Item 1.01 Entry into a Material Definitive Agreement.
America First Capital Associates Limited Partnership Two, a Delaware limited partnership (the “General Partner”) is the general partner of the registrant, America First Multifamily Investors, L.P., a Delaware limited partnership (the “Partnership”).
On August 29, 2019, Burlington Capital LLC, a Delaware limited liability company (“Burlington”), which is the general partner of the General Partner, Burlington Capital Structured Finance, LLC, a Delaware limited liability company (“BCSF,” and collectively with Burlington, the “Sellers”), Greystone AF Manager LLC, a Delaware limited liability company (“Greystone Manager”), and Greystone AF Holdings LLC, a Delaware limited liability company (“Greystone Holdings,” and collectively with Greystone Manager, “Greystone”), entered into a Partnership Interest Purchase Agreement (the “Purchase Agreement”) pursuant to which Greystone agreed to acquire all of the issued and outstanding general and limited partnership interests in the General Partner from Burlington and BCSF for $80,000,000 in cash, subject to adjustment pursuant to the terms of the Purchase Agreement (the “Transaction”). Greystone Manager and Greystone Holdings are affiliates of Greystone & Co., Inc., a New York corporation, which together with its affiliates is a commercial real estate lending, investment, and advisory company. After the closing of the transactions contemplated by the Purchase Agreement, the General Partner will be a wholly-owned subsidiary of Greystone.
Neither the Partnership nor any of the equity interests in the Partnership are being sold, disposed of, or otherwise transferred pursuant to the Purchase Agreement or any of the transactions contemplated by the Purchase Agreement. After the closing of the Transaction, the General Partner will remain the sole general partner of the Partnership. None of the transactions contemplated by the Purchase Agreement require the approval of the holders of the Partnership’s beneficial unit certificates, the outstanding preferred units or any other limited partner of the Partnership.
The Purchase Agreement contains representations, warranties, and covenants of the Sellers, with respect to themselves and with respect to the General Partner and the Partnership, including, among others, covenants requiring the Sellers to not take any action, and to use commercially reasonable efforts to cause the General Partner and the Partnership not to take any action, that would cause to occur any of the changes, events, or conditions set forth in the Purchase Agreement regarding the conduct of the Sellers’, the General Partner’s, and the Partnership’s respective businesses in the ordinary course between the execution of the Purchase Agreement and the effective time of the Transaction or the earlier termination of the Purchase Agreement. In addition, as of the closing of the Transaction, each award of restricted units granted under the Partnership’s 2015 Equity Incentive Plan that is outstanding and unvested immediately prior to the effective time of the Transaction will become fully vested and free of forfeiture restrictions.
The closing of the Transaction is subject to the satisfaction or waiver, if permitted by applicable law, by Greystone, the Sellers, or both of various customary closing conditions. In addition, the obligation of Greystone to close the Transaction is conditioned upon Greystone or an affiliate of Greystone entering into employment agreements, on or prior to the closing, with each of Chad L. Daffer, the Chief Executive Officer of the Partnership, and Craig S. Allen, the Chief Financial Officer of the Partnership. The Purchase Agreement does not contain a financing condition.
Effective upon the closing of the Transaction, the members of the Board of Managers of Burlington (the “Board”) will resign as to their roles with respect to the Partnership, namely in their capacities as the equivalent of directors of the Partnership. Correspondingly, effective as of the closing, Greystone will appoint persons to act as the directors of the Partnership and as members of a body acting in the capacity of an Audit Committee of the Partnership to satisfy applicable requirements of law, including but not limited to the rules and regulations of the SEC and the listing rules of the NASDAQ Stock Market LLC.
The Purchase Agreement contains certain termination rights in favor of the parties, as set forth therein, including, among other things, the right of any of the Sellers or Greystone, subject to specified limitations, to terminate the Purchase Agreement if the closing of the Transaction does not occur on or before October 31, 2019.
The special committee of the Board of Burlington, which committee is comprised entirely of independent managers of the Board (the “Special Committee”), reviewed in detail the Purchase Agreement, the Transaction, and the terms of the related transactions and agreements, engaged and consulted with independent financial and legal advisors with respect thereto, and unanimously recommended the approval of the Transaction, Purchase Agreement, and the other transactions contemplated thereby to the Burlington Board. Based upon the recommendation of the Special Committee, the Board, acting on behalf of Burlington and as the general partner of the General Partner, unanimously approved the Purchase Agreement, the Transaction, and the other transactions contemplated thereby. The Transaction is expected to close as soon as practicable after the satisfaction or waiver of all the conditions to the closing in the Purchase Agreement, which is currently expected to be in the third quarter of 2019.
The foregoing descriptions of the Purchase Agreement and the Transaction are summaries, do not purport to be complete, and are qualified in their entirety by reference to the full text of the Purchase Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference herein.
Cautionary Statement Regarding Representations and Warranties
The representations, warranties, and covenants contained in the Purchase Agreement were made only for the purposes of the Purchase Agreement, were made as of specific dates, were made solely for the benefit of the parties to the Purchase Agreement, and may not have been intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among the parties to the Purchase Agreement. In addition, such representations, warranties, and covenants may have been qualified by certain disclosures not reflected in the text of the Purchase Agreement and may apply standards of materiality and other qualifications and limitations in a way that is different from what may be viewed as material by the holders of the Partnership’s beneficial unit certificates. None of the holders of the Partnership’s beneficial unit certificates or any other third parties should rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the Partnership, the Sellers, Greystone, or any of their respective subsidiaries or affiliates. There are no third party beneficiaries under the Purchase Agreement.