As
filed with the Securities and Exchange Commission on January 24, 2007
Commission
File No.: 333-139864
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT
NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
(Exact name of registrant as specified in its charter)
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| Delaware
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47-0810385 |
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(State or other jurisdiction
of incorporation or
organization)
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(IRS Employer Identification
Number) |
1004 Farnam Street
Suite 400
Omaha, Nebraska 68102
(402) 444-1630
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Lisa Y. Roskens
President and Chief Executive Officer
The Burlington Capital Group L.L.C.
1004 Farnam Street
Suite 400
Omaha, Nebraska 68102
(402) 444-1630
(Name, address and telephone number of Agent for Service)
Copies to:
Steven P. Amen
Kutak Rock LLP
1650 Farnam Street
Omaha, Nebraska 68102
Tel: (402) 346-6000
Fax: (402) 346-1148
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time or at one time
after the effective date of this registration statement as the registrant shall determine.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box. o
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following box. þ
If this Form is filed to register additional securities of an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective
amendment thereto that shall become effective upon filing with the Commission pursuant to Rule
462(e) under the Securities Act, check the following box. o
If this Form is a post-effective amendment to a registration statement filed pursuant to General
Instruction I.D. filed to register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the following box. o
The registrant hereby amends this registration statement on such date or dates as may be
necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement
shall become effective on such date as the Securities and Exchange Commission, acting pursuant to
said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may
not be sold until the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and is not seeking an offer to
buy these securities in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JANUARY 24, 2007
PRELIMINARY PROSPECTUS
$100,000,000
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
Shares representing assigned limited partnership interests
We may use this prospectus to offer shares representing assigned limited partnership interests
in America First Tax Exempt Investors, L.P. We may offer these shares from time to time. We will
provide specific terms of each issuance of these securities in supplements to this prospectus. You
should read this prospectus and any supplement carefully before you decide to invest in our shares.
This prospectus may not be used to consummate sales of these securities unless it is
accompanied by a prospectus supplement.
Our shares are quoted on the Nasdaq Global Market under the symbol “ATAXZ.”
Investing in our shares involves a high degree of risk. You should carefully consider the
information under the heading “RISK FACTORS” beginning on page 5 of this prospectus before buying
our shares.
We may offer our shares in amount, at prices and on terms determined by market conditions at
the time of the offerings. We may sell shares to or through underwriters, dealers or agents, or we
may sell shares directly to investors on our own behalf.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
, 2007
You should rely only on the information contained in or incorporated by reference into this
prospectus and any related prospectus supplement. We have not authorized any other person to
provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus, the related prospectus supplement and the documents incorporated by
reference herein is accurate only as of its respective date or dates or on the date or dates which
are specified in these documents. Our business, financial condition, results of operations and
prospects may have changed since those dates.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (or the Securities
Act), and Section 21E of the Securities Exchange Act of 1934, as amended (or the Exchange Act).
When used, statements which are not historical in nature, including those containing words such as
“anticipate,” “estimate,” “should,” “expect,” “believe,” “intend” and similar expressions are
intended to identify forward-looking statements. These forward-looking statements are subject to
various risks and uncertainties, and a number of factors could affect our future operating results
and financial condition, and could cause our future operating results or financial condition to
differ materially from what is expressed in the forward-looking statements contained in this
prospectus, any prospectus supplement or any document that is incorporated by reference into this
prospectus or any prospectus supplement. Many of these risks and uncertainties are discussed under
“RISK FACTORS” in this prospectus or described in reports that we file from time to time with the
Securities and Exchange Commission (or the SEC), including our Annual Report on Form 10-K and our
Quarterly Reports on Form 10-Q. We are not obligated to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and
Exchange Commission (or SEC) using a “shelf” registration process. Under this process, we may
offer and sell shares representing assigned limited partnership interests in our company in one or
more offerings for total proceeds of up to $100,000,000. This prospectus provides a general
description of our business and the shares that we may offer. Each time we offer to sell any
shares, we will provide a supplement to this prospectus that will contain specific information
about the terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. It is important for you to consider the information
contained in this prospectus and any prospectus supplement together with additional information
described under the heading “WHERE YOU CAN FIND MORE INFORMATION.”
We urge you to carefully read this entire prospectus and the related prospectus supplement,
including the financial statements and the information that is incorporated by reference into this
prospectus and the related prospectus supplement. You should carefully consider the information
discussed under “Risk Factors” before you decide to purchase any of our shares. All references to
“we,” “us” or “the Company” mean America First Tax Exempt Investors, L.P.
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
The Company
We are in the business of investing in federally tax-exempt mortgage revenue bonds which have
been issued by various state and local housing authorities to provide construction and permanent
financing for multifamily residential properties, including student housing. Interest on these
bonds is excludable from gross income for federal income tax purposes. As a result, most of the
income we earn is exempt from federal income taxes.
As of September 30, 2006, we owned 11 tax-exempt mortgage revenue bonds which were issued to
finance nine apartment properties located in the states of Florida, Indiana, Iowa, South Carolina,
Texas, and Kentucky containing a total of 1,980 rental units, a 144-unit multifamily apartment
complex under construction in Texas and a 142-bed student housing facility in Nebraska. Each of
these mortgage revenue bonds provides for the payment of fixed-rate base interest to the Company.
Additionally, nine of the 11 bonds also provide for the payment of contingent interest based upon
net cash flow and net capital appreciation of the underlying real estate properties. As a result,
these mortgage revenue bonds provide us with the potential to participate in future increases in
the cash flow generated by the financed properties, either through operations or from their
ultimate sale.
The amount of interest income earned by the Company from its investment in tax-exempt mortgage
revenue bonds is a function of the ability of the financed properties to generate adequate net cash
flow to meet debt service requirements. The net cash flow generated by a multifamily residential
property depends on the rental and occupancy rates of the property and the level of operating
expenses. Occupancy rates and rents are directly affected by the supply of, and demand for,
apartments in the market area in which a property is located. This, in turn, is affected by
several factors such as local or national economic conditions, the amount of new apartment
construction and interest rates on single-family mortgage loans. In addition, factors such as
zoning laws and other government regulations, price inflation, real estate and other taxes, labor
problems and natural disasters can affect the economic operations of an apartment property.
Therefore, the return the Company earns on its tax-exempt mortgage revenue bonds depends upon the
economic performance of the multifamily residential properties which collateralize these bonds.
For this reason, the Company’s investments are dependent on the economic performance of such real
estate and may be considered to be in competition with other income-producing real estate of the
same type in the same geographic areas.
We also invest in other types of tax-exempt securities that may or may not be secured by real
estate. These tax-exempt securities must be rated in one of the four highest rating categories by
at least one nationally recognized securities rating agency and may not represent more than 25% of
our assets at the time of acquisition. We may also make taxable mortgage loans secured by
multifamily properties which were financed by tax-exempt mortgage revenue bonds that we hold. We
do not generally seek to acquire direct interests in real property. However, we may acquire
apartment complexes securing our revenue bonds or taxable mortgage loans through foreclosure in the
event of a default. We do not currently own a direct interest in any real properties.
Business Objectives and Strategy
Our business objectives are to (i) preserve and protect our capital and (ii) provide regular
and increasing cash distributions to our shareholders which are substantially exempt from federal
income tax. We have sought to meet these objectives by primarily investing in a portfolio of
tax-exempt mortgage revenue bonds that were issued to finance, and are secured by first mortgages
on, multifamily apartment properties, including student housing. Certain of these bonds may be
structured to provide a potential for an enhanced federally tax-exempt yield through the payment of
contingent interest which is payable out of net cash flow from operations and net capital
appreciation of the financed apartment properties.
We are 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 our shareholders; (ii) reduce risk through asset diversification and interest rate
hedging; and (iii) achieve economies of scale. We are pursuing this 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. We may finance the acquisition of additional tax-exempt
mortgage revenue bonds through the reinvestment of cash flow, the issuance of additional shares,
and securitization financing using our existing portfolio of tax-exempt mortgage revenue bonds.
Our operating policy is to use securitizations or other forms of leverage to maintain a level of
debt financing between 40% and 60% of the total market value of our assets.
In connection with our growth strategy, we are also assessing opportunities to reposition our
existing portfolio of tax-exempt mortgage revenue bonds. The principal objective of this
repositioning initiative is to improve the quality and performance of our revenue bond portfolio
and, ultimately, increase the amount of cash available for distribution to our shareholders. In
some cases, we may force a redemption of selected tax-exempt bonds that are secured by multifamily
properties that have experienced significant appreciation. By forcing a redemption of the bonds, a
sale or refinancing of the underlying property will be required which, if sufficient sale or
refinancing proceeds exist, will entitle the Company to receive payment of accrued contingent
interest on its bond investment. In other cases, we may elect to sell bonds on properties that
are in stagnant or declining markets. The proceeds received from these transactions would be
redeployed into other tax exempt investments consistent with our investment objects. We may also
be able to use a higher-quality investment portfolio to obtain higher leverage to be used to
acquire additional investments.
Another goal of our repositioning strategy is to allow for the preparation of financial
statements that more accurately reflect the nature of the Company as a tax-exempt bond fund rather
than as an owner of apartment properties. Currently, generally accepted accounting principles, in
particular FASB No. 46R (“FIN 46R”), require us to present the financial results of eight of the
properties financed with tax-exempt bonds owned by us on a consolidated basis with our financial
results. The consolidation of underlying apartment properties under FIN 46R results mainly from
the participation interest in the net cash flow and net capital appreciation from the payment of
both base interest and contingent interest under the mortgage revenue bonds issued to finance the
consolidated properties. By repositioning the investment portfolio into tax-exempt mortgage bonds
which do not result in consolidation of the underlying property, we will be able to present our
financial results in what we believe is a more understandable and transparent manner.
In executing our growth strategy, we expect to invest primarily in bonds issued to provide
affordable rental housing, but may also consider bonds issued to finance student housing projects
and housing for senior citizens. The four basic types of multifamily housing revenue bonds which
we may acquire as investments are as follows:
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Private activity bonds issued under Section 142(d) of the Internal
Revenue Code of 1986, as amended (the “Code”); |
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Bonds issued under Section 145 of the Code by not-for-profit entities
qualified under Section 501(c) 3 of the Code, |
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Essential function bonds issued by a public instrumentality to finance an
apartment property owned by such instrumentality; and |
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Existing “80/20 bonds” that were issued under section 103(b)(4)(A) of the
Internal Revenue Code of 1954. |
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Each of these bond structures permits the issuance of tax exempt bonds to finance the
construction or acquisition and rehabilitation of affordable rental housing. Under applicable
Treasury Regulations, any apartment project financed with tax-exempt bonds must set aside a
percentage of its total rental units for occupancy by tenants whose incomes do not exceed stated
percentages of the median income in the local area. In each case, the balance of the rental units
in the apartment project may be rented at market rates. With respect to private activity bonds
issued under Code Section 142(d), the owner of the apartment project may elect, at the time the
bonds are issued, whether the set aside will be 20% of the units for tenants making less than 50%
of area median income (as adjusted for household size) or 40% of the units for tenants making less
than 60% of the area median income (as adjusted for household size). Multifamily housing bonds
that were issued prior to the Tax Reform Act of 1986 (so called “80/20” bonds) require that 20% of
the rental units be set aside for tenants whose income does not exceed 80% of the area median
income, without adjustment for household size.
We expect that many of the private activity housing bonds that we evaluate for acquisition
will be issued in conjunction with the syndication of Low Income Housing Tax Credits under Section
42 of the Code (“LIHTCs”) by the owner of the financed apartment project. LIHTC projects often
require that up to 100% of the rental units in the project be set aside for tenants whose incomes
do not exceed stated percentages of the median income in the local area. In addition, rental rates
which can be charged at LIHTC projects are limited.
Financing Strategy
We have financed acquisitions of additional revenue bonds through a securitization transaction
offered through the Merrill Lynch proprietary residual interest tax-exempt securities and puttable
floating option tax-exempt receipts “P-Float” program. In a securitization transaction, we deposit
a tax-exempt mortgage revenue bond into a trust which issues two types of securities, senior
securities (“P-Floats”) and subordinated residual interest securities (“RITES”). The P-Floats are
floating-rate securities representing a beneficial ownership interest in the outstanding principal
and interest of the tax-exempt mortgage revenue bond credit-enhanced by Merrill Lynch (or a Merrill
Lynch affiliate) and sold to institutional investors. We receive the net proceeds from the sale of
the P-Floats and may use these funds to make additional investments. The RITES are issued to us
and represent a beneficial ownership interest in the remaining interest on the underlying
tax-exempt mortgage revenue bond. We maintain a call right on the senior P-Float securities and
this allows us to collapse the trusts and retain a level of control over the underlying revenue
bond. The call price of a P-Float is equal to its par amount plus 10% of any increase in the
market value of the underlying revenue bonds. We account for these transactions as secured
borrowings, and they, in effect, provide us with variable-rate financing. Accordingly, we record
these senior certificates as debt financing, the revenue bonds as investment securities held in
trust, and the RITES as investment securities.
