16. Commitments and Contingencies

Legal Proceedings

The Partnership, from time to time, is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are frequently covered by insurance. If it has been determined that a loss is probable to occur and the amount of the loss can be reasonably estimated, the estimated amount of the loss is accrued in the Partnership's condensed consolidated financial statements. If the Partnership determines that a loss is reasonably possible, the Partnership will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of loss can be made. While the resolution of these matters cannot be predicted with certainty, the Partnership currently believes there are no pending legal proceedings in which the Partnership is currently involved the outcome of which will have a material effect on the Partnership’s financial condition, results of operations, or cash flows.

Bond Purchase Commitments

The Partnership may enter into bond purchase commitments related to MRBs to be issued and secured by properties under construction. Upon execution of the bond purchase commitment, the proceeds from the MRBs will be used to pay off the construction related debt. The Partnership bears no construction or stabilization risk during the commitment period. The Partnership accounts for its bond purchase commitments as available-for-sale securities and reports the asset or liability at fair value. Changes in the fair value of bond purchase commitments are recorded as gains or losses on the Partnership's condensed consolidated statements of comprehensive income (loss). The following table summarizes the Partnership’s bond purchase commitments as of March 31, 2026 and December 31, 2025:

Investment Commitments

The Partnership has remaining contractual commitments to provide additional funding of certain MRBs, taxable MRBs, GILs, and property loans while the secured properties are under construction, rehabilitation, or predevelopment. See Note 10 for information on the allowance for credit losses on such commitments. The Partnership also has outstanding contractual commitments to contribute additional equity to unconsolidated entities. The following table summarizes the Partnership’s total and remaining commitments as of March 31, 2026:

In addition, the Partnership is committed to funding 10% of the capital for the Construction Lending JV with the remainder to be funded by a third-party investor with each party contributing its proportionate capital contributions upon funding of future investments. The Partnership’s capital is contributed on a draw-down basis over the term of the underlying investments of the Construction Lending JV. As of March 31, 2026, the Partnership had contributed approximately $448,000 of its maximum capital commitment of approximately $15.1 million.

Construction Loan Guaranties

The Partnership entered into limited guaranty agreements for bridge loans related to certain investments in unconsolidated entities. The Partnership will only have to perform on the guaranties if a default by the borrower were to occur. The Partnership has not accrued any amount for these contingent liabilities because the Partnership believes the likelihood of guaranty claims is remote. The following table summarizes the Partnership’s maximum exposure under these guaranty agreements as of March 31, 2026:

In addition, the Partnership entered into a guaranty for the Freestone Cresta Bella mortgage loan. The Partnership has guaranteed debt service on the loan and certain operating costs. The Partnership has guaranteed 100% of the outstanding loan balance upon the occurrence of fraud or other willful misconduct by the borrower or if the borrower voluntarily files for bankruptcy. The guaranty agreement requires the Partnership to maintain a minimum net worth of not less than $42.0 million and maintain liquid assets of not less than $4.2 million at the end of each quarter. The Partnership was in compliance with these requirements as of March 31, 2026. The Partnership has also provided indemnification to the lender for various costs including interest expenses, environmental non-compliance and remediation during the term. The balance of the Freestone Cresta Bella bridge loan was approximately $42.0 million as of March 31, 2026. The Partnership has not accrued any amount for this contingent liability because the Partnership believes the likelihood of guaranty claims is remote.

Other Guaranties and Commitments

The Partnership has entered into guaranty agreements with unaffiliated entities under which the Partnership has guaranteed certain obligations of the general partners of certain limited partnerships upon the occurrence of a “repurchase event.” Potential repurchase events include LIHTC recapture and foreclosure. The Partnership’s maximum exposure is limited to 75% of the equity contributed by the limited partner to each limited partnership. No amount has been accrued for these guaranties because the Partnership believes the likelihood of repurchase events is remote. The following table summarizes the Partnership’s maximum exposure under these guaranty agreements as of March 31, 2026:

In December 2022, the Partnership sold 100% of its ownership interest in The 50/50 MF Property to an unrelated non-profit organization. The buyer assumed two mortgages payable associated with the property and the Partnership agreed to provide certain recourse support for the assumed mortgages. The TIF Loan was paid off in June 2024, and the Partnership does not have exposure as of March 31, 2026. The mortgage support is in the form of a forward loan purchase agreement upon maturity of the mortgage. The reported value of the credit guaranty was approximately $447,000 and $550,000 as of March 31, 2026 and December 31, 2025, respectively, and is included within other liabilities in the Partnership's condensed consolidated balance sheets. No additional contingent liability has been accrued because the likelihood of claims is remote. The Partnership's remaining forward loan purchase agreement expires in 2027 and its maximum exposure as of March 31, 2026 was approximately $20.5 million.

