-----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, QlkJk03OT8zbt4nbmAXcK2No9TcKI9ZVbSgLqAxbBDDrKCo+htnZY4tfvl6Hy+aW oa2XDwJuTa9AU138jV5vPQ== 0000950146-97-000496.txt : 19970430 0000950146-97-000496.hdr.sgml : 19970430 ACCESSION NUMBER: 0000950146-97-000496 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970401 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23972 FILM NUMBER: 97571980 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-K 1 AMERICAN MORTGAGE INVESTORS TRUST SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - - --- ACT OF 1934 For the fiscal year ended December 31, 1996 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23972 AMERICAN MORTGAGE INVESTORS TRUST (Exact name of registrant as specified in its governing instrument) Massachusetts 13-6972380 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 625 Madison Avenue, New York, New York 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-5333 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest, par value $.10 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] DOCUMENTS INCORPORATED BY REFERENCE Registrant's prospectus dated March 29, 1993, as supplemented April 22, 1993, August 9, 1993, November 9, 1993, January 31, 1994, April 25, 1994, September 2, 1994, November 9, 1994 and January 31, 1995, as filed with the Commission pursuant to Rules 424(b) and 424(c) of the Securities Act of 1933, but only to the extent expressly incorporated by reference in Parts I, II, III and IV. Index to exhibits may be found on page 41 Page 1 of 107 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURENCE OF UNANTICIPATED EVENTS. -2- PART I Item 1. Business. General American Mortgage Investors Trust (the "Company") is a business trust which was formed under the laws of the State of Massachusetts on June 11, 1991. The Company has elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The Advisor to the Company is Related AMI Associates, Inc., a Delaware corporation (the "Advisor"). The Advisor manages the day to day affairs of the Company under the control of the Company's trustees and pursuant to an Advisory Services Agreement, dated as of March 29, 1993 and as amended as of October 26, 1993, December 31, 1993 and March 29, 1994, between the Company and the Advisor (the "Advisory Services Agreement"). See Item 10, Directors and Executive Officers of the Registrant. The Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from the Advisor. On March 29, 1993, the Company commenced a public offering (the "Offering") through Related Equities Corporation (the "Dealer Manager"), an affiliate of the Advisor, and other broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of beneficial interest at an initial offering price of $20 per share. The Offering terminated as of November 30, 1994. As of December 31, 1996, a total of 3,809,601 shares have been sold to the public, either through the Offering or through the Company's dividend reinvestment plan (the "Reinvestment Plan"), representing Gross Proceeds (the "Gross Proceeds") of $76,192,021 (before volume discounts of $40,575) resulting in Net Proceeds available for investment of approximately $69,334,743 after volume discounts, payments of sales commissions and organization and offering expenses (the "Net Proceeds"). Net Proceeds from sales pursuant to the Reinvestment Plan are required to be used first to redeem shares under the Company's redemption plan (the "Redemption Plan"), and any remaining proceeds may be used for additional investments or working capital reserves. Pursuant to the Redemption Plan, which became effective November 30, 1994, the Company is required to redeem eligible shares presented for redemption for cash to the extent it has sufficient Net Proceeds from the sale of shares under the Reinvestment Plan. After November 30, 1994, 151,918 shares were sold through the Reinvestment Plan, the proceeds of which are restricted for use in connection with the Redemption Plan and are not included in gross proceeds. Pursuant to the Redemption Plan, as of December 31, 1996, 168,943 shares were redeemed for an aggregate price of $3,206,353. Of such redemptions, 16,931 shares were redeemed from proceeds from the Reinvestment Plan before the termination of the Offering and therefore the proceeds available for future investment were reduced by $319,987. In addition, the Advisor is authorized to receive 1% of all outstanding shares. During the Offering, the Advisor received 38,481 restricted shares (including 717 from the Reinvestment Plan) in addition to the 10,000 shares purchased, which the Advisor has valued at $14.75 per share, pursuant to the terms of the Offering. As a result of the shares being redeemed the Advisor was required to return 172 shares as of December 31, 1996. The Company's principal investment objectives are to: (i) preserve and protect the Company's capital; (ii) provide quarterly cash distributions; and (iii) provide additional distributions from additional interest arising from participations in the annual cash flow of the Developments (defined below) and/or the sale or refinancing of a Development. There can be no assurance that such objectives can be achieved. The Company has invested principally in two types of Mortgage Investments ("Mortgage Investments"): (i) new mortgage loans originated by or on behalf of the Company or by other lenders and sold to the Company prior to the loans being fully funded and (ii) Ginnie Mae mortgage-backed securities and pass-through certificates ("Originated Mortgages"); and existing mortgage loans that it acquires ("Acquired Mortgages") on multifamily residential rental properties ("Developments"). No more than 7% of the Net Proceeds may be invested -3- in non-interest bearing uninsured loans made directly to developers or sponsors of Developments (or the general partners or other principals of the owner of the Developments) with respect to which the Company holds a mortgage ("Additional Loans"). As of December 31, 1996, of the total Net Proceeds available for investment, 84.9% had been invested in Originated Mortgages (including 6.32% in Additional Loans) and 15.1% in Acquired Mortgages. Mortgage Investments As of December 31, 1996, the Company has made the following Mortgage Investments: Originated Mortgages The Cove Apartments On December 16, 1993, the Company funded an Originated Mortgage with respect to a 308 unit project known as The Cove Apartments located in Houston, Texas ("The Cove"). The Originated Mortgage is in the amount of $6,800,000 and is fully insured by HUD under Section 223(f) of the National Housing Act and applicable HUD regulations. The Company provided an additional $840,500 as a non-interest bearing Additional Loan to the developer and an additional loan-bridge loan in the amount of $84,210. On April 7, 1994, the additional loan-bridge loan was repaid in full. The Additional Loan was made by the Company directly to the developer to defray certain specific cash requirements in connection with the Development and is not insured. The Originated Mortgage has a term of 35 years, subject to mandatory prepayment any time after 10 years, upon 1 years notice, and bears interest at 7.625% to 9.23% during the permanent loan period (8.125% on the total of the Originated Mortgage and Additional Loan). In addition to the interest rate during the permanent loan period, the Company is entitled to 30% of cash flow remaining after payment of 9.23% interest and accrued interest, if any, and certain amounts from sale or refinancing proceeds. Payments at the rate of 9.23% were guaranteed by the developer until December 16, 1996. The Additional Loan has a term of ten years and is secured by an unrecorded mortgage, an assignment of the general partners' (Al L. Bradley, Jr. and Tim L. Myers) partnership interests in the owning entity (Cove Apartments, L.L.C.) and an assignment of the general partners' interests in surplus cash and residual proceeds. Within a two-mile radius of The Cove, there are ten properties which compete with The Cove. A current problem with curb appeal, due to defective siding has caused occupancies at The Cove to fall to 75.7%. The problem is being resolved and the property should do 90% occupancy shortly. See also, "Oxford on Greenridge Apartments" below. Oxford on Greenridge Apartments On December 16, 1993, the Company funded an Originated Mortgage with respect to a 405 unit project known as Oxford on Greenridge Apartments located in Houston, Texas ("Oxford on Greenridge"). The Originated Mortgage is in the amount of $9,350,000 and is fully insured by HUD under Section 223(f) of the National Housing Act and applicable HUD regulations. The Company provided an additional $1,156,000 as a non-interest bearing Additional Loan to the developer and an additional loan-bridge loan in the amount of $115,790. On April 7, 1994 the additional loan-bridge loan was repaid in full. The Additional Loan was made by the Company directly to the developer to defray certain specific cash requirements in connection with the Development and is not insured. The Originated Mortgage has a term of 35 years, subject to mandatory prepayment at any time after 10 years, upon 1 years notice, and bears interest at 7.625% to 9.23% during the permanent loan period (8.125% on the total of the Originated Mortgage and Additional Loan). In addition to the interest rate during the permanent loan period, the Company is entitled to 30% of cash flow remaining after payment of 9.23% interest and accrued interest, if any, and certain amounts from sale or refinancing proceeds. Payments at the rate of 9.23% were guaranteed by the developer until December 16, 1996. The Additional Loan has a term of ten years and is secured by an unrecorded mortgage, an assignment of the general partners' (Al L. Bradley, Jr. and Tim L. Myers) partnership interests in the owning entity (Oxford Apartments, L.L.C.) and an assignment of the general partners' interests in surplus cash and residual proceeds. -4- Within a three-mile radius of Oxford on Greenridge, there are seven properties which compete with Oxford on Greenridge. Although The Cove is also located in the Houston area, Oxford on Greenridge is situated over 30 miles away from The Cove. As a result of the physical distance between The Cove and Oxford on Greenridge, the Company does not believe that the two properties compete with each other. Nevertheless, there are additional risks associated with the loans on both of these properties. These risks include the Company's concentration of real estate loans in the Houston area and the fact that both of the Additional Loans were made to the same borrower. The current market demand for rental apartment units in the immediate area has caused Oxford on Greenridge to achieve a 93.5% occupancy rate at competitive levels. Town and Country IV Apartments On April 24, 1994, the Company funded an Originated Mortgage with respect to a 330 unit project known as Town & Country IV Apts. located in Urbana, Illinois ("Town and Country IV"). The Originated Mortgage is in the amount of $9,348,000 and is fully insured by HUD under Section 223(f) of the National Housing Act and applicable HUD regulations. The Company