Greystone Housing Impact Investors LP
11/06/2025 | Press release | Distributed by Public on 11/06/2025 07:47
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis ofFinancial Condition and Results of Operations.
In this Management's Discussion and Analysis, all references to "we," "us," and the "Partnership" refer to Greystone Housing Impact Investors LP, its consolidated subsidiaries, and consolidated VIEs for all periods presented. 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 the Partnership, its subsidiaries, and consolidated VIEs have been eliminated in consolidation. See Note 2 and Note 3 to the Partnership's condensed consolidated financial statements for further disclosures.
Executive Summary
The Partnership was formed in 1998 for the 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, seniors housing and commercial properties. We also invest in GILs, which, similar to MRBs, provide financing for affordable multifamily and seniors housing properties. We expect and believe the interest received on these MRBs and GILs is excludable from gross income for federal income tax purposes. We also invest in other types of securities and investments that may or may not be secured by real estate and may make property loans to multifamily properties which may or may not be financed by MRBs or GILs held by us and may or may not be secured by real estate. We also make JV Equity Investments for the construction, stabilization, and ultimate sale of market-rate multifamily and seniors housing properties. In addition, the Partnership may acquire and hold interests in multifamily, student or senior citizen residential MF Properties.
Business Environment and Current Outlook
The macroeconomic environment remains challenging. The Federal Reserve approved 25-basis point reductions in the Federal Funds rate in September and October 2025, though it indicated that future rate setting decisions will continue to be dependent on relevant data and the balance of employment and inflationary risks. As such, the likelihood of any additional rate reductions in 2025 and 2026 is uncertain. Lower short-term interest rates will lower our borrowing costs in the near term. Longer term interest rates have been volatile in recent quarters due to shifting tariff policies, weak employment data, the partial shutdown of the Federal government, and national debt concerns. We continue to employ our hedging strategies to reduce our exposure to changes in the interest cost on debt financing related to our fixed rate investments.
The borrowers of our MRBs and GILs were all current on contractual debt service payments and we have received no requests for forbearance of contractual debt service payments as of September 30, 2025. However, we have recorded asset-specific provisions for credit losses for affordable multifamily investments totaling approximately $9.9 million for the nine months ended September 30, 2025 across three MRBs, three taxable MRBs and one property loan related to certain multifamily properties in South Carolina.
We believe there continues to be significant unmet demand for affordable multifamily and seniors residential housing in the United States. Government programs that provide direct rental support to residents have not kept up with demand. Therefore, investment programs that promote private sector development and support for affordable housing through MRBs, GILs, tax credits and grant funding to developers, have become more prominent. The types of MRBs and GILs in which we invest offer developers of affordable multifamily housing a low-cost source of construction and/or permanent debt financing.
Current market dynamics related to our market rate multifamily JV Equity Investments are challenging. The San Antonio, TX, Austin, TX, and Huntsville, AL markets experienced record new multifamily unit supply in recent years, peaking in 2024. Rental rates and occupancy have declined as these markets absorb new units, which is putting downward pressure on leasing velocity and net operating income for these properties. We expect rental rates and occupancy to remain under pressure throughout 2025. However, we expect this trend to lessen in 2026 due to limited new construction starts in these markets in 2024 and 2025.
The leasing market pressures noted above have made it more difficult for the respective managing members of our stabilized market rate multifamily JV Equity Investments to sell the properties, resulting in longer than expected investment holding periods and lower sales prices than in 2022 and 2023. In addition, less available and more expensive debt capital have had pronounced effects on property acquisitions by making it harder for potential buyers to obtain attractive financing. Accordingly, we have observed increasing capitalization rates in recent periods resulting in lower property valuations. Historically, the majority of our income from our JV Equity Investments is recognized at the time of sale and is dependent on the sales prices of the related properties. There were no JV Equity Investment property sales in 2024 and we have recognized significantly less investment income and gains on sale from the two JV Equity Investments sold in 2025 as compared to 2022 and 2023. After the current elevated level of new multifamily supply peaks, we expect net rents and occupancy to increase, capitalization rates to decline, and property valuations to increase.
We remain positive on the market rate senior housing segment of the market. We believe market rate seniors housing industry trends, potential resident demographics, and expected returns remain encouraging, so we will continue to evaluate joint venture equity
investment opportunities in the seniors housing segment, though in lower volume than our historical capital allocation to market rate multifamily investments.
Because of the challenges in the market rate multifamily markets, we will be implementing a strategy to reduce our capital allocation to market rate multifamily JV Equity Investments going forward. We and the respective managing members will manage the remaining portfolio of market rate multifamily investments to maximize sales prices and returns to the extent possible, with our return of capital from the sale of these investments to be redeployed into primarily tax-exempt MRB investments. We believe this reallocation of capital will result in increased stability of earnings from the net interest spread on new MRB investments as compared to the transaction-driven income from JV Equity Investments. We also expect the additional MRB investments to increase the proportion of tax-advantaged income allocated to Unitholders in the long term. We expect to continue leveraging Greystone's strong lending relationships across affordable housing, seniors housing, and skilled nursing business lines in identifying MRB investment opportunities.
Summary Financial Results
As of September 30, 2025, we had four reportable segments: (1) Affordable Multifamily Investments, (2) Seniors and Skilled Nursing Investments, (3) Market-Rate Joint Venture Investments and (4) MF Properties. We separately report our consolidation and elimination information because we do not allocate certain items to the segments. All "General and administrative expenses" on the Partnership's condensed consolidated statements of operations are reported within the Affordable Multifamily Investments segment. See Notes 2 and 24 to the Partnership's condensed consolidated financial statements for additional details. The following table presents summary information regarding activity of our segments for the three and nine months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
|
2025 |
Percentage of Total |
2024 |
Percentage of Total |
2025 |
Percentage of Total |
2024 |
Percentage of Total |
|||||||||||||||||||||||||
|
Total revenues |
||||||||||||||||||||||||||||||||
|
Affordable Multifamily Investments |
$ |
19,653 |
90.7 |
% |
$ |
22,201 |
91.2 |
% |
$ |
59,872 |
85.0 |
% |
$ |
62,194 |
90.5 |
% |
||||||||||||||||
|
Seniors and Skilled Nursing Investments |
1,245 |
5.7 |
% |
1,081 |
4.4 |
% |
3,719 |
5.3 |
% |
2,649 |
3.9 |
% |
||||||||||||||||||||
|
Market-Rate Joint Venture Investments |
779 |
3.6 |
% |
1,063 |
4.4 |
% |
6,802 |
9.7 |
% |
3,842 |
5.6 |
% |
||||||||||||||||||||
|
MF Properties |
- |
0.0 |
% |
- |
0.0 |
% |
- |
0.0 |
% |
- |
0.0 |
% |
||||||||||||||||||||
|
Total revenues |
$ |
21,677 |
$ |
24,345 |
$ |
70,393 |
$ |
68,685 |
||||||||||||||||||||||||
|
Net income (loss) |
||||||||||||||||||||||||||||||||
|
Affordable Multifamily Investments |
2,687 |
136.5 |
% |
(3,292 |
) |
71.0 |
% |
$ |
(3,953 |
) |
222.5 |
% |
$ |
9,379 |
83.8 |
% |
||||||||||||||||
|
Seniors and Skilled Nursing Investments |
624 |
31.7 |
% |
(812 |
) |
17.5 |
% |
923 |
-51.9 |
% |
578 |
5.2 |
% |
|||||||||||||||||||
|
Market-Rate Joint Venture Investments |
(1,345 |
) |
-68.3 |
% |
(533 |
) |
11.5 |
% |
1,245 |
-70.1 |
% |
1,166 |
10.4 |
% |
||||||||||||||||||
|
MF Properties |
2 |
0.1 |
% |
2 |
0.0 |
% |
8 |
-0.5 |
% |
68 |
0.6 |
% |
||||||||||||||||||||
|
Net income (loss) |
$ |
1,968 |
$ |
(4,635 |
) |
$ |
(1,777 |
) |
$ |
11,191 |
||||||||||||||||||||||
During the nine months ended September 30, 2025 and 2024, our net income was significantly impacted by unrealized losses on our derivative instrument portfolio, which primarily consists of interest rate swaps. Under the applicable accounting guidance, we report our derivatives at fair value as of each reporting date. The fair value is based on a model that considers observable indices and observable market trades for similar arrangements, such as publicly available current SOFR rates and forward SOFR swap rates. The period-over-period change in the fair value of each derivative that is not directly related to net cash settlements are recorded as unrealized (gains) losses within "Net result from derivative transactions" on our condensed consolidated statements of operations and is included as a component of our reported net income. Unrealized (gains) losses can be significant in periods of significant interest rate volatility. The following table summarizes unrealized (gains) losses for the three and nine months ended September 30, 2025 and 2024 by segment:
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Unrealized (gains) losses from derivatives |
||||||||||||||||
|
Affordable Multifamily Investments |
$ |
663 |
$ |
8,294 |
$ |
5,717 |
$ |
4,301 |
||||||||
|
Seniors and Skilled Nursing Investments |
51 |
1,401 |
1,023 |
580 |
||||||||||||
|
Total unrealized (gains) losses from derivatives |
$ |
714 |
$ |
9,695 |
$ |
6,740 |
$ |
4,881 |
||||||||
Differences between the respective periods is primarily due to market interest rate changes between reporting dates. The 3-year SOFR swap rate is a reasonable proxy for our interest rate swap portfolio as a whole as our derivatives are primarily SOFR-denominated interest rate swaps and the weighted average life of our interest rate swap portfolio is typically between three and four years. The 3-year SOFR swap rate declined 0.70% from 4.05% as of December 31, 2024 to 3.35% as of September 30, 2025, resulting in significant unrealized losses on our interest rate swap portfolio for the nine months ended September 30, 2025. The 3-year SOFR swap rate declined 0.44% from 3.75% as of December 31, 2023 to 3.31% as of September 30, 2024, resulting in significant unrealized losses on our interest rate swap portfolio for the three and nine months ended September 30, 2024.
Though unrealized (gains) losses may impact our reported net income period-to-period, the net cash settlements on our interest rate swaps are less variable. Our interest rate swaps are designed such that changes in the monthly net cash settlements will offset the changes in monthly interest costs on our variable-rate debt financings. Our interest rate swaps are subject to monthly net cash settlements whereby we pay a stated fixed rate and our counterparty pays a variable rate equal to the compounded SOFR rate for the settlement period. If short-term interest rates decline, the interest cost of our variable-rate debt financings will typically decline. Meanwhile, the variable rate payment by the counterparty on our interest rate swap will decline such that our benefit from the monthly net settlement payment will decline.The change in interest cost on our variable-rate debt financing generally offsets the reduced monthly net cash settlement payments associated with the related interest rate swap, such that our net cash flow for the period is not materially impacted by changes in short term interest rate changes. For this reason, we adjust net income for unrealized losses on our derivative instruments when calculating CAD, a non-GAAP performance measure discussed later in this Item 2, which we consider to be a useful measure of our operating performance.
In addition, we recognized asset-specific provisions for credit losses totaling approximately $9.9 million in the Affordable Multifamily Investments segment for the nine months ended September 30, 2025, which significantly impacted our reported net income. These provisions are not realized losses but are based on expectations of credit losses after our evaluation of several factors including current and expected operating results of the underlying properties, borrower financial conditions, and estimated collateral values. See the operational matters section of the Affordable Multifamily Investments section discussion in this Item 2.
Recent Legislative Developments
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), which is a sweeping federal reconciliation package that permanently extends and expands key provisions of the 2017 Tax Cuts and Jobs Act, introduces new tax benefits (including elevated standard deductions, higher state-and-local tax (SALT) caps, and no taxation on tips and overtime income for certain workers), and enacts broad reductions in government spending. The OBBBA contains provisions that may affect the Partnership and its unitholders. For example, the OBBBA affects the LIHTC program by permanently increasing the state allocation for 9% LIHTC properties by 12% and lowering the private activity bond financing threshold from 50% to 25% for 4% LIHTC projects. In sum, the OBBBA is a complex revision to the U.S. federal income tax laws with potentially far-reaching consequences. The OBBBA will require subsequent rulemaking in a number of areas. The long-term impact of the OBBBA on the Partnership, our unitholders, the developers and owners of the properties underlying our MRBs, GILs, and market-rate joint venture investments, and the multifamily real estate industry in general cannot be reliably predicted at this early stage of the new law's implementation. Unitholders are urged to consult with their own tax advisors regarding the impact of the OBBBA to them and their acquisition, ownership, and disposition of the Partnership's units. The Partnership's management continues to evaluate the impact of the OBBBA on the Partnership and its business, financial condition, and results of operations.
Recent Investment Activities
The following table presents information regarding the investment activity of the Partnership for the three and nine months ended September 30, 2025 and 2024:
|
Investment Activity |
# |
Amount |
Retired Debt |
Tier 2 income (loss) |
Notes to the |
|||||||||||
|
For the Three Months Ended September 30, 2025 |
||||||||||||||||
|
Mortgage revenue bond acquisition and advance |
2 |
$ |
14,600 |
N/A |
N/A |
|||||||||||
|
Mortgage revenue bond redemptions and paydown |
3 |
29,015 |
$ |
24,760 |
N/A |
|||||||||||
|
Property loan advance |
1 |
596 |
N/A |
N/A |
||||||||||||
|
Investments in unconsolidated entities |
2 |
383 |
N/A |
N/A |
||||||||||||
|
Taxable mortgage revenue bond acquisition |
1 |
6,000 |
N/A |
N/A |
||||||||||||
|
Taxable governmental issuer loan advance |
1 |
6,280 |
N/A |
N/A |
||||||||||||
|
For the Three Months Ended June 30, 2025 |
||||||||||||||||
|
Mortgage revenue bond acquisitions and advances |
4 |
$ |
23,185 |
N/A |
N/A |
|||||||||||
|
Mortgage revenue bond redemptions |
2 |
27,846 |
$ |
27,846 |
$ |
208 |
||||||||||
|
Governmental issuer loan advance |
1 |
1,570 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan redemption |
1 |
34,620 |
31,155 |
N/A |
||||||||||||
|
Property loan acquisition and advance |
2 |
6,624 |
N/A |
N/A |
||||||||||||
|
Property loan paydown |
1 |
588 |
455 |
N/A |
||||||||||||
|
Investments in unconsolidated entities, net |
7 |
3,053 |
N/A |
N/A |
||||||||||||
|
Return of investment in unconsolidated entity upon sale |
1 |
12,591 |
N/A |
163 |
||||||||||||
|
Taxable mortgage revenue bond acquisition |
1 |
800 |
N/A |
N/A |
||||||||||||
|
Taxable governmental issuer loan advances |
2 |
15,441 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan sale to Construction Lending JV |
1 |
6,500 |
N/A |
N/A |
||||||||||||
|
Taxable governmental issuer loan sale to Construction Lending JV |
1 |
1,000 |
N/A |
N/A |
||||||||||||
|
For the Three Months Ended March 31, 2025 |
||||||||||||||||
|
Mortgage revenue bond advances |
3 |
$ |
14,101 |
N/A |
N/A |
|||||||||||
|
Mortgage revenue bond redemption |
1 |
10,352 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan advances |
3 |
17,409 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan redemptions |
3 |
82,203 |
$ |
67,210 |
N/A |
|||||||||||
|
Property loan paydowns |
2 |
7,798 |
6,185 |
N/A |
||||||||||||
|
Investments in unconsolidated entities, net |
4 |
5,621 |
N/A |
N/A |
||||||||||||
|
Return of investment in unconsolidated entity upon sale |
1 |
11,400 |
N/A |
N/A |
||||||||||||
|
Real estate asset sale proceeds |
1 |
1,354 |
1,354 |
N/A |
||||||||||||
|
Taxable mortgage revenue bond advances |
3 |
7,400 |
N/A |
N/A |
||||||||||||
|
Taxable governmental issuer loan advances |
3 |
21,700 |
N/A |
N/A |
||||||||||||
|
Taxable governmental issuer loan paydowns |
3 |
12,700 |
10,160 |
N/A |
||||||||||||
|
For the Three Months Ended September 30, 2024 |
||||||||||||||||
|
Mortgage revenue bond acquisition and advances |
5 |
$ |
36,503 |
N/A |
N/A |
|||||||||||
|
Mortgage revenue bond redemptions |
3 |
21,980 |
$ |
9,840 |
N/A |
|||||||||||
|
Governmental issuer loan advances |
3 |
16,842 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan redemption and paydown |
2 |
24,697 |
19,750 |
N/A |
||||||||||||
|
Property loan advance |
1 |
500 |
N/A |
N/A |
||||||||||||
|
Property loan redemption |
1 |
8,119 |
6,480 |
N/A |
||||||||||||
|
Investments in unconsolidated entities |
4 |
10,443 |
N/A |
N/A |
||||||||||||
|
Taxable mortgage revenue bond advances |
2 |
4,000 |
N/A |
N/A |
||||||||||||
|
Taxable mortgage revenue bond redemption |
1 |
1,000 |
825 |
N/A |
||||||||||||
|
Taxable governmental issuer loan advance |
1 |
158 |
N/A |
N/A |
||||||||||||
|
For the Three Months Ended June 30, 2024 |
||||||||||||||||
|
Mortgage revenue bond acquisitions and advances |
8 |
$ |
78,375 |
N/A |
N/A |
|||||||||||
|
Mortgage revenue bond sale |
1 |
8,221 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan advances |
3 |
9,000 |
N/A |
N/A |
||||||||||||
|
Property loan acquisition and advance |
2 |
9,321 |
N/A |
N/A |
||||||||||||
|
Property loan redemptions |
2 |
454 |
N/A |
N/A |
||||||||||||
|
Investments in unconsolidated entities |
5 |
11,669 |
N/A |
N/A |
||||||||||||
|
Taxable mortgage revenue bond acquisition and advance |
2 |
5,077 |
N/A |
N/A |
||||||||||||
|
For the Three Months Ended March 31, 2024 |
||||||||||||||||
|
Mortgage revenue bond acquisition and advances |
5 |
$ |
26,298 |
N/A |
N/A |
|||||||||||
|
Governmental issuer loan advances |
3 |
6,000 |
N/A |
N/A |
||||||||||||
|
Governmental issuer loan redemption |
1 |
23,390 |
$ |
18,712 |
N/A |
|||||||||||
|
Property loan advances |
2 |
3,073 |
N/A |
N/A |
||||||||||||
|
Property loan redemptions and paydown |
6 |
72,323 |
60,575 |
N/A |
||||||||||||
|
Investments in unconsolidated entities |
7 |
6,960 |
N/A |
N/A |
||||||||||||
|
Taxable mortgage revenue bond advance |
1 |
1,000 |
N/A |
N/A |
||||||||||||
|
Taxable mortgage revenue bond paydown |
1 |
11,500 |
9,480 |
N/A |
||||||||||||
|
Taxable governmental issuer loan redemption |
1 |
10,573 |
9,515 |
N/A |
||||||||||||
(1)
See "Cash Available for Distribution" in Item 2 below.