Executive
Compensation
Neither the Company nor its general partner has any employees, executive
officers or directors. However, services are provided to us by employees and officers of
The Burlington Capital Group L.L.C. (“Burlington”) which is the general partner of our
general partner. Under the terms of our Partnership Agreement, neither our
general partner nor Burlington is allowed to be reimbursed by us for any compensation
paid by Burlington to its officers. Accordingly, we do not pay compensation of any nature
to the persons who effectively act as our executive officers.
The Board of Managers of Burlington effectively acts as our board of directors.
Although Burlington is not a public company and its securities are not listed on any stock
market or otherwise publicly traded, its Board of Managers is constituted in a manner that
complies with the rules of the Securities and Exchange Commission
(“SEC”) and the Nasdaq Stock
Market related to public companies with securities listed on the Nasdaq Global Market in
order for the Company and its shares to comply with these rules. Among other things, a
majority of the Board of Managers of Burlington consists of managers who meet the
definitions of independence under the rules of the SEC and the Nasdaq Stock Market.
These independent managers are Patrick J. Jung, Mariann Byerwalter, Martin M.
Massengale, Clayton Yeutter, William S. Carter and James O. Ellis. During 2006, we
paid Burlington a total of $92,167 in order to reimburse it for a portion of the fees it
pays to these six independent directors. We did not pay any other compensation of any
nature to any of the managers of Burlington or reimburse Burlington for any other
amounts representing compensation to its Board of Managers.
Recent Developments
On August 24, 2006, we sold our beneficial interest in Northwood Lakes Apartments Multifamily
Housing Revenue Refunding Bonds, Series 2004B to Northwoods Lake Partners, LLC at par value plus
accrued interest of approximately $20,000, resulting in total proceeds to the Company of
approximately $6,170,000. The property financed by our mortgage revenue bonds, Northwood Lakes
Apartments in Duluth, Georgia, was required to be consolidated into our financial statements under
FIN 46R. Immediately preceding the sale of our Series B Bonds, the owner of the property completed
the sale of the property, resulting in approximately $4.3 million of net cash proceeds. These net
proceeds realized from the sale of the property were applied by the property owner against
accumulated tax-exempt contingent interest earned by us on our bonds. The sale of the bonds plus
the receipt of accumulated contingent interest resulted in total cash to us of approximately $10.4
million.
In April 2006, we acquired $6.8 million of tax-exempt revenue bonds issued to provide
construction and permanent financing for a 144-unit multifamily apartment complex in Gainesville,
Texas known as Bella Vista Apartments. The apartment complex is currently under construction, with
an estimated completion date of April 2007. The bonds earn an annual interest rate of 6.15%, with
semiannual interest payments and a stated maturity date of April 1, 2046. The bonds are secured by
a construction performance guarantee during the construction period by a third-party guarantor. We
have determined that the company that owns Bella Vista Apartments does not meet the definition of a
“variable interest entity.” As a result, we will not be required to be consolidate financial
statements of this company into our consolidated financial statements under FIN 46R. The Bella
Vista bonds were acquired with a portion of the proceeds realized from the sale of Clear Lake
Colony Apartments discussed below.
On November 10, 2005, we sold Clear Lake Colony Apartments, a 316-unit multifamily housing
project located in West Palm Beach, Florida, for a sales price of $33,500,000. Because the owner
of the property defaulted on its obligations under the $16,000,000 of Multi-Family Housing Revenue
Refunding Bonds — Series 2000A that were issued to us to finance this property,
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we acquired sole ownership of the property by way of deed in lieu of foreclosure immediately
prior to the sale. We held all of these bonds. The sale resulted in a gain to us for book and tax
purposes of approximately $12,400,000. In conjunction with the Clear Lake transaction, we made a
special distribution of $3.5 million to our shareholders and our general partner which was
classified as Tier 2 Net Residual Proceeds under the terms of our Partnership Agreement. As this
was a Tier 2 distribution, approximately $2.6 million or 75% of the total distribution was paid to
shareholders of record as of November 30, 2005 and approximately $0.9 million was paid to our
general partner. In addition to the one-time distribution to BUC holders and the general partner,
a portion of the proceeds was used to pay $359,000 of deferred administrative fees to the general
partner. The general partner has deferred payment of these administrative fees without interest
since 1989. Due to the gain realized on this transaction, the general partner now has elected to
receive these previously earned fees. The remaining proceeds from the sale of the Clear Lake
Colony Apartments will be reinvested in accordance with our investment strategy.
General Information
We are a Delaware limited partnership. Our general partner is America First Capital
Associates Limited Partnership 2, which is a subsidiary of Burlington. Since 1984, Burlington (which was known as America First Companies L.L.C. until
2005) has specialized in the management of investment funds, many of which were formed to acquire
real estate investments such as tax-exempt mortgage revenue bonds, mortgage securities and
multifamily real estate properties. Burlington maintains its principal executive offices at 1004
Farnam Street, Suite 400, Omaha, Nebraska 68102, and its telephone number is (402) 444-1630.
We do not have any employees of our own. Employees of Burlington, acting through our general
partner, are responsible for our operations and we reimburse Burlington for the allocated salaries
and benefits of these employees and for other expenses it incurs in running our business
operations. In connection with the operation of the Company, our general partner is entitled to an
administrative fee in an amount equal to 0.45% per annum of principal amount of the revenue bonds,
other tax-exempt investments and taxable mortgage loans held by the Company. Nine of the
tax-exempt revenue bonds held by the Company provide for the payment of this administrative fee to
the general partner by the owner of the financed property. When the administrative fee is payable
a property owner, it is subordinated to the payment of all base interest to the Company on the
tax-exempt revenue bond on that property. Our Partnership Agreement provides that the
administrative fee will be paid directly by the Company with respect to any investments for which
the administrative fee is not payable by the property owner or a third party. In addition, our
Partnership Agreement provides that the Company will pay the administrative fee to the general
partner with respect to any foreclosed mortgage bonds.
Our general partner or its affiliates may also earn mortgage placement fees in connection with
the identification and evaluation of additional investments that we acquire. Any mortgage
placement fees will be paid by the owners of the properties financed by the acquired mortgage
revenue bonds out of bond proceeds. The amount of mortgage placement fees, if any, will be subject
to negotiation between the general partner or its affiliates and such property owners.
America First Properties Management Company, L.L.C. (“Properties Management”) is an affiliate
of Burlington that is engaged in the management of apartment complexes. Properties Management
currently manages eight of the properties financed by the Company. Properties Management may also
seek to become the manager of apartment complexes financed by additional mortgage bonds acquired by
the Company, subject to negotiation with the owners of such properties. If the Company acquires
ownership of any property through foreclosure of a revenue bond, Properties Management may provide
property management services for such property and, in such case, the Company will pay Properties
Management its fees for such services.
Our sole limited partner is America First Fiduciary Corporation Number Five, a Nebraska
corporation. Our shares, which are referred to as “beneficial unit certificates” or “BUCs” in our
Partnership Agreement, represent assignments by the sole limited partner of its rights and
obligations as a limited partner.
We are a partnership for federal income tax purposes. This means that we do not pay federal
income taxes on our income. Instead, all of our profits and losses are allocated to our partners,
including the holders of shares, under the terms of our Partnership Agreement. In addition, a
majority of our income consists of tax-exempt interest income. See “ U.S. FEDERAL INCOME TAX
CONSIDERATIONS.”
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USE OF PROCEEDS
We intend to use the net proceeds of this offering primarily to acquire additional tax-exempt
mortgage revenue bonds and other investments meeting our investment criteria. Any remaining net
proceeds will be used for general business purposes, including reduction in our indebtedness.
RISK FACTORS
An investment in our shares involves a number of risks. Before making an investment decision,
you should carefully consider all of the risks described in this prospectus and any accompanying
prospectus supplement. If any of the risks discussed in this prospectus or such prospectus
supplement actually occur, our business, financial condition and results of operations could be
materially adversely affected. If this were to occur, the amount of cash distributions we pay on
the shares may be reduced, the trading price of the shares could decline and you may lose all or
part of your investment.
The receipt of interest and principal payments on our tax-exempt mortgage revenue bonds will be
affected by the economic results of the underlying multifamily properties.
Although our tax-exempt mortgage revenue bonds are issued by state or local housing
authorities, they are not obligations of these governmental entities and are not backed by any
taxing authority. Instead, each of these revenue bonds is backed by a non-recourse loan made to
the owner of the underlying apartment complex and is secured by a first mortgage lien on the
property. Because of the non-recourse nature of the underlying mortgage loans, the sole source of
cash to pay base and contingent interest on the revenue bond, and to ultimately pay the principal
amount of the bond, is the net cash flow generated by the operation of the financed property and
the net proceeds from the ultimate sale or refinancing of the property. This makes our investments
in these mortgage revenue bonds subject to the kinds of risks usually associated with direct
investments in multifamily real estate. If a property is unable to sustain net cash flow at a
level necessary to pay its debt service obligations on our tax-exempt mortgage revenue bond on the
property, a default may occur. Net cash flow and net sale proceeds from a particular property are
applied only to debt service payments of the particular mortgage revenue bond secured by that
property and are not available to satisfy debt service obligations on other mortgage revenue bonds
that we hold. 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 base and
contingent interest that we earn on our mortgage revenue bonds, and whether or not we will receive
the entire principal balance of the bonds as and when due, will depend to a large degree on the
economic results of the underlying apartment complexes.
The net cash flow from the operation of a property may be affected by many things, such as the
number of tenants, the rental rates, operating expenses, the cost of repairs and maintenance,
taxes, government regulation, competition from other apartment complexes, mortgage rates for
single-family housing and general and local economic conditions. In most of the markets in which
the properties financed by our bonds are located, there is significant competition from other
apartment complexes and from single-family housing that is either owned or leased by potential
tenants. Low mortgage interest rates make single-family housing more accessible to persons who may
otherwise rent apartments.
In the event of a default on a mortgage revenue bond (or a taxable loan on the same property),
we will have the right to foreclose on the mortgage or deed of trust securing the property. If we
take ownership of the property securing a defaulted revenue bond or taxable loan, we will be
entitled to all net cash flow generated by the property. However, such amounts will no longer
represent tax-exempt interest to us.
The value of the properties is the only source of repayment of our tax-exempt mortgage revenue
bonds.
The principal of most of our tax-exempt mortgage revenue bonds does not fully amortize over
their terms. This means that all or some of the balance of the mortgage loans underlying these
bonds will be repaid as a lump-sum “balloon” payment at the end of the term. The ability of the
property owners to repay the mortgage loans with balloon payments is dependent upon their ability
to sell the properties securing our tax-exempt mortgage revenue bonds or obtain adequate
refinancing. The mortgage revenue bonds are not personal obligations of the property owners, and
we rely solely on the value of the properties securing these bonds for security. Similarly, if a
tax-exempt mortgage revenue bond goes into default, our only recourse is to foreclose on the
underlying multifamily property. If the value of the underlying property securing the bond is less
than the outstanding principal balance and accrued interest on the bond, we will suffer a loss.
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In the event a property securing a tax-exempt mortgage revenue bond is not sold prior to the
maturity or remarketing of the bond, any contingent interest payable from the net sale or
refinancing proceeds of the underlying property will be determined on the basis of the appraised
value of the underlying property. Real estate appraisals represent only an estimate of the value
of the property being appraised and are based on subjective determinations, such as the extent to
which the properties used for comparison purposes are comparable to the property being evaluated
and the rate at which a prospective purchaser would capitalize the cash flow of the property to
determine a purchase price. Accordingly, such appraisals may result in us realizing less
contingent interest from a tax-exempt mortgage revenue bond than we would have realized had the
underlying property been sold.
There is additional credit risk when we make a taxable loan on a property.
Taxable mortgage loans which we make to owners of the properties which secure mortgage revenue
bonds held by us are non-recourse obligations of the property owner. As a result, the sole source
of principal and interest payments on these taxable loans is the net cash flow generated by these
properties or the net proceeds from the sale of these properties. The net cash flow from the
operation of a property may be affected by many things as discussed above. If a property is unable
to sustain net cash flow at a level necessary to pay current debt service obligations on our
taxable loan on such property, a default may occur. In addition, any payment of principal and
interest on a taxable loan on a particular property will be subordinate to payment of all principal
and interest (including contingent interest) on the mortgage revenue bond secured by the same
property. As a result, there may be a higher risk of default on the taxable loans than on the
mortgage revenue bonds.
The properties financed by our tax-exempt bonds are not completely insured against damages from
hurricanes and other major storms.
