UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number:  000-24843

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

(Exact name of registrant as specified in its charter)

Delaware	47-0810385
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1004 Farnam Street, Suite 400, Omaha, Nebraska	68102
(Address of principal executive offices)	(Zip Code)
(402) 444-1630
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P.	ATAX	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non- accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES ☐ NO☒

As of September 30, 2019, the registrant had 60,835,204 Beneficial Unit Certificates representing assignments of limited partnership interests in America First Multifamily Investors, L.P. outstanding.

INDEX

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Partners’ Capital	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3	Quantitative and Qualitative Disclosures About Market Risk	62
Item 4	Controls and Procedures	64
PART II – OTHER INFORMATION
Item 1A	Risk Factors	65
Item 6	Exhibits	66
SIGNATURES		68

Forward-Looking Statements

This report (including, but not limited to, the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) contains forward-looking statements.  All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.  When used, statements which are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements.  We have based forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations.  This report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data.  This data involves several assumptions and limitations, and you are cautioned not to give undue weight to such estimates.  We have not independently verified the statistical and other industry data generated by independent parties which are contained in this report and, accordingly, we cannot guarantee their accuracy or completeness.

These forward-looking statements are subject, but not limited, to various risks and uncertainties, including those relating to:

• current maturities of our financing arrangements and our ability to renew or refinance such financing arrangements;

• defaults on the mortgage loans securing our mortgage revenue bonds (“MRBs”);

• the competitive environment in which we operate;

• risks associated with investing in multifamily and student residential properties and commercial properties, including changes in business conditions and the general economy;

• changes in interest rates;

• our ability to use borrowings or obtain capital to finance our assets;

• local, regional, national and international economic and credit market conditions;

• recapture of previously issued Low Income Housing Tax Credits (“LIHTCs”) in accordance with Section 42 of the Internal Revenue Code;

• changes in the United States Department of Housing and Urban Development’s (“HUD”) Capital Fund Program;

• geographic concentration within the MRB portfolio held by the Partnership;

• appropriations risk related to the funding of federal housing programs, including HUD Section 8; and

• changes in the U.S. corporate tax code and other government regulations affecting our business.

Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We are not obligated to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “Risk Factors” in Item 1A of America First Multifamily Investors, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2018.

All references to “we,” “us,” “our” and the “Partnership” in this document mean America First Multifamily Investors, L.P. (“ATAX”), its wholly-owned subsidiaries and its consolidated variable interest entities.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents	$	40,782,506		$	32,001,925
Restricted cash		570,990			1,266,686
Interest receivable, net		7,927,509			7,011,839
Mortgage revenue bonds held in trust, at fair value (Note 6)		747,157,387			645,258,873
Mortgage revenue bonds, at fair value (Note 6)		30,125,333			86,894,562
Public housing capital fund trust certificates, at fair value (Note 7)		44,684,506			48,672,086
Real estate assets: (Note 8)
Land and improvements		4,900,465			4,971,665
Buildings and improvements		72,003,079			71,897,070
Real estate assets before accumulated depreciation		76,903,544			76,868,735
Accumulated depreciation		(14,650,397	)		(12,272,387	)
Net real estate assets		62,253,147			64,596,348
Investments in unconsolidated entities (Note 9)		87,059,995			76,534,306
Property loans, net of loan loss allowance (Note 10)		7,999,094			15,961,012
Other assets (Note 12)		4,940,703			4,515,609
Total Assets	$	1,033,501,170		$	982,713,246
Liabilities:
Accounts payable, accrued expenses and other liabilities (Note 13)	$	9,592,950		$	7,543,822
Distribution payable		8,869,350			7,576,167
Unsecured lines of credit (Note 14)		13,200,000			35,659,200
Debt financing, net (Note 15)		538,812,130			505,663,565
Mortgages payable and other secured financing, net (Note 16)		27,049,871			27,454,375
Total Liabilities		597,524,301			583,897,129
Commitments and Contingencies (Note 18)
Redeemable Series A Preferred Units, approximately $94.5 million redemption value, 9.5 million    issued and outstanding, net (Note 19)		94,377,414			94,350,376
Partnersʼ Capital:
General Partner (Note 1)		731,741			344,590
Beneficial Unit Certificates ("BUCs," Note 1)		340,867,714			304,121,151
Total Partnersʼ Capital		341,599,455			304,465,741
Total Liabilities and Partnersʼ Capital	$	1,033,501,170		$	982,713,246

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Property revenues	$	1,974,546		$	2,285,736		$	6,002,971		$	7,025,390
Investment income		12,589,743			12,733,013			37,072,288			38,360,534
Contingent interest income		3,360			4,246,094			3,045,462			4,246,094
Other interest income		206,625			5,217,741			635,732			7,019,465
Other income		91,428			1,518,531			120,181			1,592,831
Total revenues		14,865,702			26,001,115			46,876,634			58,244,314
Expenses:
Real estate operating (exclusive of items shown below)		1,381,909			1,606,765			3,477,983			4,292,745
Impairment of securities		-			309,958			-			1,141,020
Impairment charge on real estate assets		75,000			150,000			75,000			150,000
Depreciation and amortization		743,503			864,600			2,384,115			2,692,731
Interest expense (Note 2)		6,509,021			6,394,683			19,110,876			18,091,314
General and administrative		6,992,528			3,653,288			12,267,917			9,506,258
Total expenses		15,701,961			12,979,294			37,315,891			35,874,068
Other Income:
Gain on sales of real estate assets, net		-			4,051,429			-			4,051,429
Gain on sale of investment in an unconsolidated entity		10,475,927			-			10,475,927			-
Income before income taxes		9,639,668			17,073,250			20,036,670			26,421,675
Income tax benefit		(68,235	)		(809,805	)		(9,236	)		(803,805	)
Net income		9,707,903			17,883,055			20,045,906			27,225,480
Redeemable Series A Preferred Unit distributions and accretion		(717,762	)		(717,763	)		(2,153,288	)		(2,153,288	)
Net income available to Partners	$	8,990,141		$	17,165,292		$	17,892,618		$	25,072,192
Net income available to Partners allocated to:
General Partner	$	1,266,157		$	2,163,058		$	2,078,086		$	2,242,127
Limited Partners - BUCs		7,695,468			14,933,260			15,719,693			22,662,993
Limited Partners - Restricted units		28,516			68,974			94,839			167,072
	$	8,990,141		$	17,165,292		$	17,892,618		$	25,072,192
BUC holders' interest in net income per BUC, basic and diluted	$	0.13		$	0.25		$	0.26		$	0.38
Weighted average number of BUCs outstanding, basic		60,519,542			59,907,123			60,457,299			59,989,585
Weighted average number of BUCs outstanding, diluted		60,519,542			59,907,123			60,457,299			59,989,585

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  

(UNAUDITED)

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2019		2018			2019		2018
Net income	$	9,707,903	$	17,883,055		$	20,045,906	$	27,225,480
Reversal of net unrealized losses on securities with    other-than-temporary impairment		-		-			-		525,446
Unrealized gain (loss) on securities		19,048,316		(6,744,509	)		42,112,324		(24,097,818	)
Unrealized gain (loss) on bond purchase commitments		-		51,760			-		(1,956,095	)
Comprehensive income		28,756,219		11,190,306			62,158,230		1,697,013

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(UNAUDITED)

	General Partner			# of BUCs - Restricted and Unrestricted			BUCs - Restricted and Unrestricted			Total			Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2018	$	344,590			60,691,467		$	304,121,151		$	304,465,741		$	58,978,042
Cumulative effect of accounting change (Note 2)		(2	)		-			(210	)		(212	)		-
Distributions paid or accrued ($0.125 per BUC):
Regular distribution		(53,812	)		-			(5,327,357	)		(5,381,169	)		-
Distribution of Tier 2 income (Note 3)		(753,025	)		-			(2,259,077	)		(3,012,102	)		-
Net income allocable to Partners		780,245			-			4,953,805			5,734,050			-
Restricted unit compensation expense		1,842			-			182,342			184,184			-
Unrealized gain on securities		81,439			-			8,062,488			8,143,927			8,143,927
Balance as of March 31, 2019		401,277			60,691,467			309,733,142			310,134,419			67,121,969
Distributions paid or accrued ($0.125 per BUC):
Regular distribution		(76,631	)		-			(7,586,433	)		(7,663,064	)		-
Net income allocable to Partners		31,684			-			3,136,743			3,168,427			-
Restricted unit compensation expense		1,862			-			184,368			186,230			-
Unrealized gain on securities		149,201			-			14,770,880			14,920,081			14,920,081
Balance as of June 30, 2019		507,393			60,691,467			320,238,700			320,746,093			82,042,050
Distributions paid or accrued ($0.125 per BUC):
Distribution of Tier 2 income (Note 3)		(1,264,949	)		-			(3,794,847	)		(5,059,796	)		-
Distribution of Tier 3 income (Note 3)		-			-			(3,809,553	)		(3,809,553	)		-
Net income allocable to Partners		1,266,157			-			7,723,984			8,990,141			-
Restricted units awarded		-			353,197			-			-			-
Restricted unit compensation expense		32,657			-			3,233,020			3,265,677			-
BUCs surrendered to pay tax withholding    on vested restricted units		-			(209,460	)		(1,581,423	)		(1,581,423	)		-
Unrealized gain on securities		190,483			-			18,857,833			19,048,316			19,048,316
Balance as of September 30, 2019	$	731,741			60,835,204		$	340,867,714		$	341,599,455		$	101,090,366

7

	General Partner			# of BUCs - Restricted and Unrestricted			BUCs - Restricted and Unrestricted			Total			Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2017	$	437,256			60,373,674		$	313,403,014		$	313,840,270		$	75,623,830
Cumulative effect of accounting change		(2,169	)		-			(214,779	)		(216,948	)		-
Distributions paid or accrued ($0.125 per BUC):
Regular distribution		(76,329	)		-			(7,556,616	)		(7,632,945	)		-
Net income allocable to Partners		52,865			-			5,233,676			5,286,541			-
Sale of BUCs, net of issuance costs		-			38,617			192,310			192,310			-
Repurchase of BUCs		-			(198,465	)		(1,256,654	)		(1,256,654	)		-
Restricted units awarded		-			239,102			-			-			-
Restricted units compensation expense		2,066			-			204,570			206,636			-
Unrealized loss on securities		(218,749	)		-			(21,656,127	)		(21,874,876	)		(21,874,876	)
Unrealized loss on bond purchase commitments		(9,751	)		-			(965,316	)		(975,067	)		(975,067	)
Balance as of March 31, 2018		185,189			60,452,928			287,384,078			287,569,267			52,773,887
Distributions paid or accrued ($0.125 per BUC):
Regular distribution		(76,330	)		-			(7,556,616	)		(7,632,946	)		-
Net income allocable to Partners		26,204			-			2,594,155			2,620,359			-
Repurchase of BUCs		-			(70,110	)		(440,959	)		(440,959	)		-
Restricted units awarded		-			70,110			-			-			-
Restricted units compensation expense		5,436			-			538,085			543,521			-
Unrealized gain on securities		45,216			-			4,476,351			4,521,567			4,065,221
Unrealized loss on bond purchase commitments		(10,328	)		-			(1,022,460	)		(1,032,788	)		(1,032,788	)
Reversal of net unrealized loss on securities    with other-than-temporary impairment		5,254			-			520,192			525,446			981,792
Balance as of June 30, 2018		180,641			60,452,928			286,492,826			286,673,467			56,788,112
Distributions paid or accrued ($0.125 per BUC):
Regular distribution		(13,554	)		-			(1,341,891	)		(1,355,445	)		-
Distribution of Tier 2 income (Note 3)		(2,074,381	)					(6,223,142	)		(8,297,523	)
Net income allocable to Partners		2,163,058			-			15,002,234			17,165,292			-
Sale of BUCs, net of issuance costs		-			67,333			383,990			383,990			-
Restricted units compensation expense		6,222			-			616,005			622,227			-
Unrealized loss on securities		(67,445	)		-			(6,677,064	)		(6,744,509	)		(6,288,163	)
Unrealized gain on bond purchase commitments		518			-			51,242			51,760			51,760
Reversal of net unrealized loss on securities    with other-than-temporary impairment		-			-			-			-			(456,346	)
Balance as of September 30, 2018	$	195,059			60,520,261		$	288,304,200		$	288,499,259		$	50,095,363

The accompanying notes are an integral part of the condensed consolidated financial statements.

8

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	20,045,906		$	27,225,480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		2,384,115			2,692,731
Gain on sale of real estate assets, net		-			(4,051,429	)
Gain on sale of investment in an unconsolidated entity		(10,475,927	)		-
Contingent interest realized on investing activities		(3,045,462	)		(4,246,094	)
Impairment of securities		-			1,141,020
Impairment charge on real estate assets		75,000			150,000
Loss (gain) on derivatives, net of cash paid		574,028			(1,266,808	)
Restricted unit compensation expense		3,636,091			1,372,384
Bond premium/discount amortization		(106,114	)		(50,839	)
Debt premium amortization		(8,410	)		-
Amortization of deferred financing costs		1,476,463			1,304,879
Deferred income tax expense (benefit) & income tax payable/receivable		100,804			(840,871	)
Change in preferred return receivable from unconsolidated entities, net		(1,935,286	)		(2,642,634	)
Changes in operating assets and liabilities
Increase in interest receivable		(915,670	)		(1,395,660	)
(Increase) decrease in other assets		694,925			(921,756	)
Increase (decrease) in accounts payable and accrued expenses		327,188			(473,415	)
Net cash provided by operating activities		12,827,651			17,996,988
Cash flows from investing activities:
Capital expenditures		(88,110	)		(496,336	)
Proceeds from sale of MF Properties		-			13,450,000
Proceeds from sale of investment in an unconsolidated entity		20,189,663			-
Acquisition of mortgage revenue bonds		(19,250,000	)		(19,540,000	)
Contributions to unconsolidated entities		(18,304,139	)		(35,153,613	)
Principal payments received on mortgage revenue bonds and contingent interest		15,508,192			46,001,893
Principal payments received on taxable mortgage revenue bonds		25,997			33,384
Principal payments received on PHC Certificates		4,775,103			226,714
Cash paid for land held for development and deposits on potential purchases		-			(2,764,403	)
Advances on property loans		(405,717	)		(66,652	)
Principal payments received on property loans and contingent interest		11,413,098			5,762,536
Net cash provided by investing activities		13,864,087			7,453,523
Cash flows from financing activities:
Distributions paid		(25,758,751	)		(25,800,111	)
Repurchase of BUCs		-			(1,697,613	)
Proceeds from the sale of BUCs		-			626,033
Payment of offering costs related to the sale of BUCs		-			(12,531	)
Payment of tax withholding related to restricted unit awards		(1,581,423	)		-
Proceeds from debt financing		122,921,712			238,920,000
Principal payments on debt financing		(90,025,780	)		(253,250,185	)
Principal payments on mortgages payable		(474,391	)		(7,963,815	)
Principal borrowing on unsecured lines of credit		23,200,000			30,540,000
Principal payments on unsecured lines of credit		(45,659,200	)		(52,074,400	)
Decrease in security deposit liability related to restricted cash		(51,324	)		(23,243	)
Debt financing and other deferred costs		(1,177,696	)		(625,706	)
Net cash used in financing activities		(18,606,853	)		(71,361,571	)
Net increase (decrease) in cash, cash equivalents and restricted cash		8,084,885			(45,911,060	)
Cash, cash equivalents and restricted cash at beginning of period		33,268,611			71,583,329
Cash, cash equivalents and restricted cash at end of period	$	41,353,496		$	25,672,269
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	16,874,341		$	17,571,617
Cash paid during the period for income taxes		155,000			178,564
Supplemental disclosure of noncash investing and financing activities:
Distributions declared but not paid for BUCs and General Partner	$	8,869,350		$	9,652,968
Distributions declared but not paid for Series A Preferred Units		708,750			708,750
Land contributed as investment in an unconsolidated entity		-			2,879,473
Capital expenditures financed through accounts payable		24,504			5,898
Deferred financing costs financed through accounts payable		15,000			12,836

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown in the condensed consolidated statements of cash flows:

	September 30, 2019		September 30, 2018
Cash and cash equivalents	$	40,782,506	$	24,969,157
Restricted cash		570,990		703,112
Total cash, cash equivalents and restricted cash	$	41,353,496	$	25,672,269

The accompanying notes are an integral part of the condensed consolidated financial statements.

9

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

America First Multifamily Investors, L.P. (the “Partnership”) was formed on April 2, 1998, under the Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring, holding, selling and otherwise dealing with a portfolio of mortgage revenue bonds (“MRBs”) that provide construction and/or permanent financing for affordable multifamily and student housing residential properties (collectively “Residential Properties”) and commercial properties. The Partnership may also invest in other types of securities that may or may not be secured by real estate and may make property loans to multifamily residential properties which may or may not be financed by MRBs held by the Partnership.   The Partnership may acquire real estate securing its MRBs or property loans through foreclosure in the event of a default or through the receipt of a fee simple deed in lieu of foreclosure.  In addition, the Partnership may acquire interests in multifamily and student residential properties (“MF Properties”) in order to position itself for future investments in MRBs that finance these properties or to operate the MF Properties until their “highest and best use” can be determined by management.

The Partnership’s general partner is America First Capital Associates Limited Partnership Two (“AFCA 2” or “General Partner”).  The general partner of AFCA 2 is Greystone AF Manager LLC (“Greystone Manager”). The Partnership has previously issued Beneficial Unit Certificates (“BUCs”) representing assigned limited partnership interests to investors (“BUC holders”). The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units (“Series A Preferred Units”) that represent limited partnership interests in the Partnership under the Partnership’s First Amended and Restated Agreement of Limited Partnership dated September 15, 2015, as further amended (the “Amended and Restated LP Agreement”). The holders of the BUCs and Series A Preferred Units are referred to herein as “Unitholders.”     

2. Summary of Significant Accounting Policies

Consolidation

The “Partnership,” as used herein, includes America First Multifamily Investors, L.P., its consolidated subsidiaries and consolidated variable interest entities (Note 5). All intercompany transactions are eliminated.  As of September 30, 2019, the consolidated subsidiaries of the Partnership consist of:

• ATAX TEBS I, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M24 Tax Exempt Bond Securitization (“TEBS”) Financing with the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

• ATAX TEBS II, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M31 TEBS Financing with Freddie Mac.

• ATAX TEBS III, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M33 TEBS Financing with Freddie Mac.

• ATAX TEBS IV, LLC, a special purpose entity owned and controlled by the Partnership, created to hold MRBs to facilitate the M45 TEBS Financing with Freddie Mac.

• ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, which is committed to loan money or provide equity for the development of multifamily properties.

• One wholly-owned corporation (“the Greens Hold Co”).  The Greens Hold Co owns 100% of The 50/50 MF Property and certain property loans.

The Partnership also consolidates variable interest entities (“VIEs”) for which it is deemed to be the primary beneficiary.  See Note 5 for information regarding the Partnership’s consolidated VIEs.

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Lease Accounting

On January 1, 2019, the Partnership adopted the lease guidance in Accounting Standards Codification (“ASC”) 842.  The Partnership adopted ASC 842 at the required adoption date of January 1, 2019, using the transition method that allowed the Partnership to initially apply ASC 842 as of January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of partners’ capital in the period of adoption. No changes have been made to the condensed consolidated financial statements dated prior to the effective date related to the adoption of ASC 842.

Lessee Operating Leases  

The Partnership’s only material lessee lease is a ground lease at The 50/50 MF Property. Upon adoption of ASC 842, the Partnership elected the package of practical expedients in Accounting Standards Update (“ASU”) 2016-11, elected not to apply ASC 842 to short-term leases and elected to combine lease and non-lease components when accounting for these lease arrangements.  On the date of adoption of ASC 842, the Partnership recognized operating lease right-of-use (“ROU”) assets of $1.7 million, operating lease liabilities of $2.2 million, and an immaterial cumulative adjustment to partners’ capital.  The Partnership used a discount rate of 6.6% to calculate the ROU asset and lease liability related to the ground lease.  The discount rate is based on the Partnership’s estimated incremental borrowing rate to borrow, on a fully collateralized basis, over a similar term for the amount of contractual lease payments. The incremental borrowing rate was estimated using market transactions adjusted for differences in the term and security.

The Partnership’s lessee ROU assets are reflected in other assets on the Partnership’s condensed consolidated balance sheet (see Note 12).  The Partnership’s lessee operating lease liabilities are reflected in accounts payable, accrued expenses and other liabilities on the Partnership’s condensed consolidated balance sheet (see Note 13).  See Note 13 for additional information on the Partnership’s ground lease.

Lessor Operating Leases

The Partnership’s lessor leases consist of tenant leases related to real estate assets, specifically at the MF Properties. Tenant leases also contain terms for non-lease revenues related to operations at the MF Properties, such as parking and food service revenues. The Partnership has elected to combine the lease and non-lease components when accounting for lessor leases. The unit lease component of the tenant lease is considered the predominant component, so all components of the tenant lease are accounted for under ASC 842. Tenant leases are typically for terms of 12 months or less and do not include extension options.  Lease revenue is recognized monthly and is reported within property revenues on the Partnership’s condensed consolidated statements of operations.  ASC 842 did not have a material impact on the Partnership’s accounting for its lessor arrangements with tenants at the MF Properties.

