Variable Interest Entities

Although each multifamily property financed with mortgage revenue bonds held by the Partnership is owned by a separate entity in which the Partnership has no equity ownership interest, the debt financing provided by the Partnership creates a variable interest in these ownership entities that may require the Partnership to report the assets, liabilities and results of operations of these entities on a consolidated basis under GAAP. Under consolidation guidance, the Partnership must make an evaluation of these entities to determine if they meet the definition of a VIE.

At December 31, 2013, the Partnership determined that four of the entities financed by mortgage revenue bonds owned by the Partnership were held by VIEs. These VIEs were Ashley Square, Bent Tree, Cross Creek, and Fairmont Oaks. The Partnership then determined that it is the primary beneficiary of two of these VIEs; Bent Tree and Fairmont Oaks and has continued to consolidate these entities. Effective December 1, 2013, the ownership of Lake Forest became a not-for-profit entity and Lake Forest ceased to be reported as a Consolidated VIE.

At December 31, 2012, the Partnership determined that five of the entities financed by mortgage revenue bonds owned by the Partnership were held by VIEs. These VIEs were Ashley Square, Bent Tree, Cross Creek, Fairmont Oaks and Lake Forest. The Partnership then determined that it is the primary beneficiary of three of these VIEs; Bent Tree, Fairmont Oaks, and Lake Forest and has continued to consolidate these entities during 2012. At December 31, 2012, the Partnership also determined that the Exchange Accommodation Titleholder ("EAT (Maples on 97th)") was also a VIE based on the Qualified Exchange Accommodation Agreement and Master Lease Agreement between the Partnership and EAT (Maples on 97th). In February 2013, title to the Maples on 97th property transferred to the Partnership from the EAT (Maples on 97th) and the property is reported as an MF Property as of December 31, 2013.

The Partnership does not hold an equity interest in the four VIEs and therefore, the assets of the VIEs cannot be used to settle the general commitments of the Partnership and the Partnership is not responsible for the commitments and liabilities of the VIEs. The primary risks to the Partnership associated with the four VIEs financed by mortgage revenue bonds owned by the Partnership relate to the entities ability to meet debt service obligations to the Partnership and the valuation of the underlying multifamily apartment property which serves as bond collateral.

The following is a discussion of the significant judgments and assumptions made by the Partnership in determining the primary beneficiary of the VIE and, therefore, whether the Partnership must consolidate the VIE.

Consolidated VIEs

At December 31, 2013, the Partnership determined it is the primary beneficiary of the Bent Tree and Fairmont Oaks VIEs. The capital structure of Bent Tree and Fairmont Oaks VIEs consists of senior debt, subordinated debt, and equity capital. The senior debt is in the form of a mortgage revenue bond and accounts for the majority of the VIEs' total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The equity ownership in these entities is ultimately held by corporations which are owned by four individuals, three of which are related parties. Additionally, each of these properties is managed by an affiliate of the Partnership, America First Properties Management Company, LLC (“Properties Management”) which is an affiliate of the Burlington Capital Group, LLC ("Burlington").

The Partnership lent the EAT (Maples on 97th) the necessary funds to purchase the Maples on 97th property and executed a Master Lease Agreement and Construction Management Agreement. These two agreements gave the Partnership the rights and obligations to manage the replacement property as well as the rehabilitation during the six month hold period. The Partnership determined that it was the primary beneficiary of the EAT (Maples on 97th). Based on the terms of the Master Lease Agreement, the Partnership reported the rental income and related real estate operating expenses for the Maples on 97th property during the six month holding period (August 2012 to January 2013) as an MF Property since it has all the rights and obligations of landlord for the property. In February 2013, title to the Maples on 97th property transferred to the Partnership from the EAT (Maples on 97th).

In determining the primary beneficiary of these VIEs, the Partnership considered the activities of the VIE which most significantly impact the VIEs' economic performance, who has the power to control such activities, the risks which the entities were designed to create, the variability associated with those risks and the interests which absorb such variability. The Partnership also considered the related party relationships of the entities involved in the VIEs. It was determined that the Partnership, as part of the related party group, met both of the primary beneficiary criteria and was the most closely associated with the VIEs and, therefore, was determined to be the primary beneficiary.