Three of the multifamily housing properties financed by tax-exempt bonds held by the
Partnership are located in Florida in areas that are prone to damage from hurricanes and other
major storms. Due to the significant losses incurred by insurance companies on policies written on
properties in Florida damaged by hurricanes, property and casualty insurers in Florida have
modified their approach to underwriting policies. As a result, the owners of these Florida
properties now assume the risk of first loss on a larger percentage of their property’s value. If
any of these properties were damaged in a hurricane or other major storm, the losses incurred could
be significant and would reduce the cash flow available to pay base or contingent interest on the
Partnership’s tax-exempt bonds collateralized by these properties. In general, the current
insurance policies on these properties carry a 3% deductible on the insurable value of the
properties. The current insurable value of the Florida properties is approximately $51.4 million.
We may suffer adverse consequences from changing interest rates.
We have financed the acquisition of some of our assets using variable-rate debt financing.
The interest that we pay on this financing fluctuates with a specific interest rate index. If the
interest rate index increases, our interest expense will increase. This will reduce the amount of
cash we have available for distribution and may affect the market value of our shares.
An increase in interest rates could also decrease the value of our tax-exempt mortgage bonds.
A decrease in the value of our tax-exempt mortgage revenue bonds could cause the debt financing
counterparty to demand additional collateral. If additional collateral is not available, the debt
financing could be terminated and some or all of the bonds collateralizing such financing may be
sold to repay the debt. In that case, we lose the net interest income from these bonds. A
decrease in the value of our tax-exempt mortgage revenue bonds could also decrease the amount we
could realize on the sale of our investments and would decrease the amount of funds available for
distribution to our shareholders.
There are risks associated with our participation in the P-Float program.
In order to obtain debt financing, we have securitized many of our tax-exempt mortgage revenue
bonds through the Merrill Lynch P-Float program. Under this program, we deposit a tax-exempt
mortgage revenue bond into a trust which issues a senior P-Float to an institutional investor and a
residual interest to us. The trust pays interest on the P-Floats and the residual interest from
the interest payments received on the underlying tax-exempt mortgage revenue bond. If the trust is
unable to pay the full amount of interest due on the P-Float, a default will occur. In addition,
if the value of the mortgage revenue bond and any other collateral declines below a specified
level, a default will occur. In such event, the trust could be terminated and some or all of the
bonds pledged as collateral may be sold to satisfy the debt.
6
In this program, the senior interests sold are credit-enhanced by Merrill Lynch or its
affiliate. The inability of Merrill Lynch or its affiliate to perform under the program or
impairment of the credit-enhancement may terminate the transaction and cause us to lose the net
interest income earned as a result.
By using the P-Float program for debt financing, we forego a portion of the interest we would
have received on our existing tax-exempt mortgage revenue bonds. If we are unable to reinvest the
proceeds from this borrowing in investments that generate a greater amount of interest, the amount
of net interest income that we receive may decline.
Our tax-exempt mortgage revenue bonds are illiquid assets and their value may decrease.
The majority of our assets consist of our tax-exempt mortgage revenue bonds. These mortgage
revenue bonds are relatively illiquid, and there is no existing trading market for these mortgage
revenue bonds. As a result, there are no market makers, price quotations or other indications of a
developed trading market for these mortgage revenue bonds. In addition, no rating has been issued
on any of the existing mortgage revenue bonds and we do not expect to obtain ratings on mortgage
revenue bonds we may acquire in the future. Accordingly, any buyer of these mortgage revenue bonds
would need to perform its own due diligence prior to a purchase. As a result, our ability to sell
our tax-exempt mortgage revenue bonds, and the price we may receive upon their sale, will be
affected by the number of potential buyers, the number of similar securities on the market at the
time and a number of other market conditions. As a result, such a sale could result in a loss to
us.
We could be adversely affected if counterparties are unable to fulfill their obligations under
our derivative agreements.
We have used interest rate swaps and caps to help us mitigate our interest rate risks.
However, these derivative transactions do not fully insulate us from the interest rate risks to
which we are exposed. We cannot assure you that a liquid secondary market will exist for any
instruments purchased or sold in those transactions, thus, we may be required to maintain a
position until exercise or expiration, which could result in losses. Moreover, the derivative
instruments are required to be marked to market with the difference recognized in earnings as
interest expense which can result in significant volatility to reported net income over the term of
these instruments. The counterparty to certain of these agreements has the right to convert them
to fixed-rate agreements, and it is possible that such a conversion could result in our paying more
interest than we would under our variable-rate financing. There is also a risk that a counterparty
to such agreements will be unable to perform its obligations under the agreement.
The rent restrictions and occupant income limitations imposed on properties financed by tax-exempt
mortgage revenue bonds may limit the revenues of the properties financed by our tax-exempt mortgage
revenue bonds.
All of the properties securing our tax-exempt mortgage revenue bonds are subject to certain
federal, state and/or local requirements with respect to the permissible income of their tenants.
Since federal subsidies are not generally available on these properties, rents must be charged on a
designated portion of the units at a level to permit these units to be continuously occupied by low
or moderate income persons or families. As a result, these rents may not be sufficient to cover
all operating costs with respect to these units and debt service on the applicable tax-exempt
mortgage revenue bond. This may force the property owner to charge rents on the remaining units
that are higher than they would be otherwise and may, therefore, exceed competitive rents which may
adversely affect the occupancy rate of a property securing an investment and the property owner’s
ability to service its debt.
The properties securing our revenue bonds may be subject to liability for environmental
contamination and thereby increase the risk of default on such bonds.
The owner or operator of real property may become liable for the costs of removal or
remediation of hazardous substances released on its property. Various federal, state and local
laws often impose such liability without regard to whether the owner or operator knew of, or was
responsible for, the release of such hazardous substances. We cannot assure you that the
properties that secure our revenue bonds, or any additional revenue bonds we acquire in the future,
will not be contaminated. The costs associated with the remediation of any such contamination may
be significant and may exceed the value of a property, causing the property owner to default on the
revenue bond secured by the property.
7
Any future issuances of additional shares could cause their market value to decline.
We have the authority to issue additional shares representing assigned limited partner
interests in the Company, and we plan to issue such shares from time to time. The issuance of
additional shares could cause dilution of the existing shares and a decrease in the market price of
the shares.
The Company is not registered under the Investment Company Act.
The Company is not required to register as an investment company under the Investment Company
Act of 1940, as amended (the “Investment Company Act”) because it operates under an exemption
therefrom. As a result, none of the protections of the Investment Company Act (disinterested
directors, custody requirements for securities, and regulation of the relationship between a fund
and its advisor) will be applicable to the Company.
The Company engages in transactions with related parties.
Each of the executive officers of Burlington and four of the managers of Burlington hold
equity positions in Burlington. A subsidiary of Burlington acts as our general partner and manages
our investments and performs administrative services for us and earns certain fees that are either
paid by the properties financed by our tax-exempt mortgage revenue bonds or by us. Another
subsidiary of Burlington provides on-site management for many of the multifamily apartment
properties that underlie our tax-exempt bonds and earns fees from the property owners based on the
gross revenues of these properties. The shareholders of the limited-purpose corporations which own
five of the apartment properties financed with tax-exempt bonds and taxable loans held by the
Company are employees of Burlington who are not involved in the operation or management of the
Company and who are not executive officers or managers of Burlington. Because of these
relationships, our agreements with Burlington and its subsidiaries are related-party transactions.
By their nature, related-party transactions may not be considered to have been negotiated at
arm’s-length. These relationships may also cause a conflict of interest in other situations where
we are negotiating with Burlington.
Shareholders may incur tax liability if any of the interest on our tax-exempt mortgage revenue
bonds is determined to be taxable.
Certain of our tax-exempt mortgage revenue bonds bear interest at rates which include
contingent interest. Payment of the contingent interest depends on the amount of net cash flow
generated by, and net proceeds realized from a sale of, the property securing the bond. Due to
this contingent interest feature, an issue may arise as to whether the relationship between the
property owner and us is that of debtor and creditor or whether we are engaged in a partnership or
joint venture with the property owner. If the IRS were to determine that tax-exempt mortgage
revenue bonds represented an equity investment in the underlying property, the interest paid to us
could be viewed as a taxable return on such investment and would not qualify as tax-exempt interest
for federal income tax purposes. We have obtained unqualified legal opinions to the effect that
interest on our tax-exempt mortgage revenue bonds is excludable from gross income for federal
income tax purposes which opinions provide that interest paid to a “substantial user” or “related
person” (each as defined in the Internal Revenue Code” is not exempt from federal income taxation.
However, these legal opinions have no binding effect on the IRS or the courts, and no assurances
can be given that the conclusions reached will not be contested by the IRS or, if contested, will
be sustained by a court. In addition, the tax-exempt status of the interest paid on our tax-exempt
mortgage revenue bonds is subject to compliance by the underlying properties, and the owners
thereof, with the bond documents and covenants required by the bond-issuing authority and the
Internal Revenue Code. Among these requirements are tenant income restrictions, regulatory
agreement compliance, reporting requirements, use of proceeds restrictions and compliance with
rules pertaining to arbitrage. Each issuer of the revenue bonds, as well as each of the underlying
property owners/borrowers, has covenanted to comply with procedures and guidelines designed to
ensure satisfaction with the continuing requirements of the Internal Revenue Code. Failure to
comply with these continuing requirements of the Internal Revenue Code may cause the interest on
our bonds to be includable in gross income for federal income tax purposes retroactively to the
date of issuance, regardless of when such noncompliance occurs. In addition, we hold residual
interests issued in securitization programs which hold tax-exempt mortgage revenue bonds, such as
the P-Floats/RITES program, which entitle us to a share of the tax-exempt interest of these
mortgage revenue bonds. It is possible that the characterization of the residual interest in the
P-Floats/RITES program could be challenged and the income that we receive through these instruments
could be treated as ordinary taxable income includable in our gross income for federal tax
purposes. The rules dealing with federal income taxation are constantly under review by persons
involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to
the tax law, which may have retroactive application, could adversely affect us and our
shareholders. It cannot be predicted whether, when, in what forms or with what effective dates the
tax law applicable to us will be changed.
8
Not all of the interest income of the Company is exempt from taxation.
We have made, and may make in the future, taxable mortgage loans to the owners of properties
which are secured by tax-exempt mortgage revenue bonds that we hold. Shareholders will be taxed on
their allocable share of this taxable interest income. In any case that interest earned by the
Company is taxable, a shareholder’s allocable share of this taxable interest income will be taxable
to the shareholder regardless of whether an amount of cash equal to such allocable share is
actually distributed to the shareholder.
If the Company was determined not to be a partnership for tax purposes, it will have adverse
economic consequences for the Company and its shareholders.
We are a Delaware limited partnership and have chosen to operate as a partnership for federal
income tax purposes. As a partnership, to the extent we generate taxable income, shareholders will
be individually liable for income tax on their proportionate share of this taxable income, whether
or not we make cash distributions. The ability of shareholders to deduct their proportionate share
of the losses and expenses we generate will be limited in certain cases, and certain transactions
may result in the triggering of the Alternative Minimum Tax for shareholders who are individuals.
If the Company is classified as an association taxable as a corporation rather than as a
partnership, we will be taxed on our taxable income, if any, and all distributions made by us to
our shareholders would constitute ordinary dividend income taxable to such shareholders to the
extent of our earnings and profits, which would include tax-exempt income, as well as any taxable
income we might have, and the payment of these dividends would not be deductible by us. The
listing of the Company’s shares for trading on the Nasdaq Global Market causes the Company to be
treated as a “publicly traded partnership” under Section 7704 of the Code. A publicly traded
partnership is generally taxable as a corporation unless 90% or more of its gross income is
“qualifying” income. Qualifying income includes interest, dividends, real property rents, gain
from the sale or other disposition of real property, gain from the sale or other disposition of
capital assets held for the production of interest or dividends and certain other items.
Substantially all of the Company’s gross income will continue to be tax-exempt interest income on
mortgage bonds. While we believe that all of this interest income is qualifying income, it is
possible that some or all of our income could be determined not to be qualifying income. In such a
case, if more than 10% of our annual gross income in any year is not qualifying income, the Company
will be taxable as a corporation rather than a partnership for federal income tax purposes. We
have not received, and do not intend to seek, a ruling from the Internal Revenue Service regarding
our status as a partnership for tax purposes. See “ U.S. FEDERAL INCOME TAX CONSIDERATIONS.”
Prospective subscribers are urged to consult with their own tax advisors regarding the
potential tax consequences of an investment in the Company prior to purchasing shares.
TERMS OF THE PARTNERSHIP AGREEMENT
General
The rights and obligations of our general partner and our shareholders are set forth in our
Agreement of Limited Partnership dated December 31, 1998 (the “Partnership Agreement”). The
following is a summary of the Partnership Agreement. This summary does not purport to be complete
and is subject to, and qualified in its entirety by, the terms of the Partnership Agreement, the
form of which is attached as Appendix A to this prospectus and is incorporated by reference herein.
