Greystone Housing Impact Investors LP

Previous wording

Several of California’s largest property insurance providers have recently paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state, which could increase the Partnership’s risk of loss in its MRB portfolio.

Current wording

Several of California’s largest property insurance providers have previously paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state, which could increase the Partnership’s risk of loss in its MRB portfolio.

Previous wording

We are subject to various risks associated with our secured line of credit arrangements.

Current wording

We are subject to various risks associated with our secured line of credit arrangements and mortgage payable.

Previous wording

A resurgence of higher than expected inflation may cause the real value of distributions on our BUCs and Preferred Units to decline.

Current wording

A resurgence of inflation may cause the real value of distributions on our BUCs and Preferred Units to decline.

Previous wording

The Partnership is managed by its sole General Partner, which is controlled by affiliates of Greystone. In addition, employees of Greystone Manager are responsible for the Partnership’s operations, including the Partnership’s chief executive officer and chief financial officer. The Partnership’s general partner manages our investments, performs administrative services for us and earns administrative fees that are paid by either the borrowers related to our investment assets or by us, subject to the terms of the Partnership Agreement. The General Partner does not have a fiduciary duty or obligation to any limited partner or BUC holder. Various potential and actual conflicts of interest may arise from the activities of the Partnership and Greystone and its affiliates by virtue of the fact that the General Partner is controlled by Greystone. The General Partner may be removed by a vote of limited partners holding at least 66.7% of outstanding limited partnership interests, voting as a single class. Such removal shall be effective immediately following the admission of a successor general partner.

Current wording

The Partnership is managed by its sole General Partner, which is controlled by affiliates of Greystone. In addition, employees of Greystone Manager are responsible for the Partnership’s operations, including the Partnership’s chief executive officer and chief financial officer. The General Partner manages our investments, performs administrative services for us and earns administrative fees that are paid by either the borrowers related to our investment assets or by us, subject to the terms of the Partnership Agreement. The General Partner does not have a fiduciary duty or obligation to any limited partner or BUC holder. Various potential and actual conflicts of interest may arise from the activities of the Partnership and Greystone and its affiliates by virtue of the fact that the General Partner is controlled by Greystone. The General Partner may be removed by a vote of limited partners holding at least 66.7% of outstanding limited partnership interests, voting as a single class. Such removal shall be effective immediately following the admission of a successor general partner.

Previous wording

Downgrades by rating agencies of the U.S. government’s credit rating or concerns about its debt and deficit levels in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our investment portfolio and our ability to access the debt markets on favorable terms. Interest rates have risen in recent years, and the risk that they may continue to do so is pronounced. In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the market value of our BUCs.

Current wording

Concerns about the U.S. government’s debt and deficit levels in general could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our investment portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased U.S. government credit rating stemming from consistently high federal budget deficits could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the market value of our BUCs.

Previous wording

The current global financial market situation, as well as various social and political circumstances in the U.S. and around the world, including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, adverse effects of climate crisis and global health epidemics, may contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. In particular, current military conflicts (including the Russia-Ukraine war and the Israel-Hamas war), including comprehensive international sanctions, the impact on inflation and increased disruption to supply chains may impact our counterparties with which we do business, and specifically our financing counterparties and financial institutions from which we obtain financing for the purchase of our investments, result in an economic downturn or recession either globally or locally in the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional military action, reignited “cold” wars or in the form of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on the Partnership’s returns, net income, and CAD. We have no way to predict the duration or outcome of the situation, as the conflicts and government reactions are rapidly developing and beyond our control. Prolonged unrest, military activities, or broad-based sanctions may increase our funding costs or limit our access to the capital markets.

Current wording

Global financial market dynamics, as well as various social and political circumstances in the U.S. and around the world, including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, adverse effects of climate crisis and global health epidemics, may contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. In particular, current military conflicts, including comprehensive international sanctions, the impact on inflation and increased disruption to supply chains may impact our counterparties with which we do business, and specifically our financing counterparties and financial institutions from which we obtain financing for the purchase of our investments, result in an economic downturn or recession either globally or locally in the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional military action, reignited “cold” wars or in the form of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on the Partnership’s returns, net income, and CAD. We have no way to predict these events, or their duration or outcomes. Prolonged unrest, military activities, or broad-based sanctions may increase our funding costs or limit our access to the capital markets.

Previous wording

In 2022 and 2023, the U.S. Federal Reserve raised short term interest rates by a total of 5.25% to combat price inflation. In September through December 2024, the Federal Reserve cut short-term rates by a total of 1.0%. In addition, the Federal Reserve issued an updated “dot plot” of future short-term interest rate expectations which showed a slower pace of expected short-term interest rate cuts in 2025. Federal Reserve representatives have continued to emphasize that future short-term interest rate changes will be data-dependent with the goal of fulfilling its dual mandate of stable prices and full employment. As such, we expect market interest rates may continue to be volatile as further relevant data becomes available in the near future. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rate movements and/or volatility. In periods of rising interest rates, to the extent we borrow money subject to a variable interest rate, our cost of funds would increase, which could reduce our net income. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. Further, rising interest rates could also adversely affect our performance if we hold investments with variable interest rates, subject to specified minimum interest rates (such as a SOFR floor, as applicable), while at the same time engaging in borrowings subject to variable interest rates not subject to such minimums. In such a scenario, rising interest rates may increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner as a result of such floor rates.

Current wording

In 2022 and 2023, the U.S. Federal Reserve raised short term interest rates by a total of 5.25% to combat price inflation. In 2024 and 2025, the Federal Reserve cut short-term rates by a total of 1.75%. In addition, the Federal Reserve issued an updated “dot plot” of future short-term interest rate expectations which showed an additional one to two interest rate reductions of 0.25% in 2026 and 2027. Federal Reserve representatives have continued to emphasize that future short-term interest rate changes will be data-dependent with the goal of fulfilling its dual mandate of stable prices and full employment. Future economic data that deviates from current market expectations will likely increase volatility in market interest rates. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rate movements and/or volatility. While we are currently in a lowering-rate cycle, we remain subject to risks if interest rates unexpectedly rise in the future. In periods of rising interest rates, to the extent we borrow money subject to a variable interest rate, our cost of funds would increase, which could reduce our net income. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. Further, rising interest rates could also adversely affect our performance if we hold investments with variable interest rates, subject to specified minimum interest rates (such as a SOFR floor, as applicable), while at the same time engaging in borrowings subject to variable interest rates not subject to such minimums. In such a scenario, rising interest rates may increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner as a result of such floor rates.

