Debt Financing

9 Months Ended

Sep. 30, 2022

Debt Financing [Abstract]

Debt Financing

15. Debt Financing

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of September 30, 2022 and December 31, 2021:

	Outstanding Debt Financings as of September 30, 2022, net		Restricted Cash		Year Acquired	Stated Maturities	Reset Frequency	Variable Rate Index	Index Based Rates	Spread/ Facility Fees	Period End Rates
TEBS Financings
Fixed - M24	$	7,752,126	$	39,080	2010	2027	N/A	N/A	N/A	N/A	3.05%
Variable - M31 (1)		75,970,493		4,999	2014	2024	Weekly	SIFMA	1.43%	2.49%	3.92%
Fixed - M33		29,713,724		2,606	2015	2030	N/A	N/A	N/A	N/A	3.24%
Fixed - M45 (2)		212,430,600		5,000	2018	2034	N/A	N/A	N/A	N/A	3.82%
Secured Notes
Variable - Notes		102,567,831		36,009,014	2020	2025	Monthly	3-month LIBOR	3.29%	9.00%	12.29% (3)
TOB Trust Securitizations
Mizuho Capital Markets:
Variable - TOB		48,712,716	(4)		2020 - 2021	2023	Weekly	SIFMA	2.66% - 2.68%	0.89% - 1.44%	3.55% - 4.10%
Variable - TOB		139,759,072	(4)		2020	2023	Weekly	OBFR	3.32%	0.89%	4.21%
Variable - TOB		170,843,324	(4)		2021	2024	Weekly	OBFR	3.32%	0.89% - 1.16%	4.21% - 4.48%
Variable - TOB		59,556,053	(4)		2019 - 2020	2025	Weekly	SIFMA	2.66% - 2.68%	1.17% - 1.67%	3.83% - 4.35%
Variable - TOB		13,337,843	(4)		2022	2025	Weekly	OBFR	3.32%	1.18%	4.50%
Variable - TOB		53,088,531	(4)		2022	2027	Weekly	SIFMA	2.68%	1.18%	3.86%
Morgan Stanley:
Fixed - Term TOB		12,852,040		-	2019	2024	N/A	N/A	N/A	N/A	1.98%
Barclays Capital Inc.:
Variable - TOB		36,031,013		-	2021	2023	Weekly	OBFR	3.60%	1.27%	4.87%
Total Debt Financings	$	962,615,366

(1)Facility fees have a variable component.

(2)The M45 TEBS has an initial interest rate of 3.82% through July 31, 2023. From August 1, 2023 through the stated maturity date, the interest rate is 4.39%. These rates are inclusive of credit enhancement fees payable to Freddie Mac.

(3)The Partnership has entered into a total return swap transaction with the Secured Notes as the reference security and a notional amount totaling the outstanding principal on the Secured Notes. The total return swap effectively nets down the interest rate on the Secured Notes. Considering the effect of the total return swap, the effective net interest rate of the Secured Notes is 7.04% as of September 30, 2022. See Note 17 for further information on the total return swap.

(4)The Partnership has restricted cash totaling approximately $4.5 million related to its total net position with Mizuho Capital Markets.

	Outstanding Debt Financings as of December 31, 2021, net		Restricted Cash		Year Acquired	Stated Maturities	Reset Frequency	Variable Rate Index	Index Based Rates	Spread/ Facility Fees	Period End Rates
TEBS Financings
Fixed - M24	$	35,551,762	$	204,000	2010	2027	N/A	N/A	N/A	N/A	3.05%
Variable - M31 (1)		76,964,051		4,999	2014	2024	Weekly	SIFMA	0.13%	1.32%	1.45%
Fixed - M33		30,191,051		2,606	2015	2030	N/A	N/A	N/A	N/A	3.24%
Fixed - M45 (2)		213,931,752		5,000	2018	2034	N/A	N/A	N/A	N/A	3.82%
Secured Notes
Variable - Notes		102,798,158		77,531,264	2020	2025	Monthly	3-month LIBOR	0.20%	9.00%	9.20% (3)
TOB Trust Securitizations
Mizuho Capital Markets:
Variable - TOB		13,482,312		-	2020	2022	Weekly	SIFMA	0.23%	0.89%	1.12%
Variable - TOB		117,257,933		-	2019 - 2021	2023	Weekly	SIFMA	0.23% - 0.30%	1.17% - 1.67%	1.40% - 1.97%
Variable - TOB		115,143,312		-	2020	2023	Weekly	OBFR	0.18%	0.89%	1.07%
Variable - TOB		98,703,495		-	2021	2024	Weekly	OBFR	0.18%	0.89% - 1.16%	1.07% - 1.34%
Morgan Stanley:
Fixed - Term TOB		12,915,190		-	2019	2024	N/A	N/A	N/A	N/A	1.98%
Barclays Capital Inc.:
Variable - TOB		3,139,698		-	2021	2022	Weekly	OBFR	0.14%	1.27%	1.41%
Total Debt Financings	$	820,078,714

(1)Facility fees have a variable component.