Management
Under the terms of the Partnership Agreement, our general partner has full, complete and
exclusive authority to manage and control the business affairs of the Company. Such authority
specifically includes, but is not limited to, the power to (i) acquire, hold, refund, reissue,
remarket, securitize, transfer, foreclose upon, sell or otherwise deal with the investments of the
Company, (ii) issue additional shares, borrow money and issue evidences of indebtedness, and (iii)
apply the proceeds from the sale or the issuance of additional shares to the acquisition of
additional revenue bonds (and associated taxable mortgages) and other types of tax-exempt
securities. The Partnership Agreement provides that the general partner and its affiliates may and
shall have the right to provide goods and services to the Company subject to certain conditions.
The Partnership Agreement also imposes certain limitations on the authority of the general partner,
including restrictions on the ability of the general partner to dissolve the Company without the
consent of a majority in interest of the shareholders.
9
Other than certain limited voting rights discussed under “Voting Rights,” the shareholders do
not have any authority to transact business for, or participate in the management of, the Company.
The only recourse available to shareholders in the event that the general partner takes actions
with respect to the business of the Company with which shareholders do not agree is to vote to
remove the general partner and admit a substitute general partner. See “Removal or Withdrawal of
the General Partner” below.
Allocations and Distributions
Net Interest Income.
The Partnership Agreement provides that all Net Interest Income generated by the Company that
is not contingent interest will be distributed 99% to shareholders and 1% to the general partner.
During the year ended December 31, 2005 and the nine months ended September 30, 2006, the general
partner received total distributions of Net Interest Income of approximately $54,000 and $40,000,
respectively. In addition, the Partnership Agreement provides that the general partner is entitled
to 25% of Net Interest Income representing contingent interest up to a maximum amount equal to 0.9%
per annum of the principal amount of all mortgage bonds held by the Company, as the case may be.
During the year ended December 31, 2005, the general partner received total distributions of Net
Interest Income representing contingent interest of approximately $0.9 million. During the nine
months ended September 30, 2006, the general partner received no distributions of Net Interest
Income representing contingent interest.
Interest Income of the Company includes all cash receipts except for (i) capital
contributions, (ii) Residual Proceeds or (iii) the proceeds of any loan or the refinancing of any
loan. “Net Interest Income” of the Company means all Interest Income plus any amount released from
the Reserve for distribution less expenses and debt service payments and any amount deposited in
the Reserve or used or held for the acquisition of additional tax-exempt bonds.
Net Residual Proceeds.
The Partnership Agreement provides that Net Residual Proceeds (whether representing a return
of principal or contingent interest) will be distributed 100% to the shareholders, except that 25%
of Net Residual Proceeds representing contingent interest will be distributed to the general
partner until it receives a maximum amount per annum (when combined with all distributions to it of
Net Interest Income representing contingent interest during the year) equal to 0.9% of the
principal amount of the Company’s mortgage bonds. Under the terms of the Partnership Agreement,
“Residual Proceeds” means all amounts received by the Company upon the sale of any asset or from
the repayment of principal of any bond. “Net Residual Proceeds” means, with respect to any
distribution period, all Residual Proceeds received by the Company during such distribution period,
plus any amounts released from the Reserve for distribution less all expenses that are directly
attributable to the sale of an asset, amounts used to discharge indebtedness and any amount
deposited in the Reserve or used or held for the acquisition of additional tax-exempt bonds. In
connection with the sale of Clear Lake Apartment in 2005, the Company made a special distribution
of $3.5 million of the Net Residual Proceeds, of which approximately $0.9 million was paid to the
general partner. No other distributions of Net Residual Proceeds have been made by the Company.
Notwithstanding its authority to invest Residual Proceeds in additional revenue bonds, the general
partner does not intend to use this authority to acquire additional bonds indefinitely without
distributing Net Residual Proceeds to the shareholders. Rather, it is designed to afford the
general partner the ability to increase the income-generating investments of the Company in order
to potentially increase the Net Interest Income from, and value of, the Company.
Distributions upon Liquidation.
The term of the Company expires on December 31, 2050 unless terminated earlier as provided in
the Partnership Agreement. Upon the dissolution of the Company, the proceeds from the liquidation
of its assets will be first applied to the payment of the obligations and liabilities of the
Company and the establishment of any reserve therefor as the general partner determines to be
necessary and then distributed to the general partner and the shareholders in proportion to, and to
the extent of, their respective capital account balances and then in the same manner as Net
Residual Proceeds.
10
Timing of Cash Distributions.
The Company currently makes quarterly cash distributions to shareholders. However, the
Partnership Agreement allows the general partner to elect to make cash distributions on a more or
less frequent basis. Regardless of the distribution period selected by the general partner, cash
distributions must be made within 60 days of the end of each such period.
Allocation of Income and Losses.
Income and losses from operations will be allocated 99% to the shareholders and 1% to the
general partner. Income arising from a sale of or liquidation of the Company’s assets will be
first allocated to the general partner in an amount equal to the Net Residual Proceeds or
liquidation proceeds distributed to the general partner from such transaction, and the balance will
be distributed to the shareholders. Losses from a sale of a property or from a liquidation of the
Company will be allocated among the general partner and the shareholders in the same manner as the
Net Residual Proceeds or liquidation proceeds from such transaction are distributed.
Allocation Among Shareholders.
Income and losses will be allocated on a monthly basis to the shareholders of record as of the
last day of a month. If a shareholder is recognized as the record holder of shares on such date,
such shareholder will be allocated all income and losses for such month. Cash distributions will
be made to the shareholders of record as of the last day of each distribution period. If the
Company recognizes a transfer prior to the end of a distribution period, the transferee will be
deemed to be the holder for the entire distribution period and will receive the entire cash
distribution for such period. Accordingly, if the general partner selects a quarterly or
semiannual distribution period, the transferor of shares during such a distribution period may be
recognized as the record holder of the shares at the end of one or more months during such period
and be allocated income or losses for such months but not be recognized as the record holder of the
shares at the end of the period and, therefore, not be entitled to a cash distribution for such
period. The general partner retains the right to change the method by which income and losses of
the Company will be allocated between buyers and sellers of shares during a distribution period
based on consultation with tax counsel and accountants. However, no change may be made in the
method of allocation of income or losses without written notice to the shareholders at least 10
days prior to the proposed effectiveness of such change unless otherwise required by law.
Payments to the General Partner
Fees.
In addition to its share of Net Interest Income and Net Residual Proceeds and reimbursement
for expenses, the general partner will be entitled to an administrative fee in an amount equal to
0.45% per annum of principal amount of the revenue bonds, other tax-exempt investments and taxable
mortgage loans held by the Company. In general, the administrative fee will be payable by the
owners of the properties financed by the revenue bonds held by the Company but will be subordinate
to the payment of all base interest to the Company on the bonds. Nine of the revenue bonds held by
the Company provide for the payment of this administrative fee to the general partner by the owner
of the financed property. The general partner may seek to negotiate the payment of the
administrative fee in connection with the acquisition of additional revenue bonds by the Company by
the owner of the financed property or by another third party. However, the Partnership Agreement
provides that the administrative fee will be paid directly by the Company with respect to any
investments for which the administrative fee is not payable by a third party. In addition, the
Partnership Agreement provides that the Company will pay the administrative fee to the general
partner with respect to any foreclosed mortgage bonds.
Reimbursement of Expenses.
In addition to the allocation of profits, losses and cash distributions to the general
partner, the Company will reimburse the general partner or its affiliates on a monthly basis for
the actual out-of-pocket costs of direct telephone and travel expenses incurred in connection with
the business of the Company, direct out-of-pocket fees, expenses and charges paid to third parties
for rendering legal, auditing, accounting, bookkeeping, computer, printing and public relations
services, expenses of preparing and distributing reports to shareholders, an allocable portion of
the salaries and fringe benefits of non-officer employees of Burlington, insurance premiums
(including premiums for liability insurance that will cover the Company, the general partner and
Burlington), the cost of compliance with all state and federal regulatory requirements and Nasdaq
listing fees and charges and
11
other payments to third parties for services rendered to the Company. The general partner
will also be reimbursed for any expenses it incurs acting as tax matters partner for the Company.
The Company will not reimburse the general partner or its affiliates for the travel expenses of the
president of Burlington or for any items of general overhead. The Company will not reimburse the
general partner or Burlington for any salaries or fringe benefits of any of the executive officers
of Burlington. The Company’s independent accountants are required to verify that any
reimbursements received by the general partner from the Company were for expenses incurred by the
general partner or its affiliates in connection with the conduct of the business and affairs of the
Company or the acquisition and management of its assets and were otherwise permissible
reimbursements under the terms of the Partnership Agreement. The annual report to shareholders is
required to itemize the amounts reimbursed to the general partner and its affiliates.
Payments for Goods and Services.
The Partnership Agreement provides that the general partner and its affiliates may provide
goods and services to the Company. The provision of any goods and services by the general partner
or its affiliates to the Company must be part of their ordinary and ongoing business in which it or
they have previously engaged, independent of the activities of the Company, and such goods and
services shall be reasonable for and necessary to the Company, shall actually be furnished to the
Company and shall be provided at the lower of the actual cost of such goods or services or the
competitive price charged for such goods or services for comparable goods and services by
independent parties in the same geographic location. All goods and services provided by the
general partner or any affiliates must be rendered pursuant to a written contract containing a
clause allowing termination without penalty on 60 days’ notice to the general partner by the vote
of the majority in interest of the shareholders. Payment made to the general partner or any
affiliate for goods and services must be fully disclosed to shareholders. The general partner does
not currently provide goods and services to the Company other than its services as general partner.
If the Company acquires ownership of any property through foreclosure of a revenue bond, an
affiliate of the general partner may provide property management services for such property and, in
such case, the Company will pay such its fees for such services. Under the Partnership Agreement,
such property management fees may not exceed the lesser of (i) the fees charged by unaffiliated
property managers in the same geographic area or (ii) 5% of the gross revenues of the managed
property.
Issuance of Additional Shares
The Partnership Agreement provides that the general partner may cause the Company to issue
additional shares from time to time on such terms and conditions as it shall determine.
Liability of Partners and Shareholders
Under the Delaware Act and the terms of the Partnership Agreement, the general partner will be
liable to third parties for all general obligations of the Company to the extent not paid by the
Company. However, the Partnership Agreement provides that the general partner has no liability to
the Company for any act or omission reasonably believed to be within the scope of authority
conferred by the Partnership Agreement and in the best interest of the Company, provided that the
course of conduct giving rise to the threatened, pending or completed claim, action or suit did not
constitute fraud, bad faith, negligence, misconduct or a breach of its fiduciary obligations to the
shareholders. Therefore, shareholders may have a more limited right of action against the general
partner than they would have absent those limitations in the Partnership Agreement. The
Partnership Agreement also provides for indemnification of the general partner and its affiliates
by the Company for certain liabilities that the general partner and its affiliates may incur under
the Securities Act of 1933, as amended, and in dealings with the Company and third parties on
behalf of the Company. To the extent that the provisions of the Partnership Agreement include
indemnification for liabilities arising under the Securities Act of 1933, as amended, such
provisions are, in the opinion of the Securities and Exchange Commission, against public policy
and, therefore, unenforceable.
No shareholder will be personally liable for the debts, liabilities, contracts or any other
obligations of the Company unless, in addition to the exercise of his rights and powers as a
shareholder, he takes part in the control of the business of the Company. It should be noted,
however, that the Delaware Act prohibits a limited partnership from making a distribution that
causes the liabilities of the limited partnership to exceed the fair value of its assets. Any
limited partner who receives a distribution knowing that the distribution was made in violation of
this provision of the Delaware Act is liable to the limited partnership for the amount of the
distribution. This provision of the Delaware Act probably applies to shareholders as well as to
the sole limited partner of the Company. In any event, the Partnership Agreement provides that to
the extent our sole limited partner is required to return any distributions or repay any amount by
law or pursuant to the Partnership Agreement, each shareholder who has received any portion of such
distributions is required to repay his proportionate share of such distribution to
12
our sole limited partner immediately upon notice by the sole limited partner to such
shareholder. Furthermore, the Partnership Agreement allows the general partner to withhold future
distributions to shareholders until the amount so withheld equals the amount required to be
returned by the sole limited partner. Because shares are transferable, it is possible that
distributions may be withheld from a shareholder who did not receive the distribution required to
be returned.
