{"url_path":"/sec/ghi/10-q/2026/item-3","section_key":"item-3","section_title":"Item 3 Quantitative and Qualitative Disclosures About Market Risk.","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-11","source_url":"https://www.sec.gov/Archives/edgar/data/1059142/0001193125-26-216905-index.html","accession_number":"0001193125-26-216905","cik":"0001059142","ticker":"GHI","issuer_name":"Greystone Housing Impact Investors LP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1059142/0001193125-26-216905-index.html","primary_entity_key":"0001059142","primary_entity_name":"Greystone Housing Impact Investors LP"},"word_count":3002,"has_tables":true,"body_markdown":"Item 3. Quantitative and Qualitative Disclosures About Market Risk.\n\nThe primary components of our market risk as of March 31, 2026 are related to interest rate risk and credit risk. We also have exposure to valuation and reinvestment risks. Our exposure to market risks relates primarily to our investments in MRBs, GILs, property loans, and our debt financing, and mortgages payable. We seek to actively manage these and other risks and to acquire and hold assets that we believe justify bearing those risks, and to maintain capital levels consistent with those risks.\n\nInterest Rate Risk\n\nThe Federal Reserve has held the federal funds rate steady at a target range for the federal funds rate of 3.50-3.75% in recent quarters. Recent federal funds rate decisions have not been unanimous as there are differing views among board members with certain subsets wanting to hold rates steady or further reduce rates. The Federal Reserve continues to evaluate economic data in assessing whether to make further changes to the federal funds rate, which in turn, influences market expectations for current and future interest rate levels. It is uncertain if additional federal funds rate reductions will occur in the near term. Changes in short-term interest rates will generally result in similar changes in the interest cost associated with our variable debt financing arrangements, though such changes are expected to be offset by changes in net receipts on our interest rate swap portfolio.\n\nInterest rates are highly sensitive to many factors, including governmental, tariff, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. The nature of our MRB, GIL, and property loan investments and the debt used to finance these investments, exposes us to financial risk due to fluctuations in market interest rates. The majority of our debt investments bear interest at fixed rates.\n\nWe regularly hedge our exposure to changes in interest rates where we have financed fixed rate investment assets with variable rate debt financing by executing SOFR-denominated interest rate swaps. Though the variable rate indices of our debt financing and interest rate swaps may differ, the interest rate swaps have effectively synthetically fixed the interest rate of the related debt financing. The majority of our variable-rate debt financings that are hedged through interest rate swaps have interest that is tax-exempt to the senior securities holders. In order to account for the differential between our interest rate swaps which are indexed to SOFR (a taxable rate) and our debt financing rate (which is correlated to short-term tax-exempt municipal securities rates), we assume that, over the term of our debt financing, the tax-exempt senior securities interest rate will approximate 70% of the SOFR rate. This assumption aligns with common market assumptions and the historical correlation between taxable and tax-exempt municipal short-term securities rates. However, such ratio may not be accurate in the short term or long term in the future.\n\nThe following table sets forth information regarding the impact on our net interest income assuming various changes in short-term interest rates as of March 31, 2026:\n\nDescription\n\n \n\n- 100 basis points\n\n \n\n \n\n- 50 basis points\n\n \n\n \n\n+ 50 basis points\n\n \n\n \n\n+ 100 basis points\n\n \n\n \n\n+ 200 basis points\n\n \n\nTOB Debt Financings\n\n \n\n$\n\n2,779,201\n\n \n\n \n\n$\n\n1,389,600\n\n \n\n \n\n$\n\n(1,389,600\n\n)\n\n \n\n$\n\n(2,779,201\n\n)\n\n \n\n$\n\n(5,558,402\n\n)\n\nOther Financings & Derivatives\n\n \n\n \n\n(1,617,420\n\n)\n\n \n\n \n\n(808,710\n\n)\n\n \n\n \n\n808,710\n\n \n\n \n\n \n\n1,617,420\n\n \n\n \n\n \n\n3,234,840\n\n \n\nVariable Rate Investments\n\n \n\n \n\n(425,508\n\n)\n\n \n\n \n\n(212,754\n\n)\n\n \n\n \n\n212,754\n\n \n\n \n\n \n\n425,508\n\n \n\n \n\n \n\n851,017\n\n \n\nNet Interest Income Impact\n\n \n\n$\n\n736,273\n\n \n\n \n\n$\n\n368,136\n\n \n\n \n\n$\n\n(368,136\n\n)\n\n \n\n$\n\n(736,273\n\n)\n\n \n\n$\n\n(1,472,545\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nPer BUC Impact (1)\n\n \n\n$\n\n0.032\n\n \n\n \n\n$\n\n0.016\n\n \n\n \n\n$\n\n(0.016\n\n)\n\n \n\n$\n\n(0.032\n\n)\n\n \n\n$\n\n(0.063\n\n)\n\n(1)\nThe net interest income impact per BUC calculated based on 23,266,619 BUCs outstanding as of March 31, 2026.