Debt Financing

3 Months Ended

Mar. 31, 2021

15. Debt Financing

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of March 31, 2021 and December 31, 2020:

	Outstanding Debt Financings as of March 31, 2021, net		Restricted Cash		Year Acquired	Stated Maturities	Reset Frequency	Variable Rate Index	Index Based Rates	Spread/ Facility Fees	Period End Rates
TEBS Financings
Fixed - M24	$	39,710,422	$	4,000	2010	May 2027	N/A	N/A	N/A	N/A	3.05%
Variable - M31 ⁽¹⁾		77,965,698		4,999	2014	July 2024	Weekly	SIFMA	0.08%	1.36%	1.44%
Fixed - M33		30,648,101		2,606	2015	September 2030	N/A	N/A	N/A	N/A	3.24%
Fixed - M45 ⁽²⁾		215,362,292		5,000	2018	July 2034	N/A	N/A	N/A	N/A	3.82%

Secured Notes
Variable - Notes		103,016,551		77,530,126	2020	September 2025	Monthly	3-month LIBOR	0.18%	9.00%	9.18% ⁽³⁾

TOB Trusts Securitization
Mizuho Capital Markets:
Variable - TOB		3,635,973		-	2020	July 2022	Weekly	SIFMA	0.25%	0.89%	1.14%
Variable - TOB		7,873,144		-	2021	February 2023	Weekly	SIFMA	0.25%	1.42%	1.67%
Variable - TOB		122,615,475		-	2019	July 2023	Weekly	SIFMA	0.25% - 0.30%	1.17% - 1.67%	1.42% - 1.97%
Variable - TOB		76,533,047		-	2020	September 2023	Weekly	OBFR	0.32%	0.89%	1.21%
Variable - TOB		5,680,127		-	2020	December 2023	Weekly	SIFMA	0.25%	1.27%	1.52%
Variable - TOB		15,761,909		-	2021	January 2024	Weekly	OBFR	0.32%	0.89%	1.21%
Morgan Stanley:
Fixed - Term TOB		12,986,162		-	2019	May 2022	N/A	N/A	N/A	N/A	3.53%
Total Debt Financings	$	711,788,901

⁽¹⁾	^{Facility fees have a variable component.}

⁽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.}

⁽³⁾

^{The Partnership has entered into two total return swap transactions with the Secured Notes as the reference security and notional amounts totaling the outstanding principal on the Secured Notes. The total return swaps effectively net down the interest rate on the Secured Notes. Considering the effect of the total return swaps, the effective net interest rate is 4.25% for approximately $39.9 million of the Secured Notes and 1.00% for approximately $63.5 million of the Secured Notes as of March 31, 2021. See Note 17 for further information on the total return swaps.}

	Outstanding Debt Financings as of December 31, 2020		Restricted Cash		Year Acquired	Stated Maturities	Reset Frequency	Variable Rate Index	Index Based Rates	Spread/ Facility Fees	Period End Rates
TEBS Financings
Fixed - M24	$	39,825,019	$	238,760	2010	May 2027	N/A	N/A	N/A	N/A	3.05%
Variable - M31 ⁽¹⁾		78,272,018		4,999	2014	July 2024	Weekly	SIFMA	0.12%	1.34%	1.46%
Fixed - M33		30,796,097		2,606	2015	September 2030	N/A	N/A	N/A	N/A	3.24%
Fixed - M45 ⁽²⁾		215,825,022		5,000	2018	July 2034	N/A	N/A	N/A	N/A	3.82%

Secured Notes
Variable - Notes		103,086,756		77,500,000	2020	September 2025	Monthly	3-month LIBOR	0.22%	9.00%	9.22% ⁽³⁾

TOB Trusts Securitization
Mizuho Capital Markets:
Variable - TOB		1,765,167		-	2020	July 2022	Weekly	SIFMA	0.29%	0.89%	1.18%
Variable - TOB		122,724,862		-	2019	July 2023	Weekly	SIFMA	0.29% - 0.39%	1.17% - 1.67%	1.46% - 2.06%
Variable - TOB		62,992,845		-	2020	September 2023	Weekly	OBFR	0.33%	0.89%	1.22%
Variable - TOB		5,668,324		-	2020	December 2023	Weekly	SIFMA	0.29%	1.27%	1.56%
Morgan Stanley:
Fixed - Term TOB		13,001,530		-	2019	May 2022	N/A	N/A	N/A	N/A	3.53%
Total Debt Financings	$	673,957,640

⁽¹⁾	Facility fees have a variable component.

⁽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.