(2)The M45 TEBS has an initial interest rate of 3.82% through July 31, 2023. From August 1, 2023 through the stated maturity date, the interest rate is 4.39%. These rates are inclusive of credit enhancement fees payable to Freddie Mac.

(3)The Partnership has entered into two total return swap transactions with the Secured Notes as the reference security and notional amounts totaling the outstanding principal on the Secured Notes. The total return swaps effectively net down the interest rate on the Secured Notes. Considering the effect of the total return swaps, the effective net interest rate is 4.25% for approximately $39.6 million of the Secured Notes and 1.00% for approximately $63.5 million of the Secured Notes as of December 31, 2021. See Note 17 for further information on the total return swaps.

The TOB, Term TOB and TEBS financing arrangements are consolidated VIEs of the Partnership (Note 5). The Partnership is the primary beneficiary due to its rights to the underlying assets. Accordingly, the Partnership consolidates the TOB, Term TOB and TEBS financings on the Partnership's condensed consolidated financial statements. See information regarding the MRBs, GILs, property loans, taxable MRBs and taxable GIL securitized within the TOB, Term TOB and TEBS financings in Notes 6, 7, 10 and 12, respectively. As the residual interest holder in the arrangements, the Partnership 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 for the senior securities. If such an event occurs in an individual VIE, the Partnership may be required to deleverage the VIE by repurchasing some or all of the senior securities. Otherwise, the underlying collateral will be sold and, if the proceeds are not sufficient to pay the principal amount of the senior securities plus accrued interest and other trust expenses, the Partnership will be required to fund any such shortfall. If the Partnership does not fund the shortfall, the default and liquidation provisions will be invoked against the Partnership. The Partnership has never been, and does not expect in the future, to be required to reimburse the VIEs for any shortfall.

The Partnership has entered into various TOB trust financings with Mizuho and Barclays secured by MRBs, GILs, taxable MRBs, a taxable GIL, and property loans. The TOB trusts and Secured Notes with Mizuho and the TOB trust with Barclays are subject to respective master agreements that contain certain covenants and requirements. The TOB trust financings with Mizuho and Barclays require that the Partnership's residual interests in each TOB trust maintain a certain value in relation to total assets in each TOB trust. The Mizuho and Barclays master agreements also require the Partnership's partners' capital, as defined, to maintain a certain threshold and that the Partnership remain listed on the NASDAQ. The master agreement with Barclays also puts limits on the Partnership's Leverage Ratio (as defined by the Partnership). In addition, both Mizuho and Barclays master agreements specify that default(s) on the Partnership’s other senior debts above a specified dollar amount, in the aggregate, will constitute a default under the master agreement. If the Partnership is not in compliance with any of these covenants, a termination event of the financing facilities would be triggered. The Partnership was in compliance with these covenants as of September 30, 2022.

As of September 30, 2022 and December 31, 2021, the Partnership posted restricted cash as contractually required under the terms of the four TEBS financings. In addition, the Partnership has entered into an interest rate cap agreement to mitigate its exposure to interest rate fluctuations on the variable-rate M31 TEBS financing (Note 17).

As of September 30, 2022 and December 31, 2021, the restricted cash associated with the Secured Notes is collateral posted with Mizuho according to the terms of two total return swaps that have the Secured Notes as the reference security (Note 17). The Partnership may also be required to post additional collateral if the value of TEBS financing residual certificates declines below a threshold under the total return swaps.

The Partnership may also be required to post collateral, typically cash, related to the TOB trust financings with Mizuho and Barclays. The amount of collateral posting required is dependent on the valuation of the securitized assets and interest rate swaps (Note 17) in relation to thresholds set by Mizuho and Barclays. As of September 30, 2022, the Partnership had posted approximately $4.5 million of cash collateral with Mizuho. There was no requirement to post collateral with Barclays as of September 30, 2022.

The Term TOB trust financing with Morgan Stanley is subject to a Trust Agreement and other related agreements that contain covenants with which the Partnership or the underlying MRB are required to comply. The underlying property must maintain certain occupancy and debt service covenants. A termination event will occur if the Partnership’s net assets, as defined, decrease by 25% in one quarter or 35% over one year. The covenants also require the Partnership’s partners’ capital, as defined, to maintain a certain threshold and that the Partnership remain listed on a nationally recognized stock exchange. If the underlying property or the Partnership, as applicable, is out of compliance with any of these covenants, a termination event of the financing facility would be triggered. The Partnership was in compliance with all covenants as of September 30, 2022.

The Partnership’s variable rate debt financing arrangements include maximum interest rate provisions that prevent the debt service on the debt financings from exceeding the cash flows from the underlying securitized assets.