Non-Consolidated VIEs

The Company does not consolidate two VIE entities, Ashley Square and Cross Creek. In determining the primary beneficiary of these VIEs, the Partnership considered the activities of each VIE which most significantly impact the VIEs' economic performance, who has the power to control such activities, the risks which the entities were designed to create, the variability associated with those risks and the interests which absorb such variability. The significant activities of the VIE that impact the economic performance of the entity include leasing and maintaining apartments, determining if the property is to be sold, decisions relating to debt refinancing, the selection of or replacement of the property manager and the approval of the operating and capital budgets. As discussed below, while the capital structures of these VIEs resulted in the Partnership holding a majority of the variable interests in these VIEs, the Partnership determined it does not have the power to direct the activities of these VIEs that most significantly impact the VIEs' economic performance and, as a result, is not the primary beneficiary of these VIEs.

Ashley Square - Ashley Square Housing Cooperative acquired the ownership of the Ashley Square apartments in December 2008 from Ashley Square LLC through a warranty deed of transfer and an assumption of debt. This transfer of ownership constitutes a reconsideration event as outlined in consolidation guidance which triggers a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans. and equity capital. The senior debt is in the form of mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE's total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The VIE is organized as a housing cooperative and the 99% equity owner of this VIE is The Foundation for Affordable Housing (“FAH”), an unaffiliated Nebraska non-profit organization. Additionally, this property is managed by Properties Management.

Cross Creek - Cross Creek Apartments Holdings LLC is the owner of the Cross Creek Apartments. On January 1, 2010, Cross Creek Apartment Holdings LLC entered into a new operating agreement and admitted three new members. These new members committed approximately $2.2 million of capital, payable in three installments including $563,000 on January 1, 2010. The new operating agreement and admission of new owner members constitutes a reconsideration event as outlined in the consolidation guidance which triggers a re-evaluation of the holders of variable interests to determine the primary beneficiary of the VIE. The capital structure of the VIE consists of senior debt, subordinated loans and equity capital at risk. The senior debt is in the form of mortgage revenue bonds that are 100% owned by the Partnership and account for the majority of the VIE's total capital. As the bondholder, the Partnership is entitled to principal and interest payments and has certain protective rights as established by the bond documents. The three newly admitted members of this VIE are each unaffiliated with the Partnership and have contributed significant equity capital to the VIE. These members collectively control a 99% interest in the VIE. The other 1% member of this VIE is FAH, which is also unaffiliated with the Partnership. Additionally, this property is managed by Properties Management.

The following table presents information regarding the carrying value and classification of the assets held by the Partnership as of December 31, 2013 and 2012, which constitute a variable interest in Ashley Square and Cross Creek.



December 31, 2013
	Balance Sheet	Carrying		Maximum Exposure
	Classification	Value		to Loss
Ashley Square Apartments
Mortgage Revenue Bond	Bond Investment	$	5,212,000	$	5,212,000
Property Loan	Other Asset	1,482,000		7,131,757
		$	6,694,000	$	12,244,123

Cross Creek Apartments
Mortgage Revenue Bond	Bond Investment	$	7,522,563	$	6,042,297
Property Loans	Other Asset	3,448,615		3,448,615
		$	10,971,178	$	9,490,912



December 31, 2012
	Balance Sheet	Carrying		Maximum Exposure
	Classification	Value		to Loss
Ashley Square Apartments
Mortgage Revenue Bond	Bond Investment	5,506,981		5,260,000
Property Loan	Other Asset	1,298,000		6,575,664
		$	6,804,981	$	11,835,664

Cross Creek Apartments
Mortgage Revenue Bond	Bond Investment	7,999,335		6,004,424
Property Loans	Other Asset	3,383,615		3,383,615
		$	11,382,950	$	9,388,039

The following tables provide information about the two VIEs at December 31, 2013 and the three VIEs at December 31, 2012 in the Partnership's financial statements under the provisions of the guidance on consolidations. These schedules also include information on the mortgage revenue bonds owned by the Partnership which are eliminated in consolidation, as of December 31, 2013 and 2012, respectively. In addition to the mortgage revenue bonds detailed below, the Partnership has made taxable property loans to these consolidated VIEs of $7.1 million and $10.6 million as of December 31, 2013 and 2012, respectively.



