-----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, WufqzBw8J3WLlZcRxiz/t2R7k0+r9TRCi/K0iiyafCeXt5AYmXJHxS5Qyc8zp5CY K8UrMPJIudSpn7ou2k443Q== 0000912057-01-528098.txt : 20010814 0000912057-01-528098.hdr.sgml : 20010814 ACCESSION NUMBER: 0000912057-01-528098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14583 FILM NUMBER: 1706696 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-Q 1 a2056772z10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ----- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 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 ------------------------------------ (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 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 --- --- PART I. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets
------------ ------------ JUNE 30, DECEMBER 31, 2001 2000 ------------ ------------ (UNAUDITED) ASSETS Investments in mortgage loans $ 25,938,405 $ 32,564,679 Investments in GNMA certificates- available for sale 40,309,471 5,851,219 Investment in ARCap 20,232,637 20,041,733 Investment in unconsolidated subsidiary 0 1,149,182 Cash and cash equivalents 12,320,002 1,632,652 Note receivable 2,837,439 8,677,843 Accrued interest receivable 514,517 680,728 Other assets 666,248 576,223 ------------ ------------ Total assets $102,818,719 $ 71,174,259 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facilities payable $ 45,099,616 $ 12,655,940 Accrued interest payable 51,749 27,850 Deferred income 709,925 735,946 Accounts payable and accrued expenses 295,609 278,760 Due to Advisor and affiliates 324,926 1,008,387 Distributions payable 1,391,503 1,391,503 ------------ ------------ Total liabilities 47,873,328 16,098,386 ------------ ------------ 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 421,383 421,383 Treasury shares of beneficial interest; 375,196 shares (37,520) (37,520) Additional paid-in capital 68,840,500 68,840,500 Distributions in excess of net income (14,354,146) (14,126,317) Accumulated other comprehensive gain (loss) 75,174 (22,173) ------------ ------------ Total shareholders' equity 54,945,391 55,075,873 ------------ ------------ Total liabilities and shareholders' equity $102,818,719 $ 71,174,259 ============ ============
See accompanying notes to financial statements 2 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------- ---------------------- 2001 2000 2001 2000 --------------------- ---------------------- Revenues: Interest income: Mortgage loans $1,018,687 $ 356,405 $1,906,939 $ 847,805 GNMA certificates 378,929 118,630 494,553 238,261 Commercial mortgage- backed security-related investment 0 956,530 0 1,907,192 Note receivable 61,626 0 106,939 0 Temporary investments 9,782 674,520 26,761 1,221,624 Equity in earnings of ARCap 591,781 0 1,183,781 0 Other income 24,719 0 30,786 0 --------------------- ---------------------- Total revenues 2,085,524 2,106,085 3,749,759 4,214,882 --------------------- ---------------------- Expenses: Interest 361,382 903,614 637,007 1,812,721 General and administrative 289,756 271,101 527,534 603,321 Amortization 10,357 40,450 30,041 54,101 --------------------- ---------------------- Total expenses 661,495 1,215,165 1,194,582 2,470,143 --------------------- ---------------------- Other gain (loss): Net gain (loss) on repayments of GNMA certificates and mortgage loans 0 (6,077) 0 80,362 Net loss on commercial mortgage- backed security-related investment and government securities sold short 0 (253,735) 0 (710,777) --------------------- ---------------------- Total other gain (loss) 0 (259,812) 0 (630,415) --------------------- ---------------------- Net income $1,424,029 $ 631,108 $2,555,177 $1,114,324 ===================== ====================== Net income per share (basic and diluted) $ .37 $ .16 $ .67 $ .29 ===================== ====================== Weighted average shares outstanding (basic and diluted) 3,838,630 3,838,630 3,838,630 3,838,630 ===================== ======================
See accompanying notes to financial statements 3 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
TREASURY SHARES OF ADDITIONAL SHARES OF BENEFICIAL INTEREST BENEFICIAL INTEREST PAID-IN --------------------------- -------------------- ----------- SHARES AMOUNT SHARES AMOUNT CAPITAL --------- -------- -------- -------- ----------- Balance at January 1, 2001 4,213,826 $421,383 (375,196) $(37,520) $68,840,500 Comprehensive income: Net income 0 0 0 0 0 Other comprehensive income: Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period Comprehensive income Distributions 0 0 0 0 0 --------- -------- -------- -------- ----------- Balance at June 30, 2001 4,213,826 $421,383 (375,196) $(37,520) $68,840,500 ========= ======== ======== ======== =========== ACCUMULATED DISTRIBUTIONS OTHER IN EXCESS COMPREHENSIVE COMPREHENSIVE OF NET INCOME INCOME INCOME (LOSS) TOTAL ------------- ------------- ------------- ----------- Balance at January 1, 2001 $(14,126,317) $(22,173) $55,075,873 Comprehensive income: Net income 2,555,177 $2,555,177 0 2,555,177 Other comprehensive income: Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period 97,347 97,347 97,347 ---------- Comprehensive income $2,652,524 ========== Distributions (2,783,006) 0 (2,783,006) ------------ -------- ----------- Balance at June 30, 2001 $(14,354,146) $ 75,174 $54,945,391 ============ ======== ===========