Previous wording

Further increases in interest rates may make it more costly for us to service the debt under our financing arrangements. Rising interest rates could also cause the developers of the projects we finance through MRBs, GILs, and property loans to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to delays in construction, leasing and stabilization of properties, and corresponding increased defaults. Properties securing our MRB, GIL and property loan investments that have variable interest rates may also experience higher construction costs that may exceed established capitalized interest reserves and other contingency reserves, potentially resulting in shortfalls in contractual debt service payments. Similarly, our JV Equity Investments have variable-rate construction loans and have established capitalized interest reserves during construction. Higher interest rates may result in higher than anticipated construction costs, which may require us to contribute additional equity and/or result in ultimately lower returns during the operating period and upon sale.

Current wording

Increases in interest rates may make it more costly for us to service the debt under our financing arrangements. Rising interest rates could also cause the borrowers of the properties we finance through MRBs, GILs, and property loans to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to delays in construction, leasing and stabilization of properties, and corresponding increased defaults. Properties securing our MRB, GIL and property loan investments that have variable interest rates may also experience higher construction costs that may exceed established capitalized interest reserves and other contingency reserves, potentially resulting in shortfalls in contractual debt service payments. Similarly, our JV Equity Investments have variable-rate construction loans and have established capitalized interest reserves during construction. Higher interest rates may result in higher than anticipated construction costs, which may require us to contribute additional equity and/or result in ultimately lower returns and potentially losses during the operating period and upon sale.

Previous wording

We finance the purchase of a significant portion of our investment assets. As a result, our net income and CAD will depend, in part, upon the difference between the rate at which we borrow funds and the yields on our investment assets. If debt financing is unavailable at acceptable rates, we may not be able to purchase and finance additional investments at an acceptable levered return. If we have previously financed the acquisition of an investment, we may be unable to refinance such debt at maturity or may be unable to refinance at acceptable terms. If we refinance our debt at higher rates of interest, our interest expense will increase and our cash flows from operations will be reduced. We can offer no assurance that continued significant changes in market interest rates will not have a material adverse effect on our net income and CAD. In periods of rising interest rates, our cost of funds may further increase, which could reduce our net income and CAD.

Current wording

We finance the purchase of a significant portion of our investment assets. As a result, our net income and CAD will depend, in part, upon the difference between the rate at which we borrow funds and the yields on our investment assets. If debt financing is unavailable at acceptable rates, we may not be able to purchase and finance additional investments at an acceptable levered return. If we have previously financed the acquisition of an investment, we may be unable to refinance such debt at maturity or may be unable to refinance at acceptable terms. If we refinance our debt at higher rates of interest, our interest expense will increase and our cash flows from operations will be reduced. We can offer no assurance that future changes in market interest rates will not have a material adverse effect on our net income and CAD. If interest rates unexpectedly rise, our cost of funds may further increase, which could reduce our net income and CAD.

Previous wording

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value or purchasing power of money. Inflation rates may change frequently and significantly due to various factors, including unexpected shifts in the domestic or global economy and changes in economic policies. The yields on our investments may not keep pace with inflation, which may result in losses to our Unitholders. This risk is greater for fixed-income investments with longer maturities such as our MRB investments.

Current wording

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value or purchasing power of money. Inflation rates may change frequently and significantly due to various factors, including unexpected shifts in the domestic or global economy and changes in economic and fiscal policies, including tariffs. The yields on our investments may not keep pace with inflation, which may result in losses to our Unitholders. This risk is greater for fixed-income investments with longer maturities such as our MRB investments.

Previous wording

While consumer and producer inflation rates have moderated or declined during the second half of 2024, the aggregate effects of the elevated inflation rates experienced from 2021 to 2023, as well as the potential for a resurgence in inflation, continue to present risks to the Partnership. A resurgence in inflation could cause increases in our general and administrative costs resulting in a decrease in our operating cash flows. A resurgence in inflation may also increase the operating expenses for multifamily properties securing our investment assets. Such cost increases may result in lower debt service coverage for properties related to our investments. Such cost increases may result in less distributable operating cash from our JV Equity Investments and may also result in lower property sales prices causing a reduction in distributions upon capital events. The majority of tenant leases related to multifamily investment assets are for terms of one year or less. The short-term nature of these leases generally serves to reduce the risk to the properties of the adverse effects of inflation; however, market conditions may prevent such properties from increasing rental rates in amounts sufficient to offset higher operating costs. Rental rates for set-aside units at affordable multifamily properties are typically tied to certain percentages of the area median income. Increases in area median income are not necessarily correlated to increases in property operating costs. A significant mismatch between area median income growth and property operating cost increases could negatively impact net operating cash flows available to pay debt service.

Current wording

While consumer and producer inflation rates have moderated in 2024 and 2025, the aggregate effects of the elevated inflation rates experienced from 2021 to 2023, as well as the potential for a resurgence in inflation, continue to present risks to the Partnership. A resurgence in inflation could cause increases in our general and administrative costs resulting in a decrease in our operating cash flows. A resurgence in inflation may also increase the operating expenses for multifamily properties securing our investment assets. Such cost increases may result in lower debt service coverage for properties related to our investments. Such cost increases may result in less distributable operating cash from our JV Equity Investments and may also result in lower property sales prices causing a reduction in distributions upon capital events. The majority of tenant leases related to multifamily investment assets are for terms of one year or less. The short-term nature of these leases generally serves to reduce the risk to the properties of the adverse effects of inflation; however, market conditions may prevent such properties from increasing rental rates in amounts sufficient to offset higher operating costs. Rental rates for set-aside units at affordable multifamily properties are typically tied to certain percentages of the area median income. Increases in area median income are not necessarily correlated to increases in property operating costs. A significant mismatch between area median income growth and property operating cost increases could negatively impact net operating cash flows available to pay debt service.

Previous wording

Inflation typically is accompanied by higher interest rates, which could adversely impact borrowers’ ability to obtain financing on favorable terms, thereby causing a decrease in our number of investment opportunities. In addition, during any periods of rising inflation, interest rates on our variable rate debt financing arrangements would likely increase, which would tend to further reduce returns to Unitholders. Higher interest rates due to the aggregate effects of the recent inflationary environment, or a resurgence in inflation, may also depress investment asset values due to a decrease in demand or increasing cost of operations, such that we may record charges against earnings for asset impairments that may be material.

Current wording

Inflation typically is accompanied by higher interest rates, which could adversely impact potential borrowers’ ability to obtain financing on favorable terms, thereby causing a decrease in our number of investment opportunities. In addition, during any periods of rising inflation, interest rates on our variable rate debt financing arrangements would likely increase, which would tend to further reduce returns to Unitholders. Higher interest rates due to the aggregate effects of the recent inflationary environment, or a resurgence in inflation, may also depress investment asset values due to a decrease in demand or increasing cost of operations, such that we may record charges against earnings for asset impairments that may be material.

