-----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, R2lcJfYoZM9Vr5jrbYzq2yAKCVTsCuDIm+gMNxpaU8nvcZ47eut7WsR1aRMC79fw vV3vpnBcKVtDgjSsi+C2bg== 0000912057-01-539905.txt : 20020410 0000912057-01-539905.hdr.sgml : 20020410 ACCESSION NUMBER: 0000912057-01-539905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1791624 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 a2063522z10-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 September 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
============== ============== SEPTEMBER 30, DECEMBER 31, 2001 2000 -------------- -------------- (UNAUDITED) ASSETS Investments in mortgage loans $ 25,104,648 $ 31,828,733 Investments in GNMA certificates- available for sale 46,868,805 5,851,219 Investment in ARCap 20,238,637 20,041,733 Investment in unconsolidated subsidiary 0 1,149,182 Cash and cash equivalents 1,102,239 1,632,652 Notes receivable 5,535,031 8,677,843 Accrued interest receivable 426,368 680,728 Other assets 636,699 576,223 -------------- -------------- Total assets $ 99,912,427 $ 70,438,313 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facilities payable $ 43,191,173 $ 12,655,940 Accrued interest payable 29,934 27,850 Accounts payable and accrued expenses 395,349 278,760 Due to Advisor and affiliates 184,157 1,008,387 Distributions payable 1,391,503 1,391,503 -------------- -------------- Total liabilities 45,192,116 15,362,440 -------------- -------------- 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 (14,655,543) (14,126,317) Accumulated other comprehensive gain (loss) 151,491 (22,173) -------------- --------------- Total shareholders' equity 54,720,311 55,075,873 ============== =============== Total liabilities and shareholders' equity $ 99,912,427 $ 70,438,313 ============== ===============
See accompanying notes to financial statements. 2 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
================================ ============================= THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------------- ----------------------------- 2001 2000 2001 2000 -------------------------------- ----------------------------- Revenues: Interest income: Mortgage loans $ 349,575 $ 500,295 $2,256,514 $1,188,021 GNMA certificates 859,754 117,701 1,354,307 355,962 Commercial mortgage- backed security-related investment 0 960,467 0 2,867,659 Notes receivable 126,943 0 233,882 0 Temporary investments 19,783 624,146 46,544 1,845,770 Equity in earnings of ARCap 604,356 0 1,788,137 0 Other income 39,677 298,660 70,463 444,828 ------------ ------------ ------------ ------------ Total revenues 2,000,088 2,501,269 5,749,847 6,702,240 ------------ ------------ ------------ ------------ Expenses: Interest 462,600 1,044,215 1,099,607 2,856,936 General and administrative 230,622 425,520 758,156 1,015,710 Amortization 5,187 26,227 35,228 60,229 ------------ ------------ ------------ ------------ Total expenses 698,409 1,495,962 1,892,991 3,932,875 ------------ ------------ ------------ ------------ Other gain (loss): Net gain (loss) on repayments of GNMA certificates and mortgage loans (211,572) (8,371) (211,572) 71,991 Net gain (loss) on commercial mortgage-backed security- related investment and government securities sold short 0 246,341 0 (464,436) ------------ ------------ ------------ ------------ Total other gain (loss) (211,572) 237,970 (211,572) (392,445) ------------ ------------ ------------ ------------ Net income $1,090,107 $1,243,277 $3,645,284 $2,376,920 ============ ============ ============ ============ Net income per share (basic and diluted) $ .28 $ .32 $ .95 $ .62 ============ ============ ============ ============ 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 SHARES OF BENEFICIAL INTEREST BENEFICIAL INTEREST ADDITIONAL DISTRIBUTIONS ----------------------------- -------------------- PAID-IN IN EXCESS SHARES AMOUNT SHARES AMOUNT CAPITAL OF NET INCOME ------------ --------------- ---------- --------- ---------- ------------- Balance at January 1, 2001 4,213,826 $421,383 (375,196) $(37,520) $68,840,500 $(14,126,317) Comprehensive income: Net income 0 0 0 0 0 3,645,284 Other comprehensive income: Net unrealized gain on GNMA Certificates: Net unrealized holding gain arising during the period Comprehensive income Distributions 0 0 0 0 0 (4,174,510) --------- -------- -------- -------- ----------- ------------ Balance at September 30, 2001 4,213,826 $421,383 (375,196) $(37,520) $68,840,500 $(14,655,543) ========= ======== ======== ======== =========== ============ ACCUMULATED OTHER COMPREHENSIVE COMPREHENSIVE INCOME INCOME (LOSS) TOTAL -------------- -------------- ----------- Balance at January 1, 2001 $(22,173) $55,075,873 Comprehensive income: Net income $3,645,284 0 3,645,284 Other comprehensive income: Net unrealized gain on GNMA Certificates: Net unrealized holding gain arising during the period 173,664 173,664 173,664 ----------- Comprehensive income $3,818,948 =========== Distributions 0 (4,174,510) ---------- ------------ Balance at September 30, 2001 $151,491 $54,720,311 ========== ============
See accompanying notes to financial statements. 4 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