See accompanying notes to financial statements. 4 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
------------------------------ SIX MONTHS ENDED JUNE 30, ------------------------------ 2001 2000 ------------ ------------ Cash flows from operating activities: Net income $ 2,555,177 $ 1,114,324 Adjustments to reconcile net income to net cash provided by operating activities: Gain on commercial mortgage-backed security-related investment 0 (297,576) Loss on government securities sold short 0 1,008,353 Net gain on repayments of GNMA certificates and mortgage loans 0 (80,362) Equity in earnings of ARCap, in excess of distributions received (190,904) 0 Amortization - deferred financing costs 30,041 54,101 Amortization expense-loan premium and origination costs 3,217 103,837 Accretion of GNMA discount (10,982) (11,240) Accretion of deferred income (26,021) (3,858) Accretion of discount on commercial mortgage-backed security-related investment 0 (299,903) Amortization of deferred costs relating to the CMBS-related investment 0 5,502 Purchase of government security 0 (37,299,201) Government security sold short 0 33,541,350 Changes in operating assets and liabilities: Deposit with broker as collateral for security sold short 0 2,703,421 Accrued interest receivable 166,211 482,208 Other assets 5,590 (86,126) Due to Advisor and affiliates (674,294) (97,370) Accounts payable and accrued expenses 16,849 75,385 Accrued interest payable 23,899 439,563 Deferred costs relating to the CMBS-related investment 0 (53,139) ------------ ------------ Net cash provided by operating activities 1,898,783 1,299,269 ------------ ------------ Cash flows from investing activities: Increase in investment in mortgage loans (19,622,200) (9,302,732) Proceeds from repayments of mortgage loans 0 10,040,284 Periodic principal payments of mortgage loans 133,815 0 Increase in note receivable (1,423,689) 0 Principal repayments of GNMA Certificates 165,628 3,823,910 Costs relating to repayment of mortgage loan 0 (51,166) Increase in other assets (83,160) (35,693) ------------ ------------ Net cash (used in) provided by investing activities (20,829,606) 4,474,603 ------------ ------------
See accompanying notes to financial statements 5 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (continued)
--------------------------------- SIX MONTHS ENDED JUNE 30, --------------------------------- 2001 2000 ------------ ---------- Cash flows from financing activities: Proceeds from repurchase facilities payable 32,443,676 1,594,000 Repayments of repurchase facilities payable 0 (1,097,000) Distribution paid to shareholders (2,783,007) (2,783,008) Increase in deferred loan costs (42,496) (143,742) ------------ ---------- Net cash provided by (used in) financing activities 29,618,173 (2,429,750) ------------ ---------- Net increase in cash and cash equivalents 10,687,350 3,344,122 Cash and cash equivalents at the beginning of the period 1,632,652 3,802,298 ------------ ---------- Cash and cash equivalents at the end of the period $ 12,320,002 $7,146,420 ============ ========== Supplemental information: Interest paid $ 613,108 $1,373,158 ============ ========== Conversion of FHA mortgage loans to GNMA certificates: Investment in GNMA certificates $(34,515,534) Decrease in investment in mortgage loans 34,515,534 ------------ $ 0 ============ Consolidation of former unconsolidated subsidiary: Increase in investment in mortgage loans $ 8,353,294 Decrease in notes receivable (7,264,092) Decrease in investment in unconsolidated subsidiary (1,089,202) ------------ $ 0 ============
See accompanying notes to financial statements 6 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) 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. 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 business plan 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 direct and indirect subordinated interests in commercial mortgage-backed securities. The Company had been governed by a board of trustees comprised of two independent trustees and one trustee who is affiliated with Related Capital Company ("Related"), a nationwide, fully integrated real estate financial services firm. Effective June 12, 2001, at its annual meeting, the Company added two additional trustees, one an independent trustee, the other an affiliate of Related, bringing the total number of trustees to five. The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. The consolidated financial statements include the accounts of the Company and two wholly owned subsidiaries which it controls: AMAC Repo Seller and (effective January 2001) AMAC/FM Corporation. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, the "Company" as hereinafter used, refers to American Mortgage Acceptance Company and its subsidiaries. The consolidated financial statements of the Company have been prepared without audit. In the opinion of management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 2001 and the results of its operations and its cash flows for the three and six months ended June 30, 2001 and 2000. However, the operating results for the interim periods may not be indicative of the results for the full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. It is suggested that these financial state- 7 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) ments should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2000. 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. 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 was implemented by the Company on January 1, 2001. Because the Company does not utilize derivatives, implementation of this statement did not have a material effect on the Company's financial statements. In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations (SFAS 141) and Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). These statements establish new standards for accounting and reporting for business combinations and for goodwill and intangible assets resulting from business combinations. SFAS 141 applies to all business combinations initiated after June 30, 2001; the Company is required to implement SFAS 142 on January 1, 2002. Management believes that implementation of these statements will not have a material impact on the Company's financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. 8 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) Note 2 - Investments in Mortgage Loans Information relating to investments in mortgage loans as of June 30, 2001 and December 31, 2000 is as follows:
BASE INTEREST AMOUNTS ADVANCED RATE ON ----------------------------------------- FINAL MORTGAGE NON-INTEREST DATE OF MA- LOAN ADDITIONAL BEARING TOTAL DESCRIP INVEST- TURITY (HUD PARTICIPATION INTEREST MORTGAGE ADDITIONAL AMOUNTS PROPERTY -TION MENT DATE INSURED) RATES (C) RATE LOANS LOANS ADVANCED - -------- ------ ------- ------ -------- ------------- --------- ----------- -------------- ----------- Columbiana 204 4/94 8/29 7.90% 25%/- 0.778% $ 9,106,099 $ 563,000 $ 9,669,099 Lakes Apts. Apt. Columbia, Units (A) (B) SC Stony Brook 125 12/95 6/37 7.75% 1.378% 8,500,000 763,909 9,263,909 Village II Apt. Apts. Units (A) East Haven, CT Hollows 184 4/00 1/42 7.875% 50%/25% 1.4482% (D) 1,549,200 1,549,200 Apts. Apt. Greenville, Units NC Elmhurst 313 6/00 1/42 8.00% 50%/25% 1.3232% (D) 2,874,000 2,874,000 Village Apt. Oveida, FL Units Reserve at 212 8/00 12/41 8.00% 50%/25% 1.202% (D) 1,987,000 1,987,000 Autumn Apt. Creek Units Friends- wood, TX Plaza at 132 6/01 6/11 (E) 50%/50% 2.1735% 975,000 975,000 San Apt. (E) Jacinto Units La Porte, TX ----------------------------------------- Total $17,606,099 $8,712,109 $26,318,208 ========================================= INTEREST EARNED LESS BALANCE AT BALANCE AT BY THE 2001 NET JUNE DECEMBER COMPANY AMOR- INTEREST PROPERTY 30, 2001 31, 2000 FOR 2001 TIZATION EARNED - -------- ----------- ----------- ---------- ---------- ---------- Columbiana $ 9,495,686 $ 9,563,501 $ 558,053 $ (44,779) $ 513,274 Lakes Apts. Columbia, SC Stony Brook 9,057,519 748,665 377,143 (44,440) 332,703 Village II Apts. East Haven, CT Hollows 1,549,200 5,113,264 201,917 8,656 210,573 Apts. Greenville, NC Elmhurst 2,874,000 10,568,310 522,167 14,905 537,072 Village Oveida, FL Reserve at 1,987,000 6,570,939 310,856 2,461 313,317 Autumn Creek Friends- wood, TX Plaza at 975,000 San Jacinto La Porte, TX - ---------------------------------------------------------------------------------- Total $25,938,405 $32,564,679 $1,970,136 $ (63,197) $1,906,939 ==================================================================================
9 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) (A) The Mortgages have terms of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (B) Pledged as collateral in connection with a secured credit repurchase facility with Nomura Asset Capital Corporation (See Note 5). (C) In addition to the interest due at the base and additional interest rates, the Company is entitled to participation in certain cash flows from the underlying properties. The first percentage listed represents the Company's participation in cash flows remaining, if any, after payment of debt service: the second represents the Company's participation in sale or refinancing proceeds. (D) Effective 5/29/01 , 6/28/01 and 6/28/01, the mortgage loans for the Hollows Apartments, Elmhurst Village and Reserve at Autumn Creek, respectively, were converted to GNMA certificates. (E) The first mortgage loan for San Jacinto was underwritten by the Company, then funded by an unaffiliated third party. The Company has funded the additional equity loan for an amount of $975,000 and committed to fund an additional $275,000. The first mortgage bears interest at 7.125% per annum, is insured by HUD, and has a term of 40 years. 10 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) Note 3 - Investments in GNMA Certificates-Available for Sale Information relating to investments in GNMA certificates as of June 30, 2001 and December 31, 2000 is as follows:
