Variable Interest Entities

9 Months Ended

Sep. 30, 2015

Variable Interest Entities [Abstract]

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 are 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.

On September 30, 2015 and December 31, 2014, the Partnership determined that thirteen of the entities financed by mortgage revenue bonds owned by the Partnership were held by VIEs. The Partnership then determined that it is the primary beneficiary of two of these VIEs: Bent Tree and Fairmont Oaks and has consolidated these entities. The primary purpose of the Company is to acquire, hold, sell and otherwise deal with mortgage revenue bonds and other instruments which have been issued to provide construction and/or permanent financing for Residential Properties and other commercial properties. The Mortgage Revenue Bonds, the Public Housing Capital Fund Trust, and the Mortgage-Backed Securities segments fulfill this purpose, are long-term investments, and the properties which collateralize the mortgage revenue bonds are not owned or managed by the Company. The MF Property segment is comprised of indirectly owned, actively managed, and controlled multifamily properties. The MF Properties included in this segment are typically financed with third party mortgages.

In April 2015, the Partnership entered into separate brokerage contracts to sell Bent Tree and Fairmont Oaks. As a result, these entities met the criteria for discontinued operations presentation and have been classified as such in the Company’s condensed consolidated financial statements for all periods presented. The Company has also eliminated the Consolidated VIE segment as a reportable segment (see Notes 1, 7, 9, and 19).

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 include 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. On September 30, 2015 and December 31, 2014, the Partnership determined it is the primary beneficiary of the Bent Tree and Fairmont Oaks VIEs, which are classified as discontinued operations in the Company’s condensed consolidated financial statements.

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 three individuals, one of which is a related party. 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 eleven VIE entities on September 30, 2015 based on its determination of the primary beneficiary of these eleven 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 the 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 non-consolidated VIEs held by the Company on September 30, 2015:



	September 30, 2015
	Balance Sheet Classification				Maximum Exposure to Loss
	Mortgage Revenue Bond		Property Loan		Mortgage Revenue Bond		Property Loan
Ashley Square Apartments	$	5,572,262	$	1,482,000	$	5,114,000	$	7,839,749
Bruton Apartments	19,648,516		—		18,145,000		—
Cross Creek	8,903,193		3,619,116		6,095,463		3,619,116
Glenview Apartments	6,850,865		—		6,723,000		—
Harden Ranch	7,531,277		—		6,960,000		—
Montclair Apartments	3,529,444		—		3,458,000		—
Santa Fe Apartments	4,867,300		—		4,736,000		—
Seasons at Simi Valley	6,539,709		—		6,320,000		—
Silver Moon Lodge Apartments	9,060,239		2,819,183		7,995,983		2,819,183
Tyler Park Apartments	6,478,195		—		6,075,000		—
Westside Village Market	4,233,487		—		3,970,000		—
	$	83,214,487	$	7,920,299	$	75,592,446	$	14,278,048

The mortgage revenue bonds are classified on the balance sheet as available for sale investments and are carried at fair value. Property loans are presented on the balance sheet as Other Assets and are carried at the unpaid principal less any loan loss reserves. Note 4 includes additional information regarding the mortgage revenue bonds and Note 8 includes additional information regarding the property loans. The maximum exposure to loss for the mortgage revenue bonds is equal to the unpaid principal balance on September 30, 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 on September 30, 2015 and December 31, 2014:

Condensed Consolidating Balance Sheets



	Partnership on September 30, 2015			Consolidated VIEs on September 30, 2015			Consolidation -Elimination on September 30, 2015			Total on September 30, 2015
Assets
Cash and cash equivalents	$	33,111,749		$	—		$	—		$	33,111,749
Restricted cash	9,780,383			—			—			9,780,383
Interest receivable	5,551,354			—			—			5,551,354
Mortgage revenue bonds held in trust, at fair value	499,197,562			—			—			499,197,562
Mortgage revenue bonds, at fair value	28,247,980			—			—			28,247,980
Public housing capital fund trusts, at fair value	59,876,842			—			—			59,876,842
Mortgage-backed securities, at fair value	14,681,587			—			—			14,681,587
Real estate assets:
Land and improvements	15,277,733			—			—			15,277,733
Buildings and improvements	139,167,496			—			—			139,167,496
Real estate assets before accumulated depreciation	154,445,229			—			—			154,445,229
Accumulated depreciation	(14,490,131		)	—			—			(14,490,131		)
Net real estate assets	139,955,098			—			—			139,955,098
Other assets	34,817,296			—			—			34,817,296
Assets held for sale	27,603,810			13,419,727			(27,842,870		)	13,180,667
Total Assets	$	852,823,661		$	13,419,727		$	(27,842,870	)	$	838,400,518

