-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TU3EvtFddddl8QCRQjA0G1+bKDOwbp9uJFAx3JqIYHm2bOOzD1FFvbqkZuuRAYMb KwOUdDeBkwMR6k4WdYYb7Q== 0000912057-00-015366.txt : 20000501 0000912057-00-015366.hdr.sgml : 20000501 ACCESSION NUMBER: 0000912057-00-015366 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 DATE AS OF CHANGE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14583 FILM NUMBER: 589648 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - ------- EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - ------- EXCHANGE ACT OF 1934 Commission File Number 0-23972 AMERICAN MORTGAGE ACCEPTANCE COMPANY (Formerly American Mortgage Investors Trust) -------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 13-6972380 - - ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - - -------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-5333 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest, par value $.10 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The approximate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of March 9, 2000 was $33,159,869, based on a price of $8 13/16 per share, the closing sales price for the Registrant's shares of beneficial interest on the American Stock Exchange on that date. As of March 9, 2000 there were 3,838,630 outstanding shares of the Registrant's shares of beneficial interest. DOCUMENTS INCORPORATED BY REFERENCE Registrant's prospectus dated March 29, 1993, as supplemented April 22, 1993, August 9, 1993, November 9, 1993, January 31, 1994, April 25, 1994, September 2, 1994, November 9, 1994 and January 31, 1995, as filed with the Commission pursuant to Rules 424(b) and 424(c) of the Securities Act of 1933, but only to the extent expressly incorporated by reference in Parts I, II, III and IV. Part III: Those portions of the Registrant's Proxy Statement for Annual Meeting of Shareholders to be held on June 14, 2000, which are incorporated into Items 10, 11, 12 and 13. Index to exhibits may be found on page Page 1 of CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. -2- PART I Item 1. Business. GENERAL American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business trust for the primary purpose of investing in government-insured mortgages and guaranteed mortgage-backed certificates. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On April 6, 1999, the Company received the necessary consent from its shareholders to approve proposals (the "Proposals") to, among other things, restructure the Company from a closed-ended, finite-life REIT to a publicly traded, open-ended, infinite-life operating REIT. In addition to restructuring the Company, the Proposals, among other matters, permit the Company to modify its investment objectives, to incur a specified amount of indebtedness and to list the Company's shares on a national exchange. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of December 31, 1999, there were 3,838,630 Shares outstanding. The Company's new business plan as a publicly traded REIT focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Federal National Mortgage Association ("Fannie Mae"), and 3) acquisition of subordinated interests in commercial mortgage-backed securities. As of December 31, 1999 the Company's mortgage investments consisted of three mortgage loans originated by or on behalf of the Company, four GNMA mortgage-backed securities and pass-through certificates and one commercial mortgage-backed security ("CMBS")-related investment. Due to the complexity of the GNMA and CMBS structure and the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effect of future events upon the yield to maturity or the market value of the GNMA certificates or the CMBS-realted investment upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the coupon rate. The current composition of the Company's investment portfolio reflects the recent change in the Company's business plan and is not comparable to its investment portfolio prior to April 1999. Furthermore, the Company is still in the process of implementing its new business plan and, therefore, the current portfolio should not be considered indicative of the composition of the portfolio that might be expected in the future. The Company is governed by a board of trustees comprised of two independent trustees and one trustee who is affiliated with Related Capital Company ("Related"). The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. -3- MORTGAGE LOANS Information relating to the Company's investments in Mortgage Loans as of December 31, 1999 is as follows:
Date of Invest- ment/ Amounts Advanced Final Interest ----------------------------------------- Outstanding Matu Rate on Total Loan Descrip -rity Mortgage Mortgage Additional Amounts Balance at Property -tion Date Loan (A) Loans Loans (B) Advanced 12/31/99 - - -------- ------- -------- -------- ----------- ----------- -------- ------------ The Cove 308 Dec-93 7.625%- $6,800,000 $840,500 $ 7,640,500 $ 0 Apts. Apt 29-Jan 9.13% Houston, TX Units (C) (J) Oxford on 405 Dec-93 7.625%- 9,350,000 1,156,000 10,506,000 0 Greenridge Apt. 29-Jan 9.13% Apts. Units (C) Houston, TX (J) Town & 330 Apr-94 7.375%- 9,348,000 1,039,000 10,387,000 9,936,476 Country IV Apt. 29-May 9.17% Apts. Units (D) (K) (E) (F) Urbana, IL Columbiana 204 Apr-94 (H) 9,106,099 563,000 9,669,099 9,705,686 Lakes Apts. Apt. Nov-35 Columbia, SC Units (G) (K) Stony Brook 125 Dec-95 7.75%- 8,500,000 763,909 9,263,909 9,251,320 Village II Apt. Jun-37 9.13% Apts. Units (G) (K) (I) East Haven,CT -------------------------------------------------------------- Total $43,104,099 $4,362,409 $47,466,508 $28,893,482 -------------------------------------------------------------- --------------------------------------------------------------
Comparable Rental Year of Competing Occu- Rates at Construc- Properties pancy at December tion Com- Within Property 3/1/00 31, 1999 pletion Location - - -------- -------- ---------- --------- ---------- The Cove - - - - Apts. Houston, TX (J) Oxford on - - - - Greenridge Apts. Houston, TX (J) Town & 95.00% $455-605 1988 8 Country IV Apts. Urbana, IL Columbiana 94.50% 549-949 1994 107 Lakes Apts. Columbia, SC Stony Brook 98.40% 845-1175 1996 3 Village II Apts. East Haven,CT ---------------------------------------------------------- Total ---------------------------------------------------------- ----------------------------------------------------------
On March 1, 1999, Cove Apartments L.L.C. (the "Cove Obligor"), the owner of Cove Apartments ("Cove"), sold Cove to a third party for $10.25 million. The Cove Obligor then fully repaid its outstanding debt due to the Company totaling $8,676,849 including the outstanding balance of an FHA first mortgage loan in the amount of $6,558,872, an $840,500 additional loan, a $327,944 prepayment premium due the Company on the FHA loan, an $814,465 sales proceeds participation payment and accrued Base Interest and Additional Interest through the repayment date of $135,068 resulting in a gain on the repayment in the amount of $1,224,968. On March 1, 1999, Oxford Apartments, L.L.C. (the "Oxford Obligor"), the owner of Oxford on Greenridge Apartments ("Oxford"), sold Oxford to a third party for $15.25 million. The Oxford Obligor then fully repaid its outstanding debt due to the Company totaling $12,288,813 including the outstanding balance of an FHA first mortgage loan in the amount of $9,018,450, a $1,156,000 additional loan, a $450,922 prepayment premium due the Company on the FHA loan, a $1,483,664 sales proceeds participation payment and accrued Base Interest and Additional Interest through the repayment date of $179,777 resulting in a gain on the repayment in the amount of $2,048,234. On April 29, 1999, the Company made its final advance, in the amount of $829,204, on the Columbiana Mortgage. At the time of the final advance, construction loan extension fees, intended to compensate the Company for the difference between the construction period interest rate and the higher permanent loan interest rate during the extension period, in the amount of $195,958 were received by the Company. The fees received are classified as "interest income from mortgage loans" in the accompanying statements of operations. (A) The minimum interest rate shown represents base interest, which is fully insured by HUD ("Base Interest"). The additional interest rate represents interest which is not contingent upon cash flow and is secured by partnership interests in the partnerships which own the Developments ("Additional Interest"). (B) Additional loans are non-interest bearing. (C) In addition to the interest rate, the Company was entitled to 30% of the cash flow remaining after payment of Base Interest and Additional Interest and 35% of net sale or refinancing proceeds. (D) The Originated Mortgage has a term of 35 years, subject to mandatory prepayment at any time after 12 years and upon one year's notice. (E) In addition to the interest rate, the Company is entitled to 30% of the cash flow remaining after payment of Base Interest and Additional Interest. (F) The operations of Town and Country had not been able to support the payment of Additional Interest for the period July 1, 1997 through December 31, 1999 which amounted to $411,911. Accordingly, the accrued interest income that was doubtful of collection was fully reserved and excluded from interest income from mortgage loans in previous quarters. On January 21, 2000, the general partner of the Town and Country obligor, in exchange for the waiving of the prepayment penalty and future Additional Interest and also because the obligation was secured by its partnership interest in the obligor, repaid the additional loan and Additional Interest due through January 21, 2000 in the amounts of -4- $1,039,000 and $421,273, respectively. As a result, the Additional Interest which had been fully reserved was deemed to be fully collectible and recorded as interest income in the fourth quarter of 1999. (G) The Originated Mortgages have terms of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (H) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan period and was 7.4% during the construction period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 25% of the cash flow remaining after payment of 8.678% interest. The operations of Columbiana had not been able to support the payment of Additional Interest for the period October 1, 1997 through June 30, 1998 which amounted to $48,760. Accordingly, the accrued interest income that was deemed doubtful of collection was fully reserved and reversed from interest income from mortgage loans in the fourth quarter of 1998. As a result of the final advance and conversion of the construction loan to a permanent loan during the second quarter of 1999, Columbiana was able to repay construction period advances from the developer as well as Additional Interest due to the Company through the second quarter. As a result, the Additional Interest which had been fully reserved was recorded as interest income in the second quarter of 1999. (I) In addition to the interest rate, the Company is entitled to 40% of the cash flow remaining after payment of Base and Additional Interest. (J) On March 1, 1999 the outstanding debt due to the Company was fully repaid (see above). (K) In order for the Company to exercise an acceleration option it must terminate the mortgage insurance contract with FHA not later than the accelerated payment date and, in certain circumstances, must terminate the mortgage insurance contract upon the exercise of the acceleration option. Since the exercise of such option would be at the Company's discretion, it is intended to be exercised only where the value of the Development has increased by an amount which would justify accelerating payment in full and assuming the risks of foreclosure if the mortgagor failed to make the accelerated payment. -5- GNMA CERTIFICATES Information relating to the Company's investments in GNMA Certificates as of December 31, 1999 is as follows:
Principal Balances At Purchase Price 12/31/99 Fair Stated Final Certificate Date --------------------- Including Value At Interest Payment Seller Number Purchased % Amount (Discount) 12/31/99 Rate Date - - ------ ----------- --------- -------- ----------- ---------- ---------- -------- ----------- Bear Stearns & Co. 0355540 7/27/94 90.7500% $2,407,102 $2,307,238 $2,431,778 7.125% 3/15/2029 Malone Mortgage Co. 0382486 7/28/94 99.6250% 2,197,130 2,132,565 2,168,686 8.500 8/15/2029 Goldman Sachs 0328502 7/29/94 99.9063% 3,928,615 3,548,408 3,565,054 8.250 7/15/2029 SunCoast Capital Group,Ltd. G22412 6/23/97 99.34375% 1,981,566 1,340,671 1,298,919 7.000 4/20/2027 ---------- ---------- ---------- $10,514,413 $9,328,882 $9,464,437 ---------- ---------- ---------- ---------- ---------- ----------
COMMERCIAL MORTGAGE-BACKED SECURITY-RELATED INVESTMENT AND SHORT SALE On September 30, 1999, the Company acquired from ARCap Investors, L.L.C. ("ARCap") a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust (the "Chase-First Union Trust"). The CMBS investment, which was purchased for $35,622,358, has a face amount of $50,399,711 and an annual coupon rate of 6.4%. The Company purchased the CMBS investment using cash and debt provided through a repurchase facility. In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. ARCap acquired from the Chase-First Union Trust all of the commercial mortgage backed securities that are subordinate to the CMBS investment (the "Subordinate Bonds") acquired by the Company. Under the Agreement, the Company has the right to acquire a portion of the Subordinate Bonds from ARCap and to exchange a portion or all of the CMBS investment and Subordinate Bonds for a preferred equity interest in ARCap. Furthermore, the Company has the right to participate on the same terms with ARCap in any subsequent resecuritization by ARCap of the Chase-First Union Trust bond issuance. In connection with such resecuritization, ARCap has the right to cause the Company to choose between three alternative options: (i) to sell the CMBS investment to ARCap; (ii) to participate with ARCap in the resecuritization; or (iii) to exchange the CMBS investment for a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. As of December 31, 1999, the 205 mortgage loans underlying the CMBS were secured by 217 properties of the types and in the states identified below:
Property Type Percentage (1) - - ------------- -------------- Multifamily 38% Retail 25 Office 18 Health Care 4 Hospitality 4 Industrial 4 Other 7
State Percentage (1) - - ----- -------------- CA 23% NY 14 FL 6 PA 6 Others (2) 51