ACCUM- DATE ORIGINAL ULATED PURCHASED PURCHASE AMORTI- /FINAL STATED PRICE PRINCIPAL DISCOUNT ZATION CERTIFICATE PAYMENT INTEREST INCLUDING AT JUNE AT JUNE AT JUNE SELLER NUMBER DATE RATE DISCOUNT 30, 2001 30, 2001 30, 2001 - ------ ----------- --------- -------- ---------- --------- --------- -------- GNMA Certificates - ----------------- Bear Stearns 0355540 7/27/94 7.125% $ 2,407,102 $ 2,503,354 $(231,560) $135,405 3/15/29 Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,116,243 (7,935) 4,844 8/15/29 SunCoast Capital Group, Ltd. G22412 6/23/97 7.000% 1,981,566 1,049,856 (6,890) 6,124 4/20/27 Hollows Apts. 511908 5/29/01 7.620% 8,002,108 8,002,108 0 0 7/15/02 Elmhurst Village 549390 6/28/01 7.745% 16,717,335 16,717,335 0 0 4/15/04 Reserve at Autumn Creek 448747 6/28/01 7.745% 9,796,091 9,796,091 0 0 7/15/02 ------------------------------------------------- Total $41,101,332 $40,184,987 $(246,385) $146,373 ================================================= UNREALIZED INTEREST LOAN GAIN EARNED ORIGINATION (LOSS)AT BALANCE BALANCE BY THE NET COSTS AT JUNE JUNE AT JUNE AT DECEMBER COMPANY 2001 INTEREST SELLER 30, 2001 30, 2001 30, 2001 31, 2000 FOR 2001 ACCRETION EARNED - ------ ------------- --------- ----------- ----------- -------- --------- --------- GNMA Certificates - ----------------- Bear Stearns $ 77,448 $ (2,479) $ 2,482,168 $2,498,175 $ 89,444 $ 9,811 $ 99,255 Malone Mortgage 71,874 (18,078) 2,166,948 2,159,906 90,152 351 90,503 SunCoast Capital Group, Ltd. 0 33,402 1,082,492 1,193,138 38,802 820 39,622 Hollows Apts. 0 (15,916) 7,986,192 0 94,051 0 94,051 Elmhurst Village 0 28,713 16,746,048 0 107,896 0 107,896 Reserve at Autumn Creek 0 49,532 9,845,623 0 63,226 0 63,226 ----------------------------------------------------------------------------------- Total $149,322 $75,174 $40,309,471 $5,851,219 $483,571 $10,982 $494,553 ===================================================================================
11 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) The amortized cost, unrealized gain and fair value for the investment in GNMA Certificates at June 30, 2001 and December 31, 2000 were as follows:
JUNE 30, DECEMBER 31, 2001 2000 ----------- ---------- Amortized cost $40,234,297 $5,873,392 Gross unrealized gain (loss) 75,174 (22,173) ----------- ---------- Fair Value $40,309,471 $5,851,219 =========== ==========
Note 4 - Commercial Mortgage-Backed Security-Related Investment and Short Sale; Investment in ARCap On September 30, 1999, the Company acquired from ARCap a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust. The CMBS investment, which was purchased for $35,622,358, had 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 the Bear Stearns Repurchase Facility (see Note 5). In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. Under the Agreement, the Company had the right to sell the CMBS investment to ARCap and purchase a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. This investment was accounted for as a trading asset and carried at estimated fair value, with changes in fair value included in earnings. Interest income was accrued as it became receivable, and included accretion of discounts, computed using the effective yield method, after considering estimated prepayments and credit losses. The Company recognized gains on this investment totaling $297,577 during the six months ended June 30, 2000 due to mark-to-market adjustments. On September 30, 1999, in order to mitigate the potential income statement effect of changes in the fair value of its CMBS investment caused by changes in interest rates, the Company entered into a short sale involving 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"). On March 16, 2000, the Company replaced the borrowed security by purchasing such security through Bear Stearns, and entered into an additional short sale contract involving the sale of a U.S. Treasury Note with a face amount of $34,512,000 and an annual coupon rate of 6.0% borrowed from Bear Stearns. On November 1, 2000, the Company terminated the short sale in connection with its sale of the associated CMBS investment. Short sale positions were carried at estimated fair value, with changes in fair value included in earnings. The Company recognized losses on these positions totaling $1,008,353 during the six months ended June 30, 2000 due to mark-to-market adjustments. On November 1, 2000, the Company, in accordance with the Agreement, sold the CMBS investment to ARCap and repaid its borrowing under the Bear Stearns Repurchase Facility (see Note 5), closed out its short sales position and purchased a preferred equity interest in ARCap in the face amount of $20,000,000, with a preferred dividend rate of 12%. This preferred equity interest was recorded at $19,640,637, representing the fair value of the CMBS investment at the date of the transaction, less the Bear Stearns Repurchase Facility repayment plus approximately $3.5 million in cash paid to ARCap. 