PHC Certificate Impairment

The Partnership periodically reviews the PHC Certificates for impairment. The Partnership evaluates whether declines in the fair value of the investments below amortized cost are other-than temporary. Factors considered include:

• The duration and severity of the decline in fair value,

• The Partnership’s intent to hold and the likelihood of it being required to sell the security before its value recovers,

• Potential changes in HUD appropriations to local housing authorities,

• Downgrade in the security’s rating by Standard & Poor’s, and

• Volatility of the fair value of the security.

Real Estate AssetsImpairment

The Partnership reviews real estate assets for impairment at least quarterly and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. When indicators of potential impairment suggest that the carrying value of a real estate asset may not be recoverable, the Partnership compares the carrying amount of the real estate asset to the undiscounted net cash flows expected to be generated from the use of the asset. If the carrying value exceeds the undiscounted net cash flows, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

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Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation.

In the three and nine months ended September 30, 2019, the Partnership reported amortization of deferred financing costs within interest expense in the Partnership’s condensed consolidated statements of operations.  Previously, “Amortization of deferred financing costs expense” had been reported as a separate line item in the Partnership’s condensed consolidated statement of operations.  Accordingly, for the three and nine months ended September 30, 2018, the Partnership has included amortization of deferred financing costs expense within interest expense in conformity with the current reporting period presented herein. This reclassification has no effect on the Partnership’s reported net income or partners’ capital in the Partnership’s condensed consolidated financial statements for the periods presented.

Estimates and assumptions

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such SEC rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018. These condensed consolidated financial statements and notes have been prepared consistently with the 2018 Form 10-K, with the exception of new accounting standards that were adopted and reclassifications that are discussed herein. In the opinion of management, all adjustments (consisting of normal and recurring accruals) necessary to present fairly the Partnership’s financial position as of September 30, 2019, and the results of operations for the interim periods presented, have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated balance sheet as of December 31, 2018 was derived from the audited annual consolidated financial statements but does not contain all the footnote disclosures from the annual consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The ASU enhances the methodology of measuring expected credit losses for financial assets, to include the use of reasonable and supportable forward-looking information to better estimate credit losses. The ASU is effective for the Partnership’s annual and interim periods beginning after December 15, 2019 and is to be applied using a modified-retrospective approach. In October 2019, the FASB approved a delay in the effective date of this ASU for smaller reporting companies, such as the Partnership, and other non-SEC reporting entities.  The FASB expects to issue two final ASUs relating to this matter in mid-November 2019. The new ASUs will delay the effective date for such entities to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods.  As the Partnership is a smaller reporting company, it may elect to delay its effective date. The Partnership has completed an assessment of the items that are within the scope of the new ASU. The items include property loans, receivables reported within other assets, financial guarantees and commitments. Also within the scope of the ASU are changes to the impairment model for available-for-sale debt securities, which includes the Partnership’s MRBs, PHC Certificates, and taxable MRBs.  The Partnership is currently developing data collection processes, assessment procedures and internal controls required to implement the ASU for such items in the Partnership’s condensed consolidated financial statements. The Partnership is continuing to evaluate whether to defer their implementation date of the ASU and will make a final determination in the fourth quarter of 2019.

In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections” which amends the SEC Rules, Regulations and Interpretations section of various topics within the FASB Accounting Standards Codification.  The amendments were made as the result of the SEC’s Final Rule Releases No. 33-10532, “Disclosure Update and Simplification”, No. 33-10231, “Investment Company Reporting Modernization”, and No. 33-10442, “Miscellaneous Update”.  The Partnership’s condensed consolidated financial statements and notes to condensed consolidated financial statements are in compliance with the relevant Codification updates. There were no significant changes to the Partnership’s condensed consolidated financial statements as a result of the ASU.

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3. Partnership Income, Expenses and Cash Distributions  

The Amended and Restated LP Agreement of the Partnership contains provisions for the distribution of Net Interest Income, Net Residual Proceeds and Liquidation Proceeds; for the allocation of income or loss from operations; and for the allocation of income and loss arising from a repayment, sale, or liquidation of investments.  Income and losses will be allocated to each Unitholder on a periodic basis, as determined by the General Partner, based on the number of Series A Preferred Units and BUCs held by each Unitholder as of the last day of the period for which such allocation is to be made. Distributions of Net Interest Income and Net Residual Proceeds will be made to each Unitholder of record on the last day of each distribution period based on the number of Series A Preferred Units and BUCs held by each Unitholder on that date. Cash distributions are currently made on a quarterly basis.  

The holders of the Series A Preferred Units are entitled to distributions at a fixed rate of 3.0% per annum prior to payment of distributions to other Unitholders.

Net Interest Income (Tier 1) is allocated 99% to the limited partners and BUC holders as a class and 1% to the General Partner. Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2) are allocated 75% to the limited partners and BUC holders as a class and 25% to the General Partner.  Net Interest Income (Tier 2) and Net Residual Proceeds (Tier 2) in excess of the maximum allowable amount as set forth in the Amended and Restated LP Agreement are considered Net Interest Income (Tier 3) and Net Residual Proceeds (Tier 3) and are allocated 100% to the limited partners and BUC holders as a class.

4. Net income per BUC

The Partnership has disclosed basic and diluted net income per BUC on the Partnership’s condensed consolidated statements of operations. The unvested Restricted Unit Awards (“RUAs”) issued under the Partnership’s 2015 Equity Incentive Plan (the “Plan”) are considered participating securities. There were no dilutive BUCs for the three and nine months ended September 30, 2019 and 2018.

5. Variable Interest Entities

Consolidated VIEs

The Partnership has determined the Tender Option Bond (“TOB”), Term TOB, Term A/B and TEBS Financings are VIEs and the Partnership is the primary beneficiary. In determining the primary beneficiary of each VIE, the Partnership considered which party has the power to control the activities of the VIE which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE.  The executed agreements related to the TOB, Term TOB, Term A/B and TEBS Financings stipulate the Partnership has the sole right to cause the trusts to sell the underlying assets. If underlying assets were sold, the extent to which the VIEs will be exposed to gains or losses would result from decisions made by the Partnership.

As the primary beneficiary, the Partnership reports the TOB, Term TOB, Term A/B and TEBS Financings on a consolidated basis. The Partnership reports the senior Floater Certificates for the TOB Trusts and the Class A Certificates for the Term TOB, Term A/B Trusts and TEBS Financings as secured debt financings on the Partnership’s condensed consolidated balance sheets (see Note 15). The MRBs secured by the TOB, Term TOB, Term A/B and TEBS Financings are reported as assets on the Partnership’s condensed consolidated balance sheets (see Notes 6 and 7).

Non-Consolidated VIEs

The Partnership has variable interests in various entities in the form of MRBs, property loans and investments in unconsolidated entities. These variable interests do not allow the Partnership to direct the activities that most significantly impact the economic performance of such VIEs. As a result, the Partnership is not considered the primary beneficiary and does not consolidate the financial statements of these VIEs in the Partnership’s condensed consolidated financial statements.

The Partnership held variable interests in 16 and 17 non-consolidated VIEs as of September 30, 2019 and December 31, 2018, respectively. The following table summarizes the Partnership’s variable interests in these entities as of September 30, 2019 and December 31, 2018:

	Maximum Exposure to Loss
	September 30, 2019		December 31, 2018
Mortgage revenue bonds	$	30,480,000	$	51,791,000
Property loans		-		8,367,635
Investment in unconsolidated entities		87,059,995		76,534,306
	$	117,539,995	$	136,692,941

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The maximum exposure to loss for the MRBs as of September 30, 2019 and December 31, 2018 is equal to the cost adjusted for paydowns. The difference between an MRB’s carrying value on the Partnership’s condensed consolidated balance sheets and the maximum exposure to loss is a function of the unrealized gains or losses on the MRB. 

The maximum exposure to loss on the property loans as of September 30, 2019 and December 31, 2018 is equal to the unpaid principal balance plus accrued interest. The difference between a property loan’s carrying value and the maximum exposure is the value of loan loss allowances, if any, that have been previously recorded against the property loan.

The maximum exposure to loss for investments in unconsolidated entities as of September 30, 2019 and December 31, 2018 is equal to the Partnership’s carrying value.

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6. Investments in Mortgage Revenue Bonds

MRBs owned by the Partnership provide construction and/or permanent financing for Residential Properties and a commercial property.  MRBs are either held directly by the Partnership or are held in trusts created in connection with debt financing transactions (Note 15). The Partnership had the following investments in MRBs as of September 30, 2019 and December 31, 2018:

	September 30, 2019
Description of Mortgage Revenue Bonds Held in Trust	State	Cost Adjusted for Paydowns		Cumulative Unrealized Gain		Cumulative Unrealized Loss			Estimated Fair Value
Courtyard - Series A (5)	CA	$	10,168,651	$	1,696,441	$	-		$	11,865,092
Glenview Apartments - Series A (4)	CA		4,546,210		767,387		-			5,313,597
Harmony Court Bakersfield - Series A (5)	CA		3,707,631		582,453		-			4,290,084
Harmony Terrace - Series A (5)	CA		6,863,296		1,185,795		-			8,049,091
Harden Ranch - Series A (3)	CA		6,719,931		1,207,559		-			7,927,490
Las Palmas II - Series A (5)	CA		1,682,524		278,924		-			1,961,448
Montclair Apartments - Series A (4)	CA		2,462,936		415,737		-			2,878,673
Montecito at Williams Ranch Apartments - Series A (7)	CA		7,690,000		1,651,838		-			9,341,838
San Vicente - Series A (5)	CA		3,469,276		558,315		-			4,027,591
Santa Fe Apartments - Series A (4)	CA		2,983,755		548,485		-			3,532,240
Seasons at Simi Valley - Series A (5)	CA		4,293,474		912,975		-			5,206,449
Seasons Lakewood - Series A (5)	CA		7,310,902		1,191,125		-			8,502,027
Seasons San Juan Capistrano - Series A (5)	CA		12,309,171		2,005,465		-			14,314,636
Summerhill - Series A (5)	CA		6,384,482		972,132		-			7,356,614
Sycamore Walk - Series A (5)	CA		3,568,952		590,916		-			4,159,868
The Village at Madera - Series A (5)	CA		3,066,499		481,734		-			3,548,233
Tyler Park Townhomes - Series A (3)	CA		5,854,394		859,781		-			6,714,175
Vineyard Gardens - Series A (7)	CA		3,995,000		852,151		-			4,847,151
Westside Village Market - Series A (3)	CA		3,825,835		601,208		-			4,427,043
Brookstone (1)	IL		7,413,743		2,191,618		-			9,605,361
Copper Gate Apartments (3)	IN		5,055,000		710,986		-			5,765,986
Renaissance - Series A (4)	LA		11,032,412		1,899,144		-			12,931,556
Live 929 Apartments (7), (8)	MD		40,055,592		-		(149,095	)		39,906,497
Woodlynn Village (1)	MN		4,197,000		10,509		-			4,207,509
Gateway Village (2)	NC		2,600,000		289,170		-			2,889,170
Greens Property - Series A (3)	NC		7,960,000		844,249		-			8,804,249
Lynnhaven Apartments (2)	NC		3,450,000		383,707		-			3,833,707
Silver Moon - Series A (4)	NM		7,777,580		1,447,981		-			9,225,561
Village at Avalon - Series A (6)	NM		16,329,272		3,275,151		-			19,604,423
Ohio Properties - Series A (1)	OH		13,890,001		48,160		-			13,938,161
Bridle Ridge (1)	SC		7,315,000		54,050		-			7,369,050
Columbia Gardens (5)	SC		13,105,293		2,157,828		-			15,263,121
Companion at Thornhill Apartments (5)	SC		11,208,284		1,729,367		-			12,937,651
Cross Creek (1)	SC		6,144,672		2,520,743		-			8,665,415
Rosewood Townhomes - Series A (7)	SC		9,280,000		114,365		-			9,394,365
South Pointe Apartments - Series A (7)	SC		21,600,000		362,290		-			21,962,290
The Palms at Premier Park Apartments (3)	SC		18,891,224		2,779,140		-			21,670,364
Village at River's Edge (5)	SC		9,889,108		2,330,806		-			12,219,914
Willow Run (5)	SC		12,923,882		2,126,087		-			15,049,969
Arbors at Hickory Ridge (3)	TN		11,092,043		2,021,048		-			13,113,091
Pro Nova 2014-1 (2), (8)	TN		10,023,617		-		(347,124	)		9,676,493
Avistar at Copperfield - Series A (2)	TX		13,977,000		2,333,591		-			16,310,591
Avistar at the Crest - Series A (3)	TX		9,279,129		1,772,133		-			11,051,262
Avistar at the Oaks - Series A (3)	TX		7,496,870		1,407,554		-			8,904,424
Avistar at the Parkway - Series A (4)	TX		13,020,181		2,117,134		-			15,137,315
Avistar at Wilcrest - Series A (2)	TX		5,297,000		818,097		-			6,115,097
Avistar at Wood Hollow - Series A (2)	TX		40,220,000		6,546,613		-			46,766,613
Avistar in 09 - Series A (3)	TX		6,473,257		1,068,331		-			7,541,588
Avistar on the Boulevard - Series A (3)	TX		15,807,997		2,738,122		-			18,546,119
Avistar on the Hills - Series A (3)	TX		5,179,570		996,345		-			6,175,915
Bruton Apartments (5)	TX		17,839,917		3,637,297		-			21,477,214
Concord at Gulfgate - Series A (5)	TX		19,018,891		3,758,251		-			22,777,142
Concord at Little York - Series A (5)	TX		13,323,633		2,757,400		-			16,081,033
Concord at Williamcrest - Series A (5)	TX		20,639,734		4,174,795		-			24,814,529
Crossing at 1415 - Series A (5)	TX		7,423,125		1,149,904		-			8,573,029
Decatur Angle (5)	TX		22,500,338		3,869,765		-			26,370,103
Esperanza at Palo Alto (5)	TX		19,390,360		4,290,792		-			23,681,152
Heights at 515 - Series A (5)	TX		6,795,999		1,229,217		-			8,025,216
Heritage Square - Series A (4)	TX		10,722,964		1,471,450		-			12,194,414
Oaks at Georgetown - Series A (5)	TX		12,264,411		1,750,507		-			14,014,918
Runnymede (1)	TX		9,985,000		154,466		-			10,139,466
Southpark (1)	TX		11,679,665		2,411,352		-			14,091,017
15 West Apartments (5)	WA		9,689,570		2,382,417		-			12,071,987
Mortgage revenue bonds held in trust		$	650,161,253	$	97,492,353	$	(496,219	)	$	747,157,387

⁽¹⁾ MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 15

⁽²⁾ MRBs held by Deutsche Bank in a secured financing transaction, Note 15

⁽³⁾ MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 15

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⁽⁴⁾ MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 15

⁽⁵⁾ MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 15

⁽⁶⁾ MRB held by Morgan Stanley in a secured financing transaction, Note 15

⁽⁷⁾ MRBs held by Mizuho Capital Markets, LLC in a secured financing transaction, Note 15

⁽⁸⁾ As of the date presented, the MRB had been in a cumulative unrealized loss for less than 12 consecutive months.

	September 30, 2019
Description of Mortgage Revenue Bonds held by the Partnership	State	Cost Adjusted for Paydowns		Cumulative Unrealized Gain		Cumulative Unrealized Loss		Estimated Fair Value
Montevista - Series A & B	CA	$	13,200,000	$	1,722,484	$	-	$	14,922,484
Solano Vista - Series A & B	CA		5,768,000		650,549		-		6,418,549
Greens Property - Series B	NC		931,038		145,428		-		1,076,466
Ohio Properties - Series B	OH		3,508,510		10,480		-		3,518,990
Rosewood Townhomes - Series B	SC		470,000		1,563		-		471,563
South Pointe Apartments - Series B	SC		1,100,000		3,139		-		1,103,139
Avistar at the Crest - Series B	TX		742,034		97,848		-		839,882
Avistar at the Oaks - Series B	TX		542,984		69,234		-		612,218
Avistar at the Parkway - Series B	TX		124,382		38,672		-		163,054
Avistar in 09 - Series B	TX		447,913		55,370		-		503,283
Avistar on the Boulevard - Series B	TX		440,919		54,786		-		495,705
Mortgage revenue bonds held by the Partnership		$	27,275,780	$	2,849,553	$	-	$	30,125,333

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	December 31, 2018
Description of Mortgage Revenue Bonds Held in Trust	State	Cost Adjusted for Paydowns		Cumulative Unrealized Gain		Cumulative Unrealized Loss		Estimated Fair Value
Courtyard - Series A (5)	CA	$	10,230,000	$	954,573	$	-	$	11,184,573
Glenview Apartments - Series A (4)	CA		4,581,930		524,024		-		5,105,954
Harmony Court Bakersfield - Series A (5)	CA		3,730,000		312,844		-		4,042,844
Harmony Terrace - Series A (5)	CA		6,900,000		647,686		-		7,547,686
Harden Ranch - Series A (3)	CA		6,775,508		1,007,557		-		7,783,065
Las Palmas II - Series A (5)	CA		1,692,774		141,187		-		1,833,961
Montclair Apartments - Series A (4)	CA		2,482,288		246,752		-		2,729,040
Montecito at Williams Ranch Apartments - Series A (2)	CA		7,690,000		973,133		-		8,663,133
San Vicente - Series A (5)	CA		3,490,410		291,121		-		3,781,531
Santa Fe Apartments - Series A (4)	CA		3,007,198		401,203		-		3,408,401
Seasons at Simi Valley - Series A (5)	CA		4,325,536		655,326		-		4,980,862
Seasons Lakewood - Series A (5)	CA		7,350,000		654,929		-		8,004,929
Seasons San Juan Capistrano - Series A (5)	CA		12,375,000		1,102,687		-		13,477,687
Summerhill - Series A (5)	CA		6,423,000		508,639		-		6,931,639
Sycamore Walk - Series A (5)	CA		3,598,006		363,405		-		3,961,411
The Village at Madera - Series A (5)	CA		3,085,000		229,934		-		3,314,934
Tyler Park Townhomes - Series A (3)	CA		5,903,368		731,073		-		6,634,441
Vineyard Gardens - Series A (2)	CA		3,995,000		534,351		-		4,529,351
Westside Village Market - Series A (3)	CA		3,857,839		483,436		-		4,341,275
Brookstone (1)	IL		7,432,076		1,956,010		-		9,388,086
Copper Gate Apartments (3)	IN		5,055,000		643,012		-		5,698,012
Renaissance - Series A (4)	LA		11,123,800		1,383,680		-		12,507,480
Live 929 Apartments (2)	MD		40,240,405		2,873,978		-		43,114,383
Woodlynn Village (1)	MN		4,221,000		34,155		-		4,255,155
Greens Property - Series A (3)	NC		8,032,000		818,686		-		8,850,686
Silver Moon - Series A (4)	NM		7,822,610		778,940		-		8,601,550
Ohio Properties - Series A (1)	OH		13,989,000		241,675		-		14,230,675
Bridle Ridge (1)	SC		7,395,000		90,349		-		7,485,349
Columbia Gardens (5)	SC		13,222,480		1,396,828		-		14,619,308
Companion at Thornhill Apartments (5)	SC		11,294,928		1,148,219		-		12,443,147
Cross Creek (1)	SC		6,143,919		2,540,949		-		8,684,868
The Palms at Premier Park Apartments (3)	SC		19,044,617		2,194,791		-		21,239,408
Village at River's Edge (5)	SC		9,938,059		1,421,114		-		11,359,173
Willow Run (5)	SC		13,040,029		1,375,542		-		14,415,571
Arbors at Hickory Ridge (3)	TN		11,194,690		1,399,461		-		12,594,151
Pro Nova 2014-1 (2)	TN		10,027,413		19,710		-		10,047,123
Avistar at Copperfield - Series A (2)	TX		10,000,000		589,196		-		10,589,196
Avistar at the Crest - Series A (3)	TX		9,357,374		1,036,288		-		10,393,662
Avistar at the Oaks - Series A (3)	TX		7,558,240		706,970		-		8,265,210
Avistar at the Parkway - Series A (4)	TX		13,114,418		1,232,292		-		14,346,710
Avistar at Wilcrest - Series A (2)	TX		3,775,000		206,263		-		3,981,263
Avistar at Wood Hollow - Series A (2)	TX		31,850,000		1,624,687		-		33,474,687
Avistar in 09 - Series A (3)	TX		6,526,247		525,939		-		7,052,186
Avistar on the Boulevard - Series A (3)	TX		15,941,296		1,628,269		-		17,569,565
Avistar on the Hills - Series A (3)	TX		5,221,971		557,084		-		5,779,055
Bruton Apartments (5)	TX		17,933,482		2,046,056		-		19,979,538
Concord at Gulfgate - Series A (5)	TX		19,144,400		2,222,555		-		21,366,955
Concord at Little York - Series A (5)	TX		13,411,558		1,617,217		-		15,028,775
Concord at Williamcrest - Series A (5)	TX		20,775,940		2,505,243		-		23,281,183
Crossing at 1415 - Series A (5)	TX		7,474,716		600,738		-		8,075,454
Decatur Angle (5)	TX		22,630,276		1,945,516		-		24,575,792
Esperanza at Palo Alto (5)	TX		19,487,713		2,350,453		-		21,838,166
Heights at 515 - Series A (5)	TX		6,843,232		722,522		-		7,565,754
Heritage Square - Series A (4)	TX		10,958,661		893,881		-		11,852,542
Oaks at Georgetown - Series A (5)	TX		12,330,000		693,579		-		13,023,579
Runnymede (1)	TX		10,040,000		64,280		-		10,104,280
Southpark (1)	TX		11,623,649		2,482,923		-		14,106,572
15 West Apartments (5)	WA		9,737,418		1,480,489		-		11,217,907
Mortgage revenue bonds held in trust		$	586,445,474	$	58,813,399	$	-	$	645,258,873

⁽¹⁾ MRBs owned by ATAX TEBS I, LLC (M24 TEBS), Note 15

⁽²⁾ MRBs held by Deutsche Bank in a secured financing transaction, Note 15

⁽³⁾ MRBs owned by ATAX TEBS II, LLC (M31 TEBS), Note 15

⁽⁴⁾ MRBs owned by ATAX TEBS III, LLC (M33 TEBS), Note 15

⁽⁵⁾ MRBs owned by ATAX TEBS IV, LLC (M45 TEBS), Note 15

17

	December 31, 2018
Description of Mortgage Revenue Bonds held by the Partnership	State	Cost Adjusted for Paydowns		Cumulative Unrealized Gain		Cumulative Unrealized Loss			Estimated Fair Value
Courtyard - Series B	CA	$	6,228,000	$	2,450	$	-		$	6,230,450
Seasons San Juan Capistrano - Series B (1)	CA		5,574,000		-		(1,078	)		5,572,922
Solano Vista - Series A & B	CA		5,768,000		-		-			5,768,000
Greens Property - Series B	NC		933,928		149,789		-			1,083,717
Village at Avalon - Series A	NM		16,400,000		1,408,802		-			17,808,802
Ohio Properties - Series B	OH		3,520,900		51,334		-			3,572,234
Rosewood Townhomes - Series A & B (1)	SC		9,750,000		-		(644,962	)		9,105,038
South Pointe Apartments - Series A & B (1)	SC		22,700,000		-		(1,411,986	)		21,288,014
Avistar at Copperfield - Series B	TX		4,000,000		11,730		-			4,011,730
Avistar at the Crest - Series B	TX		745,358		50,965		-			796,323
Avistar at the Oaks - Series B	TX		545,321		28,738		-			574,059
Avistar at the Parkway - Series B	TX		124,600		32,220		-			156,820
Avistar at Wilcrest - Series B	TX		1,550,000		4,013		-			1,554,013
Avistar at Wood Hollow - Series B	TX		8,410,000		23,940		-			8,433,940
Avistar in 09 - Series B	TX		449,841		18,742		-			468,583
Avistar on the Boulevard - Series B	TX		442,894		27,023		-			469,917
Mortgage revenue bonds held by the Partnership		$	87,142,842	$	1,809,746	$	(2,058,026	)	$	86,894,562

⁽¹⁾ As of the date presented, the MRB had been in a cumulative unrealized loss position for less than 12 consecutive months.