Previous wording

Our MRB investments require the borrower to make regular principal and interest payments during their contractual term. Although our MRB investments are issued by state or local governments, their agencies, and authorities, they are not general obligations of these governmental entities and are not backed by any taxing authority. Instead, each MRB is backed by a non-recourse obligation of the owner of the secured property and the sole source of cash to make regular principal and interest on the MRB is the net cash flow generated by the operation of the secured property and the net proceeds from the ultimate sale or refinancing of the property (except in cases where a property owner or its affiliates has provided a limited guaranty of certain payments). This makes our MRB investments subject to risks usually associated with direct investments in such properties. Defaults may occur if a property is unable to sustain net cash flow at a level necessary to pay its debt service obligations. Net cash flow and net sale proceeds from a property are applied only to debt service payments of the MRB secured by that property and are not available to satisfy debt service obligations on our other MRB investments. In addition, the value of a property at the time of its sale or refinancing will be a direct function of its perceived future profitability. Therefore, the amount of interest that we earn on our MRB investments, and whether or not we will receive the entire principal balance of the MRB investments as and when due, will depend to a large degree on the economic results of the secured properties.

Current wording

Our MRB investments require the borrower to make regular principal and interest payments during their contractual term. Although our MRB investments are issued by state or local governments, their agencies, and authorities, they are not general obligations of these governmental entities and are not backed by any taxing authority. Instead, each MRB is backed by a non-recourse obligation of the owner of the secured property and the sole source of cash to make regular principal and interest on the MRB is the net cash flow generated by the operation of the secured property and the net proceeds from the ultimate sale or refinancing of the property (except in cases where a property owner or its affiliates has provided a limited guaranty of certain payments). This makes our MRB investments subject to risks usually associated with direct investments in such properties. Defaults may occur if a property is unable to generate or sustain net cash flow at a level necessary to pay its debt service obligations. Net cash flow and net sale proceeds from a property are applied only to debt service payments of the MRB secured by that property and are not available to satisfy debt service obligations on our other MRB investments. In addition, the value of a property at the time of its sale or refinancing will be a direct function of its perceived future profitability. Therefore, the amount of interest that we earn on our MRB investments, and whether or not we will receive the entire principal balance of the MRB investments as and when due, will depend to a large degree on the economic results of the secured properties.

Previous wording

We may extend property loans to properties experiencing difficulties meeting debt service requirements to avoid defaults on MRBs and protect the tax-exempt nature of MRB interest income. The property loans may be recourse or non-recourse obligations of the property owner and may not be secured by the related property. The primary source of principal and interest payments on these property loans is the net cash flow generated by these properties or the net proceeds from the sale or refinancing of these properties after payment of the related MRBs. The net cash flow from the operation of a property may be impacted by many factors as previously discussed. In addition, any payment of principal and interest is subordinate to payment of all principal and interest of the MRB secured by the property. As a result, there is a greater risk of default on a property loan than on the associated MRB. If a property is unable to pay current debt service obligations on its property loan, a default may occur. We may not be able to or do not expect to pursue foreclosure or other remedies against a property upon default of a property loan if the property is not in default on the MRB.

Current wording

We may extend property loans to properties experiencing difficulties meeting debt service requirements to avoid defaults on MRBs and protect the tax-exempt nature of MRB interest income. The property loans may be recourse or non-recourse obligations of the property owner and may not be secured by the related property. The primary source of principal and interest payments on these property loans is the net cash flow generated by these properties or the net proceeds from the sale or refinancing of these properties after payment of the related MRBs. The net cash flow from the operation of a property may be impacted by many factors as previously discussed. In addition, any payment of principal and interest is subordinate to payment of all principal and interest of the MRB secured by the property. As a result, there is a greater risk of default on a property loan than on the associated MRB. If a property is unable to pay current debt service obligations on its property loan, a default may occur. We may not be able to or do not expect to pursue foreclosure or other remedies against a property upon default of a property loan if the property is not also in default on the MRB.

Previous wording

Our GIL investments and related property loans require regular interest payments during their contractual term. Although our GIL investments are issued by state or local governments, their agencies, and authorities, they are not general obligations of these governmental entities and are not backed by any taxing authority. Instead, each GIL is a non-recourse obligation of the owner of the secured property. In addition, certain property loans are on parity with the related GIL investments and share a first mortgage lien position on all real and personal property. Contractual interest payments during the contractual term are initially paid using capitalized interest in each property’s development budget. Once capitalized interest has been exhausted for a property, interest is payable from net operating cash flows, which is dependent to a large degree on the property’s operating results.

Current wording

Our GIL investments and related property loans require regular interest payments during their contractual term. Although our GIL investments are issued by state or local governments, their agencies, and authorities, they are not general obligations of these governmental entities and are not backed by any taxing authority. Instead, each GIL is a non-recourse obligation of the owner of the secured property. In addition, certain property loans are on parity with the related GIL investments and share a first mortgage lien position on all real and personal property. Contractual interest payments during the contractual term are initially paid using capitalized interest in each property’s development budget. Once capitalized interest has been exhausted for a property, interest is payable from net operating cash flows, which is dependent to a large degree on the property’s operating results. Non-payment risk is somewhat mitigated by partial-to-full guaranties from the developer and/or affiliates during the term of the GIL.

Previous wording

We acquire MRBs, GILs and property loans to finance properties in various stages of construction or renovation. As construction or renovation is completed, these properties will move into the lease-up phase. The lease-up of these properties may not be completed on schedule or at anticipated rent levels, resulting in a greater risk of default compared to investments secured by mortgages on properties that are stabilized or fully leased. Properties may not achieve expected occupancy or debt service coverage levels. While we may require borrowers and their affiliates to provide certain payment guaranties during the construction and lease-up phases, we may not be able to do so in all cases or such guaranties may not fully protect us in the event a property is not leased to an adequate level of rents or economic occupancy as anticipated. In addition, Freddie Mac, through a servicer, has forward committed to purchase our GIL investments at maturity at par if the property has reached stabilization and other conditions are met. If the lease-up of the related properties is either not completed on schedule or rent levels are less than anticipated, then permanent financing proceeds from Freddie Mac may be less than anticipated or fail to meet the conditions for execution of the commitment which may negatively impact the redemption of our investment. In such instances, we will pursue enforcement of payment guaranties from owners and their affiliates.