(1) Based on a percentage of the total unpaid principal balance of the underlying loans. (2) No other state comprises more than 5% of the total. As of December 31, 1999, there are no unpaid principal balances of loans that are underlying the CMBS investment which are more than 60 days delinquent. As of December 31, 1999 the CMBS-related investment had an estimated fair value of $34,347,403 and an amortized cost of $35,766,419, resulting in an unrealized loss of $1,419,016 at that date (partially offset by an unrealized gain of $1,201,317 on the Short Sale - see below) which is included in "net unrealized losses on subordinated commercial mortgage-backed security and government security sold short" in the statements of income. The fair value of the Company's CMBS-related investment is generally estimated by management based on market prices provided by certain dealers who make a market in these financial instruments. The market for CMBS investments periodically suffers from a lack of liquidity. Accordingly, the fair value reported may not necessarily be indicative of the amount the Company could realize in a current liquidation of this investment. At December 31, 1999, the un-leveraged, un-hedged, weighted average yield to maturity of the Company's CMBS-related investment was approximately 10%. The yield to maturity on the Company's CMBS-related investment depends on, among other things, the rate and timing of principal payments, the pass-through rate and interest rate fluctuations. The subordinated CMBS interest provides credit support to the more senior interests of the -6- related commercial securitization. Cash flow from the mortgages underlying the CMBS interest generally is allocated first to the senior interests, with the most senior interest having a priority entitlement to cash flow. Remaining cash flow is allocated generally among the other CMBS interests in order of their relative seniority. To the extent that there are defaults and unrecoverable losses on the underlying mortgages, resulting in reduced cash flows, the most subordinate CMBS interest will bear this loss first. To the extent there are losses in excess of the most subordinated interest's stated entitlement to principal and interest, then the remaining CMBS interests will bear such losses in order of their relative subordination. There is, therefore no assurance that the yield to maturity discussed above will be achieved. On September 30, 1999, the Company entered into a Short Sale. The Company is utilizing this contract as a means of mitigating the potential financial statement impact of changes in the fair value of its CMBS-related investment due to changes in interest rates. This contract involved the sale of a U.S. Treasury Note with a face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from Bear Stearns & Co., Inc. ("Bear Stearns") for net proceeds of $39,028,841 (which included accrued interest of $835,565). Bear Stearns will retain proceeds from the sale until the Company replaces the borrowed security. As of December 31, 1999, the U.S. Treasury Note had an estimated fair value of $36,991,959, resulting in an unrealized gain of $1,201,317 at that date which is included in "net unrealized loss on commercial mortgage-backed security-related investment and government security sold short" in the statements of income. The Company earned $471,262 on Short Sale proceeds held by Bear Stearns ($37,733,101 at December 31, 1999) and incurred interest of $547,025 on the Short Sale contract during the period September 30, 1999 to December 31, 1999. REPURCHASE FACILITY On September 30, 1999, the Company entered into a repurchase facility (the "Repurchase Facility") with Bear Stearns, whereby Bear Stearns advanced $19,568,000 (55% of the purchase price) in cash towards the purchase of a CMBS-related investment. The Repurchase Facility has a variable interest rate based on the one-month LIBOR rate plus 1.5% (7.98% at December 31, 1999), which is adjusted on the first day of each month, and terminates on March 17, 2000. In March 2000, the Repurchase Facility was renewed through June 17, 2000. The Repurchase Facility is collateralized by the Company's CMBS-related investment and contains restrictions based on the then current market value of such investment as calculated by Bear Stearns. A decline in the market value of the CMBS could result in cash flow from such investment being diverted to reduce the outstanding borrowing, the requirement to post additional collateral, or the sale of such investment. The outstanding balance of the Repurchase Facility (based on 55% of the market of the CMBS at December 1, 1999) was $19,127,000 at December 31, 1999. LOAN VENTURE WITH FEDERAL NATIONAL MORTGAGE ASSOCIATION The Company is currently in the process of completing a loan venture with Federal National Mortgage Association ("Fannie Mae") which has agreed to fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Fannie Mae is the nation's largest source of financing for home mortgages and the largest investor in multifamily mortgages. Under the proposed transaction, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. COMPETITION The Company competes with various financial institutions in each of its lines of business. For CMBS investments, competitors include major financial institutions that sponsor CMBS conduits, pension funds, REITs and finance companies that specialize in CMBS investment management. The Company competes with banks and quasi-governmental agencies such as Fannie Mae, Freddie Mac and HUD, as well as their designated mortgages, for multifamily loan product. The Company's business is also affected by competition to the extent that Underlying Properties from which it derives interest and, ultimately, principal payments may be subject to rental rates and relative levels of amenities from comparable neighboring properties. EMPLOYEES The Company does not directly employ anyone. All services are performed for the Company by the Advisor and its affiliates. The Advisor receives compensation in connection with such activities as set forth in Item 8, Financial Statements and Supplementary Data, Item 11, Executive Compensation and Item 13, Certain Relationships and Related Transactions. In addition, the Company reimburses the Advisor and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Company in accordance with the Declaration of Trust. Item 2. Properties. The Company does not own or lease any properties. Item 3. Legal Proceedings. The Company is not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Shareholders. None. PART II Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters. As of March 9, 2000, there were 941 registered shareholders owning 3,838,630 Shares. The Company's Shares have been listed on the American Stock Exchange since July 1, 1999 under the symbol "AMC". Prior to July 1, 1999, there was no established public trading market for the Company's Shares. -7- The high and low prices for each quarterly periods in which the Shares were traded is as follows:
1999 1999 Quarter Ended Low High - - ------------- --- ---- September 30 9 13/16 12 15/16 December 31 8 5/8 11 3/8
The last reported sale price of Shares on the American Stock Exchange on March 9, 2000 was $8 13/16. In December 1992, the Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from the Advisor. On March 29, 1993, the Company commenced a public offering (the "Offering") through Related Equities Corporation, an affiliate of the Advisor, and other broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of beneficial interest at an initial offering price of $20 per share. The Offering terminated as of November 30, 1994. As of November 30, 1994, a total of 3,809,601 shares had been sold to the public, either through the Offering or the Company's dividend reinvestment plan (the "Reinvestment Plan") which became effective on March 29, 1993, representing Gross Proceeds (the "Gross Proceeds") of $76,192,021 (before volume discounts of $40,575). Pursuant to the Redemption Plan which became effective November 30, 1994, the Company was required to redeem eligible shares presented for redemption for cash to the extent it has sufficient net proceeds from the sale of shares under the Reinvestment Plan. Since November 30, 1994, 355,744 shares were sold through the Reinvestment Plan, the proceeds of which were restricted for use in connection with the Redemption Plan and were not included in gross proceeds. Pursuant to the Redemption Plan, since November 30, 1994, 374,412 shares have been redeemed for an aggregate price of $6,575,799. Of such redemptions, 16,931 shares were redeemed from proceeds from the Reinvestment Plan before the termination of the Offering and therefore, the proceeds available for future investment were reduced by $319,987. During the Offering, the Advisor received 38,481 restricted shares (including 717 from the Reinvestment Plan) in addition to the 10,000 shares purchased, which the Advisor has valued at $14.75 per share, pursuant to the terms of the Offering. As a result of the shares being redeemed the Advisor was required to return 172 shares as of December 31, 1994; no additional shares were required to be returned since then. During the offering period the price per share purchased pursuant to the Reinvestment Plan equaled $20. From November 30, 1994 (the termination of the offering period) until November 30, 1997 (the third anniversary of the final closing date), the price per share purchased pursuant to the Reinvestment Plan was equal to $19. Effective November 30, 1997, the Board adopted a policy to adjust the reinvestment price annually to reflect the net asset value of a share of the Company's shares of beneficial interest ($15.16 at December 31, 1998). Shares received pursuant to the Reinvestment Plan entitled participants to the same rights and treatment in the same manner as those issued pursuant to the Offering. In connection with shares issued pursuant to the Company's Reinvestment Plan which were not used for the Redemption Plan, the Company issued shares to the Advisor in an amount which equalled (after such issuance) 1% of the outstanding shares. Through the quarter ended March 31, 1997, the redemption price pursuant to the Redemption Plan was $19 per Eligible Share. As permitted by the provisions of the Redemption Plan, the Board of Trustees implemented the following change to the calculation of the redemption price for the quarter ended June 30, 1997: the original $19 per share redemption price was reduced to reflect any return of principal received by shareholders. As of June 30, 1997, the amount of principal which had been distributed to shareholders was $1.53 per share and, therefore, the redemption price was $17.47 per share ($19 per share less $1.53 per share) for redemptions which occurred in October 1997 for the quarter ended June 30, 1997. The Board subsequently adopted a policy to adjust the redemption price annually to reflect the then net asset value of a share of the Company's shares of beneficial interest ($15.16 at December 31, 1998). This new policy was effective for redemptions with respect to quarters ended September 30, 1997 and thereafter. Under the Redemption Plan, any shareholder (except the Advisor who could not participate in the Redemption Plan) who acquired or received shares directly from the Company or the Reinvestment Plan (such shares, for so long as owned by the original holder, were called "Eligible Shares") could present such Eligible Shares to the Company for redemption. The Company was required to redeem such Eligible Shares presented for redemption for cash to the extent it had sufficient net proceeds ("Reinvestment Proceeds") from the sale of shares under the Reinvestment Plan. The full amount of Reinvestment Proceeds in any quarter was used to redeem Eligible Shares presented for redemption during such quarter. If the full amount of Reinvestment Proceeds available for redemption in any given quarter was insufficient to redeem all Eligible Shares presented for redemption during such quarter, the Company would redeem the Eligible Shares presented for redemption on a pro rata whole share basis, without redemption of fractional shares. A shareholder could present less than all their Eligible Shares to the Company for redemption, provided, however, that (i) they presented the lesser of all of their Eligible Shares or 125 Eligible Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan) for redemption, and (ii) if they retained any Eligible Shares, they must have retained at least 125 Eligible Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan). As a result of the adoption of the Proposals (see "Item 1. Business. - General"), the Company's Reinvestment Plan and Redemption Plan have been terminated, effective with the distribution for the quarter ended March 31, 1999. The final reinvestment of shares occurred on May 15, 1999. The final redemption of shares occurred on May 24, 1999. In addition, in connection with the listing of the Company's Shares on the American Stock Exchange, fractional shares totaling approximately 612 were redeemed on July 1, 1999. -8- DISTRIBUTION INFORMATION Cash distributions per share for the years ended December 31, 1999 and 1998 are as set forth in the following table:
Cash Distribution Total Amount for Quarter Ended Date Paid Per Share Distributed - - ----------------- --------- --------- ----------- March 31, 1999 5/15/99 $ .3575 $1,372,661 June 30, 1999 8/14/99 .3615 1,387,912 September 30, 1999 11/14/99 .3625 1,391,504 December 31, 1999 2/14/00 .3625 1,391,503 ------- --------- Total for 1999 $1.4440 $5,543,580 ------- --------- ------- --------- March 31, 1998 5/15/98 $ .3575 $1,372,660 June 30, 1998 8/14/98 .3615 1,387,913 September 30, 1998 11/14/98 .3655 1,403,165 December 31, 1998* 2/14/99 .3655 1,403,165 ------- ---------- Total for 1998 $1.4500 $5,566,903 ------- ---------- ------- ----------
* Dividend was declared in 1999. There are no material legal restrictions upon the Company's present or future ability to make distributions in accordance with the provisions of the Declaration of Trust. Future distributions paid by the Company will be at the discretion of the Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements and such other factors as the Trustees deem relevant. In order to qualify as a REIT under the Internal Revenue Code, as amended, the Company must, among other things, distribute at least 95% of its taxable income. The Company believes that it is in compliance with the REIT-related provisions of the Code. Of the total distributions of $6,946,745 and $5,566,903 for the years ended December 31, 1999 and 1998, respectively, $686,445 ($.18 per share or 10%) and $2,170,291 ($.56 per share or 39%), respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of December 31, 1999, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $11,869,468. The portion of the distributions which constituted a return of capital was significant during the initial acquisition stage in order to maintain level distributions to shareholders. -9- Item 6. Selected Financial Data. The information set forth below presents selected financial data of the Company. Additional financial information is set forth in the audited financial statements and footnotes thereto contained in Item 8, Financial Statements and Supplementary Data.
