America First Tax Exempt (NASDAQ:ATAXZ)
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On May 9, 2008, America First Tax Exempt Investors, L.P. and subsidiary
(NASDAQ: ATAXZ) (the “Company”),
reported its financial results for the quarter ended March 31, 2008 on
its Quarterly Report on Form 10-Q. The Company reported net income of
$13,000 and net income allocated to Beneficial Unit Certificate (“BUC”
or “share”) holders
of $660,000 or $0.05 per share for the quarter ended March 31, 2008.
As discussed further below, management utilizes a calculation of Cash
Available for Distribution (“CAD”)
as a means to determine the Company’s ability
to make distributions to BUC holders. We believe that CAD provides
relevant information about the Company’s
operations and is necessary along with net income for an understanding
of the Company’s operating results. CAD
generated during the quarter was $1.5 million, or $0.11 per share. This
compares to CAD generated in the first quarter of 2007 of approximately
$1.3 million, or $0.13 per share, and CAD generated in the fourth
quarter of 2007 of approximately $1.4 million, or $0.11 per share.
CAD generated in the first quarter fell short of the quarterly
distribution of $0.135 per share due primarily to higher borrowing
costs. Our borrowing costs increased during the fourth quarter of 2007,
and remain at an increased level, as a direct result of recent credit
losses and rating downgrades experienced by the our main credit provider
resulting in higher credit facility costs which are passed on to the
Company. As of March 31, 2008, the total outstanding debt subject to
these increased borrowing costs was approximately $71.4 million.
Alternative financing vehicles are currently being explored in order to
reduce interest expense and provide access to new leverage financing on
reasonable terms. We have not entered into any agreements with respect
to any such alternative debt financing and there can be no assurances
that we will be able to do so.
Notwithstanding the current issues being experienced by the Company in
its variable rate borrowing program, we believe it is prudent to
continue to pursue our repositioning and growth strategy, the principal
objective of which is to increase CAD through the improvement of the
quality and performance of its revenue bond portfolio thereby creating
value for investors. To this end, we acquired two new Multifamily
Housing Revenue Bond investments in 2008 totaling approximately $12.4
million in par value. We also took advantage of an opportunity to sell
two revenue bond investments, one in March and one in April. Both sales
were completed at, or slightly above, the bond par values and resulted
in sale proceeds of approximately $14.9 million. A portion of the sale
proceeds was used in April to pay down $6.5 million of outstanding debt
thereby reducing our exposure to increased borrowing costs. Remaining
sale proceeds may be used for the further reduction of outstanding debt
or for general business purposes.
The well publicized turmoil within the credit markets has had a
significant impact on many entities. The Company continues to stress the
following commentary on our business:
The Company is in the business of investing in tax-exempt mortgage
revenue bonds secured by first mortgages on multifamily housing projects
throughout the United States which it holds as long-term investments.
The Company is not in the business of making mortgage loans secured by
mortgages on single-family residential properties, including those
categorized as subprime, and does not invest in securities backed by
such mortgages. The Company continues to be pleased with the performance
of its bond portfolio and the debt service coverage and loan to value
aspects of the portfolio.
The Company believes continued subprime and single family mortgage
defaults may help its business by creating additional demand for
affordable rental housing. It also feels the current tightening of
credit may create opportunities for additional investments consistent
with the Company’s investment strategy. While
the current environment may create new investing opportunities it has
also created new challenges for the Company in the form of increased
borrowing costs as discussed above. While the Company believes that
issues currently being experienced in its credit facilities are
short-term in nature and likely to be resolved there can be no assurance
that the increased cost of borrowing will not continue for an extended
period of time. If we are unable to obtain alternative financing and the
current increased borrowing costs continue the annual distribution may
need to be reduced.
The Company and its predecessor partnership have been continuously
operating this business since 1985 and have consistently distributed
tax-exempt income to our investors for 91 consecutive quarters.
In summary, the Company remains committed to executing its business plan
and generating steady, predictable distributions of predominantly tax
exempt income to its investors.
Cash Available for Distribution (“CAD”)
Management utilizes a calculation of Cash Available for Distribution (“CAD”)
as a means to determine the Partnership’s
ability to make distributions to BUC holders. The General Partner
believes that CAD provides relevant information about the Partnership’s
operations and is necessary along with net income for an understanding
of the Partnership’s operating results. To
calculate CAD, amortization expense related to debt financing costs and
bond reissuance costs, Tier 2 income due to the General Partner as
defined in the Partnership’s Agreement of
Limited Partnership, interest rate derivative expense or income,
provision for loan losses, impairments on bonds and losses related to
variable interest entities (“VIE’s”)
including depreciation expense are added back to the Company’s
net income (loss) as computed in accordance with accounting principles
generally accepted in the United States of America (“GAAP”).
There is no generally accepted methodology for computing CAD, and the
Company’s computation of CAD may not be
comparable to CAD reported by other companies. Although the Company
considers CAD to be a useful measure of its operating performance, CAD
should not be considered as an alternative to net income or net cash
flows from operating activities which are calculated in accordance with
GAAP.
The following tables show the calculation of CAD for the quarters ended
March 31, 2008 and 2007.
For the Three
For the Three
Months Ended
Months Ended
March 31, 2008
March 31, 2007
Net income
$
13,402
$
938,777
Net loss related to VIEs and eliminations due to consolidation
652,783
315,884
Net income before impact of VIE consolidation
666,185
1,254,661
Change in fair value of derivatives and interest rate cap
amortization
183,191
31,953
Depreciation and amortization expense (Partnership only)
630,198
6,658
CAD
$
1,479,574
$
1,293,272
For the Three
For the Three
Months Ended
Months Ended
March 31, 2008
March 31, 2007
CAD
$
1,479,574
$
1,293,272
Weighted average number of units outstanding,
basic and diluted
13,512,928
9,837,928
Net income, basic and diluted, per unit
$
0.05
$
0.13
CAD per unit
$
0.11
$
0.13
About America First Tax Exempt Investors, L.P.
America First Tax Exempt Investors, L.P. was formed for the primary
purpose of acquiring, holding, selling and otherwise dealing with a
portfolio of federally tax-exempt mortgage revenue bonds which have been
issued to provide construction and/or permanent financing of multifamily
residential apartments. The Company is pursuing a business strategy of
acquiring additional tax-exempt mortgage revenue bonds on a leveraged
basis in order to: (i) increase the amount of tax-exempt interest
available for distribution to its investors; (ii) reduce risk through
asset diversification and interest rate hedging; and (iii) achieve
economies of scale. The Company seeks to achieve its investment growth
strategy by investing in additional tax-exempt mortgage revenue bonds
and related investments, taking advantage of attractive financing
structures available in the tax-exempt securities market and entering
into interest rate risk management instruments. America First Tax Exempt
Investors, L.P. press releases are available on the World Wide Web at www.ataxz.com.
Information contained in this Press Release contains “forward-looking
statements” relating to, without limitation,
future performance, plans and objectives of management for future
operations and projections of revenue and other financial items, which
can be identified by the use of forward-looking terminology such as “may,”
“will,” “should,”
“expect,” “anticipate,”
“estimate” or “continue”
or the negative thereof or other variations thereon or comparable
terminology. Several factors with respect to such forward-looking
statements, including certain risks and uncertainties, could cause
actual results to differ materially from those in such forward-looking
statements. Many of these risks and uncertainties are described in
filings made by the Company with the Securities and Exchange Commission,
including its annual reports on Form 10-K, its quarterly reports on Form
10-Q and its current reports on Form 8-K.