See Note 22 for a description of the methodology and significant assumptions used in determining the fair value of the MRBs. Unrealized gains or losses on the MRBs are recorded in the Partnership’s condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the MRBs.

Cumulative unrealized loss positions on MRBs are not considered credit losses as of September 30, 2019.  The cumulative unrealized loss for the Pro Nova 2014-1 MRB, related to a commercial property, as of September 30, 2019, is a result of fluctuations in market interest rates and comparable trades of MRBs for similar commercial properties. Due to the historical volatility of the fair value of this MRB, the cumulative unrealized loss is considered temporary. The cumulative unrealized loss for the Live 929 Apartments MRB as of September 30, 2019, is due to recent operational results and debt service coverage declines. The Partnership has evaluated the operational results and loan-to-collateral value ratio for the property underlying this MRB and has determined that the cumulative unrealized loss is temporary.

MRB Activity in the First Nine Months of 2019

Acquisitions:

The following MRBs were acquired during the nine months ended September 30, 2019:

Property Name	Month Acquired	Property Location	Units	Maturity Date	Base Interest Rate			Principal Outstanding at Date of Acquisition
Gateway Village	February	Durham, NC	64	4/1/2032		6.10	%	$	2,600,000
Lynnhaven Apartments	February	Durham, NC	75	4/1/2032		6.10	%		3,450,000
Montevista - Series A	June	San Pablo, CA	82	7/1/2036		5.75	%		6,720,000
Montevista - Series B	June	San Pablo, CA	82	7/1/2021		5.75	%		6,480,000
								$	19,250,000

18

Redemptions:

The following MRBs were redeemed at prices that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2019:

Property Name	Month Redeemed	Property Location	Units		Original Maturity Date	Base Interest Rate			Principal Outstanding at Date of Redemption
Seasons San Juan Capistrano - Series B	January	San Juan Capistrano, CA		112	1/1/2019		8.00	%	$	5,574,000
Courtyard Apartments - Series B	April	Fullerton, CA		108	6/1/2019		8.00	%		6,228,000
									$	11,802,000

Restructurings:

The following MRBs were restructured during the nine months ended September 30, 2019.  The principal outstanding on the Series B MRBs were collapsed into the principal outstanding on the associated Series A MRBs and the Series B MRBs were eliminated.  No cash was paid or received on restructuring. The terms of the Series B MRBs that were eliminated are as follows:

Property Name	Month Restructured	Property Location	Units		Original Maturity Date	Base Interest Rate			Principal Outstanding at Date of Restructuring
Avistar at Copperfield - Series B	May	Houston, TX		192	6/1/2054		12.00	%	$	4,000,000
Avistar at Wilcrest - Series B	May	Houston, TX		88	6/1/2054		12.00	%		1,550,000
Avistar at Wood Hollow - Series B	May	Austin, TX		409	6/1/2054		12.00	%		8,410,000
									$	13,960,000

MRB Activity in the First Nine Months of 2018

Acquisitions:

The following MRB was acquired during the nine months ended September 30, 2018:

Property Name	Month Acquired	Property Location	Units		Maturity Date	Base Interest Rate			Principal Outstanding at Date of Acquisition
Esperanza at Palo Alto (1)	May	San Antonio, TX		322	7/1/2058		5.80	%	$	19,540,000

⁽¹⁾ Previously reported bond purchase commitment that converted to an MRB in May 2018.

Redemptions:

The following MRBs were redeemed at a price that approximated the Partnership’s carrying value plus accrued interest during the nine months ended September 30, 2018:

Property Name	Month Redeemed	Property Location	Units		Original Maturity Date	Base Interest Rate			Principal Outstanding at Date of Redemption
Sycamore Walk - Series B	January	Bakersfield, CA		112	1/1/2018		8.00	%	$	1,815,000
Seasons Lakewood - Series B	March	Lakewood, CA		85	1/1/2019		8.00	%		5,260,000
Summerhill - Series B	March	Bakersfield, CA		128	12/1/2018		8.00	%		3,372,000
Oaks at Georgetown - Series B	April	Georgetown, TX		192	1/1/2019		8.00	%		5,512,000
Seasons at Simi Valley - Series B	April	Simi Valley, CA		69	9/1/2018		8.00	%		1,944,000
San Vicente - Series B	May	Soledad, CA		50	11/1/2018		8.00	%		1,825,000
The Village at Madera - Series B	May	Madera, CA		75	12/1/2018		8.00	%		1,719,000
Las Palmas - Series B	July	Coachella, CA		81	11/1/2018		8.00	%		1,770,000
Harmony Terrace - Series B	August	Simi Valley, CA		136	1/1/2019		8.00	%		7,400,000
Lake Forest	September	Daytona Beach, FL		240	12/1/2031		6.25	%		8,397,000
									$	39,014,000

19

Upon redemption of the Lake Forest MRB, the Partnership realized contingent interest income of approximately $4.2 million. The Partnership also realized additional income due to the early redemption of the MRB of approximately $1.5 million. The additional income is reported within other income on the condensed consolidated statements of operations.

7. Public Housing Capital Fund Trust (“PHC”) Certificates

The Partnership’s PHC Certificates represent beneficial interests in three PHC Trusts. The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to numerous local public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities under the Department of Housing and Urban Development’s (“HUD”) Capital Fund Program established under the Quality Housing and Work Responsibility Act of 1998 (the “Capital Fund Program”).  The PHC Trusts have a first lien on these annual Capital Fund Program payments to secure the public housing authorities’ respective obligations to pay principal and interest on their loans.  The loans payable by the public housing authorities are not debts of, or guaranteed by, the United States of America or HUD.  Interest payable on the public housing authority debt held by the PHC Trusts is exempt from federal income taxes.  The PHC Certificates issued by each of the PHC Trusts have been rated investment grade by Standard & Poor’s. The PHC Certificates are held in trust at Mizuho Capital Markets, LLC (“Mizuho”) in secured financing transactions as of September 30, 2019 (see Note 15).

The Partnership had the following investments in the PHC Certificates as of September 30, 2019 and December 31, 2018:

	September 30, 2019
Description of PHC Certificates	Weighted Average Lives (Years)		Investment Rating	Weighted Average Interest Rate Over Life	Cost Adjusted for Paydowns and Impairment		Cumulative Unrealized Gain		Cumulative Unrealized Loss		Estimated Fair Value
PHC Certificate Trust I		5.73	AA-	5.37%	$	24,510,244	$	483,113	$	-	$	24,993,357
PHC Certificate Trust II		4.09	AA-	4.38%		4,372,215		362,710		-		4,734,925
PHC Certificate Trust III		6.08	BBB	5.12%		14,588,947		367,277		-		14,956,224
					$	43,471,406	$	1,213,100	$	-	$	44,684,506

	December 31, 2018
Description of PHC Certificates	Weighted Average Lives (Years)	Investment Rating	Weighted Average Interest Rate Over Life	Cost Adjusted for Paydowns and Impairment		Cumulative Unrealized Gain		Cumulative Unrealized Loss		Estimated Fair Value
PHC Certificate Trust I	6.49	AA-	5.33%	$	24,608,543	$	285,984	$	-	$	24,894,527
PHC Certificate Trust II	5.56	A+	4.35%		9,071,785		44,768		-		9,116,553
PHC Certificate Trust III	6.76	BBB	5.30%		14,566,975		94,031		-		14,661,006
				$	48,247,303	$	424,783	$	-	$	48,672,086

See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the PHC Certificates. Unrealized gains or losses on the PHC Certificates are recorded in the Partnership’s condensed consolidated statements of comprehensive income to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the PHC Certificates.

The Partnership recognized an impairment charge on the three PHC Certificates of approximately $310,000 and $1.1 million during the three and nine months ended September 30, 2018, respectively. See Note 2 for information considered in the Partnership’s evaluation of impairment of the PHC Certificates.

20

8. Real Estate Assets

The following tables summarize information regarding the Partnership’s real estate assets as of September 30, 2019 and December 31, 2018:

Real Estate Assets as of September 30, 2019
Property Name	Location	Number of Units		Land and Land Improvements		Buildings and Improvements		Carrying Value
Suites on Paseo	San Diego, CA		384	$	3,199,268	$	39,065,722	$	42,264,990
The 50/50 MF Property	Lincoln, NE		475		-		32,937,357		32,937,357
Land held for development	(1)	(1)			1,701,197		-		1,701,197
								$	76,903,544
Less accumulated depreciation									(14,650,397	)
Total real estate assets								$	62,253,147

⁽¹⁾ Land held for development consists of land and development costs for parcels in Gardner, KS; Richland County, SC and Omaha, NE.

Real Estate Assets as of December 31, 2018
Property Name	Location	Number of Units		Land and Land Improvements		Buildings and Improvements		Carrying Value
Suites on Paseo	San Diego, CA		384	$	3,195,468	$	38,961,163	$	42,156,631
The 50/50 MF Property	Lincoln, NE		475		-		32,935,907		32,935,907
Land held for development	(2)	(2)			1,776,197		-		1,776,197
								$	76,868,735
Less accumulated depreciation									(12,272,387	)
Total real estate assets								$	64,596,348

⁽²⁾ Land held for development consists of land and development costs for parcels in Gardner, KS; Richland County, SC and Omaha, NE.

Activity in the First Nine Months of 2019

As of September 30, 2019, the land held for development in Omaha, NE and Gardner, KS were listed for sale. These parcels of land were originally listed for sale in May 2018 and October 2018, respectively.

In September 2019, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded an impairment charge of $75,000 in the third quarter of 2019, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.

Activity in the First Nine Months of 2018

In February 2018, the Partnership acquired two contiguous tracts of land in Omaha, NE. The total purchase price was approximately $2.7 million. In March 2018, a portion of the land acquired was contributed to Vantage at Stone Creek, LLC in exchange for an ownership interest in the entity (Note 9). The remaining land was classified as “Land held for development.”  

In February 2018, the Partnership executed a Purchase Agreement to acquire a tract of land in Omaha, NE. The Purchase Agreement was assigned to Vantage at Coventry in September 2018 (Note 9).

In September 2018, the Partnership sold the Jade Park MF Property to an unrelated third party. The table below summarizes information related to the sale. The gain on sale is considered Tier 2 income (Note 3). The Partnership determined the sale did not meet the criteria for discontinued operations.

Property Name	Month Sold	Property Location	Units	Gross Proceeds		Gain on Sale before Income Taxes
Jade Park	September	Daytona, FL	144	$	13,450,000	$	4,051,429

In September 2018, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded an impairment charge of $150,000 in the third quarter of 2018, which represents the difference between the Partnership’s carrying value and the estimated fair value of the land.

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9. Investments in Unconsolidated Entities

ATAX Vantage Holdings, LLC, a wholly-owned subsidiary of the Partnership, has equity investment commitments and has made equity investments in unconsolidated entities. The carrying value of the equity investments represents the Partnership’s maximum exposure to loss. ATAX Vantage Holdings, LLC is the only limited equity investor in the unconsolidated entities. An affiliate of the unconsolidated entities guarantees ATAX Vantage Holdings, LLC’s return on its investments through the second anniversary of construction completion. The return on these investments earned by the Partnership is reported as investment income on the Partnership’s condensed consolidated statements of operations.

The following table provides the details of the investments in unconsolidated entities as of September 30, 2019 and December 31, 2018 and remaining equity investment commitment amounts as of September 30, 2019:

Property Name	Location	Units		Month Commitment Executed	Construction Completion Date	Carrying Value as of September 30, 2019		Carrying Value as of December 31, 2018		Maximum Remaining Equity Commitment as of September 30, 2019
Vantage at Boerne	Boerne, TX		288	August 2016	April 2018	$	8,363,500	$	8,830,000	$	1,475,936
Vantage at Waco	Waco, TX		288	August 2016	May 2018		9,337,166		9,337,166		1,592,039
Vantage at Panama City    Beach	Panama City Beach, FL		288	March 2017	July 2018		-		11,408,135		-
Vantage at Powdersville	Powdersville, SC		288	November 2017	N/A		12,295,801		11,535,895		-
Vantage at Stone Creek	Omaha, NE		294	March 2018	N/A		7,840,500		7,572,819		-
Vantage at Bulverde	Bulverde, TX		288	March 2018	August 2019		9,894,619		9,182,522		-
Vantage at Germantown	Germantown, TN		288	June 2018	N/A		11,456,353		7,033,398		-
Vantage at Murfreesboro	Murfreesboro, TN		288	September 2018	N/A		13,184,069		6,254,104		-
Vantage at Coventry	Omaha, NE		288	September 2018	N/A		8,825,914		5,380,267		-
Vantage at Conroe	Conroe, TX		288	April 2019	N/A		5,862,073		-		3,393,059
			2,886			$	87,059,995	$	76,534,306	$	6,461,034

Activity in the First Nine Months of 2019

In September 2019, the membership interests of Vantage at Panama City Beach were sold to an unrelated third party. The Partnership received cash of approximately $22.7 million upon sale. The Partnership recognized approximately $547,000 of investment income and approximately $10.5 million of gain on sale of investment in an unconsolidated entity associated with the sale. The Partnership may also be entitled to receive up to $325,000 of additional proceeds in the third quarter of 2020 if certain gain contingencies are satisfied.

In April 2019, the Partnership executed a $9.0 million equity commitment to fund construction of the Vantage at Conroe multifamily property.

Activity in the First Nine Months of 2018

In March 2018, the Partnership committed to make equity investments in the Vantage at Stone Creek and Vantage at Bulverde multifamily properties of approximately $7.1 million and $8.6 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Stone Creek (Note 18).

In June 2018, the Partnership executed a $10.4 million equity commitment to fund construction of the Vantage at Germantown multifamily property.

In September 2018, the Partnership executed equity commitments to fund construction of the Vantage at Coventry and Vantage at Murfreesboro multifamily properties of approximately $8.1 million and $12.2 million, respectively. The Partnership also entered into a guarantee agreement related to the construction loan for Vantage at Coventry (Note 18).

22

The following table provides combined summary financial information for the Partnership’s investments in unconsolidated entities for three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2019		2018			2019		2018
Property Revenues	$	3,713,106	$	2,824,019		$	9,534,250	$	5,687,214
Gain on sale of property	$	22,556,694	$	-		$	22,556,694	$	-
Net income (loss)	$	21,606,621	$	(353,067	)	$	20,918,176	$	(2,688,985	)

10. Property Loans, Net of Loan Loss Allowances

The following tables summarize the Partnership’s property loans, net of loan loss allowances, as of September 30, 2019 and December 31, 2018:

	September 30, 2019
	Outstanding Balance		Loan Loss Allowance			Property Loan Principal, net of allowance
Arbors at Hickory Ridge	$	191,264	$	-		$	191,264
Avistar (February 2013 portfolio)		201,972		-			201,972
Avistar (June 2013 portfolio)		251,622		-			251,622
Cross Creek		11,101,887		(7,393,814	)		3,708,073
Greens Property		850,000		-			850,000
Ohio Properties		2,390,446		-			2,390,446
Live 929 Apartments		405,717		-			405,717
Total	$	15,392,908	$	(7,393,814	)	$	7,999,094

	December 31, 2018
	Outstanding Balance		Loan Loss Allowance			Property Loan Principal, net of allowance
Arbors at Hickory Ridge	$	191,264	$	-		$	191,264
Avistar (February 2013 portfolio)		201,972		-			201,972
Avistar (June 2013 portfolio)		251,622		-			251,622
Cross Creek		11,101,887		(7,393,814	)		3,708,073
Greens Property		850,000		-			850,000
Ohio Properties		2,390,446		-			2,390,446
Vantage at Brooks, LLC		8,367,635		-			8,367,635
Total	$	23,354,826	$	(7,393,814	)	$	15,961,012

During the three and nine months ended September 30, 2019 and 2018, the interest to be earned on the Cross Creek property loans was in nonaccrual status.  The discounted cash flow method used by management to establish the net realizable value of these property loans determined the collection of the interest earned since inception was not probable.  In addition, for the three and nine months ended September 30, 2019 and 2018, interest to be earned on approximately $983,000 of property loan principal for the Ohio Properties and all principal for Live 929 Apartments was in nonaccrual status as, in management’s opinion, the interest was not considered collectible.

Activity in the First Nine Months of 2019

In August 2019, the Partnership entered into a secured property loan with Live 929 Apartments. The property may request additional advances for the sole purpose of funding monthly operating shortfalls up to a total loan amount of $1.0 million. The property loan is subordinate to the MRBs associated with the property and has a stated maturity date of July 31, 2049.

In January 2019, the Vantage at Brooks property was sold by its owner. Upon sale, the Partnership received all outstanding principal and accrued interest on the Vantage at Brooks, LLC property loan. The Partnership received additional proceeds of approximately $3.0 million, which is recorded as contingent interest on the Partnership’s condensed consolidated statements of operations. The contingent interest recognized is considered Tier 2 income for purposes of distributions to the General Partner and BUC holders (see Note 3).

23

Activity in the First Nine Months of 2018

In September 2018, the Lake Forest property was sold by its owner.  Upon the sale, the Partnership received all outstanding principal and accrued interest on the Lake Forest property loans. The Partnership received approximately $5.1 million of principal and approximately $4.6 million of interest on the property loans at sale. The interest received was not previously recognized as income as the property loans were on nonaccrual status. The interest realized is reported within other interest income on the condensed consolidated statements of operations for the three and nine months ended September 30, 2018.

11. Income Tax Provision

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by the Greens Hold Co, which owns The 50/50 MF Property and certain property loans. The following table summarizes income tax expense (benefit) for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Current income tax expense (benefit)	$	13,932		$	(809,805	)	$	129,095		$	(837,805	)
Deferred income tax expense (benefit)		(82,167	)		-			(138,331	)		34,000
Total income tax benefit	$	(68,235	)	$	(809,805	)	$	(9,236	)	$	(803,805	)

The Partnership evaluated whether it is more likely than not that its deferred income tax assets will be realizable. There was no valuation allowance recorded as of September 30, 2019 and December 31, 2018.

12. Other Assets

The following table summarizes the other assets as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
Deferred financing costs, net	$	333,004	$	397,823
Fair value of derivative instruments (Note 17)		52,605		626,633
Taxable mortgage revenue bonds, at fair value		1,427,336		1,409,895
Operating lease right-of-use assets, net		1,681,238		-
Other assets		1,446,520		2,081,258
Total other assets	$	4,940,703	$	4,515,609

See Note 2 for a discussion of the operating lease right-of-use lease assets, net, recorded pursuant to the adoption of ASC 842 effective January 1, 2019.  