VIEs - December 31, 2013
			Base		Principal		Income
		Maturity	Interest		Outstanding at		Earned in
Property Name	Location	Date	Rate		December 31, 2013		2013
Bent Tree Apartments ⁽¹⁾	Columbia, SC	12/15/2030	6.25	%	$	7,542,000	$	473,438
Fairmont Oaks Apartments ⁽¹⁾	Gainsville, FL	4/1/2033	6.30	%	7,355,000		465,791
Total Mortgage Revenue Bonds					$	14,897,000	$	939,229
(1) Bonds held by ATAX TEBS I, LLC
VIEs - December 31, 2012
			Base		Principal		Income
		Maturity	Interest		Outstanding at		Earned in
Property Name	Location	Date	Rate		December 31, 2012		2012
Bent Tree Apartments ⁽¹⁾	Columbia, SC	12/15/2030	6.25	%	$	7,614,000	$	477,938
Fairmont Oaks Apartments ⁽¹⁾	Gainesville, FL	4/1/2033	6.30	%	$	7,439,000	$	471,067
Lake Forest Apartments ⁽¹⁾	Daytona Beach, FL	12/1/2031	6.25	%	$	9,105,000	$	571,813
Total Mortgage Revenue Bonds					$	24,158,000	$	1,520,818
(1) Bonds held by ATAX TEBS I, LLC

The following tables present the effects of the consolidation of the VIEs on the Company's Consolidated Balance Sheets and Statements of Operations. As discussed above, the assets of the VIEs cannot be used to settle the general commitments of the Partnership and the Partnership is not responsible for the commitments and liabilities of the VIEs. The cash flows from the VIEs do not represent cash flows available to the Partnership.

Consolidating Balance Sheets as of December 31, 2013 and 2012:



	Partnership as of December 31, 2013			Consolidated VIEs as of December 31, 2013			Consolidation -Elimination as of December 31, 2013			Total as of December 31, 2013
Assets
Cash and cash equivalents	$	11,292,039		$	25,976		$	—		$	11,318,015
Restricted cash	6,344,666			500,877			—			6,845,543
Interest receivable	14,357,065			—			(4,820,550		)	9,536,515
Mortgage revenue bonds held in trust	230,885,864			—			(14,514,063		)	216,371,801
Mortgage revenue bonds	68,946,370			—			—			68,946,370
Public housing capital fund trusts	62,056,379			—			—			62,056,379
Mortgage-backed securities	37,845,661			—			—			37,845,661
Real estate assets:
Land and land improvements	9,245,592			1,836,400			—			11,081,992
Buildings and improvements	90,253,256			20,942,439			—			111,195,695
Real estate assets before accumulated depreciation	99,498,848			22,778,839			—			122,277,687
Accumulated depreciation	(9,386,811		)	(9,741,942		)	—			(19,128,753		)
Net real estate assets	90,112,037			13,036,897			—			103,148,934
Other assets	24,413,077			456,087			(6,705,350		)	18,163,814
Total Assets	$	546,253,158		$	14,019,837		$	(26,039,963	)	$	534,233,032

Liabilities
Accounts payable, accrued expenses and other liabilities	$	4,963,653		$	20,634,613		$	(20,147,572	)	$	5,450,694
Distribution payable	6,446,076			—			—			6,446,076
Debt financing	257,274,000			—			—			257,274,000
Mortgage payable	57,087,320			14,897,000			(14,897,000		)	57,087,320
Bond purchase commitment at fair value	4,852,177			—			—			4,852,177
Total Liabilities	330,623,226			35,531,613			(35,044,572		)	331,110,267
Partners' Capital
General Partner	16,671			—			—			16,671
Beneficial Unit Certificate holders	215,624,583			—			7,948,729			223,573,312
Unallocated loss of Consolidated VIEs	—			(21,511,776		)	1,055,880			(20,455,896		)
Total Partners' Capital	215,641,254			(21,511,776		)	9,004,609			203,134,087
Noncontrolling interest	(11,322		)	—			—			(11,322		)
Total Capital	215,629,932			(21,511,776		)	9,004,609			203,122,765
Total Liabilities and Partners' Capital	$	546,253,158		$	14,019,837		$	(26,039,963	)	$	534,233,032



