Unsecured Lines of Credit

9 Months Ended

Sep. 30, 2019

15. Debt Financing

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of September 30, 2019 and December 31, 2018:

	Outstanding Debt Financings as of September 30, 2019, net		Restricted Cash		Year Acquired	Stated Maturities	Reset Frequency	SIFMA Based Rates	Facility Fees	Period End Rates
TEBS Financings
Fixed - M24	$	40,792,062	$	98,007	2010	May 2027	N/A	N/A	N/A	3.05%
Variable - M31 ⁽¹⁾		79,885,290		4,999	2014	July 2024	Weekly	1.61%	1.42%	3.03%
Fixed - M33		31,638,938		2,606	2015	September 2030	N/A	N/A	N/A	3.24%
Fixed - M45 ⁽²⁾		218,030,897		5,000	2018	July 2034	N/A	N/A	N/A	3.82%

TOB & Term A/B Trusts Securitization
Deutsche Bank:
Fixed - Term TOB		8,010,000		-	2014	October 2019	N/A	N/A	N/A	4.01%
Fixed - Term A/B		5,256,054		-	2019	February 2020	N/A	N/A	N/A	4.53%
Fixed - Term A/B		38,404,644		-	2017	February 2027	N/A	N/A	N/A	4.46%
Mizuho Capital Markets:
Variable - TOB		25,645,347		-	2019	July 2020	Weekly	1.68%	1.17%	2.85%
Variable - TOB		42,228,417		-	2019	August 2020	Weekly	1.68%	1.17% - 1.66%	2.85% - 3.34%
Variable - TOB		35,841,489		-	2019	September 2020	Weekly	2.03%	1.12%	3.15%
Morgan Stanley:
Fixed - Term TOB		13,078,992		-	2019	May 2022	N/A	N/A	N/A	3.53%
Total Debt Financings	$	538,812,130

⁽¹⁾	Facility fees are variable.

⁽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.

	Outstanding Debt Financings as of December 31, 2018, net		Restricted Cash		Year Acquired	Stated Maturities	Reset Frequency	SIFMA Based Rates	Facility Fees	Period End Rates
TEBS Financings
Variable - M24 ⁽¹⁾	$	41,466,000	$	432,998	2010	September 2020	Weekly	1.76%	1.85%	3.61%
Variable - M31⁽²⁾		80,418,505		181,626	2014	July 2019	Weekly	1.74%	1.49%	3.23%
Variable - M33 ⁽³⁾		31,262,039		58,002	2015	July 2020	Weekly	1.74%	1.26%	3.00%
Fixed - M45 ⁽⁴⁾		219,250,387		5,000	2018	July 2034	N/A	N/A	N/A	3.82%

TOB & Term A/B Trusts Securitization
Deutsche Bank:
Variable - TOB		37,620,000		-	2012	May 2019	Weekly	2.21%	1.67%	3.88%
Fixed - Term TOB		46,675,413		-	2014	October 2019	N/A	N/A	N/A	4.01% - 4.39%
Fixed - Term A/B		10,516,000			2018	May 2019	N/A	N/A	N/A	4.53%
Fixed - Term A/B		38,455,221		-	2017	February 2027	N/A	N/A	N/A	4.46%
Total Debt Financings	$	505,663,565

⁽¹⁾	In July 2019, the Partnership refinanced the M24 TEBS Financing with Freddie Mac. After refinancing, the M24 TEBS Financing has a fixed interest rate of 3.05% and a stated maturity of May 2027.

⁽²⁾	In June 2019, the Partnership exercised its unilateral right to extend the financing for an additional five-year period through July 2024. Facility fees are variable.

⁽³⁾	In July 2019, the Partnership refinanced the M33 TEBS Financing with Freddie Mac. After refinancing, the M33 TEBS Financing has a fixed interest rate of 3.24% and a stated maturity of September 2030.

⁽⁴⁾	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.

The TOB, Term TOB and Term A/B Trusts with Deutsche Bank are subject to a Master Trust Agreement that contains covenants with which the Partnership is required to comply. If the Partnership were to be out of compliance with any of these covenants, a termination event of the financing facilities would be triggered which would require the Partnership to purchase a portion or all of the senior SPEARS or Class A Certificates held by Deutsche Bank. The most restrictive covenant within the Master Trust Agreement states that cash available to distribute plus interest expense for the trailing twelve months must be at least twice the trailing twelve-month interest expense. The Partnership was in compliance with these covenants as of September 30, 2019.