Recent Financing Activity
The following table presents information regarding the debt financing, derivatives, Preferred Units and partners' capital activities of the Partnership for the three and nine months ended September 30, 2025 and 2024, exclusive of retired debt amounts listed in the investment activity table above:
|
Financing, Derivative and Capital Activity |
# |
Amount |
Secured |
Notes to the |
||||||||
|
For the Three Months Ended September 30, 2025 |
||||||||||||
|
Paydown on Acquisition LOC |
1 |
$ |
50 |
Yes |
||||||||
|
Net paydown on General LOC |
2 |
2,500 |
Yes |
|||||||||
|
Proceeds from TOB trust financings |
3 |
16,990 |
Yes |
|||||||||
|
Interest rate swap executed |
1 |
- |
N/A |
|||||||||
|
For the Three Months Ended June 30, 2025 |
||||||||||||
|
Net paydown on Acquisition LOC |
1 |
$ |
7,500 |
Yes |
||||||||
|
Net paydown on General LOC |
2 |
$ |
7,000 |
Yes |
||||||||
|
Proceeds from TOB trust financings |
7 |
34,495 |
Yes |
|||||||||
|
For the Three Months Ended March 31, 2025 |
||||||||||||
|
Net paydown on Acquisition LOC |
1 |
$ |
10,352 |
Yes |
||||||||
|
Proceeds from TOB trust financings |
8 |
48,435 |
Yes |
|||||||||
|
Issuance of Series B Preferred Units |
1 |
20,000 |
Yes |
|||||||||
|
For the Three Months Ended September 30, 2024 |
||||||||||||
|
Net paydown on Acquisition LOC |
3 |
$ |
10,850 |
Yes |
||||||||
|
Borrowing on General LOC |
2 |
14,000 |
Yes |
|||||||||
|
Proceeds from TOB trust financings |
9 |
47,985 |
Yes |
|||||||||
|
Interest rate swap executed |
1 |
- |
N/A |
|||||||||
|
For the Three Months Ended June 30, 2024 |
||||||||||||
|
Net borrowing on Acquisition LOC |
6 |
$ |
14,750 |
Yes |
||||||||
|
Net borrowing on General LOC |
1 |
10,000 |
Yes |
|||||||||
|
Proceeds from TOB trust financings |
10 |
75,360 |
Yes |
|||||||||
|
Interest rate swap executed |
2 |
- |
N/A |
|||||||||
|
Redemption of Series A Preferred Units |
1 |
10,000 |
N/A |
|||||||||
|
Proceeds on issuance of BUCs, net of issuance costs |
1 |
439 |
N/A |
N/A |
||||||||
|
For the Three Months Ended March 31, 2024 |
||||||||||||
|
Net paydown on Acquisition LOC |
2 |
$ |
16,900 |
Yes |
||||||||
|
Net activity on General LOC |
2 |
- |
Yes |
|||||||||
|
Proceeds from TOB trust financings |
11 |
63,250 |
Yes |
|||||||||
|
Interest rate swap executed |
1 |
- |
N/A |
|||||||||
|
Issuance of Series B Preferred Units |
1 |
5,000 |
N/A |
|||||||||
|
Exchange of Series A Preferred Units for Series B Preferred Units |
1 |
17,500 |
N/A |
|||||||||
|
Proceeds on issuance of BUCs, net of issuance costs |
1 |
1,055 |
N/A |
N/A |
||||||||
Corporate Responsibility
We are committed to corporate responsibility and the importance of developing environmental, social, and governance policies and practices consistent with that commitment. We believe the implementation and maintenance of such policies and practices benefit the employees that serve the Partnership, support long-term performance for our Unitholders, and have a positive impact on society and the environment.
Environmental Responsibility
Achieving positive environmental and sustainability impacts in connection with our affordable housing investment activity is important to us. Opportunities for positive environmental investments are open to us because private activity bond volume cap and LIHTC allocations are key components of the capital structure for most new construction or acquisition/rehabilitation affordable housing properties financed by our MRB and GIL investments. These resources are allocated by individual states to our property sponsors through a competitive application process under a state-specific QAP as required under Section 42 of the IRC. Each state implements its public policy objectives through an application scoring or ranking system that rewards certain property features. Some of the common features rewarded under individual state QAPs are transit amenities (proximity to various forms of public transportation), proximity to public services (parks, libraries, full scale supermarkets, or a senior center), and energy efficiency/sustainability. Some state-specific QAPs have minimum energy efficiency standards that must be met, such as the use of low water need landscaping, Energy Star appliances and hot water heaters, and GREENGUARD Gold certified insulation. Since we can only finance properties with successful applications, we work with our sponsor clients to maximize these environmental features such that their applications can earn the most points possible under the individual state's QAP. The following table summarizes our total funding commitments related to properties that were awarded both private activity bond cap and LIHTC allocations through state-specific QAPs (inclusive of investments of our Construction Lending JV):
|
Asset Type |
For the Period from January 1, 2022, through September 30, 2025 |
|||
|
MRBs and taxable MRBs |
$ |
233,375,500 |
||
|
GILs, taxable GILs and property loans |
265,051,554 |
|||
|
Total |
$ |
498,427,054 |
||
In 2021, we acquired an MRB investment secured by Meadow Valley, a to-be-constructed 174-bed seniors housing facility in Traverse City, MI. Part of the construction financing is provided through a C-PACE program, which is a state policy-enabled financing mechanism that allows developers to access the capital needed to make renewable energy accessible and cost-effective. In the case of Meadow Valley, C-PACE financing of $24.8 million will be provided to finance energy conservation features including high efficiency windows, roof, walls, heating, cooling, indoor and outdoor lighting, water heating and low-flow fixtures. The C-PACE financing is repaid through a property tax assessment over the life of the property. Many lenders are averse to financing properties with C-PACE financing as the tax assessment is a senior obligation of the property. We have developed underwriting procedures that allow for the borrower to obtain C-PACE financing and still meet our security and underwriting requirements. We will continue to evaluate investment opportunities related to properties that utilize C-PACE financing for future investment as we want to encourage our borrowers to utilize clean energy design and construction practices.
We are committed to minimizing the overall environmental impact of our corporate operations. The Partnership's operations are primarily managed by 17 employees of Greystone Manager, so we have a relatively modest environmental impact and have adequate facilities to grow our employee base without acquiring additional physical space.
Social Responsibility
Our MRB and GIL investments directly support the construction, rehabilitation, and stabilized operation of decent, safe, and sanitary affordable multifamily housing across the United States. The development of affordable multifamily housing has relatively broad legislative support at the federal and state levels. Each of the properties securing our MRB and GIL investments is required to maintain a minimum percentage of units set aside for a combination of very low-income (50% or less of AMI) and low-income (80% or less of AMI) tenants in accordance with IRC guidelines, and the owners of the properties often agree to exceed the minimum IRC requirements. The rent charged to income qualified tenants at MRB or GIL properties is often restricted to a certain percentage of the tenants' income, making them more affordable. For any new MRB or GIL investments associated with a low-income housing tax credit property, restrictions regarding tenant incomes and rents charged to those low-income households are required. In addition, certain borrowers related to our MRB investments are non-profit entities that provide affordable multifamily housing consistent with their charitable purposes. These properties provide valuable housing and support services to both low-income and market-rate tenants and create housing diversity in the geographic and social communities in which they are located.
The following table summarizes, by investment asset class, the number of residential rental units associated with the affordable multifamily properties financed by the Partnership that have some form of tenant income or rent restrictions as evidenced by a regulatory agreement recorded on the local government land records as of September 30, 2025:
|
Number of Units at <=50% AMI |
Number of Units at <=60% AMI |
Number of Units at <=80% AMI |
Total Number of Units |
Affordable Units as % of Total Units |
Number of Properties |
Number of States |
Reported Asset Value |
Percentage of Total Partnership Assets |
||||||||||||||||||||||||
|
MRBs and taxable MRBs |
1,665 |
5,897 |
8,845 |
10,006 |
88 |
% |
66 |
$ |
915,196,797 |
62% |
||||||||||||||||||||||
|
GILs and taxable GILs |
- |
527 |
527 |
527 |
100 |
% |
4 |
165,737,300 |
11% |
|||||||||||||||||||||||
|
Total |
1,665 |
6,424 |
9,372 |
10,533 |
89 |
% |
70 |
$ |
1,080,934,097 |
73% |
||||||||||||||||||||||
Certain investments may be eligible for regulatory credit under the CRA to help meet the credit needs of the communities in which they exist, including low- and moderate-income neighborhoods. See "Community Investments" in this Item 2 below for further information regarding assets of the Partnership the General Partner believes are eligible for regulatory credit under the CRA.
We and Greystone are committed to supporting our workforce. Greystone has implemented evaluation and compensation policies designed to attract, retain, and motivate employees that provide services to the Partnership to achieve superior results. Greystone also provides formal and informal training programs to enhance the skills of employees providing services to the Partnership and to instill Greystone's corporate policies and practices. We are also committed to ensuring the safety of personnel that work for third-party contractors that perform services at properties that underlie our investment assets. Specifically for properties under construction, we consider the safety record of contractors and monitor safety incidents through reviews of independent construction monitoring reports.
Greystone and the Partnership are committed to building a workplace that allows all employees to feel supported and valued, regardless of any identity, by focusing on our culture of 'where people matter' to build belonging. Specific initiatives include training and employee resources groups to support our workforce as well as a formal Culture and Community Committee and Culture and Community Executive Advisory Council to lead and advise all belonging related work, events, and learning. Of the 17 employees of Greystone Manager responsible for the Partnership's operations, three are women and two employees identify as ethnically diverse.
Corporate Governance
Greystone Manager, as the general partner of the Partnership's general partner, is committed to corporate governance that aligns with the interests of our Unitholders and stakeholders. We set high ethical standards for our related employees and partners. We regularly review and update, as appropriate, our policies governing ethical conduct and responsible behavior in order to support our sustainable and continued success. Our Code of Business Conduct and Ethics is applicable to all Greystone personnel that provide services to the Partnership and is available on the Partnership's website. All employees are required to annually affirm that they have read and understood the Code of Business Conduct and Ethics. Employees are encouraged to share any ethics or compliance concerns with their supervisors or confidentially through our third-party managed hotline. We maintain a formal compliance policy to investigate ethics or compliance concerns and to protect whistleblowers. Our policy is designed to meet the requirements and standards of the Sarbanes Oxley Act of 2002 and the Securities and Exchange Act of 1934.
The Board of Managers of Greystone Manager brings a diverse set of skills and experiences across industries in the public, private and not-for-profit sectors. The composition of the Board of Managers is in compliance with the NYSE listing rules and SEC rules applicable to the Partnership. The majority of the members of the Board of Managers meet the independence standards established by the New York Stock Exchange listing rules and the rules of the SEC. All the members of the Audit Committee are independent under the applicable SEC and NYSE independence requirements, two of whom qualify as "audit committee financial experts." Of the seven Managers of Greystone Manager, one Manager is female.
The Board of Managers is highly engaged in the governance and operations of the Partnership. Our non-independent Managers are employees of Greystone that regularly monitor developments in our operating environment and capital markets and discuss such developments with management on a regular basis. One of our Managers is a member of our investment committee that pre-approves all new investments. We regularly monitor and assess risks to achieving our business objectives and such risk assessments are discussed with both the Audit Committee and the full Board of Managers at regularly held meetings and in regular informal discussions. The Audit Committee had 100% attendance at meetings during 2024 and to date in 2025. The Board of Managers had 100% and 95% attendance during 2024 and to date in 2025, respectively.
Results of Operations
The tables and following discussions of our changes in results of operations for the three and nine months ended September 30, 2025 and 2024 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, 2024.
The following table compares our revenue and other income for the periods indicated (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Revenues and Other Income: |
||||||||||||||||||||||||||||||||
|
Investment income |
$ |
18,301 |
$ |
21,821 |
$ |
(3,520 |
) |
-16.1 |
% |
$ |
61,004 |
$ |
60,921 |
$ |
83 |
0.1 |
% |
|||||||||||||||
|
Other interest income |
3,106 |
2,235 |
871 |
39.0 |
% |
7,953 |
7,310 |
643 |
8.8 |
% |
||||||||||||||||||||||
|
Contingent interest income |
- |
- |
- |
N/A |
208 |
- |
208 |
N/A |
||||||||||||||||||||||||
|
Other income |
270 |
289 |
(19 |
) |
-6.6 |
% |
1,229 |
455 |
774 |
170.1 |
% |
|||||||||||||||||||||
|
Gain on sale of real estate assets |
- |
- |
- |
N/A |
- |
64 |
(64 |
) |
N/A |
|||||||||||||||||||||||
|
Gain on sale of mortgage revenue bonds |
- |
- |
- |
N/A |
- |
1,013 |
(1,013 |
) |
N/A |
|||||||||||||||||||||||
|
Gain on sale of investments in unconsolidated entities |
- |
- |
- |
N/A |
201 |
57 |
144 |
252.6 |
% |
|||||||||||||||||||||||
|
Earnings (losses) from investments in unconsolidated entities |
(1,319 |
) |
(704 |
) |
(615 |
) |
87.4 |
% |
(3,078 |
) |
(826 |
) |
(2,252 |
) |
272.6 |
% |
||||||||||||||||
|
Total Revenues and Other Income |
$ |
20,358 |
$ |
23,641 |
$ |
(3,283 |
) |
-13.9 |
% |
$ |
67,517 |
$ |
68,994 |
$ |
(1,477 |
) |
-2.1 |
% |
||||||||||||||
Total Revenues and Other Income comparison for the three months ended September 30, 2025 and 2024
Investment income.The decrease in investment income for the three months ended September 30, 2025 as compared to the same period in 2024 was due to the following factors:
•
A decrease of approximately $2.2 million in interest income due to MRB redemptions and principal repayments, offset by an increase of approximately $1.8 million in interest income from recent MRB advances;
•
A decrease of approximately $3.0 million in interest income due to recent GIL redemptions, offset by an increase of approximately $589,000 in interest income from recent GIL investments;
•
A decrease of approximately $328,000 in interest income due to lower interest rates on variable-rate MRBs;
•
A decrease of approximately $284,000 of investment income related to unconsolidated entities consisting of:
o
A decrease of approximately $723,000 of investment income due to certain investments meeting the maximum guaranteed preferred return during 2024 and 2025; and
o
An increase of approximately $439,000 in investment income related to preferred returns on equity contributions during 2024 and 2025.
Other interest income. Other interest income is comprised primarily of interest income on our property loan, taxable MRB, and taxable GIL investments. The increase in other interest income for the three months ended September 30, 2025 as compared to the same period in 2024 was primarily due to:
•
A net increase of approximately $1.0 million from overall higher average property loan, taxable MRB and taxable GIL investment balances of approximately $53.6 million; and
•
A decrease of approximately $169,000 in other interest income due to less interest earned on cash balances.
Other income.Other income for the three months ended September 30, 2025 and 2024 related to the receipt of non-refundable fees for the extension of various MRB and GIL maturity dates.
Earnings (losses) on investments in unconsolidated entities. The Partnership reports its proportionate share of earnings (losses) on investments in unconsolidated entities using the equity method of accounting. Our JV Equity Investments typically incur operating losses during development and lease-up, particularly from depreciation, consistent with development plans. The increase in losses for the three months ended September 30, 2025 as compared to the same period in 2024 is primarily due to general and administrative expenses at the Jessam at Hays Farm and non-capitalized interest expense at Freestone Greenville, Freestone Cresta Bella, and Freestone Ladera as the properties have begun operations.
Total Revenues and Other Income comparison for the nine months ended September 30, 2025 and 2024
Investment income.Investment income increased slightly for the nine months ended September 30, 2025 as compared to the same period in 2024. The individual factors consisted of the following:
•
An increase of approximately $6.7 million in interest income from recent MRB advances, offset by a decrease of approximately $3.6 million in interest income due to MRB redemptions and principal repayments;
•
A decrease of approximately $7.7 million in interest income due to recent GIL redemptions, offset by an increase of approximately $2.4 million in interest income from recent GIL investments;
•
A decrease of approximately $683,000 in interest income due to lower interest rates and accretion on certain MRBs;
•
An increase of approximately $3.0 million of investment income related to unconsolidated entities consisting of:
o
An increase of approximately $1.9 million of investment income due to a preferred return distribution from Vantage at Loveland in March 2025;
o
An increase of approximately $1.8 million of investment income related to preferred return recognized upon the sale of Vantage at Helotes in May 2025;
o
An increase of approximately $1.5 million in investment income related to preferred returns on equity contributions during 2024 and 2025; and
o
A decrease of approximately $2.2 million of investment income due to certain investments meeting the maximum guaranteed preferred return during 2024 and 2025.
Other interest income. Other interest income is comprised primarily of interest income on our property loan, taxable MRB, and taxable GIL investments. The increase in other interest income for the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily due to:
•
An increase of approximately $3.4 million from recent property loan, taxable MRB and taxable GIL investment advances, offset by a decrease of approximately $2.0 million due to recent property loan, taxable MRB and taxable GIL investment redemptions and principal repayments; and
•
A decrease of approximately $800,000 in other interest income due to less interest earned on cash balances.
Contingent interest income.Contingent interest income for the nine months ended September 30, 2025 related to a premium received upon redemption of the Companion at Thornhill Apartments MRB in June 2025. There was no contingent interest income for the nine months ended September 30, 2024.
Other income.Other income for the nine months ended September 30, 2025 and 2024 related to the receipt of non-refundable fees for the extension of various MRB and GIL maturity dates.
Gain on sale of real estate assets.There was no gain on sale of real estate assets for the nine months ended September 30, 2025. The gain on sale of real estate assets for the nine months ended September 30, 2024 related to final purchase price adjustments for the Suites on Paseo MF Property that was sold in December 2023.
Gain on sale of mortgage revenue bonds.There was no gain on sale for the nine months ended September 30, 2025. The gain on sale of mortgage revenue bond for the nine months ended September 30, 2024 related to the sale of the Brookstone MRB in May 2024.
Gain on sale of investments in unconsolidated entities. The gain on sale for the nine months ended September 30, 2025 related to the sale of Vantage at Helotes in May 2025 for a gain of approximately $163,000 and final settlement of the Vantage at O'Connor and Vantage at Coventry sales that occurred in July 2022 and January 2023, respectively. The gain on sale of investments in unconsolidated entities for the nine months ended September 30, 2024 related to final settlement of the Vantage at Coventry and Vantage at Westover Hills sales that occurred in January 2023 and May 2022, respectively.
Earnings (losses) on investments in unconsolidated entities. The Partnership reports its proportionate share of earnings (losses) on investments in unconsolidated entities using the equity method of accounting. Our JV Equity Investments typically incur operating losses during development and lease-up, particularly from depreciation, consistent with development plans. The increase in losses for the nine months ended September 30, 2025 as compared to the same period in 2024 is primarily due to general and administrative expenses at Valage Senior Living Carson Valley and the Jessam at Hays Farm and non-capitalized interest expense at Freestone Greenville, Freestone Cresta Bella, and Freestone Ladera as the properties have begun operations.
The following table compares our expenses for the periods indicated (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Expenses: |
||||||||||||||||||||||||||||||||
|
Provision for credit losses |
534 |
(226 |
) |
760 |
N/A |
9,415 |
(1,012 |
) |
10,427 |
N/A |
||||||||||||||||||||||
|
Depreciation |
1 |
6 |
(5 |
) |
-83.3 |
% |
8 |
18 |
(10 |
) |
-55.6 |
% |
||||||||||||||||||||
|
Interest expense |
13,140 |
15,489 |
(2,349 |
) |
-15.2 |
% |
41,501 |
44,191 |
(2,690 |
) |
-6.1 |
% |
||||||||||||||||||||
|
Net result from derivative transactions |
(100 |
) |
7,897 |
(7,997 |
) |
N/A |
4,315 |
(256 |
) |
4,571 |
N/A |
|||||||||||||||||||||
|
General and administrative |
4,817 |
5,113 |
(296 |
) |
-5.8 |
% |
14,062 |
14,865 |
(803 |
) |
-5.4 |
% |
||||||||||||||||||||
|
Total Expenses |
$ |
18,392 |
$ |
28,279 |
$ |
(9,887 |
) |
-35.0 |
% |
$ |
69,301 |
$ |
57,806 |
$ |
11,495 |
19.9 |
% |
|||||||||||||||
Total Expenses comparison for the three months ended September 30, 2025 and 2024
Provision for credit losses. The provision for credit losses for the three months ended September 30, 2025 includes an asset-specific allowance of approximately $596,000 related to the Opportunity South Carolina property loan. This asset-specific provision was partially offset by a decrease in our general allowance for credit losses from a decrease in the weighted average life of the remaining investment portfolio.
The decrease in the provision for credit losses for the three months ended September 30, 2024 is primarily due to GIL and property loan redemptions, a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in our model used to estimate the allowance for credit losses.
Depreciation expense. Depreciation expense for the three months ended September 30, 2025 and 2024 related to furniture and equipment owned by the Partnership.
Interest expense. The decrease in interest expense for the three months ended September 30, 2025 as compared to the same period in 2024 was due primarily to the following factors:
•
A decrease of approximately $1.9 million due to lower average interest rates on debt financing; and
•
A decrease of approximately $486,000 due to a decrease in the average outstanding principal of our debt financing instruments of approximately $42.9 million.