provided an additional $1,039,000 as a non-interest bearing Additional Loan to the developer. The Additional Loan was made by the Company directly to the developer to defray certain specific cash requirements in connection with the Development and is not insured. The Originated Mortgage has a term of 35 years, subject to mandatory prepayment at any time after 12 years, upon 1 years notice, and bears interest at 7.375% to 9.167% during the permanent loan period (8.25% on the total of the Originated Mortgage and Additional Loan). In addition to the interest rate during the permanent loan period, the Company will be entitled to 30% of cash flow remaining after payment of 9.167% interest and accrued interest, if any, and certain amounts from sale or refinancing proceeds. Payments at the rate of 9.167% are guaranteed by the developer until June 1997. The Additional Loan has a term of twelve years and is secured by an unrecorded mortgage, an assignment of the general partners' (Leonard Wineburgh and Arnold Dwinn) partnership interests in the owning entity (Town and Country Estates, Ltd.) and an assignment of the general partners' interests in surplus cash flow and residual proceeds. Within the Urbana submarket, there are a number of properties which compete with Town & Country IV. The Company does not believe that the three preceding projects, Town & Country, Phases I, II & III, directly compete with Town and Country IV because they are significantly older and of a different architectural style. The current market demand for rental apartment units in the submarket has caused the project to achieve a 97% occupancy rate at competitive rent levels. Columbiana Lakes Apartments On April 28, 1994, the Company funded an Originated Mortgage with respect to the construction of a 204 unit project known as Columbiana Lakes Apts. located in Columbia, South Carolina ("Columbiana Lakes"). The Originated Mortgage is in the amount of $8,683,000 and is fully insured by HUD under Section 221(d)(4) of the National Housing Act and applicable HUD regulations. As of December 31, 1996, $8,016,128 of the mortgage loan had been funded. The Company provided an additional $563,000 as a non-interest bearing Additional Loan to the developer. The Additional Loan was made by the Company directly to the developer to defray certain specific cash requirements in connection with the Development and is not insured. The Originated Mortgage has a term of approximately 40 years, subject to mandatory prepayment at any time after 10 years, upon 1 years notice, and bears interest at 7.40% during the construction period and at 7.90% to 8.678% during the permanent loan period (8.15% on the total of the Originated Mortgage and Additional Loan). In addition to the interest rate during the permanent loan period, the Company will be entitled to 25% of cash flow remaining after payment of 8.678% interest and accrued interest, if any, and certain amounts from sale or refinancing proceeds. Payments at the rate of 8.678% are guaranteed by the developer until December 1998. The Additional Loan has a term of ten years plus the construction period and is secured by an unrecorded mortgage, an assignment of the general partner's (Ronald P. Curry) and limited partner's (Anderson G. Wise) interests in the owning entity (Columbiana Lakes Limited Partnership) and an assignment of the general partner's and limited partner's interests in surplus cash flow and residual proceeds. -5- Within a two mile radius of Columbiana Lakes there are eight properties of which only two are expected to compete with Columbiana Lakes. Monthly construction draws will be disbursed to Columbiana Lakes based on percentage completion of the Development's construction as approved by HUD. The current market demand for rental apartment units in the submarket has caused the initial lease-up of the project to reach an 84% occupancy rate at competitive rent levels. Stony Brook Loan On December 15, 1995, the Company committed to fund two loans in the aggregate amount of $9,263,909 (the "Stony Brook Loan" or "Total Loan"), to SCI-ROEV East Haven Land, L.P., a Connecticut limited partnership (the "SCI-ROEV Partnership" or "Mortgagor"). Stony Brook commenced construction in December 1995. The Mortgagor's general partners (the "General Partners") are SCI Real Estate Development, Ltd., and ROEV General, Inc. The Stony Brook Loan, described below, provided construction and permanent financing in connection with the construction of 125 apartment units known as Stony Brook Village II Apartments in East Haven, Connecticut ("Stony Brook II"). The Total Loan is comprised of (i) an Originated Mortgage to the Mortgagor in an amount of $8,500,000 (the "Mortgage Loan") and (ii) a non-interest bearing Additional Loan to the General Partners in an amount of $763,909 has been funded. As of December 31, 1996, $6,294,663 of the Mortgage Loan had been funded. The Mortgage Loan was made by Rockport Mortgage Corporation ("Rockport"), an unaffiliated third party, on behalf of the Company. Rockport received the funds to make the Mortgage Loan from the Company, which purchased a 100% participation interest from Rockport. The Mortgage Loan, which has a term of 40 years, is evidenced by a note (the "Mortgage Note") and secured by a non-recourse first mortgage or deed of trust encumbering the Project. The Mortgage Note provides for interest at a rate (the "Note Rate") of 8.625% during the construction period (7.914% on the Total Loan), and 7.75% during the permanent loan period (7.111% on the Total Loan), commencing 60 days after completion of construction and continuing until maturity (the "Permanent Loan Period"). It is anticipated that the construction period for Stony Brook II will last approximately 16 months. Construction commenced in December 1995. The Mortgage Loan, with interest at the Note Rate, is insured by HUD under Section 221 (d) (4) of the National Housing Act and applicable HUD regulations. During the Permanent Loan Period, all interest rates stated herein include a servicing fee of 0.125% per annum on the Mortgage Loan (0.1147% on the Total Loan) payable to Rockport. Failure to make any payments due under the Mortgage Note will constitute a default under HUD regulations. Notwithstanding the Note Rate, during the Permanent Loan Period, the Company is entitled to (a) interest on the Mortgage Loan, at the rate of 9.128% per annum (8.375% on the Total Loan) (the "Annual Yield"), (b) 40% of distributable cash remaining, if any, after payment of the Annual Yield and all accrued payments of Annual Yield due on the Mortgage Loan, and (c) 35% of net proceeds from capital transactions (such as the (i) sale of the Project, (ii) sale of a substantial interest in the SCI-ROEV Partnership, (iii) refinancing or full prepayment of the Total Loan, (iv) acceleration or (v) default) remaining, if any, after payment of the Annual Yield and all accrued payments of Annual Yield due on the Mortgage Loan. This amount, in excess of the Note Rate, is collectively referred to as "Additional Interest". In no event will the Mortgagor be liable for an aggregate amount in excess of 50% of distributable cash or net proceeds after payment of the Note Rate. -6- GNMA Certificates The Company used a portion of the net proceeds of its Offering to purchase three Ginnie Mae Guaranteed FHA Insured Project Loan Backed Certificates from unaffiliated third parties. The full amount of the purchase price of each of the GNMA Certificates was allocated as a permanent Originated Mortgage. The following table outlines pertinent information relating to the GNMA Certificates:
Principal Balances at Purchase Price 12/31/96 Stated Final Certificate Date -------------------- Including Interest Payment Seller Number Purchased % Amount Prem/(Disc) Rate Date - - ------ --------- --------- ------- ---------- ----------- -------- -------- Bear, Stearns & Co. 0355540 7/27/94 90.7500% $2,407,102 $2,367,410 7.125% 3/15/2029 Malone Mortgage Co. 0382486 7/28/94 99.6250 2,197,130 2,172,525 8.500 8/15/2029 Goldman, Sachs 0328502 7/29/94 99.9063 3,928,615 3,780,267 8.250 7/15/2029
Acquired Mortgages REMIC Certificates The Company used a portion of the net proceeds of its Offering to purchase six REMIC Certificates from unaffiliated third parties. Except as set forth in the notes to the table, each of the REMIC Certificates was purchased as a permanent Acquired Mortgage. The following table outlines pertinent information relating to the REMIC Certificates:
Principal Balances at Purchase Price 12/31/96 Stated Final Certificate Date -------------------------- Including Interest Payment Seller Number Purchased % Amount Prem/(Disc) Rate Date - - ------ --------- --------- ------- ---------- ----------- -------- -------- Bear, Stearns & Co. 1992-17G (1) 8/27/93 101.609375% $10,160,938 $ 0 6.50% Sold(1) Bear, Stearns & Co. G-024C (2) 10/26/93 100.00 4,838,600 0 4.85 Sold(2) Meridan Capital Markets 1292ZA (3) 10/25/94 98.96875 1,721,291 335,245 5.75 6/15/97 Meridan Capital Markets 1992-153A (3) 10/25/94 97.875 258,357 60,113 5.25 9/25/97 Meridan Capital Markets 1580A (3) 10/27/94 99.3125 742,538 213,073 6.50 9/15/98 Meridan Capital Markets 1258C (3) 11/9/94 100.375 269,658 28,677 7.35 5/15/2004
(1) On October 15, 1993 the Company allocated $5,000,000 of the principal face value as an Acquired Mortgage based on the expectation that a majority of the investment would be held for at least two years. Based on such allocation, compensation was paid to the Advisor. The Advisor has undertaken to reimburse the Company for any compensation paid to it which is attributable to the portion of any REMIC Certificate which is sold to support the Company's distribution policy (the "Advisor's Reimbursement Undertaking"). On November 4, 1993 and February 1, 1994, the Company sold $200,000 and $200,000, respectively, of the REMIC Certificate and the Advisor has reimbursed the Company for the fees previously paid and the trading loss incurred with respect to the portions of the REMIC Certificate which were sold. Also on March 30, 1995, the Company sold $4,500,000 of the temporary portion at the discounted price of 90.9375% or $4,092,188. The realized loss on this sale -7- was $447,472. Also on August 15, 1996, the Company sold the remaining balance of the temporary and permanent portions of the REMIC Certificate which totaled $5,100,000. The realized loss on this sale was $328,895. The REMIC Certificate represented a beneficial ownership interest in Fannie Mae REMIC Trust 1992-17. The assets of the trust consisted primarily of interests in a separate trust which held Fannie Mae Guaranteed Pass-Through Certificates (the "MBS Certificates"), each of which represented a beneficial interest in a pool of first lien, fixed-rate residential mortgage loans (the "Mortgage Loans"). The Company was entitled to monthly interest payments on the outstanding principal amount of the REMIC Certificate. (2) Represented an FHLMC Mortgage Participation Certificate. On May 4, 1994, the Company allocated $2,419,300 of the principal face value as a permanent Acquired Mortgage based on the expectation that a majority of the investment would be held for at least two years. Based upon such allocation, compensation was paid to the Advisor. On May 5, 1994, the Company sold $1,000,000 of the permanent portion of the Mortgage Participation Certificate and on October 11, 1994, the Company sold the remaining balance of the temporary and permanent portions of the Mortgage Participation Certificate which totaled $3,838,600. Pursuant to the Advisor's Reimbursement Undertaking, the Advisor has reimbursed the Company for the fees previously paid and the trading loss incurred with respect to the permanent investment portion of the certificate which was sold. A loss of $297,836 was recorded on these sales in 1994. (3) Purchased as a permanent investment using a portion of the proceeds from the sale of FHLMC REMIC Certificate #G-024C. See (2) above. FHA Insured Project Loan The Company used a portion of the net proceeds of its Offering to purchase a FHA Insured Project Loan from an unaffiliated third party. The full amount of the purchase price was allocated as a permanent Acquired Mortgage. The table set forth below outlines pertinent information relating to the FHA Insured Project Loan:
