations of the Partnership.
Greystone and the Partnership are committed to 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.
Greystone Manager is responsible for filling open positions as it relates to the Partnership and considers both internal and external candidates. Greystone Manager may contract with third-party search firms to identify candidates for open positions as needed.
Tax Status
We are a partnership for federal income tax purposes. This means that we do not pay federal income taxes on our income. Instead, our profits and losses are allocated to our partners, including the holders of Preferred Units, under the terms of the Partnership Agreement. The distributive share of income, deductions and credits is reported to our Unitholders on IRS Schedule K-1 and Unitholders should include such amount in their respective federal and state income tax returns.
We hold certain property loans and real estate through a wholly owned subsidiary that is a “C” corporation for income tax purposes. The subsidiary files separate federal and state income tax returns and is subject to federal and state income taxes.
We consolidate separate legal entities that record and report income taxes based upon their individual legal structure which may include corporations, limited partnerships, and limited liability companies. We do not believe the consolidation of these entities for reporting under GAAP will impact our tax status, amounts reported to Unitholders on IRS Schedule K-1, our ability to distribute income to Unitholders that we believe is tax-exempt, or the current level of quarterly distributions.
All financial information in this Annual Report on Form 10-K is presented on the basis of Accounting Principles Generally Accepted in the United States of America, with the exception of identified Non-GAAP information disclosed in Item 7 of this Report.
General Information
The Partnership is a Delaware limited partnership. The affairs of the Partnership and the conduct of its business are governed by the Partnership Agreement. The Partnership maintains its principal corporate office at 14301 FNB Parkway, Suite 211, Omaha, NE 68154, and its telephone number is (402) 952-1235.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports are filed with the SEC. Copies of our filings with the SEC may be obtained from the SEC’s website at www.sec.gov, or from our website at www.ghiinvestors.com as soon as reasonably practical after filed with the SEC. Access to these filings is free of charge. The information on our website is not incorporated by reference into this Report.
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Item 1A. Risk Factors
Set forth below are the risks that we believe are material to Unitholders and prospective investors. You should carefully consider the following risk factors and the various other factors identified in or incorporated by reference into any other documents filed by us with the SEC in evaluating our company and our business. The risks discussed herein can materially adversely affect our business, liquidity, operating results, prospects, financial condition and ability to make distributions to our Unitholders, and may cause the market price of our securities to decline. The risk factors described below are not the only risks that may affect us. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, also may materially adversely affect our business, liquidity, operating results, prospects, financial condition and ability to make distributions to our Unitholders.
Summary Risk Factors
These risks are discussed more fully below and include, but are not limited to, risks related to:
Risks Related to our Business and Investments
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We are managed by our General Partner and engage in transactions with related parties.
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Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations.
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We are subject to risks associated with the current interest rate environment, and changes in interest rates may affect our cost of capital and, consequently, our net income and Cash Available for Distribution.
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We are subject to risks related to inflation.
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Our investment assets are generally illiquid and our valuation estimates are subject to inherent uncertainty.
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The market value of our investment assets may be adversely impacted by elevated interest rate levels.
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The receipt of contractual interest and principal payments on our debt investments will be affected by the economic results of the secured properties.
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The rent restrictions and occupant income limitations imposed on properties securing our MRBs and GILs may limit the revenues of such properties.
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There are risks related to the lease-up of newly constructed or renovated properties that may affect our debt investments secured by these properties.
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The repayment of principal of our debt investments is principally dependent upon proceeds from the sale or refinancing of the secured properties.
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We are subject to various risks associated with our debt investments secured by seniors housing and skilled nursing properties.
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There are various risks associated with our JV Equity Investments including, but not limited to, risks normally associated with the ownership of such multifamily real estate, sales or refinancing, third-party property management, and variable interest costs.
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There are risks related to the construction of properties underlying our investment assets.
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Conditions in the low income housing tax credit markets due to known or potential changes in U.S. corporate tax rates may increase our cost of borrowing, make financing difficult to obtain or restrict our ability to invest in MRB and other investments, each of which may have a material adverse effect on our results of operations and our business.
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There are various risks associated with our commitments to fund investments on a draw-down or forward basis.
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If we acquire ownership of properties securing our investment assets through foreclosure or otherwise, we will be subject to all the risks normally associated with the ownership of such properties.
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Properties related to our MRB investments and JV Equity Investments are geographically concentrated in certain states.
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Our investments in certain asset classes may be concentrated with certain developers and related affiliates.
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Recourse guaranties related to our GIL investments and property loans are concentrated in certain entities.
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There is risk that a third-party developer that has provided guaranties of preferred returns on our Vantage JV Equity Investments may not perform.
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Our reserves for credit losses are based on estimates and may prove inadequate, which could have a material adverse effect on our financial results.
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Properties related to our investment assets may not be completely insured against damage from natural disasters.
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Several of California’s largest property insurance providers have recently paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state, which could increase the Partnership’s risk of loss in its MRB portfolio.
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The properties related to our investment assets may be subject to liability for environmental contamination which could increase the risk of default or loss on our investment.
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We are subject to reinvestment risk from maturities and prepayments of our investment assets.
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Adverse developments affecting the banking industry, such as actual events or concerns regarding bank failures, liquidity, defaults, or non-performance by financial institutions, could adversely affect our current and projected business operations and our financial condition and results of operations.
Risks Related to Debt Financings and Derivative Instruments
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Our investment strategy involves significant leverage, which could adversely affect our financial condition and results of operations.
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Our access to financing sources, which may not be available on favorable terms, or at all, may be limited, and our lenders and derivative counterparties may require us to post additional collateral which may materially impact our financial condition and results of operations.
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There are risks associated with debt financing programs that involve securitization of our investment assets.