Activity in the First Nine Months of 2022

New Debt Financings:

The following is a summary of the new TOB trust financings that were entered into during the nine months ended September 30, 2022:

TOB Trusts Securitization	Initial TOB Trust Financing		Stated Maturity	Reset Frequency	Variable Rate Index	Facility Fees
Residency at the Entrepreneur MRBs and taxable MRB	$	14,000,000	April 2025	Weekly	OBFR	1.18%
Live 929 Series 2022A MRB (1)		53,092,000	September 2027	Weekly	SIFMA	1.18%
Total TOB Trust Financings	$	67,092,000

(1)The TOB Trust financing associated with the Live 929 Apartments MRB and taxable MRB was originated in January 2022 and subsequently redeemed in September 2022. The Live 929 Apartments Series 2022A MRB was securitized into a new TOB Trust financing in September 2022. The Live 929 Apartments Series 2022B taxable MRB was removed from the original TOB trust financing and was not leveraged in a debt financing facility as of September 30, 2022. The termination of the original TOB Trust financing was treated as an extinguishment for accounting purposes and the Partnership expensed approximately $508,000 of deferred financings costs.

In July 2022, the Partnership deposited the Magnolia Heights GIL and property loan into the existing TOB Trust 2021-XF2953 financing and received additional debt financing proceeds of approximately $12.6 million.

Redemptions:

The following is a summary of TOB trust financings that were redeemed and all principal and interest were paid in full during the nine months ended September 30, 2022:

Debt Financing	Debt Facility	Month	Paydown Applied
Live 929 Apartments - 2014 Series A	TOB Trust	January 2022	$	31,565,000
Gateway Village	TOB Trust	May 2022		2,183,000
Lynnhaven Apartments	TOB Trust	May 2022		2,896,000
			$	36,644,000

Refinancing Activity:

The Partnership executed three-month extensions of the maturity date of Barclays credit facility Trust 2021-XF2953 in January, April, July and October 2022. There were no additional changes to terms or fees associated with the extensions.

In April 2022, the Partnership extended the maturity date of TOB trust financings for Hope on Avalon and Hope on Broadway from February 2023 to August 2023. Additionally, in June 2022, the Partnership extended the maturity date of the TOB trust financings for Ocotillo Springs - Series A from July 2022 to July 2023. There were no additional changes to terms or fees associated with the extensions.

In July 2022, the Partnership extended the maturity date of TOB trust financings for Montecito at Williams Ranch - Series A, Vineyard Gardens - Series A, Avistar at Copperfield - Series A, Avistar at Wilcrest - Series A, and Avistar at Wood Hollow - Series A from July 2023 to July 2025. There were no additional changes to terms or fees associated with the extensions.

In September 2022, the Partnership made certain structural modifications to the TOB trust financings for Hope on Avalon, Hope on Broadway and Jackson Manor, but these changes did not materially impact the financial terms of the TOB trust financings. The structural modifications required cash settlement of the initial TOB trust financings and receipt of cash proceeds from the new TOB trust financings. The cash settlements and proceeds are reported on a gross basis in the cash flows from financing activities section of the consolidated statements of cash flows.

Activity in the First Nine Months of 2021

New Debt Financings:

The following is a summary of the TOB trust financings that were entered into during the nine months ended September 30, 2021:

TOB Trusts Securitization	Initial TOB Trust Financing (1)		Stated Maturity	Reset Frequency	Variable Rate Index	Facility Fees
Trust 2021-XF2926 (2)	$	16,190,000	January 2024	Weekly	OBFR	0.89%
Hope on Avalon GIL		5,064,000	February 2023	Weekly	SIFMA	1.42%
Hope on Broadway GIL		2,953,000	February 2023	Weekly	SIFMA	1.42%
Jackson Manor Apartments MRB		3,528,000	April 2023	Weekly	SIFMA	1.27%
Trust 2021-XF2939 (3)		4,085,000	July 2024	Weekly	OBFR	1.16%
Total TOB Trust Financings	$	31,820,000

(1)Amounts shown are the initial funding into the respective TOB trusts. The balances will increase based upon subsequent fundings of the related securitized assets and the current outstanding balances are contained in the summarized debt financing table above.

(2)The TOB trust is securitized by the Legacy Commons at Signal Hills GIL and property loan, Hilltop at Signal Hills GIL and property loan, Oasis at Twin Lakes property loan and Hope on Avalon taxable GIL.

(3)The TOB Trust is a securitization of the Osprey Village GIL and property loan and the Ocotillo Springs Series A-T taxable MRB.

Redemptions:

The following is a summary of the TOB trust financings that were collapsed and all principal and interest were paid in full during the nine months ended September 30, 2021:

Debt Financing	Debt Facility	Month	Paydown Applied
Rosewood Townhomes - Series A	TOB Trust	July 2021	$	7,700,000
South Pointe Apartments - Series A	TOB Trust	July 2021		17,990,000
			$	25,690,000

Refinancing Activity:

In June 2021, the Partnership extended the maturity date of the Morgan Stanley Term TOB financing from May 2022 to May 2024 and the interest rate was reduced to 1.98% from 3.53%.

Future Maturities

The Partnership’s contractual maturities of borrowings as of September 30, 2022 for the twelve-month periods ending December 31st for the next five years and thereafter are as follows:

Remainder of 2022	$	1,675,596
2023		230,681,816
2024		269,559,152
2025		177,359,289
2026		3,544,863
Thereafter		282,537,017
Total		965,357,733
Unamortized deferred financing costs and debt premium		(2,742,367	)
Total debt financing, net	$	962,615,366