Net result from derivative transactions.The net result from derivative transactions consists of realized and unrealized (gains) losses from our derivative financial instruments. Realized (gains) losses represent receipts or payments related to our interest rate swaps during the period. Unrealized (gains) losses are generally a result of changes in current and forward interest rates during the period. Increasing interest rates generally result in unrealized gains while decreasing interest rates generally result in unrealized losses. The following table summarizes the components of this line item for the three months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Realized (gains) losses on derivatives, net |
$ |
(814 |
) |
$ |
(1,798 |
) |
||
|
Unrealized (gains) losses on derivatives, net |
714 |
9,695 |
||||||
|
Net result from derivative transactions |
$ |
(100 |
) |
$ |
7,897 |
|||
Realized gains on derivatives, net, decreased during the three months ended September 30, 2025 as compared to the same period in 2024 due to generally decreasing spot interest rates during 2024 and 2025. Unrealized losses on derivatives, net, decreased during the three months ended September 30, 2025 as compared to the same period in 2024 due to generally more stable rates in 2025 as compared to 2024. See the "Executive Summary" section of this Item 2 for additional discussion.
General and administrative expenses.The decrease in general and administrative expenses for the three months ended September 30, 2025 as compared to the same period in 2024 was primarily due to a decrease of approximately $281,000 in professional and consulting fees.
Total Expenses comparison for the Nine Months Ended September 30, 2025 and 2024
Provision for credit losses.The provision for credit losses for the nine months ended September 30, 2025 includes asset-specific allowances of approximately $1.2 million related to the Opportunity South Carolina property loan and approximately $8.7 million related
to The Park at Sondrio MRB and taxable MRB, The Park at Vietti MRB and taxable MRB, and the Windsor Shores Apartments MRB and taxable MRB. These asset-specific provisions were partially offset by a decline in expected credit losses primarily due to GIL and property loan redemptions and a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in our model used to estimate the allowance for credit losses.
The decrease in the provision for credit losses for the nine months ended September 30, 2024 is primarily due to GIL and property loan redemptions, a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in our model used to estimate the allowance for credit losses. The provision for credit losses for the nine months ended September 30, 2024 also includes the recovery of approximately $169,000 of prior credit losses in connection with final settlement of the bankruptcy estate of the Provision Center 2014-1 MRB.
Depreciation expense. Depreciation expense for the nine months ended September 30, 2025 and 2024 related to furniture and equipment owned by the Partnership.
Interest expense. The decrease in interest expense for the nine months ended September 30, 2025 as compared to the same period in 2024 was due to the following factors:
•
A decrease of approximately $4.6 million due to lower average interest rates on debt financing, net of cash receipts received on interest rate derivatives; and
•
An increase of approximately $2.0 million due to higher average principal outstanding of approximately $34.0 million.
Net result from derivative transactions.The net result from derivative transactions consists of realized and unrealized (gains) losses from our derivative financial instruments. Realized (gains) losses represent receipts or payments related to our interest rate swaps during the period. Unrealized (gains) losses are generally a result of changes in current and forward interest rates during the period. Increasing interest rates generally result in unrealized gains while decreasing interest rates generally result in unrealized losses. The following table summarizes the components of this line item for the nine months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Nine Months Ended September 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Realized (gains) losses on derivatives, net |
$ |
(2,425 |
) |
$ |
(5,137 |
) |
||
|
Unrealized (gains) losses on derivatives, net |
6,740 |
4,881 |
||||||
|
Net result from derivative transactions |
$ |
4,315 |
$ |
(256 |
) |
|||
Realized gains decreased during the nine months ended September 30, 2025 as compared to the same period in 2024 due to generally decreasing spot interest rates during 2024 and 2025. Unrealized losses on derivatives, net, increased during the nine months ended September 30, 2025 as compared to the same period in 2024 due to lower interest rates in 2025 and beyond as compared to forward market interest rates as of September 30, 2024. See the "Executive Summary" section of this Item 2 for additional discussion.
General and administrative expenses.The decrease in general and administrative expenses for the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily due to decreases of approximately $379,000 in employee compensation and benefits, and approximately $543,000 in professional and consulting fees. These decreases were partially offset by an increase of approximately $135,000 in administration fees paid to the General Partner due to higher assets under management.
Income Tax Expense for the three and nine months ended September 30, 2025 and 2024
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 certain property loans and real estate assets. The Greens Hold Co sold its ownership interest in The 50/50 MF Property to an unrelated non-profit organization in December 2022 and deferred a gain on sale of approximately $6.6 million. There was minimal taxable income for the Greens Hold Co for the three and nine months ended September 30, 2025 and 2024.
Cash Available for Distribution - Non-GAAP Financial Measures
The Partnership believes that 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 as computed in accordance with GAAP and adjusts for non-cash expenses or income consisting of depreciation expense, amortization expense related to deferred financing costs, amortization of premiums and discounts, fair value adjustments to derivative instruments, provisions for credit and loan losses, impairments on MRBs, GILs, real estate assets and property loans, deferred income tax expense (benefit) and restricted unit compensation expense. The Partnership also adjusts net income for the Partnership's share of (earnings) losses of investments in unconsolidated entities related to the Market-Rate Joint Venture Investments segment as such amounts are primarily depreciation expenses and development costs that are expected to be recovered upon an exit event. The Partnership also deducts Tier 2 income (see Note 22 to the Partnership's condensed consolidated financial statements) distributable to the General Partner as defined in the Partnership Agreement and distributions and accretion for the Preferred Units. 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 calculated in accordance with GAAP, or any other measures of financial performance presented in accordance with GAAP.
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, 2025 and 2024 (all per BUC amounts are presented giving effect to the BUCs Distributions on a retroactive basis for all periods presented):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Net income (loss) |
$ |
1,968,155 |
$ |
(4,635,707 |
) |
$ |
(1,776,547 |
) |
$ |
11,190,810 |
||||||
|
Unrealized (gains) losses on derivatives, net |
714,077 |
9,695,459 |
6,740,050 |
4,880,661 |
||||||||||||
|
Depreciation expense |
1,335 |
5,967 |
7,523 |
17,900 |
||||||||||||
|
Provision for credit losses (1) |
534,084 |
(226,000 |
) |
9,414,818 |
(843,000 |
) |
||||||||||
|
Amortization of deferred financing costs |
345,384 |
360,349 |
1,114,080 |
1,187,700 |
||||||||||||
|
Restricted unit compensation expense |
747,560 |
564,699 |
1,486,882 |
1,455,581 |
||||||||||||
|
Deferred income taxes |
(1,023 |
) |
(951 |
) |
(785 |
) |
1,271 |
|||||||||
|
Redeemable Preferred Unit distributions and accretion |
(1,029,641 |
) |
(741,476 |
) |
(2,819,969 |
) |
(2,250,194 |
) |
||||||||
|
Tier 2 income allocable to the General Partner (2) |
- |
- |
(92,852 |
) |
- |
|||||||||||
|
Recovery of prior credit loss (3) |
(11,060 |
) |
(17,344 |
) |
51,164 |
(51,844 |
) |
|||||||||
|
Bond premium, discount and acquisition fee amortization, net |
55,880 |
498,983 |
318,728 |
1,337,376 |
||||||||||||
|
(Earnings) losses from investments in unconsolidated entities |
1,320,297 |
704,096 |
3,049,867 |
825,652 |
||||||||||||
|
Total CAD |
$ |
4,645,048 |
$ |
6,208,075 |
$ |
17,492,959 |
$ |
17,751,913 |
||||||||
|
Weighted average number of BUCs outstanding, basic |
23,171,226 |
23,085,261 |
23,171,226 |
23,056,467 |
||||||||||||
|
Net income (loss) per BUC, basic |
$ |
0.03 |
$ |
(0.23 |
) |
$ |
(0.21 |
) |
$ |
0.38 |
||||||
|
Total CAD per BUC, basic |
$ |
0.20 |
$ |
0.27 |
$ |
0.75 |
$ |
0.77 |
||||||||
|
Cash Distributions declared, per BUC |
$ |
0.30 |
$ |
0.37 |
$ |
0.97 |
$ |
1.108 |
||||||||
|
BUCs Distributions declared, per BUC (4) |
$ |
- |
$ |
- |
$ |
- |
$ |
0.07 |
||||||||
(1)
The adjustments reflect the change in allowances for credit losses under the CECL standard which requires the Partnership to update estimates of expected credit losses for its investment portfolio at each reporting date. Credit losses are not reported within CAD until such losses are realized. The provision for credit loss includes asset-specific provisions for credit losses for affordable multifamily investments totaling approximately $596,000 and $9.9 million for the three and nine months ended September 30, 2025, respectively. In connection with the final settlement of the bankruptcy estate of the Provision Center 2014-1 MRB in July 2024, the Partnership recovered approximately $169,000 of its previously recognized allowance credit loss which is not included as an adjustment to net income in the calculation of CAD for the nine months ended September 30, 2024.
(2)
As described in Note 22 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 25% of Tier 2 income due to the General Partner. Tier 2 income for the nine months ended September 30, 2025 related to the gain on sale of Vantage at Helotes and the premium received upon redemption of the Companion at Thornhill Apartments MRB. There was no Tier 2 income for the three months ended September 30, 2025 and 2024 and the nine months ended September 30, 2024
(3)
The Partnership determined there was a recovery of previously recognized impairment recorded for the Live 929 Apartments Series 2022A MRB prior to the adoption of the CECL standard effective January 1, 2023. The Partnership is accreting the recovery of prior credit loss for this MRB into investment income over the term of the MRB consistent with applicable guidance. The accretion of recovery of value, net of adjustments, is presented as a reduction to current CAD as the original provision for credit loss was an addback for CAD calculation purposes in the period recognized.
(4)
The Partnership declared the First Quarter 2024 BUCs Distribution payable in the form of additional BUCs equal to $0.07 per BUC for outstanding BUCs as of the record date of March 28, 2024.
Portfolio Information
The following tables summarize occupancy and other information regarding the properties underlying our various investments. The narrative discussion that follows provides a brief operating analysis of each investment as of and for the nine months ended September 30, 2025 and 2024.
Non-Consolidated Properties - Stabilized
The owners of the following properties either do not meet the definition of a VIE and/or we have evaluated and determined we are not the primary beneficiary of the VIE. As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis. These properties have met the stabilization criteria (see footnote 3 below the table) as of September 30, 2025. Debt service on our MRBs for the non-consolidated stabilized properties was current as of September 30, 2025. The amounts presented below were obtained from records provided by the property owners and their related property management service providers.
|
Number |
Physical Occupancy (1) |
Economic Occupancy (2) |
||||||||||||||||||||
|
Property Name |
State |
2025 |
2025 |
2024 |
2025 |
2024 |
||||||||||||||||
|
MRB Multifamily Properties-Stabilized (3) |
||||||||||||||||||||||
|
CCBA Senior Garden Apartments |
CA |
45 |
98 |
% |
93 |
% |
92 |
% |
102 |
% |
||||||||||||
|
Courtyard |
CA |
108 |
100 |
% |
98 |
% |
92 |
% |
95 |
% |
||||||||||||
|
Glenview Apartments |
CA |
88 |
95 |
% |
95 |
% |
88 |
% |
90 |
% |
||||||||||||
|
Harden Ranch (4) |
CA |
100 |
97 |
% |
99 |
% |
94 |
% |
97 |
% |
||||||||||||
|
Harmony Court Bakersfield |
CA |
96 |
98 |
% |
96 |
% |
94 |
% |
95 |
% |
||||||||||||
|
Harmony Terrace |
CA |
136 |
98 |
% |
97 |
% |
123 |
% |
131 |
% |
||||||||||||
|
Las Palmas II |
CA |
81 |
100 |
% |
100 |
% |
92 |
% |
98 |
% |
||||||||||||
|
Montclair Apartments |
CA |
80 |
100 |
% |
98 |
% |
94 |
% |
99 |
% |
||||||||||||
|
Montecito at Williams Ranch Apartments |
CA |
132 |
93 |
% |
98 |
% |
97 |
% |
109 |
% |
||||||||||||
|
Montevista |
CA |
82 |
96 |
% |
99 |
% |
96 |
% |
105 |
% |
||||||||||||
|
Ocotillo Springs |
CA |
75 |
97 |
% |
100 |
% |
99 |
% |
100 |
% |
||||||||||||
|
San Vicente |
CA |
50 |
100 |
% |
100 |
% |
95 |
% |
97 |
% |
||||||||||||
|
Santa Fe Apartments |
CA |
89 |
89 |
% |
97 |
% |
87 |
% |
97 |
% |
||||||||||||
|
Seasons at Simi Valley |
CA |
69 |
99 |
% |
96 |
% |
113 |
% |
121 |
% |
||||||||||||
|
Seasons Lakewood |
CA |
85 |
100 |
% |
99 |
% |
100 |
% |
109 |
% |
||||||||||||
|
Seasons San Juan Capistrano |
CA |
112 |
100 |
% |
95 |
% |
97 |
% |
101 |
% |
||||||||||||
|
Solano Vista |
CA |
96 |
96 |
% |
97 |
% |
87 |
% |
91 |
% |
||||||||||||
|
Summerhill |
CA |
128 |
98 |
% |
96 |
% |
92 |
% |
98 |
% |
||||||||||||
|
Sycamore Walk |
CA |
112 |
99 |
% |
100 |
% |
88 |
% |
94 |
% |
||||||||||||
|
The Village at Madera |
CA |
75 |
99 |
% |
96 |
% |
101 |
% |
104 |
% |
||||||||||||
|
Tyler Park Townhomes (4) |
CA |
88 |
98 |
% |
98 |
% |
100 |
% |
98 |
% |
||||||||||||
|
Vineyard Gardens |
CA |
62 |
100 |
% |
98 |
% |
105 |
% |
105 |
% |
||||||||||||
|
Wellspring Apartments |
CA |
88 |
92 |
% |
99 |
% |
103 |
% |
82 |
% |
||||||||||||
|
Westside Village Market |
CA |
81 |
100 |
% |
99 |
% |
96 |
% |
98 |
% |
||||||||||||
|
Handsel Morgan Village Apartments (5) |
GA |
45 |
100 |
% |
n/a |
n/a |
n/a |
|||||||||||||||
|
Renaissance |
LA |
208 |
87 |
% |
84 |
% |
80 |
% |
83 |
% |
||||||||||||
|
Live 929 Apartments |
MD |
575 |
92 |
% |
90 |
% |
94 |
% |
78 |
% |
||||||||||||
|
Jackson Manor Apartments |
MS |
60 |
100 |
% |
98 |
% |
94 |
% |
94 |
% |
||||||||||||
|
Silver Moon (6) |
NM |
151 |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||
|
Village at Avalon |
NM |
240 |
96 |
% |
99 |
% |
91 |
% |
98 |
% |
||||||||||||
|
Columbia Gardens (4) |
SC |
188 |
80 |
% |
86 |
% |
81 |
% |
88 |
% |
||||||||||||
|
Village at River's Edge |
SC |
124 |
94 |
% |
90 |
% |
85 |
% |
92 |
% |
||||||||||||
|
Willow Run (4) |
SC |
200 |
83 |
% |
87 |
% |
75 |
% |
89 |
% |
||||||||||||
|
Avistar at Copperfield |
TX |
192 |
90 |
% |
96 |
% |
85 |
% |
89 |
% |
||||||||||||
|
Avistar at the Crest |
TX |
200 |
83 |
% |
97 |
% |
81 |
% |
89 |
% |
||||||||||||
|
Avistar at the Oaks |
TX |
156 |
79 |
% |
94 |
% |
69 |
% |
87 |
% |
||||||||||||
|
Avistar at the Parkway |
TX |
236 |
69 |
% |
88 |
% |
66 |
% |
73 |
% |
||||||||||||
|
Avistar at Wilcrest |
TX |
88 |
78 |
% |
90 |
% |
73 |
% |
84 |
% |
||||||||||||
|
Avistar at Wood Hollow |
TX |
409 |
88 |
% |
86 |
% |
69 |
% |
77 |
% |
||||||||||||
|
Avistar in 09 |
TX |
133 |
84 |
% |
96 |
% |
81 |
% |
91 |
% |
||||||||||||
|
Avistar on the Boulevard |
TX |
344 |
68 |
% |
82 |
% |
69 |
% |
77 |
% |
||||||||||||
|
Avistar on the Hills |
TX |
129 |
77 |
% |
91 |
% |
67 |
% |
85 |
% |
||||||||||||
|
Bruton Apartments |
TX |
264 |
76 |
% |
78 |
% |
45 |
% |
59 |
% |
||||||||||||
|
Concord at Gulfgate |
TX |
288 |
87 |
% |
90 |
% |
80 |
% |
86 |
% |
||||||||||||
|
Concord at Little York |
TX |
276 |
80 |
% |
83 |
% |
68 |
% |
77 |
% |
||||||||||||
|
Concord at Williamcrest |
TX |
288 |
81 |
% |
91 |
% |
77 |
% |
84 |
% |
||||||||||||
|
Crossing at 1415 |
TX |
112 |
76 |
% |
85 |
% |
72 |
% |
84 |
% |
||||||||||||
|
Decatur Angle |
TX |
302 |
90 |
% |
81 |
% |
67 |
% |
63 |
% |
||||||||||||
|
Esperanza at Palo Alto |
TX |
322 |
90 |
% |
86 |
% |
67 |
% |
73 |
% |
||||||||||||
|
Heights at 515 |
TX |
96 |
79 |
% |
90 |
% |
77 |
% |
85 |
% |
||||||||||||
|
Heritage Square |
TX |
204 |
74 |
% |
94 |
% |
71 |
% |
86 |
% |
||||||||||||
|
Oaks at Georgetown |
TX |
192 |
95 |
% |
90 |
% |
60 |
% |
82 |
% |
||||||||||||
|
15 West Apartments |
WA |
120 |
97 |
% |
99 |
% |
94 |
% |
98 |
% |
||||||||||||
|
MRB Seniors Housing and Skilled Nursing Properties-Stabilized (3) |
||||||||||||||||||||||
|
Village Point (7) |
NJ |
120 |
(7) |
86 |
% |
85 |
% |
n/a |
n/a |
|||||||||||||
|
8,420 |
87.8 |
% |
90.9 |
% |
80.8 |
% |
85.9 |
% |
||||||||||||||
(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 a period after construction completion or completion of the rehabilitation.
(4)
The physical occupancy and economic occupancy amounts are based on the latest available occupancy and financial information, which is as of June 30, 2025.
(5)
Physical and economic occupancy information is not available for the periods indicated as the related investment was recently acquired or is otherwise unavailable.
(6)
The MRB is defeased and as such, the Partnership does not report property occupancy information.
(7)
Village Point is a skilled nursing property with 120 beds in 92 units. Physical occupancy is based on the daily average of beds occupied during the last month of the period. Economic occupancy is not reported for skilled nursing properties.
Comparison of the nine months ended September 30, 2025 and 2024
Physical occupancy as of September 30, 2025 decreased from the same period in 2024 due primarily to occupancy declines at various properties located in Texas - primarily in San Antonio and Houston. These markets have experienced large increases in the supply of available multifamily units in recent periods. Overall higher vacancy levels in these markets is putting pressure on leasing at the properties related to our MRBs. We observed new construction starts in these markets declined sharply starting in late 2023 in San Antonio and mid-2024 in Austin and we expect that occupancy will recover once available units are absorbed and new supply deliveries decline in the near term. The overall physical occupancy for Texas properties as of September 30, 2025 is slightly lower than physical occupancy as of June 30, 2025 due to these market factors. The borrowers are still current on MRB debt service. If there are continuing declines in operating results of the properties such that the borrowers are unable to make contractual principal and interest payments on our MRBs, we may receive forbearance requests or experience MRB defaults. We may choose to provide support to the borrowers through supplemental property loans to prevent such MRB defaults, which will be considered on a case-by-case basis. We will continue to monitor results and discuss property operations with the individual borrowers.
Economic occupancy for the nine months ended September 30, 2025 decreased from the same period in 2024 due primarily to decreases in rental revenue at various properties in Texas as a result of the declines in physical occupancy noted above. The overall economic occupancy for Texas properties as of September 30, 2025 is lower than June 30, 2025 due to downward pressure on rental rates from high local competition. Elsewhere, Willow Run reported a large decline in economic occupancy due to significant bad debts recognized in the first quarter of 2025. Such declines were partially offset by improving economic occupancy at Live 929 Apartments as a result of higher physical occupancy.
Decatur Angle and Bruton Apartments continue to report low physical and economic occupancy, though Decatur Angle occupancy has improved during 2025. The properties are continuing to remove non-paying tenants now that local regulations permit tenant evictions. The removals have resulted in higher than historical bad debt write-offs, declines in physical occupancy, and high repairs and maintenance costs to ready units to be leased to new tenants. Bruton Apartments has also experienced an increase in local crime, which the borrower is actively working to deter. We continue to monitor and discuss property operations with the individual borrowers to assess progress towards resolving performance issues.
