America First Tax Exempt Investors L.P. Reports Operating Results (10-Q)
America First Tax Exempt Investors L.p. has a market cap of $162.06 million; its shares were traded at around $5.58 with and P/S ratio of 7.76. The dividend yield of America First Tax Exempt Investors L.p. stocks is 8.96%.ATAX is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Recent credit and real estate market conditions have created significant investment opportunities which the Company intends to aggressively pursue. Beginning in 2007, the Partnership has issued Beneficial Ownership Units ("BUCs") from time to time to raise additional equity capital to fund investment opportunities. In April 2010, a Registration Statement on Form S-3 was declared effective by SEC under which the Partnership may offer up to $200.0 million of additional BUCs from time to time. In April 2010, the Partnership issued an additional 8,280,000 BUCs through an underwritten public offering at a public offering price of $5.37 per BUC pursuant to this new Registration Statement. Net proceeds realized by the Partnership from the issuance of these BUCs were approximately $41.7 million after payment of an underwriter's discount and other offering costs of approximately $2.8 million.
In June 2010, the Company acquired 100% of the $18.3 million tax-exempt mortgage revenue bonds issued by the Ohio Housing Finance Agency as part of a plan of financing for the acquisition and rehabilitation of Crescent Village, Post Woods (I and II) and Willow Bend apartments in Ohio (the “Ohio Properties”). The tax-exempt mortgage bonds secured by the Ohio Properties were acquired by the Company at par and consisted of two series. The Series A bond has a par value of $14.7 million and bears interest at an annual rate of 7.0%. The Series B bond has a par value of $3.6 million and bears interest at an annual interest rate of 10.0%. Both series of bonds mature in June 2050. The Company had previously acquired a 99% interest in the Ohio Properties as part of its strategy of acquiring existing multifamily apartment properties that it expects will be partially financed with new tax-exempt mortgage bond at the time the properties become eligible for the issuance of additional low-income housing tax credits. In connection with the issuance of the new tax-exempt bonds, the Ohio properties were sold to three new ownership entities controlled by an unaffiliated not-for-profit company that financed the acquisition through the issuance of the new bonds and other subordinated debt acquired and issued by the Company. The new owners ultimately plan to sell limited partnership interests in the properties and syndicate LIHTCs as part of the overall plan of finance. The Ohio properties were sold for a total purchase price of $16.2 million. The new owners have not contributed any capital to the transaction and the Company has effectively provided 100% of the capital structure to the new owners as part of the sale transaction. As such, the transaction does not meet accounting standards for treatment as a sale and the Company will continue to consolidate the Ohio Properties for accounting purposes as if they were owned. Cash received as part of the sale transaction represents a gain on the sale transaction of approximately $1.9 million (See Note 5 in the financial statements).
In June 2010, prior to the sale of the Ohio Properties as discussed in Note 5, the Company repurchased the $12.8 million outstanding mortgage secured by the Ohio Properties at a discount. The early extinguishment of the mortgage debt resulted in a gain of approximately $439,000.
For the three and six months ended June 30, 2010, the Company generated Net Income equal to approximately $567,000 and $915,000, respectively. This is compared to approximately $570,000 of Net Loss reported for the three months ended June 30, 2009 and approximately $25.2 million of Net Income reported for the six months ended June 30, 2009. The Company generated Cash Available for Distribution (“CAD”) of approximately $3.6 million and $5.4 million, for the three and six months ended June 30, 2010, respectively. Comparatively, CAD of approximately $1.7 million and $5.0 million was reported for the three and six months ended June 30, 2009, respectively. See further discussion of CAD in this Management s Discussion and Analysis on page 44. The principal reason for the higher net income during the first half of 2009 relates to the gains realized upon the redemption of three tax-exempt mortgage bonds in February 2009. The Company reported losses from continuing operations during the three and six months ended June 30, 2009 of approximately $573,000 and $1.5 million, respectively. The improvement in income from continuing operations was due to higher revenues from the Company s tax-exempt bond investments and to lower total expenses.
CAD continues to be negatively affected mainly by higher financing costs and low levels of debt utilized by the Partnership to provide additional funds for investment in income generating assets. Because of the higher financing costs and our under-leveraged balance sheet, the Company has been exploring various options to provide more favorable debt financing. During March 2010, the Partnership signed a term sheet for a Tax-Exempt Bond Securitization facility (“TEBS”) with Freddie Mac. This financing option offers several advantages over the Company s current credit facilities including a longer term of up to 10 years. The TEBS facility is expected to provide the Company with approximately $96.0 million of proceeds which will be used to retire the current BOA Facility and OSB Facility and would provide approximately $40.0 million of additional funds for investment. The Company anticipates closing the TEBs facility in the third quarter of 2010, but there is no assurance that the TEBs Facility will close.
In June 2010, the Partnership completed the first planned restructuring by investing in two Ohio tax exempt bonds, collateralized by three existing Ohio MF properties, with a total of 362 rental units. The Company acquired 100% of the Series A bond with a par value of $14.7 million and the Series B bond with a par value of $3.6 million issued by the Ohio Housing Finance Agency as part of a plan of financing for the acquisition and rehabilitation of the Ohio Properties. The new owners have not contributed any capital to the transaction and the Company has effectively provided 100% of the capital structure to the new owners as part of the sale transaction. As such, the transaction does not meet accounting standards for treatment as a sale and the Company will continue to consolidate the Ohio Properties as if they were owned and these bonds will be eliminated upon consolidation. Cash received as part of the sale transaction represents a deferred gain on the sale transaction of approximately $1.9 million (See Note 5).
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