12 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) NOTE 5 - Repurchase Facilities On September 30, 1999, the Company entered into a repurchase facility with Bear Stearns (the "Bear Stearns Repurchase Facility"), whereby Bear Stearns advanced $19,568,000 in cash towards the purchase of a CMBS-related investment (see Note 4). The Bear Stearns Repurchase Facility had a variable interest rate based on the one-month LIBOR rate plus 1.5%, which was adjusted on the first day of each month. The Bear Stearns Repurchase Facility was repaid November 1, 2000 in connection with the CMBS sale discussed above. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility with Nomura Asset Capital Corporation (the "Nomura Repurchase Facility") with a term of 1 year. 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. The Nomura Repurchase Facility was renewed February 15, 2001 for $40 million, with a one time option to increase to $60 million, a one year term and interest at LIBOR plus 1.25%. As of June 30, 2001 and December 31, 2000, $6,721,616 and $7,138,940, respectively, were outstanding under The Nomura Repurchase Facility and interest rates were 5.00% and 7.87%, respectively. Deferred costs relating to the Nomura Repurchase Facility are being amortized using the straight-line method over 364 days, which is the term of the facility. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International Inc. (the "Nomura Securities Repurchase Facility"). This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of June 30, 2001 and December 31, 2000, the amount outstanding under this facility was $38,378,000 and $5,517,000 and interest rates were 4.26% and 7.12%, respectively. Deferred costs of $101,169 relating to the Nomura Securities Repurchase Facility are being amortized using the straight-line method over five years. As of June 30, 2001, all GNMA certificates owned by the Company were pledged as collateral. NOTE 6 - Related Party Transactions The costs incurred to related parties for the three and six months ended June 30, 2001 and 2000 were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Expense reimbursement $110,935 $ 73,327 $171,935 $188,973 Asset management fees 67,333 108,158 124,380 230,102 -------- -------- -------- -------- $178,268 $181,485 $296,315 $419,075 ======== ======== ======== ========
Note 7 - Earnings Per Share Basic net income per share in the amount $. 37 and $.16 and $.67 and $.29 for the three and six months ended June 30, 2001 and 2000, respectively, equals net income for the periods ($1,424,029 and $631,108 and $2,555,177 and $1,114,324, respectively), divided by the weighted average number of shares outstanding which was 3,838,630 for each period. 13 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) Because the Company had no dilutive securities outstanding during the three and six months ended June 30, 2001 or 2000, diluted net income per share is the same as basic net income per share. Note 8 - Commitments and Contingencies The Company completed a loan venture with Fannie Mae which has agreed to fully 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 (see Note 9). Under the loan venture, 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, loan origination and other fees. As of June 30, 2001, the Company had originated loans totaling approximately $8.9 million under this program. Note 9 - Investment in Unconsolidated Subsidiary and Note Receivable The Company has entered into an agreement with Fannie Mae whereby the Company will provide first loss protection ("First Loss Obligation") on certain loans funded by Fannie Mae pursuant to a Master Financing and Loss Sharing Agreement. Through a consolidated subsidiary, AMAC/FM Corporation ("AMAC/FM"), and pursuant to a Guaranty and Security Agreement with Fannie Mae, the payment of the First Loss Obligation is guaranteed and secured by AMAC/FM's pledge and grant to Fannie Mae of a security interest on certain assets of AMAC/FM. AMAC/FM was capitalized by a contribution by the Company to AMAC/FM of the mortgage loan secured by Stony Brook Village II Apartments with a principal amount of $8,404,092. This contribution was recorded by AMAC/FM as a $7,264,093 loan from the Company via a subordinated promissory note, with a stated interest rate of 7.75% and a $1,140,000 capital contribution through the issuance of AMAC/FM non-voting common stock. During 2000, the Company accounted for its $1,140,000 investment in AMAC/FM under the equity method of accounting, because all of AMAC/FM's voting common shares were held by the Advisor and, therefore, the Company did not control AMAC/FM. During January 2001, all of the voting common stock of AMAC/FM, previously owned by the Advisor, was purchased by the Company, the effect of which is to make AMAC/FM a wholly owned, consolidated subsidiary of the Company. This change was due to the REIT Modernization Act of 1999, allowing REITS to directly own taxable REIT subsidiaries, beginning after the year 2000. 