Current wording

We acquire MRBs, GILs and property loans to finance properties in various stages of construction or renovation. As construction or renovation is completed, these properties will move into the lease-up phase. The lease-up of these properties may not be completed on schedule or at anticipated rent levels, resulting in a greater risk of default compared to investments secured by mortgages on properties that are stabilized or fully leased. Properties may not achieve expected occupancy or debt service coverage levels. While we may require developers and their affiliates to provide certain payment guaranties during the construction and lease-up phases, we may not be able to do so in all cases, or such guaranties may not fully protect us in the event a property is not leased to an adequate level of rents or economic occupancy as anticipated. In addition, Freddie Mac, through a servicer, has forward committed to purchase our GIL investments at maturity at par if the property has reached stabilization and other conditions are met. If the lease-up of the related properties is either not completed on schedule or rent levels are less than anticipated, then permanent financing proceeds from Freddie Mac may be less than anticipated or fail to meet the conditions for execution of the commitment which may negatively impact the redemption of our investment. In such instances, we will pursue enforcement of payment guaranties from developers and their affiliates.

Previous wording

Our GIL investments and related property loans require only interest payments during their contractual term, so all principal is due at the end of the contractual term. The GILs are primarily repaid through a conversion to permanent financing pursuant to a forward commitment from Freddie Mac, through a Freddie Mac-approved seller/servicer. Freddie Mac will purchase each of our GILs once certain conditions are met, at a price equal to the outstanding principal plus accrued interest and convert the GIL into a Freddie Mac TEL financing. The execution of Freddie Mac’s forward commitments is dependent on completion of construction and various other conditions that each property must meet. If such conditions are not met, then Freddie Mac is not required to purchase the GIL and we will pursue collection via other means. Alternatively, Freddie Mac may purchase the GIL in an amount lower than par, which would then require the borrower to use additional sources to repay the principal on our GIL investment. The property loans related to our GILs are primarily to be repaid from future equity contributions by investors and other forward financing commitments provided by various parties. If Freddie Mac is not required to purchase the GIL and payment of the property loans from available sources is not made, the GIL and property loan will default and our recourse is to foreclose on the underlying property. We will also enforce our available recourse guaranty provisions against affiliates of the borrower. If the value of the property is less than the outstanding principal balance plus accrued interest on the GIL and related property loan, and we are unable to recoup any shortfall through enforcement of guaranties against affiliates of the borrower, then we will incur a loss. If there is a default, we are entitled to the borrower's original allocation of LIHTCs, which we can monetize through sales to third-party investors. The value of LIHTCs is dependent on market demand and the underlying property’s ability to cover debt service during the permanent financing phase, which is uncertain.

Current wording

Our GIL investments and related property loans require only interest payments during their contractual term, so all principal is due at the end of the contractual term. The GILs are primarily repaid through a conversion to permanent financing pursuant to a forward commitment from Freddie Mac, through a Freddie Mac-approved seller/servicer. Freddie Mac will purchase each of our GILs once certain conditions are met, at a price equal to the outstanding principal plus accrued interest and convert the GIL into a Freddie Mac TEL Financing. The execution of Freddie Mac’s forward commitments is dependent on completion of construction and various other conditions that each property must meet. If such conditions are not met, then Freddie Mac is not required to purchase the GIL and we will pursue collection via other means. Alternatively, Freddie Mac may purchase the GIL in an amount lower than par, which would then require the borrower to use additional sources to repay the principal on our GIL investment. The property loans related to our GILs are primarily to be repaid from future equity contributions by investors and other forward financing commitments provided by various parties. If Freddie Mac is not required to purchase the GIL and payment of the property loans from available sources is not made, the GIL and property loan will default and our recourse is to foreclose on the underlying property. We will also enforce our available recourse guaranty provisions against the developers and their affiliates. If the value of the property is less than the outstanding principal balance plus accrued interest on the GIL and related property loan, and we are unable to recoup any shortfall through enforcement of guaranties, then we will incur a loss. If there is a default, we are entitled to the borrower's original allocation of LIHTCs, which we can monetize through sales to third-party investors. The value of LIHTCs is dependent on market demand and the underlying property’s ability to cover debt service during the permanent financing phase, which is uncertain.

Previous wording

We have acquired MRB investments and property loans secured by seniors housing and skilled nursing properties. By their nature, such properties have different operational and financial risks than traditional affordable multifamily properties that impact a property’s ability to pay contractual debt service on our MRB or property loan investment. Such differences will also impact the availability and cost of debt financing associated with such investments.

Current wording

We have acquired MRB investments and property loans secured by seniors housing and skilled nursing properties. We also have JV Equity Investments in market rate seniors housing properties. By their nature, such properties have different operational and financial risks than traditional affordable multifamily properties that impact a property’s ability to pay contractual debt service on our MRB or property loan investment. Such differences will also impact the availability and cost of debt financing associated with such investments.

Previous wording

Our JV Equity Investments are passive in nature with operational oversight of each property controlled by our respective joint venture partner, as managing member, according to the entity’s operating agreement. We have the ability to remove the managing member under certain circumstances under the operating agreements. The properties are predominately managed by a property management company affiliated with our joint venture partner. 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, so we have limited influence on the operating policies and procedures for the JV Equity Investments. If we choose to remove the managing member, then we will become the economic owner of the property and will consolidate the property in our consolidated financial statements, which will impact our reported results of operations.

Current wording

Our JV Equity Investments are passive in nature with operational oversight of each property controlled by our respective joint venture partner, as managing member, according to the entity’s operating agreement. We have the ability to remove the managing member under certain circumstances under the operating agreements. Five of the properties are managed by a property management company affiliated with our joint venture partner. 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, so we have limited influence on the operating policies and procedures for the JV Equity Investments. If we choose to remove the managing member, then we will become the economic owner of the property and will consolidate the property in our consolidated financial statements, which will impact our reported results of operations.

Previous wording

The construction of the properties underlying our JV Equity Investments is dependent on obtaining construction loans from financial institutions that finance approximately 55% to 75% of the total cost of development with terms ranging from three to five years. Such construction loans typically bear interest at variable rates indexed to SOFR or the Wall Street Journal Prime Rate and are subject to interest rate risk. The development budget for each property includes a capitalized interest component, which may be insufficient if interest rates increase beyond expectations. In such instances, we have contributed additional capital and may contribute further capital to the property to cover any capitalized interest shortfalls, which may negatively impact our return on investment.