Principal Balances at Purchase Price 12/31/96 Stated Final Certificate Date -------------------- Including Interest Payment Seller Number Purchased % Amount Prem/(Disc) Rate Date - - ------ --------- --------- ------- ---------- ----------- -------- -------- Donaldson Lufkin & Jenrette 092-11005 1/3/95 96.6875% $3,374,679 $3,295,340 8.60% 4/1/2019
Competition As described above, the Company's business is affected by competition to the extent that the underlying properties from which it is to derive interest and principal payments may be subject to competition from neighboring properties. -8- Employees The Company does not directly employ anyone. All services are performed for the Company by the Advisor and its affiliates. The Advisor receives compensation in connection with such activities as set forth in Item 8, Financial Statements and Supplementary Data, Item 11, Executive Compensation and Item 13, Certain Relationships and Related Transactions. In addition, the Company reimburses the Advisor and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Company in accordance with the Declaration of Trust. Item 2. Properties. The Company does not own or lease any property. Item 3. Legal Proceedings. The Company is not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Shareholders. No matters were submitted to a vote of shareholders during the fourth quarter of the fiscal year covered by this report through the solicitation of proxies or otherwise. PART II Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters. The Offering terminated as of November 30, 1994. As of December 31, 1996, a total of 3,809,601 shares have been sold to the public, either through the Offering or the Company's dividend reinvestment plan (the "Reinvestment Plan"), representing Gross Proceeds of $76,192,021 (before volume discounts of $40,575). Pursuant to the Redemption Plan, which became effective November 30, 1994, the Company is required to redeem eligible shares presented for redemption for cash to the extent it has sufficient net proceeds from the sale of shares under the Reinvestment Plan. After November 30, 1994 151,918 shares were sold through the Reinvestment Plan, the proceeds of which are restricted for use in connection with the Redemption Plan and are not included in gross proceeds. Pursuant to the Redemption Plan as of December 31, 1996, 168,943 shares were redeemed for an aggregate price of $3,206,353. The number of shareholders as of December 31, 1996 was 3,575. Although the shares are freely transferable, shareholders may not be able to liquidate their investment because the shares are not intended to be included for listing or quotation on any established market and no public trading market is expected to develop for the shares, although there may be an informal market. Shares may, therefore, not be readily accepted as collateral for a loan. Furthermore, even if an informal market for the sale of shares develops, a shareholder may only be able to sell its shares at a substantial discount from the public offering price. Consequently, the purchase of shares should be considered only as a long-term investment. Reinvestment Plan A Reinvestment Plan is available which enables shareholders to have their distributions from the Company invested in shares of the Company, or fractions thereof. The Reinvestment Plan became effective on March 29, 1993, the effective date of the Offering. During the offering period the price per share purchased pursuant to the Reinvestment Plan equaled $20. From November 30, 1994 (the termination of the offering period) until November 30, 1997 (the third anniversary of the final closing date), the price per share purchased pursuant to the Reinvestment Plan will equal $19. Thereafter, the price per share purchased pursuant to the Reinvestment Plan will be the greater of $20 (the -9- public offering price) or 95% of the then fair market value of such share (as determined by the Advisor under procedures adopted by the Board of Trustees). Shares received pursuant to the Reinvestment Plan will entitle participants to the same rights and be treated in the same manner as those issued pursuant to the Offering. In connection with shares issued pursuant to the Company's Reinvestment Plan, the Company will issue shares to the Advisor in an amount which will equal (after such issuance) 1% of the outstanding shares. Experience under the Reinvestment Plan may indicate that changes are desirable. The Company's Declaration of Trust gives the Trustees broad powers to renew, modify, extend, consolidate or cancel the Company's Reinvestment Plan without the consent of shareholders. Redemption Plan The Company's Redemption Plan became effective November 30, 1994. Under the Redemption Plan, any shareholder (except the Advisor who cannot participate in the Redemption Plan) who acquired or received shares directly from the Company or the Reinvestment Plan (such shares, for so long as owned by the original holder, are called "Eligible Shares") may present such Eligible Shares to the Company for redemption. The Company is required to redeem such Eligible Shares presented for redemption for cash to the extent it has sufficient net proceeds ("Reinvestment Proceeds") from the sale of shares under the Reinvestment Plan. There is no assurance that there will be Reinvestment Proceeds available for redemption and, accordingly, an investor's shares may not be redeemed. The full amount of Reinvestment Proceeds in any quarter will be used to redeem Eligible Shares presented for redemption during such quarter. If the full amount of Reinvestment Proceeds available for redemption in any given quarter is insufficient to redeem all Eligible Shares presented for redemption during such quarter, the Company will redeem the Eligible Shares presented for redemption on a pro rata whole share basis, without redemption of fractional shares. Upon presentment of Eligible Shares to the Company for redemption, the redemption price will be $19 per Eligible Share. The Trustees, in their sole discretion, may determine that it is appropriate to pay a higher price than described above. The redemption price of $19 will be reduced by that portion of all distributions received with respect to such share which represent principal payments. A shareholder may present less than all his Eligible Shares to the Company for redemption, provided, however, that (i) he must present the lesser of all of his Eligible Shares or 125 Eligible Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan) for redemption, and (ii) if he retains any Eligible Shares, he must retain at least 125 Eligible Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan). Pursuant to the Redemption Plan, through March 27, 1997, the Company redeemed 168,943 shares aggregating $3,206,353. The Trustees, may amend or suspend the Redemption Plan at any time they determine, in their sole discretion, that it is in the best interest of the Company. -10- Distribution Information Cash distributions per share for the years ended December 31, 1996 and 1995 were as set forth in the following table: Cash Distribution Total Amount for Quarter Ended Date Paid Per Share Distributed ----------------- --------- --------- ----------- March 31, 1996 5/15/96 $ .3575 $1,373,248 June 30, 1996 8/14/96 .3615 1,388,505 September 30, 1996 11/14/96 .3655 1,403,765 December 31, 1996 2/14/97 .3655 1,403,765 ------- ---------- Total for 1996 $1.4500 $5,569,283 ------- ---------- March 31, 1995 5/15/95 $ .3575 $1,373,469 June 30, 1995 8/14/95 .3615 1,388,505 September 30, 1995 11/14/95 .3655 1,403,816 December 31, 1995 2/14/96 .3655 1,403,765 ------- ---------- Total for 1995 $1.4500 $5,569,555 ------- ---------- Quarterly distributions were made 45 days following the close of the calendar quarter and were funded from cash provided from earnings through approximately the distribution dates. There are no material legal restrictions upon the Company's present or future ability to make distributions in accordance with the provisions of the Declaration of Trust. The Company has adopted a policy of attempting to maintain stable distributions to shareholders during the offering and acquisition stages of the Company. In order to accomplish this result, it has disposed of, and may be required to continue to dispose of, a portion of the Mortgage Investments consisting of CMOs and REMICs during this period. The effect of this policy has been the following: (a) a portion of the distributions have constituted, and will continue to constitute, a return of capital; (b) earlier investors' returns from an investment in the Company will be greater than later investors' returns; and (c) there will be a decrease in funds remaining invested in Mortgage Investments. Of the total distributions of $5,569,283 and $5,566,609 made in the years ended December 31, 1996 and 1995, $2,281,652 ($.57 per share or 41%) and $2,419,477 ($.61 per share or 43%) represented returns of capital determined in accordance with generally accepted accounting principles. As of December 31, 1996, the aggregate amount of the distributions made since the commencement of the Offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $6,983,015 ($1.74 per share or 43%). The portion of the distributions which constitutes a return of capital may continue to be significant during the acquisition stage in order to maintain level distributions to shareholders. However, the aggregate amount of the disposition proceeds used for distributions cannot in the aggregate, exceed 3% of the Gross Proceeds. As of December 31, 1996, the aggregate amount of disposition proceeds used to support distributions equaled 2.44% of the Gross Proceeds. During the years ended December 31, 1996 and 1995, no investments were sold in order to support the distribution policy. -11- Item 6. Selected Financial Data. The information set forth below presents selected financial data of the Company. Additional financial information is set forth in the audited financial statements and footnotes thereto contained in Item 8, Financial Statements and Supplementary Data.
