Unsecured Lines of Credit

6 Months Ended

Jun. 30, 2021

Unsecured Lines of Credit

16. Debt Financing

The following tables summarize the Partnership’s debt financings, net of deferred financing costs, as of June 30, 2021 and December 31, 2020:

	Outstanding Debt Financings as of June 30, 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	$	39,552,847	$	204,000	2010	May 2027	N/A	N/A	N/A	N/A	3.05%
Variable - M31 (1)		77,655,139		4,999	2014	July 2024	Weekly	SIFMA	0.06%	1.34%	1.40%
Fixed - M33		30,497,949		2,606	2015	September 2030	N/A	N/A	N/A	N/A	3.24%
Fixed - M45 (2)		214,892,281		5,000	2018	July 2034	N/A	N/A	N/A	N/A	3.82%
Secured Notes
Variable - Notes		102,944,935		77,530,500	2020	September 2025	Monthly	3-month LIBOR	0.12%	9.00%	9.12% (3)
TOB Trusts Securitization
Mizuho Capital Markets:
Variable - TOB		6,102,623		-	2020	July 2022	Weekly	SIFMA	0.23%	0.89%	1.12%
Variable - TOB		9,213,676		-	2021	February 2023	Weekly	SIFMA	0.23%	1.42%	1.65%
Variable - TOB		3,486,987		-	2021	April 2023	Weekly	SIFMA	0.23%	1.27%	1.50%
Variable - TOB		122,503,096		-	2019	July 2023	Weekly	SIFMA	0.23% - 0.28%	1.17% - 1.67%	1.40% - 1.95%
Variable - TOB		91,897,806		-	2020	September 2023	Weekly	OBFR	0.33%	0.89%	1.22%
Variable - TOB		5,683,115		-	2020	December 2023	Weekly	SIFMA	0.23%	1.27%	1.50%
Variable - TOB		24,132,417		-	2021	January 2024	Weekly	OBFR	0.33%	0.89%	1.22%
Morgan Stanley:
Fixed - Term TOB		12,969,836		-	2019	May 2024	N/A	N/A	N/A	N/A	1.98%
Total Debt Financings	$	741,532,707

⁽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 $39.8 million of the Secured Notes and 1.00% for approximately $63.5 million of the Secured Notes as of June 30, 2021. See Note 18 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 18 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 June 30, 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 18). 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 June 30, 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 June 30, 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; requires the Partnership’s partners’ capital, as defined, to maintain a certain threshold and that the Partnership remains listed on a nationally recognized stock exchange. 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 Class A Certificates held by Morgan Stanley.  The Partnership was in compliance with all covenants as of June 30, 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 Six Months of 2021

New Debt Financings:

The following is a summary of the Mizuho TOB Trust financings that were entered into during the six months ended June 30, 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%
Jackson Manor Apartments MRB		3,528,000	April 2023	Weekly	SIFMA	1.27%
Total TOB Trust Financings	$	27,735,000

⁽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.

In June 2021, the Partnership extended the maturity date of the Morgan Stanley Term TOB financing from May 2022 to May 2024 and the interest rate was reduced to 1.98% from 3.53%.

Activity in the First Six Months of 2020

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

In April 2020, the Partnership terminated its Master Trust Agreement and collapsed its Term TOB Trust and all Term A/B Trust financings with Deutsche Bank.  As of the termination, the Partnership is no longer subject to the debt covenants in the Master Trust Agreement.  All outstanding principal and interest related to the Term A/B Trust financings were paid off in full, and the Partnership paid a one-time fee of approximately $454,000 to terminate the trusts.  

The following is a summary of the Deutsche Bank Term A/B Trust and TOB Trust financings that were collapsed and paid off in April 2020:

Debt Financing	Debt Facility	Month	Paydown Applied
Avistar at Copperfield - Series A	Term A/B Trust	April 2020	$	8,417,739
Avistar at Wilcrest - Series A	Term A/B Trust	April 2020		3,162,435
Avistar at Wood Hollow - Series A	Term A/B Trust	April 2020		26,860,536
Gateway Village	Term A/B Trust	April 2020		2,262,000
Lynnhaven	Term A/B Trust	April 2020		3,001,500
Pro Nova 2014-1	Term TOB	April 2020		8,010,000
			$	51,714,210

The following is a summary of the Mizuho TOB Trust financings that were entered into during the six months ended June 30, 2020:

TOB Trusts Securitization	Outstanding TOB Trust Financing		Stated Maturity	Reset Frequency	Variable Rate Index	Facility Fees
Avistar at Copperfield - Series A	$	11,818,000	May 2021 (1)	Weekly	SIFMA	1.67%
Avistar at Wilcrest - Series A		4,479,000	May 2021 (1)	Weekly	SIFMA	1.67%
Avistar at Wood Hollow - Series A		34,007,000	May 2021 (1)	Weekly	SIFMA	1.67%
Gateway Village		2,184,000	May 2021 (1)	Weekly	SIFMA	1.67%
Lynnhaven		2,898,000	May 2021 (1)	Weekly	SIFMA	1.67%
Scharbauer Flats Apartments		36,000,000	July 2023	Weekly	SIFMA	0.89%
Total TOB Trust Financing	$	91,386,000

⁽¹⁾    In July 2020, the Partnership extended the maturity date to July 2023.

Future Maturities

The Partnership’s contractual maturities of borrowings as of June 30, 2021 for the twelve-month periods ending December 31^st for the next five years and thereafter are as follows:

Remainder of 2021	$	3,075,795
2022		12,921,689
2023		237,464,816
2024		125,103,152
2025		11,363,784
Thereafter		354,283,139
Total		744,212,375
Unamortized deferred financing costs and debt premium		(2,679,668	)
Total debt financing, net	$	741,532,707

Unsecured Lines of Credit [Member]

Unsecured Lines of Credit

14. Unsecured Lines of Credit

The following tables summarize the unsecured lines of credit (“LOC” or “LOCs”) as of June 30, 2021 and December 31, 2020:

Unsecured Line of Credit	Outstanding as of June 30, 2021		Total Commitment		Commitment Maturity	Variable / Fixed	Reset Frequency	Period End Rate
Bankers Trust non-operating	$	-	$	50,000,000	June 2022	Variable (1)	Monthly		2.65	%

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

Unsecured Lines of Credit	Outstanding as of December 31, 2020		Total Commitment		Commitment Maturity	Variable / Fixed	Reset Frequency	Period End Rate
Bankers Trust non-operating	$	7,475,000	$	50,000,000	June 2022	Variable (1)	Monthly		2.65	%
Bankers Trust operating		-		10,000,000	June 2022	Variable (1)	Monthly		3.40	%
Total unsecured lines of credit	$	7,475,000	$	60,000,000

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

The principal amount of each acquisition advance from the non-operating LOC is due on the 270th day following the advance date and may be extended for up to three additional 90-day periods by making partial repayments in accordance with the Credit Agreement. The non-operating LOC contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed 75% of the market value of the Partnership’s assets, as defined in the Credit Agreement. The Partnership was in compliance with all covenants as of June 30, 2021.

The Partnership and Bankers Trust agreed to terminate the $10 million operating LOC upon closing of the new secured LOC in June 2021 (Note 15). There was no outstanding principal or accrued interest as of the termination date.