Voting Rights
The Partnership Agreement provides that the sole limited partner will vote its limited
partnership interests as directed by the shareholders. Accordingly, the shareholders, by vote of a
majority in interest thereof, may:
| |
(i) |
|
amend the Partnership Agreement (provided that the concurrence of the general
partner is required for any amendment that modifies the compensation or distributions to
which the general partner is entitled or that affects the duties of the general
partner); |
| |
| |
(ii) |
|
dissolve the Company; |
| |
| |
(iii) |
|
remove any general partner and consent to the admission of a successor general partner; or |
| |
| |
(iv) |
|
terminate an agreement under which the general partner provides goods and services to the Company. |
In addition, without the consent of a majority in interest of the shareholders, the general
partner may not, among other things:
| |
(i) |
|
sell or otherwise dispose of all or substantially all of the assets of the
Company in a single transaction (provided that the general partner may sell the last
property owned by the Company without such consent); |
| |
| |
(ii) |
|
elect to dissolve the Company; or |
| |
| |
(iii) |
|
admit an additional general partner. |
The general partner may at any time call a meeting of the shareholders, call for a vote
without a meeting of the shareholders or otherwise solicit the consent of the shareholders and is
required to call such a meeting or vote or solicit consents following receipt of a written request
therefor signed by 10% or more in interest of the shareholders. The Company does not intend to
hold annual or other periodic meetings of shareholders. Although the Partnership Agreement permits
the consent of the shareholders to be given after the act is done with respect to which the consent
is solicited, the general partner does not intend to act without the prior consent of the
shareholders, in such cases where consent of the shareholders is required, except in extraordinary
circumstances where inaction may have a material adverse effect on the interest of the
shareholders.
Reports
Within 120 days after the end of the fiscal year, the general partner will distribute a report
to shareholders that shall include (i) financial statements of the Company for such year that have
been audited by the Company’s independent public accountant, (ii) a report of the activities of the
Company during such year and (iii) a statement (which need not be audited) showing distributions of
Net Interest Income and Net Residual Proceeds. The annual report will also include a detailed
statement of the amounts of fees and expense reimbursements paid to the general partner and its
affiliates by the Company during the fiscal year.
Within 60 days after the end of the first three quarters of each fiscal year, the general
partner will distribute a report that shall include (i) unaudited financial statements of the
Company for such quarter, (ii) a report of the activities of the Company during such quarter and
(iii) a statement showing distributions of Net Interest Income and Net Residual Proceeds during
such quarter.
The Company will also provide shareholders with a report on Form K-1 or other information
required for federal and state income tax purposes within 75 days of the end of each year.
13
Removal or Withdrawal of the General Partner
The shareholders may, by vote of a majority in interest, remove the general partner from the
Company with or without cause and appoint a successor general partner. The general partner may not
withdraw voluntarily from the Company or sell, transfer or assign all or any portion of its
interest in the Company unless a substitute general partner has been admitted in accordance with
the terms of the Partnership Agreement. With the consent of a majority in interest of the
shareholders, the general partner may at any time designate one or more persons as additional
general partners, provided that the interests of the shareholders in the Company are not reduced
thereby. The designation must meet the conditions set out in the Partnership Agreement and comply
with the provisions of the Delaware Act with respect to admission of an additional general partner.
In addition to the requirement that the admission of a person as successor or additional general
partner have the consent of the majority in interest of the shareholders, the Partnership Agreement
requires, among other things, that (i) such person agree to and execute the Partnership Agreement
and (ii) counsel for the Company or shareholders render an opinion that such person’s admission is
in accordance with the Delaware Act.
Effect of Removal, Bankruptcy, Dissolution or Withdrawal of the General Partner
In the event of a removal, bankruptcy, dissolution or withdrawal of the general partner, it
will cease to be the general partner but will remain liable for obligations arising prior to the
time it ceases to act in that role. The former general partner’s interest in the Company will be
converted into a limited partner interest having the same rights to share in the allocations of
income and losses of the Company and distributions of Net Interest Income, Net Residual Proceeds
and cash distributions upon liquidation of the Company as it did as general partner. Any successor
general partner shall have the option, but not the obligation, to acquire all or a portion of the
interest of the removed general partner at its then fair market value. The Partnership Agreement
bases the fair market value of the general partner’s interest on the present value of its future
administrative fees and distributions of Net Interest Income plus any amount that would be paid to
the removed general partner upon an immediate liquidation of the Company. Any disputes over
valuation would be settled by the successor general partner and removed general partner through
arbitration.
Amendments
In addition to amendments to the Partnership Agreement adopted by a majority in interest of
the shareholders, the Partnership Agreement may be amended by the general partner, without the
consent of the shareholders, in certain limited respects if such amendments are not materially
adverse to the interest of the shareholders. In addition, the general partner is authorized to
amend the Partnership Agreement to admit additional, substitute or successor partners into the
Company if such admission is effected in accordance with the terms of the Partnership Agreement.
Dissolution and Liquidation
The Company will continue in full force and effect until December 31, 2050, unless terminated
earlier as a result of:
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(i) |
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the passage of 90 days following the bankruptcy, dissolution, withdrawal or
removal of a general partner who is at that time the sole general partner, unless all of
the remaining partners (it being understood that for purposes of this provision the sole
limited partner shall vote as directed by a majority in interest of the shareholders)
agree in writing to continue the business of the Company and a successor general partner
is designated within such 90-day period; |
| |
| |
(ii) |
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the passage of 180 days after the repayment, sale or other disposition of all of
the Company’s investments and substantially all its other assets; |
| |
| |
(iii) |
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the election by a majority in interest of shareholders or by the general partner
(subject to the consent of a majority in interest of the shareholders) to dissolve the
Company; or |
| |
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(iv) |
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any other event causing the dissolution of the Company under the laws of the
State of Delaware. |
Upon dissolution of the Company, its assets will be liquidated and after the payment of its
obligations and the setting up of any reserves for contingencies that the general partner considers
necessary, any proceeds from the liquidation will be distributed as set forth under “Allocations
and Distributions—Distributions upon Liquidation” above.
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Designation of Tax Matters Partner
The general partner has been designated as the Company’s “tax matters partner” for purposes of
federal income tax audits pursuant to Section 6231 of the Code and the regulations thereunder.
Each shareholder agrees to execute any documents that may be necessary or appropriate to maintain
such designation.
Tax Elections
Under the Partnership Agreement, the general partner has the exclusive authority to make or
revoke any tax elections on behalf of the Company.
Books and Records
The books and records of the Company shall be maintained at the office of the Company located
at Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102, and shall be available there during
ordinary business hours for examination and copying by any shareholder or his duly authorized
representative. The records of the Company will include a list of the names and addresses of all
shareholders, and shareholders will have the right to secure, upon written request to the general
partner and payment of reasonable expenses in connection therewith, a list of the names and
addresses of, and the number of shares held by, all shareholders.
Accounting Matters
The fiscal year of the Company will be the calendar year. The books and records of the
Company shall be maintained on an accrual basis in accordance with generally accepted accounting
principles.
Other Activities
The Partnership Agreement allows the general partner and its affiliates to engage generally in
other business ventures and provides that shareholders will have no rights with respect thereto by
virtue of the Partnership Agreement. In addition, the Partnership Agreement provides that an
affiliate of the general partner may acquire and hold debt securities or other interests secured by
a property that also secures a mortgage bond held by the Company, provided that such mortgage bond
is not junior or subordinate to the interest held by such affiliate.
Derivative Actions
The Partnership Agreement provides that a shareholder may bring a derivative action on behalf
of the Company to recover a judgment to the same extent as a limited partner has such rights under
the Delaware Act. The Delaware Act provides for the right to bring a derivative action, although
it authorizes only a partner of a partnership to bring such an action. There is no specific
judicial or statutory authority governing the question of whether an assignee of a partner (such as
a shareholder) has the right to bring a derivative action where a specific provision exists in the
Partnership Agreement granting such rights. Furthermore, there is no express statutory authority
for a limited partner’s class action in Delaware, and whether a class action may be brought by
shareholders to recover damages for breach of the general partner’s fiduciary duties in Delaware
state courts is unclear.
DESCRIPTION OF THE SHARES
Beneficial Unit Certificates
Our shares are beneficial unit certificates that represent assignments by the sole limited
partner of its entire limited partner interest in the Company. Although shareholders will not be
limited partners of the Company and have no right to be admitted as limited partners, they will be
bound by the terms of the Partnership Agreement and will be entitled to the same economic benefits,
including the same share of income, gains, losses, deductions, credits and cash distributions, as
if they were limited partners of the Company.
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A majority in interest of the shareholders (voting through the sole limited partner), without
the concurrence of the general partner, may, among other things, (i) amend the Partnership
Agreement (with certain restrictions), (ii) approve or disapprove the sale of all or substantially
all of the Company’s assets in a single transaction (other than a transfer necessary to create or
sell Senior Interests), (iii) dissolve the Company or (iv) remove the general partner and elect a
replacement therefor. The general partner may not dissolve the Company without the consent of a
majority in interest of the shareholders.
Transfers
The shares will be issued in registered form only and, except as noted below, are freely
transferable. The shares are listed on the Nasdaq Global Market under the symbol “ATAXZ.”
A purchaser of shares will be recognized as a shareholder for all purposes on the books and
records of the Company on the day on which the general partner (or other transfer agent appointed
by the general partner) receives satisfactory evidence of the transfer of shares. All shareholder
rights, including voting rights, rights to receive distributions and rights to receive reports, and
all allocations in respect of shareholders, including allocations of income and expenses, will vest
in, and be allocable to, shareholders as of the close of business on such day. America Stock
Transfer of New York, New York has been appointed by the general partner to act as the registrar
and transfer agent for the shares.
A transfer or assignment of 50% or more of the outstanding shares within a 12-month period may
terminate the Company for federal income tax purposes, which may result in adverse tax consequences
to shareholders. In order to protect against such a termination, the Partnership Agreement permits
the general partner to suspend or defer any transfers or assignments of shares at any time after it
determines that 45% or more of all shares may have been transferred (as defined by the federal
income tax laws) within a 12-month period and that the resulting termination of the Company for tax
purposes would adversely affect the economic interests of the shareholders. Any deferred transfers
will be effected (in chronological order to the extent practicable) on the first day of the next
succeeding period in which transfers can be effected without causing a termination of the Company
for tax purposes or any adverse effects from such termination, as the case may be.
In addition, the Partnership Agreement grants the general partner the authority to take such
action as it deems necessary or appropriate, including action with respect to the manner in which
shares are being or may be transferred or traded, in order to preserve the status of the Company as
a partnership for federal income tax purposes or to ensure that shareholders will be treated as
limited partners for federal income tax purposes.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes U.S. federal income tax considerations with respect to the purchase,
ownership and disposition of the shares. This summary is based on existing U.S. federal income tax
law, consisting of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury
Regulations thereunder, and judicial and administrative interpretations thereof, all of which is
subject to change, possibly with retroactive effect. This discussion does not address all aspects
of U.S. federal income taxation that may be relevant to you in light of your personal investment
circumstances or to certain types of investors subject to special treatment under the U.S. federal
income tax laws (including financial institutions, insurance companies, broker-dealers and, except
to the extent discussed below, tax-exempt entities, partnerships or other pass-through entities and
foreign taxpayers) and it does not discuss any aspects of state, local or foreign tax law. This
discussion assumes that you will hold your shares as a “capital asset” (generally, property held
for investment) under the Code.
No ruling on the federal, state or local tax considerations relevant to the purchase,
ownership and disposition of the Company’s shares, or the statements or conclusions in this
summary, has been or will be requested from the Internal Revenue Service (the “IRS”) or from any
other tax authority, and a taxing authority, including the IRS, may not agree with the statements
and conclusions expressed herein. The Company will receive an opinion from Kutak Rock LLP, counsel
to the Company, to the effect that, for U.S. federal income tax purposes, the Company should be
treated as a partnership and the holders of shares should be subject to tax as partners of the
Company. However, no assurance can be given that any opinion of counsel would be accepted by the
IRS or, if challenged by the IRS, sustained in court. We urge you to consult your own tax advisors
about the specific tax consequences to you of purchasing, holding and disposing of our shares,
including the application and effect of federal, state, local and foreign income and other tax
laws.
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Income tax considerations relating to the Company and its shareholders.
Partnership Status. Under the “check-the-box” regulations promulgated by the IRS, absent an
election to be treated as an association taxable as a corporation, an entity formed as a
partnership such as the Company generally will be treated as a partnership for income tax purposes.
The Company is a limited partnership under Delaware law and it will not file any election with the
IRS to be treated as an association taxable as a corporation. Subject to the discussion below
concerning Publicly Traded Partnerships under the heading “—Treatment of the Company as a Publicly
traded Partnership”, the Company should be treated as a partnership for federal income tax
purposes and the holders of shares should be subject to tax as partners.
Because the Company will be treated as a partnership for income tax purposes, it will not be
liable for any income tax. Rather, all items of the Company’s income, gain, loss, deduction or tax
credit will be allocated to its partners (including the shareholders), who will be subject to
taxation on their distributive share thereof. Taxable income allocated by the Company to
shareholders with respect to a taxable year may exceed the amount of cash distributed by the
Company to shareholders for such year.
The Company is not intended to act as a “tax shelter” and will not register as such with the
IRS.