Liabilities
Accounts payable, accrued expenses and other liabilities	$	6,468,124		$	—		$	—		$	6,468,124
Distribution payable	7,895,646			—			—			7,895,646
Lines of Credit	6,425,261			—			—			6,425,261
Debt financing	447,606,493			—			—			447,606,493
Mortgage payable	68,494,688			—			—			68,494,688
Derivative swap	1,539,781			—			—			1,539,781
Liabilities held for sale	—			38,038,532			(37,521,940		)	516,592
Total Liabilities	538,429,993			38,038,532			(37,521,940		)	538,946,585
Partners' Capital
General Partner	473,783			—			—			473,783
Beneficial Unit Certificate holders	313,912,550			—			6,203,622			320,116,172
Unallocated loss of Consolidated VIEs	—			(24,618,805		)	3,475,448			(21,143,357		)
Total Partners' Capital	314,386,333			(24,618,805		)	9,679,070			299,446,598
Noncontrolling interest	7,335			—			—			7,335
Total Capital	314,393,668			(24,618,805		)	9,679,070			299,453,933
Total Liabilities and Partners' Capital	$	852,823,661		$	13,419,727		$	(27,842,870	)	$	838,400,518



	Partnership on December 31, 2014			Consolidated VIEs on December 31, 2014			Consolidation -Elimination on December 31, 2014			Total on December 31, 2014
Assets
Cash and cash equivalents	$	49,157,571		$	—		$	—		$	49,157,571
Restricted cash	11,141,496			—			—			11,141,496
Interest receivable	4,121,486			—			—			4,121,486
Mortgage revenue bonds held in trust, at fair value	378,423,092			—			—			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			—			—			13,753,493
Buildings and improvements	110,706,173			—			—			110,706,173
Real estate assets before accumulated depreciation	124,459,666			—			—			124,459,666
Accumulated depreciation	(14,108,154		)	—			—			(14,108,154		)
Net real estate assets	110,351,512			—			—			110,351,512
Other assets	31,134,319			—			—			31,134,319
Assets held for sale	27,640,053			13,456,861			(27,892,899		)	13,204,015
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		$	—		$	—		$	4,123,346
Distribution payable	7,617,390			—			—			7,617,390
Debt financing	345,359,000			—			—			345,359,000
Mortgages payable	76,707,834			—			—			76,707,834
Liabilities held for sale	—			36,956,477			(36,452,734		)	503,743
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 and nine months ended September 30, 2015 and 2014:



	Partnership For the Three Months Ended September 30, 2015			Consolidated VIEs For the Three Months Ended September 30, 2015			Consolidation -Elimination For the Three Months Ended September 30, 2015		Total For the Three Months Ended September 30, 2015
Revenues:
Property revenues	$	4,124,413		$	—		$	—	$	4,124,413
Investment income	8,485,518			—			—		8,485,518
Gain on sale of MF Property	1,187,807			—			—		1,187,807
Other interest income	287,134			—			—		287,134
Total revenues	14,084,872			—			—		14,084,872
Expenses:
Real estate operating (exclusive of items shown below)	2,933,278			—			—		2,933,278
Recovery of loss on receivables	(98,431		)	—			—		(98,431		)
Depreciation and amortization	1,829,026			—			—		1,829,026
Interest	4,754,119			—			—		4,754,119
General and administrative	2,380,497			—			—		2,380,497
Total expenses	11,798,489			—			—		11,798,489
Income from continuing operations	2,286,383			—			—		2,286,383
Income (loss) from discontinued operations	227,583			(334,164		)	360,475		253,894
Net income (loss)	2,513,966			(334,164		)	360,475		2,540,277
Net loss attributable to noncontrolling interest	(372		)	—			—		(372		)
Net income (loss) - America First Multifamily Investors, L. P.	$	2,514,338		$	(334,164	)	$	360,475	$	2,540,649