=================================== NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------- 2001 2000 ----------------- ----------------- Cash flows from operating activities: Net income $ 3,645,284 $ 2,376,920 Adjustments to reconcile net income to net cash provided by operating activities: Gain on commercial mortgage-backed security-related investment 0 (996,801) Loss on government securities sold short 0 1,461,237 Net loss (gain) on repayments of GNMA Certificates and mortgage loans 211,572 (71,991) Equity in earnings of ARCap, in excess of distributions received (196,904) 0 Equity income in unconsolidated subsidiary 0 (17,209) Amortization - deferred financing costs 35,228 60,229 Amortization expense-loan premium and origination costs 41,066 148,521 Accretion of GNMA discount (16,413) (16,813) Accretion of deferred income (39,473) (16,587) Accretion of discount on commercial mortgage-backed security-related investment 0 (455,959) Amortization of deferred costs relating to the CMBS-related investment 0 7,485 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 3,048,541 Accrued interest receivable 254,360 254,967 Other assets 6,079 19,196 Due to Advisor and affiliates (797,634) (103,149) Accounts payable and accrued expenses 116,589 133,145 Accrued interest payable 2,084 (66,648) Deferred costs relating to the CMBS-related investment 0 (54,116) ------------- -------------- Net cash provided by operating activities 3,261,838 1,953,117 ------------- -------------- Cash flows from investing activities: Increase in investment in mortgage loans (19,794,035) (15,548,160) Proceeds from repayments of mortgage loans 0 9,975,438 Periodic principal payments of mortgage loans 193,512 68,315 Funding of in notes receivable (4,138,655) 0 Principal repayments of GNMA Certificates 244,103 3,874,003 Increase in investment in GNMA Certificates (6,556,117) 0 Costs relating to repayment of mortgage loan 0 (59,583) Increase in other assets (59,285) (335,903) ------------- -------------- Net cash used in investing activities (30,110,477) (2,025,890) ============= ==============
See accompanying notes to financial statements. 5 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (continued)
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------- 2001 2000 ----------------- ----------------- Cash flows from financing activities: Proceeds from repurchase facilities payable 30,535,233 2,056,000 Repayments of repurchase facilities payable 0 (1,122,000) Distribution paid to shareholders (4,174,510) (4,174,512) Increase in deferred loan costs (42,497) (159,631) Secured borrowings 0 8,794,081 --------------- -------------- Net cash provided by financing activities 26,318,226 5,393,938 --------------- -------------- Net (decrease) increase in cash and cash equivalents (530,413) 5,321,165 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 $ 1,102,239 $ 9,123,463 =============== ============== Supplemental information: Interest paid $ 1,097,524 $ 2,818,753 =============== ============== 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 ================ Adjustments due to contribution of mortgage loan to unconsolidated subsidiary: Increase in investment in unconsolidated subsidiary $ 1,140,000 Increase in note receivable 7,264,093 Decrease in investments in mortgage loans (8,404,093) --------------- $ 0 ===============
See accompanying notes to financial statements. 6 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 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 government insured and uninsured mortgages secured by multifamily properties, which may take the form of government insured first mortgages and uninsured mezzanine loans, construction loans and bridge loans. Additionally, the Company has indirectly invested in subordinate commercial mortgage-backed securities and may invest in other real estate assets, including non-multifamily mortgages. 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 September 30, 2001 and the results of its operations and its cash flows for the three and nine months ended September 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 September 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. In August of 2001, the FASB issued SFAS No, 143, "Accounting for Asset Retirement Obligations" (effective January 1, 2003) and SFAS No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets" (effective January 1, 2002). SFAS No. 143 requires the recording of the fair value of a liability for an asset retirement obligation in the period in which it is incurred. SFAS No. 144 supercedes existing accounting literature dealing with impairment and disposal of long-lived assets, including discontinued operations. It addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of, and expands current reporting for discontinued operations to include disposals of a "component" of an entity that has been disposed of or is classified as held for sale. The Company is in the process of evaluating the financial statement impact of the adoption these two standards. 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 September 30, 2001 (Unaudited) Note 2 - Investments in Mortgage Loans Information relating to investments in mortgage loans as of September 30, 2001 is as follows
