Greystone Housing Impact Investors LP(GHI) - 2020 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements show total assets decreased to $977.5 million, net income available to partners fell to $2.3 million Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $977,516,262 | $1,029,168,508 | | Cash and cash equivalents | $35,158,156 | $42,308,153 | | Mortgage revenue bonds, at fair value (Total) | $761,082,275 | $773,597,465 | | Public housing capital fund trust certificates | $0 | $43,349,357 | | Net real estate assets | $60,888,491 | $61,559,963 | | Total Liabilities | $556,684,942 | $592,843,818 | | Debt financing, net | $500,385,429 | $536,197,421 | | Total Partners' Capital | $326,435,881 | $341,938,263 | Condensed Consolidated Statements of Operations Highlights | Income Statement Item | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Total revenues | $13,736,135 | $17,664,598 | | Provision for credit loss | $1,357,681 | $0 | | Total expenses | $12,158,987 | $11,171,137 | | Net income | $2,981,757 | $6,451,813 | | Net income available to Partners | $2,263,994 | $5,734,050 | | BUC holders' interest in net income per BUC | $0.04 | $0.08 | Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Item | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,344,104 | $3,565,582 | | Net cash provided by investing activities | $37,477,567 | $8,281,471 | | Net cash used in financing activities | ($47,248,850) | ($6,112,846) | | Net (decrease) increase in cash | ($7,427,179) | $5,734,207 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, COVID-19 impact, PHC Certificate sale, MRB credit loss, and subsequent debt refinancing - The Partnership's primary business is acquiring, holding, and dealing with a portfolio of mortgage revenue bonds (MRBs) for affordable multifamily, student, and commercial properties[28] - The full impact of the COVID-19 pandemic on the Partnership's financial condition and results of operations is uncertain and cannot be predicted, potentially affecting MRB borrowers, tenants, and investment valuations[37] - During Q1 2020, the Partnership recognized a $1.4 million provision for credit loss related to the Pro Nova 2014-1 MRB, driven by debt service shortfalls at the underlying commercial property[55] - On January 30, 2020, the Partnership sold its entire portfolio of Public Housing Capital Fund (PHC) Certificates for approximately $43.3 million, recognizing a gain of about $1.4 million[62] - In February 2020, the Partnership refinanced The 50/50 MF Property mortgage and TIF loans, extending maturities to 2027 and 2025, respectively, and securing lower fixed interest rates[104] - Subsequent to quarter-end, in April 2020, the Partnership terminated its Master Trust Agreement with Deutsche Bank and refinanced the associated debt into new variable-rate TOB Trusts with Mizuho[148] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, segment performance, COVID-19 impacts, liquidity, and $0.05 per BUC Cash Available for Distribution - The COVID-19 outbreak poses significant risks to the business. While average rental collection for properties securing MRBs was 94% for April 2020, management cautions this is not predictive for future months. University closures may adversely impact occupancy and results for the Partnership's two MF Properties, which primarily serve students[158][160] Segment Net Income (Loss) Comparison | Segment | Q1 2020 Net Income (Loss) | Q1 2019 Net Income (Loss) | % Change | | :--- | :--- | :--- | :--- | | Mortgage Revenue Bond Investments | $440,000 | $2,043,000 | -78.5% | | Public Housing Capital Fund Trusts | $1,391,000 | $256,000 | 443.4% | | MF Properties | ($253,000) | ($437,000) | 42.1% | | Other Investments | $1,403,000 | $4,589,000 | -69.4% | - Total revenues and other income decreased by 14.2% to $15.2 million, primarily due to a $3.0 million decrease in contingent interest income that was recognized in Q1 2019 and did not recur. Total expenses increased by 8.8% to $12.2 million, driven by a new $1.4 million provision for credit loss[196][198][201] - The Partnership's leverage ratio, defined as total outstanding debt divided by total assets (at cost), was approximately 60% as of March 31, 2020[233] Cash Available for Distribution (CAD) Reconciliation | Metric | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net income | $2,981,757 | $6,451,813 | | Total CAD | $2,836,683 | $6,574,269 | | Total CAD per BUC, basic | $0.05 | $0.11 | | Distributions declared, per BUC | $0.125 | $0.125 | Quantitative and Qualitative Disclosures About Market Risk Market risks include interest rate sensitivity and geographic concentration, with a 10% yield change impacting MRBs by $21.1 million Mortgage Revenue Bonds Sensitivity Analysis (as of March 31, 2020) | Description | Estimated Fair Value | Range of Effective Yields | Additional Unrealized Losses with 10% Adverse Change | | :--- | :--- | :--- | :--- | | Mortgage Revenue Bonds | $761,082,000 | 2.8% - 7.9% | $21,113,000 | Geographic Concentration of MRB Portfolio | State | % of Total MRB Principal (Mar 31, 2020) | | :--- | :--- | | Texas | 43% | | California | 17% | | South Carolina | 17% | Interest Rate Risk – Change in Net Interest Income (Next 12 Months) | Change in Interest Rates | Impact on Net Interest Income | | :--- | :--- | | -25 basis points | +$421,392 | | +50 basis points | -$842,662 | | +100 basis points | -$1,685,163 | | +150 basis points | -$2,410,452 | | +200 basis points | -$3,094,820 | Controls and Procedures CEO and CFO concluded disclosure controls and procedures were effective with no material changes in internal control - The CEO and CFO concluded that the Partnership's disclosure controls and procedures were effective as of the end of the reporting period (March 31, 2020)[259] - No material changes to the Partnership's internal control over financial reporting occurred during the first quarter of 2020[260] PART II – OTHER INFORMATION Risk Factors New risk factors primarily relate to the COVID-19 pandemic, impacting operations, financial condition, and distributions - The COVID-19 outbreak is identified as a significant new risk factor with the potential to adversely affect business activities, financial condition, and results of operations[263][264] - Key risks from COVID-19 include: - Decreased rent collections at underlying properties, potentially causing MRB defaults and triggering collateral calls or financing defaults. - Negative impacts on MF Properties, especially student housing, if universities do not resume on-campus classes. - Financial market volatility impairing investment values and hindering the ability to raise capital through BUCs or Series A Preferred Units. - Supply chain disruptions causing construction delays and cost overruns for development projects. - Potential for reduced distributions to unitholders if cash flows are significantly impacted[265][267][268] Unregistered Sales of Equity Securities and Use of Proceeds The Partnership fully executed a BUC repurchase program, buying back 290,000 BUCs for $2.1 million BUC Repurchase Activity (Q1 2020) | Period | Total BUCs Purchased | Average Price Paid per BUC | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2020 | 0 | $ - | | Feb 1 - Feb 29, 2020 | 20,727 | $7.15 | | Mar 1 - Mar 31, 2020 | 269,273 | $7.27 | | Total | 290,000 | $7.26 | Exhibits Exhibits include CEO/CFO certifications and financial statements in XBRL format - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and financial data in XBRL format (101)[272]