Year Ended December 31, ------------------------------------------------------------------ OPERATIONS 1999 1998 1997 1996 1995 - - ---------- ------------ ------------ ------------ ------------- ------------ Revenues: Interest income: Mortgage loans $2,569,901 $3,037,882 $3,118,027 $2,866,017 $2,257,883 REMIC and GNMA certificates and the FHA Insured Project Loan 785,591 880,680 975,599 1,306,658 1,582,724 Commercial mortgage-backed security - related investment 950,456 0 0 0 0 Note receivable 85,786 0 0 0 0 Temporary investments 1,092,617 112,953 151,228 252,140 515,295 Other income 23,231 0 0 0 0 ------------ ------------ ------------ ------------- ------------ Total revenues 5,507,582 4,031,515 4,244,854 4,424,815 4,355,902 ------------ ------------ ------------ ------------- ------------ Total expenses 2,301,293 647,047 632,304 721,209 769,523 ------------ ------------ ------------ ------------- ------------ Other gain (loss): Net realized gain (loss) on repayment of REMIC and GNMA certificates and the FHA Insured Project Loan (1,492) 12,144 (66,735) (87,080) 8,225 Net realized loss on sale of REMIC certificates 0 0 0 (328,895) (447,472) Net unrealized loss on commercial mortgage-backed security-related investment and government security sold short (217,699) 0 0 0 0 Gain on repayment of mortgage loans 3,273,202 0 0 0 0 ------------ ------------ ------------ ------------- ------------ Total other gain (loss) 3,054,011 12,144 (66,735) (415,975) (439,247) ------------ ------------ ------------ ------------- ------------ Net income $6,260,300 $3,396,612 $3,545,815 $3,287,631 $3,147,132 ------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------ ------------- ------------ Net income per share (basic and diluted) $1.63 $0.88 $0.92 $0.83 $0.81 ------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------ ------------- ------------ Weighted average shares outstanding (basic and diluted) 3,841,931 3,845,101 3,851,029 3,972,625 3,896,620 ------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------ ------------- ------------ December 31, ----------------------------------------------------------------------------------------- FINANCIAL POSITION 1999 1998 1997 1996 1995 - - ------------------ ------------ ------------ ------------- ------------- ------------ Total assets $115,565,441 $59,993,040 $61,645,922 $63,147,215 $65,517,610 ------------ ------------ ------------- ------------- ------------ ------------ ------------ ------------- ------------- ------------ Repurchase facility payable $19,127,000 $0 $0 $0 $0 ------------ ------------ ------------- ------------- ------------ ------------ ------------ ------------- ------------- ------------ Total liabilities $58,474,076 $1,788,466 $1,259,997 $986,551 $1,002,976 ------------ ------------ ------------- ------------- ------------ ------------ ------------ ------------- ------------- ------------ Total shareholders' equity $57,091,365 $58,204,574 $60,385,925 $62,160,664 $64,514,634 ------------ ------------ ------------- ------------- ------------ ------------ ------------ ------------- ------------- ------------ DISTRIBUTIONS Distributions to shareholders $5,543,580 $5,566,903 $5,574,932 $5,569,283 $5,569,555 ------------ ------------ ------------- ------------- ------------ ------------ ------------ ------------- ------------- ------------ Distribution per share $1.44 $1.45 $1.45 $1.45 $1.45 ------------ ------------ ------------- ------------- ------------ ------------ ------------ ------------- ------------- ------------
The results for the year ended December 31, 1999 reflect a gain on repayment of the Cove and Oxford mortgage loans. -10- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. LIQUIDITY AND CAPITAL RESOURCES American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business trust for the primary purpose of investing in government-insured mortgages and guaranteed mortgage-backed certificates. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On April 6, 1999, the Company received the necessary consent from its shareholders to approve proposals (the "Proposals") to, among other things, restructure the Company from a closed-ended, finite-life REIT to a publicly traded, open-ended, infinite-life operating REIT. In addition to restructuring the Company, the Proposals, among other matters, permit the Company to modify its investment objectives, to incur a specified amount of indebtedness and to list the Company's shares on a national exchange. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of December 31, 1999, there were 3,838,630 Shares outstanding. The Company's new business plan as a publicly traded REIT focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Fannie Mae, and 3) acquisition of subordinated interests in commercial mortgage-backed securities. As of December 31, 1999 the Company's mortgage investments consisted of three mortgage loans originated by or on behalf of the Company, four GNMA mortgage-backed securities and pass-through certificates and one commercial mortgage-backed security ("CMBS")-related investment. Due to the complexity of the GNMA and CMBS structure and the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effect of future events upon the yield to maturity or the market value of the GNMA Certificates or the CMBS-related investment upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the coupon rate. The current composition of the Company's investment portfolio reflects the recent change in the Company's business plan and is not comparable to its investment portfolio prior to April 1999. Furthermore, the Company is still in the process of implementing its new business plan and, therefore, the current portfolio should not be considered indicative of the composition of the portfolio that might be expected in the future. Also as a result of the adoption of the Proposals, the Board of Trustees amended the Advisory Agreement between the Company and the Advisor to, among other matters, reflect the Proposals and change the Advisory Agreement's fee structure to (a) eliminate the acquisition and disposition fees currently payable to the Advisor; (b) modify the annual asset management fee payable to the Advisor as set forth below; and (c) include an annual incentive fee payable to the Advisor as also set forth below. The modified annual asset management fee is calculated as follows: (i) .355% for investments in Mortgage Loans; (ii) .355% for certain investment grade investments; (iii) .750% for certain non-investment grade investments; (iv) 1.000% for unrated investments; and (v) .625% for investments held prior to the adoption of the Proposals. The annual incentive fee is calculated as follows: subject to a minimum annual distribution being made to shareholders from cash available for distribution of approximately $1.45 per Share, the Advisor will be entitled to receive incentive compensation for each fiscal year in an amount equal to the product of (A) 25% of the dollar amount by which (1)(a) Funds From Operations of the Company (before the incentive fee) per Share (based on the weighted average number of Shares outstanding) plus (b) gains (or minus losses) from debt restructuring and sales of property per Share (based on the weighted average number of Shares outstanding), exceed (2) an amount equal to (a) the weighted average of the price per Share of the initial offering (i.e. $20 per Share) and the prices per Share of any secondary offerings by the Company multiplied by (b) the ten-year U.S. Treasury rate plus two percent per annum multiplied by (B) the weighted average number of Shares outstanding during such fiscal year. For any period less than a fiscal year during which the amended Advisory Agreement is in effect, the incentive fee will be prorated according to the proportion which such period bears to a full fiscal year, taking into account, however, the Company's cash available for distribution for the entire fiscal year. In addition, the Advisory Agreement's fee structure was also changed so that with respect to the first $100 million of new Mortgage Loans acquired by the Company, the Advisor will receive origination points (fees) paid by borrowers equal to up to 1% of the principal amount of each Mortgage Loan and the Company will receive origination points paid by borrowers in excess of 1%. After the first $100 million of additional Mortgage Loans is acquired, the Company will retain 100% of the origination points paid by borrowers. These changes are intended to make such fees comparable to fees paid by other publicly traded, open-ended infinite-life REITs with investment strategies similar to the Company's new investment strategy. During the year ended December 31, 1999, cash and cash equivalents increased approximately $849,000 primarily due to principal repayments of mortgage loans and GNMA Certificates ($21,284,000) and proceeds from a repurchase facility payable ($19,568,000) which exceeded cash used in operating activities, primarily due to the acquisition of the CMBS-related investment ($33,057,000), distributions paid to shareholders ($5,555,000), repayments of the repurchase facility payable ($441,000), an increase in other assets relating to investing activities ($111,000) and an increase in investment in mortgage loans ($829,000). Included in the adjustments to reconcile the net income to cash used in operating activities is a gain on repayment of mortgage loans ($3,273,000), a realized loss on repayments of GNMA certificates, an unrealized loss on a subordinated commercial mortgage-backed security ($1,419,000), an unrealized gain on a government security sold short ($1,201,000) and net amortization ($170,000). -11- Net unrealized losses on GNMA investments included in shareholders' equity pursuant to Statement of Financial Accounting Standards No. 115 aggregated $254,939 at December 31, 1999. This represents a decrease of $417,472 in the unrealized gain for the year ended December 31, 1999, of which a decrease of $8,114 is attributable to the repayments of GNMA investments (which resulted in a net realized loss of $1,492) and a decrease of $409,358 is attributable to a decrease in market prices for GNMA investments held at December 31, 1999 and December 31, 1998. On January 18, 2000, one of the Company's GNMA certificates in the original amount of $3,928,615 (including the discount), with an amortized cost basis of $3,671,107 at December 31, 1999, was repaid in the amount of $3,551,736 along with a prepayment penalty of $177,587 which was received in February 2000. This repayment (including the prepayment penalty) resulted in a realized gain in the amount of approximately $58,000. The yield on the GNMA Certificates will depend, in part, upon the rate and timing of principal prepayments on the underlying mortgages in the asset pool. Generally, as market interest rates decrease, mortgage prepayment rates increase and the market value of interest rate sensitive obligations like the GNMA Certificates increases. As market interest rates increase, mortgage prepayment rates tend to decrease and the market value of interest rate sensitive obligations like the GNMAs tends to decrease. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. The yield on the mortgage loans will depend, in part, on when, and if, the Company disposes of the mortgage loans prior to maturity or the obligor fully repays the outstanding debt. The mortgage loans have fixed interest rates, the base amount of which is insured by HUD, resulting in a minimal amount of interest rate risk. The effects of prepayment on yield is greater the earlier a prepayment of principal is received. Due to the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effects of future events upon the yield to maturity or the market value of the mortgage loans upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the current mortgage loan rates. As described below, two mortgage loans were repaid and the Company is still in the process of reinvesting the proceeds of such repaid mortgage loans. On September 30, 1999, the Company acquired from ARCap Investors, L.L.C. ("ARCap") a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust (the "Chase-First Union Trust"). The CMBS investment, which was purchased for $35,622,358, has a face amount of $50,399,711 and an annual coupon rate of 6.4%. The Company purchased the CMBS investment using cash and debt provided through a repurchase facility. In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. ARCap acquired from the Chase-First Union Trust all of the commercial mortgage backed securities that are subordinate to the CMBS investment (the "Subordinate Bonds") acquired by the Company. Under the Agreement, the Company has the right to acquire a portion of the Subordinate Bonds from ARCap and to exchange a portion or all of the CMBS investment and Subordinate Bonds for a preferred equity interest in ARCap. Furthermore, the Company has the right to participate on the same terms with ARCap in any subsequent resecuritization by ARCap of the Chase-First Union Trust bond issuance. In connection with such resecuritization, ARCap has the right to cause the Company to choose between three alternative options: (i) to sell the CMBS investment to ARCap; (ii) to participate with ARCap in the resecuritization; or (iii) to exchange the CMBS investment for a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. As of December 31, 1999 the CMBS-related investment had an estimated fair value of $34,347,403 and an amortized cost of $35,766,419, resulting in an unrealized loss of $1,419,016 at that date (partially offset by an unrealized gain of $1,201,317 on the Short Sale - see below) which is included in "net unrealized losses on commercial mortgage-backed security-related investment and government security sold short" in the statements of income. The fair value of the Company's CMBS-related investment is generally estimated by management based on market prices provided by certain dealers who make a market in these financial instruments. The market for CMBS periodically suffers from a lack of liquidity. Accordingly, the fair value reported may not necessarily be indicative of the amount the Company could realize in a current liquidation of this investment. The yield to maturity on the Company's CMBS-related investment depends on, among other things, the rate and timing of principal payments, the pass-through rate and interest rate fluctuations. The subordinated CMBS interest provides credit support to the more senior interests of the related commercial securitization. Cash flow from the mortgages underlying the CMBS interest generally is allocated first to the senior interests, with the most senior interest having a priority entitlement to cash flow. Remaining cash flow is allocated generally among the other CMBS interests in order of their relative seniority. To the extent that there are defaults and unrecoverable losses on the underlying mortgages, resulting in reduced cash flows, the most subordinate CMBS interest will bear this loss first. To the extent there are losses in excess of the most subordinated interest's stated entitlement to principal and interest, then the remaining CMBS interests will bear such losses in order of their relative subordination. There is, therefore no assurance that the yield to maturity discussed above will be achieved. On September 30, 1999, the Company entered into a contract to sell a security it did not own at the time of the sale ("Short Sale"). The Company is utilizing this contract as a means of mitigating the potential financial statement impact of changes in the fair value of its CMBS-related investment due to changes in interest rates. This contract involved the sale of a U.S. Treasury Note with a face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from Bear Stearns & Co., Inc. ("Bear Stearns") for net proceeds of $39,028,841 (which included accrued interest of $835,565). Bear Stearns will retain proceeds from the sale until the Company replaces the borrowed security. As of December 31, 1999, the U.S. Treasury Note had an estimated fair value of $36,991,959, resulting in an unrealized gain of $1,201,317 at that date which is included in "net unrealized loss on commercial mortgage-backed security-related investment and government security sold short" in the statements of income. The Company earned $471,262 on Short Sale proceeds held by Bear Stearns ($37,733,101 at December 31, 1999) and incurred interest of $547,025 on the Short Sale contract during the period September 30, 1999 to December 31, 1999. On September 30, 1999, the Company entered into a repurchase facility (the "Repurchase Facility") with Bear Stearns, whereby Bear Stearns advanced $19,568,000 (55% of the purchase price) in cash towards the purchase of a CMBS-related investment. The Repurchase Facility has a variable interest rate based on the one-month LIBOR rate plus 1.5% (7.98% at December 31, 1999), which is adjusted on the first day of each month, and terminates on March 17, 2000. In March 2000, the Repurchase Facility was renewed through June 17, 2000. The Repurchase Facility is collateralized by the Company's CMBS-related investment and contains restrictions based on the then current market value of such investment as calculated by Bear Stearns. A decline in the market value of the CMBS could result in cash flow from such investment -12- being diverted to reduce the outstanding borrowing, the requirement to post additional collateral, or the sale of such investment. The Repurchase Facility currently represents the Company's sole source of liquidity needed to finance its long-term CMBS-related investment. If the lender fails to renew the Repurchase Facility, the Company will be required to seek new financing or may have to liquidate the CMBS or other investments. The outstanding balance of the Repurchase Facility (based on 55% of the market of the CMBS at December 1, 1999) was $19,127,000 at December 31, 1999. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility with Nomura Asset Capital Corporation. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value of FHA loans owned by the Company. This facility has a term of 364 days and bears interest at LIBOR plus 1.25%. As of March 20, 2000, no amounts are outstanding under this facility. In order to qualify as a REIT under the Internal Revenue Code, as amended, the Company must, among other things, distribute at least 95% of its taxable income. The Company believes that it is in compliance with the REIT-related provisions of the Code. The Company expects that cash generated from the Company's investments will meet its needs for short-term liquidity, and will be sufficient to pay all of the Company's expenses and to make distributions to its shareholders in amounts sufficient to retain the Company's REIT status in the foreseeable future. Pursuant to the Redemption Plan which became effective November 30, 1994, the Company was required to redeem eligible shares presented for redemption for cash to the extent it had sufficient net proceeds from the sale of shares under the Reinvestment Plan. As a result of the adoption of the Proposals, the Company's Reinvestment Plan and Redemption Plan have been terminated, effective with the distribution for the quarter ended March 31, 1999. The final reinvestment of shares occurred on May 15, 1999. The final redemption of shares occurred on May 24, 1999. On March 1, 1999, Cove Apartments L.L.C. (the "Cove Obligor"), the owner of Cove Apartments ("Cove"), sold Cove to a third party for $10.25 million. The Cove Obligor then fully repaid its outstanding debt due to the Company totaling $8,676,849 including the outstanding balance of an FHA first mortgage loan in the amount of $6,558,872, an $840,500 additional loan, a $327,944 prepayment premium due the Company on the FHA loan, an $814,465 sales proceeds participation payment and accrued Base Interest and Additional Interest through the repayment date of $135,068 resulting in a gain on the repayment in the amount of $1,224,968. On March 1, 1999, Oxford Apartments, L.L.C. (the "Oxford Obligor"), the owner of Oxford on Greenridge Apartments ("Oxford"), sold Oxford to a third party for $15.25 million. The Oxford Obligor then fully repaid its outstanding debt due to the Company totaling $12,288,813 including the outstanding balance of an FHA first mortgage loan in the amount of $9,018,450, a $1,156,000 additional loan, a $450,922 prepayment premium due the Company on the FHA loan, a $1,483,664 sales proceeds participation payment and accrued Base Interest and Additional Interest through the repayment date of $179,777 resulting in a gain on the repayment in the amount of $2,048,234. On May 19, 1999, the Company made a loan in the amount of $1,900,000 to Patterson Hope '98 Urban Renewal L.L.C. (the "Borrower"), an entity in which an affiliate of the Advisor is a member. The note bore interest at 12% which was payable, along with the principal, at maturity on September 15, 1999. The note was secured by all of the membership interest in the Borrower, was guaranteed by Related Capital Company and could be prepaid in whole or in part at any time. In September 1999 the loan was repaid and the Advisor and the Company each received origination points (fees) in the amount of $19,000. The Company earned interest income of approximately $86,000 from this loan. The Company is currently in the process of completing a loan venture with Federal National Mortgage Association ("Fannie Mae") which has agreed to fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Fannie Mae is the nation's largest source of financing for home mortgages and the largest investor in multifamily mortgages. Under the proposed transaction, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. RESULTS OF OPERATIONS The following is a summary of the results of operations of the Company for the years ended December 31, 1999, 1998 and 1997. The net income for the years ended December 31, 1999, 1998 and 1997 was $6,260,300, $3,396,612 and $3,545,815, respectively. The total of the annual operating expenses of the Company may not exceed the greater of (i) 2% of the Average Invested Assets of the Company or (ii) 25% of the Company's net income, unless such excess is approved by the Independent Trustees. There was no such excess for the years ended December 31, 1999, 1998 and 1997. 1999 VS. 1998 Interest income from mortgage loans decreased approximately $468,000 for the year ended December 31, 1999 as compared to 1998 primarily due to the repayment of the Cove and Oxford mortgage loans on March 1, 1999 which was partially offset by increases due to the receipt of Additional Interest relating to Columbiana and the accrual of Additional Interest (received in January 2000) relating to Town and Country, both of which had been fully reserved and reversed from interest in 1998. Interest income from REMIC and GNMA certificates decreased approximately $95,000 for the year ended December 31, 1999 as compared to 1998 primarily due to the repayment of one of the REMICs in October 1998 and a decrease in the balances of the GNMA certificates due to principal payments received during 1999 and 1998. -13- Interest income from commercial mortgage-backed security-related investment in the amount of approximately $950,000 was recorded for the year ended December 31, 1999; such investment was made on September 30, 1999. Interest income from note receivable in the amount of approximately $86,000 was recorded for the year ended December 31, 1999 relating to a loan made in May 1999 which was repaid in September 1999. Interest income from temporary investments increased approximately $980,000 for the year ended December 31, 1999 as compared to 1998 primarily due to proceeds from the repayment of the Cove and Oxford mortgage loans on March 1, 1999 which were temporarily invested in 1999. Other income in the amount of approximately $23,000 was recorded for the year ended December 31, 1999 relating primarily to origination points (fees) relating to the note receivable. Interest expense in the amount of approximately $907,000 was recorded for the year ended December 31, 1999 relating to interest on a repurchase facility payable entered into on September 30, 1999 and interest on a government security sold short on September 30, 1999. General and administrative expenses increased approximately $388,000 for the year ended December 31, 1999 as compared to 1998 primarily due to an incentive fee payable to the Advisor, an increase in the reimbursements of certain administrative and other costs incurred by the Advisor on behalf of the Company and an increase in public relations expenses due to the restructuring of the Company. Organization costs in the amount of approximately $365,000 were expensed for the year ended December 31, 1999 relating to the restructuring of the Company. A net unrealized loss on the commercial mortgage-backed security-related investment and government security sold short position in the amount of approximately $218,000 was recorded for the year ended December 31, 1999 relating to such securities purchased and sold, respectively, on September 30, 1999. A gain on repayment of mortgage loans in the amount of approximately $3,273,000 was recorded for the year ended December 31, 1999 relating to the repayment of the Cove and Oxford mortgage loans on March 1, 1999. 1998 VS. 1997 Interest income from mortgage loans decreased approximately $80,000 for the year ended December 31, 1998 as compared to 1997 primarily due to the reversal of Additional Interest in 1998 relating to Town and Country and Columbiana, partially offset by an increase due to additional advances on the Stonybrook mortgage loan during 1997. Interest income from REMIC and GNMA certificates and the FHA Insured Project Loan decreased approximately $95,000 for the year ended December 31, 1998 as compared to 1997 primarily due to the repayment of the FHA Insured Project Loan in May 1997. Interest income from temporary investments decreased approximately $38,000 for the year ended December 31, 1998 as compared to 1997 primarily due to a decrease in temporarily invested proceeds earning interest during 1998. Realized (gain) loss on sale of REMIC and GNMA certificates and the FHA Insured Project Loan decreased approximately $79,000 for the year ended December 31, 1998 as compared to 1997 primarily due to the repayment, in 1997, of four REMICs and the FHA Insured Project Loan on which losses had been recognized and a gain on a repayment of one REMIC in 1998. DISTRIBUTIONS Of the total distributions of $6,946,745 and $5,566,903 for the years ended December 31, 1999 and 1998, respectively, $686,445 ($.18 per share or 10%) and $2,170,291 ($.56 per share or 39%), respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of December 31, 1999, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $11,869,468. The portion of the distributions which constituted a return of capital was significant during the initial acquisition stage in order to maintain level distributions to shareholders. RECENTLY ISSUED ACCOUNTING STANDARDS SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2001. Because the Company does not currently utilize derivatives, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements. FORWARD-LOOKING STATEMENTS Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the availability and creditworthiness of prospec- -14- tive tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. INFLATION Inflation did not have a material effect on the Company's results for the periods presented. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk is the exposure to loss resulting from changes in interest rates, changes in spreads on CMBS, foreign currency exchange rates, commodity prices and equity prices. The primary market risks to which the investments of the Company are exposed are interest rate risk and CMBS spread risk, which are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the control of the Company. Changes in the general level of interest rates can affect the net interest income of the Company. The following table demonstrates the estimated effect that changes in interest rates would have on the net interest income from, and the value of the Company's CMBS-related investment and short positions in government securities. All changes in income and value are measured as percentage changes from the projected income and value if no change in interest rates were to occur. CHANGE IN EXPECTED INCOME FROM AND VALUE OF THE CMBS-RELATED INVESTMENT AND SHORT POSITIONS, FROM CHANGES IN INTEREST RATES
Change in Income ------------------------------ Change in Interest Rates Amount Percentage - - ------------------------ -------- ---------- - - -250 Basis Points $733,437 21.2% - - -200 Basis Points 586,749 16.9 - - -150 Basis Points 440,062 12.7 - - -100 Basis Points 293,375 8.5 - - -50 Basis Points 146,687 4.2 No Change 0 0.0 +50 Basis Points -146,687 -4.2 +100 Basis Points -293,375 -8.5 +150 Basis Points -440,062 -12.7 +200 Basis Points -586,749 -16.9 +250 Basis Points -733,437 -21.2
* Income includes expected interest income from the CMBS-related investment, amortization of market discount on CMBS, net interest income on short positions in government securities and mark to market adjustments to the CMBS-related investment and government securities from changes in interest rates. The Company is further exposed to interest rate risk through its short term financing through repurchase agreements at rates that are based on 30-day LIBOR. Changes in interest rates may increase the Company's cost of financing its investments. The following table demonstrates the estimated effect that changes in interest rates would have on the interest expense of the Company: CHANGE IN INTEREST EXPENSE UNDER REPURCHASE AGREEMENT FROM CHANGES IN LIBOR
Change in Interest Expense ------------------------------ Change in LIBOR Amount Percentage - - ------------------------ -------- ---------- - - -250 Basis Points $-489,200 -31% - - -200 Basis Points -391,360 -25 - - -150 Basis Points -293,520 -19 - - -100 Basis Points -195,680 -13 - - -50 Basis Points -97,840 -6 No change in LIBOR 0 0 +50 Basis Points 97,840 6 +100 Basis Points 195,680 13 +150 Basis Points 293,520 19 +200 Basis Points 391,360 25 +250 Basis Points 489,200 31
The investments of the Company are also exposed to spread risk. The price of a fixed income security is generally determined by adding an interest rate spread to a benchmark interest rate, such as the U.S. Treasury rate. As the spread on a security widens (or increases), the price (or value) of the security falls. As spreads on CMBS widen, the fair value of the Company's portfolio falls. Spread widening in the market for CMBS can occur as a result of market concerns over the stability of the commercial real estate market, excess supply of CMBS, or gen- -15- eral credit concerns in other markets. The following table demonstrates the estimated effect that changes in CMBS spreads would have on the value of the Company's CMBS-related investment: CHANGE IN VALUE OF CMBS-RELATED INVESTMENT FROM CHANGES IN CMBS SPREADS
Change in CMBS Portfolio Value --------------------------------- Change in CMBS Spreads Amount Percentage - - ---------------------- ---------- ---------- - - -250 Basis Points $6,410,158 18.8% - - -200 Basis Points 5,128,126 15.1 - - -150 Basis Points 3,846,095 11.3 - - -100 Basis Points 2,564,063 7.5 - - -50 Basis Points 1,282,032 3.8 No change in CMBS Spreads 0 0.0 +50 Basis Points -1,282,032 -3.8 +100 Basis Points -2,564,063 -7.5 +150 Basis Points -3,846,095 -11.3 +200 Basis Points -5,128,126 -15.1 +250 Basis Points -6,410,158 -18.8
The above tables show the possible impact of changes in interest rates and CMBS spreads on the Company's CMBS-related investment, the financing related to that investment, and the associated hedging instruments. Cash flows and income from the Company's other financial instruments, consisting primarily of mortgage loans, GNMA certificates, and cash and cash equivalents, would not be significantly affected by changes in interest rates, because most of these instrument bear interest at fixed rates, and are not subject to financing or hedged. Cash and cash equivalents and the mortgage loans are carried at amortized cost, and so their carrying values are not impacted by changes in interest rates. The GNMA investments are adjusted to market value through comprehensive income in the equity statement, but changes in their value have not historically been significant to shareholders' equity. The Company's analysis of risks is based on management's experience, estimates and assumptions. These analyses rely on financial models, which utilize estimates of fair value and interest rate sensitivity. Actual economic conditions or implementation of investment decisions by management may produce results significantly different from the projected results shown in the above tables. -16- Item 8. Financial Statements and Supplementary Data. (a) 1. Financial Statements Page -------------------- ---- Independent Auditors' Report - Deloitte & Touche LLP Independent Auditors' Report - KPMG LLP 13 Balance Sheets as of December 31, 1999 and 1998 14 Statements of Income for the years ended December 31, 1999, 1998 and 1997 15 Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997 16 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 18 Notes to Financial Statements 20 (a) 2. Financial Statement Schedules ----------------------------- All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto. -17- INDEPENDENT AUDITORS' REPORT To the Board of Trustees And Shareholders of American Mortgage Acceptance Company New York, New York We have audited the accompanying balance sheet of American Mortgage Acceptance Company (the "Company") as of December 31, 1999 and the related statements of income, changes in shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of American Mortgage Acceptance Company as of December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP New York, New York March 20, 2000 -18- INDEPENDENT AUDITORS' REPORT To the Board of Trustees American Mortgage Acceptance Company: We have audited the accompanying balance sheet of American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) as of December 31, 1998, and the related statements of income, changes in shareholders' equity, and cash flows for each of the years in the two-year period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Mortgage Acceptance Company as of December 31, 1998, and the results of its operations and its cash flows for each of the years in the two-year period then ended, in conformity with generally accepted accounting principles. /s/ KPMG LLP New York, New York January 15, 1999, except as to Note 3 which is as of March 1, 1999 -19- AMERICAN MORTGAGE ACCEPTANCE COMPANY BALANCE SHEETS