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We are subject to various risks associated with our derivative agreements.
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We are subject to various risks associated with our secured line of credit arrangements.
Risks Related to Ownership of Beneficial Unit Certificates and Preferred Units
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Cash distributions related to BUCs may change at the discretion of the Partnership’s general partner.
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A resurgence of higher than expected inflation may cause the real value of distributions on our BUCs and Preferred Units to decline.
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Future issuances of additional BUCs could cause the market value of all outstanding BUCs to decline.
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Certain rights of our BUC holders are limited by and subordinate to the rights of the holders of our Preferred Units, and these rights may have a negative effect on the value of the BUCs.
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Holders of Preferred Units have extremely limited voting rights.
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The General Partner has the authority to declare cash distributions related to the Preferred Units.
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Holders of Preferred Units may have liability to repay distributions.
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We may be required to redeem Preferred Units in the future.
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The assets held by the Partnership may not be considered qualified investments under the CRA by the bank regulatory authorities.
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Under certain circumstances, investors may not receive CRA credit for their investment in the Preferred Units.
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The Partnership’s portfolio investment decisions may create CRA strategy risks.
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The Preferred Units are subordinated to existing and future debt obligations, and the interests could be diluted by the issuance of additional units, including additional Preferred Units, and by other transactions.
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Holders of the Preferred Units may be required to bear the risks of an investment for an indefinite period of time.
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Treatment of distributions on our Preferred Units is uncertain.
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There is no public market for the Preferred Units, which may prevent an investor from liquidating its investment.
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Market interest rates may adversely affect the value of the Preferred Units.
Risks Related to Income Taxes
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Income from various investments is subject to taxation.
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To the extent we generate taxable income, Unitholders will be subject to income taxes on this income, whether or not they receive cash distributions.
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There are limits on the ability of our Unitholders to deduct Partnership losses and expenses allocated to them.
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Unitholders may incur tax liability if any of the interest on our MRB or GIL investments is determined to be taxable.
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If we are determined to be an association taxable as a corporation, it will have adverse economic consequences for us and our Unitholders.
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Certain income may be considered UBTI for certain tax-exempt or tax-deferred owners of BUCs and Preferred Units.
Risks Related to Governmental and Regulatory Matters
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We are not registered under the Investment Company Act.
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Any downgrade, or anticipated downgrade, of U.S. sovereign credit ratings or the credit ratings of the GSEs by the various credit rating agencies may materially adversely affect our business.
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A change in the federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae, Freddie Mac, and the U.S. government, may materially adversely affect our business, financial condition and results of operations.
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The Partnership faces legislative and regulatory risks in connection with its assets and operations, including under the CRA.
General Risk Factors
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We face possible risks associated with the effects of climate change and severe weather.
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We are increasingly dependent on information technology, and potential disruption, cyber-attacks, security issues, and expanding social media vehicles present new risks.
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Developments related to artificial intelligence could result in reputational or competitive harm, legal liability, and other adverse effects on our business.
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Risks Related to our Business and Investments
We are managed by our General Partner and engage in transactions with related parties.
The Partnership is managed by its sole General Partner, which is controlled by affiliates of Greystone. In addition, employees of Greystone Manager are responsible for the Partnership’s operations, including the Partnership’s chief executive officer and chief financial officer. The Partnership’s general partner manages our investments, performs administrative services for us and earns administrative fees that are paid by either the borrowers related to our investment assets or by us, subject to the terms of the Partnership Agreement. The General Partner does not have a fiduciary duty or obligation to any limited partner or BUC holder. Various potential and actual conflicts of interest may arise from the activities of the Partnership and Greystone and its affiliates by virtue of the fact that the General Partner is controlled by Greystone. The General Partner may be removed by a vote of limited partners holding at least 66.7% of outstanding limited partnership interests, voting as a single class. Such removal shall be effective immediately following the admission of a successor general partner.
We may also enter into various arrangements for services provided by entities controlled by or affiliates of Greystone. Our arrangements with Greystone and its affiliates are considered related party transactions. By their nature, related party transactions may not be considered to have been negotiated at arm’s length. These relationships may also cause a conflict of interest in other situations where we are negotiating with Greystone or its affiliates. See Note 20 of the Partnership’s consolidated financial statements for additional details.
Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations.
Downgrades by rating agencies of the U.S. government’s credit rating or concerns about its debt and deficit levels in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our investment portfolio and our ability to access the debt markets on favorable terms. Interest rates have risen in recent years, and the risk that they may continue to do so is pronounced. In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the market value of our BUCs.
The current global financial market situation, as well as various social and political circumstances in the U.S. and around the world, including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, adverse effects of climate crisis and global health epidemics, may contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. In particular, current military conflicts (including the Russia-Ukraine war and the Israel-Hamas war), including comprehensive international sanctions, the impact on inflation and increased disruption to supply chains may impact our counterparties with which we do business, and specifically our financing counterparties and financial institutions from which we obtain financing for the purchase of our investments, result in an economic downturn or recession either globally or locally in the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional military action, reignited “cold” wars or in the form of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on the Partnership’s returns, net income, and CAD. We have no way to predict the duration or outcome of the situation, as the conflicts and government reactions are rapidly developing and beyond our control. Prolonged unrest, military activities, or broad-based sanctions may increase our funding costs or limit our access to the capital markets.
Additionally, the U.S. government’s debt and deficit concerns, the European geopolitical and economic environment, and any continuing macroeconomic uncertainty with respect to China could cause interest rates to be volatile, which may negatively impact our ability to obtain debt financing on favorable terms. In this period of rising interest rates, our cost of funds may increase except to the extent we have obtained fixed rate debt, issued Preferred Units with a fixed distribution rate, or sufficiently hedged our interest rate risk, which hedging could reduce our net income and CAD.