Restricted rents at affordable multifamily properties are tied to changes in AMI, which has generally been increasing in the United States as overall wages increased significantly in 2021 through 2024. AMI is updated on a one-year lag, so restricted rental rates will increase on a similar lag and is realized upon annual lease renewals. On an overall basis, we noted same-property maximum rental income amounts increased 5.8% during the nine months ended September 30, 2025 as compared to the same period in 2024, which is higher than average historical annual rent increases. However, we observed a decrease in same-property net rental revenue of 0.3% during the nine months ended September 30, 2025 as compared to the same period in 2024 due to lower physical occupancy.
Non-Consolidated Properties - Not Stabilized
The owners of the following residential properties do not meet the definition of a VIE and/or we have evaluated and determined we are not the primary beneficiary of each VIE. As a result, we do not report the assets, liabilities and results of operations of these properties on a consolidated basis. As of September 30, 2025, these residential properties have not met the stabilization criteria (see footnote 3 below the table). As of September 30, 2025, debt service on the Partnership's MRBs and GILs for the non-consolidated, non-stabilized properties was current. The amounts presented below were obtained from records provided by the property owners and their related property management service providers.
|
Number |
Physical Occupancy (1) |
Economic Occupancy (2) |
||||||||||||||||||||
|
Property Name |
State |
2025 |
2025 |
2024 |
2025 |
2024 |
||||||||||||||||
|
MRB Multifamily Properties-Non Stabilized (3) |
||||||||||||||||||||||
|
Residency at the Mayer (4) |
CA |
79 |
68 |
% |
n/a |
n/a |
n/a |
|||||||||||||||
|
MaryAlice Circle Apartments (4) |
GA |
98 |
81 |
% |
66 |
% |
68 |
% |
n/a |
|||||||||||||
|
Woodington Gardens Apartments |
MD |
197 |
93 |
% |
94 |
% |
91 |
% |
92 |
% |
||||||||||||
|
The Ivy Apartments |
SC |
212 |
83 |
% |
87 |
% |
57 |
% |
71 |
% |
||||||||||||
|
The Park at Sondrio Apartments |
SC |
271 |
75 |
% |
77 |
% |
68 |
% |
59 |
% |
||||||||||||
|
The Park at Vietti Apartments |
SC |
204 |
89 |
% |
94 |
% |
79 |
% |
71 |
% |
||||||||||||
|
Windsor Shores Apartments |
SC |
176 |
83 |
% |
90 |
% |
80 |
% |
79 |
% |
||||||||||||
|
Agape Helotes (4), (5) |
TX |
288 |
82 |
% |
n/a |
84 |
% |
n/a |
||||||||||||||
|
Aventine Apartments (4), (5) |
WA |
68 |
91 |
% |
91 |
% |
84 |
% |
n/a |
|||||||||||||
|
The Safford (4) |
AZ |
200 |
100 |
% |
n/a |
n/a |
n/a |
|||||||||||||||
|
40rty on Colony - Series P (4) |
CA |
40 |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||
|
Residency at Empire (4) |
CA |
148 |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||
|
Residency at the Entrepreneur (4) |
CA |
200 |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||
|
Village at Hanford Square (4) |
CA |
100 |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||
|
2,281 |
||||||||||||||||||||||
|
MRB Seniors Housing and Skilled Nursing Properties-Non Stabilized (3) |
||||||||||||||||||||||
|
Meadow Valley (4) |
MI |
174 |
(6) |
76 |
% |
n/a |
n/a |
n/a |
||||||||||||||
|
GIL Multifamily Properties-Non Stabilized (3) |
||||||||||||||||||||||
|
Poppy Grove I (4) |
CA |
147 |
99 |
% |
n/a |
n/a |
n/a |
|||||||||||||||
|
Poppy Grove II (4) |
CA |
82 |
89 |
% |
n/a |
n/a |
n/a |
|||||||||||||||
|
Poppy Grove III (4) |
CA |
158 |
47 |
% |
n/a |
n/a |
n/a |
|||||||||||||||
|
Sandy Creek Apartments |
TX |
140 |
99 |
% |
100 |
% |
96 |
% |
86 |
% |
||||||||||||
|
527 |
||||||||||||||||||||||
|
Grand total |
2,982 |
|||||||||||||||||||||
(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)
The property is not considered stabilized as it has not met the criteria for stabilization. A property is considered stabilized once construction and/or rehabilitation is complete, it reaches 90% physical occupancy for 90 days, and it achieves 1.15 times debt service coverage ratio on amortizing debt service for a certain period.
(4)
Physical and economic occupancy information is not available for the periods indicated as the related investment was under construction or rehabilitation, or was recently acquired.
(5)
The physical occupancy and economic occupancy amounts are based on the latest available occupancy and financial information, which is as of June 30, 2025.
(6)
Meadow Valley is a seniors housing property with 174 beds in 154 units.
As September 30, 2025, four MRB multifamily properties were under construction or recently acquired and have no operating metrics to report. Agape Helotes is continuing its conversion from market-rate units to rent-restricted units after purchase of the property by a non-profit entity in May 2025. The remaining nine MRB multifamily properties and one MRB seniors housing property are currently undergoing either or both rehabilitation and construction phases. Property manager changes have been implemented at The Park at Sondrio Apartments, The Park at Vietti Apartments and Windsor Shores Apartments in an effort to improve occupancy and overall performance in the near term.
As of September 30, 2025, Poppy Grove I, Poppy Grove II, and Poppy Grove III have substantially completed construction and are in lease-up. Sandy Creek Apartments stabilized and was redeemed in October 2025.
JV Equity Investments
We are a noncontrolling equity investor in various unconsolidated entities formed for the purpose of constructing market-rate, multifamily real estate properties. The Partnership determined the JV Equity Investments are VIEs but that the Partnership is not the primary beneficiary. As a result, the Partnership does not report the assets, liabilities and results of operations of these properties on a consolidated basis. The one exception is Vantage at San Marcos, for which the Partnership is deemed the primary beneficiary and reports the entity's assets and liabilities on a consolidated basis. Our JV Equity Investments entitle us to shares of certain cash flows generated by the entities from operations and upon the occurrence of certain capital transactions, such as a refinance or sale. The amounts presented below were obtained from records provided by the property management service providers.
|
Physical Occupancy (1) |
||||||||||||||||||||||||||
|
Property Name |
State |
Construction Completion Date |
Planned Number of Units |
2025 |
2024 |
Revenue for the three months ended September 30, 2025 (2) |
Sale Date |
Per-unit |
||||||||||||||||||
|
Most Recent Property Sales |
||||||||||||||||||||||||||
|
Vantage at Stone Creek |
NE |
April 2020 |
n/a |
n/a |
n/a |
n/a |
January 2023 |
196,000 |
||||||||||||||||||
|
Vantage at Coventry |
NE |
February 2021 |
n/a |
n/a |
n/a |
n/a |
January 2023 |
180,000 |
||||||||||||||||||
|
Vantage at Conroe |
TX |
January 2021 |
n/a |
n/a |
n/a |
n/a |
June 2023 |
174,000 |
||||||||||||||||||
|
Vantage at Tomball |
TX |
April 2022 |
n/a |
n/a |
n/a |
n/a |
January 2025 |
148,000 |
||||||||||||||||||
|
Vantage at Helotes |
TX |
November 2022 |
n/a |
n/a |
n/a |
n/a |
May 2025 |
170,000 |
||||||||||||||||||
|
Operating Properties |
||||||||||||||||||||||||||
|
Vantage at Fair Oaks |
TX |
May 2023 |
288 |
93 |
% |
90 |
% |
$ |
1,083,742 |
n/a |
n/a |
|||||||||||||||
|
Vantage at Hutto |
TX |
December 2023 |
288 |
87 |
% |
94 |
% |
1,063,810 |
n/a |
n/a |
||||||||||||||||
|
Vantage at McKinney Falls |
TX |
July 2024 |
288 |
82 |
% |
46 |
% |
870,755 |
n/a |
n/a |
||||||||||||||||
|
Vantage at Loveland |
CO |
October 2024 |
288 |
90 |
% |
28 |
% |
1,067,560 |
n/a |
n/a |
||||||||||||||||
|
Freestone Cresta Bella |
TX |
November 2024 |
296 |
69 |
% |
2 |
% |
765,999 |
n/a |
n/a |
||||||||||||||||
|
Valage Senior Living Carson Valley |
NV |
April 2025 |
102 |
(3) |
58 |
% |
n/a |
1,275,524 |
n/a |
n/a |
||||||||||||||||
|
Freestone Greenville |
TX |
September 2025 |
300 |
13 |
% |
n/a |
93,091 |
n/a |
n/a |
|||||||||||||||||
|
Properties Under Construction |
||||||||||||||||||||||||||
|
The Jessam at Hays Farm |
AL |
n/a |
318 |
6 |
% |
n/a |
29,971 |
n/a |
n/a |
|||||||||||||||||
|
Freestone Ladera |
TX |
n/a |
288 |
1 |
% |
n/a |
n/a |
n/a |
n/a |
|||||||||||||||||
|
Properties in Planning |
||||||||||||||||||||||||||
|
Vantage at San Marcos (4) |
TX |
n/a |
288 |
n/a |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||||
|
Freestone Greeley |
CO |
n/a |
296 |
n/a |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||||
|
3,040 |
||||||||||||||||||||||||||
(1)
Physical occupancy is defined as the total number of units occupied divided by total units at the date of measurement.
(2)
Revenue is attributable to the property underlying the Partnership's equity investment and is not included in the Partnership's income.
(3)
Valage Senior Living Carson Valley is a seniors housing property with 102 beds in 88 units.
(4)
The property is reported as a consolidated VIE as of September 30, 2025 (see Note 3 to the Partnership's condensed consolidated financial statements).
Vantage at Hutto occupancy declined from the prior year due to the loss of a corporate tenant. The property management team is working to lease the now vacant units.
Vantage at McKinney Falls, Vantage at Loveland, Freestone Cresta Bella, Valage Senior Living Carson Valley, and Freestone Greenville have completed construction and commenced leasing activities in March 2024, May 2024, September 2024, April 2025, and April 2025, respectively. All properties achieving increasing occupancy during the third quarter.
The Jessam at Hays Farm and Freestone Ladera are nearing construction completion and began leasing activities in April 2025 and July 2025, respectively.
Affordable Multifamily 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 area. We have also invested in taxable MRBs, GILs, taxable GILs and property loans which are included within this segment. All "General and administrative expenses" on our condensed consolidated statements of operations are reported within this segment.
Our MRBs, taxable MRBs, GILs, taxable GILs and certain property loans are secured by a mortgage or deed of trust. Property loans related to multifamily properties are also included in this segment and may or may not be secured by a mortgage or deed of trust.
We report the Partnership's proportionate share of earnings from our Construction Lending JV within this segment. The first capital call and investment for the Construction Lending JV occurred in April 2025.
The following table compares operating results for the Affordable Multifamily Investments segment for the periods indicated (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Affordable Multifamily Investments |
||||||||||||||||||||||||||||||||
|
Total revenues |
$ |
19,653 |
$ |
22,201 |
$ |
(2,548 |
) |
-11.5 |
% |
$ |
59,872 |
$ |
62,194 |
$ |
(2,322 |
) |
-3.7 |
% |
||||||||||||||
|
Expenses: |
||||||||||||||||||||||||||||||||
|
Provision for credit losses |
536 |
(228 |
) |
764 |
-335.1 |
% |
9,411 |
(1,229 |
) |
10,640 |
-865.7 |
% |
||||||||||||||||||||
|
Depreciation expense |
1 |
6 |
(5 |
) |
-83.3 |
% |
8 |
18 |
(10 |
) |
-55.6 |
% |
||||||||||||||||||||
|
Interest expense |
11,674 |
13,931 |
(2,257 |
) |
-16.2 |
% |
36,764 |
40,553 |
(3,789 |
) |
-9.3 |
% |
||||||||||||||||||||
|
Net result from derivative transactions |
(61 |
) |
6,672 |
(6,733 |
) |
-100.9 |
% |
3,552 |
(379 |
) |
3,931 |
-1037.2 |
% |
|||||||||||||||||||
|
General and administrative expenses |
4,817 |
5,113 |
(296 |
) |
-5.8 |
% |
14,062 |
14,865 |
(803 |
) |
-5.4 |
% |
||||||||||||||||||||
|
Total expenses |
16,967 |
25,494 |
(8,527 |
) |
-33.4 |
% |
63,797 |
53,828 |
9,969 |
18.5 |
% |
|||||||||||||||||||||
|
Other income: |
||||||||||||||||||||||||||||||||
|
Gain on sale of mortgage revenue bonds |
- |
- |
- |
N/A |
- |
1,013 |
(1,013 |
) |
N/A |
|||||||||||||||||||||||
|
Earnings (losses) from investments in unconsolidated entities |
1 |
- |
1 |
N/A |
(28 |
) |
- |
(28 |
) |
N/A |
||||||||||||||||||||||
|
Segment net income (loss) |
$ |
2,687 |
$ |
(3,293 |
) |
$ |
5,980 |
-181.6 |
% |
$ |
(3,953 |
) |
$ |
9,379 |
$ |
(13,332 |
) |
-142.1 |
% |
|||||||||||||
Comparison of the Three Months Ended September 30, 2025 and 2024
Total revenues decreased for the three months ended September 30, 2025 as compared to the same period in 2024 primarily due to:
•
A decrease of approximately $2.2 million in interest income due to MRB redemptions and principal repayments, offset by an increase of approximately $1.6 million in interest income from recent MRB advances;
•
A decrease of approximately $3.0 million in interest income due to recent GIL redemptions, offset by an increase of approximately $589,000 in interest income from recent GIL investments;
•
An increase of approximately $1.0 million in other interest income from higher average property loan, taxable MRB and taxable GIL investment balances of approximately $53.4 million;
•
A decrease of approximately $328,000 in interest income due to lower interest rates on variable-rate MRBs; and
•
A decrease of approximately $169,000 in other interest income due to less interest earned on cash balances.
The provision for credit losses for the three months ended September 30, 2025 includes an asset-specific allowance of approximately $596,000 related to the Opportunity South Carolina property loan. This asset-specific provision was partially offset by a decrease in our general allowance for credits losses from a decrease in the weighted average life of the remaining investment portfolio.
The decrease in the provision for credit losses for the three months ended September 30, 2024 is primarily due to GIL and property loan redemptions, a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in our model used to estimate the allowance for credit losses.
Total interest expense decreased for the three months ended September 30, 2025 as compared to the same period in 2024 primarily due to:
•
A decrease of approximately $1.5 million due to lower average interest rates on our debt financings; and
•
An decrease of approximately $778,000 due to an decrease in the average outstanding principal of our debt financing instruments of approximately $51.6 million.
Net result from derivative transactions consists of realized and unrealized (gains) losses from our derivative financial instruments. Realized (gains) losses represent receipts or payments related to our interest rate swaps during the period. Unrealized (gains) losses are generally a result of changes in current and forward interest rates during the period. Increasing interest rates generally result in unrealized gains while decreasing interest rates generally result in unrealized losses. The following table summarizes the components of this line item for the three months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Realized (gains) losses on derivatives, net |
$ |
(724 |
) |
$ |
(1,622 |
) |
||
|
Unrealized (gains) losses on derivatives, net |
663 |
8,294 |
||||||
|
Net result from derivative transactions |
$ |
(61 |
) |
$ |
6,672 |
|||
Realized gains on derivatives, net, decreased during the three months ended September 30, 2025 as compared to the same period in 2024 due to generally decreasing spot interest rates during 2024 and 2025. Unrealized losses on derivatives, net, decreased during the three months ended September 30, 2025 as compared to the same period in 2024 due to generally more stable market interest rates in 2025 as compared to 2024. See the "Executive Summary" section of this Item 2 for additional discussion.
The decrease in general and administrative expenses for the three months ended September 30, 2025 as compared to the same period in 2024 was primarily due to a decrease of approximately $281,000 in professional and consulting fees.
Earnings (losses) from investments in unconsolidated entities represent our proportionate share of net loss of the Construction Lending JV for the period. The Construction Lending JV began activities in April 2025.
The following table summarizes the segment's net interest income, average principal 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 months ended September 30, 2025 and 2024. The average balances are based primarily on monthly averages during the respective periods. All dollar amounts are in thousands.
|
For the Three Months Ended September 30, |
|||||||||||||||||||||||||
|
2025 |
2024 |
||||||||||||||||||||||||
|
Average |
Interest |
Average |
Average |
Interest |
Average |
||||||||||||||||||||
|
Interest-earning assets: |
|||||||||||||||||||||||||
|
Mortgage revenue bonds |
$ |
921,108 |
$ |
14,344 |
6.2 |
% |
$ |
916,725 |
$ |
15,319 |
6.7 |
% |
(1) |
||||||||||||
|
Governmental issuer loans |
121,858 |
2,122 |
7.0 |
% |
217,519 |
4,549 |
8.4 |
% |
|||||||||||||||||
|
Property loans |
48,361 |
912 |
7.5 |
% |
54,152 |
1,007 |
7.4 |
% |
|||||||||||||||||
|
Other investments |
82,820 |
1,566 |
7.6 |
% |
23,622 |
429 |
7.3 |
% |
|||||||||||||||||
|
Total interest-earning assets |
$ |
1,174,147 |
$ |
18,944 |
6.5 |
% |
$ |
1,212,018 |
$ |
21,304 |
7.0 |
% |
|||||||||||||
|
Other income |
270 |
289 |
|||||||||||||||||||||||
|
Non-investment income |
439 |
608 |
|||||||||||||||||||||||
|
Total revenues |
$ |
19,653 |
$ |
22,201 |
|||||||||||||||||||||
|
Interest-bearing liabilities: |
|||||||||||||||||||||||||
|
Lines of credit |
$ |
975 |
$ |
47 |
19.3 |
% |
$ |
7,513 |
$ |
185 |
9.8 |
% |
|||||||||||||
|
Fixed TEBS financing |
225,634 |
2,250 |
4.0 |
% |
237,776 |
2,381 |
4.0 |
% |
|||||||||||||||||
|
Fixed TEBS Residual financing |
47,303 |
846 |
7.2 |
% |
61,164 |
1,096 |
7.2 |
% |
|||||||||||||||||
|
Variable TEBS financing |
- |
- |
N/A |
65,775 |
761 |
4.6 |
% |
||||||||||||||||||
|
Fixed 2024 PFA Securitization Financing |
57,683 |
702 |
4.9 |
% |
- |
- |
N/A |
||||||||||||||||||
|
Fixed Term TOB financing |
- |
- |
N/A |
12,677 |
201 |
6.3 |
% |
||||||||||||||||||
|
Variable TOB financing |
645,631 |
7,533 |
4.7 |
% |
643,943 |
9,020 |
5.6 |
% |
|||||||||||||||||
|
Realized gains on interest rate swaps, net |
N/A |
(724 |
) |
N/A |
N/A |
(1,636 |
) |
N/A |
|||||||||||||||||
|
Total interest-bearing liabilities |
$ |
977,226 |
$ |
10,654 |
4.4 |
% |
$ |
1,028,848 |
$ |
12,008 |
4.7 |
% |
|||||||||||||
|
Net interest spread (2) |
$ |
8,290 |
2.8 |
% |
$ |
9,296 |
3.1 |
% |
|||||||||||||||||
|
Interest expense on interest-bearing |
11,378 |
13,644 |
|||||||||||||||||||||||
|
Amortization of deferred finance costs |
296 |
287 |
|||||||||||||||||||||||
|
Total interest expense |
$ |
11,674 |
$ |
13,931 |
|||||||||||||||||||||
(1)
Interest income includes $1.1 million of discount accretion on the Southpark MRB upon redemption at par in the third quarter of 2024. Excluding this item, the average interest rate was 6.2%.
(2)
Net interest spread equals interest income less interest expense, excluding amortization of deferred finance costs, and adjusted for realized (gains) losses on derivative instruments.