See Note 22 for a description of the methodology and significant assumptions for determining the fair value of derivative instruments and taxable MRBs. Unrealized gains or losses on these assets are recorded in the condensed consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the assets.

13. Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the accounts payable, accrued expenses and other liabilities as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
Accounts payable	$	182,099	$	230,631
Accrued expenses		3,023,629		2,956,368
Accrued interest expense		2,572,279		2,270,348
Operating lease liabilities		2,137,792		-
Other liabilities		1,677,151		2,086,475
Total accounts payable, accrued expenses and other liabilities	$	9,592,950	$	7,543,822

See Note 2 for discussion of the adoption of ASC 842 effective January 1, 2019.

24

The 50/50 MF Property has a ground lease with the University of Nebraska-Lincoln with an initial lease term expiring in March 2038. The Partnership has an option to extend the lease for an additional five-year period, which has not been factored into the calculation of the ROU asset and lease liability.  Annual lease payments are $100 per year. The Partnership is also required to make monthly payments, when cash is available at The 50/50 MF Property, to the University of Nebraska-Lincoln. Payment amounts are based on The 50/50 MF Property’s revenues, subject to an annual guaranteed minimum amount.  As of September 30, 2019, the minimum aggregate annual payment due under the agreement is approximately $132,000. The minimum aggregate annual payment increases 2% annually until July 31, 2034 and increases 3% annually thereafter.  The 50/50 MF Property will be required to make additional payments under the agreement if its gross revenues exceed certain thresholds.  The Partnership recognized expenses related to the ground lease of approximately $42,000 and $126,000 for the three and nine months ended September 30, 2019 and 2018 and are included within real estate operating expenses on the Partnership’s condensed consolidated statements of operations.  

The following table summarizes future contractual payments for the Partnership’s operating leases and a reconciliation to the carrying value of operating lease liabilities:

Remainder of 2019	$	34,165
2020		135,812
2021		136,366
2022		139,091
2023		141,871
Thereafter		4,661,979
Total		5,249,284
Less:  Amount representing interest		(3,111,492	)
Total operating lease liabilities	$	2,137,792

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.

15. Debt Financing

25

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.

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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 triggeredwhich 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.

27

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

28

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

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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

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16. Mortgages Payable and Other Secured Financing

The following tables summarize the Partnership’s mortgages payable and other secured financing, net of deferred financing costs, as of September 30, 2019 and December 31, 2018:

MF Property Mortgage Payables	Outstanding Mortgage Payable as of September 30, 2019, net		Year Acquired or Refinanced	Stated Maturity	Variable / Fixed	Reset Frequency	Variable Based Rate				Period End Rate
The 50/50 MF Property--TIF    Loan	$	2,988,989	2014	December 2019	Fixed	N/A	N/A					4.65	%
The 50/50 MF Property--Mortgage		24,060,882	2013	March 2020	Variable	Monthly		5.00	%	(1)		5.00	%
Total Mortgage Payable\Weighted    Average Period End Rate	$	27,049,871										4.96	%

⁽¹⁾ Variable rate is based on the Wall Street Journal Prime Rate, but not to exceed 5.0%.

MF Property Mortgage Payables	Outstanding Mortgage Payable as of December 31, 2018, net		Year Acquired or Refinanced	Stated Maturity	Variable / Fixed	Reset Frequency	Variable Based Rate				Period End Rate
The 50/50 MF Property--TIF    Loan	$	3,118,478	2014	December 2019	Fixed	N/A	N/A					4.65	%
The 50/50 MF Property--Mortgage		24,335,897	2013	March 2020	Variable	Monthly		5.00	%	(2)		5.00	%
Total Mortgage Payable\Weighted    Average Period End Rate	$	27,454,375										4.96	%

⁽²⁾ Variable rate is based on the Wall Street Journal Prime Rate, but not to exceed 5.0%.

In September 2018, the Partnership sold the Jade Park MF Property. At the closing of the sale, the Partnership paid all outstanding principal and accrued interest on the related mortgage payable.

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	$	3,133,103
2020		23,945,254
2021		-
2022		-
2023		-
Thereafter		-
Total		27,078,357
Unamortized deferred financing costs		(28,486	)
Total mortgages payable and other secured financings, net	$	27,049,871

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17. Interest Rate Derivative Agreements

The following tables summarize the Partnership’s interest rate derivatives as of September 30, 2019 and December 31, 2018:

Purchase Date	Notional Amount		Maturity Date	Effective Capped Rate (1)			Index	Variable Debt Financing Facility Hedged (1)	Counterparty	Fair Value as of September 30, 2019
July 2015		27,117,092	Aug 2020		3.0	%	SIFMA	TOB Trusts	Wells Fargo Bank		2
July 2015		27,117,092	Aug 2020		3.0	%	SIFMA	TOB Trusts	Royal Bank of Canada		2
July 2015		27,117,092	Aug 2020		3.0	%	SIFMA	TOB Trusts	SMBC Capital Markets, Inc		2
June 2017		81,351,277	Aug 2020		1.5	%	SIFMA	M33 TEBS	Barclays Bank PLC		45,274
Sept 2017		58,447,000	Sept 2020		4.0	%	SIFMA	M24 TEBS	Barclays Bank PLC		-
Aug 2019		79,695,286	Aug 2024		4.5	%	SIFMA	M31 TEBS	Barclays Bank PLC		7,325
										$	52,605

⁽¹⁾ See Note 22 for additional details.

Purchase Date	Notional Amount		Maturity Date	Effective Capped Rate (2)			Index	Variable Debt Financing Facility Hedged (2)	Counterparty	Fair Value as of December 31, 2018
July 2014	$	30,252,409	Aug 2019		3.0	%	SIFMA	M31 TEBS	Barclays Bank PLC	$	-
July 2014		30,252,409	Aug 2019		3.0	%	SIFMA	M31 TEBS	Royal Bank of Canada		-
July 2014		30,252,409	Aug 2019		3.0	%	SIFMA	M31 TEBS	SMBC Capital Markets, Inc		-
July 2015		27,359,689	Aug 2020		3.0	%	SIFMA	M33 TEBS	Wells Fargo Bank		536
July 2015		27,359,689	Aug 2020		3.0	%	SIFMA	M33 TEBS	Royal Bank of Canada		536
July 2015		27,359,689	Aug 2020		3.0	%	SIFMA	M33 TEBS	SMBC Capital Markets, Inc		536
June 2017		90,757,226	Aug 2019		1.5	%	SIFMA	M31 TEBS	Barclays Bank PLC		158,989
June 2017		82,079,066	Aug 2020		1.5	%	SIFMA	M33 TEBS	Barclays Bank PLC		465,983
Sept 2017		59,038,000	Sept 2020		4.0	%	SIFMA	M24 TEBS	Barclays Bank PLC		53
										$	626,633

⁽²⁾ See Note 22 for additional details.

In August 2019, the Partnership purchased an interest rate derivative intended to cap the variable interest rate component of the M31 TEBS Financing at 4.5%. The Partnership paid approximately $30,000 for the interest rate derivative.

During the nine months ended September 30, 2018, the Partnership was a party to two interest rate swaps with Deutsche Bank, which were designated to mitigate interest rate risk for the variable-rate TOB Trusts secured by the Partnership’s PHC Certificates. The interest rate swaps were terminated in September 2018 and October 2018.

The Partnership’s interest rate derivatives are not designated as hedging instruments and are recorded at fair value. Changes in fair value are included in current period earnings as interest expense on the condensed consolidated statements of operations. See Note 22 for a description of the methodology and significant assumptions for determining the fair value of the interest rate derivatives. The interest rate derivatives are presented within other assets on the condensed consolidated balance sheets.  

18. Commitments and Contingencies

Legal Proceedings

The Partnership, from time to time, may be subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are frequently covered by insurance. If it has been determined that a loss is probable to occur, the estimated amount of the loss is accrued in the Partnership’s condensed consolidated financial statements. While the resolution of these matters cannot be predicted with certainty, the Partnership believes the outcome of such matters will not have a material effect on the Partnership’s condensed consolidated financial statements.

32

Construction Loan Guarantees

The Partnership entered into guaranty agreements for construction loans related to certain investments in unconsolidated entities. The Partnership will only have to perform on the guarantees if a default by the borrower were to occur.  All guarantees were initially for the entire amount of the respective construction loan and decrease based on the achievement of certain events or financial ratios, as defined by the respective construction loan agreement.  The Partnership has not accrued any amount for these contingent liabilities because the likelihood of guarantee claims is remote. The following table summarizes the Partnership’s maximum exposure under these guarantee agreements as of September 30, 2019:

Borrower	Year the Guarantee was Executed	Maximum Balance Available on Construction Loan		Construction Loan Balance as of September 30, 2019		Partnership's Maximum Exposure as of September 30, 2019		Guarantee Terms
Vantage at Stone Creek	2018	$	30,824,000	$	24,826,510	$	24,826,510	(1)
Vantage at Coventry	2018		31,500,000		5,275,651		5,275,651	(1)

(1) The Partnership’s maximum exposure will decrease to 50% of the construction loan balance upon receipt of the certificate of occupancy and to 25% of the construction loan balance when certain debt service coverage levels are achieved by the borrower.

Other Guarantees and Commitments

The Partnership has entered into guarantee agreements with unaffiliated entities under which the Partnership has guaranteed certain obligations of the general partners of certain limited partnerships upon the occurrence of a “repurchase event.” Potential repurchase events include the delivery of LIHTCs, tax credit recapture and foreclosure. The Partnership’s maximum exposure is limited to 75% of the equity contributed by the limited partner to each limited partnership. No amount has been accrued for these guarantees because the likelihood of repurchase events is remote. The following table summarizes the Partnership’s maximum exposure under these guarantee agreements as of September 30, 2019:

Limited Partnership(s)	Year the Guarantee was Executed	End of Guarantee Period	Partnership's Maximum Exposure as of September 30, 2019
Ohio Properties	2011	2026	$	3,712,436
Greens of Pine Glen, LP	2012	2027		2,429,658

The Partnership has agreed, in limited instances, to indemnify certain parties to the TOB Trusts related to the PHC Certificates for claims by the Floater Certificates holders related to the calculation of interest and principal payments. The maximum exposure for such claims is up to the total value of the Floater Certificates plus accrued interest. The Partnership has not accrued any amount for this commitment as of September 30, 2019 because the likelihood of a claim is remote. The maximum exposure was approximately $36.0 million as of September 30, 2019.

19. Redeemable Series A Preferred Units

The Partnership has issued non-cumulative, non-voting, non-convertible Series A Preferred Units via private placements to five financial institutions. The Series A Preferred Units represent limited partnership interests in the Partnership and are redeemable in the future. The balance of Series A Preferred Units on the condensed consolidated balance sheet is presented net of issuance costs. The following table summarizes the outstanding Series A Preferred Units as of September 30, 2019 and December 31, 2018:  

Month Issued	Units		Purchase Price		Distribution Rate			Redemption Price per Unit		Earliest Redemption Date
March 2016		1,000,000	$	10,000,000		3.00	%	$	10.00	March 2022
May 2016		1,386,900		13,869,000		3.00	%		10.00	May 2022
September 2016		1,000,000		10,000,000		3.00	%		10.00	September 2022
December 2016		700,000		7,000,000		3.00	%		10.00	December 2022
March 2017		1,613,100		16,131,000		3.00	%		10.00	March 2023
August 2017		2,000,000		20,000,000		3.00	%		10.00	August 2023
October 2017		1,750,000		17,500,000		3.00	%		10.00	October 2023
Series A Preferred Units outstanding    as of September 30, 2019 and    December 31, 2018		9,450,000	$	94,500,000

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20. Restricted Unit Awards (“RUAs”)

The Plan, as approved by the BUC holders, permits the grant of RUAs and other awards to the employees of Greystone Manager, the Partnership, or any affiliate of either, and members of the Board of Managers of Greystone Manager for up to 3.0 million BUCs. RUAs are generally granted with vesting conditions ranging from three months to approximately three years. Unvested RUAs are entitled to receive distributions during the restriction period. The RUAs provide for accelerated vesting if there is a change in control related to the Partnership, the General Partner, or Greystone Manager; or death or disability of the participant. All of the restrictions applicable to the previously unvested RUAs lapsed and all such RUAs became immediately vested and nonforfeitable upon the closing of the previously disclosed acquisition of all of the issued and outstanding partnership interests in the General Partner from Burlington Capital LLC (“Burlington”) by Greystone Manager and Greystone AF Holdings, LLC (“Greystone Holdings,” and collectively with Greystone Manager, “Greystone”), which occurred on September 10, 2019.

The fair value of each RUA is estimated on the grant date based on the Partnership’s exchange-listed closing price of the BUCs. The Partnership recognizes compensation expense for the RUAs on a straight-line basis over the requisite vesting period. The compensation expense for RUAs totaled approximately $3,266,000 and $622,000 for the three months ended September 30, 2019 and 2018, respectively.  The compensation expense for RUAs totaled approximately $3,636,000 and $1,372,000 for the nine months ended September 30, 2019 and 2018, respectively. Compensation expense is reported within general and administrative expenses in the Partnership’s condensed consolidated statements of operations.

The following table summarizes the RUA activity as of and for the nine months ended September 30, 2019 and the year ended December 31, 2018:

	Restricted Units Awarded			Weighted-average Grant-date Fair Value
Nonvested as of January 1, 2018		242,069		$	5.83
Granted		309,212			6.31
Vested		(279,034	)		6.06
Forfeited		(6,957	)		6.31
Nonvested as of December 31, 2018		265,290		$	6.14
Granted		353,197			7.74
Vested		(618,487	)		7.05
Nonvested as of September 30, 2019		-		$	-

There was no unrecognized compensation expense related to nonvested RUAs granted under the Plan as of September 30, 2019.

21. Transactions with Related Parties

Effective September 10, 2019, Greystone acquired all of the issued and outstanding partnership interests of AFCA 2, at which time Burlington and its affiliates ceased to be related parties of the Partnership. The disclosures herein related to Burlington and its affiliates only reflect transactions that occurred through September 9, 2019.  

The Partnership incurs costs for services and makes contractual payments to AFCA 2, the general partner of AFCA 2, and their affiliates. The costs are reported either as expenses or capitalized costs depending on the nature of each item. The following table summarizes transactions with related parties that are reflected in the Partnership’s condensed consolidated financial statements for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Partnership administrative fees paid to AFCA 2 (1)	$	914,000	$	940,000	$	2,714,000	$	2,789,000
Property management fees paid to an affiliate (2)		28,000		49,000		101,000		147,000
Reimbursable franchise margin taxes incurred on behalf of    unconsolidated entities (3)		12,000		-		44,000		-

(1) The General Partner of the Partnership, AFCA 2, is entitled to receive an administrative fee from the Partnership equal to 0.45% per annum of the outstanding principal balance of any of its MRBs, property loans collateralized by real property, and other investments for which the owner of the financed property or other third party is not obligated to pay such administrative fee directly to AFCA 2. The disclosed amounts represent administrative fees paid or accrued during the periods specified and are reported within general and administrative expenses on the Partnership’s condensed consolidated statements of operations.

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(2) An affiliate of AFCA 2, Burlington Capital Properties, LLC (“Properties Management”), provides property management, administrative and marketing services for the MF Properties (excluding Suites on Paseo). The property management fees are reported within real estate operating expenses in the Partnership’s condensed consolidated statements of operations.

(3) The Partnership pays franchise margin taxes on revenues in Texas related to its investments in unconsolidated entities. Such taxes are paid by the Partnership as the unconsolidated entities are required by tax regulations to be included in the Partnership’s group tax return. The Partnership is then reimbursed for franchise margin taxes paid on behalf of the unconsolidated entities.

AFCA 2 receives fees from the borrowers of the Partnership’s MRBs for services provided to the borrower and based on the occurrence of certain investment and debt financing transactions. These fees were paid by the borrowers and are not reflected in the Partnership’s condensed consolidated financial statements. The following table summarizes transactions between borrowers of the Partnership’s MRBs and affiliates for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Non-Partnership property administrative fees received by AFCA 2 (1)		9,000		17,000	$	27,000	$	60,000
Investment/mortgage placement fees received by AFCA 2 (2)		-		1,189,000		822,000		2,787,000
MRB redemption administrative fee received by AFCA 2 (3)		-		114,000		-		114,000

(1) AFCA 2 received administrative fees directly from the owners of certain properties financed by certain MRBs held by the Partnership.  These administrative fees equal 0.45% per annum of the outstanding principal balance of the MRBs. These amounts represent administrative fees received by AFCA 2 during the periods specified.

(2) AFCA 2 received placement fees in connection with the acquisition of certain MRBs and investments in unconsolidated entities.  

(3) AFCA 2 received a one-time administrative fee related to early redemption of the Lake Forest MRB from the property in September 2018.

In addition, Properties Management provided services to seven of the properties collateralizing MRBs of the Partnership and one of the Partnership’s investments in unconsolidated entities. These property management fees are paid out of the revenues generated by the respective property prior to the payment of debt service on the Partnership's MRBs and property loans, as applicable, and the construction loan for the unconsolidated entity. Properties Management ceased to be a related party effective September 10, 2019.

The Partnership reported receivables due from unconsolidated entities and affiliates totaling approximately $29,000 and $77,000 as of September 30, 2019 and December 31, 2018, respectively. These amounts are reported within other assets on the Partnership’s condensed consolidated balance sheets. The Partnership had outstanding liabilities due to related parties totaling approximately $599,000 and $330,000 as of September 30, 2019 and December 31, 2018, respectively. These amounts are reported within accounts payable, accrued expenses and other liabilities on the Partnership’s condensed consolidated balance sheets.

22. Fair Value of Financial Instruments

Current accounting guidance on fair value measurements establishes a framework for measuring fair value and provides for expanded disclosures about fair value measurements.  The guidance:

• Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and

• Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.  To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The three levels of the hierarchy are defined as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 inputs are unobservable inputs for asset or liabilities.

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The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following are descriptions of the valuation methodologies used for the Partnership’s assets and liabilities measured at fair value.

Investments in MRBs

The fair value of the Partnership’s investments in MRBs and taxable MRBs, as of September 30, 2019 and December 31, 2018, is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the MRBs and price quotes for the MRBs are not available. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each MRB as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure of the borrower, collateral, seniority or subordination to other obligations, operating results of the underlying property, geographic location, and property quality. These characteristics are used to estimate an effective yield for each MRB. The MRB fair value is estimated using a discounted cash flow and yield to maturity or call analysis by applying the effective yield to contractual cash flows. Significant increases (decreases) in the effective yield would have resulted in a significantly lower (higher) fair value estimate. Changes in fair value due to an increase or decrease in the effective yield do not impact the Partnership’s cash flows.

The Partnership evaluates pricing data received from the third-party pricing service by evaluating consistency with information from either the third-party pricing service or public sources. The fair value estimates of the MRBs and taxable MRBs are based largely on unobservable inputs believed to be used by market participants and require the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s investments in MRBs and taxable MRBs are categorized as a Level 3 input. As of September 30, 2019, the range of effective yields on the individual MRBs was 2.6% to 8.7% per annum, with a weighted average effective yield of 3.8% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.1% to 8.8% per annum, with a weighted average effective yield of 8.6% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.  As of December 31, 2018, the range of effective yields on the individual MRBs was 3.3% to 9.1% per annum, with a weighted average effective yield of 4.6% when weighted by the total principal outstanding of all MRBs as of the reporting date; and the range of effective yields on the individual taxable MRBs was 8.3% to 9.3% per annum, with a weighted average effective yield of 9.1% when weighted by the total principal outstanding of all taxable MRBs as of the reporting date.

Investments in PHC Certificates

The fair value of the Partnership’s investment in PHC Certificates as of September 30, 2019 and December 31, 2018 is based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates owned by the Partnership. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Certificate as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs.

The Partnership reviews the inputs used by the primary third-party pricing service by reviewing source information and reviews the methodology for reasonableness.  The Partnership also engages a second third-party pricing service to confirm the values developed by the primary third-party pricing service. The valuation methodologies used by the third-party pricing services encompass the use of judgment in their application. Due to the judgments involved, the fair value measurement of the Partnership’s investment in PHC Certificates is categorized as a Level 3 input. As of September 30, 2019, the range of effective yields on the PHC Certificates was 4.5% to 5.4% per annum, with a weighted average effective yield of 5.3% when weighted by the principal outstanding of all PHC Certificates as of the reporting date. As of December 31, 2018, the range of effective yields on the PHC Certificates was 5.3% to 6.0% per annum, with a weighted average effective yield of 5.5% when weighted by the principal outstanding of all PHC Certificates as of the reporting date.

Interest Rate Derivatives.

The effect of the Partnership’s interest rate derivatives is to set a cap, or upper limit, subject to performance by the counterparty, on the base rate of interest paid on the Partnership’s variable rate debt financings equal to the notional amount of the derivative agreement.   The effect of the Partnership’s interest rate swaps is to change a variable-rate debt obligation to a fixed rate for that portion of the debt equal to the notional amount of the derivative agreement.  The fair value of the interest rate derivatives is based on a model whose inputs are not observable and therefore is categorized as a Level 3 input.  The inputs in the valuation model include three-month LIBOR rates, unobservable adjustments to account for the SIFMA index, as well as any recent interest rate cap trades with similar terms.