ASSETS DECEMBER 31, ----------------------------- 1999 1998 ------------ ----------- Investments in mortgage loans $ 28,893,482 $45,965,488 Investments in GNMA certificates-available for sale 9,464,437 10,303,002 Commercial mortgage-backed security-related investment 34,347,403 0 Deposit with broker as collateral for security sold short 37,733,101 0 Cash and cash equivalents 3,802,298 2,953,125 Accrued interest receivable 1,180,115 766,702 Other assets 144,605 4,723 ------------ ----------- Total assets $115,565,441 $59,993,040 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facility payable $ 19,127,000$ 0 Accrued interest payable 407,952 0 Accounts payable and accrued expenses 122,397 73,372 Due to Advisor and affiliates 433,265 1,715,094 Distributions payable 1,391,503 0 Government security sold short 36,991,959 0 ------------ ----------- Total liabilities 58,474,076 1,788,466 ------------ ----------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest; $.10 par value; 12,500,000 shares authorized; 4,213,826 issued and 3,838,630 outstanding and 4,172,790 issued and 3,839,245 outstanding in 1999 and 1998, respectively 421,383 417,280 Treasury shares of beneficial interest; 375,196 and 333,545 shares in 1999 and 1998, respectively (37,520) (33,355) Additional paid-in capital 68,840,500 68,849,730 Distributions in excess of net income (11,878,059) (11,191,614) Accumulated other comprehensive income (loss) (254,939) 162,533 ------------ ----------- Total shareholders' equity 57,091,365 58,204,574 ------------ ----------- Total liabilities and shareholders' equity $115,565,441 $59,993,040 ============ ===========
See accompanying notes to financial statements -20- AMERICAN MORTGAGE ACCEPTANCE COMPANY STATEMENTS OF INCOME
Years Ended December 31, ------------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Revenues: Interest income: Mortgage loans $2,569,901 $3,037,882 $3,118,027 REMIC and GNMA certificates and the FHA Insured Project Loan 785,591 880,680 975,599 Commercial mortgage-backed security-related investment 950,456 0 0 Note receivable 85,786 0 0 Temporary investments 1,092,617 112,953 151,228 Other income 23,231 0 0 ---------- ---------- ---------- Total revenues 5,507,582 4,031,515 4,244,854 ---------- ---------- ---------- Expenses: Interest 906,581 0 0 General and administrative 1,029,840 642,047 622,304 Amortization 0 5,000 10,000 Organization costs 364,872 0 0 ---------- ---------- ---------- Total expenses 2,301,293 647,047 632,304 ---------- ---------- ---------- Other gain (loss): Net realized gain (loss) on repayments of REMIC and GNMA certificates and the FHA Insured Project Loan (1,492) 12,144 (66,735) Net unrealized loss on commercial mortgage-backed security-related investment and government security sold short (217,699) 0 0 Gain on repayment of mortgage loans 3,273,202 0 0 ---------- ---------- ---------- Total other gain (loss) 3,054,011 12,144 (66,735) ---------- ---------- ---------- Net income $6,260,300 $3,396,612 $3,545,815 ========== ========== ========== Net income per share (basic and diluted) $ 1.63 $ .88 $ .92 ========== ========== ========== Weighted average shares outstanding (basic and diluted) 3,841,931 3,845,101 3,851,029 ========== ========== ==========
See accompanying notes to financial statements -21- AMERICAN MORTGAGE ACCEPTANCE COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Treasury Shares of Shares of Beneficial Interest Beneficial Interest Additional Distributions ----------------------------- ----------------------- Paid-in in Excess Shares Amount Shares Amount Capital of Net Income ---------- --------- --------- ---------- -------------- --------------- Balance at January 1, 1997 4,010,000 $401,001 (169,115) $(16,912) $68,849,567 $ (6,991,606) Comprehensive income: Net income 3,545,815 Other comprehensive income Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period Add: reclassification adjustment for losses included in net income Other comprehensive income Comprehensive income Issuance of shares of beneficial interest 77,583 7,758 0 0 1,390,751 0 Distributions 0 0 0 0 0 (5,575,532) Purchase of treasury shares 0 0 (79,224) (7,922) (1,390,593) 0 ---------- --------- --------- ---------- -------------- --------------- Balance at December 31, 1997 4,087,583 408,759 (248,339) (24,834) 68,849,725 (9,021,323) Comprehensive income: Net income 3,396,612 Other comprehensive loss: Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period Less: reclassification adjustment for gains included in net income Other comprehensive loss Comprehensive income Issuance of shares of beneficial interest 85,207 8,521 0 0 1,328,465 0 Distributions 0 0 0 0 0 (5,566,903) Purchase of treasury shares 0 0 (85,206) (8,521) (1,328,460) 0 ---------- --------- --------- ---------- -------------- --------------- Balance at December 31, 1998 4,172,790 417,280 (333,545) (33,355) 68,849,730 (11,191,614) Accumulated Other Comprehen- Comprehen- sive sive Income Income Total ---------- ------------ ------------ Balance at January 1, 1997 $ (81,386) $62,160,664 Comprehensive income: Net income $3,545,815 3,545,815 --------- Other comprehensive income Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period 188,249 Add: reclassification adjustment for losses included in net income 66,735 --------- Other comprehensive income 254,984 254,984 254,984 --------- Comprehensive income $3,800,799 ========= Issuance of shares of beneficial interest 0 1,398,509 Distributions 0 (5,575,532) Purchase of treasury shares 0 (1,398,515) ------------ ------------ Balance at December 31, 1997 173,598 60,385,925 Comprehensive income: Net income $3,396,612 3,396,612 --------- Other comprehensive loss: Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period 1,079 Less: reclassification adjustment for gains included in net income (12,144) Other comprehensive loss (11,065) (11,065) (11,065) --------- Comprehensive income $3,385,547 ========= Issuance of shares of beneficial interest 0 1,336,986 Distributions 0 (5,566,903) Purchase of treasury shares 0 (1,336,981) ------------ ------------ Balance at December 31, 1998 162,533 58,204,574 (continued) See accompanying notes to financial statements -22- AMERICAN MORTGAGE ACCEPTANCE COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 Treasury Shares of Shares of Beneficial Interest Beneficial Interest Additional Distributions ----------------------------- ----------------------- Paid-in in Excess Shares Amount Shares Amount Capital of Net Income ---------- --------- --------- ---------- -------------- --------------- Comprehensive income: Net income 6,260,300 Other comprehensive loss: Net unrealized loss on first mortgage bonds: Net unrealized holding loss arising during the period Add: reclassification adjustment for losses included in net income Other comprehensive loss Comprehensive income Issuance of shares of beneficial interest 41,036 4,103 0 0 629,834 0 Purchase of treasury shares 0 0 (41,651) (4,165) (639,064) 0 Distributions 0 0 0 0 0 (6,946,745) ---------- ---------- --------- ---------- ----------- ------------ - - - - Balance at December 31, 1999 4,213,826 $ 421,383 (375,196) $ (37,520) $68,840,500 $(11,878,059) =========== ========== ========= ========= ========== =========== Accumulated Other Comprehen- Comprehen- sive sive Income Income Total ---------- ------------ ------------ Comprehensive income: Net income 6,260,300 6,260,300 Other comprehensive loss: Net unrealized loss on first mortgage bonds: Net unrealized holding loss arising during the period (418,964) Add: reclassification adjustment for losses included in net income 1,492 Other comprehensive loss (417,472) (417,472) (417,472) --------- Comprehensive income $5,842,828 ========== Issuance of shares of beneficial interest 0 633,937 Purchase of treasury shares 0 (643,229) Distributions 0 (6,946,745) ------------ ------------ Balance at December 31, 1999 $ (254,939) $57,091,365 ============ ===========
See accompanying notes to financial statements -23- AMERICAN MORTGAGE ACCEPTANCE COMPANY STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------------------------- 1999 1998 1997 ----------- ------------ ----------- Cash flows from operating activities: Net income $ 6,260,300 $ 3,396,612 $ 3,545,815 ----------- ------------ ----------- Adjustments to reconcile net income to net cash (used in) provided by operating activities: Unrealized loss on commercial mortgage- backed security-related investment 1,419,016 0 0 Unrealized gain on government security sold short (1,201,317) 0 0 Gain on repayment of mortgage loans (3,273,202) 0 0 Amortization expense-organization costs 0 5,000 10,000 Amortization expense-loan premium and origination costs 337,590 553,608 510,101 Amortization of REMIC premium 0 0 3,181 Accretion of REMIC, GNMA and FHA Insured Project Loan discount (23,145) (26,272) (31,860) Accretion of discount on commercial mortgage-backed security-related investment (144,061) 0 0 (Gain) loss on repayment of REMIC certificates 0 (12,986) 21,849 Loss on repayment of GNMA certificates 1,492 842 1,807 Loss on repayment of FHA Insured Project Loan 0 0 43,080 Changes in operating assets and liabilities: Investment in commercial mortgage- backed security-related investment (35,622,358) 0 0 Deposit with broker as collateral for security sold short (37,733,101) 0 0 Accrued interest receivable (413,413) (264,775) 56,219 Other assets (33,159) 0 0 Due to Advisor and affiliates (1,281,829) 504,220 324,091 Accounts payable and accrued expenses 49,025 24,249 (50,645) Accrued interest payable 407,952 0 0 Government security sold short 38,193,276 0 0 ----------- ------------ ----------- Total adjustments (39,317,234) 783,886 887,823 ----------- ------------ ----------- Net cash (used in) provided by operating activities (33,056,934) 4,180,498 4,433,638 ----------- ------------ ----------- Cash flows from investing activities: Increase in investment in mortgage loans (829,204) 0 (2,466,104) Proceeds from repayments of mortgage loans 20,841,545 273,757 215,778 Increase in note receivable (1,900,000) 0 0 Repayment of note receivable 1,900,000 0 0 Purchase of REMIC certificates 0 0 (1,981,566) Purchase of GNMA certificates 0 0 (1,889,817) Principal repayments of GNMA certificates 442,746 413,254 127,621 Principal repayments of REMIC certificates 0 1,806,973 739,904 Principal repayments of FHA Insured Project Loan 0 0 3,408,238 (Increase) decrease in other assets (111,446) 4,826 0 ----------- ------------ ----------- Net cash provided by (used in) investing activities 20,343,641 2,498,810 (1,845,946) ----------- ------------ ----------- (continued) See accompanying notes to financial statements -24- AMERICAN MORTGAGE ACCEPTANCE COMPANY STATEMENTS OF CASH FLOWS (continued) Years Ended December 31, ------------------------------------------------- 1999 1998 1997 ----------- ------------ ----------- Cash flows from financing activities: Proceeds from repurchase facility payable 19,568,000 0 0 Repayments of repurchase facility payable (441,000) 0 0 Distributions paid to shareholders (5,555,242) (5,566,903) (5,575,532) Proceeds from issuance of shares of beneficial interest 633,937 1,336,986 1,398,509 Purchase of treasury shares (643,229) (1,336,981) (1,398,515) ----------- ------------ ----------- Net cash provided by (used in) financing activities 13,562,466 (5,566,898) (5,575,538) ----------- ------------ ----------- Net increase (decrease) in cash and cash equivalents 849,173 1,112,410 (2,987,846) Cash and cash equivalents at the beginning of the year 2,953,125 1,840,715 4,828,561 ----------- ------------ ----------- Cash and cash equivalents at the end of the year $ 3,802,298 $ 2,953,125 $ 1,840,715 ============ ============ ============ Supplemental information: Interest paid $ 498,629 $ 0 $ 0 ============ ============ ============
See accompanying notes to financial statements -25- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 1 - General American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business trust for the primary purpose of investing in government-insured mortgages and guaranteed mortgage-backed certificates. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On April 6, 1999, the Company received the necessary consent from its shareholders to approve proposals (the "Proposals") to, among other things, restructure the Company from a closed-ended, finite-life REIT to a publicly traded, open-ended, infinite-life operating REIT. In addition to restructuring the Company, the Proposals, among other matters, permit the Company to modify its investment objectives, to incur a specified amount of indebtedness and to list the Company's shares on a national exchange. As a result of the adoption of the Proposals, the Company was liable for the transaction expenses. Such expenses amounted to approximately $365,000 and are classified as organization costs in the accompanying statements of income. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of December 31, 1999, there were 3,838,630 Shares outstanding. The Company's new business plan as a publicly traded REIT focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Fannie Mae, and 3) acquisition of subordinated interests in commercial mortgage-backed securities. As of December 31, 1999 the Company's mortgage investments consisted of three mortgage loans originated by or on behalf of the Company, four GNMA mortgage-backed securities and pass-through certificates and one commercial mortgage-backed security ("CMBS")-related investment. Due to the complexity of the GNMA and CMBS structure and the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effect of future events upon the yield to maturity or the market value of the GNMA Certificates or the CMBS-related investment upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the coupon rate. The current composition of the Company's investment portfolio reflects the recent change in the Company's business plan and is not comparable to its investment portfolio prior to April 1999. Furthermore, the Company is still in the process of implementing its new business plan and, therefore, the current portfolio should not be considered indicative of the composition of the portfolio that might be expected in the future. The Company is governed by a board of trustees comprised of two independent trustees and one trustee who is affiliated with Related Capital Company ("Related"). The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. NOTE 2 - Accounting Policies a) Basis of Accounting The books and records of the Company are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP"). b) Investments in Mortgage Loans The Company accounts for its investments in mortgage loans under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"). Under SFAS 114, a loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. SFAS No. 114 requires lenders to measure impaired loans based on: (i) the present value of expected future cash flows discounted at the loans' effective interest rate; (ii) the loan's observable market price; or (iii) the fair value of the collateral if the loan is collateral-dependent. An allowance for loan losses is maintained if the measure of an impaired loan is less than its recorded investment. Adjustments to the allowance are made through corresponding charges or credits to the provision for loan losses. Interest on mortgage loans is recognized on the accrual basis. Interest which was accrued but not received is reversed from income if deemed to be uncollectible. c) Investments in Mortgage-Backed Securities The Company accounts for its investments in mortgage-backed securities under the provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities". At the date of acquisition, the Company elected to designate its GNMA certificates as available-for-sale securities. Available-for-sale securities are carried at fair value with net unrealized gain (loss) reported as a separate component of other comprehensive income until realized. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security -26- as an adjustment to interest income using the effective yield method. Dividend and interest income are recognized when earned. Realized gains and losses on securities are included in earnings and are derived using the specific identification method for determining the cost of the securities sold. At the date of acquisition, the Company elected to designate its CMBS-related investment as a trading asset (see Note 5). This investment is carried at its estimated fair value, with the net unrealized gains or losses included in earnings. Interest income is recognized as it becomes receivable, and includes accretion of discounts, computed using the effective yield method, after considering estimated prepayments and credit losses. Actual credit loss and prepayment experience are reviewed periodically and effective yields adjusted if necessary. d) Short Sales The Company has entered into a contract to sell a security that it did not own at the time of the sale ("Short Sale"). The Company is utilizing this contract as a means of mitigating the potential financial statement impact of changes in the fair value of its CMBS-related investment due to changes in interest rates. This contract involved the sale of a U.S. Treasury Note borrowed from a broker. The broker will retain the proceeds from the sale until the Company replaces the borrowed security. Risks in these contracts arise from the possible inability of counterparties to meet the terms of their contracts and from movements in securities values and interest rates. The Company does not anticipate nonperformance by any counterparty. If the market value of the securities involved in the Short Sale increases, the Company may be required to meet a "margin call". The Company accounts for its liability to return the borrowed security under its Short Sale contract at its market value, with unrealized gains or losses recorded in earnings. Income earned on the proceeds on deposit with the broker is included in interest income from temporary investments and interest due on securities borrowed under the Short Sale is included in interest expense. e) Cash and Cash Equivalents Cash and cash equivalents include cash in banks, and temporary investments in short-term instruments with original maturity dates equal to or less than three months. f) Loan Origination Costs Acquisition fees and other direct expenses incurred for activities performed to originate or acquire mortgage loans have been capitalized and are included in Investment in Mortgage Loans in the balance sheets. Loan origination costs are being amortized to interest income using the effective yield method over the lives of the respective mortgages. g) Fair Value of Financial Instruments As described above, the Company's GNMA certificates, commercial mortgage-backed security-related investment, and government security sold short are carried at estimated fair values. The Company has determined that the fair value of its remaining financial instruments, including its mortgage loans, cash and cash equivalents, deposit with broker as collateral for security sold short and the repurchase facility payable, approximate their carrying values at December 31, 1999 and 1998. The fair value of investments in Mortgage Loans and GNMA certificates are based on actual market price quotes or by determining the present value of the projected future cash flows using appropriate discount rates, credit losses and prepayment assumptions. h) Income Taxes The Company has qualified as a REIT under the Code. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income ("Taxable Income") which is distributed to its shareholders provided that at least 95% of Taxable Income is distributed and provided that such income meets certain other conditions. Accordingly, no provision for federal income taxes is required. The Company may be subject to state taxes in certain jurisdictions. During 1999, the Company declared distributions of $1.44 per share. For federal income tax purposes, 100% of the distributions were reported as ordinary income to shareholders for 1999. i) Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income," requires the Company to classify items of "other comprehensive income", such as unrealized gains and losses on its investment in GNMA certificates, by their nature in the financial statements and display the accumulated balance of other comprehensive income (loss) separately from shareholders' equity in the shareholders' equity section of the balance sheets. In accordance with SFAS No. 130, cumulative unrealized gains and losses on securities available-for-sale are classified as accumulated other comprehensive income in shareholders' equity and current period unrealized gains and losses are included as a component of comprehensive income. j) Use of Estimates The preparation of financial statements in conformity with GAAP requires the Advisor to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -27 k) Segment Information SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", requires enterprises to report certain financial and descriptive information about their reportable operating segments, and certain enterprise-wide disclosures regarding products and services, geographic areas and major customers. The Company is an investor in mortgage products and operates in only one reportable segment. The Company does not have or rely upon any major customers. All of the Company's investments are secured by real estate properties located in the United States; accordingly, all of its revenues were derived from U.S. operations. l) New Pronouncements SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2001. Because the Company does not currently utilize derivatives, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements. m) Reclassifications Certain amounts in the 1998 and 1997 financial statements have been reclassified to conform to the 1999 presentation. -28- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 3 - Investments in Mortgage Loans Information relating to investments in mortgage loans as of December 31, 1999 and 1998 is as follows:
Date of Invest- ment/ AMOUNTS ADVANCED Final Interest ---------------------------------------- Out- Matu Rate on Total standing Origi- Descrip -rity Mortgage Mortgage Additional Amounts Loan nation Property -tion Date Loan (A) Loans Loans(b) Advanced Balance Costs - - ------------- -------- ------- ---------- ----------- ----------- ------------ ----------- --------- The Cove 308 12/93 7.625%- $ 6,800,000 $ 840,500 $ 7,640,500 $ 0 $ 0 Apts. Apt 1/29 9.129% Houston, TX Units (C) (J) Oxford on 405 12/93 7.625%- 9,350,000 1,156,000 10,506,000 0 0 Greenridge Apt. 1/29 9.129% Apts. Units (C) Houston, TX (J) Town & 330 4/94 7.375%- 9,348,000 1,039,000 10,387,000 9,995,170 603,895 Country IV Apt. 5/29 9.167% Apts. Units (D)(M) (E)(F) Urbana, IL Columbiana 204 4/94 (H) 9,106,099 563,000 9,669,099 9,576,839 537,558 Lakes Apts. Apt. 11/35 Columbia, Units (G)(M) SC Stony Brook 125 12/95 7.75%- 8,500,000 763,909 9,263,909 9,177,588 413,492 Village II Apt. 6/37 9.128% Apts. Units (G)(M) (I) East Haven, CT ----------- ----------- ------------ ----------- ---------- Total $43,104,099 $4,362,409 $47,466,508 $28,749,597 $1,554,945 =========== ========== ============ =========== ========== Accum -ulated Amor- tization- Interest Additional Earned Less Loans and Balance at Balance at by the 1999 Net Descrip Origina- December December Company Amor- Interest Property -tion tion Costs 31, 1999(K) 31, 1998 for 1999 Tization Earned - - ------------- -------- ---------- ----------- ------------ ---------- -------- ---------- The Cove 308 $ 0 $ 0 $ 7,343,073 $ 117,242 $ 16,789 $ 100,453 Apts. Apt Houston, TX Units (J) Oxford on 405 0 0 10,096,915 155,267 23,090 132,177 Greenridge Apt. Apts. Units Houston, TX (J) Town & 330 662,589 9,936,476 10,134,960 887,897 115,989 771,908 Country IV Apt. Apts. Units Urbana, IL Columbiana 204 408,711 9,705,686 9,014,698 986,289 93,741 892,548 Lakes Apts. Apt. Columbia, Units SC Stony Brook 125 339,760 9,251,320 9,375,842 760,796 87,981 672,815 Village II Apt. Apts. Units East Haven, CT ---------- ----------- ------------ ---------- -------- ---------- Total $1,411,060 $28,893,482 $45,965,488 $2,907,491 $337,590 $2,569,901 ========== =========== ============ ========== ======== ==========
-29- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS On March 1, 1999, Cove Apartments L.L.C. (the "Cove Obligor"), the owner of Cove Apartments ("Cove"), sold Cove to a third party for $10.25 million. The Cove Obligor then fully repaid its outstanding debt due to the Company totaling $8,676,849 including the outstanding balance of an FHA first mortgage loan in the amount of $6,558,872, an $840,500 additional loan, a $327,944 prepayment premium due the Company on the FHA loan, an $814,465 sales proceeds participation payment and accrued Base Interest and Additional Interest through the repayment date of $135,068 resulting in a gain on the repayment in the amount of $1,224,968. On March 1, 1999, Oxford Apartments, L.L.C. (the "Oxford Obligor"), the owner of Oxford on Greenridge Apartments ("Oxford"), sold Oxford to a third party for $15.25 million. The Oxford Obligor then fully repaid its outstanding debt due to the Company totaling $12,288,813 including the outstanding balance of an FHA first mortgage loan in the amount of $9,018,450, a $1,156,000 additional loan, a $450,922 prepayment premium due the Company on the FHA loan, a $1,483,664 sales proceeds participation payment and accrued Base Interest and Additional Interest through the repayment date of $179,777 resulting in a gain on the repayment in the amount of $2,048,234. Due to the waiving of future additional interest (see Note F below), the Town and Country mortgage loan is considered an impaired loan, as it will not perform in accordance with the contractual terms of the original loan agreement. No allowance for loan losses has been provided for this loan. On April 29, 1999, the Company made its final advance, in the amount of $829,204, on the Columbiana Mortgage. At the time of the final advance, construction loan extension fees, intended to compensate the Company for the difference between the construction period interest rate and the higher permanent loan interest rate during the extension period, in the amount of $195,958 were received by the Company. The fees received are classified as "interest income from mortgage loans" in the accompanying statements of operations. (A) The minimum interest rate shown represents base interest, which is fully insured by HUD ("Base Interest"). The additional interest rate represents interest which is not contingent upon cash flow and is secured by partnership interests in the partnerships which own the Developments ("Additional Interest"). (B) Additional loans are non-interest bearing. (C) In addition to the interest rate, the Company was entitled to 30% of the cash flow remaining after payment of Base Interest and Additional Interest and 35% of net sale or refinancing proceeds. (D) The Originated Mortgage has a term of 35 years, subject to mandatory prepayment at any time after 12 years and upon one year's notice. (E) In addition to the interest rate, the Company is entitled to 30% of the cash flow remaining after payment of Base Interest and Additional Interest. (F) The operations of Town and Country had not been able to support the payment of Additional Interest for the period July 1, 1997 through December 31, 1999 which amounted to $411,911. Accordingly, the accrued interest income that was doubtful of collection was fully reserved and excluded from interest income from mortgage loans in previous quarters. On January 21, 2000, the general partner of the Town and Country obligor, in exchange for the waiving of the prepayment penalty and future Additional Interest and also because the obligation was secured by its partnership interest in the obligor, repaid the additional loan and Additional Interest due through January 21, 2000 in the amounts of $1,039,000 and $421,273, respectively. As a result, the Additional Interest which had been fully reserved was deemed to be fully collectible and recorded as interest income in the fourth quarter of 1999. (G) The Originated Mortgages have terms of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (H) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan period and was 7.4% during the construction period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 25% of the cash flow remaining after payment of 8.678% interest. The operations of Columbiana had not been able to support the payment of Additional Interest for the period October 1, 1997 through June 30, 1998 which amounted to $48,760. Accordingly, the accrued interest income that was deemed doubtful of collection was fully reserved and reversed from interest income from mortgage loans in the fourth quarter of 1998. As a result of the final advance and conversion of the construction loan to a permanent loan during the second quarter of 1999, Columbiana was able to repay construction period advances from the developer as well as Additional Interest due to the Company through the second quarter. As a result, the Additional Interest which had been fully reserved was recorded as interest income in the second quarter of 1999. (I) In addition to the interest rate, the Company is entitled to 40% of the cash flow remaining after payment of Base and Additional Interest. (J) On March 1, 1999 the outstanding debt due to the Company was fully repaid (see above). (K) Aggregate cost for federal income tax purposes is $29,766,598. (M) In order for the Company to exercise an acceleration option it must terminate the mortgage insurance contract with FHA not later than the accelerated payment date and, in certain circumstances, must terminate the mortgage insurance contract upon the exercise of the acceleration option. Since the exercise of such option would be at the Company's discretion, it is intended to be exercised only where the value of the Development has increased by an amount which would justify accelerating payment in full and assuming the risks of foreclosure if the mortgagor failed to make the accelerated payment. Further information relating to investments in mortgage loans and Additional Loans for the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ----------- ----------- ----------- Investments in mortgage loans - January 1, $45,965,488 $46,792,853 $45,049,596 ----------- ----------- ----------- Additions: Columbiana - advance 829,204 0 260,767 Columbiana - loan origination costs 4,723 0 3,032 Stonybrook - advances 0 2,205,337 Stonybrook - loan origination costs 0 0 0 Accumulated amortization of additional loans at March 1, 1999 included in gain on repayment of mortgage loans - Cove 365,219 0 0 - Oxford 502,315 0 0 Accumulated amortization of loan origination costs at March 1, 1999 included in gain on repayment of mortgage loans - Cove 161,555 0 0 - Oxford 222,148 0 0 ----------- ----------- ----------- 2,085,164 0 2,469,136 ----------- ----------- ----------- Deductions: Amortization of Additional Loans (234,272) (372,916) (372,916) Amortization of loan origination costs (103,318) (180,692) (137,185) Collection of principal - FHA loans - Cove (6,568,343) (54,375) (50,395) - Oxford (9,031,473) (74,765) (69,293) - Town and Country (82,496) (76,648) (71,215) - Columbiana (49,198) (34,145) (8,918) - Stonybrook (36,541) (33,824) (15,957) Collection of principal- Additional Loans - Cove (840,500) 0 0 - Oxford (1,156,000) 0 0 Loan origination costs at March 1, 1999 included in gain on repayment of mortgage loans - Cove (444,215) 0 0 - Oxford (610,814) 0 0 ----------- ----------- ----------- (19,157,170) (827,365) (725,879) Investments in mortgage loans - December 31, $28,893,482 $45,965,488 $46,792,853 =========== =========== ===========
-30- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 4 - Investments in GNMA Certificates-Available for Sale Information relating to investments in GNMA Certificates as of December 31, 1999 and 1998 is as follows:
Accum Date Original -ulated Purchased Purchase Amorti Final Stated Price Principal at Discount at -zation Certificate Payment Interest Including December December at December SELLER Number Date Rate Discount 31, 1999 31, 1999 31, 1999 - - ----------------------------- ----------- ------------- --------- -------------- -------------- --------------- ------------ GNMA CERTIFICATES Bear Stearns 0355540 7/27/94 7.125% $2,407,102 $2,542,411 $(235,173) $107,681 3/15/29 Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,140,592 (8,027) 3,837 8/15/29 Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 3,551,736 (3,328) 1,730 7/15/29 SunCoast Capital Group, Ltd. G22412 6/23/97 7.000% 1,981,566 1,349,527 (8,856) 4,920 4/20/27 -------------- -------------- --------------- ------------ Total $10,514,413 $9,584,266 $(255,384) $118,168 ============== ============== =============== ============ Loan Unrealized Interest Origination Loss at Earned Costs at December Balance at Balance at by the Net December December December Company 1999 Interest SELLER 31, 1999 31, 1999 31, 1999 31, 1998 for 1999 Accretion Earned - - ----------------------------- --------------- -------------- -------------- -------------- ------------ ------------- ----------- GNMA CERTIFICATES Bear Stearns $78,656 $(61,797) $2,431,778 $ 2,589,414 $181,932 $19,968 $201,900 Malone Mortgage 72,701 (40,417) 2,168,686 2,252,798 182,527 711 183,238 Goldman Sachs 120,969 (106,053) 3,565,054 3,761,846 296,240 323 296,563 SunCoast Capital Group, Ltd. 0 (46,672) 1,298,919 1,698,944 101,747 2,143 103,890 --------------- -------------- -------------- -------------- ------------ ------------- ----------- Total $272,326 $(254,939) $9,464,437 $10,303,002 $762,446 $23,145 $785,591 =============== ============== ============== ============== ============ ============= ===========