The following table summarizes the changes in interest income and interest expense for the three months ended September 30, 2025 and 2024, and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, and 2) changes in the interest rates of the interest-earning assets and interest-bearing liabilities. All dollar amounts are in thousands.
|
For the Three Months Ended September 30, 2025 vs. 2024 |
|||||||||||||
|
Total |
Volume |
Rate |
|||||||||||
|
Interest-earning assets: |
|||||||||||||
|
Mortgage revenue bonds |
$ |
(975 |
) |
$ |
73 |
$ |
(1,048 |
) |
(1) |
||||
|
Governmental issuer loans |
(2,427 |
) |
(2,001 |
) |
(426 |
) |
|||||||
|
Property loans |
(95 |
) |
(108 |
) |
13 |
||||||||
|
Other investments |
1,137 |
1,075 |
62 |
||||||||||
|
Total interest-earning assets |
$ |
(2,360 |
) |
$ |
(961 |
) |
$ |
(1,399 |
) |
||||
|
Interest-bearing liabilities: |
|||||||||||||
|
Lines of credit |
$ |
(138 |
) |
(161 |
) |
23 |
|||||||
|
Fixed TEBS financing |
(131 |
) |
(131 |
) |
- |
||||||||
|
Fixed TEBS Residual financing |
(250 |
) |
(250 |
) |
- |
||||||||
|
Variable TEBS financing |
(761 |
) |
(761 |
) |
- |
||||||||
|
Fixed 2024 PFA Securitization Financing |
702 |
702 |
- |
||||||||||
|
Fixed Term TOB financing |
(201 |
) |
(201 |
) |
- |
||||||||
|
Variable TOB financing |
(1,487 |
) |
24 |
(1,511 |
) |
||||||||
|
Realized gains on interest rate swaps, net |
912 |
N/A |
912 |
||||||||||
|
Total interest-bearing liabilities |
$ |
(1,354 |
) |
$ |
(778 |
) |
$ |
(576 |
) |
||||
|
Net interest spread change |
$ |
(1,006 |
) |
$ |
(183 |
) |
$ |
(823 |
) |
||||
(1)
The average change attributable to rate includes $1.1 million of discount accretion on the Southpark MRB upon redemption at par in the third quarter of 2024.
Comparison of the Nine Months Ended September 30, 2025 and 2024
Total revenues decreased for the nine months ended September 30, 2025 as compared to the same period in 2024 primarily due to:
•
An increase of approximately $6.0 million in interest income from recent MRB advances, offset by a decrease of approximately $3.6 million in interest income due to MRB redemptions and principal repayments;
•
A decrease of approximately $7.7 million in interest income due to recent GIL redemptions, offset by an increase of approximately $2.4 million in interest income from recent GIL investments and higher average interest rates;
•
An increase of approximately $1.1 million in other interest income from higher average property loan, taxable MRB and taxable GIL investment balances of approximately $20.3 million;
•
An increase of approximately $774,000 in other income related to the receipt of non-refundable fees for the extension of various MRB and GIL maturity dates;
•
An increase of approximately $208,000 in contingent interest income related to a premium received upon redemption of the Companion at Thornhill Apartments MRB in June 2025;
•
A decrease of approximately $683,000 in interest income due to lower interest rates on variable-rate MRBs and accretion on certain MRBs; and
•
A decrease of approximately $800,000 in other interest income due to less interest earned on cash balances.
The provision for credit losses for the nine months ended September 30, 2025 includes an asset-specific allowance of approximately $1.2 million related to the Opportunity South Carolina property loan and approximately $8.7 million related to The Park at Sondrio MRB and taxable MRB, The Park at Vietti MRB and taxable MRB, and the Windsor Shores Apartments MRB and taxable MRB. These asset-specific provisions were partially offset by a decline in our general allowance for credit losses primarily due to GIL and property loan redemptions and a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in our model used to estimate the allowance for credit losses.
The decrease in the provision for credit losses for the nine months ended September 30, 2024 is primarily due to GIL and property loan redemptions, a decrease in the weighted average life of the remaining investment portfolio, and updates of market data used as quantitative assumptions in our model used to estimate the allowance for credit losses. The provision for credit losses for the nine months
ended September 30, 2024 also includes the recovery of approximately $169,000 of prior credit losses in connection with final settlement of the bankruptcy estate of the Provision Center 2014-1 MRB.
Interest expense decreased for the nine months ended September 30, 2025 as compared to the same period in 2024 primarily due to:
•
A decrease of approximately $4.2 million due to lower average interest rates on debt financing, net of cash receipts received on interest rate derivatives; and
•
An increase of approximately $419,000 due to an increase in the average outstanding principal of our debt financing instruments of approximately $4.9 million.
The net result from derivative transactions consists of realized and unrealized (gains) losses from our derivative financial instruments. Realized (gains) losses represent receipts or payments related to our interest rate swaps during the period. Unrealized (gains) losses are generally a result of changes in current and forward interest rates during the period. Increasing interest rates generally result in unrealized gains while decreasing interest rates generally result in unrealized losses. The following table summarizes the components of this line item for the nine months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Nine Months Ended September 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Realized (gains) losses on derivatives, net |
$ |
(2,165 |
) |
$ |
(4,680 |
) |
||
|
Unrealized (gains) losses on derivatives, net |
5,717 |
4,301 |
||||||
|
Net result from derivative transactions |
$ |
3,552 |
$ |
(379 |
) |
|||
Realized gains decreased during the nine months ended September 30, 2025 as compared to the same period in 2024 due to generally decreasing spot interest rates during 2024 and 2025. Unrealized losses on derivatives, net, increased during the nine months ended September 30, 2025 as compared to the same period in 2024 due to lower market interest rates in 2025 and beyond as compared to forward market interest rates as of September 30, 2024. See the "Executive Summary" section of this Item 2 for additional discussion.
The decrease in general and administrative expenses for the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily due to decreases of approximately $379,000 in employee compensation and benefits, and approximately $543,000 in professional and consulting fees. These decreases were partially offset by an increase of approximately $135,000 in administration fees paid to the General Partner due to higher assets under management.
There was no gain on sale of mortgage revenue bond for the nine months ended September 30, 2025. The gain on sale of mortgage revenue bond for the nine months ended September 30, 2024 related to the sale of the Brookstone MRB in May 2024.
Earnings (losses) from investments in unconsolidated entities represent our proportionate share of net loss of the Construction Lending JV for the period. The Construction Lending JV began activities in April 2025.
The following table summarizes the segment's net interest income, average principal 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 nine months ended September 30, 2025 and 2024. The average balances are based primarily on monthly averages during the respective periods. All dollar amounts are in thousands.
|
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||
|
2025 |
2024 |
||||||||||||||||||||||||
|
Average |
Interest |
Average |
Average |
Interest |
Average |
||||||||||||||||||||
|
Interest-earning assets: |
|||||||||||||||||||||||||
|
Mortgage revenue bonds |
$ |
933,736 |
$ |
43,261 |
6.2 |
% |
$ |
882,586 |
$ |
41,523 |
6.3 |
% |
(1) |
||||||||||||
|
Governmental issuer loans |
145,579 |
7,792 |
7.1 |
% |
212,081 |
13,110 |
8.2 |
% |
|||||||||||||||||
|
Property loans |
45,375 |
2,309 |
6.8 |
% |
67,827 |
3,690 |
7.3 |
% |
|||||||||||||||||
|
Other investments |
66,693 |
3,752 |
7.5 |
% |
23,985 |
1,295 |
7.2 |
% |
|||||||||||||||||
|
Total interest-earning assets |
$ |
1,191,383 |
$ |
57,114 |
6.4 |
% |
$ |
1,186,479 |
$ |
59,618 |
6.7 |
% |
|||||||||||||
|
Contingent interest income |
208 |
- |
|||||||||||||||||||||||
|
Other income |
1,229 |
455 |
|||||||||||||||||||||||
|
Non-investment income |
1,321 |
2,121 |
|||||||||||||||||||||||
|
Total revenues |
$ |
59,872 |
$ |
62,194 |
|||||||||||||||||||||
|
Interest-bearing liabilities: |
|||||||||||||||||||||||||
|
Lines of credit |
$ |
7,096 |
$ |
388 |
7.3 |
% |
$ |
7,145 |
$ |
478 |
8.9 |
% |
|||||||||||||
|
Fixed TEBS Financing |
231,771 |
6,989 |
4.0 |
% |
238,572 |
7,165 |
4.0 |
% |
|||||||||||||||||
|
Fixed TEBS Residual Financing |
50,229 |
2,712 |
7.2 |
% |
61,271 |
3,292 |
7.2 |
% |
|||||||||||||||||
|
Variable TEBS Financing |
- |
- |
N/A |
66,116 |
2,367 |
4.8 |
% |
||||||||||||||||||
|
Fixed 2024 PFA Securitization Transaction |
68,021 |
2,540 |
5.0 |
% |
- |
- |
N/A |
||||||||||||||||||
|
Fixed term TOB trust financing |
- |
- |
N/A |
12,704 |
419 |
4.4 |
% |
||||||||||||||||||
|
Variable TOB trust financing |
644,161 |
23,210 |
4.8 |
% |
610,524 |
25,852 |
5.6 |
% |
|||||||||||||||||
|
Realized gains on interest rate swaps, net |
N/A |
(2,165 |
) |
N/A |
N/A |
(4,694 |
) |
N/A |
|||||||||||||||||
|
Total interest-bearing liabilities |
$ |
1,001,278 |
$ |
33,674 |
4.5 |
% |
$ |
996,332 |
$ |
34,879 |
4.7 |
% |
|||||||||||||
|
Net interest spread (2) |
$ |
23,440 |
2.6 |
% |
$ |
24,739 |
2.8 |
% |
|||||||||||||||||
|
Interest expense on interest-bearing |
35,839 |
39,573 |
|||||||||||||||||||||||
|
Amortization of deferred finance costs |
925 |
980 |
|||||||||||||||||||||||
|
Total interest expense |
$ |
36,764 |
$ |
40,553 |
|||||||||||||||||||||
(1)
Interest income includes $1.1 million of discount accretion on the Southpark MRB upon redemption at par in the third quarter of 2024. Excluding this item, the average interest rate was 6.1%.
(2)
Net interest spread equals interest income less interest expense, excluding amortization of deferred finance costs, and adjusted for realized gains (losses) on derivative instruments.
The following table summarizes the changes in interest income and interest expense for the nine months ended September 30, 2025 and 2024, and the extent to which these variances are attributable to 1) changes in the volume of interest-earning assets and interest-bearing liabilities, and 2) changes in the interest rates of the interest-earning assets and interest-bearing liabilities. All dollar amounts are in thousands.
|
For the Nine Months Ended September 30, 2025 vs. 2024 |
|||||||||||||
|
Total |
Average |
Average |
|||||||||||
|
Interest-earning assets: |
|||||||||||||
|
Mortgage revenue bonds |
$ |
1,738 |
$ |
2,406 |
$ |
(668 |
) |
(1) |
|||||
|
Governmental issuer loans |
(5,318 |
) |
(4,111 |
) |
(1,207 |
) |
|||||||
|
Property loans |
(1,381 |
) |
(1,221 |
) |
(160 |
) |
|||||||
|
Other investments |
2,457 |
2,306 |
151 |
||||||||||
|
Total interest-earning assets |
$ |
(2,504 |
) |
$ |
(620 |
) |
$ |
(1,884 |
) |
||||
|
Interest-bearing liabilities: |
|||||||||||||
|
Lines of credit |
$ |
(90 |
) |
$ |
(3 |
) |
$ |
(87 |
) |
||||
|
Fixed TEBS Financing |
(176 |
) |
(176 |
) |
- |
||||||||
|
Fixed TEBS Residual Financing |
(580 |
) |
(580 |
) |
- |
||||||||
|
Variable TEBS Financing |
(2,367 |
) |
(2,367 |
) |
- |
||||||||
|
Fixed 2024 PFA Securitization Transaction |
2,540 |
2,540 |
- |
||||||||||
|
Fixed term TOB trust financing |
(419 |
) |
(419 |
) |
- |
||||||||
|
Variable TOB trust financing |
(2,642 |
) |
1,424 |
(4,066 |
) |
||||||||
|
Realized gains on interest rate swaps, net |
2,529 |
N/A |
2,529 |
||||||||||
|
Total interest-bearing liabilities |
$ |
(1,205 |
) |
$ |
419 |
$ |
(1,624 |
) |
|||||
|
Net interest spread change |
$ |
(1,299 |
) |
$ |
(1,039 |
) |
$ |
(260 |
) |
||||
(1)
The average change attributable to rate includes $1.1 million of discount accretion on the Southpark MRB upon redemption at par in the third quarter of 2024.
Operational Matters
The multifamily properties securing our MRBs were all current on contractual debt service payments on our MRBs and we have received no requests for forbearance of contractual debt service payments as of September 30, 2025. However, we have recorded asset-specific provisions for credit losses for affordable multifamily investments totaling approximately $9.9 million for the nine months ended September 30, 2025. The provisions for credit losses related to The Park at Sondrio. The Park at Vietti, and the Windsor Shorts Apartments MRBs and taxable MRBs totaling approximately $8.7 million. We also recorded an asset-specific provision for credit loss of approximately $1.2 million for funds loaned to Opportunity South Carolina as property support loans for The Park at Sondrio and The Park at Vietti MRB properties. The underlying properties were acquired by Opportunity South Carolina, a non-profit entity, in December 2022 and January 2023. The properties underwent rehabilitation and converted from market rate operations under their previous ownership to rent-restricted affordable properties. The rehabilitation of each property has been completed, and each property is working to stabilize operations by the first quarter of 2026, which is the deadline for stabilization under the MRBs. Property operating results have not met the originally underwritten levels and collateral values are less than originally expected. We are in active discussions with the owners about opportunities to improve property operations and refinance the outstanding debt. In the event of a default on the MRBs, the Partnership may foreclose the properties and either continue operating under current rent restrictions or convert the properties back to market rate operations.
Our sole student housing property securing an MRB, Live 929 Apartments, was 92% occupied as of September 30, 2025, and is current on MRB debt service. The 2025-2026 academic year has begun and occupancy and rental rates are consistent with the prior year. The property leases exclusively to students, personnel and other tenants associated with the nearby Johns Hopkins University medical campus. The property is expected to pay all operating expenses and debt service from operating cash flows for the 2025-2026 academic year.
Construction is complete at three of the four properties securing our GILs and taxable GILs, with Poppy Grove III being nearly complete. All underlying affordable multifamily properties had commenced leasing operations as of September 30, 2025. The properties have not experienced any material supply chain disruptions for either construction materials or labor. The Sandy Creek Apartments GIL was redeemed at par in October 2025. Freddie Mac, through a servicer, has forward committed to purchase each GIL at maturity at par if the property has reached stabilization and other conditions are met. The Freddie Mac forward commitment includes a forward committed interest rate that was set at the original closing of the GIL, with many committed rates being well below current market interest rates. Such forward committed rates significantly reduce refinance risk and incentivize borrowers to convert to the Freddie Mac loan to realize interest savings.
We own various MRBs and taxable MRBs that finance the construction or rehabilitation of affordable multifamily properties. We regularly monitor construction progress at the underlying properties and have noted no material cost overruns or supply chain disruptions for either construction materials or labor. Borrowers for all such MRBs are current on debt service as of September 30, 2025. In many
instances, we have developer completion guaranties as well as capital contributed by LIHTC equity investors that will only receive their tax credits upon completion and stabilization of the projects, which create a strong disincentive to default.
Seniors and Skilled Nursing Investments Segment
The Seniors and Skilled Nursing Investments segment provides acquisition, construction and permanent financing for seniors housing and skilled nursing properties and a property loan associated with a master lease of essential healthcare support buildings. Seniors housing consists of a combination of independent living, assisted living and memory care units.
As of September 30, 2025, we owned two MRBs with aggregate outstanding principal of $65.5 million, with an outstanding commitment to provide additional funding of $1.5 million on a draw-down basis during construction. The MRBs are secured by a new construction, combined independent living, assisted living and memory care property in Traverse City, MI, with 174 total beds and a skilled nursing facility in Monroe Township, NJ with 120 beds. As of September 30, 2025, the Partnership also had a property loan with a principal balance of $7.3 million used to facilitate the purchase of a portfolio of nine essential healthcare support buildings located in eastern Pennsylvania. The loan is subordinate to the senior debt of the borrower and secured by a first priority security interest in master lease payments guaranteed by an investment grade healthcare system.
The following table compares the operating results for the Seniors and Skilled Nursing Investments segment for the periods indicated (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Seniors and Skilled Nursing Investments |
||||||||||||||||||||||||||||||||
|
Total revenues |
$ |
1,245 |
$ |
1,081 |
$ |
164 |
15.2 |
% |
$ |
3,719 |
$ |
2,649 |
$ |
1,070 |
40.4 |
% |
||||||||||||||||
|
Expenses: |
||||||||||||||||||||||||||||||||
|
Provision for credit losses |
(2 |
) |
2 |
(4 |
) |
-200.0 |
% |
4 |
217 |
(213 |
) |
-98.2 |
% |
|||||||||||||||||||
|
Interest expense |
662 |
666 |
(4 |
) |
-0.6 |
% |
2,028 |
1,730 |
298 |
17.2 |
% |
|||||||||||||||||||||
|
Net result from derivative transactions |
(39 |
) |
1,225 |
(1,264 |
) |
-103.2 |
% |
763 |
124 |
639 |
515.3 |
% |
||||||||||||||||||||
|
Total expenses |
621 |
1,893 |
(1,272 |
) |
-67.2 |
% |
2,795 |
2,071 |
724 |
35.0 |
% |
|||||||||||||||||||||
|
Segment net income |
$ |
624 |
$ |
(812 |
) |
$ |
1,436 |
-176.8 |
% |
$ |
924 |
$ |
578 |
$ |
346 |
59.9 |
% |
|||||||||||||||
Comparison of the Three Months Ended September 30, 2025 and 2024
Total revenues increased for the three months ended September 30, 2025 as compared to the same period in 2024 due to higher average principal balances of approximately $9.0 million.
The recovery of provision for credit losses was minimal for the three months ended September 30, 2025 and 2024.
Interest expense decreased for the three months ended September 30, 2025 as compared to the same period in 2024 primarily due to:
•
A decrease of approximately $131,000 due to lower average interest rates on debt financing; and
•
An increase of approximately $127,000 due to an increase in the average outstanding principal of our debt financing instruments of approximately $8.9 million.
The net result from derivative transactions consists of realized and unrealized (gains) losses from our derivative financial instruments. Realized (gains) losses represent receipts or payments related to our interest rate swaps during the period. Unrealized (gains) losses are generally a result of changes in current and forward interest rates during the period. Increasing interest rates generally result in unrealized gains while decreasing interest rates generally result in unrealized losses. The following table summarizes the components of this line item for the three months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Realized (gains) losses on derivatives, net |
$ |
(90 |
) |
$ |
(176 |
) |
||
|
Unrealized (gains) losses on derivatives, net |
51 |
1,401 |
||||||
|
Net result from derivative transactions |
$ |
(39 |
) |
$ |
1,225 |
|||
Realized gains on derivatives, net, decreased during the three months ended September 30, 2025 as compared to the same period in 2024 due to generally decreasing spot interest rates during 2024 and 2025. Unrealized losses on derivatives, net, decreased during the
three months ended September 30, 2025 as compared to the same period in 2024 due to generally more stable market interest rates in 2025 as compared to 2024. See the "Executive Summary" section of this Item 2 for additional discussion.
Comparison of the Nine Months Ended September 30, 2025 and 2024
Total revenues increased for the nine months ended September 30, 2025 as compared to the same period in 2024 due to higher average principal balances of approximately $17.2 million.
The provision for credit losses for the nine months ended September 30, 2025 was minimal. The provision for credit losses for the nine months ended September 30, 2024 related to the initial allowance for credit loss for a new property loan investment during 2024.
Interest expense increased for the nine months ended September 30, 2025 as compared to the same period in 2024 primarily due to:
•
An increase of approximately $622,000 due to an increase in the average outstanding principal of our debt financing instruments of approximately $14.5 million; and
•
A decrease of approximately $324,000 due to lower average interest rates on debt financing.