Current wording

The construction of the properties underlying our JV Equity Investments is dependent on obtaining construction loans from financial institutions that finance approximately 55% to 75% of the total cost of development with terms ranging from three to seven years. Such construction loans typically bear interest at variable rates indexed to SOFR or the Wall Street Journal Prime Rate and are subject to interest rate risk. The development budget for each property includes a capitalized interest component, which may be insufficient if interest rates increase beyond expectations. In such instances, we have contributed additional capital and may contribute further capital to the property to cover any capitalized interest shortfalls, which may negatively impact our return on investment or potentially result in losses.

Previous wording

For construction loans related to certain of our JV Equity Investments, we have entered into forward loan purchase agreements which require us to purchase the construction loan from the construction lender at maturity of the loan, which is typically five to seven years from closing, if not otherwise repaid by the borrower entity. Certain forward loan purchase agreements are only effective upon the property’s receipt of a certificate of occupancy by the borrower entity while others are effective as of the construction loan closing. We would need to purchase the construction loan with cash on hand or obtain alternative financing, which may be less than the original construction loan or at less attractive terms, and negatively impact our liquidity and results of operations. The Partnership has recourse to the managing member of the borrower entity and/or the project’s general contractor for those agreements that are effective prior to the receipt of a certificate of occupancy. If the Partnership is required to perform under a forward loan purchase agreement, then it has the right to remove the managing member of the borrower entity, take ownership of the underlying property, and either sell the property or obtain replacement financing. We may also provide limited guarantees of construction loans associated with JV Equity Investments, which would have similar risks and recourse options as those for properties with forward loan purchase commitments.

Current wording

For construction loans related to certain of our JV Equity Investments, we have entered into forward loan purchase agreements which require us to purchase the construction loan from the construction lender at maturity of the loan, which is typically five to seven years from closing, if not otherwise repaid by the borrower entity. Certain forward loan purchase agreements are only effective upon the property’s receipt of a certificate of occupancy by the borrower entity while others are effective as of the construction loan closing. We would need to purchase the construction loan with cash on hand or obtain alternative financing, which may be less than the original construction loan or at less attractive terms, and negatively impact our liquidity and results of operations. The Partnership has recourse to the managing member of the borrower entity and/or the property's general contractor for those agreements that are effective prior to the receipt of a certificate of occupancy. If the Partnership is required to perform under a forward loan purchase agreement, then it has the right to remove the managing member of the borrower entity, take ownership of the underlying property, and either sell the property or obtain replacement financing. We may also provide limited guarantees of construction loans associated with JV Equity Investments, which would have similar risks and recourse options as those for properties with forward loan purchase commitments.

Previous wording

Our various investments are related to new construction or acquisition/rehabilitation of affordable multifamily, seniors housing, skilled nursing, and market-rate multifamily rental properties. Construction of such properties generally takes 18 to 36 months to complete. There is a risk that construction of the properties may be substantially delayed or never completed for many reasons including, but not limited to, (i) insufficient financing to complete the project due to underestimated construction costs or cost overruns; (ii) failure of contractors or subcontractors to perform under their agreements; (iii) availability of construction materials and appliances; (iv) inability to obtain governmental approvals; (v) labor disputes; and (vi) adverse weather and other unpredictable contingencies beyond the control of the developer. While we may mitigate some of these risks by obtaining construction completion guaranties from developers or other parties and/or payment and performance bonds from contractors, we may not be able to do so in all cases, or such guaranties or bonds may not fully protect us in the event a property is not completed. In other cases, we may decide to forego certain types of available security if we determine that the security is not necessary or is too expensive to obtain in relation to the risks covered.

Current wording

Our various investments are related to new construction or acquisition/rehabilitation of affordable multifamily, seniors housing, skilled nursing, and market-rate multifamily and seniors housing rental properties. Construction of such properties generally takes 18 to 36 months to complete. There is a risk that construction of the properties may be substantially delayed or never completed for many reasons including, but not limited to, (i) insufficient financing to complete the property due to underestimated construction costs or cost overruns; (ii) failure of contractors or subcontractors to perform under their agreements; (iii) availability of construction materials and appliances; (iv) inability to obtain governmental approvals; (v) labor disputes; and (vi) adverse weather and other unpredictable contingencies beyond the control of the developer. While we may mitigate some of these risks by obtaining construction completion guaranties from developers or other parties and/or payment and performance bonds from contractors, we may not be able to do so in all cases, or such guaranties or bonds may not fully protect us in the event a property is not completed. In other cases, we may decide to forego certain types of available security if we determine that the security is not necessary or is too expensive to obtain in relation to the risks covered.

Previous wording

As it relates to our JV Equity Investments, if a property is not completed or costs more to complete than anticipated, we may be required to contribute additional capital to support construction and/or operations. During the year ended December 31, 2024, we contributed additional equity above our original equity commitments totaling $9.0 million across five properties to cover cost overruns, higher than anticipated interest costs, and to support operations. We anticipate advancing additional equity to certain JV Equity Investments during the remainder of 2025 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, proceeds from refinancings of the original construction debt, and overall operating results of the underlying properties. Such additional equity may result in lower returns on our investments or we may be unable to recover our initial investment upon sale, which would adversely affect our cash flow and results of operations.

Current wording

As it relates to our JV Equity Investments, if a property is not completed or costs more to complete than anticipated, we may be required to contribute additional capital to support construction and/or operations. During the years ended December 31, 2024 and 2025, we contributed additional equity above our original equity commitments totaling $9.0 million and $4.1 million to various properties to cover cost overruns, higher than anticipated interest costs, and to support operations. We anticipate advancing additional equity to certain JV Equity Investments during the remainder of 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, proceeds from refinancings of the original construction debt, and overall operating results of the underlying properties. Such additional equity may result in lower returns on our investments or we may be unable to recover our initial investment upon sale, which would adversely affect our cash flow and results of operations.

Previous wording

Many of our debt investments are associated with syndicated partnerships formed to receive allocations of LIHTCs. Conditions in the low income housing tax credit market due to changes in the U.S. corporate tax rates have previously had, and may in the future have, an adverse impact on our cost of borrowings and may also restrict our ability to make additional investments. These conditions, as well as the cost and availability of financing have been, and may continue to be, adversely affected in all markets in which we operate. Concern about the stability of the low income housing tax credit markets has led many lenders and institutional investors to reduce, and in some cases cease providing, funding to borrowers and our access to debt financing may be adversely affected. Changes in the U.S. tax rates, and the resulting impacts to the low income housing tax credit market, may limit our ability to replace or renew maturing debt financing on a timely basis, may impair our ability to acquire new investments and may impair our access to capital markets to meet our liquidity and growth strategies which may have an adverse effect on our financial condition and results of operations.