	Partnership as of December 31, 2012			Consolidated VIEs as of December 31, 2012			Consolidation -Elimination as of December 31, 2012			Total as of December 31, 2012
Assets
Cash and cash equivalents	$	30,123,447		$	49,326		$	—		$	30,172,773
Restricted cash	4,538,071			933,451			—			5,471,522
Interest receivable	14,131,063			—			(5,657,703		)	8,473,360
Mortgage revenue bonds held in trust	124,149,600			—			(24,615,518		)	99,534,082
Mortgage revenue bonds	45,703,294			—			—			45,703,294
Public housing capital fund trusts	65,389,298			—			—			65,389,298
Mortgage-backed securities	32,121,412			—			—			32,121,412
Real estate assets:
Land and land improvements	6,798,407			4,404,469			—			11,202,876
Buildings and improvements	55,776,753			37,838,726			—			93,615,479
Real estate assets before accumulated depreciation	62,575,160			42,243,195			—			104,818,355
Accumulated depreciation	(5,458,961		)	(13,871,102		)	—			(19,330,063		)
Net real estate assets	57,116,199			28,372,093			—			85,488,292
Other assets	22,923,356			852,321			(15,559,382		)	8,216,295
Assets of discontinued operations	32,580,427			—			—			32,580,427
Total Assets	$	428,776,167		$	30,207,191		$	(45,832,603	)	$	413,150,755

Liabilities
Accounts payable, accrued expenses and other liabilities	2,330,852			28,529,405			(25,846,310		)	5,013,947
Distribution payable	5,566,908			—			—			5,566,908
Debt financing	177,948,000			—			—			177,948,000
Mortgage payable	39,119,507			24,158,000			(24,158,000		)	39,119,507
Liabilities of discontinued operations	1,531,462			—			—			1,531,462
Total Liabilities	226,496,729			52,687,405			(50,004,310		)	229,179,824
Partners' Capital
General Partner	(430,087		)	—			—			(430,087		)
Beneficial Unit Certificate holders	200,655,786			—			6,727,301			207,383,087
Unallocated deficit of Consolidated VIEs	—			(22,480,214		)	(2,555,594		)	(25,035,808		)
Total Partners' Capital	200,225,699			(22,480,214		)	4,171,707			181,917,192
Noncontrolling interest	2,053,739			—			—			2,053,739
Total Capital	202,279,438			(22,480,214		)	4,171,707			183,970,931
Total Liabilities and Partners' Capital	$	428,776,167		$	30,207,191		$	(45,832,603	)	$	413,150,755

Consolidating Statements of Operations for the years ended December 31, 2013, 2012, and 2011:



	Partnership For the Year Ended December 31, 2013		Consolidated VIEs For the Year Ended December 31, 2013		Consolidation -Elimination For the Year Ended December 31, 2013			Total For the Year Ended December 31, 2013
Revenues:
Property revenues	$	11,358,718	$	4,752,022	$	—		$	16,110,740
Mortgage revenue bond investment income	24,109,397		—		(1,457,775		)	22,651,622
Contingent interest income	6,497,160		—		—			6,497,160
Other interest income	1,772,338		—		—			1,772,338
Other income	250,000		9,186,828		(9,186,828		)	250,000
Total revenues	43,987,613		13,938,850		(10,644,603		)	47,281,860
Expenses:
Real estate operating (exclusive of items shown below)	6,522,091		3,052,731		—			9,574,822
Realized loss on taxable property loans	4,557,741		—		—			4,557,741
Provision for loan loss	168,000		—		—			168,000
Provision for loss on receivables	241,698		—		—			241,698
Depreciation and amortization	5,374,802		1,399,548		(41,770		)	6,732,580
Interest	7,235,336		3,221,000		(3,221,000		)	7,235,336
General and administrative	4,237,245		—		—			4,237,245
Total expenses	28,336,913		7,673,279		(3,262,770		)	32,747,422
Income (loss) from continuing operations	15,650,700		6,265,571		(7,381,833		)	14,534,438
Income from discontinued operations (including gain on sale of MF Properties of $3,177,183 in 2013)	3,442,404		—		—			3,442,404
Net income (loss)	19,093,104		6,265,571		(7,381,833		)	17,976,842
Net income attributable to noncontrolling interest	261,923		—		—			261,923
Net income (loss) - America First Multifamily Investors, L. P.	$	18,831,181	$	6,265,571	$	(7,381,833	)	$	17,714,919