The net result from derivative transactions consists of realized and unrealized (gains) losses from our derivative financial instruments. Realized (gains) losses represent receipts or payments related to our interest rate swaps during the period. Unrealized (gains) losses are generally a result of changes in current and forward interest rates during the period. Increasing interest rates generally result in unrealized gains while decreasing interest rates generally result in unrealized losses. The following table summarizes the components of this line item for the nine months ended September 30, 2025 and 2024 (dollar amounts in thousands):
|
For the Nine Months Ended September 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Realized (gains) losses on derivatives, net |
$ |
(260 |
) |
$ |
(456 |
) |
||
|
Unrealized (gains) losses on derivatives, net |
1,023 |
580 |
||||||
|
Net result from derivative transactions |
$ |
763 |
$ |
124 |
||||
Realized gains decreased during the nine months ended September 30, 2025 as compared to the same period in 2024 due to generally decreasing spot interest rates during 2024 and 2025. Unrealized losses on derivatives, net, increased during the nine months ended September 30, 2025 as compared to the same period in 2024 due to lower market interest rates in 2025 and beyond as compared to forward market interest rates as of September 30, 2024. See the "Executive Summary" section of this Item 2 for additional discussion.
Market-Rate Joint Venture Investments Segment
The Market-Rate Joint Venture Investments segment consists of our noncontrolling joint venture equity investments in market-rate multifamily properties, also referred to as our JV Equity Investments. Our JV Equity Investments are passive in nature. Operational oversight of each property is controlled by our respective joint venture partners according to each respective entity's operating agreement. The properties are predominantly managed by property management companies affiliated with our joint venture partners. Decisions on when to sell an individual property are made by our respective joint venture partners based on their views of the local market conditions and current leasing trends.
As noted in the "Executive Summary" section in this Item 2, because of the challenges in the market rate multifamily markets, we will be implementing a strategy to reduce our capital allocation to market rate multifamily JV Equity Investments going forward. We and the respective managing members will manage the remaining portfolio of market rate multifamily investments to maximize sales prices and returns to the extent possible, with our return of capital from the sale of these investments to be redeployed into primarily MRB investments.
We account for all our JV Equity Investments using the equity method and recognize our preferred returns during the hold period. Specifically for our Vantage JV Equity Investments, an affiliate of our Vantage joint venture partner provides a guaranty of our preferred returns for Vantage Properties through a date approximately five years after commencement of construction. Upon the sale of a property, net proceeds will be distributed according to the entity operating agreement. Sales proceeds distributed to us that represent previously unrecognized preferred return and gain on sale are recognized in net income upon receipt. Historically, the majority of our income from our JV Equity Investments is recognized at the time of sale. As a result, we may experience significant income recognition in those quarters when a property is sold and our equity investment is redeemed.
The following table compares operating results for the Market-Rate Joint Venture Investments segment for the periods indicated (dollar amounts in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Market-Rate Joint Venture Investments |
||||||||||||||||||||||||||||||||
|
Total revenues |
$ |
779 |
$ |
1,063 |
$ |
(284 |
) |
-26.7 |
% |
$ |
6,802 |
$ |
3,842 |
$ |
2,960 |
77.0 |
% |
|||||||||||||||
|
Expenses: |
||||||||||||||||||||||||||||||||
|
Interest expense |
804 |
892 |
(88 |
) |
-9.9 |
% |
2,708 |
1,908 |
800 |
41.9 |
% |
|||||||||||||||||||||
|
Other income: |
||||||||||||||||||||||||||||||||
|
Gain on sale of investments in unconsolidated entities |
- |
- |
- |
-100.0 |
% |
201 |
57 |
144 |
252.6 |
% |
||||||||||||||||||||||
|
Earnings (losses) from investments in unconsolidated entities |
(1,320 |
) |
(704 |
) |
(616 |
) |
87.5 |
% |
(3,050 |
) |
(826 |
) |
(2,224 |
) |
269.2 |
% |
||||||||||||||||
|
Segment net income |
$ |
(1,345 |
) |
$ |
(533 |
) |
$ |
(812 |
) |
152.3 |
% |
$ |
1,245 |
$ |
1,165 |
$ |
80 |
6.9 |
% |
|||||||||||||
Comparison of the Three Months Ended September 30, 2025 and 2024
The decrease in total revenues for the three months ended September 30, 2025 as compared to the same period in 2024 was primarily due to the following:
•
A decrease of approximately $723,000 of investment income due to certain investments meeting the maximum guaranteed preferred return during 2024 and 2025; and
•
An increase of approximately $439,000 in investment income related to preferred returns on equity contributions during 2024 and 2025.
Interest expense for the three months ended September 30, 2025 and 2024 is related to our General LOC that is primarily secured by the JV Equity Investments. The slight decrease in interest expense is primarily due to lower average outstanding balances.
Earnings (losses) on investments in unconsolidated entities is the Partnership's recognition of its proportionate share of earnings (losses) on investments in unconsolidated entities using the equity method of accounting. Such investments typically incur operating losses during development and lease-up, particularly from depreciation, consistent with development plans. The increase in losses for the three months ended September 30, 2025 as compared to the same period in 2024 is primarily due to general and administrative expenses at the Jessam at Hays Farm and non-capitalized interest expense at Freestone Greenville, Freestone Cresta Bella, and Freestone Ladera as the properties have begun operations.
Comparison of the Nine Months Ended September 30, 2025 and 2024
The increase in total revenues for the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily due to the following:
•
An increase of approximately $1.9 million of investment income due to a preferred return distribution received from Vantage at Loveland in March 2025;
•
An increase of approximately $1.8 million of investment income related to preferred return recognized upon the sale of Vantage at Helotes in May 2025;
•
An increase of approximately $1.5 million in investment income related to preferred returns on equity contributions during 2024 and 2025; and
•
A decrease of approximately $2.2 million of investment income due to certain investments meeting the maximum guaranteed preferred return during 2024 and 2025.
Interest expense for the nine months ended September 30, 2025 and 2024 is related to our General LOC that is primarily secured by our JV Equity Investments. The increase in interest expense is primarily due to higher average outstanding balances.
The gain on sale for the nine months ended September 30, 2025 related to the sale of Vantage at Helotes in May 2025 for a gain of approximately $163,000 and final settlement of the Vantage at O'Connor and Vantage at Coventry sales that occurred in July 2022 and January 2023, respectively. The gain on sale of investments in unconsolidated entities for the nine months ended September 30, 2024 related to final settlement of the Vantage at Coventry and Vantage at Westover Hills sales that occurred in January 2023 and May 2022, respectively.
Earnings (losses) on investments in unconsolidated entities is the Partnership's recognition of its proportionate share of earnings (losses) on investments in unconsolidated entities using the equity method of accounting. Such investments typically incur operating losses during development and lease-up, particularly from depreciation, consistent with development plans. The increase in losses for the nine months ended September 30, 2025 as compared to the same period in 2024 is primarily due to general and administrative expenses at Valage Senior Living Carson Valley and the Jessam at Hays Farm and non-capitalized interest expense at Freestone Greenville, Freestone Cresta Bella, and Freestone Ladera as the properties have begun operations.
Sales Activity
The leasing market pressures noted in the "Executive Summary" section of this Item 2 and further discussed below have made it more difficult for the respective managing members of our stabilized JV Equity Investments to sell stabilized properties, resulting in longer than expected investment holding periods and lower sales prices than in 2022 and 2023. In addition, less available and more expensive debt capital has had pronounced effects on capital markets, making property acquisitions by potential buyers harder to finance. Accordingly, we have observed increasing capitalization rates in recent periods resulting in lower property valuations. Historically, the majority of our income from our JV Equity Investments is recognized at the time of sale and is dependent on the sales prices of the related properties. There were no JV Equity Investment property sales in 2024 and we have recognized significantly less investment income and gains on sale of JV Equity Investments in 2025 as compared to 2022 and 2023. After the current peak in new supply peaks, we expect net rents and occupancy to increase, capitalization rates to decline, and property valuations to increase. Such a recovery is subject to various macroeconomic and local market conditions.
Though our returns on JV Equity Investments may be lower in the near-term, we have not recorded any impairment reserves or losses on our portfolio of JV Equity Investments to date based on our internal assessments of individual investments.
Recently, the Vantage at Loveland property located in Loveland, CO was publicly listed for sale at the direction of the property-owning entity's managing member. Consistent with past Vantage property sales, the managing member controls the listing and sales process under the terms of the property-owning entity's operating agreement, with the Partnership entitled to certain net proceeds upon the successful completion of the sale of the property.
Two of our JV Equity Investment properties were sold in 2025 by the respective managing members. In January 2025, the managing member of Vantage at Tomball sold the property to a third-party. We received gross proceeds of approximately $14.2 million upon sale, inclusive of the return of our capital contributions and accrued preferred return. We did not recognize any gain or loss on the transaction in the first quarter. The return for Vantage at Tomball was lower than past JV Equity Investments due to rising insurance costs in the Houston metropolitan area as well as the higher interest rate environment in recent years.
In May 2025, the managing member of Vantage at Helotes sold the property to a non-profit entity that financed the purchase by issuing tax-exempt and taxable bonds. We received gross proceeds of approximately $17.1 million, inclusive of the return of our capital contributions and accrued preferred return. We recognized investment income of approximately $1.8 million and a gain on sale of approximately $163,000 in the second quarter of 2025, before settlement of final proceeds and expenses. The Partnership purchased two MRBs for approximately $12.8 million issued by the non-profit purchaser to finance the purchase of the property.
The managing members of Vantage at Hutto and Vantage at Fair Oaks each previously listed the properties for sale. However, neither sale has closed and the listings have been withdrawn due to recent uncertain multifamily market dynamics in Texas.
Property Operations & Construction
The "Portfolio Information" section in this Item 2 contains various occupancy and other operational information relating to the JV Equity Investments. Of our 11 current JV Equity Investments (inclusive of Vantage at San Marco), 7 have completed construction, 2 are under construction, and 2 are in the planning stage.
As noted in the "Executive Summary" section of this Item 2, current market dynamics related to our JV Equity Investments are challenging. The San Antonio, TX, Austin, TX, and Huntsville, AL markets experienced record new multifamily unit supply in recent years, peaking in 2024. Rental rates and occupancy have declined as these markets absorb new units, which is putting downward pressure on leasing velocity and net operating income for these properties. We expect rental rates and occupancy to remain under pressure throughout 2025, but expect this trend to reverse in 2026 due to very limited new construction starts in late 2024 and 2025.
We do not see these same challenges for market rate senior housing JV Equity Investments, like our investment in Valage Senior Living Carson Valley. We believe market rate seniors housing industry trends, potential resident demographics, and expected returns remain encouraging.
We have noted no material construction cost overruns for securing materials and labor needed to construct the properties underlying our JV Equity Investments, despite general supply chain constraints noted in recent years. In 2024, we contributed additional equity of $1.0 million to Vantage at McKinney Falls to cover cost overages associated with delayed utility connections to the site by the local municipality, and the follow-on delays to vertical construction and incurred additional general conditions costs.
The construction loans associated with our JV Equity Investments typically have variable interest rates, so we regularly monitor interest costs in comparison to capitalized interest reserves in each property's development budget and available construction budget contingency balances. Though original development budgets were sized to incorporate potential interest rate increases, the pace of interest rate increases in 2023 and 2024 has caused actual interest costs during construction to exceed original budgets. We have noted that some properties that are complete or nearing construction completion are incurring interest costs that exceed capitalized interest reserves, and such properties have utilized construction contingencies and developers have deferred a portion of their developer fee payments. In addition, high levels of new unit supply and declining market rents in certain local markets has prolonged the lease-up phase of certain properties such that operating cash flows are insufficient to pay all debt service. Under the operating agreements, if additional capital is required, the parties to the JV Equity Investment will mutually agree on how to fund additional capital. From January 2024 through October 2025, we agreed to advance additional net equity totaling $9.3 million across six JV Equity Investments to cover primarily additional interest costs and certain property taxes and operating expenses. We may advance additional equity to certain JV Equity Investments during the remainder of 2025 and in 2026 though the ultimate amount is uncertain. The amount of such additional funding, if any, will depend on various future developments, including, but not limited to, the pace of development, changes in interest rates, the pace of lease-up, and overall operating results of the underlying properties. We plan to contribute additional funds from unrestricted cash on hand or other currently available liquidity sources. Such additional equity may result in lower overall returns on our JV Equity Investments.
Between December 2024 and September 2025, the managing members of Vantage at McKinney Falls, Vantage at Hutto, and Vantage at Loveland refinanced the construction loans at each property, which resulted in lower variable interest rates of over 100 basis points for each loan. The Vantage at Loveland refinancing resulted in additional loan proceeds, of which approximately $7.9 million were distributed to the Partnership. The distribution resulted in recognition of approximately $2.2 million of investment income in the first quarter of 2025. In June 2025, the managing member of Freestone Greenville refinanced the construction loan at the property and distributed approximately $1.8 million to the Partnership.
MF Properties Segment
As of September 30, 2025, the Partnership did not own any MF Properties. The Partnership previously owned the Suites on Paseo MF Property until the property was sold in December 2023 and there is no continuing involvement with the property. The Partnership previously sold The 50/50 MF Property to an unrelated non-profit organization in December 2022 in exchange for a seller financing property loan which is included in the MF Properties Segment.
There was a gain on sale of real estate assets of approximately $64,000 for the nine months ended September 30, 2024 related to final purchase price adjustments for the Suites on Paseo MF Property that was sold in December 2023. There was minimal income tax expense and no other operating results to report for the MF Properties segment for three and nine months ended September 30, 2025 and 2024.
Liquidity and Capital Resources
We continually evaluate our potential sources and uses of liquidity, including current and potential future developments related to market interest rates and the general economic and geopolitical environment. The information below is based on our current expectations and projections about future events and financial trends, which could materially differ from actual results. See the discussion of Risk Factors in Item 1A of the Partnership's Form 10-K for the year ended December 31, 2024 for further information.
Our short-term liquidity requirements over the next 12 months will be primarily operational expenses; investment commitments (net of leverage secured by the investment assets); debt service (principal and interest payments) related to our debt financings; repayments of our secured lines of credit balances; and distribution payments to Unitholders. We expect to meet these liquidity requirements primarily using cash on hand, operating cash flows from our investments, proceeds from asset redemptions and sales in the normal course of business, and potentially additional debt financing issued in the normal course of business. In addition, we will consider the issuance of additional BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests in the Partnership based on needs and opportunities for executing our strategy.
Our long-term liquidity requirements will be primarily for maturities of debt financings, funding purchases of additional investment assets (net of leverage secured by the investment assets), and repayments of our secured lines of credit balances. We expect to meet these liquidity requirements primarily through refinancing of maturing debt financings with the same or similar lenders; contractual principal and interest payments from our investments; and proceeds from asset redemptions and sales in the normal course of business. In addition, we will consider the issuance of additional BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests in the Partnership based on needs and opportunities for executing our strategy.
Sources of Liquidity
The Partnership's principal sources of liquidity consist of:
•
Unrestricted cash on hand;
•
Operating cash flows from investment assets;
•
Secured lines of credit;
•
Proceeds from the redemption or sale of assets;
•
Proceeds from obtaining additional debt; and
•
Issuances of debt securities, BUCs, Series A-1 Preferred Units, Series B Preferred Units, or other series of limited partnership interests.
Unrestricted Cash on Hand
As of September 30, 2025, we reported unrestricted cash on hand of approximately $36.2 million. There are no contractual restrictions on our ability to use unrestricted cash on hand. The Partnership has a financial covenant to maintain a minimum consolidated liquidity of $6.3 million under the terms of our financing arrangements.
Operating Cash Flows from Investment Assets
Cash flows from operations are primarily comprised of regular principal and interest payments received on our investment assets that provide consistent cash receipts throughout the year. All MRBs, taxable MRBs, GILs, taxable GILs and property loans are current on contractual debt service payments as of September 30, 2025. Investment receipts, net of interest expense on related debt financing and lines of credit, are available for our general use. We also receive distributions from JV Equity Investments if, and when, cash is available for distribution. In March 2025, we received approximately $7.9 million of distributions from Vantage at Loveland from additional loan proceeds received by the property upon refinancing of its construction loan. In June 2025, we received approximately $1.8 million of distributions from Freestone Greenville from additional loan proceeds received by the property upon refinancing of its construction loan.
Receipt of operating cash from our investments in MRBs, taxable MRBs, and JV Equity Investments is dependent upon the generation of net cash flows at multifamily properties that underlie these 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 operating cash from our investments in GILs, taxable GILs, and construction financing and mezzanine property loans is dependent on the availability of funds in the original development budgets. The elevated interest rate environment experienced in recent years continues to result in higher interest costs for properties with variable rate construction financing. We regularly monitor capitalized interest costs in comparison to capitalized interest reserves in the property's development budget, available construction cost contingencies balances, and the funding of certain equity commitments by the owners of the underlying property. The developers may also make cash payments to pay interest due to avoid claims under their payment and completion guaranties.
Secured Lines of Credit
We maintain a General LOC with a commitment of up to $50.0 million to purchase additional investments and to meet general working capital and liquidity requirements. We may borrow, prepay and reborrow amounts at any time through the maturity date, subject to the limitations of a borrowing base. The aggregate available commitment cannot exceed a borrowing base calculation, which is equal to 35% multiplied by the aggregate value of a pool of eligible encumbered assets. Eligible encumbered assets consist of 100% of our equity capital contributions to JV Equity Investments, subject to certain limits and restrictions. The General LOC is secured by first priority security interests in our JV Equity Investments. We have the ability to increase the total maximum commitment by an additional
$10.0 million to $60.0 million, subject to the identification of lenders to provide the additional commitment, the payment of certain fees, and other conditions. We will evaluate whether to increase the commitment based on the size of the borrowing base, liquidity needs and costs of such additional commitments. We are subject to various affirmative and negative covenants that, among others, require us to maintain consolidated liquidity of not less than $6.3 million (which will increase up to a maximum of $7.5 million if the maximum available commitment is fully increased to $60.0 million) and maintain a consolidated tangible net worth of not less than $200.0 million. We were in compliance with all covenants as of September 30, 2025. There was a balance of $40.5 million outstanding on the General LOC and approximately $9.5 million was available to be drawn as of September 30, 2025. The General LOC has a maturity date of June 2027, with options to extend for up to two additional years, subject to certain terms and conditions.
We maintain an Acquisition LOC with a commitment of up to $80.0 million that may be used to fund purchases of MRBs, taxable MRBs, or loans issued to finance the acquisition, rehabilitation, or construction of affordable housing or which are otherwise secured by real estate or mortgage-backed securities (i.e., GILs, taxable GILs, and property loans), or master lease agreements guaranteed by investment grade tenants. Advances on the Acquisition LOC are generally due on the 270thday following the advance date but may be extended for up to an additional 270 days by making certain payments. Advances made for tax-exempt or taxable loans secured by master lease agreements guaranteed by investment grade tenants are due on the 45th day following such advance. The Acquisition LOC contains a covenant, among others, that our senior debt will not exceed a specified percentage of the market value of our assets to be consistent with the Leverage Ratio (as defined by the Partnership). We were in compliance with all covenants as of September 30, 2025. There was a balance of $1.0 million outstanding on the Acquisition LOC and approximately $79.0 million was available to be drawn as of September 30, 2025. The Acquisition LOC has a maturity date of June 2027, with two one-year extension options, subject to certain terms and conditions.
Proceeds from the Redemption or Sale of Assets
We may, from time to time, experience redemptions of or execute sales of our investments in MRBs, GILs, property loans, and JV Equity Investments consistent with our strategic plans. Borrowers on certain of our MRBs, GILs, and property loans have the right to prepay amounts outstanding prior to contractual maturity which would result in the return of our capital, net of repayment of the related leverage.
All GIL investments have maturity dates within the next 12 months, which are committed to be purchased by Freddie Mac, through a servicer, or repaid by the borrower on or before the maturity at prices equal to the principal outstanding plus accrued interest. Such proceeds will be primarily used to repay our related debt financing, with residual proceeds available to us for general use. For the period from January to October 2025, five GILs and one related property loan were redeemed at par plus accrued interest. These redemptions resulted in gross principal receipts of approximately $136.8 million, of which $114.3 million was used to repay the related debt financings. We regularly monitor the progress of the underlying properties and the likelihood of redemption upon maturity and currently have no concerns regarding repayment. Borrowers may request extensions of GIL maturity dates which are contingent upon our approval, payment of an extension fee, and obtaining an approval of Freddie Mac to extend the maturity date of the forward purchase commitment.