The Partnership has entered into various forward loan purchase agreements associated with construction loans for its investments in unconsolidated entities. Under these agreements, the Partnership will purchase a loan from the construction lender at maturity of the construction loan, which is typically five to seven years from closing, if not otherwise repaid by the borrower entity. The Partnership has the right to cure any defaults under the construction loan agreement that otherwise could accelerate the maturity of the construction loan. In addition, if the Partnership is required to perform under a forward loan purchase agreement, then it has the right to remove the managing member of the borrower entity, take ownership of the underlying property, and either sell the property or obtain replacement financing. Certain forward loan purchase agreements are only effective upon the receipt by the property of a certificate of occupancy by the borrower entity while others are effective as of the construction loan closing. The Partnership has recourse to the managing member of the borrower entity and/or the project’s general contractor for those agreements that are effective prior to the receipt of a certificate of occupancy. Total construction loan balances associated with effective forward loan purchase agreements are $150.9 million as of March 31, 2026. The Partnership has not recorded any non-contingent or contingent liabilities related to the forward loan purchase agreements as such amounts are deemed minimal.

In conjunction with the deed in lieu of foreclosure of The Park at Sondrio, The Park at Vietti, the Windsor Shores Apartments, and Century Plaza Apartments MF Properties, the Partnership entered into reimbursement agreements with GAHI, an affiliate. GAHI contributed various funds to the properties to support the rehabilitation and operations prior to the deed in lieu of foreclosure process. These amounts were subordinate obligations of the prior property owners. The Partnership and GAHI entered into the reimbursement agreements to maintain GAHI’s subordinate claims through the deed in lieu process. The Partnership will distribute excess proceeds from any future sales of the properties after the Partnership has been reimbursed for: its capital investment in the properties; costs incurred in connection with the acquisition, financing, operation or sale of the properties; and principal and accrued interest on any loans to the property, including the property loan to Opportunity South Carolina (Note 6), to prior property owner; and certain returns on the Partnership’s invested capital. The reimbursement obligations are non-recourse to the Partnership and are payable only to the extent excess proceeds are generated upon sale of the respective properties. The maximum excess proceeds payable by the Partnership to GAHI under the agreements are approximately $2.4 million for The Park at Sondrio, approximately $2.1 million for The Park at Vietti, approximately $904,000 for Windsor Shores Apartments, and approximately $1.7 million for Century Plaza Apartments. The Partnership recorded a liability upon execution of the reimbursement agreements totaling approximately $1.7 million reported within “Accounts payable, accrued expenses and other liabilities” on the condensed consolidated balance sheets.

In conjunction with the deed in lieu of foreclosure of the Century Plaza Apartments MF Property, the Partnership entered into a reimbursement agreement with the prior owner of the property. The prior owner advanced certain funds to the property to support the rehabilitation and operations prior to the deed in lieu of foreclosure process. The Partnership and the prior owner entered into the reimbursement agreement to provide for the payment of potential excess proceeds upon sale of the property in exchange for the prior owner’s release of any and all potential claims or legal actions against the Partnership from the deed in lieu of foreclosure. The Partnership will distribute excess proceeds from any future sales of the properties after the Partnership has been reimbursed for: its capital investment in the properties; costs incurred in connection with the acquisition, financing, operation or sale of the properties; and principal and accrued interest on any loans to the property; and certain returns on the Partnership’s invested capital. In addition, the prior owner’s reimbursement claim is subordinate to the GAHI reimbursement claim on the property. The reimbursement obligation is non-recourse to the Partnership and is payable only to the extent excess proceeds are generated upon sale of the property. The maximum excess proceeds payable by the Partnership to the prior owner is approximately $10.7 million. The Partnership has recorded a liability upon execution of the reimbursement agreement of approximately $393,000 reported within “Accounts payable, accrued expenses and other liabilities” on the condensed consolidated balance sheets.