14 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2001 (Unaudited) Note 10 - Subsequent Events. During July 2001, the Company repaid approximately $6,500,000 of its borrowings under the Nomura Repurchase Facility. This repayment was made from funds received from increased borrowings under the Nomura Securities Repurchase Facility against the GNMA certificates, which were recently converted from FHA mortgage loans. In August 2001, a distribution of $1,391,503, which was declared in June 2001, was paid to the shareholder for the quarter ended June 30, 2001. 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. LIQUIDITY AND CAPITAL RESOURCES 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 June 30, 2001, there were 3,838,630 Shares outstanding. The Company's 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 direct and indirect subordinated interests in commercial mortgage-backed securities. As of June 30, 2001, the Company's mortgage investments consisted of two mortgage loans and six equity loans originated by or on behalf of the Company, six GNMA mortgage-backed securities and pass-through certificates and a preferred equity investment in ARCap Investors, L.L.C. ("ARCap"). During the three months ended June 30, 2001, the Company converted three mortgage loans (Hollows Apartments, Elmhurst Village, and Reserve at Autumn Creek) to GNMA mortgage backed securities. This action was completed to take advantage of the lower interest costs and higher leverage available under the Nomura Securities Repurchase Facility (see note 5). This conversion resulted in an additional $11,000,000 in borrowings. Approximately $6,500,000 was used to repay borrowings under the Nomura Repurchase Facility during July 2001. The remaining $4,500,000 will be used for further investments. 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. During the six months ended June 30, 2001, cash and cash equivalents increased approximately $10,687,000 primarily due to cash provided by financing activities ($29,618,000), principal repayments of GNMA certificates ($166,000), and cash provided by operating activities ($1,899,000), offset by investments in mortgage loans ($19,622,000) and distributions to shareholders ($2,783,000). 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. Certain of the Company's GNMAs are collateralized by mortgage loans on multifamily properties; these loans are generally less subject to prepayment. 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 effect of prepayments on yield is greater the 16 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. The Company's equity in the earnings of ARCap will generally be equal to the Company's preferred equity dividend rate of 12%, unless ARCap does not have earnings and cash flows adequate to meet this dividend requirement. ARCap's investment portfolio consists of subordinated commercial mortgage backed securities, whose yields depend, among other things, on the rate and timing of principal payments, the pass through rate, interest rate fluctuations and defaults on the underlying mortgages. The Company's investment in ARCap is illiquid and its carrying amount is not necessarily representative of the amount the Company would receive upon a sale of this investment. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility with the Nomura Asset Capital Corporation (the "Nomura Repurchase Facility"), with a term of one year. 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. The Nomura Repurchase Facility was renewed February 15, 2001, for $40 million, with a one time option to increase to $60 million, a one year term, and interest at LIBOR plus 1.25%. As of June 30, 2001 and December 31, 2000, $6,721,616 and $7,138,940, respectively, were outstanding under The Nomura Repurchase Facility. During July 2001, the Company repaid approximately $6,500,000 using proceeds from additional borrowings under the Nomura Securities Repurchase Facility which became available upon the conversion of FHA mortgage loans to GNMA certificates discussed earlier. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International Inc. (the "Nomura Securities Repurchase Facility"). This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of June 30, 2001 and December 31, 2000, the amount outstanding under this facility was $38,378,000 and $5,517,000 and interest rates were 4.26% and 7.12%, respectively. In order to qualify as a REIT under the Code, the Company must, among other things, distribute at least 90% 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. The Company completed a loan venture with Fannie Mae which has agreed to fully 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 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, loan origination and other fees. As of June 30, 2001, the Company has loans totaling approximately $8.9 million under this program. 17 In August 2001, a distribution of $1,391,503, which was declared in June 2001, was paid to the shareholders for the quarter ended June 30, 2001. 