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Governmental Issuer Loan
6 Months Ended
Jun. 30, 2020
Governmental Issuer Loan [Abstract]  
Governmental Issuer Loan

7. Governmental Issuer Loan

 

The Partnership owns a governmental issuer loan (“GIL”) that was issued by a state governmental authority to provide construction financing for an affordable multifamily property. The Partnership expects and believes the interest earned on the GIL is excludable from gross income for federal income tax purposes. The GIL does not constitute an obligation of any state government, agency or authority and no state government, agency or authority is liable on it, nor is the taxing power of any state government pledged to the payment of principal or interest on the GIL. The GIL is secured by the borrower’s non-recourse obligation evidenced by a mortgage

on all real and personal property associated with the underlying property. The sole source of the funds to pay principal and interest on the GIL is the net cash flow or the sale or refinancing proceeds from the property. The GIL shares a first mortgage lien position with a property loan also owned by the Partnership (see Note 11). The GIL is held in trust in connection with a TOB Trust financing (see Note 16). The terms of the Partnership’s GIL as of June 30, 2020 are as follows:

 

Property Name

 

Month

Acquired

 

Property Location

 

Units

 

Maturity Date

 

Variable Interest Rate

 

Amortized Cost

 

Scharbauer Flats Apartments

 

June

 

Midland, TX

 

300

 

1/1/2023 (1)

 

SIFMA + 3.10%

 

$

40,000,000

 

 

(1)

The borrower may automatically extend the maturity to July 2023 and may further extend the maturity to January 2024 upon payment of a non-refundable extension fee.

 

An affiliate of the Partnership has forward committed to purchase the GIL at maturity, if the property has reached stabilization and other conditions are met. See Note 22 for further information. Affiliates of the borrower have guaranteed payment of principal and accrued interest on the GIL of 100% at origination, decreasing to 50% upon receipt of the certificate of occupancy, and decreasing to 25% upon achievement of 90% occupancy for 30 consecutive days.