INTEREST INCOME EARNED FINAL PERIODIC FACE CARRYING APPLICABLE MATURITY CALL INTEREST PAYMENT PRIOR AMOUNT OF OF AMOUNT TO THE PROPERTY DESCRIPTION DATE DATE RATE TERMS LIENS MORTGAGES MORTGAGES PERIOD (F) (C) (I) - --------- ----------- ----------- ---------- -------- ------ ---------- ----------- ---------------------- FIRST MORTGAGE LOANS (D): STABILIZED PROPERTIES Columbiana Lakes Columbia, SC (J) 204 Units 11/35 7.250% (A) $ - $ 8,919,374 $ 9,099,026 $ 426,528 Stony Brook II East Haven, CT 125 Units 6/37 12/06 7.625% (A) - 8,342,532 8,629,584 380,748 ----------------------------------- Subtotal First Mortgage Loans 17,261,906 17,728,610 807,276 ----------------------------------- MEZZANINE LOANS (E): STABILIZED PROPERTIES Columbiana Lakes Columbia, SC (J) 204 Units 11/35 20.670% (B) 8,919,374 563,000 146,536 175,000 Stony Brook II East Haven, CT 125 Units 6/37 12/06 15.330% (B) 8,342,532 763,909 394,960 117,870 Plaza at San Jacinto Houston, TX (G) 132 Units 1/43 6/11 11.000% (B) 6,638,000 1,150,000 1,121,039 225 ---------------------------------- Subtotal Stabilized Mezzanine Loans 2,476,909 1,662,535 293,095 ---------------------------------- PROPERTIES IN CONSTRUCTION The Hollows Greenville, NC 184 Units 1/42 TBD 10.000% (B) 8,372,426 (H) 1,549,200 1,376,731 220,875 Elmhurst Village Oveido, FL 313 Units 1/42 TBD 10.000% (B) 19,480,735 (H) 2,874,000 2,415,981 585,754 The Reserve at Autmn Creek Friendswood, TX 212 Units 1/42 TBD 10.000% (B) 13,218,490 (H) 1,987,000 1,920,791 349,514 ---------------------------------- Subtotal Construction Mezzanine Loans 6,410,200 5,713,503 1,156,143 ---------------------------------- Subtotal Mezzanine Loans 8,887,109 7,376,038 1,449,238 ---------------------------------- Total Mortgage Loans $26,149,015 $25,104,648 $2,256,514 ==================================
See accompanying notes to financial statements. 9 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (Unaudited) (A) Requires monthly payments of principal and interest based on a 40 year amortization period. Loans are subject to 5-year lockouts against prepayments, as well as a prepayment penalty structure during the second 5-year term of the loans. (B) Interest only payments are due monthly, with loan balance due at maturity. (C) Interest on the mezzanine loans is based on a fixed percentage of the unpaid principal balance of the related first mortgage loan (prior liens). The amount shown is the approximate effective rate earned on the balance of the mezzanine loan. The mezzanine loans also provide for payments of additional interest based on a percentage of cash flow remaining after debt service (generally 50%) and participation in sale or refinancing proceeds (generally 25%) (D) Interest and principal payments on first mortgage loans are insured by the U.S. Department of Housing and Urban Development. (E) The principal balance of the mezzanine loans is secured by the partnership interests of the entity that owns the underlying property and a third mortgage deed of trust. Interest payments on the mezzanine loans are secured by a second mortgage deed of trust and are guaranteed for the first thirty six months after construction completion by an entity related to the general partner of the entity that owns the underlying property. (F) Loans are subject to mandatory prepayment at the option of the Company 10 years after construction completion, with one year's notice. (G) The funding of this mezzanine loan is based on property level operational achievements. There is a remaining amount to fund of $100,000. The Company does not hold the first mortgage loan relating to this mezzanine loan. (H) The first mortgage loans related to those properties were converted into GNMA Certificates and are held by the Company (see Note 3). (I) Carrying amounts of mortgage loans include unamortized origination costs and fees. (J) During the third quarter of 2001, the Company arrived at a negotiated settlement with the borrower under the Columbiana Lakes loans. Under this agreement, the Company received approximately $9.3 million on October 1, 2001, in full settlement of the first mortgage loan and mezzanine loan, resulting in a loss on repayment of approximately $212,000, which was recorded during the third quarter of 2001. 10 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (Unaudited) Note 3 - Investments in GNMA Certificates-Available for Sale Information relating to investments in GNMA certificates as of September 30, 2001 and December 31, 2000 is as follows:
INTEREST INCOME AMORTIZED UNREALIZED EARNED DATE PURCHASED/ PRINCIPAL AT COST AT GAIN (LOSS) AT BALANCE AT APPLICABLE CERTIFICATE FINAL PAYMENT STATED SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER TO THE NAME NUMBER PAYMENT DATE INTEREST RATE 30,2001 30,2001 30,2001 30,2001 PERIOD - ----- ---------- ------------ ------------- ----------- ---------- ------------- ---------- ------------ Bear Stearns 0355540 7/27/94 7.125% $ 2,496,416 $ 2,482,644 $ 13,771 $ 2,496,415 $148,629 3/15/29 Malone Mortgage 0382486 7/28/94 8.500% 2,111,865 2,180,680 (74,094) 2,106,586 135,576 8/15/29 SunCoast Capital G22412 6/23/97 7.000% 982,697 982,339 28,376 1,010,715 57,646 Group, Ltd. 4/20/27 Hollows Apts. 511908 5/29/01 7.620% 8,372,426 8,372,426 (20,931) 8,351,495 251,509 7/15/02 Elmhurst Village 549390 6/28/01 7.745% 19,480,735 19,480,735 121,754 19,602,489 468,681 4/15/04 Reserve at 448747 6/28/01 7.745% 13,218,490 13,218,490 82,615 13,301,105 292,266 Autum Creek 7/15/02 ------------------------------------------------------------------------ Total $46,662,629 $46,717,314 $151,491 $46,868,805 $1,354,307 ========================================================================
11 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (Unaudited) The amortized cost, unrealized gain and fair value for the investment in GNMA Certificates at September 30, 2001 and December 31, 2000 were as follows:
SEPTEMBER 30, DECEMBER 31, 2001 2000 ------------- ------------- Amortized cost $46,717,314 $5,873,392 Gross unrealized gain (loss) 151,491 (22,173) ----------- ------------ Fair Value $46,868,805 $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 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 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 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 $996,801 during the nine months ended September 30, 2000 due to marked-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. 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 $1,461,237 during the nine months ended September 30, 2000 due to marked-to-market adjustments. On November 1, 2000, the Company, in accordance with the agreement with ARCap, sold the CMBS investment to ARCap and repaid its borrowing under the Bear Stearns Repurchase Facility (see Note 5), closed out its short sale 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 September 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 in Note 4. 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 one year. This facility 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 September 30, 2001, there was no outstanding balance. As of December 31, 2000, $7,138,940 was outstanding under The Nomura Repurchase Facility and the interest rate was 7.87%. 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 also entered into a repurchase facility with Nomura Securities International Inc. (the "Nomura Securities Repurchase Facility"). This facility enables the Company to borrow up to 95% of the fair market value of GNMA Certificates and other qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of September 30, 2001 and December 31, 2000, the amount outstanding under this facility was $43,191,173 and $5,517,000 and interest rates were 4.07% 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 September 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 nine months ended September 30, 2001 and 2000 were as follows, all of which are paid to the Advisor:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- ----------------------------- 2001 2000 2001 2000 ------------------------------ ----------------------------- Expense reimbursement $ 61,000 $ 102,130 $232,935 $291,103 Asset management fees 60,517 120,733 184,897 350,835 --------- --------- -------- -------- $ 121,517 $ 222,863 $417,832 $641,938 ======== ========= ======== ========
13 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (Unaudited) Note 7 - Earnings Per Share Basic net income per share in the amount $.28 and $.32 and $.95 and $.62 for the three and nine months ended September 30, 2001 and 2000, respectively, equals net income for the periods ($1,090,107 and $1,243,277 and $3,645,284 and $2,376,920, respectively), divided by the weighted average number of shares outstanding which was 3,838,630 for each period. Because the Company had no dilutive securities outstanding during the three and nine months ended September 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 program 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 program, 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, an unaffiliated third party, 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 $21.25 million, depending on the aggregate principal amount of the loans the Company originates under this program and will receive guaranty, loan origination and other fees The Company also guaranteed construction loans for which it has issued a forward commitment to originate a loan under the Fannie Mae program with respect to which it guarantees repayment of 100% of such construction loans. As of September 30, 2001, the Company had originated loans totaling approximately $2.2 million under the Fannie Mae program and has forward commitments for an additional approximate $6.8 million. The Company's maximum guaranty at September 30, 2001 is $9.0 million. Note 9 - Investment in Unconsolidated Subsidiary and Note Receivable As discussed in Note 8, 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 implemented as a result of 14 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (Unaudited) the