Treatment of the Company as a Publicly Traded Partnership. The listing of our common shares
on the Nasdaq Global Market causes us to be treated as a “publicly traded partnership” for U.S.
federal income tax purposes. A publicly traded partnership is generally taxable as a corporation
unless 90% or more of its annual gross income in each year is “qualifying” income which is defined
as interest, dividends, real property rents, gains from the sale or other disposition of real
property, gain from the sale or other disposition of capital assets held for the production of
interest or dividends, and certain other items. In determining whether interest is treated as
“qualifying income” under these rules, interest income derived from a “financial business” and
income and gains derived by a “dealer” in securities is not treated as qualifying income. We
believe at least 90% of our annual gross income in each prior year of our operations was qualifying
income, and we intend to conduct our operations in a manner such that at least 90% of our gross
income will constitute qualifying income. Furthermore, we do not believe that we are engaged in a
financial business or are acting as a dealer, because we are acting strictly as a long-term
investor with respect to our investments and we do not conduct bond origination activities.
However, there is no clear guidance as to what constitutes a financial business for purposes of the
publicly traded partnership regulations and it is possible that the IRS could assert that our
activities constitute a financial business. If the IRS successfully asserted that we were involved
in a financial business or were acting as a dealer, less than 90% of our income could be found to
be qualifying income. In addition, in determining whether interest is treated as qualifying
income, interest income that is determined based upon the income or profits of any person is not
treated as qualifying income. It is possible that the IRS could take the position that the
contingent interest payable on some of our tax exempt bonds is determined based upon the income or
profits (rather than the net cash flow) of the properties financed by these bonds and, accordingly,
would not be qualifying interest. Since, in certain years, more than 10% of our interest income
was in the form of such contingent interest, the IRS could take the position that we fail to
qualify for the qualifying income exception to the publicly traded partnership rules and that we
should be taxed as a corporation.
If for any reason less than 90% of our gross income constitutes qualifying income, items of
income and deduction would not pass through to our shareholders and our shareholders would be
treated for federal income tax purposes as shareholders in a corporation. We would be required to
pay income tax at regular corporate rates on any portion of our net income that did not constitute
tax-exempt income. In addition, a portion of our tax-exempt income may be included in determining
our alternative minimum tax liability. All distributions made by us to our shareholders would
constitute ordinary dividend income taxable to such shareholders to the extent of our earnings and
profits, which would include tax-exempt income, as well as any taxable income we might have, and
the payment of these dividends would not be deductible by us. These consequences would have a
material adverse effect on us and our shareholders.
Taxation of the Company and shareholders. A partnership is not subject to federal income tax.
Assuming the Company is classified as a partnership for tax purposes and not a publicly traded
partnership taxable as a corporation, the Company will not be subject to federal income tax and
each shareholder will be required to report on its income tax return its distributive share of the
Company’s income, gain, loss, deduction and items of tax preference and will be subject to tax on
its distributive share of the Company’s taxable income, regardless of whether any portion of that
income is, in fact, distributed to such shareholder in the shareholder’s taxable year within which
or with which the Company’s taxable year ends. Thus, shareholders may be required to accrue
income, without the current receipt of cash, if the Company does not make cash distributions while
generating taxable income. Consequently, although it is not anticipated, a shareholder’s tax
liability with
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respect to its share of the Company’s taxable income may exceed the cash actually distributed
in a given taxable year. The Company currently uses the calendar year as its taxable year.
The Company will file a federal tax return on Form 1065 and will provide information as to
each shareholder’s distributive share of the Company’s income, gain, loss, deduction and items of
tax preference on a Schedule K-1 supplied to such shareholder after the close of the fiscal year.
In preparing such information, the Company will utilize various accounting and reporting
conventions, some of which are discussed herein, to determine each shareholder’s allocable share of
income, gain, loss and deduction. There is no assurance that the use of such conventions will
produce a result that conforms to the requirements of the Code, temporary and proposed treasury
regulations or IRS administrative pronouncements and there is no assurance that the IRS will not
successfully contend that such conventions are impermissible. Any such contentions could result in
substantial expenses to the Company and its shareholders as a result of contesting such
contentions, as well as an increase in tax liability to shareholders as a result of adjustments to
their allocable share of our income, gain, loss and deduction. See “—Tax returns, audits, interest
and penalties.”
Capital gain upon sale of assets. The Company may, from time to time, sell, dispose of or
otherwise be treated as disposing of, certain of its assets. Such sale or disposition may result
in taxable capital gain.
Shareholder’s basis in shares. Your adjusted basis in the Company’s shares is relevant in
determining the gain or loss on the sale or other disposition of shares and the tax consequences of
a distribution from the Company. See “—Treatment of cash distributions to shareholders from the
Company.” In addition, you are entitled to deduct on your income tax return, subject to the
limitations discussed below, your distributive share of the Company’s net loss, if any, to the
extent of your adjusted basis in your shares.
Your initial basis in your shares will be the purchase price for the shares, increased by your
share of items of our income (including tax-exempt interest) and gain, and reduced, but not below
zero, by (a) your share of items of Company loss and deduction (including any nondeductible
expenses), and (b) any cash distributions you receive from the Company.
Treatment of cash distributions to shareholders from the Company. Cash distributions made to
shareholders will generally be treated as a non-taxable return of capital and will not generally
increase or decrease your share of taxable income or loss from the Company. A return of capital
generally does not result in any recognition of gain or loss for federal income tax purposes but
would reduce your adjusted basis in your shares. Distributions of cash in excess of your adjusted
basis in your shares will result in the recognition of gain to the extent of such excess.
Limitations on deductibility of losses. In the event you are allocated losses, you generally
will be entitled to deduct your distributive share of any losses of the Company to the extent of
your tax basis of your shares at the end of the year in which such losses occur. However,
shareholders who are individuals, trusts, estates, personal service companies and certain closely
held C corporations may be subject to additional limitations on deducting losses of the Company.
Limitation on the deductibility of interest expense. The Code disallows any deduction for
interest paid by any taxpayer on indebtedness incurred or continued for the purpose of purchasing
or carrying a tax-exempt obligation. A purpose to carry tax-exempt obligations will be inferred
whenever a taxpayer owns tax-exempt obligations and has outstanding indebtedness which is neither
directly connected with personal expenditures nor incurred in connection with the active conduct of
a trade or business. The IRS may take the position that a shareholder’s allocable portion of any
interest paid by the Company on its borrowings, and any interest paid by a shareholder on
indebtedness incurred to purchase shares, should be viewed in whole or in part as incurred to
enable such shareholder to continue carrying such tax-exempt obligations and, therefore, that the
deduction of any such interest by such shareholder should be disallowed in whole or in part. The
Company does not expect to incur any significant amount of indebtedness for tax purposes to
purchase or carry tax-exempt obligations.
In the absence of direct evidence linking debt with purchasing or carrying tax-exempt
obligations (for example, the tax-exempt obligations secure the debt), there is an exception to the
interest disallowance rule if the taxpayer holds only an insubstantial amount of tax-exempt
obligations. This exception does not apply to banks, certain other financial institutions, or
dealers in tax-exempt securities. However, to the extent that an investor’s debt would be
allocated to purchasing or carrying its shares, such shares should only be treated as tax-exempt
obligations for purposes of the interest disallowance rule in the same proportion as the assets of
the Company comprise tax-exempt obligations (based on their adjusted tax basis or perhaps capital
account value). The Company will report to shareholders at the end of each year the average
percentage of its assets (based on
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adjusted tax basis and capital account value) that were invested in obligations believed to be
tax-exempt each year. It is uncertain whether an annual average or more frequent adjustments
should be used.
Assuming interest on indebtedness is otherwise deductible, the deductibility of a
non-corporate taxpayer’s “investment interest” expense is further limited to the amount of such
taxpayer’s “net investment income.”
Other U.S. federal income tax considerations. The Code contains certain provisions that could
result in other tax consequences as a result of the ownership of revenue bonds by the Company or
the inclusion in certain computations including, without limitation, those related to the corporate
alternative minimum tax, of interest that is excluded from gross income.
Ownership of tax-exempt obligations by the Company may result in collateral tax consequences
to certain taxpayers, including, without limitation, financial institutions, property and casualty
insurance companies, certain foreign corporations doing business in the United States, certain S
corporations with excess passive income, individual recipients of social security or railroad
retirement benefits and individuals otherwise eligible for the earned income credit. Prospective
purchasers of the Company’s shares should consult their own tax advisors as to the applicability of
any such collateral consequences.
Company expenses. The Company has incurred or will incur various expenses in connection with
its ongoing administration and operation. Payment for services generally is deductible if the
payments are ordinary and necessary expenses, are reasonable in amount and are for services
performed during the taxable year in which paid or accrued. The Company anticipates that a
substantial portion of its ordinary expenses will be allocable to tax-exempt interest income. The
Code prohibits the deduction of any expense otherwise allowable under Code Section 212 which is
allocable to tax-exempt interest income. The Company allocates its expenses in proportion to the
amount of tax-exempt income and taxable income that it receives. Shareholders generally will not
be permitted to deduct the portion of the Company’s expenses related to tax-exempt income in
calculating their federal income tax liability. Borrowers pay certain fees they incur in
connection with obtaining financing from the Company directly to the general partner. The Company
treats these fees as earned directly by the general partner for services it renders to the
borrowers. It is possible that the IRS could contend such fees should be treated as additional
taxable income to the Company and additional expense. If such position were asserted and upheld,
it would result in the Company recognizing additional taxable income, but all or a substantial
portion of the additional expense would be disallowed. In addition, depending on the amount of
such income relative to the Company’s other income, it could result in the Company being treated as
a publicly traded partnership taxable as a corporation.
The IRS may not agree with the Company’s determinations as to the deductibility of fees and
expenses and might require that certain expenses be capitalized and amortized or depreciated over a
period of years. If all or a portion of such deductions were to be disallowed, on the basis that
some of the foregoing expenses are non-deductible syndication fees or otherwise, the Company’s
taxable income would be increased or our losses would be reduced.
Treatment Of Syndication Expenses. Except as discussed below, neither the Company nor any
shareholder is permitted to deduct, for federal income tax purposes, amounts paid or incurred to
sell or market shares in the Company (“syndication expenses”). The determination as to whether or
not expenses are syndication expenses is a factual determination which will initially be made by
the Company. The IRS could challenge the Company’s determination expenses are not syndication
expenses.
Backup withholding. Distributions to shareholders whose shares are held on their behalf by a
“broker” may constitute “reportable payments” under the federal income tax rules regarding “backup
withholding.” Backup withholding, however, would apply only if the shareholder (i) failed to
furnish its Social Security number or other taxpayer identification number of the person subject to
the backup withholding requirement (e.g., the broker) or (ii) furnished an incorrect Social
Security number or taxpayer identification number. If “backup withholding” were applicable to a
shareholder, the Company would be required to withhold 28% of each distribution to such shareholder
and to pay such amount to the IRS on behalf of such shareholder.
Issuance of additional shares. The Company may issue new shares to additional investors to
finance the acquisition of additional investments. On any issuance of additional shares, the
Company expects that it will adjust the capital accounts of the existing shareholders for capital
account maintenance purposes under applicable Treasury Regulations in order to reflect a
revaluation of the Company’s assets (based on their then fair market value, net of liabilities to
which they are then subject).
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Tax returns, audits, interest and penalties. After the end of the calendar year, the Company
will supply Schedule K-1 to IRS Form 1065 to each shareholder of record as of the last day of each
month during the year. The Company is not obligated to provide tax information to persons who are
not shareholders of record.
State, local and foreign income taxes. In addition to the U.S. federal income tax
consequences described above, shareholders should consider potential state, local and foreign tax
consequences of an investment in the Company and are urged to consult their individual tax advisors
in this regard. The rules of some states, localities and foreign jurisdictions for computing
and/or reporting taxable income may differ from the federal rules. Interest income that is
tax-exempt for federal purposes is generally subject to state taxes, except in the state in which
the property securing the Company’s investment and the bond issuer are located. All the bonds and
interest income thereon may be subject to taxation by localities and foreign jurisdictions. An
investment in the Company’s shares could also require shareholders to file tax returns in various
jurisdictions, although the Company is not aware of any current filing obligations.
Under the tax laws of certain states, the Company may be subject to state income or franchise
tax or other taxes applicable to the Company. Such taxes may decrease the amount of distributions
available to shareholders. Shareholders are advised to consult with their tax advisors concerning
the tax treatment of the Company, and the effects under the tax laws of the states applicable to
the Company and its shareholders.
Income tax considerations relating to the Company’s tax-exempt revenue bonds.
Tax exemption of our revenue bonds. We primarily acquire and hold tax-exempt mortgage revenue
bonds issued for the purpose of providing construction and/or permanent financing for multifamily
housing projects in which a portion of the rental units are made available to persons of low or
moderate income. On the date of original issuance or reissuance of each revenue bond, nationally
recognized bond counsel or special tax counsel rendered its opinion to the effect that based on the
law in effect on the date of original issuance or reissuance, interest on such revenue bonds is
excludable from gross income of the bondholder for federal income tax purposes, except with respect
to any revenue bond (other than a revenue bond the proceeds of which are loaned to a charitable
organization described in Section 501(c)(3) of the Internal Revenue Code) during any period in
which it is held by a “substantial user” of the property financed with the proceeds of such revenue
bonds or a “related person” of such a “substantial user” each as defined in the Internal Revenue
Code. In the case of contingent interest bonds, such opinion assumes, in certain cases in reliance
on another unqualified opinion, that such contingent interest bond constitutes debt for federal
income tax purposes. See “Treatment of revenue bonds as equity,” below. However, an opinion of or
advice from counsel has no binding effect, and no assurances can be given that the conclusions
reached will not be contested by the IRS or, if contested, will be sustained by a court. We will
contest any adverse determination by the IRS on these issues.