For the Years Ended December 31, ----------------------------------------------------------------------------------------- OPERATIONS 1996 1995 1994 1993 1992 - - ---------- ------------ ------------ ------------ ------------ ------------ Interest income: Temporary investments $ 252,140 $ 515,295 $ 631,825 $ 320,147 $ 226 Investments in loans 2,866,017 2,257,883 1,817,057 66,251 0 Investments in REMIC and GNMA certificates and FHA Insured Project Loan 1,306,658 1,582,724 1,089,333 181,730 0 Other income 0 0 97,221 0 0 ------------ ------------ ------------ ------------ ------------ Total revenues 4,424,815 4,355,902 3,635,436 568,128 226 Total expenses 1,137,184 1,208,770 1,015,734 215,789 7,342 ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 3,287,631 $ 3,147,132 $ 2,619,702 $ 352,339 $ (7,116) ============ ============ ============ ============ ============ Net income (loss) per weighted average share$ .83 $ .81 $ .72 $ .37 $ (.71) ============ ============ ============ ============ ============ Distribution per share $ 1.4500 $ 1.4500 $ .1391-1.4500* $.0159-.7548* $ .00 ============ ============ ============ ============ ============
December 31, ----------------------------------------------------------------------------------------- FINANCIAL POSITION 1996 1995 1994 1993 1992 - - ------------------ ------------ ------------ ------------ ------------ ------------ Total Assets $ 63,147,215 $ 65,517,610 $ 65,041,319 $ 55,086,936 $ 818,336 ============ ============ ============ ============ ============ Total Liabilities $ 986,551 $ 1,002,976 $ 356,602 $ 601,398 $ 626,927 ============ ============ ============ ============ ============ Total Shareholders' Equity $ 62,160,664 $ 64,514,634 $ 64,684,717 $ 54,485,538 $ 191,409 ============ ============ ============ ============ ============
* Amounts received by shareholders varied depending on the dates they became shareholders. -12- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources The Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from the Advisor to the Company. As of November 30, 1994 (the termination date of the Offering), the Company had received $76,192,021 (before volume discounts of $40,575) in Gross Proceeds from the sale of 3,738,613 shares pursuant to the Offering and 70,988 shares through the Reinvestment Plan, resulting in Net Proceeds available for investment of approximately $69,334,743 after volume discounts, payments of sales commissions and organization and offering expenses. Pursuant to the Redemption Plan, which became effective November 30, 1994, the Company is required to redeem eligible shares presented for redemption for cash to the extent it has sufficient net proceeds from the sale of shares under the Reinvestment Plan. After November 30, 1994, 151,918 shares were sold through the Reinvestment Plan, the proceeds of which are restricted for use in connection with the Redemption Plan and are not included in gross proceeds. Pursuant to the Redemption Plan, as of December 31, 1996, the Company redeemed 168,943 shares for an aggregate price of $3,206,353. Of such redemptions, 16,931 shares were redeemed from proceeds from the Reinvestment Plan before the termination of the Offering and therefore, the proceeds available for future investment were reduced by $319,987. During the Offering, the Advisor had received 38,481 shares pursuant to the terms of the Offering and Reinvestment Plan in addition to the 10,000 shares purchased. As a result of the shares being redeemed, the Advisor was required to return 172 shares as of December 31, 1996. During the year ended Demember 31, 1996, cash and cash equivalents decreased approximately $1,414,000 primarily due to distributions to shareholders ($5,569,000) and an increase in investment in loans ($6,148,000) which exceeded proceeds from the sale of REMIC Certificates ($4,941,000), cash provided by operating activities ($3,947,000) and principal repayments of loans, GNMAs, REMICs and the FHA Insured Project Loan ($1,466,000). Included in the adjustments to reconcile the net income to cash flow from operations is net amortization in the amount of $463,000. The Company has utilized the Net Proceeds of the Offering primarily to make or invest in Originated Mortgages and Acquired Mortgages. The Company has also invested in uninsured Additional Loans made directly to the developers or sponsors of Developments provided that not more than an aggregate of 7% of the Net Proceeds raised in the Offering were invested in Additional Loans. As of December 31, 1996, of the total Net Proceeds available for investment, 84.9% had been invested in Originated Mortgages (including 6.32% in Additional Loans) and 15.1% in Acquired Mortgages. As of December 31, 1996, the Company had funded five Originated Mortgages (excluding GNMAs-see below) in an aggregate amount of $40,008,791, and five non-interest bearing Additional Loans in the aggregate amount of $4,362,409, in connection with the permanent financing provided on five Developments. In 1993, the Company made investments in two REMIC Certificates in the aggregate amount of $14,999,538, which were sold during 1993, 1994, 1995 and 1996. In 1994, the Company acquired (i) three Ginnie Mae Guaranteed FHA Insured Project Loan Backed Certificates in the aggregate amount of $8,532,847 and (ii) three FHLMC REMIC Certificates and one Fannie Mae Mortgage Guaranteed REMIC Certificate in the aggregate amount of $2,991,844. In 1995, the company acquired a FHA Insured Project Loan in the aggregate amount of $3,374,679. Unrealized losses on REMIC and GNMA and FHA Insured Project Loan investments included in shareholders' equity pursuant to Statement of Financial Accounting Standards No. 115 aggregated $81,386 at December 31, 1996. This represents an increase of $22,323 from December 31, 1995 of which a decrease of $248,254 is attributable to the sale of securities (which created a realized loss of $415,975) and an increase of $270,577 is attributed to a decrease in market prices for the investments held at December 31, 1996 and 1995. As of March 18, 1997, the unrealized loss was approximately $135,000. The yield on the REMIC and 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 REMIC and -13- 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 REMICs and GNMAs tends to decrease. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. Due to the complexity of the REMIC structure and the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effect of future events upon the yield to maturity or the market value of the REMIC and GNMA Certificates upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the coupon rate. The Company intends to continue to invest the Net Proceeds (including the portion of reinvested dividends not used for the Redemption Plan) in Mortgage Investments. Unadvanced amounts will be invested in temporary investments. The Company expects that cash generated from the Company's investments will be sufficient to pay all of the Company's expenses in the foreseeable future. Initially, liquidity was based upon the proceeds raised from the Offering. Subsequent to the offering period, which terminated as of November 30, 1994, the Company's liquidity is based primarily on interest received from permanent Mortgage Investments and interest on unadvanced amounts from Originated Mortgages. In order to qualify as a REIT under the Internal Revenue Code, as amended, the Company must distribute at least 95% of its taxable income. For a description of the Company's investments in Originated Mortgages, REMIC and GNMA Certificates and FHA Insured Project Loan, see Notes 3 and 4 to the financial statments in Item 8, Financial Statements and Supplementary Data. Results of Operations Results of operations for the years ended December 31, 1996, 1995 and 1994, primarily consists of interest income from Originated Mortgages, REMIC Certificates, FHA Insured Project Loan and temporary investments less administrative expenses, realized losses on sale of REMICs and GNMAs and FHA Insured Project Loan and amortization expenses. 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 excess for the years ended December 31, 1996, 1995 and 1994. 1996 vs 1995 Results of operations for the year ended December 31, 1996 consist primarily of interest income of approximately $2,866,000 earned on Originated Mortgages (excluding GNMAs), approximately $1,307,000 earned from investments in REMIC and GNMA Certificates and the FHA Insured Project Loan, and approximately $252,000 earned from temporary investments. The increase in interest income from Originated Mortgages (excluding GNMAs) of approximately $608,000 for the year ended December 31, 1996 as compared to 1995 is due to the addition of the Stony Brook Originated Mortgage in December 1995 and additional advances on the Columbiana Originated Mortgage during 1995 and 1996. The decrease in interest from REMIC and GNMA Certificates and the FHA Insured Project Loan of approximately $276,000 for the year ended December 31, 1996 as compared to 1995 is primarily due to the sale of a portion of one of the REMICs in March 1995 and the sale of one REMIC in August 1996, as well as decreased principal balances as a result of principal repayments. The decrease in interest income from temporary investments of approximately $263,000 for the year ended December 31, 1996 as compared to 1995 is primarily due to a decrease in uninvested proceeds, temporary investments earning interest in 1996. -14- The decrease in general and administrative expenses of approximately $28,000 for the year ended December 31, 1996 as compared to 1995 is primarily due to a decrease in printing and stationery expenses. 