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Assets measured at fair value on a recurring basis as of September 30, 2019 are summarized as follows:

	Fair Value Measurements as of September 30, 2019
Description	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Mortgage revenue bonds, held in trust	$	747,157,387	$	-	$	-	$	747,157,387
Mortgage revenue bonds		30,125,333		-		-		30,125,333
PHC Certificates		44,684,506		-		-		44,684,506
Taxable mortgage revenue bonds (reported within other assets)		1,427,336		-		-		1,427,336
Derivative instruments (reported within other assets)		52,605		-		-		52,605
Total Assets at Fair Value, net	$	823,447,167	$	-	$	-	$	823,447,167

The following tables summarize the activity related to Level 3 assets for the three and nine months ended September 30, 2019:

	For the Three Months Ended September 30, 2019
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds (1)			PHC Certificates			Taxable Bonds			Interest Rate Derivatives			Total
Beginning Balance April 1, 2019	$	759,526,707		$	46,516,154		$	1,441,316		$	118,279		$	807,602,456
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and    interest expense)		35,542			2,915			-			(68,333	)		(29,876	)
Included in other comprehensive (loss)    income		18,886,878			173,374			(11,936	)		-			19,048,316
Purchases		-			-			-			29,527			29,527
Settlements		(1,166,407	)		(2,007,937	)		(2,044	)		(26,868	)		(3,203,256	)
Ending Balance September 30, 2019	$	777,282,720		$	44,684,506		$	1,427,336		$	52,605		$	823,447,167
Total amount of gains (losses) for the period    included in earnings attributable to    the change in unrealized gains    (losses) relating to assets or liabilities    held on September 30, 2019	$	-		$	-		$	-		$	(68,333	)	$	(68,333	)

⁽¹⁾ Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.

	For the Nine Months Ended September 30, 2019
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds (1)			PHC Certificates			Taxable Mortgage Revenue Bonds			Interest Rate Derivatives			Total
Beginning Balance January 1, 2019	$	732,153,435		$	48,672,086		$	1,409,895		$	626,633		$	782,862,049
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and    interest expense)		106,909			(795	)		-			(458,141	)		(352,027	)
Included in other comprehensive income		41,280,568			788,318			43,438			-			42,112,324
Purchases		19,250,000			-			-			29,527			19,279,527
Settlements		(15,508,192	)		(4,775,103	)		(25,997	)		(145,414	)		(20,454,706	)
Ending Balance September 30, 2019	$	777,282,720		$	44,684,506		$	1,427,336		$	52,605		$	823,447,167
Total amount of gains (losses) for the    period included in earnings attributable    to the change in unrealized gains    (losses) relating to assets or liabilities    held on September 30, 2019	$	-		$	-		$	-		$	(458,141	)	$	(458,141	)

⁽¹⁾ Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.

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Assets measured at fair value on a recurring basis as of December 31, 2018 are summarized as follows:

	Fair Value Measurements as of December 31, 2018
Description	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Mortgage revenue bonds, held in trust	$	645,258,873	$	-	$	-	$	645,258,873
Mortgage revenue bonds		86,894,562		-		-		86,894,562
PHC Certificates		48,672,086		-		-		48,672,086
Taxable mortgage revenue bonds (reported within other assets)		1,409,895		-		-		1,409,895
Derivative instruments (reported within other assets)		626,633		-		-		626,633
Total Assets at Fair Value, net	$	782,862,049	$	-	$	-	$	782,862,049

The following tables summarize the activity related to Level 3 assets and liabilities for the three and nine months ended September 30, 2018:

	For the Three Months Ended September 30, 2018
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds (1)			Bond Purchase Commitments		PHC Certificates			Taxable Bonds			Interest Rate Derivatives (2)		Total
Beginning Balance July 1, 2018	$	767,629,337		$	994,685	$	49,070,710		$	2,357,952		$	897,958	$	820,950,642
Total gains (losses) (realized/unrealized)
Included in earnings (interest income and interest    expense)		36,126			-		(19,274	)		-			91,679		108,531
Included in earnings (impairment of securities)		-			-		(309,958	)		-			-		(309,958	)
Included in other comprehensive (loss) income		(6,729,317	)		51,760		-			(15,192	)		-		(6,692,749	)
Purchases		-			-		-			-			-		-
Settlements		(18,470,222	)		-		-			(2,858	)		47,540		(18,425,540	)
Ending Balance September 30, 2018	$	742,465,924		$	1,046,445	$	48,741,478		$	2,339,902		$	1,037,177	$	795,630,926
Total amount of gains (losses) for the period    included in earnings attributable to    the change in unrealized gains    (losses) relating to assets or liabilities    held on September 30, 2018	$	-		$	-	$	(309,958	)	$	-		$	91,679	$	(218,279	)

⁽¹⁾ Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership.

⁽²⁾ Interest rate derivatives include derivative instruments reported in other assets as well as derivative swap liabilities.

	For the Nine Months Ended September 30, 2018
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Revenue Bonds (1)			Bond Purchase Commitments			PHC Certificates			Taxable Mortgage Revenue Bonds			Interest Rate Derivatives (2)			Total
Beginning Balance January 1, 2018	$	788,621,707		$	3,002,540		$	49,641,588		$	2,422,459		$	(229,631	)	$	843,458,663
Total gains (losses)    (realized/unrealized)
Included in earnings (interest income and interest    expense)		108,661			-			(57,822	)		-			1,088,060			1,138,899
Included in earnings (impairment of securities)		-			-			(1,141,020	)		-			-			(1,141,020	)
Included in other comprehensive (loss) income		(24,048,645	)		(1,956,095	)		525,446			(49,173	)		-			(25,528,467	)
Purchases		19,540,000			-			-			-			-			19,540,000
Settlements		(41,755,799	)		-			(226,714	)		(33,384	)		178,748			(41,837,149	)
Ending Balance September 30, 2018	$	742,465,924		$	1,046,445		$	48,741,478		$	2,339,902		$	1,037,177		$	795,630,926
Total amount of gains (losses) for the period    included in earnings attributable to    the change in unrealized gains    (losses) relating to assets or liabilities    held on September 30, 2018	$	-		$	-		$	(1,141,020	)	$	-		$	1,088,060		$	(52,960	)

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⁽¹⁾ Mortgage revenue bonds includes both bonds held in trust as well as those held by the Partnership. The beginning balance also includes the cumulative effect of accounting change related to the adoption of ASU 2017-08 effective January 1, 2018.

⁽²⁾ Interest rate derivatives include derivative instruments reported in other assets as well as derivative swap liabilities.

Total gains and loss included in earnings for the interest rate derivatives are reported as interest expense in the condensed consolidated statements of operations.

In September 2019 and 2018, the Partnership determined that the land held for development in Gardner, KS was impaired. The Partnership recorded impairment charges of $75,000 and $150,000 in the third quarter of 2019 and 2018, respectively. The impairment charges represent the difference between the Partnership’s carrying value and the estimated fair value of the land.

As of September 30, 2019 and December 31, 2018, the Partnership utilized a third-party pricing service to determine the fair value of the Partnership’s financial liabilities, which are indicative of market prices. The valuation methodology of the Partnership’s third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each financial liability as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, legal structure, seniority to other obligations, operating results of the underlying assets, and asset quality. The financial liabilities values are then estimated using a discounted cash flow and yield to maturity or call analysis.

The Partnership evaluates pricing data received from the third-party pricing service, including consideration of current market interest rates, quantitative and qualitative characteristics of the underlying collateral, and other information from either the third-party pricing service or public sources. The fair value estimates of these financial liabilities are based largely on unobservable inputs believed to be used by market participants and require the use of judgment on the part of the third-party pricing service and the Partnership. Due to the judgments involved, the fair value measurements of the Partnership’s financial liabilities are categorized as a Level 3 input. The TEBS Financings are credit enhanced by Freddie Mac. The variable-rate TOB Trust financings are credit enhanced by either Deutsche Bank or Mizuho. The table below summarizes the fair value of the financial liabilities as of September 30, 2019 and December 31, 2018:

	September 30, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Liabilities:
Debt financing and LOCs	$	552,012,130	$	572,810,140	$	541,322,765	$	550,766,809
Mortgages payable and other secured financing		27,049,871		27,078,357		27,454,375		27,552,748

23. Segments

The Partnership has four reportable segments - Mortgage Revenue Bond Investments, MF Properties, Public Housing Capital Fund Trusts, and Other Investments.  In addition to the four reportable segments, the Partnership also separately reports its consolidation and elimination information because it does not allocate certain items to the segments.

The Amended and Restated LP Agreement authorizes the Partnership to make investments in tax-exempt securities other than MRBs provided that the tax-exempt investments are rated in one of the four highest rating categories by a national securities rating agency. The Amended and Restated LP Agreement also allows the Partnership to invest in other securities whose interest may be taxable for federal income tax purposes. Total tax-exempt securities, other than MRBs and other investments, cannot exceed 25% of the Partnership’s total assets at the time of acquisition as required under the Amended and Restated LP Agreement.  In addition, the amount of other investments is limited based on the conditions to the exemption from registration under the Investment Company Act of 1940.  The Partnership’s tax-exempt securities, other than MRBs and other investments, include PHC Certificates and Other Investments, which are reported as separate segments.

Mortgage Revenue Bond Investments Segment

The Mortgage Revenue Bond Investments segment consists of the Partnership’s portfolio of MRBs and related property loans which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.  Such MRBs are held as investments and the related property loans, net of loan loss allowance, are reported as such on the Partnership’s condensed consolidated balance sheets.  As of September 30, 2019, the Partnership held 76 MRBs. The Residential Properties financed by MRBs contain a total of 10,871 rental units. In addition, one MRB (Pro Nova 2014-1) is collateralized by commercial real estate. All general and administrative expenses on the condensed consolidated statements of operations are reported within this segment.

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MF Properties Segment

The MF Properties segment consists of multifamily and student housing residential properties held by the Partnership. During the time the Partnership holds an interest in an MF Property, any net rental income generated by the MF Properties in excess of debt service will be available for distribution to the Partnership.  As of September 30, 2019, the segment includes two MF Properties comprised of a total of 859 rental units. Income tax expense for the Greens Hold Co is reported within this segment.

Public Housing Capital Fund Trusts Segment

The Public Housing Capital Fund Trusts segment consists of the assets, liabilities, and related income and expenses of the Partnership’s PHC Certificates (Note 7) and the related debt financings.

Other Investments Segment

The Other Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which invests in unconsolidated entities (Note 9) and made property loans to certain multifamily housing properties (Note 10).

The following tables detail certain key financial information for the Partnership’s reportable segments for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Total revenues
Mortgage Revenue Bond Investments	$	10,383,867		$	21,440,970		$	31,074,582		$	44,609,666
MF Properties		1,974,546			2,285,736			6,002,971			7,099,690
Public Housing Capital Fund Trusts		589,024			617,661			1,812,779			1,860,728
Other Investments		1,918,265			1,656,748			7,986,302			4,674,230
Total revenues	$	14,865,702		$	26,001,115		$	46,876,634		$	58,244,314
Interest expense
Mortgage Revenue Bond Investments	$	5,789,009		$	5,583,512		$	16,894,378		$	16,208,340
MF Properties		365,995			472,796			1,096,016			1,325,019
Public Housing Capital Fund Trusts		354,017			338,375			1,120,482			557,955
Other Investments		-			-			-			-
Total interest expense	$	6,509,021		$	6,394,683		$	19,110,876		$	18,091,314
Depreciation expense
Mortgage Revenue Bond Investments	$	-		$	-		$	-		$	-
MF Properties		743,503			849,516			2,380,815			2,672,925
Public Housing Capital Fund Trusts		-			-			-			-
Other Investments		-			-			-			-
Total depreciation expense	$	743,503		$	849,516		$	2,380,815		$	2,672,925
Net income (loss)
Mortgage Revenue Bond Investments	$	(2,492,643	)	$	12,039,700		$	1,836,196		$	18,647,585
MF Properties		(434,099	)		4,228,494			(946,230	)		3,770,339
Public Housing Capital Fund Trusts		235,007			(30,672	)		692,297			161,753
Other Investments		12,399,638			1,645,533			18,463,643			4,645,803
Net income	$	9,707,903		$	17,883,055		$	20,045,906		$	27,225,480

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The following table details total assets for the Partnership’s reportable segments as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
Total assets
Mortgage Revenue Bond Investments	$	921,054,641		$	864,311,647
MF Properties		71,013,626			71,120,280
Public Housing Capital Fund Trusts		45,014,774			48,942,334
Other Investments		87,089,136			85,048,514
Consolidation/eliminations		(90,671,007	)		(86,709,529	)
Total assets	$	1,033,501,170		$	982,713,246

24. Subsequent Events

In October 2019, the Partnership executed a $7.4 million equity commitment to fund construction of the Vantage at O’Connor multifamily property in San Antonio, TX.

In October 2019, the Partnership extended the maturity of the Term TOB Trust financing secured by the Pro Nova 2014-1 MRB from October 2019 to January 2020.

41

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In this Management’s Discussion and Analysis, all references to “we,” “us,” and the “Partnership” refer to America First Multifamily Investors, L.P., its consolidated subsidiaries, and consolidated VIEs for all periods presented. See Note 2 and Note 5 to the Partnership’s condensed consolidated financial statements for further disclosure.

Critical Accounting Policies

The Partnership’s critical accounting policies are the same as those described in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018.  The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Executive Summary

The Partnership was formed for the primary purpose of acquiring a portfolio of MRBs that are issued by state and local housing authorities to provide construction and/or permanent financing for affordable multifamily and student housing (collectively “Residential Properties”), and commercial properties in their market areas. We expect and believe the interest received on these bonds is excludable from gross income for federal income tax purposes. We may also invest in other types of securities and investments that may or may not be secured by real estate, to the extent allowed by the Partnership’s Amended and Restated LP Agreement.

The Partnership includes the assets, liabilities, and results of operations of the Partnership, our wholly-owned subsidiaries and consolidated VIEs. All significant transactions and accounts between us and the consolidated VIEs have been eliminated in consolidation. See Note 2 to the Partnership’s condensed consolidated financial statements for additional details.

As of September 30, 2019, we have four reportable segments: (1) Mortgage Revenue Bond Investments, (2) Public Housing Capital Fund Trusts, (3) MF Properties, and (4) Other Investments. The Partnership separately reports its consolidation and elimination information because it does not allocate certain items to the segments.  See Notes 2 and 23 to the Partnership’s condensed consolidated financial statements for additional details.

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Recent Investment Activity

The following table presents information regarding the investment activity of the Partnership for the first, second and third quarters of 2019 and 2018:

Investment Activity	#	Amount (in 000's)		Retired Debt or Note (in 000's)		Tier2 income distributable to the General Partner (in 000's) (1)		Notes to the Partnership's condensed consolidated financial statements
For the Three Months Ended September 30, 2019
Investment in an unconsolidated entity	1	$	1,018	N/A		N/A		9
Return of investment in unconsolidated entity upon sale	1		9,714	N/A		$	1,265	9
Property loan advance	1		406	N/A		N/A		10
For the Three Months Ended June 30, 2019
Mortgage revenue bond acquisitions	2	$	13,200	N/A		N/A		6
Mortgage revenue bond redemption	1		6,228	N/A		N/A		6
Mortgage revenue bonds restructured	3		13,960	N/A		N/A		6
Investments in unconsolidated entities	3		10,692	N/A		N/A		9
For the Three Months Ended March 31, 2019
Mortgage revenue bond acquisitions	2	$	6,050	N/A		N/A		6
Mortgage revenue bond redemption	1		5,574	N/A		N/A		6
Investments in unconsolidated entities	3		6,594	N/A		N/A		9
Property loan redemption	1		8,368	N/A		$	753	10
For the Three Months Ended September 30, 2018
Mortgage revenue bond redemptions	3	$	17,567	$	15,917	$	1,062	6, 15
MF Property sold	1		13,450		7,500		1,001	8, 16
Investments in unconsolidated entities	6		18,946	N/A		N/A		9
Property loan redemptions	2		5,113	N/A		N/A		10
For the Three Months Ended June 30, 2018
Mortgage revenue bond acquisition	1	$	19,540	N/A		N/A		6
Mortgage revenue bond redemptions	4		11,000	$	7,710	N/A		6, 15
Investments in unconsolidated entities	4		6,764	N/A		N/A		9
Property loan redemptions	3		500	N/A		N/A		10
For the Three Months Ended March 31, 2018
Mortgage revenue bond redemptions	3	$	10,447	$	7,345	N/A		6, 15
Investments in unconsolidated entities	3		12,323	N/A		N/A		9

⁽¹⁾ See “Cash Available for Distribution” in this Item 2 below.

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Recent Financing Activity

The following table presents information regarding the debt financing, derivatives, Series A Preferred Units and partners’ capital activities of the Partnership for the first, second and third quarters of 2019 and 2018, exclusive of retired debt amounts listed in the investment activity table above: 

Financing, Derivative and Capital Activity	#	Amount (in 000's)		Secured	Maximum SIFMA Cap Rate (1)	Notes to the Partnership's condensed consolidated financial statements
For the Three Months Ended September 30, 2019
Net repayment on unsecured LOCs	1	$	10,000	No	N/A	14
Refinancing of M24 TEBS Financing	1		-	Yes	N/A	15
Refinancing of M33 TEBS Financing and Premium Proceeds	1		435	Yes	N/A	15
Proceeds from new TOB Financings with Mizuho	8		104,056	Yes	N/A	15
Repayment of TOB Financings with Deutsche Bank	3		34,185	Yes	N/A	15
Repayment of Term TOB Financing with Deutsche Bank	1		37,553	Yes	N/A	15
Repayment of Term A/B Financings with Deutsche Bank	2		10,516	Yes	N/A	15
Interest rate derivative purchased	1		30	N/A	4.5%	17
For the Three Months Ended June 30, 2019
Net repayments on unsecured LOCs	2	$	12,459	No	N/A	14
Proceeds from new Term TOB Financings with Morgan Stanley	1		13,167	Yes	N/A	15
For the Three Months Ended March 31, 2019
Proceeds from new Term A/B Financings with Deutsche Bank	2	$	5,264	Yes	N/A	15
For the Three Months Ended September 30, 2018
Net repayments on unsecured LOCs	2	$	21,074	No	N/A	14
Proceeds from M45 TEBS Financings	1		221,540	Yes	N/A	15
Proceeds from new Term A/B Financings with Deutsche Bank	4		17,380	Yes	N/A	15
Term A/B Trusts repayments related to M45 TEBS	24		208,689	Yes	N/A	15
Repayment of Term A/B Financings with Deutsche Bank	2		10,885	Yes	N/A	15
Interest rate swap terminated	1		-	N/A	N/A	17
Proceeds on issuance of BUCs, net of issuance costs	1		384	N/A	N/A	N/A
For the Three Months Ended June 30, 2018
Net repayment on unsecured LOCs	1	$	460	No	N/A	14
For the Three Months Ended March 31, 2018
Proceeds on issuance of BUCs, net of issuance costs	1	$	192	N/A	N/A	N/A

⁽¹⁾ See "Quantitative and Qualitative Disclosures About Market Risk" in Item 3 below.

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Mortgage Revenue Bond Investments Segment

The Partnership’s primary purpose is to acquire and hold as investments a portfolio of MRBs which have been issued to provide construction and/or permanent financing for Residential Properties and commercial properties in their market areas.

The following table compares operating results for the Mortgage Revenue Bond Investments segment for the periods indicated (dollar amounts in thousands):

	For the Three Months Ended September 30,											For the Nine Months Ended September 30,
	2019			2018		$ Change			% Change			2019		2018		$ Change			% Change
Mortgage Revenue Bond Investments
Total revenues	$	10,384		$	21,441	$	(11,057	)		-51.6	%	$	31,075	$	44,610	$	(13,535	)		-30.3	%
Interest expense		5,789			5,584		205			3.7	%		16,894		16,208		686			4.2	%
Segment net income (loss)		(2,493	)		12,040		(14,533	)		-120.7	%		1,836		18,648		(16,812	)		-90.2	%

The following tables summarize the segment’s net interest income, average balances, and related yields earned on interest-earning assets and incurred on interest-bearing liabilities, as well as other income included in total revenues for the three and nine months ended September 30, 2019 and 2018. The net of interest income from interest-earning assets and interest expense for interest-bearing liabilities is the segment’s net interest income. The average balances are based primarily on monthly averages during the respective periods. All amounts are in thousands.

	For the Three Months Ended September 30,
	2019								2018
	Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid				Average Balance		Interest Income/ Expense				Average Rates Earned/ Paid
Interest-earning assets:
Mortgage revenue bonds	$	677,993	$	10,086		6.0	%		$	704,700	$	10,847				6.2	%
Property loans		7,796		147		7.5	%			12,090		4,742		(1)		156.9	%
Other investments		1,756		46		10.5	%			2,735		72				10.5	%
Total interest-earning assets	$	687,545	$	10,279		6.0	%		$	719,525	$	15,661				8.7	%
Contingent interest income				-								4,246		(2)
MRB redemption income				-								1,519		(3)
Non-investment income				105								15
Total revenues			$	10,384							$	21,441
Interest-bearing liabilities:
Unsecured & secured lines of credit	$	15,700	$	227		5.8	%		$	40,386	$	583				5.8	%
Fixed TEBS financing		274,791		2,781		4.0	%			110,750		1,374				5.0	%
Variable TEBS financing		98,228		1,216		5.0	%	(4)		192,345		1,701				3.5	%
Fixed Term A/B & TOB financing		89,176		1,087		4.9	%			207,932		1,969				3.8	%
Variable TOB financing		40,470		410		4.1	%		N/A		N/A				N/A
Derivative fair value adjustments	N/A			68	N/A				N/A			(43	)		N/A
Total interest-bearing liabilities	$	518,365	$	5,789		4.5	%		$	551,413	$	5,584				4.1	%
Net interest income			$	4,490		2.6	%				$	10,077				5.6	%

(1) Interest income includes approximately $4.6 million of interest received on redemption of the Lake Forest property loans in September 2018. The interest received was not previously recognized as income as the property loans were on nonaccrual status.