-31- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS The amortized cost, unrealized gain and fair value for the investment in GNMA Certificates at December 31, 1999 and 1998 were as follows:
DECEMBER 31, ---------------------------- 1999 1998 ----------- ----------- Amortized cost $9,719,376 $10,140,469 Gross unrealized gain (loss) (254,939) 162,533 ----------- ----------- Fair Value $9,464,437 $10,303,002 =========== ===========
For the year ended December 31, 1999, there were gains and losses of $1,791 and $3,283, respectively, (including acquisition fees and expenses) on principal repayments of GNMA certificates. For the year ended December 31, 1998, there were gains and losses of $15,148 and $3,004, respectively, (including acquisition fees and expenses) on principal repayments of REMIC and GNMA certificates. NOTE 5 - Commercial Mortgage-Backed Security-Related Investment and Short Sale On September 30, 1999, the Company acquired from ARCap Investors, L.L.C. ("ARCap") a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust (the "Chase-First Union Trust"). The CMBS investment, which was purchased for $35,622,358, has a face amount of $50,399,711 and an annual coupon rate of 6.4%. The Company purchased the CMBS investment using cash and debt provided through a repurchase facility (see Note 6). In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. ARCap acquired from the Chase-First Union Trust all of the commercial mortgage backed securities that are subordinate to the CMBS investment (the "Subordinate Bonds") acquired by the Company. Under the Agreement, the Company has the right to acquire a portion of the Subordinate Bonds from ARCap and to exchange a portion or all of the CMBS investment and Subordinate Bonds for a preferred equity interest in ARCap. Furthermore, the Company has the right to participate on the same terms with ARCap in any subsequent resecuritization by ARCap of the Chase-First Union Trust bond issuance. In connection with such resecuritization, ARCap has the right to cause the Company to choose between three alternative options: (i) to sell the CMBS investment to ARCap; (ii) to participate with ARCap in the resecuritization; or (iii) to exchange the CMBS investment for a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. Because the Company is required to return the CMBS to ARCap upon request by ARCap, this transaction has been accounted for as a secured loan from the Company to ARCap under SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". This loan can be contractually settled in such a way that the Company would not recover its recorded investment, so, under SFAS 125, the Company measures its investment in the loan like an investment in a debt security. The Company has elected to utilize the "trading" classification for this investment, and measures the value of the investment as the estimated value of the CMBS collateralizing the loan. As of December 31, 1999, the 205 mortgage loans underlying the CMBS were secured by 217 properties of the types and in the states identified below:
Property Type Percentage (1) - - ------------- ------------- Multifamily 38% Retail 25 Office 18 Health Care 4 Hospitality 4 Industrial 4 Other 7 State Percentage (1) - - ----- -------------- CA 23% NY 14 FL 6 PA 6 Others (2) 51
(1) Based on a percentage of the total unpaid principal balance of the underlying loans. (2) No other state comprises more than 5% of the total. As of December 31, 1999, there are no unpaid principal balances of loans that are underlying the CMBS investment which are more than 60 days delinquent. As of December 31, 1999 the CMBS-related investment had an estimated fair value of $34,347,403 and an amortized cost of $35,766,419, resulting in an unrealized loss of $1,419,016 at that date (partially offset by an unrealized gain of $1,201,317 on the Short Sale - see below) which is included in "net unrealized losses on commercial mortgage-backed security-related investment and government security sold short" in the statements of income. The fair value of the Company's CMBS-related investment is generally estimated by management based on market -32- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS prices provided by certain dealers who make a market in these financial instruments. The market for CMBS periodically suffers from a lack of liquidity. Accordingly, the fair value reported may not necessarily be indicative of the amount the Company could realize in a current liquidation of this investment. At December 31, 1999, the un-leveraged, un-hedged, weighted average yield to maturity of the Company's CMBS-related investment was approximately 10%. The yield to maturity on the Company's CMBS-related investment depends on, among other things, the rate and timing of principal payments, the pass-through rate and interest rate fluctuations. The subordinated CMBS interest provides credit support to the more senior interests of the related commercial securitization. Cash flow from the mortgages underlying the CMBS interest generally is allocated first to the senior interests, with the most senior interest having a priority entitlement to cash flow. Remaining cash flow is allocated generally among the other CMBS interests in order of their relative seniority. To the extent that there are defaults and unrecoverable losses on the underlying mortgages, resulting in reduced cash flows, the most subordinate CMBS interest will bear this loss first. To the extent there are losses in excess of the most subordinated interest's stated entitlement to principal and interest, then the remaining CMBS interests will bear such losses in order of their relative subordination. There is, therefore no assurance that the yield to maturity discussed above will be achieved. On September 30, 1999, the Company entered into a Short Sale. The Company is utilizing this contract as a means of mitigating the potential financial statement impact of changes in the fair value of its CMBS-related investment due to changes in interest rates. This contract involved the sale of a U.S. Treasury Note with a face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from Bear Stearns & Co., Inc. ("Bear Stearns") for net proceeds of $39,028,841 (which included accrued interest of $835,565). Bear Stearns will retain proceeds from the sale until the Company replaces the borrowed security. As of December 31, 1999, the U.S. Treasury Note had an estimated fair value of $36,991,959, resulting in an unrealized gain of $1,201,317 at that date which is included in "net unrealized loss on commercial mortgage-backed security-related investment and government security sold short" in the statements of income. The Company earned $471,262 on Short Sale proceeds held by Bear Stearns ($37,733,101 at December 31, 1999) and incurred interest of $547,025 on the Short Sale contract during the period September 30, 1999 to December 31, 1999. NOTE 6 - Repurchase Facility On September 30, 1999, the Company entered into a repurchase facility (the "Repurchase Facility") with Bear Stearns, whereby Bear Stearns advanced $19,568,000 (55% of the purchase price) in cash towards the purchase of a CMBS-related investment (see Note 5). The Repurchase Facility has a variable interest rate based on the one-month LIBOR rate plus 1.5%,(7.98% at December 31, 1999) which is adjusted on the first day of each month, and terminates on March 17, 2000. In March 2000, the Repurchase Facility was renewed through June 17, 2000. The Repurchase Facility is collateralized by the Company's CMBS-related investment and contains restrictions based on the then current market value of such investment as calculated by Bear Stearns. A decline in the market value of the CMBS could result in cash flow from such investment being diverted to reduce the outstanding borrowing, the requirement to post additional collateral, or the sale of such investment. The outstanding balance of the Repurchase Facility (based on 55% of the market of the CMBS at December 1, 1999) was $19,127,000 at December 31, 1999. NOTE 7 - Related Party Transactions Prior to the adoption of the Proposals, the Company had an agreement with the Advisor pursuant to which the Advisor received compensation consisting primarily of (i) asset management fees calculated as .625% of total assets invested by the Company; (ii) a subordinated incentive fee based on the economic gain on the sale of Mortgage Investments; (iii) reimbursement of certain administrative and other costs incurred by the Advisor on behalf of the Company; and (iv) certain other fees. In addition, with respect to Mortgage Loans acquired by the Company, the Advisor was entitled to receive loan placement fees paid by borrowers equal to up to 1.5% of the principal amount of each mortgage loan. As a result of the adoption of the Proposals (see Note 1), the Board of Trustees amended the Advisory Agreement between the Company and the Advisor to, among other matters, reflect the Proposals and change the Advisory Agreement's fee structure to (a) eliminate the acquisition and disposition fees currently payable to the Advisor; (b) modify the annual asset management fee payable to the Advisor as set forth below; and (c) include an annual incentive fee payable to the Advisor as also set forth below. The modified annual asset management fee is calculated as follows: (i) .355% for investments in Mortgage Loans; (ii) .355% for certain investment grade investments; (iii) .750% for certain non-investment grade investments; (iv) 1.000% for unrated investments; and (v) .625% for investments held prior to the adoption of the Proposals. The annual incentive fee is calculated as follows: subject to a minimum annual distribution being made to shareholders from cash available for distribution of approximately $1.45 per Share, the Advisor will be entitled to receive incentive compensation for each fiscal year in an amount equal to the product of (A) 25% of the dollar amount by which (1)(a) Funds From Operations of the Company (before the incentive fee) per Share (based on the weighted average number of Shares outstanding) plus (b) gains (or minus losses) from debt restructuring and sales of property per Share (based on the weighted average number of Shares outstanding), exceed (2) an amount equal to (a) the weighted average of the price per Share of the initial offering (i.e. $20 per Share) and the prices per Share of any secondary offerings by the Company multiplied by (b) the ten-year U.S. Treasury rate plus two percent per annum multiplied by (B) the weighted average number of Shares outstanding during such fiscal year. For any period less than a fiscal year during which the amended Advisory Agreement is in effect, the incentive fee will be prorated according to the proportion which such period bears to a full fiscal year, taking into account, however, the Company's cash available for distribution for the entire fiscal year. In addition, the Advisory Agreement's fee structure was also changed so that with respect to the first $100 million of new Mortgage Loans acquired by the Company, the Advisor will receive origination points (fees) paid by borrowers equal to up to 1% of the principal amount of -33- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS each Mortgage Loan and the Company will receive origination points paid by borrowers in excess of 1%. After the first $100 million of additional Mortgage Loans is acquired, the Company will retain 100% of the origination points paid by borrowers. The costs incurred to related parties for the years ended December 31, 1999, 1998 and 1997 were as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Expense reimbursement $ 255,616 $ 120,029 $ 111,460 Asset management fees 335,682 362,280 367,044 Incentive fee 122,270 0 0 ----------- ----------- ----------- $ 713,568 $ 482,309 $ 478,504 =========== =========== ===========
Asset management fees, the incentive management fee and expense reimbursements owed to the Advisor and its affiliates amounting to approximately $431,000 and $1,327,000 were accrued and unpaid at December 31, 1999 and 1998, respectively. On May 19, 1999, the Company made a loan in the amount of $1,900,000 to Patterson Hope '98 Urban Renewal L.L.C. (the "Borrower"), an entity in which an affiliate of the Advisor is a member. The note bore interest at 12% which was payable, along with the principal, at maturity on September 15, 1999. The note was secured by all of the membership interest in the Borrower, was guaranteed by Related Capital Company and could be prepaid in whole or in part at any time. In September 1999, the loan was repaid and the Advisor and the Company each received origination points (fees) in the amount of $19,000. The Company earned interest income of approximately $86,000 from this loan. NOTE 8 - Earnings Per Share Basic net income per share in the amount of $1.63, $.88 and $.92 for the years ended December 31, 1999, 1998 and 1997, respectively, equals net income for the periods ($6,260,300, $3,396,612 and $3,545,815, respectively), divided by the weighted average number of shares outstanding for the periods (3,841,931, 3,845,101 and 3,851,029, respectively). Because the Company has no dilutive securities outstanding at December 31, 1999, diluted net income per share is the same as basic net income per share. NOTE 9 - Capital Shares In December 1992, the Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from the Advisor. On March 29, 1993, the Company commenced a public offering (the "Offering") through Related Equities Corporation, an affiliate of the Advisor, and other broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of beneficial interest at an initial offering price of $20 per share. The Offering terminated as of November 30, 1994. As of November 30, 1994, a total of 3,809,601 shares had been sold to the public, either through the Offering or the Company's dividend reinvestment plan (the "Reinvestment Plan") which became effective on March 29, 1993, representing Gross Proceeds (the "Gross Proceeds") of $76,192,021 (before volume discounts of $40,575). Pursuant to the Redemption Plan which became effective November 30, 1994, the Company was required to redeem eligible shares presented for redemption for cash to the extent it has sufficient net proceeds from the sale of shares under the Reinvestment Plan. Since November 30, 1994, 355,744 shares were sold through the Reinvestment Plan, the proceeds of which were restricted for use in connection with the Redemption Plan and were not included in gross proceeds. Pursuant to the Redemption Plan, since November 30, 1994, 374,412 shares have been redeemed for an aggregate price of $6,575,799. Of such redemptions, 16,931 shares were redeemed from proceeds from the Reinvestment Plan before the termination of the Offering and therefore, the proceeds available for future investment were reduced by $319,987. During the Offering, the Advisor received 38,481 restricted shares (including 717 from the Reinvestment Plan) in addition to the 10,000 shares purchased, which the Advisor has valued at $14.75 per share, pursuant to the terms of the Offering. As a result of the shares being redeemed the Advisor was required to return 172 shares as of December 31, 1994; no additional shares were required to be returned since then. During the offering period the price per share purchased pursuant to the Reinvestment Plan equaled $20. From November 30, 1994 (the termination of the offering period) until November 30, 1997 (the third anniversary of the final closing date), the price per share purchased pursuant to the Reinvestment Plan was equal to $19. Effective November 30, 1997, the Board adopted a policy to adjust the reinvestment price annually to reflect the net asset value of a share of the Company's shares of beneficial interest ($15.16 at December 31, 1998). Shares received pursuant to the Reinvestment Plan entitled participants to the same rights and treatment in the same manner as those issued pursuant to the Offering. In connection with shares issued pursuant to the Company's Reinvestment Plan which were not used for the Redemption Plan, the Company issued shares to the Advisor in an amount which equalled (after such issuance) 1% of the outstanding shares. Through the quarter ended March 