\n\nThe interest rate sensitivity table above (the “Table”) represents the change in interest income from investments, net of interest on debt and settlement payments for interest rate derivatives over the next twelve months, assuming an immediate parallel shift in the SOFR yield curve and the resulting implied forward rates are realized as a component of this shift in the curve. The table does not reflect any non-cash unrealized (gains) losses on interest rate swaps caused by the assumed changes in interest rates. Assumptions include anticipated interest rates; relationships between different interest rate indices such as SOFR and SIFMA; and outstanding investment, debt financing and interest rate derivative positions. No assurance can be made that the assumptions included in the Table presented herein will occur or that other events will not occur that will affect the outcomes of the analysis. Furthermore, the results included in the Table assume we do not act to change our sensitivity to the movement in interest rates. As the above information incorporates only those material positions or exposures that existed as of March 31, 2026, it does not consider those exposures or positions that have arisen or could arise after that date. The ultimate economic impact of these market risks will depend on the exposures that arise during the period, our risk mitigation strategies at that time and the overall business and economic environment.\n\nWe employ leverage to finance the acquisition of many of our fixed income assets. Approximately 65% of our leverage bears interest at short term variable interest rates. Our remaining 35% of leverage has fixed interest rates. Of those assets funded with short term variable rate debt facilities, approximately 4% bear interest at a variable rate as well. While there is some basis risk between the\n\n90\n\n \n\ninterest cost associated with our debt financing arrangements and the short-term interest rate indices on our variable rate assets, this portion of our portfolio is substantially match funded with rising short term interest rates having a minimal impact on our net interest income.\n\nFor those fixed rate assets where we have variable rate financing, hedging instruments such as interest rate caps and interest rate swaps have been utilized to hedge some, but not all, of the potential increases in our funding cost that would result from higher short-term interest rates. In other cases, these positions have been hedged to their expected maturity date. In others, a shorter-term hedge has been executed due to uncertainty regarding the time period over which the individual fixed rate asset might be outstanding.\n\nFor information on our debt financing and interest rate derivatives see Notes 13 and 15, respectively.\n\nCredit Risk\n\nOur primary credit risk is the risk of default on our investment in MRBs, GILs and property loans collateralized by multifamily residential, seniors housing and skilled nursing properties. The MRB and GIL investments are not direct obligations of the governmental authorities that issue the MRB or GIL and are not guaranteed by such authorities or any issuer. In addition, the MRB, GIL and the associated property loan investments are non-recourse obligations of the property owner. As a result, the primary sources of principal and interest payments on our MRB, GIL, and the property loan investments are the net operating cash flows generated by these properties or the net proceeds from a sale or refinance of these properties. Affiliates of the borrowers of our GIL and construction financing property loan investments have full-to-limited guaranties of construction completion and payment of principal and accrued interest on the GIL and property loan investments, so we may have additional recourse options for these investments. Similarly, we typically require affiliates of the borrowers of our MRB investments to provide full-to-limited guaranties during the construction period and pre-stabilization period, if applicable. We do not typically have recourse guarantees to non-profit borrowers during the construction or rehabilitation period.\n\nIf a property is unable to sustain net rental revenues and net operating cash flows at a level necessary to pay current debt service obligations on our MRB, GIL or property loan investments, a default may occur. A property’s ability to generate net operating cash flows is subject to a variety of factors, including rental and occupancy rates of the property and the level of its operating expenses. Occupancy rates and rents are directly affected by the supply of, and demand for, multifamily residential, single-family rentals, seniors housing and skilled nursing properties in the market area where the property is located. This is affected by several factors such as local or national economic conditions, the amount of new apartment construction and the affordability of single-family homes. In addition, factors such as government regulation (e.g. zoning laws and permitting requirements), inflation, insurance availability and cost, real estate and other taxes, labor issues, and natural disasters can affect the economic operations of a multifamily residential property. Rental rates for set-aside units at affordable multifamily properties are typically tied to certain percentages of AMI. Increases in AMI are not necessarily correlated to inflationary increases in property operating expenses or market rents. A significant mismatch between AMI growth and increased property operating expenses could negatively impact net operating cash flows available to pay debt service. If AMI declines on a year-over-year basis, rents could need to be reduced.