Variable Interest Entities

The Partnership invests in mortgage revenue bonds which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas. The Partnership owns 100% of these mortgage revenue bonds and each bond is secured by a first mortgage on the property. In certain cases, the Partnership has also made property loans to the property owners which are secured by second mortgages on these properties. Although Residential Properties 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 March 31, 2015 and December 31, 2014, the Partnership determined that eleven of the entities financed by mortgage revenue bonds owned by the Partnership were held by VIEs. These VIEs were Ashley Square, Bent Tree, Bruton Apartments, Cross Creek, Fairmont Oaks, Glenview Apartments, Harden Ranch, Montclair Apartments, Santa Fe Apartments, Tyler Park Apartments, and Westside Village Market. 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.

The Partnership does not hold an equity interest in these VIEs. 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 these VIEs relate to the entities’ ability to meet debt service obligations to the Partnership and the valuation of the underlying Residential Properties 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

In determining the primary beneficiary of these VIEs, the Partnership considers 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 considers the related party relationship of the entities involved in the VIEs. At March 31, 2015 and December 31, 2014, 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 of the consolidated VIEs is ultimately held by corporations which are owned by four individuals, two 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 Burlington.

Non-Consolidated VIEs

The Company did not consolidate nine VIE entities (Ashley Square, Bruton Apartments, Cross Creek, Glenview Apartments Harden Ranch, Montclair Apartments, Santa Fe Apartments, Tyler Park Apartments, and Westside Village Market) as of March 31, 2015 based on its determination of the primary beneficiary of these nine VIE entities. 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.

The following table presents information regarding the classification of the assets at their carrying value and maximum exposure to loss held by the Partnership as of March 31, 2015, which constitute VIEs:



	March 31, 2015
	Balance Sheet Classification				Maximum Exposure to Loss
	Mortgage Revenue Bond		Property Loan		Mortgage Revenue Bond		Property Loan
Ashley Square Apartments	$	5,642,269	$	1,482,000	$	5,144,000	$	7,635,520
Bruton Apartments	19,443,819		—		18,145,000		—
Cross Creek	8,547,448		3,586,115		6,082,064		3,586,115
Glenview Apartments	6,855,286		—		6,723,000		—
Harden Ranch	9,920,953		—		9,300,000		—
Montclair Apartments	3,606,478		—		3,458,000		—
Santa Fe Apartments	4,856,631		—		4,736,000		—
Tyler Park Apartments	8,474,338		—		8,100,000		—
Westside Village Market	5,644,156		—		5,400,000		—
	$	72,991,378	$	5,068,115	$	67,088,064	$	11,221,635

The mortgage revenue bonds are classified on the balance sheet as available for sale investments and are carried at fair value while property loans are presented on the balance sheet as Other assets and are carried at the unpaid principal less any loan loss reserves. See Note 4 for additional information regarding the mortgage revenue bonds and Note 8 for additional information regarding the property loans. The maximum exposure to loss for the mortgage revenue bonds is equal to the unpaid principal balance as of March 31, 2015. The difference between the mortgage revenue bond’s carrying value and the maximum exposure to loss is a function of the fair value of the bond. The difference between the property loan’s carrying value and the maximum exposure is the value of loan loss reserves that have been previously recorded against the outstanding property loan balances.

The following tables present the effects of the consolidation of the Consolidated VIEs on the Company’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations.

Condensed Consolidating Balance Sheets as of March 31, 2015 and December 31, 2014:



	Partnership as of March 31, 2015			Consolidated VIEs as of March 31, 2015			Consolidation -Elimination as of March 31, 2015			Total as of March 31, 2015
Assets
Cash and cash equivalents	$	24,180,224		$	25,023		$	—		$	24,205,247
Restricted cash	7,350,135			486,707			—			7,836,842
Interest receivable	6,476,392			—			(670,102		)	5,806,290
Mortgage revenue bonds held in trust, at fair value	442,029,721			—			(16,006,874		)	426,022,847
Mortgage revenue bonds, at fair value	81,875,851			—			—			81,875,851
Public housing capital fund trusts, at fair value	60,272,941			—			—			60,272,941
Mortgage-backed securities, at fair value	14,884,339			—			—			14,884,339
Real estate assets:
Land and improvements	13,754,093			1,836,400			—			15,590,493
Buildings and improvements	110,742,966			21,257,476			—			132,000,442
Real estate assets before accumulated depreciation	124,497,059			23,093,876			—			147,590,935
Accumulated depreciation	(15,513,016		)	(10,814,129		)	—			(26,327,145		)
Net real estate assets	108,984,043			12,279,747			—			121,263,790
Other assets	41,298,994			377,523			(11,112,296		)	30,564,221
Total Assets	$	787,352,640		$	13,169,000		$	(27,789,272	)	$	772,732,368

Liabilities
Accounts payable, accrued expenses and other liabilities	$	4,623,103		$	22,479,786		$	(22,107,352	)	$	4,995,537
Distribution payable	7,607,693			—			—			7,607,693
Debt financing	379,307,493			—			—			379,307,493
Mortgage payable	76,445,451			14,686,000			(14,686,000		)	76,445,451
Derivative swap	1,165,855			—			—			1,165,855
Total Liabilities	469,149,595			37,165,786			(36,793,352		)	469,522,029
Partners' Capital
General Partner	512,533			—			—			512,533
Beneficial Unit Certificate holders	317,707,398			—			6,244,916			323,952,314
Unallocated loss of Consolidated VIEs	—			(23,996,786		)	2,759,164			(21,237,622		)
Total Partners' Capital	318,219,931			(23,996,786		)	9,004,080			303,227,225
Noncontrolling interest	(16,886		)	—			—			(16,886		)
Total Capital	318,203,045			(23,996,786		)	9,004,080			303,210,339
Total Liabilities and Partners' Capital	$	787,352,640		$	13,169,000		$	(27,789,272	)	$	772,732,368