REIT Modernization Act of 1999, which allows REITs to directly own taxable REIT subsidiaries, beginning after the year 2000. Note 10 - Subsequent Events. In November 2001, a distribution of $1,391,503, ($0.3625 per share) which was declared in September 2001, was paid to shareholders for the quarter ended September 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 September 30, 2001, there were 3,838,630 Shares outstanding. The Company's business plan focuses on government insured and uninsured mortgages secured by multifamily properties, which may take the form of government insured first mortgages and uninsured mezzanine loans, construction loans and bridge loans. Additionally, the Company has indirectly invested in subordinate commercial mortgage-backed securities and may invest in other real estate assets, including non-multifamily mortgages. As of September 30, 2001, the Company's mortgage investments consisted of two mortgage loans and six mezzanine loans originated by or on behalf of the Company, six GNMA mortgage-backed securities and pass-through certificates, three bridge loans and a preferred equity investment in ARCap Investors, L.L.C. ("ARCap"). During the nine months ended September 30, 2001, the Company converted three mortgage loans (Hollows Apartments, Elmhurst Village, and Reserve at Autumn Creek) to GNMA Certificates. This action was completed to take advantage of the additional liquidity of GNMA Certificates as compared with mortgage loans and 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 was 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 nine months ended September 30, 2001, cash and cash equivalents decreased approximately $530,000 primarily due to proceeds from repurchase facilities payable ($30,535,000) and cash provided by operating activities ($3,291,000), offset by investments in mortgage loans ($19,823,000), investments in GNMA Certificates ($6,312,000), increase in notes receivable ($4,139,000) and distributions to shareholders ($4,175,000). 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, result- 16 ing in a minimal amount of interest rate risk. The effect of prepayments 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. The yield on the mezzanine loans is based on a fixed percentage of the associated first mortgage loan, plus a percentage of the available cash flow produced by the underlying multifamily property, and a participation in sale or refinancing proceeds. The yield will vary based on the operating results of the property, its requirements for capital improvements, and the ability of the property owners to successfully sell or refinance the property. 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 September 30, 2001, there was no outstanding balance on this line. As of December 31, 2000, $7,138,940 was outstanding under The Nomura Repurchase Facility. Effective February 15, 2000, the Company also 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 September 30, 2001 and December 31, 2000, the amount outstanding under this facility was $43,191,173 and $5,517,000 and interest rates were 4.07% 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 program 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 program, 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, an unaffiliated third party, which will underwrite and service the loans for Fannie 17 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 $21.25 million, depending on the aggregate principal amount of the loans the Company originates under this program and will receive guaranty, loan origination and other fees The Company also guaranteed construction loans for which it has issued a forward commitment to originate a loan under the Fannie Mae program with respect to which it guarantees repayment of 100% of such construction loans. As of September 30, 2001, the Company had originated loans totaling approximately $2.2 million under the Fannie Mae program and has forward commitments for an additional approximate $6.8 million. The Company's maximum guaranty at September 30, 2001 is $9.0 million. Since the company entered into Fannie Mae loan program, the level of loan competition has increased, reducing the projected financing volume and profitability. As a result we are de-emphasizing this program and evaluating the possibility of transferring our rights and obligations in the Fannie Mae loan program. In November 2001, a distribution of $1,391,503 ($0.3625 per share), which was declared in September 2001, was paid to the shareholders for the quarter ended September 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 nine months ended September 30, 2001 and 2000 was $1,090,107 and $1,243,277 and $3,645,284 and $2,376,920, 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 nine months ended September 30, 2001 and 2000. Interest income from mortgage loans increased approximately $1,068,000 for the nine months ended September 30, 2001 as compared to 2000 primarily due to interest earned on the additional principal advances to the Hollows, Elmhurst Village and Autumn Creek prior to their conversion to GNMA certificates