Current wording

Many of our debt investments are associated with syndicated partnerships formed to receive allocations of LIHTCs. Conditions in the low income housing tax credit market due to changes in the U.S. corporate tax rates have previously had, and may in the future have, an adverse impact on our cost of borrowings and may also restrict our ability to make additional investments. These conditions, as well as the cost and availability of financing have been, and may continue to be, adversely affected in all markets in which we operate. Concern about the stability of the low income housing tax credit markets may lead many lenders and institutional investors to reduce, and in some cases cease providing, funding to borrowers and our access to debt financing may be adversely affected. Changes in the U.S. tax rates, and the resulting impacts to the low income housing tax credit market, may limit our ability to replace or renew maturing debt financing on a timely basis, may impair our ability to acquire new investments and may impair our access to capital markets to meet our liquidity and growth strategies which may have an adverse effect on our financial condition and results of operations.

Previous wording

We have committed to advance funds for various investments on a draw-down basis during construction. We may also forward commit to purchase MRBs at future dates, contingent upon stabilization of affordable multifamily rental properties. Our gross outstanding investment commitments were approximately $171.4 million as of December 31, 2024. We believe our liquidity sources and debt financing arrangements are sufficient to fund our current investment commitments over time. However, if circumstances change such that our traditional liquidity sources and debt financing arrangements are insufficient, we may need to obtain funds from other sources, including, but not limited to, alternative financing arrangements, sales of assets, or raise additional capital. This could negatively impact our results of operations through higher costs or lower investment returns. We cannot assure you that we will have access to adequate equity or debt capital on favorable terms (including, without limitation, cost, advance rates, and term) at the desired times, or at all, which may cause us to curtail our new investment activities and/or dispose of assets, which could materially adversely affect our operating cash flows and results of operations.

Current wording

We have committed to advance funds for various investments on a draw-down basis during construction. We may also forward commit to purchase MRBs at future dates, contingent upon stabilization of affordable multifamily rental properties. Our gross outstanding investment commitments were approximately $94.5 million as of December 31, 2025. We believe our liquidity sources and debt financing arrangements are sufficient to fund our current investment commitments over time. However, if circumstances change such that our traditional liquidity sources and debt financing arrangements are insufficient, we may need to obtain funds from other sources, including, but not limited to, alternative financing arrangements, sales of assets, or raise additional capital. This could negatively impact our results of operations through higher costs or lower investment returns. We cannot assure you that we will have access to adequate equity or debt capital on favorable terms (including, without limitation, cost, advance rates, and term) at the desired times, or at all, which may cause us to curtail our new investment activities and/or dispose of assets, which could materially adversely affect our operating cash flows and results of operations.

Previous wording

As of December 31, 2024, eight of our 12 JV Equity Investments are related to market-rate multifamily properties in Texas. In addition, one JV Equity Investment for a property in Texas is reported as a consolidated VIE as of December 31, 2024. Such concentration exposes us to potentially negative effects of local or regional economic downturns, which could prevent us from realizing returns on our investments and recovery of our investment capital.

Current wording

As of December 31, 2025, six of our 11 JV Equity Investments are related to market-rate multifamily properties in Texas. In addition, one JV Equity Investment for a property in Texas is reported as a consolidated VIE as of December 31, 2025. Such concentration exposes us to potentially negative effects of local or regional economic downturns, which could prevent us from realizing returns on our investments and recovery of our investment capital.

Previous wording

We typically source our investment assets through our relationships with multifamily property developers. There are concentrations with certain developers with our MRB, GIL, property loan, and JV Equity Investment asset classes. The developers and their affiliates manage the construction and operations of the underlying properties. Though our investment assets are not cross collateralized with each other, management or other issues with an individual developer or its affiliates may impact multiple investment assets associated with the developer, resulting in potential lower debt service coverage, and investment or asset impairments.

Current wording

We typically source our investment assets through our relationships with multifamily property developers. There are concentrations with certain developers with our MRB, GIL, property loan, and JV Equity Investment asset classes. The developers and their affiliates manage the construction and operations of the underlying properties. Though our investment assets are not cross collateralized, management or other issues with an individual developer or its affiliates may impact multiple investment assets associated with the developer, resulting in potential lower debt service coverage, and investment or asset impairments.

Previous wording

Two entities, which are affiliates of one of our developer relationships, have provided limited-to-full payment guaranties of the principal and interest for five of our GIL investments and one property loan. The guarantor affiliates are required to meet certain net worth and liquidity covenants during the term of the guaranties. However, significant defaults resulting in enforcement of guaranties against the two entities will negatively impact our ability to enforce our guaranties in the event of multiple defaults on our GIL and property loan investments.

Current wording

We typically obtain limited-to-full payment guaranties of the principal and interest during the construction phase from affiliates of borrowers under our MRB and GIL investments. The guarantor affiliates are required to meet certain net worth and liquidity covenants during the term of the guaranties. Such guaranties may be concentrated in certain guarantors if we invest in multiple MRB and GIL investments with the same sponsor and/or developer. Multiple defaults resulting in enforcement of guaranties against a common guarantor may negatively impact our ability to collect under our guaranties.

Previous wording

We apply the current expected credit loss model to estimate an allowance for credit losses as required by GAAP accounting guidance. For our GIL, taxable GIL, and property loan investments and unfunded commitments, the measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement takes place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter. The measurement of credit losses for our available-for-sale MRB and taxable MRBs investments are evaluated under a different model under the accounting guidance that focuses on declines in fair value, conditions specific to the security and related collateral, and the Partnership’s intent to hold the investments. If, based on developments and trends, we are required to materially increase our level of allowance for credit losses, such an increase may affect our results of operations, financial condition, and business. Because our methodology for determining allowances may differ from the methodologies employed by other companies, our allowance for credit losses may not be comparable with allowances reported by other companies.

Current wording

We apply the current expected credit loss model to estimate an allowance for credit losses as required by GAAP accounting guidance. For our GIL, taxable GIL, and property loan investments and unfunded commitments, the measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement takes place at the time a financial asset is first added to the balance sheet and updated quarterly thereafter. The measurement of credit losses for our available-for-sale MRB and taxable MRBs investments are evaluated under a different model under the accounting guidance that focuses on declines in fair value, conditions specific to the security and related collateral, and our intent to hold the investments. If, based on developments and trends, we are required to materially increase our level of allowance for credit losses, such an increase may affect our results of operations, financial condition, and business. Because our methodology for determining allowances may differ from the methodologies employed by other companies, our allowance for credit losses may not be comparable with allowances reported by other companies.