(2) Contingent interest income was realized upon redemption of the Lake Forest MRB in September 2018.

(3) MRB redemption income was related to additional proceeds received upon redemption of the Lake Forest MRB in September 2018.

(4) The increase in the average rate of variable TEBS financing was due primarily to approximately $496,000 of previously unamortized deferred financing costs that were recognized as interest expense upon refinancing of the M33 TEBS financing to a fixed interest rate in July 2019.

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	For the Nine Months Ended September 30,
	2019								2018
	Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid				Average Balance		Interest Income/ Expense				Average Rates Earned/ Paid
Interest-earning assets:
Mortgage revenue bonds	$	673,143	$	30,340		6.0	%		$	707,375	$	32,999		(1)		6.2	%
Property loans		7,675		432		7.5	%			13,043		5,029		(2)		51.4	%
Other investments		1,772		140		10.5	%			2,754		580		(3)		28.1	%
Total interest-earning assets	$	682,590	$	30,912		6.0	%		$	723,172	$	38,608				7.1	%
Contingent interest income				-								4,246		(4)
MRB redemption income				29								1,519		(5)
Non-investment income				134								237
Total revenues			$	31,075							$	44,610
Interest-bearing liabilities:
Unsecured & secured lines of credit	$	26,036	$	1,121		5.7	%		$	44,109	$	1,758				5.3	%
Fixed TEBS financing		242,372		7,430		4.1	%			44,300		1,374				4.1	%
Variable TEBS financing		131,509		4,122		4.2	%	(6)		194,181		5,059				3.5	%
Fixed Term A/B & TOB financing		96,458		3,353		4.6	%			276,741		8,517				4.1	%
Variable TOB financing		16,188		410		3.4	%		N/A		N/A				N/A
Derivative fair value adjustments	N/A			458	N/A				N/A			(500	)		N/A
Total interest-bearing liabilities	$	512,563	$	16,894		4.4	%		$	559,331	$	16,208				3.9	%
Net interest income			$	14,018		2.7	%				$	22,400				4.1	%

(1) Interest income includes approximately $333,000 of additional interest income that is non-recurring.

(2) Interest income includes approximately $4.6 million of interest received on redemption of the Lake Forest property loans in September 2018. The interest received was not previously recognized as income as the property loans were on nonaccrual status.

(3) Interest income includes approximately $354,000 of additional interest income that is non-recurring.

(4) Contingent interest income was realized upon redemption of the Lake Forest MRB in September 2018.

(5) MRB redemption income was related to additional proceeds received upon redemption of the Lake Forest MRB in September 2018.

(6) The increase in the average rate of variable TEBS financing was due primarily to approximately $496,000 of previously unamortized deferred financing costs that were recognized as interest expense upon refinancing of the M33 TEBS financing to a fixed interest rate in July 2019.

The following tables summarize the changes in interest income and interest expense between the three and nine months ended September 30, 2019 and 2018, and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, or 2) changes in the interest rates of the assets and liabilities. All amounts are in thousands.

46

	For the Three Months Ended September 30, 2019 vs. 2018											For the Nine Months Ended September 30, 2019 vs. 2018
	Total Change			Volume $ Change				Rate $ Change				Total Change			Volume $ Change				Rate $ Change
Interest-earning assets:
Mortgage revenue bonds	$	(761	)	$	(411	)	(1)	$	(350	)		$	(2,659	)	$	(1,597	)	(1)	$	(1,062	)
Property loans		(4,595	)		(1,684	)			(2,911	)			(4,597	)		(2,070	)			(2,527	)
Other investments		(26	)		(26	)			-				(440	)		(207	)			(233	)
Total interest-earning assets	$	(5,382	)	$	(2,121	)		$	(3,261	)		$	(7,696	)	$	(3,874	)		$	(3,822	)
Interest-bearing liabilities:
Unsecured & secured lines of credit	$	(356	)	$	(356	)		$	-			$	(637	)	$	(720	)		$	83
Fixed TEBS financing		1,407			2,035				(628	)			6,056			6,143		(3)		(87	)
Variable TEBS financing		(485	)		(832	)			347		(2)		(937	)		(1,633	)			696		(2)
Fixed Term A/B & TOB financing		(882	)		(1,125	)			243				(5,164	)		(5,548	)	(3)		384
Variable TOB financing		410			410				-				410			410				-
Derivative fair value adjustments		111		N/A					111				958		N/A					958
Total interest-bearing liabilities	$	205		$	132			$	73			$	686		$	(1,348	)		$	2,034
Net interest income	$	(5,587	)	$	(2,253	)		$	(3,334	)		$	(8,382	)	$	(2,526	)		$	(5,856	)

(1) The decrease in volume is due primarily to the redemption of the Vantage at Judson Series B MRB in December 2018 and the scheduled redemption of various subordinate bonds during 2018.

(2) The increase in rate for the variable TEBS financing was due primarily to approximately $496,000 of previously unamortized deferred financing costs that were recognized as interest expense upon refinancing of the M33 TEBS financing to a fixed interest rate in July 2019.

(3) The fixed-rate M45 TEBS Financing closed in August 2018 through the securitization of 25 MRBs. Of the 25 MRBs included in the financing, 24 MRBs were in Term A/B Trusts that were collapsed prior to the closing of the M45 TEBS Financing.  

Comparison of the three months ended September 30, 2019 and 2018

The decrease in total revenues and the increase in total interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the rate and volume changes noted in the tables above.

Segment net income for the three months ended September 30, 2019 decreased as compared to the same period in 2018. The change consisted of the decrease in total revenues and increase in interest expense detailed in the tables above, offset by an increase of approximately $2.6 million in restricted unit compensation expense related to issuances and vesting during the third quarter of 2019. Upon the closing of the acquisition by Greystone of AFCA 2 on September 10, 2019, all outstanding restricted units vested and all previously unrecognized compensation expense was recognized. In addition, there was an increase of approximately $530,000 in professional fees due primarily to lower than usual consulting expenses in the third quarter of 2018.

Comparison of the nine months ended September 30, 2019 and 2018

The decrease in total revenues and increase in total interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the rate and volume changes noted in the tables above.

The decrease in segment net income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the decrease in total revenues and increase in interest expense detailed in the tables above and an increase of approximately $2.3 million in restricted unit compensation related to vesting in the third quarter of 2019. Upon the closing of the acquisition by Greystone of AFCA 2 on September 10, 2019, all outstanding restricted units vested and all previously unrecognized compensation expense was recognized.

Public Housing Capital Fund Trusts Segment

The PHC Certificates within this segment consist of custodial receipts evidencing loans made to public housing authorities.  Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program.

47

The following table compares operating results for the Public Housing Capital Fund Trustssegment for the periods indicated (dollar amounts in thousands):

	For the Three Months Ended September 30,											For the Nine Months Ended September 30,
	2019		2018			$ Change			% Change			2019		2018		$ Change			% Change
Public Housing Capital Fund    Trusts
Total revenues	$	589	$	618		$	(29	)		-4.7	%	$	1,813	$	1,861	$	(48	)		-2.6	%
Interest expense		354		338			16			4.7	%		1,120		558		562			100.7	%
Segment net income (loss)		235		(31	)		266			858.1	%		692		162		530			327.2	%

Comparison of the three months ended September 30, 2019 and 2018

Total revenues were down slightly for the three months ended September 30, 2019 as compared to the same periods in 2018 due to principal repayments.

The increase in interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to fair value adjustments to interest rate swaps. The net increase in interest expense related to these adjustments was approximately $48,000, partially offset by the impact of lower interest rates and principal balances.

The increase in segment net income for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the revenue and interest expense changes noted above and an impairment charge of approximately $310,000 recognized in the third quarter of 2018 that did not recur in 2019.

Comparison of the nine months ended September 30, 2019 and 2018

Total revenues were down slightly for the nine months ended September 30, 2019 as compared to the same periods in 2018 due to principal repayments.

The increase in interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to fair value adjustments to interest rate swaps. The net increase in interest expense related to these adjustments was approximately $588,000, partially offset by the impact of lower interest rates and principal balances.

The increase in segment net income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the revenue and interest expense changes noted above and impairment charges of approximately  $1.1 million recognized in 2018 that did not recur in 2019.

MF Properties Segment

The Partnership’s strategy has been to acquire ownership positions in MF Properties while assessing the viability of restructuring the property ownership through a sale of the MF Properties. As of September 30, 2019 and 2018, the Partnership and its consolidated subsidiaries owned two MF Properties which contained a total of 859 rental units.

The following table compares operating results for the MF Properties segment for the periods indicated (dollar amounts in thousands):

	For the Three Months Ended September 30,											For the Nine Months Ended September 30,
	2019			2018		$ Change			% Change			2019			2018		$ Change			% Change
MF Properties
Total revenues	$	1,975		$	2,286	$	(311	)		-13.6	%	$	6,003		$	7,100	$	(1,097	)		-15.5	%
Gain on sales of real estate assets, net		-			4,051		(4,051	)		-100.0	%		-			4,051		(4,051	)		-100.0	%
Interest expense		366			473		(107	)		-22.6	%		1,096			1,325		(229	)		-17.3	%
Segment net income (loss)		(434	)		4,228		(4,662	)		-110.3	%		(946	)		3,770		(4,716	)		-125.1	%

Comparison of the three months ended September 30, 2019 and 2018

The decrease in total revenues for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $396,000 from the sale of the Jade Park MF Property in September 2018.

48

The gain on sales of real estate assets for the three months ended September 30, 2018 is related to the sale of the Jade Park MF Property in September 2018. There was no gain on sale of real estate assets for the three months ended September 30, 2019.

The decrease in interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in the average principal outstanding of approximately $4.4 million, which reduced interest expense by approximately $58,000. This resulted primarily from the repayment of the Jade Park mortgage payable upon the sale of the property in September 2018.

The decrease in segment net income for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to the changes in revenues, interest expense and gain on sales of real estate assets described above. In addition, there were decreases in real estate operating expenses of approximately $202,000 due to the Jade Park MF Property sale in September 2018, offset by a decrease in income tax benefit of approximately $742,000 due to tax adjustments recorded in the third quarter of 2018 that did not recur in the third quarter of 2019.

Comparison of the nine months ended September 30, 2019 and 2018

The decrease in total revenues for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $1.2 million from the sale of the Jade Park MF Property in September 2018.

The gain on sales of real estate assets for the nine months ended September 30, 2018 is related to the sale of the Jade Park MF Property in September 2018. There was no gain on sale of real estate assets for the nine months ended September 30, 2019.

The decrease in interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in the average principal outstanding of approximately $4.4 million, which reduced interest expense by approximately $168,000. This resulted primarily from the repayment of the Jade Park mortgage payable upon the sale of the property in September 2018.

The decrease in segment net income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to the changes in revenues and interest expense described above. In addition, there was:

• Decreases in real estate operating expenses of approximately $589,000 and depreciation expense of approximately $267,000 due to the Jade Park MF Property sale in September 2018;

• A decrease in general operating expenses at the Suites on Paseo MF Property of approximately $188,000 due to utility expense adjustments in 2019 and one-time costs in 2018 that did not recur in 2019; and

• A decrease in income tax benefit of approximately $795,000 related to tax adjustments upon filing the Greens Hold Co tax returns during 2018 that did not recur in 2019.

Other Investments Segment

The Other Investments segment consists of the operations of ATAX Vantage Holdings, LLC, which holds noncontrolling equity investments in certain multifamily properties and issues property loans due from other multifamily properties.

The following table compares operating results for the Other Investments segment for the periods indicated (dollar amounts in thousands):

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2019		2018		$ Change		% Change			2019		2018		$ Change		% Change
Other Investments
Total revenues	$	1,918	$	1,657	$	261		15.8	%	$	7,986	$	4,674	$	3,312		70.9	%
Gain on sale of investment in an unconsolidated entity		10,476		-		10,476	N/A				10,476		-		10,476	N/A
Segment net income		12,400		1,646		10,754		653.3	%		18,464		4,646		13,818		297.4	%

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Comparison of the three months ended September 30, 2019 and 2018

The increase in total revenues for the three months ended September 30, 2019 as compared to the same period in 2018 was primarily due to the following:

• An increase of approximately $646,000 related to additional investments in unconsolidated entities of $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019; and

• A decrease of approximately $388,000 due to the redemption of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively.

The gain on sale of investment in an unconsolidated entity was related to the sale of the Vantage at Panama City Beach property in September 2019.

The change in segment net income for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the change in total revenues and gain on sale of an unconsolidated entity discussed above.

Comparison of the nine months ended September 30, 2019 and 2018

The increase in total revenues for the nine months ended September 30, 2019 as compared to the same period in 2018 was primarily due to:

• Approximately $3.0 million of contingent interest income recognized upon redemption of the Vantage at Brooks, LLC property loan in January 2019 and no such transaction occurred during the nine months ended September 30, 2018;

• An increase of approximately $1.4 million related to additional investments in unconsolidated entities of $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019; and

• A decrease of approximately $1.2 million due to the redemption of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively.

The gain on sale of investment in an unconsolidated entity was related to the sale of the Vantage at Panama City Beach property in September 2019.

The change in segment net income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the change in total revenues and gain on sale of an unconsolidated entity discussed above.

Discussion of the Residential Properties Securing our Mortgage Revenue Bonds and MF Properties

The following tables outline information regarding the Residential Properties for which we hold MRBs as investments. The tables also contain information about the MF Properties. The narrative discussion that follows provides a brief operating analysis of each category as of September 30, 2019 and 2018, and for the nine months ended September 30, 2019 and 2018.   

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Non-Consolidated Properties - Stabilized

The owners of the following properties either do not meet the definition of a VIE or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE.  As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis.  These Residential Properties have met the stabilization criteria (see footnote 3 below the table) as of September 30, 2019.  Debt service on the Partnership’s bonds for the non-consolidated stabilized properties was current as of September 30, 2019.  The amounts presented below were obtained from records provided by the property owners and their related property management service providers. 

		Number of Units as of September 30,		Physical Occupancy (1) as of September 30,						Economic Occupancy (2) for the Nine Months Ended September 30,
Property Name	State	2019		2019			2018			2019			2018
Non-Consolidated Properties-Stabilized (3)
Courtyard Apartments	CA		108		98	%		99	%		98	%		99	%
Glenview Apartments	CA		88		99	%		93	%		97	%		97	%
Harden Ranch	CA		100		100	%		99	%		96	%		96	%
Harmony Court Bakersfield	CA		96		99	%		96	%		95	%		96	%
Harmony Terrace	CA		136		99	%		99	%		127	%		126	%
Las Palmas	CA		81		100	%		100	%		99	%		98	%
Montclair Apartments	CA		80		98	%		96	%		102	%		99	%
Montecito at Williams Ranch	CA		132		92	%		97	%		108	%		92	%
San Vicente	CA		50		100	%		100	%		101	%		95	%
Santa Fe Apartments	CA		89		97	%		97	%		97	%		96	%
Seasons at Simi Valley	CA		69		100	%		100	%		120	%		119	%
Seasons Lakewood	CA		85		100	%		98	%		99	%		102	%
Seasons San Juan Capistrano	CA		112		96	%		99	%		101	%		99	%
Solano Vista (7)	CA		96		99	%	n/a				107	%	n/a
Summerhill	CA		128		95	%		98	%		97	%		97	%
Sycamore Walk	CA		112		99	%		99	%		90	%		98	%
The Village at Madera	CA		75		99	%		100	%		97	%		97	%
Tyler Park Townhomes	CA		88		99	%		100	%		98	%		97	%
Vineyard Gardens	CA		62		100	%		98	%		101	%		102	%
Westside Village Market	CA		81		99	%		100	%		99	%		100	%
Brookstone Apartments (8)	IL		168		97	%		97	%		100	%		96	%
Copper Gate (9)	IN		128		98	%		98	%		99	%		96	%
Renaissance Gateway (8)	LA		208		98	%		95	%		90	%		102	%
Live 929 Apartments	MD		572		90	%		84	%		82	%		85	%
Woodlynn Village	MN		59		98	%		100	%		97	%		97	%
Gateway Village (7)	NC		64		94	%	n/a				88	%	n/a
Greens of Pine Glen Apartments	NC		168		96	%		96	%		91	%		91	%
Lynnhaven Apartments (7)	NC		75		92	%	n/a				89	%	n/a
Silver Moon	NM		151		91	%		97	%		88	%		89	%
Village at Avalon (6)	NM		240		99	%	n/a				95	%	n/a
Ohio Properties (4)	OH		362		98	%		98	%		95	%		94	%
Bridle Ridge Apartments	SC		152		94	%		99	%		89	%		97	%
Columbia Gardens (9)	SC		188		94	%		95	%		93	%		95	%
Companion at Thornhill Apartments	SC		179		99	%		97	%		92	%		87	%
Cross Creek Apartments	SC		144		98	%		95	%		90	%		91	%
Palms at Premier Park	SC		240		99	%		93	%		90	%		89	%
Village at River's Edge (8)	SC		124		98	%		100	%		98	%		98	%
Willow Run (9)	SC		200		91	%		94	%		90	%		90	%
Arbors at Hickory Ridge	TN		348		87	%		90	%		77	%		84	%
Avistar at Copperfield	TX		192		93	%		95	%		88	%		84	%
Avistar at the Crest	TX		200		95	%		94	%		80	%		76	%
Avistar at the Oaks	TX		156		96	%		97	%		86	%		85	%
Avistar at the Parkway	TX		236		90	%		86	%		80	%		78	%
Avistar at Wilcrest	TX		88		91	%		92	%		83	%		79	%
Avistar at Wood Hollow	TX		409		98	%		97	%		91	%		81	%
Avistar in 09	TX		133		100	%		97	%		89	%		88	%
Avistar on the Boulevard	TX		344		97	%		94	%		84	%		81	%
Avistar on the Hills	TX		129		97	%		98	%		87	%		89	%
Bella Vista Apartments (5)	TX	n/a		n/a				95	%	n/a				87	%
Bruton Apartments	TX		264		87	%		94	%		85	%		87	%
Concord at Gulfgate	TX		288		95	%		94	%		83	%		86	%
Concord at Little York	TX		276		93	%		96	%		86	%		89	%
Concord at Williamcrest	TX		288		97	%		96	%		91	%		90	%
Crossing at 1415	TX		112		96	%		90	%		86	%		83	%
Decatur Angle	TX		302		92	%		89	%		83	%		80	%
Esperanza at Palo Alto	TX		322		94	%		96	%		83	%		87	%
Heights at 515	TX		96		94	%		97	%		87	%		89	%
Heritage Square Apartments	TX		204		97	%		88	%		71	%		75	%
Oaks at Georgetown	TX		192		93	%		92	%		92	%		92	%
Runnymede Apartments	TX		252		98	%		100	%		91	%		95	%
South Park Ranch Apartments	TX		192		98	%		99	%		92	%		93	%
Vantage at Judson (5)	TX	n/a		n/a				94	%	n/a				83	%
15 West Apartments	WA		120		98	%		97	%		96	%		96	%
			10,433		95	%		95	%		90	%		89	%

⁽¹⁾ Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

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⁽²⁾ Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

⁽³⁾ A property is considered stabilized once it reaches 90% physical occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for a period after construction completion or completion of the rehabilitation.

⁽⁴⁾ The Ohio Properties consist of Crescent Village, located in Cincinnati, Ohio, Willow Bend, located in Columbus (Hilliard), Ohio and Postwoods, located in Reynoldsburg, Ohio.

⁽⁵⁾ The MRB associated with the property was redeemed during 2018, so the number of units and occupancy are not applicable as of and for the nine months ended September 30, 2019.

⁽⁶⁾ The property relates to a forward bond purchase commitment that was executed after September 30, 2018. The property was considered stabilized when the MRB was acquired. Information was not available for the 2018 periods presented.

⁽⁷⁾ Previous period occupancy information is not available as these are new investments acquired after September 30, 2018.

⁽⁸⁾ The physical and economic occupancy amounts are based on the latest available occupancy and financial information, which is as of June 30, 2019.

⁽⁹⁾ The economic occupancy amounts are based on the latest available financial information, which is as of June 30, 2019. Physical occupancy is as of September 30, 2019.

Physical and economic occupancy as of and for the nine months ended September 30, 2019 were relatively consistent with the same period in 2018.

Non-Consolidated Properties - Not Stabilized

The owners of the following properties do not meet the definition of a VIE and/or the Partnership has evaluated and determined it is not the primary beneficiary of the VIE.  As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis.  These Residential Properties have not met the stabilization criteria (see footnote 3 below the table) as of September 30, 2019. Debt service on the Partnership’s MRBs for the non-consolidated non-stabilized properties was current as of September 30, 2019.  The amounts presented below were obtained from records provided by the property owners and their related property management service providers. 