	Partnership as of December 31, 2014			Consolidated VIEs as of December 31, 2014			Consolidation -Elimination as of December 31, 2014			Total as of December 31, 2014
Assets
Cash and cash equivalents	$	49,157,571		$	35,772		$	—		$	49,193,343
Restricted cash	11,141,496			544,233			—			11,685,729
Interest receivable	4,791,828			—			(670,342		)	4,121,486
Mortgage revenue bonds held in trust, at fair value	394,568,208			—			(16,145,116		)	378,423,092
Mortgage revenue bonds, at fair value	70,601,045			—			—			70,601,045
Public housing capital fund trusts, at fair value	61,263,123			—			—			61,263,123
Mortgage-backed securities, at fair value	14,841,558			—			—			14,841,558
Real estate assets:
Land and improvements	13,753,493			1,836,400			—			15,589,893
Buildings and improvements	110,706,173			21,204,048			—			131,910,221
Real estate assets before accumulated depreciation	124,459,666			23,040,448			—			147,500,114
Accumulated depreciation	(14,108,154		)	(10,583,646		)	—			(24,691,800		)
Net real estate assets	110,351,512			12,456,802			—			122,808,314
Other assets	41,958,914			420,054			(11,077,441		)	31,301,527
Total Assets	$	758,675,255		$	13,456,861		$	(27,892,899	)	$	744,239,217

Liabilities
Accounts payable, accrued expenses and other liabilities	$	4,123,346		$	22,225,477		$	(21,721,734	)	$	4,627,089
Distribution payable	7,617,390			—			—			7,617,390
Debt financing	345,359,000			—			—			345,359,000
Mortgages payable	76,707,834			14,731,000			(14,731,000		)	76,707,834
Total Liabilities	433,807,570			36,956,477			(36,452,734		)	434,311,313
Partners' Capital
General Partner	578,238			—			—			578,238
Beneficial Unit Certificate holders	324,305,442			—			6,151,675			330,457,117
Unallocated deficit of Consolidated VIEs	—			(23,499,616		)	2,408,160			(21,091,456		)
Total Partners' Capital	324,883,680			(23,499,616		)	8,559,835			309,943,899
Noncontrolling interest	(15,995		)	—			—			(15,995		)
Total Capital	324,867,685			(23,499,616		)	8,559,835			309,927,904
Total Liabilities and Partners' Capital	$	758,675,255		$	13,456,861		$	(27,892,899	)	$	744,239,217

Condensed Consolidating Statements of Operations for the three months ended March 31, 2015 and 2014:



	Partnership For the Three Months Ended March 31, 2015			Consolidated VIEs For the Three Months Ended March 31, 2015			Consolidation -Elimination For the Three Months Ended March 31, 2015			Total For the Three Months Ended March 31, 2015
Revenues:
Property revenues	$	4,302,301		$	804,068		$	—		$	5,106,369
Investment income	8,210,394			—			(230,610		)	7,979,784
Other interest income	224,540			—			—			224,540
Total revenues	12,737,235			804,068			(230,610		)	13,310,693
Expenses:
Real estate operating (exclusive of items shown below)	2,471,030			487,575			—			2,958,605
Depreciation and amortization	1,794,814			243,729			(6,645		)	2,031,898
Interest	3,994,156			569,934			(574,969		)	3,989,121
General and administrative	1,807,481			—			—			1,807,481
Total expenses	10,067,481			1,301,238			(581,614		)	10,787,105
Net income (loss)	2,669,754			(497,170		)	351,004			2,523,588
Net loss attributable to noncontrolling interest	(891		)	—			—			(891		)
Net income (loss) - America First Multifamily Investors, L. P.	$	2,670,645		$	(497,170	)	$	351,004		$	2,524,479




	Partnership For the Three Months Ended March 31, 2014			Consolidated VIEs For the Three Months Ended March 31, 2014			Consolidation -Elimination For the Three Months Ended March 31, 2014			Total For the Three Months Ended March 31, 2014
Revenues:
Property revenues	$	3,150,344		$	800,872		$	—		$	3,951,216
Investment income	6,438,835			—			(233,277		)	6,205,558
Gain on mortgage revenue bond - redemption	2,835,243			—			—			2,835,243
Other interest income	208,823			—			—			208,823
Total revenues	12,633,245			800,872			(233,277		)	13,200,840
Expenses:
Real estate operating (exclusive of items shown below)	1,650,647			449,646			—			2,100,293
Depreciation and amortization	1,382,626			237,440			(6,720		)	1,613,346
Interest	2,169,549			557,884			(557,884		)	2,169,549
General and administrative	1,270,926			—			—			1,270,926
Total expenses	6,473,748			1,244,970			(564,604		)	7,154,114
Net income (loss)	6,159,497			(444,098		)	331,327			6,046,726
Net loss attributable to noncontrolling interest	(103		)	—			—			(103		)
Net income (loss) - America First Multifamily Investors, L. P.	$	6,159,600		$	(444,098	)	$	331,327		$	6,046,829