The TOB Trusts with Mizuho require that the Partnership’s residual interest in the TOB Trusts maintain a certain value in relation to the total assets in each Trust. If the Partnership is not in compliance with any of these covenants, a termination event of the financing facility would be triggered which would require the Partnership to purchase a portion or all of the senior interests issued by each TOB Trust. The Partnership was in compliance with these covenants as of September 30, 2019.

The Term TOB Trust with Morgan Stanley Bank, N.A. (“Morgan Stanley”) is subject to a Trust Agreement and other related agreements that contains covenants with which the Partnership is required to comply. If the Partnership is out of compliance with any of these covenants, a termination event of the financing facility would be triggered which would require the Partnership to purchase a portion or all of the Class A Certificates held by Morgan Stanley. The most restrictive covenant within the Trust Agreement and related agreements requires the maintenance of a debt service coverage ratio above a specified threshold and the Partnership’s net assets cannot decline by more than specific percentages over designated periods of time. The Partnership was in compliance with these covenants as of September 30, 2019.

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 asset.

As of September 30, 2019 and December 31, 2018, the Partnership had posted restricted cash as contractually required under the terms of the four TEBS Financings. In addition, the Partnership has entered in interest rate cap agreements to mitigate its exposure to interest rate fluctuations on the variable-rate debt financings (Note 17).

The TOB, Term TOB, Term A/B and TEBS Financing arrangements are consolidated VIE’s to the Partnership (Note 5). As the residual interest holder, 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 PHCs or 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 underlying collateral may 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.

Debt Financing Activity in the First Nine Months of 2019

New Debt Financings:

In July 2019, the Partnership refinanced the M24 TEBS Financing with Freddie Mac. The M24 TEBS Financing was converted to a fixed interest rate of 3.05%, which is inclusive of credit enhancement and servicing fees, and the stated maturity was extended to May 2027. The refinancing was treated as an extinguishment for accounting purposes and the Partnership capitalized approximately $307,000 as deferred financing costs related to the refinancing.

In July 2019, the Partnership refinanced the M33 TEBS Financing with Freddie Mac. The M33 TEBS Financing converted to a fixed interest rate of 3.24%, which is inclusive of credit enhancement and servicing fees, and the stated maturity was extended to September 2030. The refinancing was treated as an extinguishment for accounting purposes and the Partnership expensed approximately $496,000 of previously unamortized deferred financing costs associated with the M33 TEBS Financing. The Partnership capitalized approximately $265,000 as deferred financing costs related to the refinancing. The Partnership received premium proceeds upon refinancing of approximately $435,000, which will be amortized using the effective interest method through the term of the agreement.

During the third quarter of 2019, The Partnership entered into various TOB Trust financings with Mizuho secured by MRBs and PHC Certificates. Under each TOB Trust structure, the trustee issues senior Floater Certificates and Residual Certificates that represent beneficial interests in the securitized asset held by the TOB Trusts. The Floater Certificates are sold to unaffiliated investors and entitle the holder to cash flows from the securitized assets at a stated interest rate. The Floater Certificates are credit enhanced by Mizuho such that Mizuho will cover any shortfall if the cash flows from the securitized assets are less than the contractual principal and interest due to the Floater Certificate holders. The Partnership would then be required to reimburse Mizuho for any credit enhancement payments. The Residual Certificates are retained by the Partnership and grant the Partnership rights to certain cash flows from the securitized assets after payment to the Floater Certificates and related trust fees, as well as certain other rights to the securitized assets. The TOB Trusts are considered VIEs (Note 5) because the Partnership’s rights are such that the Partnership is the primary beneficiary and the Partnership consolidates the TOB Trusts in its condensed consolidated financial statements. The following table summarizes the gross principal and terms of the TOB Trusts:

TOB Trusts Securitization

Outstanding TOB

Trust Financing

Stated Maturity

Reset

Frequency

Variable Rate Index

Facility Fees

Rosewood Townhomes

7,715,000

July 2020

Weekly

SIFMA

1.17%

South Pointe Apartments

18,035,000

July 2020

Weekly

SIFMA

1.17%

Live 929 Apartments

31,800,000

August 2020

Weekly

SIFMA

1.66%

Montecito at Williams Ranch

6,925,000

August 2020

Weekly

SIFMA

1.17%

Vineyard Gardens

3,595,000

August 2020

Weekly

SIFMA

1.17%

PHC Trust I

20,121,000

September 2020

Weekly

SIFMA

1.12%

PHC Trust II

3,803,000

September 2020

Weekly

SIFMA

1.12%

PHC Trust III

12,062,000

September 2020

Weekly

SIFMA

1.12%

Total Term TOB Trust Financing

104,056,000

In May 2019, the Partnership entered into a Term TOB Trust financing with Morgan Stanley secured by an MRB. The following table summarizes the gross principal and terms of the Term TOB Trust:

Term TOB Trusts Securitization

Outstanding Term TOB

Trust Financing

Stated Maturity

Fixed Interest

Rate

Village at Avalon

13,167,000

May 2022

3.53

Total Term TOB Trust Financing

13,167,000

In February 2019, the Partnership entered into two Term A/B Trusts financings with Deutsche Bank secured by MRBs. The following table summarizes the gross principal and terms of the Term A/B Trusts:

Term A/B Trusts Securitization	Outstanding Term A/B Trust Financing		Stated Maturity	Fixed Interest Rate
Gateway Village	$	2,262,000	February 2020		4.53	%
Lynnhaven Apartments		3,001,500	February 2020		4.53	%
Total Term A/B Trust Financing	$	5,263,500

Redemptions:

The following debt financing facilities were collapsed and redeemed in full at prices that approximated the Partnership’s carrying value plus accrued interest:

Debt Financing	Debt Facility	Month	Paydown Applied
Live 929 Apartments	Term TOB Trust	August 2019	$	37,553,300
Montecito at Williams Ranch	Term A/B Trust	August 2019		6,921,000
Vineyard Gardens	Term A/B Trust	August 2019		3,595,000
PHC Trust I	TOB Trust	September 2019		19,755,000
PHC Trust II	TOB Trust	September 2019		3,430,000
PHC Trust III	TOB Trust	September 2019		11,000,000
			$	82,254,300

Debt Financing Activity in the First Nine Months of 2018

New Debt Financings:

In August 2018, the Partnership and its newly created consolidated subsidiary, ATAX TEBS IV, LLC (the “2018 Sponsor”), entered into a long-term debt financing facility provided through the securitization of 25 MRBs, with an initial par value of approximately $260.6 million owned by the 2018 Sponsor pursuant to the M45 TEBS Financing. The M45 TEBS financing facility provides the Partnership with a long-term fixed-rate facility. Of the 25 MRBs securitized in the M45 TEBS Financings, 24 MRBs were in Term A/B Trusts that were collapsed prior to the closing of the M45 TEBS Financing. The collapse of the Term A/B Trusts and subsequent closing of the M45 TEBS Financing resulted in a debt modification for accounting purposes and the Partnership capitalized approximately $371,000 as deferred financing costs.

In August 2018, the Partnership entered into four Term A/B Trusts financings secured by various MRBs. The following table summarizes the gross principal and terms of the Term A/B Trusts:

Term A/B Trusts Securitization	Outstanding Term A/B Trust Financing		Stated Maturity	Fixed Interest Rate
Montecito at Williams Ranch - Series A	$	6,921,000	November 2018		4.53	%
Montecito at Williams Ranch - Series B		4,303,000	November 2018		4.53	%
Vineyard Gardens - Series A		3,595,000	November 2018		4.53	%
Vineyard Gardens - Series B		2,561,000	November 2018		4.53	%
Total Term A/B Trust Financing	$	17,380,000

Redemptions:

The following Term A/B Trusts were collapsed and redeemed in full at prices that approximated the Partnership’s carrying value plus accrued interest:

Debt Financing	Debt Facility	Month	Paydown Applied
Seasons Lakewood - Series B	Term A/B Trust	March 2018	$	4,475,000
Summerhill - Series B	Term A/B Trust	March 2018		2,870,000
Oaks at Georgetown - Series B	Term A/B Trust	April 2018		4,690,000
San Vicente - Series B	Term A/B Trust	May 2018		1,555,000
The Village at Madera - Series B	Term A/B Trust	May 2018		1,465,000
Las Palmas II - Series B	Term A/B Trust	July 2018		1,505,000
15 West Apartments ⁽¹⁾	Term A/B Trust	August 2018		8,300,012
Bruton Apartments ⁽¹⁾	Term A/B Trust	August 2018		15,279,403
Columbia Gardens ⁽¹⁾	Term A/B Trust	August 2018		10,222,680
Companion at Thornhill Apartments⁽¹⁾	Term A/B Trust	August 2018		9,642,587
Concord at Gulfgate - Series A⁽¹⁾	Term A/B Trust	August 2018		16,310,000
Concord at Little York - Series A⁽¹⁾	Term A/B Trust	August 2018		11,425,000
Concord at Williamcrest - Series A ⁽¹⁾	Term A/B Trust	August 2018		17,695,000
Courtyard - Series A ⁽¹⁾	Term A/B Trust	August 2018		9,210,000
Courtyard - Series B	Term A/B Trust	August 2018		5,295,000
Crossing at 1415 - Series A ⁽¹⁾	Term A/B Trust	August 2018		6,370,877
Decatur Angle⁽¹⁾	Term A/B Trust	August 2018		21,362,472
Harmony Court Bakersfield - Series A ⁽¹⁾	Term A/B Trust	August 2018		3,360,000
Harmony Terrace - Series A⁽¹⁾	Term A/B Trust	August 2018		6,210,000
Harmony Terrace - Series B	Term A/B Trust	August 2018		6,290,000
Heights at 515 - Series A ⁽¹⁾	Term A/B Trust	August 2018		5,402,307
Las Palmas II - Series A⁽¹⁾	Term A/B Trust	August 2018		1,530,000
Oaks at Georgetown - Series A ⁽¹⁾	Term A/B Trust	August 2018		11,100,000
San Vicente - Series A ⁽¹⁾	Term A/B Trust	August 2018		3,150,000
Seasons at Simi Valley - Series A⁽¹⁾	Term A/B Trust	August 2018		3,688,843
Seasons Lakewood - Series A ⁽¹⁾	Term A/B Trust	August 2018		6,615,000
Seasons San Juan Capistrano - Series A ⁽¹⁾	Term A/B Trust	August 2018		11,140,000
Seasons San Juan Capistrano - Series B	Term A/B Trust	August 2018		5,590,000
Summerhill - Series A ⁽¹⁾	Term A/B Trust	August 2018		5,785,000
Sycamore Walk - Series A ⁽¹⁾	Term A/B Trust	August 2018		3,066,769
The Village at Madera - Series A⁽¹⁾	Term A/B Trust	August 2018		2,780,000
Village at River's Edge⁽¹⁾	Term A/B Trust	August 2018		8,963,207
Willow Run ⁽¹⁾	Term A/B Trust	August 2018		10,079,940
			$	242,424,098

(1)	In August 2018, the MRB was transferred to the M45 TEBS Financing upon collapsing of the Term A/B Trust.

Future Maturities

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

Remainder of 2019	$	9,445,353
2020		114,279,468
2021		5,328,914
2022		18,499,166
2023		5,899,262
Thereafter		387,921,886
Total		541,374,049
Unamortized deferred financing costs and debt premium		(2,561,919	)
Total debt financing, net	$	538,812,130

Unsecured Lines of Credit [Member]

Unsecured Lines of Credit

14. Unsecured Lines of Credit

The following tables summarize the unsecured lines of credit (“LOC”) as of September 30, 2019 and December 31, 2018:

Unsecured Lines of Credit	Outstanding as of September 30, 2019		Total Commitment		Commitment Maturity	Variable / Fixed	Reset Frequency	Period End Rate
Bankers Trust non-operating	$	13,200,000	$	50,000,000	June 2021	Variable ⁽¹⁾	Monthly		4.58	%
Bankers Trust operating		-		10,000,000	June 2021	Variable ⁽¹⁾	Monthly		5.33	%
Total unsecured lines of credit	$	13,200,000	$	60,000,000

⁽¹⁾	The variable rate is indexed to LIBOR plus an applicable margin.

Unsecured Lines of Credit	Outstanding as of December 31, 2018		Total Commitment		Commitment Maturity	Variable / Fixed	Reset Frequency	Period End Rate
Bankers Trust non-operating	$	35,659,200	$	50,000,000	June 2020	Variable ⁽²⁾	Monthly		5.38	%
Bankers Trust operating		-		10,000,000	June 2020	Variable⁽²⁾	Monthly		5.63	%
Total unsecured lines of credit	$	35,659,200	$	60,000,000

⁽²⁾	The variable rate is indexed to LIBOR plus an applicable margin.

The outstanding balance of the non-operating LOC as of September 30, 2019 is due in March 2020. The Partnership can extend final repayment of the amount due by making partial repayments in accordance with the Credit Agreement to December 2020. The Partnership was in compliance with all covenants in the Credit Agreement as of September 30, 2019.

The Partnership is required to make principal payments to reduce the operating LOC to zero for fifteen consecutive calendar days during each calendar quarter. The Partnership has fulfilled its prepayment obligation for all periods presented. In addition, the Partnership has fulfilled its fourth quarter of 2019 repayment obligation as it maintained a zero balance in the operating LOC for fifteen consecutive days during October 2019.