Previous wording

If a property underlying an investment asset was to be damaged by a natural disaster, such as a hurricane, earthquake, major storm or wildfire, the amount of uninsured losses could be significant, and the property owner may not have the resources to fully rebuild the property. In addition, the damage to a property may result in all or a portion of the rental units not being rentable for a period of time. If a property owner does not carry rental interruption insurance, the loss of rental income would reduce the cash flow available to pay principal and interest on MRBs, GILs and property loans secured by these properties. In addition, the property owner could also lose their allocation of LIHTCs if the property was not repaired. A loss of rental income would also reduce the cash available for our JV Equity Investments to pay us distributions.

Current wording

If a property underlying an investment asset was to be damaged by a natural disaster, such as a hurricane, earthquake, major storm or wildfire, the amount of uninsured losses could be significant, and the property owner may not have the resources to fully rebuild the property. In addition, damage to a property may result in all or a portion of the rental units not being rentable for a period of time. If a property owner does not carry rental interruption insurance, the loss of rental income would reduce the cash flow available to pay principal and interest on MRBs, GILs and property loans secured by the property. In addition, the property owner could also lose their allocation of LIHTCs if the property was not repaired. A loss of rental income would also reduce the cash available from our JV Equity Investments to pay us distributions.

Previous wording

Several of California’s largest property insurance providers have recently paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state, which could increase the Partnership’s risk of loss in its MRB portfolio.

Current wording

Several of California’s largest property insurance providers have previously paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state, which could increase the Partnership’s risk of loss in its MRB portfolio.

Previous wording

At December 31, 2024, the outstanding principal of the Partnership’s MRBs, taxable MRBs, GILs and taxable GILs secured by multifamily properties located in California were $301.0 million, $18.0 million, $90.8 million, and $13.2 million, respectively. During 2024, several of California’s largest real property hazard insurance providers, including State Farm, Allstate, Farmers, USAA, Travelers, Nationwide, and Chubb, have either paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state. Mounting claims from wildfire damage, the increasing cost of building and repairing residential properties, and a steep increase in reinsurance premiums, as well as state insurance regulations that make it difficult for insurers to adjust premiums in response to the evolving risk landscape, have challenged the capacity of insurance companies to sustainably and profitably offer property insurance in California. The result of these actions has been to limit the availability of property insurance in California for the owners of multifamily properties such as those securing our MRBs, as well as for the residents of those properties. Those multifamily property owners and residents who are able to obtain or renew their property insurance are experiencing or are likely to experience significant increases in premiums.

Current wording

At December 31, 2025, the outstanding principal of the Partnership’s MRBs, taxable MRBs, GILs and taxable GILs secured by multifamily properties located in California were $302.2 million, $25.4 million, $138.8 million, and $44.9 million, respectively. During 2024, several of California’s largest real property hazard insurance providers, including State Farm, Allstate, Farmers, USAA, Travelers, Nationwide, and Chubb, have either paused or severely limited their issuance of new policies, or their renewal of existing policies, in the state. Mounting claims from wildfire damage, the increasing cost of building and repairing residential properties, and a steep increase in reinsurance premiums, as well as state insurance regulations that make it difficult for insurers to adjust premiums in response to the evolving risk landscape, have challenged the capacity of insurance companies to sustainably and profitably offer property insurance in California. The result of these actions has been to limit the availability of property insurance in California for the owners of multifamily properties such as those securing our MRBs, as well as for the residents of those properties. Those multifamily property owners and residents who are able to obtain or renew their property insurance are experiencing or are likely to experience significant increases in premiums.

Previous wording

Many property owners in the State of California have been negatively impacted by the contraction of insurance options in the state and the resulting lack of access to affordable property insurance, which could adversely impact the ability of multifamily property owners to obtain insurance, and escalating premiums and limited coverage options could result in limiting coverage in the event of loss. If any loss suffered by a multifamily property owner relating to an MRB is not insured or exceeds applicable insurance limits, this could increase the risk of loss in the Partnership’s MRB portfolio, which could have a material adverse effect on the Partnership’s business, financial condition, and results of operations.

Current wording

Many property owners in the State of California have been negatively impacted by the contraction of insurance options in the state and the resulting lack of access to affordable property insurance, which could adversely impact the ability of multifamily property owners to obtain insurance, and escalating premiums and limited coverage options could result in limiting coverage in the event of loss. If any loss suffered by a multifamily property owner relating to an MRB is not insured or exceeds applicable insurance limits, this could increase the risk of loss in our MRB portfolio, which could have a material adverse effect on our business, financial condition, and results of operations.

Previous wording

Similarly, we are subject to reinvestment risk on the return of capital from the sale or redemption of our JV Equity Investments. Our initial equity contributions are returned upon sale of the underlying properties, at which time we will reinvest the capital into either new JV Equity Investments or other investments. New investment opportunities may not generate the same returns as our prior investments due to factors including, but not limited to, increasing competition in the development of market-rate multifamily rental properties, rising interest rates and increasing construction costs. Lower returns on new investment opportunities will result in declining operating results over time. Though we have increased the number of developer relationships within our JV Equity Investments portfolio in recent years, we cannot ensure that we will be presented with additional investment opportunities from these groups in the future, which could negatively impact our ability to redeploy capital or achieve continuing investment returns. We continually evaluate opportunities with other developer groups, but we cannot ensure that such opportunities will materialize or, if identified, result in returns similar to our past JV Equity Investments.

Current wording

Similarly, we are subject to reinvestment risk on the return of capital from the sale or redemption of our JV Equity Investments. In November 2025, we announced that we are implementing a strategy to reduce our capital allocation to market rate multifamily JV Equity Investments going forward and we expect to reinvest the return of capital from the sale of these investments into primarily new MRB investments. We may also continue acquiring JV Equity Investments related to market rate seniors housing properties. New investment opportunities may not generate the same returns as our prior investments due to factors including, but not limited to, differing risk profiles, elevated interest rates and increasing construction costs. Lower returns on new investment opportunities will result in declining operating results over time.

Previous wording

Our ability to fund our operations, meet financial obligations, and finance targeted investment opportunities may be impacted by an inability to secure and maintain debt financing from current or potential future lenders. Our lenders are primarily large global financial institutions or regional commercial banks, with exposure both to global financial markets and to more localized economic conditions. Whether because of a global or local financial crises or other circumstances, such as if one or more of our lenders experiences severe financial difficulties, lenders could become unwilling or unable to provide us with financing, could increase our retained interests required for such financing, or could increase the costs of financing.