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 net income for the three and six months ended June 30, 2001 and 2000 was $1,424,029 and $631,108 and $2,555,177 and $1,114,324, 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. On an annualized basis, there was no such excess for the six months ended June 30, 2001 and 2000. Interest income from mortgage loans increased approximately $662,000 and $1,059,000 for the three and six months ended June 30, 2001 as compared to 2000 primarily due to interest earned on the additional principal advances to Elmhurst Village, Autumn Creek and The Hollows prior to their conversion to GNMA certificates, partially offset by the repayment of the Town and Country mortgage loan. Interest income from GNMA certificates increased approximately $260,000 and $256,000 for the three and six months ended June 30, 2001, primarily due to the conversion of three mortgage loans to GNMA certificates. Interest income from commercial mortgage-backed security-related investment in the amount of approximately $956,000 and $1,907,000 was recorded for the three and six months ended June 30, 2000; such investment was sold in October 2000. Interest income from temporary investments decreased approximately $665,000 and $1,195,000 for the three and six months ended June 30, 2001 as compared to 2000 primarily due to the reduced balances of temporary investments and termination of the deposits with brokers held as collateral for short sales. Interest income from notes receivable in the amount of approximately $62,000 and $107,000 was recorded for the three and six months ended June 30, 2001; such investments were made since September 2000. Equity in earnings of ARCap in the amount of $592,000 and $1,184,000 was recorded for the three and six months ended June 30, 2001. This investment was acquired in October 2000. Other income in the amount of $25,000 and $31,000 was recorded for the three and six months ended June 30, 2001 due to the guaranty and loan origination fees earned on loans in the Fannie Mae venture. Interest expense decreased approximately $542,000 and $1,176,000 for the three and six months ended June 30, 2001 as compared to 2000 due to the termination of the Bear Stearns Repurchase Facility and closing out of government securities sold short positions partially offset by higher interest expenses related to the Nomura Securities repurchase facilities due to higher outstanding balance. 18 General and administrative expenses decreased approximately $76,000 for the six months ended June 30, 2001 as compared to 2000 primarily due to a decrease in asset management fees payable to the Advisor due to the sale of commercial mortgage-backed security-related investment and a decrease in the reimbursements of certain administrative and other costs incurred by the Advisor on behalf of the Company. There was no significant difference for the three months ended June 30, 2001. Amortization decreased approximately $30,000 and $24,000 for the three and six months ended June 30, 2001 due to the deferred costs relating to the Nomura Repurchase Facility being fully amortized. A gain on the repayment of mortgage loans in the amount of approximately $22,000 was recorded for the six months ended June 30, 2000, relating to the repayment of the Town & Country additional loan and FHA insured mortgage loan on January 21, 2000. A gain of approximately $59,000 was recognized during the six months ended June 30, 2000 from the repayment of a GNMA certificate. There were no similar repayments or gains during the six months ended June 30, 2001. A net loss on the commercial mortgage-backed security-related investment and government securities sold short in the amount of approximately $254,000 and $711,000 was recorded for the three and six months ended June 30, 2000. These positions were liquidated in October of 2000. DISTRIBUTIONS Of the total distributions of $2,783,007 and $2,783,008 for the six months ended June 30, 2001 and 2000, respectively, $227,830 ($.06 per share or 8.19%) and $1,668,684, respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of June 30, 2001, 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 $14,345,557. 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. 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 prospective 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. 19 INFLATION Inflation did not have a material effect on the Company's results for the periods presented. 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 risk to which the investments of the Company is exposed is interest rate risk which is 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. The Company's borrowings under repurchase agreements bear interest at rates that fluctuate with LIBOR. Based on the $45.1 million of borrowings outstanding under these facilities at June 30, 2001, a 1% change in LIBOR would impact the Company's net income by approximately $451,000. Cash flows and income from the Company's other financial instruments, consisting primarily of mortgage loans, a preferred equity interest, GNMA certificates, and cash and cash equivalents, would not be significantly affected by changes in interest rates, because most of these instruments 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 preferred equity interest is carried on the equity method; although changes in interest rates would not directly impact the carrying value of this asset, they might adversely affect the ability of the underlying entity to meet its preferred distribution requirements. 