Our MRB portfolio is marked at a premium to cost, adjusted for paydowns, primarily due to higher stated interest rates when compared to current market interest rates for investments with similar terms. We may consider selling certain MRB investments in exchange for cash at prices that approximate our currently reported fair value. However, we are contractually prevented from selling the MRB investments included in our TEBS Financings.
Our ability to dispose of investment assets on favorable terms is dependent upon several factors including, but not limited to, the number of potential buyers and the availability of credit to such potential buyers to purchase investment assets at prices we consider acceptable. Recent volatility in market interest rates, recent inflation and the potential for an economic recession may negatively impact the potential prices we could realize upon the disposition of our various assets.
Our JV Equity Investments are passive in nature and decisions on when to sell an individual property are made by our joint venture partner based on its view of the local market conditions and current leasing trends. The completion of sale is dependent on the identification of a buyer and at a price deemed acceptable by the joint venture partner and the Partnership. Once a buyer is selected, the period for negotiation of the sales contract, buyer due diligence, and satisfaction of closing requirements can range from two to six months. We are entitled to proceeds upon the sales of JV Equity Investments in accordance with the terms of the entity operating agreement. In January 2025, Vantage at Tomball was sold by the managing member with gross proceeds to the Partnership totaling approximately $14.2 million. In May 2025, Vantage at Helotes was sold by the managing member with gross proceeds to the Partnership totaling approximately $17.1 million, before consideration of the Partnership's purchase of a portion of MRBs issued to finance the sale of the property.
Proceeds from Obtaining Additional Debt
We hold certain investments that are not associated with our debt financings or secured lines of credit. We may obtain leverage for these investments by posting the investments as security. As of September 30, 2025, our primary unleveraged assets were certain MRBs and taxable MRBs with outstanding principal totaling approximately $10.4 million.
Issuances of Debt Securities, BUCs, Series A-1 Preferred Units or Series B Preferred Units
We may, from time to time, issue additional BUCs, Preferred Units, or debt securities, in one or more offerings, at prices or quantities that are consistent with our strategic goals. In December 2022, the Partnership's Shelf Registration Statement was declared effective by the SEC under which the Partnership may, from time to time, offer and sell BUCs, Preferred Units, or debt securities, in one or more offerings, with a maximum aggregate offering price of $300.0 million. Debt securities issued under the Shelf Registration Statement may be senior or subordinate obligations of the Partnership. The Shelf Registration Statement will expire in December 2025. In October 2025, we filed a new Form S-3 shelf registration statement with the SEC, which will allow the Partnership to issue up to an aggregate of $200.0 million of BUCs, Preferred Units, and debt securities from time to time, in one or more offerings. The new shelf registration statement has not yet become effective and, upon its effectiveness, will replace the existing Shelf Registration Statement.
In March 2024, we entered into a Sales Agreement with JonesTrading Institutional Services LLC and BTIG, LLC, as Agents, pursuant to which the Partnership may offer and sell, from time to time through or to the Agents, BUCs having an aggregate offering price of up to $50.0 million. As of September 30, 2025, we have sold 92,802 BUCs for gross proceeds of $1.5 million under the Sales Agreement to date.
We have one registration statement on Form S-3 covering the offering of Series B Preferred Units that has been declared effective by the SEC. The following table summarizes the Partnership's current Preferred Unit offering:
|
Preferred Unit Series |
Initial Registration Effectiveness Date |
Expiration Date |
Unit Offering Price |
Distribution Rate |
Optional Redemption Date |
Units Issued as of |
Remaining Units Available to Issue as of |
||||||||||||||
|
Series B |
September 2024 |
September 2027 |
$ |
10.00 |
5.75% |
Sixth anniversary |
2,500,000 |
7,500,000 |
(1) |
||||||||||||
(1)
The Partnership is able to issue Series B Preferred Units so long as the aggregate market capitalization of the BUCs, based on the closing price on the trading day prior to issuance of the Series B Preferred Units, is no less than two times the aggregate book value of all Series A Preferred Units, Series A-1 Preferred Units and Series B Preferred Units, inclusive of the amount to be issued.
In March 2025, we issued 2,000,000 Series B Preferred Units to an existing investor for gross proceeds of $20.0 million. In October 2025, we issued 500,000 Series B Preferred Units to a new investor for gross proceeds of $5.0 million.
In April 2024, we commenced a registered offering of up to $25.0 million of BUCs which are being offered and sold pursuant to the effective Shelf Registration Statement and a prospectus supplement filed with the SEC relating to this offering. As of the date of this filing, we have not issued any BUCs in connection with this offering.
We may also designate and issue additional series of preferred units representing limited partnership interests in the Partnership in accordance with the terms of the Partnership Agreement.
Uses of Liquidity
Our principal uses of liquidity consist of:
•
General and administrative expenses;
•
Investment funding commitments;
•
Debt service on debt financings, mortgage payable, and secured lines of credit;
•
Distributions paid to holders of Preferred Units and BUCs;
•
Redemptions of Preferred Units; and
•
Other contractual obligations.
General and Administrative Expenses
We use cash to pay general and administrative expenses of our operations. For additional details, see Item 1A, "Risk Factors" in the Partnership's the Partnership's Annual Report on Form 10-K for the year ended December 31, 2024 and the section captioned "Cash flows from operating activities" in the condensed consolidated statements of cash flows set forth in Item 1 of this Report. General and administrative expenses are typically paid from unrestricted cash on hand and operating cash flows.
Investment Funding Commitments
Our overall strategy is to invest in quality multifamily properties through the acquisition of MRBs, GILs, property loans and JV Equity Investments in both existing and new markets. We evaluate investment opportunities based on many factors including, but not limited to, our market outlook, 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 financing sources, and the availability of investment capital. We may commit to fund additional investments on a draw-down or forward basis. The following table summarizes our outstanding investment commitments as of September 30, 2025:
|
Projected Funding by Year (1) |
||||||||||||||||||||||||||||
|
Property Name |
Commitment Date |
Asset |
Total Commitment |
Remaining Commitment |
Remainder of 2025 |
2026 |
2027 |
Interest Rate |
Related Debt |
|||||||||||||||||||
|
Mortgage Revenue Bonds |
||||||||||||||||||||||||||||
|
Meadow Valley |
December 2021 |
December 2029 |
$ |
44,000,000 |
$ |
1,500,000 |
$ |
1,500,000 |
$ |
- |
$ |
- |
6.25% |
Variable TOB |
||||||||||||||
|
Residency at Empire Series BB-4 |
December 2022 |
December 2040 |
47,000,000 |
5,850,000 |
5,850,000 |
- |
- |
6.45% (4) |
Variable TOB |
|||||||||||||||||||
|
Subtotal |
91,000,000 |
7,350,000 |
7,350,000 |
- |
- |
|||||||||||||||||||||||
|
Taxable Mortgage Revenue Bonds |
||||||||||||||||||||||||||||
|
Residency at Empire Series BB-T |
December 2022 |
December 2025 (3) |
$ |
9,404,500 |
$ |
8,404,500 |
$ |
8,404,500 |
$ |
- |
$ |
- |
7.45% |
Variable TOB |
||||||||||||||
|
Gateway and Yarbrough Predevelopment Project |
June 2025 |
July 2026 |
2,000,000 |
1,200,000 |
- |
1,200,000 |
- |
9.00% |
N/A |
|||||||||||||||||||
|
Triangle Square Predevelopment Project |
July 2025 |
July 2026 |
9,300,000 |
3,300,000 |
3,000,000 |
300,000 |
- |
9.00% |
N/A |
|||||||||||||||||||
|
Subtotal |
20,704,500 |
12,904,500 |
11,404,500 |
1,500,000 |
- |
|||||||||||||||||||||||
|
Property Loans |
||||||||||||||||||||||||||||
|
Sandoval Flats |
November 2024 |
December 2027 (3) |
$ |
29,846,000 |
$ |
28,846,000 |
$ |
- |
$ |
24,150,000 |
$ |
4,696,000 |
7.48% |
(5) |
||||||||||||||
|
Equity Investments |
||||||||||||||||||||||||||||
|
Vantage at San Marcos (6), (7) |
November 2020 |
N/A |
$ |
9,914,529 |
$ |
8,943,914 |
$ |
8,943,914 |
$ |
- |
$ |
- |
N/A |
N/A |
||||||||||||||
|
Freestone Greeley (7) |
October 2022 |
N/A |
16,035,710 |
10,562,345 |
10,562,345 |
- |
- |
N/A |
N/A |
|||||||||||||||||||
|
Subtotal |
25,950,239 |
19,506,259 |
19,506,259 |
- |
- |
|||||||||||||||||||||||
|
Bond Purchase Commitments |
||||||||||||||||||||||||||||
|
Kindred Apartments |
March 2025 |
December 2027 (3) |
$ |
21,921,000 |
$ |
21,921,000 |
$ |
- |
$ |
- |
$ |
21,921,000 |
6.875% |
N/A |
||||||||||||||
|
Total Commitments |
$ |
189,421,739 |
$ |
90,527,759 |
$ |
38,260,759 |
$ |
25,650,000 |
$ |
26,617,000 |
||||||||||||||||||
(1)
Projected fundings by year are based on current estimates and the actual funding schedule may differ materially due to, but not limited to, the pace of construction, adverse weather conditions, delays in governmental approvals or permits, the availability of materials and contractors, and labor disputes.
(2)
We have securitized the indicated assets in TOB trust financing facilities that allow for additional principal proceeds as the remaining investment commitments are funded by us. See Note 13 for further details on debt financing.
(3)
The borrower may elect to extend the maturity date for up to six months upon meeting certain conditions, which may include payment of a non-refundable extension fee.
(4)
Upon stabilization, the MRB will resize to an amount not to exceed $3.3 million and become subordinate to the other senior MRBs of the borrower. In December 2029, the interest rate will convert to a fixed rate of 10.0%.
(5)
All draws to date were funded with proceeds from the Acquisition LOC. The Partnership expects to sell the related investment into the Construction Lending JV in the future.
(6)
The property became a consolidated VIE effective during the fourth quarter of 2021.
(7)
A development site has been identified, and land has been acquired for these properties. The Partnership's joint venture partners are evaluating the highest and best use for the development sites as of September 30, 2025, which may include a sale of the land or the commencement of construction. The timing of any funding commitment is uncertain and the Partnership's remaining funding commitment will be terminated if the land is sold.
We are also committed to fund 10% of the capital for the Construction Lending JV with the remainder to be funded by third-party investors with each party contributing its proportionate capital contributions upon funding of future investments. Our capital will be contributed on a draw-down basis over the term of the underlying investments of the Construction Lending JV. Our maximum remaining capital commitment to the Construction Lending JV is approximately $14.7 million as of October 31, 2025. Our maximum commitment will increase if additional third-party capital commitments are obtained by the Construction Lending JV. In April 2025, the Partnership transferred the Natchitoches Thomas Apartments GIL, taxable GIL, and related future funding commitments to the Construction Lending JV at prices that approximated outstanding principal plus accrued interest.
In addition, we will consider providing additional financing to borrowers on our debt investments or additional equity to our JV Equity Investments above our original commitments if requested by the borrowers and managing members, respectively, on a case-by-case basis. When considering whether to fund such requests, we will consider various factors including, but not limited to, the economic return on additional investments in the entity, the impact to the Partnership's credit and investment risk from either funding or withholding funding, and the requesting entity's other available sources of funding. From January 2024 through October 2025, we advanced additional net equity totaling $10.3 million across six JV Equity Investments. The additional capital was used to cover development cost overruns, primarily due to higher than anticipated interest costs, and certain operating expenses resulting from longer holding periods. We anticipate making additional investments in certain JV Equity Investments during 2025 and 2026, though the ultimate amount is uncertain. The amount of such additional funding will depend on various future developments, including, but not limited to, the pace of development, changes in interest rates, the pace of lease-up, and overall operating results of the underlying properties. The Partnership plans to contribute such additional funds from unrestricted cash on hand or other currently available liquidity sources.
Debt Service on Debt Financings, Mortgage Payable and Secured Lines of Credit
Our debt financing arrangements consist of various secured financing transactions to leverage our portfolio of MRB, taxable MRB, GIL, taxable GIL and certain property loan investment assets. The financing arrangements generally involve the securitization of these investment assets into trusts whereby we retain beneficial interests in the trusts that provide us certain rights to the underlying investment assets. The senior securities are sold to unaffiliated parties in exchange for debt proceeds. The senior securities require periodic interest payments that may be fixed or variable, depending on the terms of the arrangement, and scheduled principal payments. We are required to fund any shortfall in principal and interest payable to the senior securities of the TEBS Financings in the case of non-payment, forbearance or default of the borrowers' contractual debt service payments of the related MRBs, up to the value of our residual interests. In the case of forbearance or default on an underlying investment asset in a term TOB or TOB trust financing, we may be required to fund shortfalls in principal and interest payable to the senior securities, repurchase a portion of the outstanding senior securities, or repurchase the underlying investment asset and seek alternative financing. We anticipate that cash flows from the securitized investment assets will fund normal, recurring principal and interest payments to the senior securities and all trust-related fees.
When possible, we structure the debt financing maturity dates associated with our GIL, taxable GIL, and property loan investments to match the investment maturity dates such that investment redemption proceeds will redeem the outstanding debt financing.
Our debt financing arrangements include various fixed rate and variable rate debt arrangements. Recent increases in short-term interest rates have resulted in increases in the interest costs associated with our variable rate debt financing arrangements. We actively manage our portfolio of fixed rate and variable rate debt financings and our exposure to changes in market interest rates. The following table summarizes our fixed rate and variable rate debt financings as of September 30, 2025 and December 31, 2024:
|
September 30, 2025 |
December 31, 2024 |
|||||||||||||||||
|
Securitized Assets - |
Related Debt Financing - Fixed or Variable Interest Rates |
Outstanding |
% of Total |
Outstanding |
% of Total |
|||||||||||||
|
Fixed |
Fixed |
$ |
327,509,430 |
31.9 |
% |
$ |
363,885,818 |
33.2 |
% |
|||||||||
|
Variable (1) |
Variable (1) |
33,216,000 |
3.2 |
% |
152,040,000 |
13.8 |
% |
|||||||||||
|
Fixed |
Variable - Hedged (2) |
452,368,593 |
44.2 |
% |
564,508,822 |
51.4 |
% |
|||||||||||
|
Fixed |
Variable |
212,147,407 |
(3) |
20.7 |
% |
17,882,177 |
1.6 |
% |
||||||||||
|
Total |
$ |
1,025,241,430 |
$ |
1,098,316,817 |
||||||||||||||
(1)
The securitized assets and related debt financing each have variable interest rates, though the variable rate indices may differ on individual transactions. As such, the Partnership is largely hedged against rising interest rates.
(2)
The variable-rate debt financing is hedged through our interest rate swap agreements. Though the variable rate indices may differ, these interest rate swaps have effectively synthetically fixed the interest rate of the related debt financing. See further discussion of our interest rate hedging activities below.
(3)
Approximately $153.3 million of this amount relates to investment assets with maturity dates on or before April 2026.
The interest rate paid on our variable rate debt financings are generally determined by the senior securities remarketing agent as the rate necessary to remarket any senior securities tendered by holders thereof for remarketing that week at a price of par. Interest on the senior securities is either taxable or tax-exempt to the holders based on the structure of the debt financing. The senior securities rate on debt financings structured as tax-exempt to the senior securities holders are typically correlated to tax-exempt municipal short-term securities indices, such as SIFMA. The senior securities rate on debt financings structured as taxable to the senior securities holders are typically correlated to taxable short-term securities indices, such as SOFR.
We have hedged a portion of our overall exposure to changes in market interest rates on our variable rate debt financings through various interest rate swaps. Our interest rate swaps are subject to monthly settlements whereby we pay a stated fixed rate and our
counterparty pays a variable rate equal to the compounded SOFR rate for the settlement period. We are currently a net receiver on our portfolio of interest rate swaps and received net settlement proceeds totaling approximately $814,000 and $1.8 million during the three months ended September 30, 2025 and 2024, respectively, and approximately $2.4 million and $5.2 million during the nine months ended September 30, 2025 and 2024, respectively.
The majority of our variable rate debt financings that are hedged through interest rate swaps have interest that is tax-exempt to the senior securities holders. In order to account for the differential between our interest rate swaps which are indexed to SOFR (a taxable rate) and our debt financing rate (which is correlated to short-term tax-exempt municipal securities rates), we assume that, over the term of our debt financing, the tax-exempt senior securities interest rate will approximate 70% of the SOFR rate. This assumption aligns with common market assumptions and the historical correlation between taxable and tax-exempt municipal short-term securities rates. However, such ratio may not be accurate in the short term or long term in the future. We apply a 70% conversion ratio when determining the notional amount of our interest rate swaps such that, as an example, a $7.0 million notional amount indexed to SOFR is the equivalent to $10.0 million notional amount for tax-exempt debt financing. As such, the reported amount of variable debt financing in the table above exceeds the stated notional amount of the SOFR-indexed interest rate swaps as of September 30, 2025. The following table summarizes the average stated SOFR-denominated notional amount by year for our existing interest rate swaps as of September 30, 2025 (before applying our assumed 70% ratio of tax-exempt municipal securities rates to SOFR):
|
Year |
Average Notional |
|||
|
Remainder of 2025 |
$ |
312,827,361 |
||
|
2026 |
305,305,966 |
|||
|
2027 |
222,943,332 |
|||
|
2028 |
165,255,466 |
|||
|
2029 |
128,652,299 |
|||
|
2030 |
28,852,800 |
|||
|
2031 |
21,205,500 |
|||
|
2032 |
18,931,333 |
|||
|
2033 |
15,863,500 |
|||
|
2034 |
11,755,833 |
|||
|
2035 |
9,145,833 |
|||
|
2036 |
9,066,667 |
|||
|
2037 |
8,983,333 |
|||
|
2038 |
8,893,333 |
|||
|
2039 |
8,833,333 |
|||
When we execute a TOB trust financing, we retain a residual interest that is pledged as our initial collateral under the ISDA master agreement with the lender based on the market value of the investment asset(s) at the time of initial closing. If the net aggregate value of our investment assets in TOB trust financings and our interest rate swap agreements decline below a certain threshold, then we are required to post additional collateral with our counterparties. We had approximately $7.3 million of net cash collateral returned to us by Mizuho during the nine months September 30, 2025 due primarily to increases in the value of our fixed interest rate investment assets funded with TOB trusts resulting from generally declining market interest rates. Continuing volatility in market interest rates and potential deterioration of general economic conditions may cause the value of our investment assets to decline and result in the posting of additional collateral in the future. The valuation of our interest rate swaps generally change inversely with the change in valuation of our investment assets, so the change in valuation of our interest rate swaps partially offset the change in value of our investment assets when determining the amount of collateral posting requirements.
The 2024 PFA Securitization Transaction is secured by the cash flows on the senior custodial receipts associated with the 2024 PFA Securitization Bonds. The holders of the Affordable Housing Multifamily Certificates associated with the 2024 PFA Securitization Transaction are entitled to interest at a fixed rate of 4.10% per annum, payable monthly, and all principal payments from the 2024 PFA Securitization Bonds until the stated amount of the Affordable Housing Multifamily Certificates is reduced to zero, which will be no later than September 2039. The Partnership will also pay credit enhancement, servicing, and trustee fees related to the 2024 PFA Securitization Transaction totaling 0.80% per annum. The 2024 PFA Securitization Transaction is non-recourse to the Partnership, does not require mark-to-market collateral posting, and has a term that matches the term of the underlying MRBs. In August 2025, a paydown of approximately $4.0 million was made from proceeds upon redemption of the Copper Gate MRB.
Our TEBS Residual Financing is secured by the cash flows from the residual certificates of our TEBS Financings and residual custodial receipts associated with the 2024 PFA Securitization Bonds. Interest due on the TEBS Residual Financing is at a fixed rate of 7.125% per annum and will be paid from receipts related to the TEBS Financing residual certificates. Future receipts of principal related to the TEBS Financing residual certificates will be used to pay down the principal of the TEBS Residual Financing. The TEBS Residual Financing is non-recourse financing to the Partnership and is not subject to mark-to-market collateral posting. In August 2025, a paydown of approximately $717,000 was made from proceeds upon redemption of the Copper Gate MRB.
Our General LOC and Acquisition LOC require monthly interest payments on outstanding balances and certain quarterly commitment fees. Such obligations are paid primarily from operating cash flows. The Acquisition LOC requires principal payments as previously described in this Item 2. The General LOC does not require principal payments until maturity in June 2027, subject to extension options, so long as the outstanding principal does not exceed the borrowing base calculation.