\n\nCertain MRB, GIL, and construction financing property loan investments that fund the construction of new affordable multifamily properties may have variable interest rates. Since there are little to no operating cash flows during the construction and lease-up periods for new properties, borrowers utilize capitalized interest reserves to fund debt service prior to stabilization. Increases in market interest rates will cause an increase in debt service costs where variable rate financing is used. If interest rate increases are large enough, such capitalized interest reserves and other budgeted contingencies may be insufficient to pay all debt service through stabilization. Such cost overruns may cause defaults on our construction financing investments if other funding sources are not available to the borrowers or if related guarantors fail to meet their obligations.\n\nDefaults on our MRB, GIL, or property loan investments may reduce the amount of future cash available for distribution to Unitholders. In addition, if a property’s net operating cash flow declines, it may affect the market value of the property, which may result in net proceeds from the ultimate sale or refinancing of the property to be insufficient to repay the entire principal balance of our MRB, GIL or property loan investment. In the event of a default, we will have the right to foreclose on the mortgage or deed of trust on the property securing the investment. If we take ownership of the property securing a defaulted MRB or GIL investment, we will be entitled to all net operating cash flows generated by the property and will be subject to risks associated with ownership of multifamily real estate. If such an event occurs, these investments will not provide tax-exempt income. In the event of default, we will likely be required to repay debt financing secured by our investment using available liquidity or arrange alternative financing, if available, which is likely to be at less favorable terms. Such occurrences will negatively impact our overall available liquidity and results of operations.\n\n91\n\n \n\nWe actively manage the credit risks associated with our MRB, GIL, and property loan investments by performing a comprehensive due diligence and underwriting process of the sponsors, owners and the properties securing these investments prior to investing. In addition, we carefully monitor the on-going performance of the properties underlying these investments. For those investments where Freddie Mac has provided a forward commitment to purchase our GILs, the investment has also passed Freddie Mac’s required underwriting requirements.\n\nCredit risk is also present in the geographical concentration of the properties securing our MRB investments. We have significant geographic concentrations in Texas, California, and South Carolina. The table below summarizes the geographic concentrations in these states as a percentage of the total MRB principal outstanding:\n\n \n\n \n\n \n\nMarch 31, 2026\n\n \n\n \n\nDecember 31, 2025\n\n \n\nCalifornia\n\n \n\n \n\n35\n\n%\n\n \n\n \n\n31\n\n%\n\nTexas\n\n \n\n \n\n30\n\n%\n\n \n\n \n\n27\n\n%\n\nSouth Carolina\n\n \n\n \n\n4\n\n%\n\n \n\n \n\n15\n\n%\n\n \n\nOur GIL and taxable GIL investments are also geographically concentrated, with all such investments located in California as of March 31, 2026.\n\nMortgage Revenue Bonds Sensitivity Analysis\n\nThird-party pricing services are used to value our MRB investments. The pricing service uses a discounted cash flow and yield to maturity or call analysis which encompasses judgment in its application. The key assumption in the yield to maturity or call analysis is the range of effective yields of the individual MRB investments. The effective yield analysis for each MRB considers the current market yield of similar securities, specific terms of each MRB, and various characteristics of the property collateralizing the MRB such as debt service coverage ratio, loan to value, and other characteristics. The effective yield for each MRB has historically trended with, although is not directly influenced by, medium and long-term interest rate movements. Our valuation service provider uses tax-exempt and taxable housing curves published by Municipal Market Data to estimate the value of our MRB investments. Our valuation service provider primarily uses the A rated Tax Exempt Housing Sector Yield Curve, which increased by an average of 23 basis points across the curve as of March 31, 2026 compared to December 31, 2025. The 10 year United States Treasury yield increased 12 basis points and the 30 year United States Treasury yield increased 4 basis points during the first three months of 2026. The 5 year and 10 year SOFR swap rate increased 16 and 6 basis points, respectively, during the first three months of 2026. These interest rate changes have a direct effect on the market value of our MRB portfolio, but do not directly impact a borrower's ability to meet its obligations as our MRB investments have predominantly fixed interest rates.