Mortgage Revenue Bonds

[BMK]

In my abundant free time, I hunt for the most kinky and esoteric investment products that are available to retail investors.

Greystone Housing Impact Investors LP may be a candidate.

Formed in 1998, it's a limited partnership that primarily invests in mortgage revenue bonds, using its own equity and leverage. The interest on those bonds is tax-exempt, and it remains tax-exempt when it is passed through to retail investors. Holders get a K-1.

But it also makes equity investments in housing projects, and income from those sources is not tax-exempt.

This thing is pretty small. Market cap = $385 million, with 23 million shares outstanding.

Symbol = GHI

Anyone follow this? Anyone even heard of it?

 

[Cabin111]

In my abundant free time, I hunt for the most kinky and esoteric investment products that are available to retail investors.

Greystone Housing Impact Investors LP may be a candidate.

Formed in 1998, it's a limited partnership that primarily invests in mortgage revenue bonds, using its own equity and leverage. The interest on those bonds is tax-exempt, and it remains tax-exempt when it is passed through to retail investors. Holders get a K-1.

But it also makes equity investments in housing projects, and income from those sources is not tax-exempt.

This thing is pretty small. Market cap = $385 million, with 23 million shares outstanding.

Symbol = GHI

Anyone follow this? Anyone even heard of it?

My two cents from reading and what my CPA said.

You are a GENERAL partner in this company...There is no LLP. My CPA told me to never own something where you get a K-1...A ton of liability. It should NEVER be in an IRA or Roth IRA. You could lose more that what you have put into it, to fulfill closing out of bankruptcy, if it happened.

USO (I believe) will file a K-1...Remember when oil went negative??

 

[BMK]

You are a GENERAL partner in this company...There is no LLP.

According to the GHI website:

Greystone Housing Impact Investors LP (NYSE: GHI) formerly known as America First Multifamily Investors, L.P. was formed in 1998 under the Delaware Revised Uniform Limited Partnership Act

The abbreviation LP means limited partnership.

The fact that you get a K-1 does not mean that you have any type of liability beyond your investment. Schedule K-1 is issued to general partners and limited partners. There is a box to check to indicate the type.

Whether a partner may be required to contribute money to the partnership, and whether a partner has personal liability for the debts of the partnership, are determined by state law and by the partnership agreement. Schedule K-1 does not contain sufficient information to address those issues.

But in very broad terms, a limited partner simply is not liable for the partnership's debts.

 

[Cabin111]

According to the GHI website:

Greystone Housing Impact Investors LP (NYSE: GHI) formerly known as America First Multifamily Investors, L.P. was formed in 1998 under the Delaware Revised Uniform Limited Partnership Act

The abbreviation LP means limited partnership.

The fact that you get a K-1 does not mean that you have any type of liability beyond your investment. Schedule K-1 is issued to general partners and limited partners. There is a box to check to indicate the type.

Whether a partner may be required to contribute money to the partnership, and whether a partner has personal liability for the debts of the partnership, are determined by state law and by the partnership agreement. Schedule K-1 does not contain sufficient information to address those issues.

But in very broad terms, a limited partner simply is not liable for the partnership's debts.

Do you invest other people's money??

I just grabbed this off of Schwab...We talked about this subject over 3 years ago.

I don't know if this would apply to your company. But, if they file a K-1 it might...

• Taxes on distributions not received. According to the SEC, MLP unitholders may still need to pay applicable taxes even if the MLP doesn’t provide the unitholder with cash distributions. For example, “if debt owned by an MLP is discharged in a restructuring or bankruptcy, the amount of debt discharged may be treated as income,” meaning investors may owe income taxes despite not receiving a cash distribution.5 A restructuring or bankruptcy is rarely a good thing for investors, but in the case of MLPs it can add an additional headache when it comes to taxes.
• 
  
• State taxes. According to the SEC, investors may need to file state tax returns in states that the MLP operates in, even if the investor doesn’t live in that state.6
• 
  
• MLPs held in retirement accounts. Sometimes an MLP will generate unrelated business taxable income, or UBTI, which could lead to a tax bill even if the MLP is held in a tax-deferred individual retirement account (IRA). While the income earned in a retirement account is generally tax deferred, UBTI may actually be taxed in an IRA. In other words, an investor holding an MLP in a retirement may still owe tax. If an MLP is held in a tax-deferred retirement account, it’s usually up to the MLP unitholder to send the Schedule K-1 to the IRA or retirement account custodian.

Due diligence...

 

[BMK]

I would generally agree that holding a partnership interest in a retirement account can lead to a lot of headaches. And yes, you could owe UBTI.

You could lose more that what you have put into it, to fulfill closing out of bankruptcy, if it happened.

With a limited partnership, that's not possible.

You are a GENERAL partner in this company

That's not accurate. See my previous post.

My CPA told me to never own something where you get a K-1

That's advice from CPA who doesn't want the hassle of dealing with a K-1 when they do your income tax return. It's not good investment advice; it's not even good tax advice. It's overly broad advice that can't possibly be applicable to everyone.

In deciding whether to invest in a limited partnership, you have to weigh the hassle of a K-1 against the potential benefits.

Having a bunch of very small investments in a lot of different limited partnerships would probably be a bad idea, especially if you use a CPA or other tax pro. They'll charge you a much higher fee to deal with all those K-1's, and the extra cost might well exceed any gains on your investments.

But that doesn't mean that no one should ever buy these things LOL

 

[nitrene]

I hate K-1s. I used to be part of a startup from 1998-2008 and from 2004-2008 I had to pay taxes on my share of the non-cash distribution -- it was like $4-5K per year. Fortunately some boutique equity firm bought us out (Warburg Pinkus).

I also used to own a bunch of MLPs from 2010-2013 when they started to tank. Endless forms to fill out.

For GHI it seems a lot of risk & work for 8.8% yield. Maybe the equity will rise so it makes up for the effort. I frankly prefer to just buy & hold a mix of junk bond, floating rate & CLO ETFs. You can easily get 7.5-10% on them.

You can get even more yield if you are willing to buy some CEF blackbox entities like VVR, BGB, etc.