1995 vs. 1994 Results of operations for the year ended December 31, 1995 consisted primarily of interest income of approximately $2,258,000 earned on Originated Mortgages (excluding GNMAs), approximately $1,583,000 earned from investments in REMIC and GNMA Certificates and FHA Insured Project Loan, and approximately $515,000 earned from temporary investments. The increase in interest income from Originated Mortgages (excluding GNMAs) of approximately $441,000 for the year ended December 31, 1995 compared to the year ended December 31, 1994 was due to the addition of two new Originated Mortgages in April 1994 and one new Originated Mortgage in December 1995. The increase in interest income from REMIC and GNMA Certificates and the FHA Insured Project Loan of approximately $493,000 for the year ended December 31, 1995 compared to the year ended December 31, 1994 was primarily due to the acquisition of three GNMAs in the third quarter of 1994, four REMICs in the fourth quarter in 1994 and the acquisition of the FHA Insured Project Loan in the first quarter in 1995. The decrease in interest income from temporary investments of approximately $117,000 for the year ended December 31, 1995 compared to the year ended December 31, 1994, was primarily due to a decrease in uninvested proceeds earning interest in 1995. The increase in general and administrative related parties expenses of approximately $67,000 for the year ended December 31, 1995 compared to the year ended December 31, 1994, was primarily due to an increase in asset management fees as a result of an increase in investments in 1995 as compared to 1994. There was a realized loss on sale of REMICs and GNMAs and FHA Insured Project Loan of $439,247 and $298,812 for the years ended December 31, 1995 and 1994, respectively. Distribution Policy The Company has adopted a policy of attempting to maintain stable distributions to shareholders during the offering and acquisition stages of the Company. In order to accomplish this result, it has disposed of, and may be required to continue to dispose of a portion of the CMOs and REMICs during this period. The effect of this policy has been the following: (a) a portion of the distributions have constituted, and will continue to constitute, a return of capital; (b) earlier investors' returns from an investment in the Company will be greater than later investors' returns; and (c) there will be a decrease in funds remaining to be invested in Mortgage Investments. In order to minimize the possible adverse effects of the investment and distribution policy described above, the Company has made the following undertakings: (a) the Advisor has agreed not to retain acquisition fees or loan disposition fees with respect to any portion of REMICs or CMOs which are sold pursuant to the distribution policy; such fees totaled $96,112 as of December 31, 1996 and 1995; (b) the Advisor has agreed to contribute to the Company funds equal to the amount by which all trading losses exceed the gains resulting from the sale of REMIC and CMO investments to supplement the distribution policy; such funds totaled $97,221 as of December 31, 1996 and 1995 and is included in other income during the year ended December 31, 1994; and (c) the Company has agreed to limit the total amount which can be returned to investors from the early sale of investments to support the distributions policy to less than 3% of the Gross Proceeds. During the years ended December 31, 1996 and 1995, no investments were sold in order to support the distribution policy. Of the total distributions of $5,569,283, $5,566,609 and $4,839,766 made for the years ended December 31, 1996, 1995 and 1994, $2,281,652 ($.57 per share or 41%), $2,419,477 ($.61 per share or 43%) and $2,220,064 ($.58 per share or 46%) represents a return of capital determined in accordance with generally accepted -15- accounting principles. As of December 31, 1996, the aggregate amount of the distributions made since the commencement of the Offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $6,983,015 ($ 1.74 per share or 43%). The portion of the distributions which constitute a return of capital may be significant during the acquisition stage in order to maintain level distributions to shareholders. However, as described above, the aggregate amount of the disposition proceeds used for distributions cannot in the aggregate exceed 3% of the Gross Proceeds. As of December 31, 1996, the aggregate amount of disposition proceeds used to support distributions equaled 2.44% of the Gross Proceeds resulting in approximately $428,000 being available to support future distributions if necessary. Management expects that cash flow from operations combined with the balance of the disposition proceeds above will be sufficient to fund the Company's operating expenses and continue to make distributions at the current level in the future. Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page -------------------- ---- Independent Auditors' Report 17 Balance Sheets as of December 31, 1996 and 1995 18 Statements of Income for the years ended December 31, 1996, 1995 and 19 1994 Statements of Changes in Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 20 Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 22 Notes to Financial Statements 24 (a) 2. Financial Statement Schedules All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto.
-16- INDEPENDENT AUDITORS' REPORT To the Board of Trustees American Mortgage Investors Trust: We have audited the accompanying balance sheets of American Mortgage Investors Trust (a Massachusetts Business Trust) as of December 31, 1996 and 1995, and the related statements of income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Mortgage Investors Trust as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick LLP KPMG Peat Marwick LLP New York, New York January 24, 1997 except for Note 6 which is as of February 14, 1997 -17- AMERICAN MORTGAGE INVESTORS TRUST BALANCE SHEETS DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995 ------------ ------------ Investments in loans (Note 3) $ 45,049,596 $ 39,497,133 Investment in REMIC and GNMA Certificates and FHA Insured Project Loan (Note 4) 12,683,331 19,327,518 Cash and cash equivalents (Note 6) 4,828,561 6,242,945 Organization costs (net of accumulated amortization of $35,000 and $25,000, respectively) 15,000 25,000 Deferred costs 12,581 70,988 Accrued interest receivable 558,146 354,026 ------------ ------------ Total assets $ 63,147,215 $ 65,517,610 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 99,768 $ 83,855 Due to affiliates (Note 5) 886,783 919,121 ------------ ------------ Total liabilities 986,551 1,002,976 ------------ ------------ Shareholders' equity: Shares of beneficial interest; $.10 par value; 12,500,000 shares authorized; 4,010,000 and 3,934,423 shares issued and outstanding, respectively 401,001 393,443 Treasury stock; $.10 par value; 169,115 and 93,539 shares, respectively (16,912) (9,354) Additional paid-in capital 68,849,567 68,899,562 Accumulated deficit (6,991,606) (4,709,954) Net unrealized loss on marketable securities (Note 4) (81,386) (59,063) ------------ ------------ Total shareholders' equity 62,160,664 64,514,634 ------------ ------------ Total liabilities and shareholders' equity $ 63,147,215 $ 65,517,610 ============ ============
See accompanying notes to financial statements. -18- AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ---------- ---------- ---------- Revenues: Interest income: Mortgage loans (Note 3) $2,866,017 $2,257,883 $1,817,057 REMIC and GNMA Certificates and FHA Insured Project Loan (Note 4) 1,306,658 1,582,724 1,089,333 Temporary investments 252,140 515,295 631,825 Other income (Note 5) 0 0 97,221 ---------- ---------- ---------- Total revenues 4,424,815 4,355,902 3,635,436 ---------- ---------- ---------- Expenses: General and administrative (Note 5) 203,846 232,075 246,293 General and administrative-related parties (Note 5) 507,363 527,448 460,629 Realized loss on sale of REMICs and GNMAs and FHA Insured Project Loan (Note 4) 415,975 439,247 298,812 Amortization 10,000 10,000 10,000 ---------- ---------- ---------- Total expenses 1,137,184 1,208,770 1,015,734 ---------- ---------- ---------- Net income $3,287,631 $3,147,132 $2,619,702 ========== ========== ========== Net income per weighted average share $ .83 $ .81 $ .72 ========== ========== ==========
See accompanying notes to financial statements. -19- AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Shares of Beneficial Interest Treasury Stock ------------------------ -------------------------- Shares Amount Shares Amount --------- ------------ ---------- ------------ Balance at January 1, 1994 3,021,896 $ 302,190 0 $ 0 Net unrealized loss upon adoption of SFAS No. 115 0 0 0 0 Net Income 0 0 0 0 Distributions 0 0 0 0 Issuance of shares of beneficial interest (Note 5) 836,186 83,619 0 0 Offering Costs 0 0 0 0 Change in net unrealized loss on securities available for sale (Note 4) 0 0 0 0 --------- ------------ ---------- ------------ Balance at December 31, 1994 3,858,082 385,809 0 0 Net Income 0 0 0 0 Distributions 0 0 0 0 Purchase of Treasury Stock 0 0 (93,539) (9,354) Issuance of shares of beneficial interest (Note 5) 76,341 7,634 0 0 Offering Costs 0 0 0 0 Change in net unrealized loss on securities available for sale (Note 4) 0 0 0 0 --------- ------------ ---------- ------------
AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)
Net Unrealized Gain (Loss) on Securities Additional Accumulated Available Paid-in Capital Deficit for Sale Total ------------ ------------ ------------ ------------ Balance at January 1, 1994 $ 54,253,761 $ (70,413) $ 0 $ 54,485,538 Net unrealized loss upon adoption of SFAS No. 115 0 0 (306,908) (306,908) Net Income 0 2,619,702 0 2,619,702 Distributions 0 (4,839,766) 0 (4,839,766) Issuance of shares of beneficial interest (Note 5) 16,580,628 0 0 16,664,247 Offering Costs (1,613,807) 0 0 (1,613,807) Change in net unrealized loss on securities available for sale (Note 4) 0 0 (2,324,289) (2,324,289) --------- ------------ ---------- ------------ Balance at December 31, 1994 69,220,582 (2,290,477) (2,631,197) 64,684,717 Net Income 0 3,147,132 0 3,147,132 Distributions 0 (5,566,609) 0 (5,566,609) Purchase of Treasury Stock (1,763,587) 0 0 (1,772,941) Issuance of shares of beneficial interest (Note 5) 1,442,844 0 0 1,450,478 Offering Costs (277) 0 0 (277) Change in net unrealized loss on securities available for sale (Note 4) 0 0 2,572,134 2,572,134 --------- ------------ ---------- ------------
-20- AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (continued)
Shares of Beneficial Interest Treasury Stock ------------------------ -------------------------- Shares Amount Shares Amount --------- ------------ ---------- ------------ Balance at December 31, 1995 3,934,423 $ 393,443 (93,539) $ (9,354) Net Income 0 0 0 0 Distributions 0 0 0 0 Purchase of Treasury Stock 0 0 (75,576) (7,558) Issuance of shares of beneficial interest (Note 5) 75,577 7,558 0 0 Offering Costs 0 0 0 0 Change in net unrealized loss on securities available for sale (Note 4) 0 0 0 0 --------- ------------ -------- ------------ Balance at December 31, 1996 4,010,000 $ 401,001 (169,115) $ (16,912) ========= ============ ======== ============
AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (continued)
Net Unrealized Gain (Loss) on Securities Additional Accumulated Available Paid-in Capital Deficit for Sale Total ------------ ------------ ------------ ------------ Balance at December 31, 1995 $ 68,899,562 $ (4,709,954) $ (59,063) $ 64,514,634 Net Income 0 3,287,631 0 3,287,631 Distributions 0 (5,569,283) 0 (5,569,283) Purchase of Treasury Stock (1,428,391) 0 0 (1,435,949) Issuance of shares of beneficial interest (Note 5) 1,428,396 0 0 1,435,954 Offering Costs (50,000) 0 0 (50,000) Change in net unrealized loss on securities available for sale (Note 4) 0 0 (22,323) (22,323) ------------ ------------ ------------ ------------ Balance at December 31, 1996 $ 68,849,567 $ (6,991,606) $ (81,386) $ 62,160,664 ============ ============ ============ ============
See accompanying notes to financial statements. -21- AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 3,287,631 $ 3,147,132 $ 2,619,702 ------------ ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Amortization expense-organization costs 10,000 10,000 10,000 Amortization expense-loan premium and origination costs 477,342 417,254 357,160 Amortization of REMIC premium 19,523 24,149 57,413 Amortization of REMIC and GNMA and FHA Insured Project Loan discount (43,376) (54,490) (11,994) Loss on sale of REMIC certificates 408,692 441,967 299,480 (Gain) loss on sale of GNMA certificates 5,689 (1,596) (668) (Gain) loss on sale of FHA Insured Project Loan 1,594 (1,124) 0 Changes in operating assets and liabilities: Increase in accrued interest receivable (204,120) (50,743) (189,614) (Decrease) increase in due to affiliates (32,338) 832,703 0 Increase (decrease) in accounts payable and accrued expenses 15,913 (186,329) (79,589) ------------ ------------ ------------ Total adjustments 658,919 1,431,791 442,188 ------------ ------------ ------------ Net cash provided by operating activities 3,946,550 4,578,923 3,061,890 ------------ ------------ ------------ Cash flows from investing activities: Investments in loans, net (6,148,482) (6,375,200) (13,301,018) Purchase of FHA Insured Project Loan 0 (3,374,679) 0 Purchase of REMIC and GNMA certificates 0 0 (11,524,691) Principal repayments of loans 177,095 164,285 121,446 Proceeds from sale of REMIC certificates 4,940,625 4,092,188 4,740,764 Principal repayments of GNMA certificates 95,396 87,819 33,708 Principal repayments of REMIC certificates 1,149,123 1,061,809 165,100 Principal repayments of FHA Insured Project Loan 44,598 37,460 0 Origination costs 0 (421,187) (1,163,690) Increase in deferred costs (11) (4,815) (133,505) ------------ ------------ ------------ Net cash provided by (used in) investing activities 258,344 (4,732,320) (21,061,886) ------------ ------------ ------------ Cash flows from financing activities: Decrease in due from Advisor 0 0 541,253 Decrease in due to affiliate 0 0 (165,207) Distributions to shareholders (5,569,283) (5,566,609) (4,839,766) Proceeds from issuance of shares of beneficial interest 1,435,954 1,450,478 16,540,907 Purchase of treasury stock (1,435,949) (1,770,404) 0 Increase in offering costs (50,000) (2,814) (1,490,467) ------------ ------------ ------------ Net cash (used in) provided by financing activities (5,619,278) (5,889,349) 10,586,720 ------------ ------------ ------------
(Continued) -22- AMERICAN MORTGAGE INVESTORS TRUST STATEMENTS OF CASH FLOWS (continued)
1996 1995 1994 ------------ ------------ ------------ Net decrease in cash and cash equivalents (1,414,384) (6,042,746) (7,413,276) Cash and cash equivalents at beginning of year 6,242,945 12,285,691 19,698,967 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 4,828,561 $ 6,242,945 $ 12,285,691 ============ ============ ============ Supplemental schedule of noncash financial activities: Offering costs incurred (value of shares issued to the Advisor) $ 0 $ 2,538 $ (123,340) Shares issued to the Advisor 0 0 123,340 Treasury stock (return of shares issued to Advisor) 0 (2,538) 0 Decrease in deferred costs 58,418 112,479 287,952 Increase in investments in loans (58,418) (74,130) (156,989) Increase in investments in REMICs and GNMAs 0 (38,349) (130,963) ------------ ------------ ------------ $ 0 $ 0 $ 0 ============ ============ ============
See accompanying notes to financial statements. -23- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 NOTE 1 - General 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 is electing to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from Related AMI Associates, Inc., the current advisor to the Company (the "Advisor"). On March 29, 1993, the Company commenced a public offering (the "Offering") through Related Equities Corporation, (the "Dealer Manager") an affiliate of the Advisor, and other broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of beneficial interest at an initial offering price of $20 per share. The Offering terminated as of November 30, 1994. As of November 30, 1994, a total of 3,809,601 shares had been sold to the public, either through the Offering or the Company's dividend reinvestment plan (the "Reinvestment Plan"), representing Gross Proceeds (the "Gross Proceeds") of $76,192,021 (before volume discounts of $40,575). Pursuant to the Redemption Plan which became effective November 30, 1994, the Company is required to redeem eligible shares presented for redemption for cash to the extent it has sufficient net proceeds from the sale of shares under the Reinvestment Plan. After November 30, 1994, 151,918 shares were sold through the Reinvestment Plan, the proceeds of which are restricted for use in connection with the Redemption Plan and are not included in Gross Proceeds. Pursuant to the Redemption Plan as of December 31, 1996, 168,943 shares were redeemed for an aggregate price of $3,206,353. Of such redemptions, 16,931 shares were redeemed from proceeds from the Reinvestment Plan before the termination of the Offering and therefore, the proceeds available for future investment have been reduced by $319,987. In addition, during the Offering, the Advisor received 38,481 restricted shares (including 717 from the Reinvestment Plan) in addition to the 10,000 shares purchased, which the Advisor has valued at $14.75 per share, pursuant to the terms of the Offering. As a result of the shares being redeemed the Advisor was required to return 172 shares as of December 31, 1996. The Company has invested principally in two types of mortgage investments ("Mortgage Investments"): (i) new mortgage loans originated by or on behalf of the Company or by other lenders and sold to the Company prior to the loans being fully funded and (ii) Ginnie Mae mortgage-backed securities and pass-through certificates ("Originated Mortgages") and existing mortgage loans that it acquires ("Acquired Mortgages") on multifamily residential rental properties ("Developments"). No more than 7% of the Net Proceeds may be invested in non-interest bearing uninsured loans made directly to developers or sponsors of Developments (or the general partners or other principals of the owner of the Developments) with respect to which the Company holds a mortgage ("Additional Loans"). As of December 31, 1996, all of the original Net Proceeds available for investment had been invested in permanent Mortagage Investments. As of December 31, 1996, of the total Net Proceeds available for investment, 84.9% had been invested in Originated Mortgages (including 6.32% in Additional Loans) and 15.1% had been invested in Acquired