		Number of Units as of September 30,		Physical Occupancy (1) as of September 30,						Economic Occupancy (2) for the Nine Months Ended September 30,
Property Name	State	2019		2019			2018			2019			2018
Non-Consolidated Properties-Non    Stabilized (3)
Montevista (4)	CA		82		98	%	n/a				110	%	n/a
Rosewood Townhomes	SC		100		98	%		70	%		84	%		73	%
South Pointe Apartments	SC		256		92	%		67	%		79	%		77	%
			438		94	%		68	%		84	%		76	%

⁽¹⁾ Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

⁽²⁾ Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

⁽³⁾ These properties were undergoing rehabilitation.  As such, these properties are not considered stabilized as they have not met the criteria for stabilization. A property is considered stabilized once it reaches 90% physical occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for a period after completion of the rehabilitation.

⁽⁴⁾ Previous period occupancy information is not available as this was a new investment acquired after September 30, 2018.

Physical occupancy for the non-stabilized Residential Properties increased as of September 30, 2019 as compared to September 30, 2018 due to a new investment in Montevista with higher than average occupancy and increased occupancy at Rosewood Townhomes and South Pointe Apartments, which are nearing the completion of rehabilitation projects begun in 2018.

Economic occupancy for the non-stabilized Residential Properties increased for the nine months ended September 30, 2019 as compared to the same period in 2018 due to increasing physical occupancy at Rosewood Townhomes and South Pointe Apartments. We expect economic occupancy for these non-stabilized properties to increase in future periods as the properties complete rehabilitation and lease-up.  

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MF Properties

As of September 30, 2019, we owned two MF Properties. We report the assets, liabilities, and results of operations of these properties on a consolidated basis.  For the nine months ended September 30, 2019, both MF Properties met the stabilization criteria (see footnote 3 below the table). The MF properties are encumbered by mortgage loans with an aggregate principal balance of $27.1 million as of September 30, 2019.  Debt service on our mortgage payables was current as of September 30, 2019.

		Number of Units as of September 30,		Physical Occupancy (1) as of September 30,						Economic Occupancy (2) for the Nine Months Ended September 30,
Property Name	State	2019		2019			2018			2019			2018
MF Properties-Stabilized (3)
Suites on Paseo	CA		384		90	%		92	%		87	%		90	%
The 50/50	NE		475		99	%		99	%		86	%		80	%
			859		95	%		96	%		86	%		86	%

⁽¹⁾ Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.

⁽²⁾ Economic occupancy is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property. This statistic is reflective of rental concessions, delinquent rents and non-revenue units such as model units and employee units. Physical occupancy is a point in time measurement while economic occupancy is a measurement over the period presented. Therefore, economic occupancy for a period may exceed the actual occupancy at any point in time.

⁽³⁾ A property is considered stabilized once it reaches 90% physical occupancy for 90 days and an achievement of 1.15 times debt service coverage ratio on amortizing debt service for all MF Properties that are not student housing residential properties. Suites on Paseo and The 50/50 MF Property are student housing residential properties.

The physical and economic occupancy as of and for the nine months ended September 30, 2019 were consistent as compared to the same period in 2018. These projects are stabilized and we are focused on maintaining high occupancy and efficient operations.

Results of Operations

The tables and following discussions of the Partnership’s change in operating results for the three and nine months ended September 30, 2019 and 2018 should be read in conjunction with the Partnership’s condensed consolidated financial statements and Notes thereto included in Item 1 of this report, as well as the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018.

The table below compares revenue and other income for the Partnership for the periods indicated (dollar amounts in thousands):

	For the Three Months Ended September 30,										For the Nine Months Ended September 30,
	2019		2018		$ Change			% Change			2019		2018		$ Change			% Change
Revenues and Other Income:
Property revenues	$	1,975	$	2,286	$	(311	)		-13.6	%	$	6,003	$	7,025	$	(1,022	)		-14.5	%
Investment income		12,590		12,733		(143	)		-1.1	%		37,073		38,361		(1,288	)		-3.4	%
Contingent interest income		3		4,246		(4,243	)		-99.9	%		3,045		4,246		(1,201	)		-28.3	%
Other interest income		207		5,218		(5,011	)		-96.0	%		636		7,020		(6,384	)		-90.9	%
Other income		91		1,519		(1,428	)		-94.0	%		120		1,593		(1,473	)		-92.5	%
Gain on sale of real    estate assets, net		-		4,051		(4,051	)		-100.0	%		-		4,051		(4,051	)		-100.0	%
Gain on sale of investment in an    unconsolidated entity		10,476		-		10,476		N/A				10,476		-		10,476		N/A
Total Revenues and Other    Income	$	25,342	$	30,053	$	(4,711	)		-15.7	%	$	57,353	$	62,296	$	(4,943	)		-7.9	%

Discussion of the Total Revenues and Other Income for the Three Months Ended September 30, 2019 and 2018

Property revenues.  The decrease in property revenues for the three months ended September 30, 2019as compared to the same period in 2018 is due primarily to a decrease of approximately $396,000 from the sale of the Jade Park MF Property in September 2018.

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Investment income.The decrease in investment income for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:

• Decreases of approximately of approximately $411,000 and $350,000 related to decreasing MRB volume and interest rates, respectively. See discussion of volume and interest rate changes in the Mortgage Revenue Bond Investments segment previously included in Item 2; and

• An increase of approximately $646,000 in investment interest income related to additional investments in unconsolidated entities during 2019 and 2018. We made investments in unconsolidated entities totaling approximately $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019.

Contingent interest income. There was minimal contingent interest income recognized for the three months ended September 30, 2019. The contingent interest income recognized for the three months ended September 30, 2018 was realized upon redemption of the Lake Forest MRB and sale of the underlying property.

Other interest income. Other interest income is comprised primarily of interest income on property loans held by us. The decrease in other interest income for the three months ended September 30, 2019as compared to the same period in 2018 was primarily due to approximately $4.6 million of interest income realized on the redemption of the Lake Forest property loans during 2018 that did not recur in 2019. In addition, we experienced a decrease of approximately $388,000 related to redemptions of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively.

Other income. Other income was minimal for the three months ended September 30, 2019. The other income reported for the three months ended September 30, 2018 related to early redemption of the Lake Forest MRB in September 2018.  

Gain on sale of real estate assets, net.  The gain on sale for the three months ended September 30, 2018 related to the sale of the Jade Park MF Property in September 2018. There was no gain on sale reported for the three months ended September 30, 2019.

Gain on sale of investment in an unconsolidated entity. The gain on sale of investment in an unconsolidated entity for the three months ended September 30, 2019 related to the sale of the Vantage at Panama City Beach property in September 2019. There was no gain on sale reported for the three months ended September 30, 2018.

Discussion of the Total Revenues and Other Income for the Nine Months Ended September 30, 2019 and 2018

Property revenues.  The decrease in property revenues for the nine months ended September 30, 2019as compared to the same period in 2018 is due primarily to a decrease of approximately $1.2 million from the sale of the Jade Park MF Property in September 2018.

Investment income.  The decrease in investment income for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:

• Decreases of approximately $1.6 million and $1.1 million related to decreasing MRB volume and interest rates, respectively. See discussion of volume and interest rate changes in the Mortgage Revenue Bond Investments segment previously included in Item 2; and

• An increase of approximately $1.4 million in investment interest income related to additional investments in unconsolidated entities during 2019 and 2018. We made investments in unconsolidated entities totaling approximately $41.5 million during 2018 and $18.3 million during the nine months ended September 30, 2019.

Contingent interest income. The contingent interest income recognized for the nine months ended September 30, 2019 was predominantly realized upon redemption of the Vantage at Brooks, LLC property loan in January 2019. The contingent interest income recognized for the nine months ended September 30, 2018 was realized upon redemption of the Lake Forest MRB and sale of the underlying property in September 2018.

Other interest income. Other interest income is comprised primarily of interest income on property loans held by us. The decrease in other interest income for the nine months ended September 30, 2019as compared to the same period in 2018 was primarily due to approximately $4.6 million of interest income realized on redemption of the Lake Forest property loans in September 2018 that did not recur in 2019, a decrease of approximately $1.2 million related to redemptions of the Vantage at New Braunfels, LLC and Vantage at Brooks, LLC property loans in December 2018 and January 2019, respectively, and non-recurring interest income of approximately $354,000 recognized in 2018. The remaining decrease was due to less interest recognized on cash balances during the nine months ended September 30, 2019.

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Other income. Other income was minimal for the nine months ended September 30, 2019. Other income recognized for the nine months ended September 30, 2018 consists primarily of approximately $1.5 million additional income realized upon early redemption of the Lake Forest MRB in September 2018.

Gain on sale of real estate assets, net.  The gain on sale for the nine months ended September 30, 2018 related to the sale of the Jade Park MF Property in September 2018. There was no gain on sale reported for the nine months ended September 30, 2019.

Gain on sale of investment in an unconsolidated entity. The gain on sale of investment in an unconsolidated entity for the nine months ended September 30, 2019 related to the sale of the Vantage at Panama City Beach property in September 2019. There was no gain on sale reported for the nine months ended September 30, 2018.

The table below compares expenses for the Partnership for the periods indicated (dollar amounts in thousands):

	For the Three Months Ended September 30,										For the Nine Months Ended September 30,
	2019		2018		$ Change			% Change			2019		2018		$ Change			% Change
Expenses:
Real estate operating (exclusive of    items shown below)	$	1,382	$	1,607	$	(225	)		-14.0	%	$	3,478	$	4,293	$	(815	)		-19.0	%
Impairment of securities		-		310		(310	)		-100.0	%		-		1,141		(1,141	)		-100.0	%
Impairment charge on real estate    assets		75		150		(75	)		-50.0	%		75		150		(75	)		-50.0	%
Depreciation and amortization		744		865		(121	)		-14.0	%		2,384		2,693		(309	)		-11.5	%
Interest expense		6,509		6,394		115			1.8	%		19,111		18,091		1,020			5.6	%
General and administrative		6,992		3,653		3,339			91.4	%		12,268		9,506		2,762			29.1	%
Total Expenses	$	15,702	$	12,979	$	2,723			21.0	%	$	37,316	$	35,874	$	1,442			4.0	%

Discussion of the Total Expenses for the Three Months Ended September 30, 2019 and 2018

Real estate operating expenses.  Real estate operating expenses are related to MF Properties and are comprised principally of real estate taxes, property insurance, utilities, property management fees, repairs and maintenance, and salaries and related employee expenses of on-site employees. The decrease in real estate operating expenses for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $202,000 related to the sale of the Jade Park MF Property in September 2018.

Impairment of securities. There was no impairment of securities recognized for the three months ended September 30, 2019. The impairment of securities for the three months ended September 30, 2018 related to decreases in the fair value of the PHC Certificates.

Impairment charge on real estate assets.  The impairment charge on real estate assets for the three months ended September 30, 2019 and 2018 related to the land held for development in Gardner, KS.

Depreciation and amortization expense.  Depreciation relates entirely to the MF Properties.  Amortization consists of in-place lease intangible assets recorded as part of the acquisition-method of accounting for the acquisition of MF Properties.  The decrease in depreciation and amortization for the three months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in depreciation expense of approximately $76,000 at the 50/50 related to furniture & fixtures that became fully depreciated in July 2019.

Interest expense. The increase in interest expense for the three months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:

• A decrease of approximately $400,000 due to lower average principal outstanding;

• An increase of approximately $19,000 due to an increase in effective interest rates of the debt financing portfolio;

• An increase of approximately $160,000 related to fair value adjustments to interest rate derivatives, net of cash paid; and

• An increase of approximately $336,000 in amortization of deferred financing costs.

General and administrative expenses.  The increase in general and administrative expenses for the three months ended September 30, 2019 as compared to the same period in 2018 was primarily due to an increase of approximately $2.6 million in restricted unit compensation expense. Upon the closing of the acquisition by Greystone of AFCA 2 on September 10, 2019, all outstanding restricted

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units vested and all previously unrecognized compensation expense was recognized. In addition, there was an increase of approximately $530,000 in professional fees due primarily to lower than usual consulting expenses in the third quarter of 2018.

Discussion of the Total Expenses for the Nine Months Ended September 30, 2019 and 2018

Real estate operating expenses.  The decrease in real estate operating expenses for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease of approximately $589,000 related to the sale of the Jade Park MF Property in September 2018. In addition, there was decrease of approximately $188,000 at the Suites on Paseo MF Property due to utility expense adjustments in 2019, and one-time costs in 2018 that did not recur in 2019.

Impairment of securities. There was no impairment of securities recognized for the nine months ended September 30, 2019. The impairment of securities for the nine months ended September 30, 2018 related to decreases in the fair value of the PHC Certificates.

Impairment charge on real estate assets.  The impairment charge on real estate assets for the nine months ended September 30, 2019 and 2018 related to the land held for development in Gardner, KS.

Depreciation and amortization expense. The decrease in depreciation and amortization for the nine months ended September 30, 2019 as compared to the same period in 2018 was due primarily to a decrease in depreciation expense of approximately $267,000 related to the sale of the Jade Park MF Property in September 2018.

Interest expense. The increase in interest expense for the nine months ended September 30, 2019 as compared to the same period in 2018 was due to the following factors:

• A decrease of approximately $1.4 million due to lower average principal outstanding;

• An increase of approximately $710,000 due to an increase in effective interest rates of the debt financing portfolio;

• An increase of approximately $1.5 million related to fair value adjustments to interest rate derivatives, net of cash paid; and

• An increase of approximately $172,000 in amortization of deferred financing costs.

General and administrative expenses.  The increase in general and administrative expenses for the nine months ended September 30, 2019 as compared to the same period in 2018 was primarily due to an increase of approximately $2.3 million in restricted units compensation expense upon the closing of the acquisition by Greystone of AFCA 2.

Discussion of the Income Tax Expense for the Three and Nine Months Ended September 30, 2019 and 2018

A wholly-owned subsidiary of the Partnership, the Greens Hold Co, is a corporation subject to federal and state income tax. The Greens Hold Co owns controlling equity interests in certain MF Properties. The Greens Hold Co generated minimal taxable income for the three and nine months ended September 30, 2019. The income tax benefit recognized for the three and nine months ended September 30, 2018 related to tax adjustments upon filing the Greens Hold Co tax returns during 2018. The gain on sale of the Jade Park MF Property in September 2018 did not generate taxable income as it was not owned by the Greens Hold Co.

Liquidity and Capital Resources

Our short-term liquidity requirements over the next 12 months will be primarily for distribution payments, operational expenses, equity investment commitments, debt servicing (principal and/or interest payments) and maturities of debt financings and mortgages payable. We expect to meet these liquidity requirements primarily using cash on hand and operating cash flows from our investments and MF Properties. We expect to refinance our debt financings and mortgages payable maturing within the next 12 months with the same or similar lenders prior to maturity.

Our long-term liquidity requirements will be primarily for maturities of debt financings and mortgages payable, additional investments in MRBs, and additional investments in unconsolidated entities. We expect to meet these liquidity requirements primarily through refinancing of maturing debt financings with the same or similar lenders, principal and interest proceeds from investments in MRBs and PHCs, proceeds from asset sales and redemptions, and the issuance of additional BUCs and Series A Preferred Units.  

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Sources of Liquidity

The Partnership’s principal sources of liquidity consist of:

• Operating cash flows from investments in MRBs, PHCs, property loans and investments in unconsolidated entities;

• Net operating cash flows from MF Properties;

• Unsecured lines of credit;

• Proceeds from increasing leverage of debt financings;

• Issuances of BUCs and Series A Preferred Units; and

• Proceeds from the sale of assets.

Operating Cash Flows from Investments

Cash flows from operations are primarily comprised of regular interest payments received on our MRBs, PHC Certificates and property loans that provide consistent cash receipts throughout the year.  The Partnership also receives distributions from investments in unconsolidated entities if, and when, cash is available for distribution to the underlying investees. Receipt of cash from our investments in MRBs, property loans and investments in unconsolidated entities is dependent upon the generation of net cash flows at multifamily properties that underlie our investments. These underlying properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses. Receipt of cash from our PHC Certificates is payable from annual appropriations to be made to the public housing authorities by HUD under HUD’s Capital Fund Program. There is risk that annual appropriations will be reduced, delayed or eliminated, which may make the PHC Certificates unable to pay principal and interest.

Net Operating Cash Flows from MF Properties

Cash flows generated by MF Properties, net of operating expenses and mortgage service payments, are considered unrestricted for use by the Partnership. The MF properties are subject to risks usually associated with direct investments in multifamily real estate, which include (but are not limited to) reduced occupancy, tenant defaults, falling rental rates, and increasing operating expenses.  

Unsecured Lines of Credit

We maintain two unsecured lines of credit with a financial institution. Our unsecured operating line of credit allows for the advance of up to $10.0 million to be used for general operations. We are required to make repayments of the principal to reduce the outstanding principal balance on the operating line to zero for fifteen consecutive days during each calendar quarter. We fulfilled this requirement during the quarter ended September 30, 2019.  In addition, we have fulfilled this requirement for the fourth quarter of 2019. In July 2019, we extended the maturity of the unsecured operating line of credit to June 2021.

Our unsecured non-operating line of credit allows for the advance of up to $50.0 million and may be utilized for the purchase of multifamily real estate and taxable or tax-exempt MRBs. Advances on the unsecured non-operating line of credit are due on the 270^th day following the advance date, but may be extended for up to an additional 270 days by making certain payments. The unsecured non-operating line of credit contains a covenant, among others, that the Partnership’s ratio of the lender’s senior debt will not exceed a specified percentage 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 September 30, 2019. We anticipate paying off the balances on our unsecured non-operating line of credit by entering into fixed-rate or variable-rate debt financing arrangements, to be secured with the previously acquired MRBs or multifamily real estate. We had approximately $36.8 million available on the unsecured non-operating line of credit as of September 30, 2019. In July 2019, we extended the maturity of the unsecured non-operating line of credit to June 2021.

Proceeds from Increasing Leverage of Debt Financings

In certain circumstances, the Partnership may have debt financings that have a relatively low leverage when comparing the outstanding debt principal to the value of the related securitized assets. This can occur due to either principal paydowns on the debt financings or increasing value of the securitized assets. In such cases, the Partnership may elect to refinance the existing debt financings to increase leverage and obtain additional cash proceeds from increases in the outstanding principal balances.

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Issuances of BUCs and Series A Preferred Units

As of September 30, 2019, we had an effective Registration Statement on file with the SEC to issue up to $225.0 million of BUCs. From time to time, we may issue BUCs under this Registration Statement to raise funds to invest in additional MRBs and unconsolidated entities, fund the repayment of debt financing maturities or for other general purposes. The Partnership had approximately $222.0 million of BUCs available to be issued under the Registration Statement as of September 30, 2019.  This Registration Statement expires in November 2019, and the Partnership expects to file a new shelf registration statement with the SEC prior to the expiration of the current Registration Statement, which will allow the Partnership to issue BUCs thereunder for an additional three-year period.

The Partnership is authorized to issue Series A Preferred Units under the Amended and Restated LP Agreement. As of September 30, 2019, we had issued 9,450,000 Series A Preferred Units for gross proceeds of approximately $94.5 million to five financial institutions. The Series A Preferred Units were issued in a private placement that was terminated as of October 25, 2017.  The Partnership did not issue any Series A Preferred Units during the three and nine months ended September 30, 2019 or the year ended December 31, 2018. The Partnership may conduct additional private offerings of Series A Preferred Units in the future to supplement its cash flow needs.

Proceeds from the Sale of Assets

We may, from time to time, sell our investments in MRBs, PHCs, investments in unconsolidated entities and MF Properties on a basis consistent with the Partnership’s strategic plans. Our ability to sell such investments on favorable terms is dependent upon a number of factors including (but not limited to) the availability of credit to potential buyers to purchase these investments at prices we consider acceptable. In addition, potential adverse changes to general market and economic conditions could negatively impact our future ability to sell our investments.

In September 2019, our investment in Vantage at Panama City Beach was liquidated upon the sale of the property. In total, we received approximately $22.7 million upon sale, which consists of the return of our initial capital contributions, investment income and gain on sale.

Uses of Liquidity

Our principal uses of liquidity consist of:

• General, administrative and operating expenses;

• Distributions paid to holders of Series A Preferred Units and BUCs;

• Investments in additional MRBs, tax-exempt investments, other investments and unconsolidated entities;

• Debt service on debt financings and mortgages payable; and

• Other contractual obligations of the Partnership.

General, Administrative and Operating Expenses

We use cash for general and administrative expenses of the Partnership’s operations.  For additional details, see Item 1A, “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018, and the section captioned “Cash Flows from Operating Activities” in the Partnership’s condensed consolidated statements of cash flows set forth in Item 1 of this Quarterly Report on Form 10-Q.

Distributions Paid to Holders of Series A Preferred Units and BUCs

Distributions to the holders of Series A Preferred Units, if declared by the General Partner, are paid quarterly at an annual fixed rate of 3.0%.  The Series A Preferred Units are non-cumulative, non-voting and non-convertible.  

We have paid total annual distributions of $0.50 per BUC, payable quarterly at $0.125 per BUC, during the year ended December 31, 2018 and for the three and nine months ended September 30, 2019. Distributions to the BUC holders may increase or decrease at the determination of the General Partner based on its determination of cash available for distribution and other factors deemed relevant by the General Partner.