	Partnership For the Year Ended December 31, 2012		Consolidated VIEs For the Year Ended December 31, 2012			Consolidation -Elimination For the Year Ended December 31, 2012			Total For the Year Ended December 31, 2012
Revenues:
Property revenues	$	7,846,812	$	4,807,718		$	—		$	12,654,530
Investment income	12,599,284		—			(1,520,817		)	11,078,467
Gain on sale and retirement of bonds	680,444		—			—			680,444
Other interest income	150,882		—			—			150,882
Other income	557,300		(1,972		)	—			555,328
Total revenues	21,834,722		4,805,746			(1,520,817		)	25,119,651
Expenses:
Real estate operating (exclusive of items shown below)	4,604,870		3,273,061			—			7,877,931
Provision for loss on receivables	452,700		—			—			452,700
Depreciation and amortization	3,447,316		1,578,275			(43,561		)	4,982,030
Interest	5,530,995		3,240,306			(3,240,306		)	5,530,995
General and administrative	3,512,233		—			—			3,512,233
Total expenses	17,548,114		8,091,642			(3,283,867		)	22,355,889
Income (loss) from continuing operations	4,286,608		(3,285,896		)	1,763,050			2,763,762
Income from discontinued operations (including gain on sale of MF Property of $1,406,608 in 2012)	2,232,276		—			—			2,232,276
Net income (loss)	6,518,884		(3,285,896		)	1,763,050			4,996,038
Net income attributable to noncontrolling interest	549,194		—			—			549,194
Net income (loss) - America First Multifamily Investors, L.P.	$	5,969,690	$	(3,285,896	)	$	1,763,050		$	4,446,844



	Partnership For the Year Ended December 31, 2011			Consolidated VIEs For the Year Ended December 31, 2011		Consolidation -Elimination For the Year Ended December 31, 2011			Total For the Year Ended December 31, 2011
Revenues:
Property revenues	$	5,066,443		$	5,909,807	$	—		$	10,976,250
Investment income	11,205,247			—		(2,017,956		)	9,187,291
Contingent interest income	309,990			—		—			309,990
Gain on bond retirement	445,257			—		—			445,257
Other interest income	485,679			—		—			485,679
Other income	189,340			4,133,477		(4,028,489		)	294,328
Total Revenues	17,701,956			10,043,284		(6,046,445		)	21,698,795
Expenses:
Real estate operating (exclusive of items shown below)	3,154,290			3,604,417		—			6,758,707
Provision for loan loss	4,242,571			—		—			4,242,571
Provision for loss on receivables	952,700			—		—			952,700
Depreciation and amortization	2,281,541			1,718,899		(36,938		)	3,963,502
Interest	5,441,700			4,037,725		(4,037,725		)	5,441,700
General and administrative	2,764,970			—		—			2,764,970
Total Expenses	18,837,772			9,361,041		(4,074,663		)	24,124,150
(Loss) income from continuing operations	(1,135,816		)	682,243		(1,971,782		)	(2,425,355		)
Income from discontinued operations	752,192			—		—			752,192
Net (loss) income	(383,624		)	682,243		(1,971,782		)	(1,673,163		)
Net income attributable to noncontrolling interest	570,759			—		—			570,759
Net (loss) income - America First Multifamily Investors, L. P.	$	(954,383	)	$	682,243	$	(1,971,782	)	$	(2,243,922	)