⁽³⁾

The Partnership has entered into two total return swap transactions with the Secured Notes as the reference security and notional amounts totaling the outstanding principal on the Secured Notes. The total return swaps effectively net down the interest rate on the Secured Notes. Considering the effect of the total return swaps, the effective net interest rate is 4.25% for approximately $40.0 million of the Secured Notes and 1.00% for approximately $63.5 million of the Secured Notes as of December 31, 2020. See Note 17 for further information on the total return swaps.

The TOB, Term TOB and TEBS financing arrangements are consolidated VIE’s to the Partnership (Note 5). The Partnership is the primary beneficiary due to its rights to the underlying assets. Accordingly, the Partnership consolidates the TOB, Term TOB and TEBS financings in the Partnership’s condensed consolidated financial statements. See Note 6 for information regarding the MRBs securitized within each TOB, Term TOB and TEBS financing, Note 7 for information regarding the GILs securitized within each TOB Trust financing, Note 10 for information regarding the property loans securitized within each TOB Trust financing and Note 12 for information regarding the taxable GIL securitized within a TOB Trust financing. 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 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.

As of March 31, 2021 and December 31, 2020, the Partnership posted restricted cash as contractually required under the terms of the four TEBS financings. The restricted cash associated with the Secured Notes is collateral posted with Mizuho according to the terms of two total return swaps that have the Secured Notes as the reference security (Note 17). The Partnership may also be required to post collateral, typically in cash, related to the TOB Trusts with Mizuho. The amount of collateral posting required is dependent on the valuation of the underlying MRBs, GILs and property loans in relation to thresholds set by Mizuho. There was no requirement to post collateral for the TOB Trusts with Mizuho as of March 31, 2021 and December 31, 2020.

The Partnership has entered into various TOB Trust financings with Mizuho secured by MRBs, GILs, property loans and a taxable GIL. The Mizuho TOB Trusts require that the Partnership’s residual interest in the TOB Trusts maintain a certain value in relation to the total assets in each Trust. In addition, the Master Trust Agreement with Mizuho requires the Partnership’s partners’ capital, as defined, to maintain a certain threshold and that the Partnership remains listed on the NASDAQ. 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 March 31, 2021.

The Term TOB Trust with Morgan Stanley is subject to a Trust Agreement and other related agreements that contain covenants with which the Partnership or the underlying MRB are required to comply. The underlying property must maintain certain occupancy and debt service covenants. A termination event will occur if the Partnership’s net assets, as defined, decrease by 25% in one quarter or 35% over one year. If the underlying property or the Partnership, as applicable, 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 Partnership was in compliance with all covenants as of March 31, 2021.

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 assets.

Activity in the First Three Months of 2021

New Debt Financings:

The following is a summary of the Mizuho TOB Trust financings that were entered into during the three months ended March 31, 2021:

TOB Trusts Securitization

Initial TOB

Trust Financing

Stated Maturity

Reset

Frequency

Variable Rate Index

Facility Fees

TOB Trust 2021-XF2926 ⁽¹⁾

16,190,000

January 2024

Weekly

OBFR

0.89%

Hope on Avalon GIL

5,064,000

February 2023

Weekly

SIFMA

1.42%

Hope on Broadway GIL

2,953,000

February 2023

Weekly

SIFMA

1.42%

Total TOB Trust Financings

24,207,000

⁽¹⁾	^{The TOB Trust is securitized by the Legacy Commons at Signal Hills GIL and property loan, Hilltop at Signal Hills GIL and property loan, Oasis at Twin Lakes property loan and Hope on Avalon taxable GIL.}

Activity in the First Three Months of 2020

In January 2020, the Partnership extended the maturity date of the Term TOB Trust financing related to Provision Center 2014-1 from January 2020 to May 2020. The Term TOB Trust financing was subsequently collapsed in April 2020.

In January 2020, the variable rate TOB Trust financings associated with the PHC Certificates were collapsed and all principal and interest was paid in full in conjunction with the Partnership’s sale of the PHC Certificates to an unrelated party.

In February 2020, the Partnership extended the maturity dates of the Term A/B Trust financings related to Gateway Village and Lynnhaven Apartments from February 2020 to February 2021. The Term A/B Trust financings were subsequently collapsed in April 2020.

Future Maturities

The Partnership’s contractual maturities of borrowings as of March 31, 2021 for the twelve-month periods ending December 31^st for the next five years and thereafter are as follows:

Remainder of 2021	$	4,456,041
2022		23,310,689
2023		217,166,816
2024		104,029,152
2025		11,363,784
Thereafter		354,282,763
Total		714,609,245
Unamortized deferred financing costs and debt premium		(2,820,344	)
Total debt financing, net	$	711,788,901