Current wording

Our ability to fund our operations, meet financial obligations, and finance targeted investment opportunities may be impacted by an inability to secure and maintain debt financing from current or potential future lenders. Our lenders are primarily large global financial institutions or regional commercial banks, with exposure both to global financial markets and to more localized economic conditions. Whether because of a global or local financial crises or other circumstances, such as if one or more of our lenders experience severe financial difficulties, lenders could become unwilling or unable to provide us with financing, could increase our retained interests required for such financing, or could increase the costs of financing.

Previous wording

In general, the trust or other special purpose entity formed for an asset securitization financing can terminate for various events relating to the assets or with the trust itself. Potential termination triggers related to the securitized assets include non-payment of debt service or other defaults or a determination that the interest on the assets is taxable. Potential termination triggers related to a trust include a downgrade in the investment rating of the trust credit enhancer, a ratings downgrade of the trust liquidity provider, increases in short term interest rates in excess of the interest paid on the underlying assets, an inability to remarket the senior securities, or an inability to obtain credit or liquidity support for the trust. In each of these cases, the trust will be terminated and the securitized assets held by the trusts will be sold. If the proceeds from the sale of the trust collateral are not sufficient to pay the principal amount of the senior securities plus accrued interest and all trust-related expenses then, we will be required, through our guaranty of the trusts, to fund any such shortfall. We may lose our investment in the residual interest and, except for our TEBS financings, 2024 PFA Securitization Bonds, and TEBS Residual Financing, realize additional losses to fully repay the senior trust obligations.

Current wording

In general, the trust or other special purpose entity formed for an asset securitization financing can terminate for various events relating to the assets or with the trust itself. Potential termination triggers related to the securitized assets include non-payment of debt service or other defaults or a determination that the interest on the assets is taxable. Potential termination triggers related to a trust include a downgrade in the investment rating of the trust credit enhancer, a ratings downgrade of the trust liquidity provider, increases in short term interest rates in excess of the interest paid on the underlying assets, an inability to remarket the senior securities, or an inability to obtain credit or liquidity support for the trust. In each of these cases, the trust will be terminated and the securitized assets held by the trusts will be sold. If the proceeds from the sale of the trust collateral are not sufficient to pay the principal amount of the senior securities plus accrued interest and all trust-related expenses then, we will be required, through our guaranty of the trusts, to fund any such shortfall. We may lose our investment in the residual interest. Our TOB financings are recourse obligations of the Partnership, so the Partnership is liable for losses on the senior trust obligations.

Previous wording

During 2024, we were required to post net additional collateral totaling $6.2 million with Mizuho due to declines in the value of our fixed interest rate investment assets funded with TOB trusts resulting from generally rising market interest rates. We satisfied all collateral calls using unrestricted cash on hand. 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 moves 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. However, such relationships may diverge in the near term, which may result in us being required to post collateral with Mizuho. Our total cash collateral posted at Mizuho was approximately $15.8 million and our net aggregate exposure, as calculated by Mizuho, was approximately zero as of December 31, 2024. If the value of the Partnership’s net aggregate position with Mizuho decreases, then we will be required to post cash collateral equal to the net negative exposure. As of December 31, 2024, our positions with Mizuho subject to daily valuation adjustment consist of $543.1 million of fixed rate MRBs, $65.8 million variable rate MRBs and taxable MRBs, $94.6 million of variable rate GILs and taxable GILs, $12.1 million of fixed rate GILs, $48.5 million of fixed rate property loans, and $403.4 million notional balance of interest rate swaps. Potential changes in the value of our variable rate assets are primarily driven by market credit spreads, not changes in the absolute level of market interest rates, such that valuations are typically at or near par.

Current wording

During 2025, we received a net return of collateral totaling $5.2 million with Mizuho due to increases in the value of our fixed interest rate investment assets funded with TOB financing resulting from generally declining market interest rates. We have satisfied all collateral calls to date using unrestricted cash on hand. 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 moves 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. However, such relationships may diverge in the near term, which may result in us being required to post collateral with Mizuho. Our total cash collateral posted at Mizuho was approximately $10.6 million and our net aggregate exposure, as calculated by Mizuho, was approximately zero as of December 31, 2025. If the value of the Partnership’s net aggregate position with Mizuho decreases, then we will be required to post cash collateral equal to the net negative exposure. As of December 31, 2025, our positions with Mizuho subject to daily valuation adjustment consist of $772.5 million of fixed rate MRBs and taxable MRBs, $29.4 million variable rate MRBs and taxable MRBs, $46.1 million of fixed rate property loans, and $280.9 million notional balance of interest rate swaps. Potential changes in the value of our variable rate assets are primarily driven by market credit spreads, not changes in the absolute level of market interest rates, such that valuations are typically at or near par.

Previous wording

We were not required to post any additional collateral with Barclays during 2024. Our net aggregate exposure, as calculated by Barclays, was in favor of the Partnership in an amount of approximately $6.5 million as of December 31, 2024. If the value of the Partnership’s net aggregate position with Barclays decreases over $6.5 million then we will be required to post cash collateral equal to the net negative exposure. Our positions subject to daily valuation adjustment consist of $23.0 million of fixed rate MRBs, $103.9 million of fixed rate GILs and taxable GILs, $22.2 million of variable rate GILs, and $13.6 million notional balance of two interest rate swaps. Potential changes in the value of our variable rate assets are primarily driven by market credit spreads, not changes in the absolute level of market interest rates, such that valuations are typically at or near par.

Current wording

We were not required to post any additional collateral with Barclays during 2025. Our net aggregate exposure, as calculated by Barclays, was in favor of the Partnership in an amount of approximately $7.0 million as of December 31, 2025. If the value of the Partnership’s net aggregate position with Barclays decreases over $7.0 million then we will be required to post cash collateral equal to the net negative exposure. Our positions subject to daily valuation adjustment consist of $153.6 million of fixed rate GILs and taxable GILs, $23.0 million of fixed rate MRBs, and $13.6 million notional balance of two interest rate swaps. Potential changes in the value of our variable rate assets are primarily driven by market credit spreads, not changes in the absolute level of market interest rates, such that valuations are typically at or near par.

Previous wording

We report our derivative instruments at fair value on our financial statements with changes recorded in net income, which can be significant in periods of high interest rate volatility such as during 2022 through 2024. Further interest rate volatility may result in significant period to period volatility in our reported net income over the term of the derivative instruments.

Current wording

We report our derivative instruments at fair value on our financial statements with changes recorded in net income, which can be significant in periods of interest rate volatility such as during 2022 through 2024. Future interest rate volatility may result in significant period to period volatility in our reported net income over the term of the derivative instruments.

Previous wording

We are subject to various risks associated with our secured line of credit arrangements.

Current wording

We are subject to various risks associated with our secured line of credit arrangements and mortgage payable.