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any material pending legal proceedings. INFORMATION REGARDING OTHER COMPANIES MANAGED BY AFFILIATES OF THE ADVISOR. On or about February 8, 2001, a complaint was filed in the New York Supreme Court, County of New York, against the external advisor and property manager of Aegis Realty, Inc. ("Aegis") Aegis is a public company, which like the Company, is externally advised by affiliates of the Manager. Also named as defendants in the suit were certain affiliates of Aegis' advisor and Messrs. Boesky, Hirmes, Ross, Brenner, Allen and Fisch, each of whom (other than Mr. Ross) is a Director of the Company. Aegis was also named as a nominal defendant. The action is entitled PAUL v. THE RELATED COMPANIES, L.P., et al., Index No. 01-600669, and is purportedly a class and derivative action. On or about March 23, 2001 a second action, entitled SCHNIPPER v. AEGIS REALTY, INC., et al., Case No. 219736 - V, was filed in the Circuit Court for Montgomery County, Maryland against Aegis and each of Aegis' five directors (Messrs. Boesky, Brenner, Hirmes, Allen and Fisch). SCHNIPPER is purportedly brought as a class action. On or about April 4, 2001 a third action, entitled OPPORTUNITY PARTNERS, L.P. v. STUART J. BOESKY, et al., Civ. No. 24-C-01-001579, was filed in the Circuit Court for Baltimore City, Maryland against, among others, Aegis, each of its five directors, the Advisor and the Property Manager. OPPORTUNITY PARTNERS is purportedly a class and derivative action. Each of these three actions challenges Aegis' proposed acquisition of a property portfolio and development business owned by a third party, which transaction also involves the termination by Aegis of its external advisory agreements and purchase by Aegis of various assets owned by these external advisor's. Each suit alleges that the defendants breached their fiduciary duties to the Aegis stockholders by, among other things, committing Aegis to pay unwarranted fees and other consideration to affiliates of the Aegis' manager. All three actions seek money damages, injunctive and declaratory relief and attorneys' fees. The transaction at issue in each suit, however, was approved by Aegis' independent directors (Messrs. Allen and Fisch), who first obtained legal advice and two fairness opinions from nationally recognized investment banking firms before approving those transactions. Additionally, the transaction at issue would not be consummated unless and until it was approved by Aegis' stockholders after proxy materials describing that transaction were disseminated to them. The defendants have advised the Company that they intend to defend all three actions vigorously. The defendants filed motions to dismiss the complaint in PAUL on or about April 16, 2001, in SCHNIPPER on or about July 17, 2001 and in OPPORTUNITY PARTNERS in or about July 23, 2001. The PAUL motion has been fully briefed and is awaiting a decision. Opposition papers have not yet been filed in either SCHNIPPER or OPPORTUNITY PARTNERS. On August 7, 2001, Aegis announced that it had terminated, by mutual consent with the third party, the transaction that is at issue in each suit. No action has yet been taken by any of the plaintiffs in response to Aegis's announcement. Although the transaction at issue was terminated for reasons unrelated to the three lawsuits, management believes that a collateral consequence of that termination is that the claims asserted in each of the three lawsuits are now moot. If the plaintiff in each action does not voluntarily dismiss the action because it is now moot, the defendants intend to apply to the applicable court for such relief in addition to or as an alternative to the pending motions to dismiss already filed by defendants. 21 Item 2. Changes in Securities - None. Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders A proxy and proxy statement soliciting the vote of the Company's shareholders for the Company's annual meeting of shareholders was sent to shareholders on or about April 30, 2001. Such meeting was held on June 12, 2001. Stuart Boesky, Peter Allen and Arthur Fisch were reelected as trustees for one year terms. Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K - None 22 SIGNATURES Pursuant to the requirements 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: August 14, 2001 By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Date: August 14, 2001 By: /s/ Michael I. Wirth -------------------- Michael I. Wirth Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----