	Partnership For the Three Months Ended September 30, 2014			Consolidated VIEs For the Three Months Ended September 30, 2014			Consolidation -Elimination For the Three Months Ended September 30, 2014		Total For the Three Months Ended September 30, 2014
Revenues:
Property revenues	$	3,675,140		$	—		$	—	$	3,675,140
Investment income	6,958,323			—			—		6,958,323
Other interest income	222,074			—			—		222,074
Other Income	188,000			—			—		188,000
Total revenues	11,043,537			—			—		11,043,537
Expenses:
Real estate operating (exclusive of items shown below)	2,091,706			—			—		2,091,706
Provision for loan loss	75,000			—			—		75,000
Depreciation and amortization	1,593,312			—			—		1,593,312
Interest	2,575,873			—			—		2,575,873
General and administrative	1,409,688			—			—		1,409,688
Total expenses	7,745,579			—			—		7,745,579
Income from continuing operations	3,297,958			—			—		3,297,958
Income (loss) from discontinued operations	171,954			(505,338		)	340,106		6,722
Net income (loss)	3,469,912			(505,338		)	340,106		3,304,680
Net loss attributable to noncontrolling interest	(3,149		)	—			—		(3,149		)
Net income (loss) - America First Multifamily Investors, L. P.	$	3,473,061		$	(505,338	)	$	340,106	$	3,307,829




	Partnership For the Nine Months Ended September 30, 2015			Consolidated VIEs For the Nine Months Ended September 30, 2015			Consolidation -Elimination For the Nine Months Ended September 30, 2015		Total For the Nine Months Ended September 30, 2015
Revenues:
Property revenues	$	12,512,775		$	—		$	—	$	12,512,775
Investment income	25,853,963			—			—		25,853,963
Gain on sale of MF Properties	4,605,269			—			—		4,605,269
Other interest income	739,057			—			—		739,057
Total revenues	43,711,064			—			—		43,711,064
Expenses:
Real estate operating (exclusive of items shown below)	7,679,583			—			—		7,679,583
Depreciation and amortization	5,365,121			—			—		5,365,121
Interest	11,683,429			—			—		11,683,429
General and administrative	6,214,093			—			—		6,214,093
Total expenses	30,942,226			—			—		30,942,226
Income from continuing operations	12,768,838			—			—		12,768,838
Income (loss) from discontinued operations	568,510			(1,119,191		)	1,067,290		516,609
Net income (loss)	13,337,348			(1,119,191		)	1,067,290		13,285,447
Net loss attributable to noncontrolling interest	(952		)	—			—		(952		)
Net income (loss) - America First Multifamily Investors, L. P.	$	13,338,300		$	(1,119,191	)	$	1,067,290	$	13,286,399




	Partnership For the Nine Months Ended September 30, 2014			Consolidated VIEs For the Nine Months Ended September 30, 2014			Consolidation -Elimination For the Nine Months Ended September 30, 2014		Total For the Nine Months Ended September 30, 2014
Revenues:
Property revenues	$	9,959,704		$	—		$	—	$	9,959,704
Investment income	19,405,356			—			—		19,405,356
Gain on mortgage revenue bond redemption	3,684,898								3,684,898
Other interest income	672,974			—			—		672,974
Other income	188,000			—			—		188,000
Total revenues	33,910,932			—			—		33,910,932
Expenses:
Real estate operating (exclusive of items shown below)	5,549,397			—			—		5,549,397
Provision for loan loss	75,000			—			—		75,000
Depreciation and amortization	4,265,375			—			—		4,265,375
Interest	7,029,058			—			—		7,029,058
General and administrative	4,079,493			—			—		4,079,493
Total expenses	20,998,323			—			—		20,998,323
Income from continuing operations	12,912,609			—			—		12,912,609
Income (loss) from discontinued operations	516,565			(1,426,463		)	1,006,778		96,880
Net income (loss)	13,429,174			(1,426,463		)	1,006,778		13,009,489
Net loss attributable to noncontrolling interest	(3,626		)	—			—		(3,626		)
Net income (loss) - America First Multifamily Investors, L. P.	$	13,432,800		$	(1,426,463	)	$	1,006,778	$	13,013,115