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Investments in Additional MRBs, Tax Exempt Investments, Other Investments and Unconsolidated Entities

Our overall strategy is to continue to increase our investment in multifamily properties through either the acquisition of MRBs, tax exempt investments, other investments or equity investments in both existing and new markets. We evaluate investment opportunities based on (but not limited to) our market outlook, including general economic conditions, development opportunities and long-term growth potential. Our ability to make future investments is dependent upon identifying suitable acquisition and development opportunities, access to long-term liquidity sources, and the availability of investment capital.

Debt Service on Debt Financings and Mortgages Payable

Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of MRBs and PHC Certificates. The financing arrangements generally involve the securitization of MRBs and PHC Certificates into trusts whereby we retain beneficial interests in the trusts that provide certain rights to the underlying investment assets. The senior beneficial interests are sold to unaffiliated parties with the residual interests retained by the Partnership. The senior beneficial interests require periodic interest payments that may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments. The Partnership is required to fund any shortfall in principal and interest payable to the senior beneficial interests. We anticipate that cash flows from the securitized assets will fund normal, recurring principal and interest payments to the senior beneficial interests.

Prior to 2019, all our debt financing arrangements, excluding TEBS Financings, were with Deutsche Bank. During 2019, we have strategically diversified our lending relationships to reduce our exposure to Deutsche Bank. We closed on a new Term TOB trust financing structure with Morgan Stanley in May 2019 and new TOB trust financing structures with Mizuho in the third quarter of 2019. The addition of these two investment banking relationships will further diversify our access to debt financing arrangements.

We actively manage both our fixed and variable rate debt financings. The following table summarizes our fixed and variable rate debt financings as of September 30, 2019 and December 31, 2018:

	September 30, 2019					December 31, 2018
Debt Financing Type	Outstanding Principal		% of Total Debt Financing			Outstanding Principal		% of Total Debt
Fixed	$	357,442,759		66.0	%	$	317,096,477		62.3	%
Variable		183,931,290		34.0	%		191,816,849		37.7	%
Total	$	541,374,049				$	508,913,326

As disclosed in Note 15 of the condensed consolidated financial statements, we refinanced the M24 and M33 TEBS Financings from variable to fixed in July 2019, which has resulted in an increase in the percentage of fixed rate debt financing. This increase was somewhat offset by eight new variable rate TOB Trusts with Mizuho in the third quarter of 2019.

Our mortgages payable and other secured financing arrangements are used to leverage our MF Properties. The mortgages and other secured financings are entered into with financial institutions and are secured by security interests in the MF Properties. The mortgages and other secured financings bear interest that may be fixed or variable, depending on the terms of the arrangement, and include scheduled principal payments. We anticipate that cash flows from the secured MF properties will be sufficient to pay all normal, recurring principal and interest payments.

We anticipate refinancing all debt financings and mortgage payable arrangements maturing in the next twelve months with similar arrangements with terms of one year or more. We typically refinance these arrangements with existing lenders, assuming the terms are acceptable to the Partnership, or with similar lending providers. We may also explore other financing options with Freddie Mac, Fannie Mae, other investment banks or other lending institutions.  

Other Contractual Obligations

We are subject to various guarantee obligations in the normal course of business, and, in most cases, do not anticipate these obligations to result in significant cash payments.

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Leverage Ratio

We utilize leverage to enhance rates of return to our Unitholders. We use target ratios for each type of financing obligation utilized by us to manage an overall leverage constraint, established by the Board of Managers (the “Board”) of Greystone Manager, which is the general partner of the Partnership’s General Partner. The leverage utilized is dependent upon several factors, including, but not limited to, the assets being leveraged, the leverage program utilized, constraints of market collateral calls and the liquidity and marketability of the underlying collateral of the asset being leveraged. We define our leverage ratio as total outstanding debt divided by total assets using cost adjusted for paydowns for MRBs, PHC Certificates, property loans, and taxable MRBs, and initial cost for deferred financing costs and MF Properties. As of September 30, 2019, our overall leverage ratio was approximately 61%.  

Cash Flows

For the nine months ended September 30, 2019, we generated cash of $8.1 million, which was the net result of $12.8 million provided by operating activities, $13.9 million provided by investing activities, and $18.6 million used in financing activities.

Cash provided by operating activities totaled $12.8 million for the nine months ended September 30, 2019, as compared to $18.0 million generated for the nine months ended September 30, 2018. The decrease between periods was primarily due to a decrease of $7.2 million in net income.

Cash provided by investing activities totaled $13.9 million for the nine months ended September 30, 2019, as compared to cash provided of $7.5 million for the nine months ended September 30, 2018. The change between periods was predominantly due to an increase of $20.2 million received on the sale of an investment in an unconsolidated entity, offset by a decrease of $13.5 million received on the sale of an MF Property. The remaining difference was due to roughly offsetting cash flows from our various investments in MRBs, PHCs, property loans and contributions to unconsolidated entities.

Cash used in financing activities totaled $18.6 million for the nine months ended September 30, 2019, as compared to cash used of $71.4 million for the nine months ended September 30, 2018. The change between periods was predominantly due to an increase of $47.2 million in net proceeds from debt financing and a decrease of $7.5 million in principal payments on mortgages payable.

We believe our cash balance and cash provided by the sources discussed herein will be sufficient to pay, or refinance, our debt obligations and to meet our liquidity needs over the next 12 months.

Cash Available for Distribution

The Partnership believes that Cash Available for Distribution (“CAD”) provides relevant information about the Partnership’s operations and is necessary, along with net income, for understanding its operating results.  To calculate CAD, the Partnership begins with net income and adds back non-cash expenses consisting of depreciation expense, amortization expense related to deferred financing costs, amortization of premiums and discounts, non-cash interest rate derivative expense or income, provision for loan losses, impairments on MRBs, PHC Certificates, real estate assets and property loans, deferred income taxes and RUA compensation expense, to the Partnership’s net income as computed in accordance with GAAP. The Partnership also deducts Tier 2 income (see Note 3 to the Partnership’s condensed consolidated financial statements) distributable to the General Partner as defined in the Amended and Restated LP Agreement and Series A Preferred Unit distributions and accretion.  Net income is the GAAP measure most comparable to CAD. There is no generally accepted methodology for computing CAD, and the Partnership’s computation of CAD may not be comparable to CAD reported by other companies.  Although the Partnership considers CAD to be a useful measure of the Partnership’s operating performance, CAD is a non-GAAP measure that should not be considered as an alternative to net income that is calculated in accordance with GAAP, or any other measures of financial performance presented in accordance with GAAP.

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The following table shows the calculation of CAD (and a reconciliation of the Partnership’s net income, as determined in accordance with GAAP, to CAD) for the three and nine months ended September 30, 2019 and 2018.  

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net income	$	9,707,903		$	17,883,055		$	20,045,906		$	27,225,480
Change in fair value of derivatives and interest rate derivative    amortization		68,333			(91,679	)		458,141			(1,088,060	)
Depreciation and amortization expense		743,503			864,600			2,384,115			2,692,731
Impairment of securities		-			309,958			-			1,141,020
Impairment charge on real estate assets		75,000			150,000			75,000			150,000
Amortization of deferred financing costs		745,457			409,420			1,476,463			1,304,879
RUA compensation expense		3,265,677			622,227			3,636,091			1,372,384
Deferred income taxes		(82,167	)		-			(138,331	)		34,000
Redeemable Series A Preferred Unit distribution and accretion		(717,762	)		(717,763	)		(2,153,288	)		(2,153,288	)
Tier 2 Income distributable to the General Partner (1)		(1,264,949	)		(2,074,381	)		(2,017,974	)		(2,074,381	)
Bond purchase premium (discount) amortization (accretion), net    of cash received		(24,532	)		(3,513	)		(64,970	)		(11,419	)
Total CAD	$	12,516,463		$	17,351,924		$	23,701,153		$	28,593,346
Weighted average number of BUCs outstanding, basic		60,519,542			59,907,123			60,457,299			59,989,585
Net income per BUC, basic	$	0.13		$	0.25		$	0.26		$	0.38
Total CAD per BUC, basic	$	0.21		$	0.29		$	0.39		$	0.48
Distributions declared, per BUC	$	0.125		$	0.125		$	0.375		$	0.375

(1) As described in Note 3 to the Partnership’s condensed consolidated financial statements, Net Interest Income representing contingent interest and Net Residual Proceeds representing contingent interest (Tier 2 income) will be distributed 75% to the limited partners and BUC holders, as a class, and 25% to the General Partner. This adjustment represents the 25% of Tier 2 income due to the General Partner.  

For the three months ended September 30, 2019, Tier 2 income consisted of $10.5 million gain on sale related to the Partnership’s investment in Vantage at Panama City Beach.For the three months ended September 30, 2018, Tier 2 income consisted of $4.2 million of contingent interest from Lake Forest and a $4.1 million gain on sale of the Jade Park MF Property.

For the nine months ended September 30, 2019, Tier 2 income consisted of $3.0 million of contingent interest realized on redemption of the Vantage at Brooks, LLC property loan and $10.5 million gain on sale related to the Partnership’s investment in Vantage at Panama City Beach. For the nine months ended September 30, 2018, Tier 2 income consisted of $4.2 million of contingent interest from Lake Forest and a $4.1 million gain on sale of the Jade Park MF Property. 

There was no non-recurring CAD per BUC earned by the Partnership during the three and nine months ended September 30, 2019 and 2018.

Off Balance Sheet Arrangements

As of September 30, 2019 and December 31, 2018 we held MRBs that are collateralized by Residential Properties and one commercial property.  The Residential Properties and commercial property are owned by entities that are not controlled by us.  We have no equity interest in these entities and do not guarantee any obligations of these entities.  

The Partnership has entered into various commitments and guarantees. For additional discussions related to commitments and guarantees, see Note 18 to the Partnership’s condensed consolidated financial statements.

We do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

We do not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with us or our related parties, other than those disclosed in Note 21 to the Partnership’s condensed consolidated financial statements.

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Contractual Obligations

As discussed herein and in our Annual Report on Form 10-K for the year ended December 31, 2018, the debt obligation amounts maturing in 2019 and 2020 consist of the principal paid on lines of credit, the TEBS Financings with Freddie Mac, various TOB, Term TOB and Term A/B debt financings with Deutsche Bank, Morgan Stanley, and Mizuho and payments on the MF Property mortgages payable and other secured financing.  Our strategic objective is to leverage our MRB portfolio utilizing long-term securitization financings either with Freddie Mac through its TEBS program or with other lenders with trust securitizations similar to the TOB, Term TOB or Term A/B Trust programs with Deutsche Bank, Morgan Stanley, and Mizuho.  This strategy allows us to better match the duration of our assets and liabilities and to better manage the spread between our assets and liabilities.

The Partnership’s contractual obligations presented in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference herein, have only changed pursuant to the executed contracts during the nine months ended September 30, 2019 as disclosed herein.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements that will be adopted in future periods, see Note 2 to the Partnership’s condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in market risk, except as discussed below, from the information provided under “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2018.

Mortgage Revenue Bonds and PHC Certificate Sensitivity Analysis

A third-party pricing service is used to value our MRBs. The pricing service uses a discounted cash flow and yield to maturity or call analysis which encompasses judgment in its application.  The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRBs.  The effective yield analysis for each MRB considers the current market yield on similar MRBs, specific terms of the MRB, and various characteristics of the underlying property serving as collateral for the MRB such as debt service coverage ratio, loan to value, and other characteristics.  

We value the PHC Certificates based upon prices obtained from a third-party pricing service, which are indicative of market prices. There is no active trading market for the PHC Certificates. The valuation methodology of our third-party pricing service incorporates commonly used market pricing methods. It considers the underlying characteristics of each PHC Certificate as well as other quantitative and qualitative characteristics including, but not limited to, market interest rates, security ratings from rating agencies, the impact of potential political and regulatory change, and other inputs. The fair value estimate by the third-party pricing service encompasses the use of judgment in its application.

We completed a sensitivity analysis which is hypothetical and is as of a specific point in time.  The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. The table below summarizes the sensitivity analysis metrics related to the investments in the MRBs and PHC Certificates as of September 30, 2019:

Description	Estimated Fair Value in 000's		Range of Effective Yields used in Valuation				Range of Effective Yields if 10% Adverse Applied				Additional Unrealized Losses with 10% Adverse Change in 000's
Mortgage Revenue Bonds	$	777,283		2.6	%	-8.7%		2.9	%	-9.6%	$	21,688
PHC Certificates		44,685		4.5	%	-5.4%		5.0	%	-5.9%		1,133

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Geographic Risk

The properties securing our MRBs are geographically dispersed throughout the United States, with significant concentrations (geographic risk) in Texas, California, and South Carolina.  The table below summarizes the geographic concentrations in these states as a percentage of the total MRB principal outstanding for the dates indicated:

	September 30, 2019			December 31, 2018
Texas		43	%		43	%
California		18	%		18	%
South Carolina		17	%		17	%

After a review of the economic performance of properties located in Texas, California and South Carolina, as compared to general conditions in these markets, we do not believe we are exposed to adverse risk in these markets.

Summary of Interest Rates on Borrowings and Interest Rate Cap Agreements

As of September 30, 2019, the total costs of borrowing by investment type were as follows:

• The unsecured LOCs have variable interest rates ranging between 4.6% and 5.3%;

• The M31 TEBS facility has a variable interest rate of 3.0%;

• The M24, M33 and M45 TEBS facilities have fixed interest rates ranging from 3.1% and 3.8%;

• The Term TOB Trusts securitized by MRBs have fixed interest rates that range between 3.5% and 4.0%;

• The Term A/B Trusts securitized by MRBs have fixed interest rates of 4.5%;

• The TOB Trusts securitized by MRBs and PHC Certificates have variable interest rates that range between 2.8% and 3.3%; and

• The mortgages payable have fixed and variable interest rates that range between 4.7% and 5.0%.

We enter into interest rate cap agreements to mitigate our exposure to interest rate fluctuations on variable-rate financing facilities. The following table sets forth certain information regarding the Partnership’s interest rate cap agreements as of September 30, 2019:

Purchase Date	Notional Amount		Maturity Date	Effective Capped Rate (1)			Index	Variable Debt Financing Facility Hedged (1)	Counterparty	Fair Value as of September 30, 2019
July 2015		27,117,092	Aug 2020		3.0	%	SIFMA	TOB Trusts	Wells Fargo Bank		2
July 2015		27,117,092	Aug 2020		3.0	%	SIFMA	TOB Trusts	Royal Bank of Canada		2
July 2015		27,117,092	Aug 2020		3.0	%	SIFMA	TOB Trusts	SMBC Capital Markets, Inc		2
June 2017		81,351,277	Aug 2020		1.5	%	SIFMA	M33 TEBS	Barclays Bank PLC		45,274
Sept 2017		58,447,000	Sept 2020		4.0	%	SIFMA	M24 TEBS	Barclays Bank PLC		-
Aug 2019		79,695,286	Aug 2024		4.5	%	SIFMA	M31 TEBS	Barclays Bank PLC		7,325
										$	52,605

⁽¹⁾ For additional details, see Note 22 to the Partnership's condensed consolidated financial statements.

Interest Rate Risk – Change in Net Interest Income

The following table sets forth information regarding the impact on the Partnership’s net interest income assuming a change in interest rates as of September 30, 2019:

Description	- 25 basis points		+ 50 basis points			+ 100 basis points			+ 150 basis points			+ 200 basis points
TOB & Term A/B Debt Financings	$	152,728	$	(276,955	)	$	(549,141	)	$	(826,363	)	$	(1,104,523	)
TEBS Debt Financings		114,212		(207,204	)		(304,896	)		(346,539	)		(388,804	)
Other Investment Financings		24,987		(49,947	)		(99,859	)		(149,734	)		(199,573	)
Total	$	291,927	$	(534,106	)	$	(953,896	)	$	(1,322,636	)	$	(1,692,900	)

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The above interest rate sensitivity table (“Table”) represents the change in interest income from investments, net of interest on debt and settlement payments on interest rate derivatives over the next twelve months, assuming an immediate parallel shift in the LIBOR yield curve, a shift in the SIMFA yield curve based on its average historical relationship to the LIBOR yield curve, and the resulting implied forward rates are realized as a component of this shift in the curve.  Assumptions include anticipated interest rates, relationships between interest rate indices and outstanding investments, liabilities and interest rate derivative positions.  

No assurance can be made that the assumptions included in the Table presented herein will occur or that other events will not occur that will affect the outcomes of the analysis.  Furthermore, the results included in the Table assume the Partnership does not act to change its sensitivity to the movement in interest rates.  

As the above information incorporates only those material positions or exposures that existed as of September 30, 2019, it does not consider those exposures or positions that could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigating strategies at that time and the overall business and economic environment.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures.  The Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the  Chief Financial Officer have concluded that, as of the end of such period, the Partnership’s current disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Partnership’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.  The Chief Executive Officer and Chief Financial Officer have determined that there were no changes in the Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Partnership’s most recent fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1A. Risk Factors.

The risk factors affecting the Partnership are described in Item 1A “Risk Factors” in the Partnership’s Annual Report on Form 10‑K for the year ended December 31, 2018, which is incorporated by reference herein. There have been no material changes from these previously disclosed risk factors for the nine months ended September 30, 2019.

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Item 6. Exhibits.

The following exhibits are filed as required by Item 601 of Regulation S-K.  Exhibit numbers refer to the paragraph numbers under Item 601 of Regulation S-K:

3.1		Fourth Amendment to First Amended and Restated Agreement of Limited Partnership of America First Multifamily Investors, L.P. dated September 10, 2019 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (No. 000-24843), filed by the Partnership on September 11, 2019).
10.1		Partnership Interest Purchase Agreement between Burlington Capital LLC, Burlington Capital Structured Finance, LLC, Greystone AF Manager LLC, and Greystone AF Holdings LLC, dated August 29, 2019 (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843) filed by the Partnership on August 30, 2019).
10.2		Rate Cap Agreement dated August 9, 2019 between ATAX TEBS II, LLC and Barclays Bank PLC (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on August 26, 2019).
10.3		Release of Interest Rate Cap dated August 19, 2019 related to Rate Cap Agreement between ATAX TEBS III, LLC and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on August 22, 2019).
10.4		Release of Interest Rate Cap dated August 19, 2019 related to Rate Cap Agreement between ATAX TEBS III, LLC and Royal Bank of Canada (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on August 22, 2019).
10.5		Release of Interest Rate Cap dated August 19, 2019 related to Rate Cap Agreement between ATAX TEBS III, LLC and SMBC Capital Markets, Inc. (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on August 22, 2019).
10.6		First Amendment to Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2019 between Federal Home Loan Mortgage Corporation and ATAX TEBS II, LLC relating to Freddie Mac Multifamily M Certificates Series M-031 (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on August 5, 2019).
10.7		Sixth Amendment to Credit Agreement dated July 26, 2019 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on July 31, 2019).
10.8		Revolving Line of Credit Note dated July 26, 2019 between America First Multifamily Investors, L.P. and Bankers Trust Company (incorporated herein by reference to Exhibit 10.2 to Form 8-K (No. 000-24843), filed by the Partnership on July 31, 2019).
10.9		First Amendment to Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 16, 2019 between Federal Home Loan Mortgage Corporation and ATAX TEBS I, LLC relating to Freddie Mac Multifamily M Certificates Series M-024 (incorporated herein by reference to Exhibit 10.1 to Form 8-K (No. 000-24843), filed by the Partnership on July 22, 2019).
10.10		First Supplement to Series Certificate Agreement dated July 16, 2019 by and between Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator, relating to Freddie Mac Multifamily M Certificates Series M-024 (incorporated herein by reference to Exhibit 10.3 to Form 8-K (No. 000-24843), filed by the Partnership on July 22, 2019).
10.11		First Amendment to Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 16, 2019 between Federal Home Loan Mortgage Corporation and ATAX TEBS III, LLC relating to Freddie Mac Multifamily M Certificates Series M-033 (incorporated herein by reference to Exhibit 10.5 to Form 8-K (No. 000-24843), filed by the Partnership on July 22, 2019).
10.12		First Supplement to Series Certificate Agreement dated July 16, 2019 by and between Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator, relating to Freddie Mac Multifamily M Certificates Series M-033 (incorporated herein by reference to Exhibit 10.7 to Form 8-K (No. 000-24843), filed by the Partnership on July 22, 2019).
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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32.2	Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Amendment No. 1 to the America First Multifamily Investors, L.P. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 to Form 8-K (No. 000-24843) filed by the Partnership on September 11, 2019).
101	The following materials from the Partnership’s Quarterly Report on Form 10-Q for the period ended September 30, 2019are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets on September 30, 2019and December 31, 2018, (ii) the Condensed Consolidated Statements of Operations for the periods ended September 30, 2019 and 2018, (iii) the Condensed Consolidated Statements of Comprehensive Income for the periods ended September 30, 2019 and 2018, (iv) the Condensed Consolidated Statements of Partners’ Capital for the periods ended September 30, 2019 and 2018, (v) the Condensed Consolidated Statements of Cash Flows for the periods ended September 30, 2019 and 2018, and (vi) Notes to Condensed Consolidated Financial Statements. Such materials are presented with detailed tagging of notes and financial statement schedules.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.

Date: November 1, 2019	By:	/s/ Chad L. Daffer
		Chad L. Daffer
		Chief Executive Officer

Date: November 1, 2019	By:	/s/ Craig S. Allen
		Craig S. Allen
		Chief Financial Officer

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