\n\nWe completed a sensitivity analysis which is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. The table below summarizes the sensitivity analysis metrics related to our MRB investments as of March 31, 2026:\n\nDescription\n\n \n\nEstimated Fair\nValue (in 000's)\n\n \n\n \n\nRange of Effective\nYields used\nin Valuation\n\n \n\nRange of Effective\nYields if 10%\nAdverse Applied\n\n \n\nAdditional\nUnrealized Losses\nwith 10% Adverse\nChange (in 000's)\n\n \n\nMortgage Revenue Bonds\n\n \n\n$\n\n889,693\n\n \n\n \n\n2.7%\n\n- 9.7%\n\n \n\n \n\n3.0\n\n%\n\n-10.7%\n\n \n\n$\n\n18,522\n\n \n\nReal Estate Valuation Risk\n\nOur JV Equity Investments fund the construction, stabilization and sale of market-rate multifamily real estate. We are also exposed to real estate valuation risk on our MF Properties investments. The realizable property values for such investments are primarily dependent upon the value of a property to prospective buyers at the time of its sale, which may be impacted by market capitalization rates, the operating results of the property, local market conditions and competition, and interest rates on mortgage financing. We have noticed market capitalization rates are trending upward due to, though not limited to, the current economic environment and elevated market interest rates. We have also noted that rental rates may be decreasing in certain markets, particularly in Texas, which would lower property operating results leading to a reduction in property valuations. Operating results of real estate properties may be affected by many factors, such as the number of tenants, the rental and fee rates, insurance availability and cost, operating expenses, the cost of repairs and maintenance, taxes, debt service requirements, competition from other similar multifamily rental properties and general and local economic conditions. In addition, all outstanding financing directly secured by such real estate properties must be repaid upon sale.\n\n92\n\n \n\nLower sales proceeds may prevent us from collecting our accrued preferred return or the return of our original investment equity, which would result in realized losses on our investments.\n\nOur current portfolio of JV Equity Investments is geographically concentrated with six of our 11 investments located in Texas. Our MF Properties investments are geographically concentrated with all four properties located in South Carolina. Such concentration exposes us to potentially negative effects of local or regional economic downturns in those markets, which could prevent us from realizing returns on our investments and recovery of our investment capital.\n\nReinvestment Risk\n\nMRB investments may have optional call features that may be exercised by either the borrower or the Partnership that are earlier than the contractual maturity. These optional call features may be at either par or premiums to par. In addition, our GIL and most property loan investments are prepayable at any time without penalty. Borrowers may choose to redeem our investments if prevailing market interest rates are lower than the interest rate on our investment asset or for other reasons. In order to maintain or grow our investment portfolio size and earnings, we must reinvest repayment proceeds in new investment assets. New MRB, GIL and property loan investment opportunities may not generate the same returns as our current investments such that our reported operating results may decline over time. In addition, elevated interest rates and construction costs could limit the ability of developers to initiate new projects for us to finance with MRB, GIL, and property loan investments.\n\nSimilarly, we are subject to reinvestment risk on the return of capital from sales of JV Equity Investments. Our previous strategy involves making JV Equity Investments for the development, stabilization and sale of market-rate multifamily rental properties. In November 2025, we announced that we are implementing a strategy to reduce our capital allocation to market rate multifamily JV Equity Investments going forward and we expect to reinvest the return of capital from the sale of these investments into primarily MRB investments. We may also continue acquiring JV Equity Investments related to market rate seniors housing properties. Our initial equity contributions will be returned upon sale of our remaining market rate multifamily JV Equity Investments, at which time we will look to reinvest the capital into new MRB investments or market rate seniors JV Equity Investments. New investment opportunities may not generate the same returns as our prior investments due to factors including, but not limited to, risk profiles, elevated interest rates and increasing construction costs. Lower returns on new investment opportunities will result in declining operating results over time.\n\n93"}