The table below summarizes contractual maturities by year for our secured lines of credit, debt financings, and mortgages payable as of September 30, 2025. The reported maturities for each individual debt financing are based on the earlier of contractual payments of the underlying securitized assets or the stated maturity date of the debt financing.
|
Secured Lines of Credit |
Debt Financing |
Mortgage Payable |
Total |
|||||||||||||
|
Remainder of 2025 |
$ |
950,000 |
$ |
109,274,718 |
$ |
310,220 |
$ |
110,534,938 |
||||||||
|
2026 |
- |
184,698,044 |
- |
184,698,044 |
||||||||||||
|
2027 |
40,500,000 |
193,978,408 |
- |
234,478,408 |
||||||||||||
|
2028 |
- |
225,986,221 |
- |
225,986,221 |
||||||||||||
|
2029 |
- |
5,609,116 |
- |
5,609,116 |
||||||||||||
|
Thereafter |
- |
305,694,923 |
- |
305,694,923 |
||||||||||||
|
Total |
$ |
41,450,000 |
$ |
1,025,241,430 |
$ |
310,220 |
$ |
1,067,001,650 |
||||||||
The table above is as of September 30, 2025, and does not reflect the various debt financing transactions that occurred in October 2025 that are disclosed in Note 25 of the condensed consolidated financial statements.
Distributions Paid to Holders of Preferred Units and BUCs
Distributions to the holders of Series A-1 Preferred Units, if declared by the General Partner, are paid quarterly at an annual fixed rate of 3.0%. Distributions to the holders of Series B Preferred Units, if declared by the General Partner, are paid quarterly at an annual fixed rate of 5.75%. The Series A-1 Preferred Units and Series B Preferred Units are non-cumulative, non-voting and non-convertible.
On September 16, 2025, we announced that the Board of Managers of Greystone Manager, which is the general partner of the General Partner, declared a quarterly cash distribution of $0.30 per BUC to unitholders of record on September 30, 2025 and payable on October 31, 2025.
The Partnership and its General Partner continually assess the level of distributions for the Preferred Units and BUCs based on cash available for distribution, financial performance and other factors considered relevant.
Redemptions of Preferred Units
Our outstanding Series A-1 and Series B Preferred Units are subject to optional redemption by the holders or the Partnership upon the sixth anniversary of issuance and on each anniversary thereafter. The earliest optional redemption dates for the currently outstanding Preferred Units range from April 2028 to October 2031.
Other Contractual Obligations
We are subject to various guaranty obligations in the normal course of business, and, in most cases, do not anticipate these obligations to result in significant cash payments.
Cash Flows
In the nine months ended September 30, 2025, we generated cash of $18.3 million, which was the net result of $28.9 million provided by operating activities, $99.4 million provided by investing activities, and $110.0 million used in financing activities.
Cash provided by operating activities totaled $28.9 million for the nine months ended September 30, 2025, as compared to $13.3 million generated for the nine months ended September 30, 2024. The change between periods was due to the following factors:
•
A decrease of $13.0 million in net income;
•
An increase of $11.5 million related to changes in the preferred return receivable from unconsolidated entities;
•
A total increase of $10.4 million in non-cash provisions for credit loss and loan loss; and
•
An increase of $1.4 million related to the amortization of bond premium, discount and origination fees;
•
An increase of $1.0 million related to the adjustment for the gain on sale of mortgage revenue bond that is considered cash from investing activities;
•
An increase of $2.3 million related to an increase in the Partnership's net losses from investments in unconsolidated entities;
•
An increase of $1.9 million related to reduction in the unrealized gain on interest rate derivatives.
Cash provided by investing activities totaled $99.4 million in the nine months ended September 30, 2025, as compared to cash used of $38.6 million in the nine months ended September 30, 2024. The change between periods was primarily due to the following factors:
•
A net increase of $62.1 million of cash due to lower advances on MRBs, taxable MRBs, GILs, taxable GILs and property loans;
•
A net increase of $38.6 million of cash due to overall higher paydowns and redemptions of MRBs, taxable MRBs, GILs, taxable GILs and property loans;
•
An increase of $17.6 million of cash due to lower contributions to unconsolidated entities;
•
An increase of $24.1 million of cash due to greater proceeds from the sale of investments in unconsolidated entities;
•
An increase of $2.4 million of cash due to greater proceeds from the return of investments in unconsolidated entities;
•
An increase of $1.4 million of cash due to proceeds from the sale of land held for development; and
•
A decrease of $8.2 million of cash due to the sale of an MRB.
Cash used in financing activities totaled $110.0 million in the nine months ended September 30, 2025, as compared to cash provided of $25.3 million in the nine months ended September 30, 2024. The change between periods was primarily due to the following factors:
•
An increase of $15.0 million of cash related to proceeds from the issuance of Preferred Units;
•
An increase of $10.0 million of cash related to the redemption of Preferred Units in 2024;
•
An increase of approximately $589,000 of cash due to lower distributions paid;
•
An increase of approximately $559,000 of cash due to lower debt financing costs paid;
•
A net decrease of $38.4 million of cash due to higher paydowns on the secured lines of credit;
•
A decrease of $1.4 million due to principal payments on mortgages payable;
•
A decrease of $1.5 million in net cash proceeds from the sale of BUCs; and
•
A net decrease of $120.2 million of cash due to less proceeds from debt financing.
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.
Leverage Ratio
We set target constraints for each type of financing utilized by us. Those constraints are dependent upon several factors, including the assets being leveraged, the tenor of the leverage program, whether the financing is subject to mark-to-market collateral calls, and the liquidity and marketability of the financed collateral. We use target constraints for each type of financing to manage to an overall 80% maximum Leverage Ratio, as established by the Board of Managers. The Board of Managers retains the right to change the maximum Leverage Ratio in the future based on the consideration of factors the Board of Managers considers relevant. We calculate our Leverage Ratio as total outstanding debt divided by total assets using cost adjusted for paydowns for MRBs, GILs, property loans, taxable MRBs and taxable GILs, and initial cost for deferred financing costs and real estate assets. As of September 30, 2025, our overall Leverage Ratio was approximately 73%.
Off Balance Sheet Arrangements
As of September 30, 2025 and December 31, 2024, we held MRB, GIL, taxable MRB, taxable GIL and certain property loan investments that are secured by affordable multifamily and seniors housing properties, which 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.
As of September 30, 2025, we own noncontrolling equity interests in various unconsolidated entities for the development of market rate multifamily and seniors housing properties, and for the Construction Lending JV. We account for these equity interests using the equity method of accounting and the assets, liabilities, and operating results of the underlying entities are not included in our condensed consolidated financial statements.
We have entered into various financial commitments and guaranties. For additional discussions related to commitments and guaranties, see Note 16 to the 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 19 to the condensed consolidated financial statements.
Critical Accounting Estimates
The preparation of financial statements in conformity with 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 periods. Actual results could differ from those estimates. The most significant estimates and assumptions include those used in determining (i) the fair value of MRBs and taxable MRBs; (ii) investment impairments; and (iii) allowance for credit losses.
The Partnership's critical accounting estimates are the same as those described in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2024.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see Note 2 to the Partnership's condensed consolidated financial statements.
Community Investments
The Partnership has invested and intends to invest in assets which are and will be purchased in order to support underlying community development activities targeted to low- and moderate-income individuals, such as affordable housing, small business lending, and job creating activities in areas of the United States. These investments may be eligible for regulatory credit under the CRA and available for allocation to holders of our Preferred Units (see Note 17 to Partnership's condensed consolidated financial statements).
The following table sets forth the assets of the Partnership the General Partner believes are eligible for regulatory credit under the CRA and are available for allocation to Preferred Unit investors as of November 5, 2025:
|
Property Name |
Investment |
Senior Bond |
Street |
City |
County |
State |
Zip |
|||||||||
|
The Safford |
$ |
34,185,000 |
10/10/2026 |
8740 North Silverbell Road |
Marana |
Pima |
AZ |
85743 |
||||||||
|
CCBA Senior Garden Apartments |
3,807,000 |
7/1/2037 |
438 3rd Ave |
San Diego |
San Diego |
CA |
92101 |
|||||||||
|
Courtyard Apartments |
10,230,000 |
12/1/2033 |
4127 W. Valencia Dr |
Fullerton |
Orange |
CA |
92833 |
|||||||||
|
Glenview Apartments |
4,670,000 |
12/1/2031 |
2361 Bass Lake Rd |
Cameron Park |
El Dorado |
CA |
95682 |
|||||||||
|
Harden Ranch Apartments |
6,960,000 |
3/1/2030 |
1907 Dartmouth Way |
Salinas |
Monterey |
CA |
93906 |
|||||||||
|
Harmony Court Apartments |
3,730,000 |
12/1/2033 |
5948 Victor Street |
Bakersfield |
Kern |
CA |
93308 |
|||||||||
|
Harmony Terrace Apartments |
6,900,000 |
1/1/2034 |
941 Sunset Garden Lane |
Simi Valley |
Ventura |
CA |
93065 |
|||||||||
|
Las Palmas II Apartments |
1,695,000 |
11/1/2033 |
51075 Frederick Street |
Coachella |
Riverside |
CA |
92236 |
|||||||||
|
Montclair Apartments |
2,530,000 |
12/1/2031 |
150 S 19th Ave |
Lemoore |
Kings |
CA |
93245 |
|||||||||
|
Montecito at Williams Ranch |
7,690,000 |
10/1/2034 |
1598 Mesquite Dr |
Salinas |
Monterey |
CA |
93905 |
|||||||||
|
Montevista |
720,000 |
7/1/2036 |
13728 San Pablo Avenue |
San Pablo |
Contra Costa |
CA |
94806 |
|||||||||
|
Ocotillo Springs |
2,500,000 |
8/1/2038 |
1615 I St |
Brawley |
Imperial |
CA |
92227 |
|||||||||
|
Poppy Grove I |
56,846,000 |
12/1/2025 |
10149 Bruceville Road |
Elk Grove |
Sacramento |
CA |
95624 |
|||||||||
|
Poppy Grove II |
33,191,300 |
1/1/2026 |
10149 Bruceville Road |
Elk Grove |
Sacramento |
CA |
95624 |
|||||||||
|
Poppy Grove III |
63,600,000 |
2/1/2026 |
10149 Bruceville Road |
Elk Grove |
Sacramento |
CA |
95624 |
|||||||||
|
Residency at Empire (2) |
76,650,000 |
12/31/2040 |
2814 W Empire Avenue |
Burbank |
Los Angeles |
CA |
91504 |
|||||||||
|
Residency at the Entrepreneur (3) |
72,000,000 |
3/31/2040 |
1657-1661 North Western Avenue |
Hollywood |
Los Angeles |
CA |
90027 |
|||||||||
|
Residency at the Mayer |
28,200,000 |
4/1/2039 |
5500 Hollywood Boulevard |
Hollywood |
Los Angeles |
CA |
90028 |
|||||||||
|
San Vicente Townhomes |
3,495,000 |
11/1/2033 |
250 San Vicente Road |
Soledad |
Monterey |
CA |
93960 |
|||||||||
|
Santa Fe Apartments |
1,565,000 |
12/1/2031 |
16576 Sultana St |
Hesperia |
San Bernardino |
CA |
92345 |
|||||||||
|
Seasons Lakewood Apartments |
7,350,000 |
1/1/2034 |
21309 Bloomfield Ave |
Lakewood |
Los Angeles |
CA |
90715 |
|||||||||
|
Seasons San Juan Capistrano Apartments |
12,375,000 |
1/1/2034 |
31641 Rancho Viejo Rd |
San Juan Capistrano |
Orange |
CA |
92675 |
|||||||||
|
Seasons At Simi Valley |
4,376,000 |
9/1/2032 |
1606 Rory Ln |
Simi Valley |
Ventura |
CA |
93063 |
|||||||||
|
Solano Vista Apartments |
2,655,000 |
1/1/2036 |
40 Valle Vista Avenue |
Vallejo |
Solano |
CA |
94590 |
|||||||||
|
Summerhill Family Apartments |
6,423,000 |
12/1/2033 |
6200 Victor Street |
Bakersfield |
Kern |
CA |
93308 |
|||||||||
|
Sycamore Walk |
2,132,000 |
1/1/2033 |
380 Pacheco Road |
Bakersfield |
Kern |
CA |
93307 |
|||||||||
|
Tyler Park Townhomes |
2,075,000 |
1/1/2030 |
1120 Heidi Drive |
Greenfield |
Monterey |
CA |
93927 |
|||||||||
|
Village at Madera Apartments |
3,085,000 |
12/1/2033 |
501 Monterey St |
Madera |
Madera |
CA |
93637 |
|||||||||
|
Vineyard Gardens |
995,000 |
1/1/2035 |
2800 E Vineyard Ave |
Oxnard |
Ventura |
CA |
93036 |
|||||||||
|
Wellspring Apartments |
3,900,000 |
9/1/2039 |
1500 East Anaheim Street |
Long Beach |
Los Angeles |
CA |
90813 |
|||||||||
|
Westside Village Apartments |
3,970,000 |
1/1/2030 |
595 Vera Cruz Way |
Shafter |
Kern |
CA |
93263 |
|||||||||
|
MaryAlice Circle |
3,050,000 |
3/1/2041 |
Arnold Street and Gwinnett Street |
Buford |
Gwinnett |
GA |
30518 |
|||||||||
|
Renaissance Gateway Apartments |
11,500,000 |
6/1/2050 |
650 N. Ardenwood Drive |
Baton Rouge |
East Baton Rouge Parish |
LA |
70806 |
|||||||||
|
Woodington Gardens Apartments |
33,727,000 |
5/1/2029 |
201 South Athol Avenue |
Baltimore |
Baltimore |
MD |
21229 |
|||||||||
|
Jackson Manor Apartments |
4,828,000 |
5/1/2038 |
332 Josanna Street |
Jackson |
Hinds |
MS |
39202 |
|||||||||
|
Silver Moon Apartments |
8,500,000 |
8/1/2055 |
901 Park Avenue SW |
Albuquerque |
Bernalillo |
NM |
87102 |
|||||||||
|
Village at Avalon |
16,400,000 |
1/1/2059 |
915 Park SW |
Albuquerque |
Bernalillo |
NM |
87102 |
|||||||||
|
Columbia Gardens Apartments |
15,000,000 |
12/1/2050 |
4000 Plowden Road |
Columbia |
Richland |
SC |
29205 |
|||||||||
|
The Ivy Apartments |
30,500,000 |
2/1/2030 |
151 Century Drive |
Greenville |
Greenville |
SC |
29607 |
|||||||||
|
The Park at Sondrio Apartments |
39,200,000 |
1/1/2030 |
3500 Pelham Road |
Greenville |
Greenville |
SC |
29615 |
|||||||||
|
The Park at Vietti Apartments |
27,865,000 |
1/1/2030 |
1000 Hunt Club Lane |
Spartanburg |
Spartanburg |
SC |
29301 |
|||||||||
|
Village at River's Edge |
10,000,000 |
6/1/2033 |
Gibson & Macrae Streets |
Columbia |
Richland |
SC |
29203 |
|||||||||
|
Willow Run |
15,000,000 |
12/18/2050 |
511 Alcott Drive |
Columbia |
Richland |
SC |
29203 |
|||||||||
|
Windsor Shores Apartments |
22,350,000 |
2/1/2030 |
1000 Windsor Shores Drive |
Columbia |
Richland |
SC |
29223 |
|||||||||
|
Agape Helotes |
13,024,468 |
1/1/2065 |
9311 FM 1560 N |
San Antonio |
Bexar |
TX |
78254 |
|||||||||
|
Angle Apartments |
21,000,000 |
1/1/2054 |
4250 Old Decatur Rd |
Fort Worth |
Tarrant |
TX |
76106 |
|||||||||
|
Avistar at Copperfield (Meadow Creek) |
14,000,000 |
5/1/2054 |
6416 York Meadow Drive |
Houston |
Harris |
TX |
77084 |
|||||||||
|
Avistar at the Crest Apartments |
10,147,160 |
3/1/2050 |
12660 Uhr Lane |
San Antonio |
Bexar |
TX |
78217 |
|||||||||
|
Avistar at the Oaks |
8,899,048 |
8/1/2050 |
3935 Thousand Oaks Drive |
San Antonio |
Bexar |
TX |
78217 |
|||||||||
|
Avistar at Wilcrest (Briar Creek) |
3,470,000 |
5/1/2054 |
1300 South Wilcrest Drive |
Houston |
Harris |
TX |
77042 |
|||||||||
|
Avistar at Wood Hollow (Oak Hollow) |
40,260,000 |
5/1/2054 |
7201 Wood Hollow Circle |
Austin |
Travis |
TX |
78731 |
|||||||||
|
Avistar in 09 Apartments |
7,743,037 |
8/1/2050 |
6700 North Vandiver Road |
San Antonio |
Bexar |
TX |
78209 |
|||||||||
|
Avistar on Parkway |
13,425,000 |
5/1/2052 |
9511 Perrin Beitel Rd |
San Antonio |
Bexar |
TX |
78217 |
|||||||||
|
Avistar on the Blvd |
17,422,805 |
3/1/2050 |
5100 USAA Boulevard |
San Antonio |
Bexar |
TX |
78240 |
|||||||||
|
Avistar on the Hills |
5,670,016 |
8/1/2050 |
4411 Callaghan Road |
San Antonio |
Bexar |
TX |
78228 |
|||||||||
|
Crossing at 1415 |
7,590,000 |
12/1/2052 |
1415 Babcock Road |
San Antonio |
Bexar |
TX |
78201 |
|||||||||
|
Concord at Gulf Gate Apartments |
9,185,000 |
2/1/2032 |
7120 Village Way |
Houston |
Harris |
TX |
77087 |
|||||||||
|
Concord at Little York Apartments |
13,440,000 |
2/1/2032 |
301 W Little York Rd |
Houston |
Harris |
TX |
77076 |
|||||||||
|
Concord at Williamcrest Apartments |
19,820,000 |
2/1/2032 |
10965 S Gessner Rd |
Houston |
Harris |
TX |
77071 |
|||||||||
|
Esperanza at Palo Alto Apartments |
19,540,000 |
7/1/2058 |
SWC of Loop 410 and Highway 16 South |
San Antonio |
Bexar |
TX |
78224 |
|||||||||
|
Heights at 515 |
6,435,000 |
12/1/2052 |
515 Exeter Road |
San Antonio |
Bexar |
TX |
78209 |
|||||||||
|
Oaks at Georgetown Apartments |
12,330,000 |
1/1/2034 |
550 W 22nd St |
Georgetown |
Williamson |
TX |
78626 |
|||||||||
|
15 West Apartments |
4,850,000 |
7/1/2054 |
401 15th Street |
Vancouver |
Clark |
WA |
98660 |
|||||||||
|
Aventine Apartments |
9,500,000 |
6/1/2031 |
211 112th Ave |
Bellevue |
King |
WA |
98004 |
|||||||||
|
$ |
966,171,834 |
|||||||||||||||
(1)
The date reflects the stated contractual maturity of the Partnership's senior debt investment in the property. For various reasons, including, but not limited to, call provisions that can be exercised by both the borrower and the Partnership, such debt investments may be redeemed prior to the stated maturity date. The Partnership may also elect to sell certain debt investments prior to the contractual maturity, consistent with its strategic purposes.
(2)
The Partnership committed to provide total funding of MRBs up to $79.0 million and a taxable MRB up to $9.4 million during the construction and lease-up of the property on a draw-down basis. The taxable MRB has a maturity date of 12/1/2025 with an option to extend the maturity six months if stabilization has not occurred. Upon stabilization of the property, the MRBs will be partially repaid and the maximum balance of the MRBs after stabilization will not exceed $35.3 million and will have a maturity date of 12/1/2040.
(3)
The Partnership committed to provide total funding of MRBs up to $64.0 million and a taxable MRB up to $8.0 million during the acquisition and rehabilitation phase of the property on a draw-down basis. The taxable MRB has a maturity date of 4/1/2026. Upon stabilization of the property, the MRB will be partially repaid and the maximum balance of the MRB after stabilization will not exceed $44.1 million and will have a maturity date of 3/31/2040.
Greystone Housing Impact Investors LP published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 13:48 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]