Mortgages. The Company also invests in REMICs and in CMOs or participations therein that are backed by single family and/or multifamily mortgage loans insured by FHA or mortgage certificates guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Due to the complexity of the REMIC structure and the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effect of future events upon the yield to maturity or the market value of the REMIC and GNMA Certificates upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the coupon rate. -24- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 2 - Accounting Policies a) Basis of Accounting The books and records of the Company are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles. b) Cash and Cash Equivalents Cash and cash equivalents include temporary investments with original maturity dates equal to or less than 3 months and are carried at cost plus accrued interest, which approximates market. c) Loan Origination Costs Acquisition fees and expenses incurred for the investment of mortgage loans have been capitalized and are included in investment in loans. Loan origination costs are being amortized on the effective yield method over the lives of the respective mortgages. d) Organization and Offering Costs Costs incurred to organize the Company including, but not limited to, legal, accounting, and registration fees are considered organization costs. These costs have been capitalized and are amortized on a straight line basis over a 60-month period. Costs incurred to sell shares including brokerage and nonaccountable expense allowance are considered offering costs. These costs are charged directly to shareholders' equity. e) Income Taxes The Company has qualified as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"). A real estate investment trust is generally not subject to federal income tax on that portion of its real estate investment trust taxable income ("Taxable Income") which is distributed to its shareholders provided that at least 95% of Taxable Income is distributed. No provision for federal income taxes has been made in the financial statements, as the Company believes it is in compliance with the Code and has distributed all of its Taxable Income. f) Net Income Per Weighted Average Share Net income per weighted average share is computed based on the net income for the period, divided by the weighted average number of shares outstanding for the period. The weighted average number of shares outstanding for the years ended December 31, 1996, 1995 and 1994 were 3,972,625, 3,896,620 and 3,638,977, respectively. g) Investments in Mortgage-Backed Securities The Company follows the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities". At December 31, 1996 and 1995, the Company has classified its securities as available-for-sale. Available-for-sale securities are carried at fair value with net unrealized gain (loss) reported as a -25- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 2 - Accounting Policies continued) separate component of shareholders' equity until realized. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses for securities are included in earnings and are derived using the specific identification method for determining the cost of the securities sold. h) Reclassifications Certain prior year amounts have been reclassified to conform with current year presentation. i) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. j) Financial Instruments The Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Financial instruments held by the Company include cash and cash equivalents, investments in loans, investment in REMIC and GNMA Certificates and FHA Insured Project Loan, interest receivable and accounts payable and accrued expenses. For cash and cash equivalents, investments in loans, interest receivable and accounts payable and accrued expenses the carrying amounts are a reasonable estimate of fair value. The investment in REMIC and GNMA Certificates and FHA Insured Project Loan are carried at fair value. k) Accounting by Creditors for Impairment of a Loan Effective January 1, 1995, the Company has adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." SFAS No. 114 requires lenders to measure impaired loans based on: (i) the present value of expected future cash flows discounted at the loans' effective interest rate; (ii) the loan's observable market price; or (iii) the fair value of the collateral if the loan is collateral-dependent. An allowance for loan losses is maintained if the measure of an impaired loan is less than its recorded investment. Adjustments to the allowance are made through corresponding charges or credits to the provision for loan losses. SFAS No. 114 made certain changes to existing accounting principles applicable to in-substance foreclosures and restructured loans. SFAS No. 114 substantially narrows the definition of an in-substance foreclosure to situations in which the lender has physical possession of the collateral. SFAS No. 114 was amended by SFAS No. 118 which allows for existing income recognition practices to continue. The implementation of SFAS Nos. 114 and 118 did not have any impact on the financial statements. -26- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 3 - Investments in Loans The Company originally funded five Originated Mortgages (excluding GNMAs-see Note 4), five non-interest bearing Additional Loans and two additional loan-bridge loans in the aggregate amount of $44,371,200. Information relating to investments in Originated Mortgages and Additional Loans for the years ended December 31, 1996 and 1995 are as follows: Investments in loans - January 1, 1995 $ 33,284,852 Additions: Columbiana Originated Mortgage 8,683,000 Columbiana Originated Mortgage - unadvanced (1,130,900) ---------- Columbiana total advanced 7,552,100 Columbiana advanced in 1994 (2,551,018) ---- ---------- Columbiana-advanced in 1995 5,001,082 Stonybrook Originated Mortgage 8,500,000 Stonybrook Originated Mortgage - unadvanced (7,889,791) ---------- Stonybrook advanced in 1995 610,209 Stonybrook equity loan 763,909 Columbiana-loan origination costs 58,152 Stonybrook - loan origination costs 360,468 ------------ 40,078,672 ------------ Deductions: Amortization of Additional Loans (312,165) Amortization of loan origination costs (105,089) Collection of principal - Cove (43,288) - Oxford (59,521) - Town and Country (61,476) ------------ (581,539) ------------ Investments in loans, December 31, 1995 $ 39,497,133 -27- Note 3- Investments in loans (continued) Additions: Columbiana Originated Mortgage 8,683,000 Columbiana Originated Mortgage - unadvanced (666,872) ---------- Columbiana total advanced 8,016,128 Columbiana advanced in 1995 and 1994 (7,552,100) ---------- Columbiana-advanced in 1996 464,028 Columbiana-loan origination costs 5,395 Stonybrook Originated Mortgage 8,500,000 Stonybrook Originated Mortgage - unadvanced (2,205,337) ---------- Stonybrook total advanced 6,294,663 Stonybrook advanced in 1995 (610,209) ---------- Stonybrook advanced in 1996 5,684,454 Stonybrook - loan origination costs 54,023 ------------ 45,704,033 ------------ Deductions: Amortization of Additional Loans (372,916) Amortization of loan origination costs (104,426) Collection of principal - Cove (46,706) - Oxford (64,222) - Town and Country (66,167) ------------ (654,437) ------------ Investments in loans - December 31, 1996 $ 45,049,596 ============ -28- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 3 - Investments in Loans Information relating to investments in Originated Mortgages and Additional Loans as of December 31, 1996 and 1995 is as follows:
Date of Invest- Amounts Advanced ment/ --------------------------------------------------- Final Total Maturity Additional Bridge Mortgage Amounts Property Description Date Loans Loans Loans Advanced - - -------- ----------- -------- ---------- ----------- ----------- ----------- The Cove Apts 308 Dec. 93 $ 840,500 $ 84,210 $ 6,800,000 $ 7,724,710 Houston, Apartment Jan. 29 (D) TX (A) Units (E) Oxford on 405 Dec. 93 1,156,000 115,790 9,350,000 10,621,790 Greenridge Apartment Jan. 29 (D) Apts Units (E) Houston, TX (A) Town & 330 Apr. 94 1,039,000 None 9,348,000 10,387,000 Country IV Apartment May 29 Apts Units (F) Urbana, IL (B) Columbiana 204 Apr. 94 563,000 None 8,016,128 8,579,128 Lakes Apts Apartment Nov. 35 Columbia, Units (G) SC (C) Stony Brook 125 Dec. 95 763,909 None 6,294,663 7,058,572 Village II Apts Apartment June 37 East Haven, Units (G) CT (H) ----------------------------------------------------- Total $ 4,362,409 $ 200,000 $39,808,791 $44,371,200 =====================================================
Total Amounts Advanced Loan Amounts and Outstanding Origination Accumulated Property Unadvanced Unadvanced Loan Balance Costs Amortization - - -------- ---------- ---------- ------------ ----- ------------ The Cove Apts $ 0 $ 7,724,710 $ 7,513,614 $ 444,215 $ 307,952 Houston, TX (A) Oxford on 0 10,621,790 10,331,531 610,814 423,522 Greenridge Apts Houston, TX (A) Town & 0 10,387,000 10,225,529 603,895 313,914 Country IV Apts Urbana, IL (B) Columbiana 666,872 9,246,000 8,579,128 529,803 149,039 Lakes Apts Columbia, SC (C) Stony Brook 2,205,337 9,263,909 7,058,572 413,491 66,569 Village II Apts East Haven, CT (H) ------------------------------------------------------------------- Total $ 2,872,209 $47,243,409 $43,708,374 $ 2,602,218 $ 1,260,996 ===================================================================