31, 1997, the redemption price pursuant to the Redemption Plan was $19 per Eligible Share. As permitted by the provisions of the Redemption Plan, the Board of Trustees implemented the following change to the calculation of the redemption price for the quarter ended June 30, 1997: the original $19 per share redemption price was reduced to reflect any return of principal received by shareholders. As of June 30, 1997, the amount of principal which had been distributed to shareholders was $1.53 per share and, therefore, the redemption price was $17.47 per share ($19 per share less $1.53 per share) for redemptions which occurred in October 1997 for the -34- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS quarter ended June 30, 1997. The Board subsequently adopted a policy to adjust the redemption price annually to reflect the then net asset value of a share of the Company's shares of beneficial interest ($15.16 at December 31, 1998). This new policy was effective for redemptions with respect to quarters ended September 30, 1997 and thereafter. Under the Redemption Plan, any shareholder (except the Advisor who could not participate in the Redemption Plan) who acquired or received shares directly from the Company or the Reinvestment Plan (such shares, for so long as owned by the original holder, were called "Eligible Shares") could present such Eligible Shares to the Company for redemption. The Company was required to redeem such Eligible Shares presented for redemption for cash to the extent it had sufficient net proceeds ("Reinvestment Proceeds") from the sale of shares under the Reinvestment Plan. The full amount of Reinvestment Proceeds in any quarter was used to redeem Eligible Shares presented for redemption during such quarter. If the full amount of Reinvestment Proceeds available for redemption in any given quarter was insufficient to redeem all Eligible Shares presented for redemption during such quarter, the Company would redeem the Eligible Shares presented for redemption on a pro rata whole share basis, without redemption of fractional shares. A shareholder could present less than all their Eligible Shares to the Company for redemption, provided, however, that (i) they presented the lesser of all of their Eligible Shares or 125 Eligible Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan) for redemption, and (ii) if they retained any Eligible Shares, they must have retained at least 125 Eligible Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan). As a result of the adoption of the Proposals (see Note 1), the Company's Reinvestment Plan and Redemption Plan have been terminated, effective with the distribution for the quarter ended March 31, 1999. The final reinvestment of shares occurred on May 15, 1999. The final redemption of shares occurred on May 24, 1999. In addition, in connection with the listing of the Company's Shares on the American Stock Exchange, fractional shares totaling approximately 612 were redeemed on July 1, 1999. -35- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 10 - Selected Quarterly Financial Data (unaudited)
1999 Quarter Ended ----------------------------------------------------------------------- March 31 June 30 September 30 December 31 --------- --------- ------------ ----------- Revenues: Interest income: Mortgage loans $ 548,365 $ 666,585 $ 465,994 $ 888,957 GNMA certificates 199,646 196,898 195,315 193,732 Commercial mortgage-backed security-related investment 0 0 10,187 940,269 Note receivable 0 26,860 58,926 0 Temporary investments 96,528 262,386 221,459 512,244 Other income 0 4,231 19,000 0 --------- --------- --------- --------- Total revenues 844,539 1,156,960 970,881 2,535,202 --------- --------- --------- --------- Expenses: Interest 0 0 6,061 900,520 General and administrative 137,534 298,729 250,841 342,736 Organization costs 0 348,413 16,405 54 --------- --------- --------- --------- Total expenses 137,534 647,142 273,307 1,243,310 --------- --------- --------- --------- Other gain (loss): Net realized loss on repayment of GNMA certificates (86) (331) (485) (590) Net unrealized loss on commercial mortgage-backed security-related investment and government security sold short 0 0 0 (217,699) Gain on repayment of mortgage loans 3,273,202 0 0 0 --------- --------- --------- --------- Total other gain (loss) 3,273,116 (331) (485) (218,289) --------- ------------ --------- ---------- Net income $3,980,121 $ 509,487 $697,089 $1,073,603 ========= ========= ========= ========= Net income per share (basic and diluted) $ 1.03 $ .13 $ .18 $ .28 ========= ========= ========= =========
The results for the quarter ended March 31, 1999 reflect the gain on repayment of the Cove and Oxford mortgage loans. The results for the quarter ended June 30, 1999 reflect $348,413 of organization costs incurred in connection with the restructuring of the Company. The results for the quarter ended December 31, 1999 reflect Additional Interest of $411,911 on the Town and Country mortgage loan which had been fully reserved in prior quarters but was recognized in December of 1999 when deemed collectible. In addition, $195,958 which was shown as other income for the quarter ended June 30, 1999 was reclassified to interest income from mortgage loans to conform to the December 31, 1999 presentation. -36- AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS
1999 Quarter Ended ----------------------------------------------------------------------- March 31 June 30 September 30 December 31 --------- --------- ------------- ----------- Revenues: Interest income: Mortgage loans $ 845,699 $ 802,370 $ 787,949 $ 601,864 REMIC and GNMA certificates 233,385 230,184 217,714 199,397 Temporary investments 24,423 27,196 31,336 29,998 --------- --------- --------- --------- Total revenues 1,103,507 1,059,750 1,036,999 831,259 --------- --------- --------- ------- Expenses: General and administrative 140,532 167,901 186,345 147,269 Amortization 2,500 2,500 0 0 --------- --------- --------- --------- Total expenses 143,032 170,401 186,345 147,269 --------- --------- --------- --------- Other gain (loss): Net realized gain (loss) on repayment of REMIC and GNMA certificates (368) (249) 7,265 5,496 --------- --------- --------- --------- Net income $ 960,107 $ 889,100 $ 857,919 $ 689,486 ========= ========= ========= ========= Net income per share (basic and diluted) $ .25 $ .23 $ .22 $ .18 ========= ========= ========= =========
NOTE 11 - Commitments and Contingencies The Company is currently in the process of completing a loan venture with Federal National Mortgage Association ("Fannie Mae") which has agreed to fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Under the proposed transaction, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. NOTE 12 - Subsequent Events On January 18, 2000, one of the Company's GNMA certificates in the original amount of $3,928,615 (including the discount), with an amortized cost basis of $ 3,671,107 at December 31, 1999, was repaid in the amount of $3,551,736 along with a prepayment penalty of $177,587 which was received in February 2000. This repayment (including the prepayment penalty) resulted in a realized gain in the amount of approximately $58,000. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility with Nomura Asset Capital Corporation. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value FHA loans ownes by the Company. This facility has a term of 365 days and bears interest at LIBOR plus 1.25%. As of March 20, 2000, no amounts are outstanding under facility. -37- Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Company. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Item 11. Executive Compensation. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. Item 12. Security Ownership of Certain Beneficial Owners and Management. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. Item 13. Certain Relationships and Related Transactions. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. -38- PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential Page (a) 1. FINANCIAL STATEMENTS ---------- Independent Auditors' Report - Deloitte & Touche LLP Independent Auditors' Report - KPMG LLP 13 Balance Sheets as of December 31, 1999 and 1998 14 Statements of Income for the years ended December 31, 1999, 1998 and 1997 15 Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997 16 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 18 Notes to Financial Statements 20
(a) 2. FINANCIAL STATEMENT SCHEDULES All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto. (a) 3. EXHIBITS 1(a) Dealer Manager Agreement, dated March 29, 1993 as previously filed as an Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's Registration Statement No. 33-42481. 1(b) Form of Soliciting Dealer Agreement as previously filed as an Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's Registration Statement No. 33-42481. 3.4 Amended and Restated Declaration of Trust, dated as of March 29, 1993, as amended as of July 1, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. Amendment No. 2 to Amended and Restated Declaration of Trust, dated as of April 5, 1994 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. 3.4(c) Second Amended and Restated Declaration of Trust, dated as of April 6, 1999 (incorporated by reference to Exhibit 3.4(c) in the Company's March 31, 1999 Quarterly Report on Form 10-Q). 10(a) Escrow Agreement, dated as of April 16, 1993 and amended as of August 25, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. 10(b) Advisory Services Agreement, dated as of March 29, 1993, as amended as of October 26, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. Amendment to Advisory Services Agreement, dated as of December 31, 1993 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. Third Amendment to Advisory Services Agreement, dated as of March 29, 1994 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. -39- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (continued)
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10(c) TRI Capital Corporation Mortgage Note in the principal amount of $9,350,000 dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(d) Equity Loan Note in the principal amount of $1,156,000 dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(e) Bridge Loan Note in the principal amount of $115,790, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(f) Subordinated Promissory Note by Oxford Apartments, L.C., dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(g) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers, Allied Realty Services, Ltd. and American Mortgage Investors Trust, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(h) TRI Capital Corporation Mortgage Note in the principal amount of $6,800,000, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(i) Equity Loan Note in the principal amount of $840,500, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(j) Bridge Loan Note in the principal amount of $84,210, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(k) Subordinated Promissory Note by Cove Apartments, L.C., dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(l) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers, Allied Realty Services, Ltd. and American Mortgage Investors Trust, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(m) Cambridge Realty Capital LTD Mortgage Note in the principal amount of $9,348,000, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(n) Equity Loan Note in the principal amount of $1,039,000, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. -40- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (continued)
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10(o) Subordinated Promissory Note by Town and Country IV Apartments, L.C., dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(p) Limited Operating Guaranty between Leonard E. Wineburgh, Arnold H. Dwinn and the Company, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(q) American Capital Resource, Inc. Mortgage Note in the principal amount of $8,683,000 dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(r) Equity Loan Note in the principal amount of $563,000 dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(s) Subordinated Promissory Note by Columbiana Lakes Apartments, L.C., dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(t) Limited Operating Guaranty between Anderson G. Wise, Ronald P. Curry and the Company, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(u) Rockport Mortgage Corporation Mortgage Note in the principal amount of $8,500,000 dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(v) Equity Loan Note in the principal amount of $1,039,000 dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(w) Subordinated Promissory Note by SCI-ROEV East Haven Land Limited Partnership, dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(x) Limited Operating Guaranty between SCI Real Estate Development, Ltd., and Euro General East Haven, Inc., and the Company dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(y) Supplemental Mortgage Note by Columbiana Lakes Limited Partnership, dated as of April 1, 1999 incorporated by reference to Exhibit 10(y) in the Company's September 30, 1999 Quarterly Report on Form 10-Q. 10(z) Amended and Restated Advisory Services Agreement, effective as of April 6, 1999 incorporated by reference to Exhibit 10(z) in the Company's September 30, 1999 Quarterly Report on Form 10-Q. -41- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (continued)
Sequential Page ---------- 23(a) Consent of KPMG LLP with respect to incorporation by reference in its report in the Company's Registration Statement on Form S-3 (filed herewith). 37 23(b) Consent of Deloitte & Touche LLP with respect to incorporation by reference in its report in the Company's Registration Statement on Form S-3 (filed herewith). 27 Financial Data Schedule (filed herewith) 39 (b) REPORTS ON FORM 8-K Current Report on Form 8-K relating to the acquisition of a subordinated commercial mortgage-backed security, a repurchase facility payable, a government security sold short and an agreement with ARCap Investors L.L.C. was dated October 1, 1999 and was filed on October 19, 1999. Current Report on Form 8-K relating to the resignation of J. Michael Fried as Chairman of the Board of Trustees and Chief Executive Officer and Stuart J. Boesky as Chief Operating Officer and the unanimous appointment of Stuart J. Boesky as Chairman of the Board of Trustees and Chief Executive Officer was dated December 16, 1999 and was filed on January 5, 2000.
-42- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE ACCEPTANCE COMPANY (Registrant) Date: March 29, 2000 By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /s/ Stuart J. Boesky - - -------------------- Trustee, Chairman of the Board, Stuart J. Boesky President and Chief Executive March 29, 2000 Officer /s/ Peter T. Allen - - ------------------ Peter T. Allen Trustee March 29, 2000 /s/ Arthur P. Fisch - - ------------------- Arthur P. Fisch Trustee March 29, 2000 /s/ John B. Roche - - ----------------- Senior Vice President and John B. Roche Chief Financial Officer March 29, 2000 /s/ Richard A. Palermo - - ------------------- Vice President, Treasurer, Richard A. Palermo Controller and Chief Accounting March 29, 2000 Officer EX-23.(A) 2 EXHIBIT 23.(A) EXHIBIT 23(a) ACCOUNTANTS' CONSENT The Board of Trustees American Mortgage Acceptance Company We consent to incorporation by reference in the registration statement on Form S-3 (No. 33-42481) of American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) of our report dated January 15, 1999 except as to note 3 which is as of March 1, 1999, relating to the balance sheet of American Mortgage Acceptance Company as of December 31, 1998, and the related statements of income, changes in shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 1998, which report appears in the December 31, 1999 annual report on Form 10-K of American Mortgage Acceptance Company. /s/ KPMG LLP New York, New York March 20, 2000 EX-23.(B) 3 EXHIBIT 23.(B) EXHIBIT 23(b) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-42481 of American Mortgage Acceptance Company on Form S-3 of our report relating to the financial statements of American Mortgage Acceptance Company as of December 31, 1999 and for the year then ended dated March 20, 2000, appearing in this Annual Report on Form 10-K of American Mortgage Acceptance Company for the year ended December 31, 1999. /s/ DELOITTE & TOUCHE LLP New York, New York March 30, 2000 EX-27 4 EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR AMERICAN MORTGAGE ACCEPTANCE COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000878774 AMERICAN MORTGAGE ACCEPTANCE COMPANY 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 3,802,298 43,811,840 67,806,698 0 0 0 0 0 115,565,441 58,474,076 0 0 0 0 57,091,365 115,565,441 0 5,507,582 0 0 1,394,712 0 906,581 6,260,300 0 0 0 0 0 6,260,300 1.63 1.63
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