In the case of revenue bonds which, subsequent to their original issuance, have been reissued
for federal tax purposes, nationally recognized bond counsel or special tax counsel has delivered
opinions to the effect that interest on the reissued revenue bond is excludable from gross income
of the bond holder for federal income tax purposes from the date of reissuance or, in some cases,
to the effect that the reissuance did not adversely affect the excludability of interest on the
revenue bonds from the gross income of the holders thereof. The reissuance of a revenue bond
generally does not, in and of itself, cause the interest on such revenue bond to be includable in
the gross income of the holder thereof for federal income tax purposes. However, if a revenue bond
is treated as reissued and the appropriate federal tax information return, a Form 8038, has not
been timely filed or a late filing has not been accepted by the IRS, interest on such revenue bond
could be includable in the gross income of the holder thereof for federal income tax purposes from
and after the reissuance date. In addition, if a contingent interest revenue bond is treated as
reissued, there can be no assurance that such revenue bond would continue to be characterized as
debt, as described below, insofar as the facts and circumstances underlying such characterization
may have changed. Furthermore, pursuant to regulations generally effective as of June 30, 1993, if
an issue of revenue bonds is treated as reissued within six months of the transfer of the project
financed by such issue of revenue bonds by the owner of such project to an unrelated party, the
interest on such revenue bonds could become includable in gross income for purposes of federal
income taxation. In addition, if a contingent interest revenue bond is reissued after August 13,
1996, the reissued revenue bond is or would become subject to certain regulations concerning
contingent payments, which could cause some or all of the interest payable on such contingent
interest revenue bond to become includable in gross income of the holder thereof for federal income
tax purposes, unless such contingent interest revenue bond is modified at the time of reissuance to
comply with the contingent payment regulations. Furthermore, there can be no assurance that the
IRS will not treat certain of the modifications of the contingent interest bonds as resulting in a
reissuance on a date other than the date on which counsel determined that a reissuance had occurred
in its unqualified opinions, in which case such revenue bonds may suffer adverse tax consequences,
as more fully described above, and such bond would not have the benefit of an opinion that interest
on such bond is excludable from gross income for federal income tax purposes.
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The Code establishes certain requirements which must be met subsequent to the issuance and
delivery of tax-exempt revenue bonds for interest on such revenue bonds to remain excludable from
gross income for federal income tax purposes. Among these continuing requirements are restrictions
on the investment and use of the revenue bond proceeds and, for revenue bonds the proceeds of which
are loaned to a charitable organization described in Section 501(c)(3) of the Code, the continued
tax exempt status of such borrower. In addition, the continuing requirements include tenant income
restrictions, regulatory agreement compliance reporting requirements, use of proceeds restrictions
and compliance with rules pertaining to arbitrage. Each issuer of the revenue bonds, as well as
each of the underlying borrowers, has covenanted to comply with certain procedures and guidelines
designed to ensure satisfaction with the continuing requirements of the Code. Failure to comply
with these continuing requirements of the Code may cause the interest on such bonds to be
includable in gross income for federal income tax purposes retroactively to the date of issuance,
regardless of when such noncompliance occurs.
Treatment of revenue bonds as equity. Payment of a portion of the interest accruing on our
contingent interest bonds depends in part upon the net cash flow from, or net proceeds upon sale
of, the property securing our investment financed by such revenue bond. We received opinions of
counsel with respect to each of our interest bonds to the effect that based upon assumptions
described in such opinions, which assumptions included the fair market value of the respective
properties upon completion and economic projections and guarantees, the contingent interest bonds
should be treated for federal tax purposes as representing debt. In certain instances, opinions
rendered by bond counsel provided that the characterization of the bonds as debt was not free from
doubt and that all or a portion of the interest on such bonds, including contingent interest and
deferred interest, may not be treated as interest for state and federal law but that it is more
likely than not that such interest is interest for state and federal law purpose or otherwise
similarly limited. The implicit corollary of all of these opinions is that the contingent interest
bonds do not constitute the following: (i) an equity interest in the underlying borrower; (ii) an
equity interest in a venture between the underlying borrower and us; or (iii) an ownership interest
in the properties securing our investments. Although we assume the continuing correctness of these
opinions, and will treat all interest received with respect to these bonds as tax-exempt income,
there can be no assurance that such assumptions are correct, such treatment would not be challenged
by the IRS, or intervening facts and circumstances have changed the assumptions and basis for
providing such opinions. An issue may arise as to whether the relationship between us and the
respective obligors is that of debtor and creditor or whether we are engaged in a partnership or
joint venture with the respective obligors. If the IRS were to determine that one or more of the
contingent interest bonds represented or contained an equity investment in the respective property
securing our investment because of this feature, all or part of the interest on such contingent
interest bond could be viewed as a taxable return on such investment and would not qualify as
tax-exempt interest for federal income tax purposes. To our knowledge, neither the
characterization of the contingent interest bonds as debt nor the characterization of the interest
thereon as interest excludable from gross income of the holders thereof has been challenged by the
IRS in any judicial or regulatory proceeding.
“Substantial user” limitation. Interest on a revenue bond owned by us will not be excluded
from gross income during any period in which we are a “substantial user” of the facilities financed
with the proceeds of such revenue bond or a “related person” to a “substantial user.” We have
received advice from our counsel with respect to our revenue bonds to the effect that we are not a
“substantial user” of any facilities financed with the proceeds of such bonds or a “related person”
thereto. A “substantial user” generally includes any underlying borrower and any person or entity
that uses the financed facilities on other than a de minimis basis. We would be a “related person”
to a “substantial user” for this purpose if, among other things, (i) the same person or entity
owned more than a 50% interest in both us and in the ownership of the facilities financed with the
proceeds of a bond owned by us, or (ii) if we owned a partnership or similar equity interest in the
owner of a property financed with the proceeds of a bond. Additionally, a determination that we
are a partner or a joint venturer with a mortgagor involving an equity interest, as described above
under “Treatment of revenue bonds as equity,” could cause us to be treated as a “substantial user”
of the properties securing our investments. In the event that the ownership entity which owns a
property securing our investment financed with the proceeds of a revenue bond owned by us were to
acquire shares of us, the IRS, if it became aware of such ownership, could take the position that
the substantial user and related person rules require that the interest income on such revenue bond
allocable to all of our investors, including the holders of the shares, be included in gross income
for federal income tax purposes. Kutak has advised us that in its opinion such a result is not
supported by the Code and treasury regulations; however, there can be no assurance that the IRS
would not take such a position.
Alternative minimum tax. Except for qualified Section 501(c)(3) bonds, or certain revenue
bonds that are grandfathered (i.e. “80/20 bonds”), interest on the revenue bonds generally is an
item of tax preference for purposes of the alternative minimum tax. To the extent interest on any
of the revenue bonds the Company owns is such an item of tax preference, a portion of the income
allocable to a shareholder also will be a tax preference item. This preference item may be
reduced, but not below zero, by interest expense and other expenses that could not be deducted for
regular tax purposes because the expenses were related to tax-exempt income generated by such
preference bonds. To the extent interest on any of the revenue bonds owned by the
21
Company is not a tax preference item, any corporation subject to the alternative minimum tax
must nevertheless take such tax-exempt interest into account in determining its adjusted current
earnings for purposes of computing its alternative minimum tax liability.
The foregoing summary of tax consequences set forth above is for general information only and
does not address the circumstances of any particular shareholder. You should consult your own tax
advisors as to the specific tax consequences of the purchase, ownership and disposition of the
Company’s shares, including the application of state, local and foreign tax laws.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, or ERISA, and the Internal
Revenue Code impose restrictions on (a) employee benefit plans (as defined in Section 3(3) of
ERISA); (b) plans described in Section 4975(e)(1) of the Internal Revenue Code, including
individual retirement accounts or Keogh plans; (c) any entities whose underlying assets include
plan assets by reason of a plan’s investment in such entities, each a plan; and (d) persons who
have specified relationships to those plans, i.e., “parties-in-interest” under ERISA, and
“disqualified persons” under the Internal Revenue Code. Moreover, based on the reasoning of the
U.S. Supreme Court in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993),
an insurance company’s general account may be deemed to include assets of the plans investing in
the general account (e.g., through the purchase of an annuity contract), and the insurance company
might be treated as a party-in-interest or disqualified person with respect to a plan by virtue of
such investment. ERISA also imposes certain duties on persons who are fiduciaries of plans subject
to ERISA and prohibits certain transactions between a plan and parties-in-interest or disqualified
persons with respect to such plans.
The Acquisition and Holding of Our Shares
An investment in our shares by a plan that has a relationship as “parties-in-interest” or
“disqualified persons” could be deemed to constitute a transaction prohibited under Title I of
ERISA or Section 4975 of the Internal Revenue Code (e.g., the indirect transfer to or use by
party-in-interest or disqualified person of assets of a plan). Such transactions may, however, be
subject to one or more statutory or administrative exemptions such as prohibited transaction class
exemption, or PTCE 90-1, which exempts certain transactions involving insurance company pooled
separate accounts; PTCE 91-38, which exempts certain transactions involving bank collective
investment funds; and PTCE 84-14, which exempts certain transactions effected on behalf of a plan
by a “qualified professional asset manager”; PTCE 95-60, which exempts certain transactions
involving insurance company general accounts; PTCE 96-23, which exempts certain transactions
effected on behalf of a plan by an “in-house asset manager”; or another available exemption. Such
exemptions may not, however, apply to all of the transactions that could be deemed prohibited
transactions in connection with a plan’s investment.
The Treatment of Our Underlying Assets Under ERISA
The U.S. Department of Labor has issued regulations (29 C.F.R. 2510.3-101) concerning the
definition of what constitutes the assets of an employee benefit plan (the “plan asset
regulations”). These regulations provide as a general rule, that the underlying assets and
properties of corporations, partnerships, trusts and certain other entities in which a plan
purchases an “equity interest” will be deemed, for purposes of ERISA, to be assets of the investing
plan unless certain exceptions apply. The plan asset regulations define an “equity interest” as
any interest in an entity other than an instrument that is treated as indebtedness under applicable
local law and which has no substantial equity features. Our shares should be treated as “equity
interests” for purposes of the plan asset regulations.
One exception to the look-through rule under the plan asset regulations provides that an
investing plan’s assets will not include any of the underlying assets of an entity in which such
assets are invested if at all times less than 25% of each class of “equity” interests in the entity
is held by “benefit plan investors,” which is defined to include plans that are not subject to
ERISA, such as governmental pension plans and individual retirement accounts as well as plans that
are subject to ERISA. For purposes of this determination, equity interests held by a person who
has discretionary authority or control over the entity’s assets or any person who provides
investment advice for a fee (direct or indirect) with respect to such assets, and affiliates of
such persons, are disregarded. Another exception under the plan asset regulations provides that an
investing plan’s assets will not include any of the underlying assets of an entity if the class of
“equity” interests in question is (a) widely held (i.e., held by 100 or more investors who are
independent of the issuer and each other); (b) freely transferable; and (c) part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act, or the “publicly offered
securities exception.” Another exception is provided for an
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investment in an “operating company,” which is defined in the plan assets regulations to
include a “venture capital operating company” and a “real estate operating company.”
Our general partner intends to take such steps as may be necessary to qualify for one or more
of the exceptions available under the plan asset regulations and thereby prevent our assets from
being treated as assets of any investing plan. If, however, none of the exceptions under the plan
asset regulations were applicable and we were deemed to hold plan assets by reason of a plan’s
investment in our equity securities, such plan’s assets would include an undivided interest in the
assets held by us. In such event, such assets, transactions involving such assets and the persons
with authority or control over and otherwise providing services with respect to such assets would
be subject to the fiduciary responsibility provisions of Title I of ERISA and the prohibited
transaction provisions of ERISA and Section 4975 of the Internal Revenue Code, and any statutory or
administrative exemption from the application of such rules may not be available.
As noted above, under the reasoning of the U.S. Supreme Court in John Hancock Life Ins. Co. v.
Harris Trust and Savings Bank, 510 U.S. 86 (1993), an insurance company’s general account may be
deemed to include assets of the plans investing in the general account (e.g., through the purchase
of an annuity contract), and the insurance company might be treated as a party-in-interest with
respect to a plan by virtue of such investment. Following the decision in John Hancock Life
Insurance, Congress enacted Section 401(c) of ERISA and DOL adopted regulations (29 C.F.R.