and Stonybrook while held by AMAC/FM, partially offset by the repayment of the Town and Country mortgage loan. Interest income from mortgage loans decreased approximately $151,000 for the three months ended September 30, 2001 as compared to 2000 primarily due to the conversion of the three aforementioned loans to GNMA certificates. Interest income from GNMA certificates increased approximately $742,000 and $998,000 for the three and nine months ended September 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 $960,000 and $2,868,000 was recorded for the three and nine months ended September 30, 2000; such investment was sold in October 2000. Interest income from cash and cash equivalents and temporary investments decreased approximately $604,000 and $1,799,000 for the three and nine months ended September 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 $127,000 and $234,000 was recorded for the three and nine months ended September 30, 2001; such investments were made since September 2000. Equity in earnings of ARCap in the amount of $604,000 and $1,788,000 was recorded for the three and nine months ended September 30, 2001. This investment was acquired in October 2000. 18 Other income in the amount of $40,000 and $70,000 was recorded for the three and nine months ended September 30, 2001 due to the guaranty and loan origination fees earned on loans in the Fannie Mae program. Other income for the three and nine months ended September 30, 2000 included approximately $295,000 of interest income from a note receivable from AMAC/FM. Effective January 1, 2001, AMAC/FM is consolidated for financial reporting purposes (see Note 9). Any interest due fom AMAC/FM to AMAC for the three and nine months ended September 30, 2001 was eliminated in Consolidation. Interest expense decreased approximately $582,000 and $1,757,000 for the three and nine months ended September 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. General and administrative expenses decreased approximately $195,000 and $258,000 for the three and nine months ended September 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. Amortization decreased approximately $21,000 and $25,000 for the three and nine months ended September 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 $14,000 was recorded for the nine months ended September 30, 2000, relating to the repayment of the Town & Country mezzanine loan and FHA insured mortgage loan on January 21, 2000. A gain of approximately $58,000 was recognized during the nine months ended September 30, 2000 from the repayment of a GNMA certificate. A loss of approximately $212,000 was recognized during the three months ended September 30, 2001 relating to the repayment of the Columbiana loans. A net loss on the commercial mortgage-backed security-related investment and government securities sold short in the amount of approximately $464,000 was recorded for the nine months ended September 30, 2000. These positions were liquidated in October of 2000. DISTRIBUTIONS Of the total distributions of $4,174,510 and $4,174,512 for the nine months ended September 30, 2001 and 2000, respectively, $317,654 ($.08 per share or 7.61%) and $1,836,883 ($.48 per share or 44%), respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of September 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 $14,435,381. 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 creditworthi- 19 ness 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. 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 $43.2 million of borrowings outstanding under these facilities at September 30, 2001, a 1% change in LIBOR would impact the Company's net income by approximately $432,000. 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. The three previously disclosed purported class actions against, among others, the advisor and property manager of Aegis Realty, Inc. ("Aegis") have been dismissed without prejudice. Aegis is a public company, which like the Company, is externally advised by affiliates of the company's advisor, related AMI Associates Inc.. Each of these three actions challenged Aegis' proposed acquisition of a property portfolio and development business owned by a third party, which transaction also involved the termination by Aegis of its external advisory agreements and purchase by Aegis of various assets owned by these external advisor's. Each suit alleged 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 company's advisor. 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. As of October 29, 2001, each of the three lawsuits had been dismissed without prejudice. No money was paid by any of the defendants to any plaintiff or plaintiff's attorney in connection with their dismissals. Item 2. Changes in Securities - None. Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K - None 21 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: November 14, 2001 By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Date: November 14, 2001 By: /s/ Michael I. Wirth -------------------- Michael I. Wirth Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----