2550.401c-1) to provide guidance on which assets held by the insurer constitute “plan assets” for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of the Internal
Revenue Code. The plan asset status of insurance company separate accounts is unaffected by
Section 401(c) of ERISA, and separate account assets continue to be treated as the plan assets of
any such plan invested in a separate account.
Any plan fiduciary that proposes to cause a plan to purchase our shares should consult with
its counsel with respect to the potential applicability of ERISA and the Internal Revenue Code to
such investment and determine on its own whether any exceptions or exemptions are applicable and
whether all conditions of any such exceptions or exemptions have been satisfied. Moreover, each
plan fiduciary should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in our securities is appropriate for the plan, taking
into account the overall investment policy of the plan and the composition of the plan’s investment
portfolio. The sale of our securities is in no respect a representation by us or any other person
that such an investment meets all relevant legal requirements with respect to investments by plans
generally or that such an investment is appropriate for any particular plan.
PLAN OF DISTRIBUTION
We may sell the shares offered pursuant to this prospectus and any accompanying prospectus
supplements to or through one or more underwriters or dealers, or we may sell these shares to
investors directly or through agents. Any underwriter or agent involved in the offer and sale of
our shares will be named in the applicable prospectus supplement. We may sell shares directly to
investors on our own behalf in those jurisdictions where we are authorized to do so.
Underwriters may offer and sell our shares at a fixed price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to the prevailing market prices
or at negotiated prices. We also may, from time to time, authorize dealers or agents to offer and
sell shares on the terms and conditions described in the applicable prospectus supplement. In
connection with the sale of our shares, underwriters may receive compensation from us in the form
of underwriting discounts or commissions and may also receive commissions from purchasers of the
shares for whom they may act as agent. Underwriters may sell these securities to or through
dealers, and such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters or commissions from the purchasers for which they may act as
agents.
Shares may also be sold in one or more of the following transactions: (a) block transactions
(which may involve crosses) in which a broker-dealer may sell all or a portion of the shares as
agent but may position and resell all or a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker-dealer as principal and resale by the broker-dealer for its
own account pursuant to a prospectus supplement; (c) a special offering, an exchange distribution
or a secondary distribution in accordance with applicable Nasdaq or stock exchange rules; (d)
ordinary brokerage transactions and transactions in which a broker-dealer solicits purchasers; (e)
sales “at the market” to or through a market maker or into an existing trading market, on an
exchange or otherwise, for shares; and (f) sales in other ways not involving market makers or
established trading markets, including direct sales to purchasers. Broker-dealers may also receive
compensation from purchasers of shares which is not expected to exceed that customary in the types
of transactions involved.
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Any underwriting compensation paid by us to underwriters or agents in connection with the
offering of shares, and any discounts or concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable prospectus supplement. Dealers and
agents participating in the distribution of shares may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on resale of the shares
may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into with us, to
indemnification against and contribution toward certain civil liabilities, including liabilities
under the Securities Act. Unless otherwise set forth in the accompanying prospectus supplement,
the obligations of any underwriters to purchase any shares will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all of the shares then being sold, if
any is purchased.
Underwriters, dealers and agents may engage in transactions with, or perform services for, us
and our affiliates in the ordinary course of business.
In connection with the offering of shares described in this prospectus and an accompanying
prospectus supplement, certain underwriters, and selling group members and their respective
affiliates, may engage in transactions that stabilize, maintain or otherwise affect the market
price of the security being offered. These transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M promulgated by the SEC pursuant to which these
persons may bid for or purchase securities for the purpose of stabilizing their market price.
The underwriters in an offering of shares may also create a “short position” for their account
by selling more shares in connection with the offering than they are committed to purchase from us.
In that case, the underwriters could cover all or a portion of the short position by either
purchasing the shares in the open market following completion of the offering or by exercising any
over-allotment option granted to them by us. In addition, the managing underwriter may impose
“penalty bids” under contractual arrangements with other underwriters, which means that they can
reclaim from an underwriter (or any selling group member participating in the offering) for the
account of the other underwriters, the selling concession for the shares that are distributed in
the offering but subsequently purchased for the account of the underwriters in the open market.
Any of the transactions described in this paragraph or comparable transactions that are described
in any accompanying prospectus supplement may result in the maintenance of the price of our shares
at a level above that which might otherwise prevail in the open market. None of the transactions
described in this paragraph or in an accompanying prospectus supplement are required to be taken by
any underwriters and, if they are undertaken, may be discontinued at any time.
Our shares are listed on the Nasdaq Global Market under the symbol “ATAXZ.” Any underwriters
or agents to or through which shares are sold by us may make a market in our shares, but these
underwriters or agents will not be obligated to do so and any of them may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity of or trading
market for our shares.
EXPERTS
The financial statements of the Company and its consolidated subsidiaries, except Woodbridge
Apartments of Louisville II, L.P. and Woodbridge Apartments of Bloomington III, L.P., as of
December 31, 2005 and 2004 and for each of the two years in the period ended December 31, 2005
incorporated in this prospectus by reference from the Company’s Current Report on Form 8-K under
the Securities Exchange Act of 1934 dated January 9, 2007 have been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated in their report appearing therein.
The financial statements of Woodbridge Apartments of Louisville II, L.P. and Woodbridge Apartments
of Bloomington III, L.P. (consolidated with those of the Company) not presented separately therein
have been audited by Katz, Sapper & Miller, LLP as stated in their reports included therein. Such
financial statements of the Company and its consolidated subsidiaries are incorporated by reference
herein in reliance upon the respective reports of such firms given upon their authority as experts
in accounting and auditing.
The statements of operations, partners’ capital and comprehensive income (loss), and cash
flows of the Company for the year ended December 31, 2003 have been incorporated be reference
herein in reliance upon the report of KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as experts in accounting and
auditing.
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LEGAL OPINIONS
The validity of the shares offered by this prospectus has been passed upon for us by Kutak
Rock LLP, Omaha, Nebraska. In addition, the description of federal income tax consequences in
“U.S. Federal Income Tax Considerations” is based on the opinion of Kutak Rock LLP.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission (the “SEC”). You may read and copy the materials we file at the
SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
SEC’s regional office at Citicorp Center, 500 West Madison Street, Room 1400, Chicago, Illinois
60661-2511. Please call the Commission at 1-800-SEC-0330 for further information on the operation
of the Public Reference Rooms. Our SEC filings are also available to the public from the SEC’s
World Wide Web site on the Internet at http://www.sec.gov. This site contains reports, proxy and
information statements and other information regarding issuers that file electronically with the
SEC.
We have filed a registration statement, of which this prospectus is a part, covering the
securities offered hereby. As allowed by Commission rules, this prospectus does not contain all
the information set forth in the registration statement and the exhibits, financial statements and
schedules thereto. We refer you to the registration statement, the exhibits, financial statements
and schedules thereto for further information. This prospectus is qualified in its entirety by
such other information.
We maintain a site on the World Wide Web at www.ataxz.com. The information contained on this
Web site is not part of this prospectus and you should not rely on it in deciding whether to invest
in our shares.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information we file with it, which means:
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incorporated documents are considered part of this prospectus; |
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we can disclose important information to you by referring you to those documents; and |
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information that we file with the SEC will automatically update and supersede the
information in this prospectus and any information that was previously incorporated in
this prospectus. |
We filed the following documents with the SEC (File No. 000-49986) under the Exchange Act and
incorporate them by reference into this prospectus:
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 2005; |
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Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June
30 and September 30, 2006; and |
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Our Current Reports on Form 8-K filed with the SEC on August 29, 2006 and January 9, 2007. |
Any documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this prospectus and prior to the termination of the offering of the securities to which
this prospectus relates will automatically be deemed to be incorporated by reference into this
prospectus and to be part hereof from the date of filing those documents. Any documents we file
pursuant to these sections of the Exchange Act after the date of the initial registration statement
that contains this prospectus and prior to the effectiveness of the registration statement will
automatically be deemed to be incorporated by reference into this prospectus and to be part hereof
from the date of filing those documents.
Any statement contained in this prospectus or in any document incorporated, or deemed to be
incorporated, by reference into this prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this prospectus or in any
subsequently filed document that also is or is deemed to be incorporated by reference into this
prospectus modifies or supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this prospectus and the
related registration statement. Nothing in this prospectus shall be deemed to incorporate
information furnished by us but not filed with the SEC pursuant to Items 2.02 and 7.01 of Form 8-K.
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You can obtain any of our filings incorporated by reference into this prospectus from us or
from the SEC on the SEC’s Web site at the address listed above. We will provide without charge to
each person to whom this prospectus is delivered, upon written or oral request, a copy of these
filings or portions of these filings by writing or telephoning:
Mr. Michael Draper
The Burlington Capital Group LLC
1004 Farnam Street, Suite 400
Omaha, Nebraska 68102
(402) 444-1640
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$100,000,000
Shares Representing Assigned
Limited Partnership Interests
in
AMERICA FIRST TAX EXEMPT INVESTORS, L.P.
PROSPECTUS
,
2007
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits.
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Description |
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2.1
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Agreement and Plan of Merger by and among the Registrant and America
First Tax Exempt Mortgage Fund Limited Partnership, dated as of June 12,
1998 (incorporated herein by reference to Exhibit 4.3 of the Registration
Statement on Form S-4, filed by the Registrant pursuant to the Securities
Act of 1933 on September 14, 1998 (Commission File No. 333-50513)). |
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3.1
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Articles of Incorporation and Bylaws of America First Fiduciary
Corporation Number Five (incorporated herein by reference to Form S-11
Registration Statement filed August 30, 1985, with the Securities and
Exchange Commission by America First Tax Exempt Mortgage Fund Limited
Partnership (Commission File No. 2-99997)). |
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4.1
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Form of Certificate of Beneficial Unit Certificate (incorporated herein
by reference to Exhibit 4.1 to Registration Statement on Form S-4 (No.
333-50513) filed by the Registrant on April 17, 1998). |
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4.2
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Agreement of Limited Partnership of the Company (incorporated herein by
reference to Exhibit 4(b) to Form 10-K, dated December 31, 1998, filed by
Registrant pursuant to Section 13 of the Securities Act of 1934
(Commission File No. 000-24843)). |
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5.1
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Opinion of Kutak Rock LLP * |
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8.1
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Opinion of Kutak Rock LLP as to
Certain Tax Matters * |
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23.1
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Consent of Deloitte & Touche LLP. |
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23.2
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Consent of KPMG LLP |
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23.3
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Consent of Kutak Rock LLP (included
in Exhibits 5.1 and 8.1). * |
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23.4
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Consent of Katz, Sapper &
Miller, LLP * |
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23.5
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Consent of Katz, Sapper &
Miller, LLP * |
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24.1
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Powers of Attorney (included on
page II-3 of this Registration Statement). * |
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*
Previously Filed
II-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Omaha, Nebraska, on the 24th day of January, 2007.
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AMERICA FIRST TAX EXEMPT INVESTORS,
L.P.
By America First Capital Associates Limited Partnership 2, its general partner
By The Burlington Capital Group L.L.C.
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By: |
/s/ Lisa Y. Roskens
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Lisa Y. Roskens, President and Chief Executive Officer |
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Pursuant
to the requirements of the Securities Act of 1933, this Amendment No. 1 to
the Registration Statement has
been signed below by the following persons in the capacities and on the dates indicated.
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Date: January 24, 2007
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By:
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/s/ Michael B. Yanney *
Michael B. Yanney, Chairman of the Board
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Date: January 24, 2007
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By:
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/s/ Lisa Y. Roskens |
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Lisa Y. Roskens, President, |
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Chief Executive Officer and Manager |
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(principal executive officer) |
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Date: January 24, 2007
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By:
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/s/ Michael Draper |
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Michael Draper, Chief Financial Officer |
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(principal financial officer and
principal accounting officer) |
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Date: January 24, 2007
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By:
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/s/ Patrick J. Jung * |
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Patrick J. Jung, Manager |
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Date: January 24, 2007
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By:
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/s/ George H. Krauss* |
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George H. Krauss, Manager |
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Date: January 24, 2007
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By:
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/s/ Gail Walling Yanney* |
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Gail Walling Yanney, Manager |
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Date: January 24, 2007
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By:
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/s/ Mariann Byerwalter* |
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Mariann Byerwalter, Manager |
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Date: January 24, 2007
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By:
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/s/ Martin M. Massengale* |
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Martin M. Massengale, Manager |
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Date: January 24, 2007
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By:
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/s/ Clayton Yeutter* |
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Clayton Yeutter, Manager |
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Date: January 24, 2007
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By:
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/s/ William S. Carter* |
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William S. Carter, Manager |
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Date: January 24, 2007
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By:
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/s/ James O. Ellis* |
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James O. Ellis, Manager |
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by
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Michael Draper, attorney-in-fact |
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/s/
Michael Draper |
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Michael Draper |
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II-2