Interest Earned Final Balance Final Balance by the Net At December At December Company Less 1996 Interest Property 31, 1996(I) 31, 1995 for 1996 Amortization Earned - - -------- -------- -------- -------- ------------ ------ The Cove Apts $ 7,649,877 $ 7,797,927 $ 604,479 $ 101,344 $ 503,135 Houston, TX (A) Oxford on 10,518,823 10,722,421 845,682 139,376 706,306 Greenridge Apts Houston, TX (A) Town & 10,515,510 10,698,339 824,654 116,662 707,992 Country IV Apts Urbana, IL (B) Columbiana 8,959,892 8,546,769 671,018 56,300 614,718 Lakes Apts Columbia, SC (C) Stony Brook 7,405,494 1,731,677 397,526 63,660 333,866 Village II Apts East Haven, CT (H) ------------------------------------------------------------------- Total $45,049,596 $39,497,133 $ 3,343,359 $ 477,342 $ 2,866,017 ===================================================================
(A) The interest rates for The Cove and Oxford are 7.625%-9.129% during the permanent loan period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 30% of the cash flow remaining after payment of 9.129% interest and accrued interest, if any. Payments at the rate of 9.129% are guaranteed by the developer for three years after closing of the loans. (B) The interest rates for Town and Country are 7.375%-9.167% during the permanent loan period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 30% of the cash flow remaining after payment of 9.167% interest. (C) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan period and 7.4% during the construction period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 25% of the cash flow remaining after payment of 8.678% interest. (D) Bridge loans were repaid in full on April 7, 1994. (E) The Originated Mortgages have terms of 35 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (F) The Originated Mortgage has a term of 35 years, subject to mandatory prepayment at any time after 12 years and upon one year's notice. (G) The Originated Mortgage has a term of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (H) The interest rates for Stony Brook are 7.75%-9.128% during the permanent loan period and 8.625% during the construction period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 40% of the cash flow remaining after payment of 9.128% interest. (I) Aggregate cost for federal income tax purposes is $ 45,707,370 -29- NOTE 4 - Investment in REMIC and GNMA Certificates and FHA Insured Project Loan Originated Mortgages GNMA Certificates The Company used a portion of the net proceeds of its Offering to purchase three Ginnie Mae Guaranteed FHA Insured Project Loan Backed Certificates from unaffiliated third parties. The full amount of the purchase price of each of the GNMA Certificates was allocated as a permanent Originated Mortgage. The table set forth below outlines pertinent information relating to the GNMA Certificates. Acquired Mortgages REMIC Certificates The Company used a portion of the net proceeds of its Offering to purchase six REMIC Certificates from unaffiliated third parties. Except as set forth in the notes to the table, each of the REMIC Certificates was purchased as a permanent Acquired Mortgage. The table set forth below outlines pertinent information relating to the REMIC Certificates. FHA Insured Project Loan The Company used a portion of the net proceeds of its Offering to purchase a FHA Insured Project Loan from an unaffiliated third party. The full amount of the purchase price was allocated as a permanent Acquired Mortgage. The table set forth below outlines pertinent information relating to the FHA Insured Project Loan. Information relating to investments in REMIC and GNMA Certificates and FHA Insured Project Loan for the years ended December 31, 1996 and 1995:
Investments in REMIC and GNMA Certificates and FHA Insured Project Loan - January 1, 1995 $18,953,841 Additions: FHA Insured Project Loan (092-11005) 3,374,679 Amortization of Discount 54,490 Origination of Costs 115,046 Gain on Sale of GNMAs 1,596 Gain on Sale of FHA Insured Project Loan 1,124 ----------- 22,500,776 ----------- Deductions: Principal Repayments (Sales) of GNMA (87,819) Principal Repayments (Sales) of REMIC (1,061,809) Principal Repayments (Sales) of FHA Insured Project Loan (37,460) Proceeds from Sale of REMIC Certificates (4,092,188) Loss on Sale of REMIC Certificates (441,967) Amortization of REMIC Premium (24,149) ----------- (5,745,392) -----------
-30- NOTE 4 - Investment in REMIC and GNMA Certificates and FHA Insured Project Loan (continued)
Amortized Cost at December 31, 1995 $16,755,384 Change in net unrealized loss on securities available for sale 2,572,134 ----------- Fair value at December 31, 1995 19,327,518 Additions: Amortization of Discount 43,376 ----------- 19,370,894 ----------- Deductions: Principal Repayments (Sales) of GNMA Certificates (95,396) Principal Repayments (Sales) of REMIC Certificates (1,149,123) Principal Repayments (Sales) of FHA Insured Project Loan (44,598) Proceeds from Sale of REMIC Certificates (4,940,625) Loss on Sale of REMIC Certificates (408,692) Loss on Sale of GNMA Certificates (5,689) Loss on Sale of FHA Insured Project Loan (1,594) Amortization of REMIC Premium (19,523) ----------- (6,665,240) ----------- Amortized Cost at December 31, 1996 12,705,654 (including unrealized loss of $59,063 at December 31, 1995) Change in net unrealized loss on securities available for sale (22,323) ----------- Carrying value at December 31, 1996 $12,683,331 ===========
-31- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 4 - Investment in REMIC and GNMA Certificates and FHA Insured Project Loan (continued) Information relating to investments in REMIC and GNMA Certificates and FHA Insured Project Loan as of December 31, 1996 and 1995 is as follows:
Date Original Purchased Purchase /Final Stated Price Principal Certificate Payment Interest Including at December Seller Number Date Rate Prem/(Disc) 31, 1996 - - ------ ----------- --------- -------- ----------- ----------- GNMA Certificates Bear Stearns 355540 7/27/94 7.13% $2,407,102 $2,608,716 Malone 3/15/29 Mortgage 382486 7/28/94 8.50% 2,197,130 2,180,702 8/15/29 Goldman Sachs 328502 7/29/94 8.25% 3,928,615 3,783,812 7/15/29 REMIC Certificates Bear Stearns 1992-17G(1) 8/27/93 6.50% 10,160,938 0 Sold (1) Bear Stearns G-024C(2) 10/26/93 4.85% 4,838,600 0 Sold(3) Meridan Capital Markets 1292ZA(3) 10/25/94 5.75% 1,721,291 338,738 6/15/97 Meridan Capital Markets 1992-153A(3) 10/25/94 5.25% 258,357 61,418 9/25/97 Meridan Capital Markets 1580A(3) 10/27/94 6.50% 742,538 214,548 9/15/98 Meridan Capital Markets 1258C(3) 11/9/94 7.35% 269,658 28,785 5/15/04 FHA Insured Loan Project Donaldson, Lufkin & Jenrette 092-11005 1/3/95 8.60% 3,374,679 3,408,238 4/1/19 ----------- ----------- Total $29,898,908 $12,624,957 =========== ===========
Loan Premium Accumulated Origination Unrealized Final (Discount) Amortization Costs Gain(Loss) Balance at December at December at December at December at December 31, 1996 31, 1996 31, 1996 31, 1996 31, 1996 ----------- ------------ ----------- ----------- ----------- GNMA Certificates Bear Stearns ($241,306) $49,281 $80,707 $29,593 $2,526,991 Malone Mortgage (8,177) 1,744 74,064 (21,290) 2,227,043 Goldman Sachs (3,545) 822 128,873 (107,232) 3,802,730 REMIC Certificates Bear Stearns 0 0 0 0 0 Bear Stearns 0 0 0 0 0 Meridan Capital Markets (3,493) 3,493 11,429 (12,134) 338,033 Meridan Capital Markets (1,305) 1,305 2,049 (2,386) 61,081 Meridan Capital Markets (1,475) 1,475 7,264 (6,996) 214,816 Meridan Capital Markets 108 (108) 985 (991) 28,779 FHA Insured Loan Project Donaldson, Lufkin & Jenrette (112,898) 36,127 112,341 40,050 3,483,858 --------- ------- -------- -------- ----------- Total ($372,091) $94,139 $417,712 ($81,386) $12,683,331 ========= ======= ======== ======== ===========
Interest Final Earned Balance by the Net at December Company 1996 Interest 31, 1995 for 1996 Amortization Earned ----------- --------- ------------ ------- GNMA Certificates Bear Stearns $2,628,912 $186,501 $20,468 $206,969 Malone Mortgage 2,268,623 185,803 723 186,526 Goldman Sachs 3,966,233 314,666 343 315,009 REMIC Certificates Bear Stearns 5,098,406 230,357 (19,523) 210,834 Bear Stearns 0 0 0 0 Meridan Capital Markets 1,013,800 37,563 2,076 39,639 Meridan Capital Markets 151,388 5,373 666 6,039 Meridan Capital Markets 470,090 21,523 906 22,429 Meridan Capital Markets 158,324 6,124 0 6,124 FHA Insured Loan Project Donaldson, Lufkin & Jenrette 3,571,742 294,895 18,194 313,089 ----------- ---------- ------- ---------- Total $19,327,518 $1,282,805 $23,853 $1,306,658 =========== ========== ======= ==========
-32- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 4 - Investment in REMIC and GNMA Certificates and FHA Insured Project Loan (continued) (1) On October 15, 1993 the Company allocated $5,000,000 of the principal face value as an Acquired Mortgage based on the expectation that a majority of the investment would be held for at least two years. Based on such allocation, compensation was paid to the Advisor. The Advisor has undertaken to reimburse the Company for any compensation paid to it which is attributable to the portion of any REMIC Certificate which is sold to support the Company's distribution policy (the "Advisor's Reimbursement Undertaking"). On November 4, 1993 and February 1, 1994, the Company sold $200,000 and $200,000, respectively, of the REMIC Certificate and the Advisor has reimbursed the Company for the fees previously paid and the trading loss incurred with respect to the portions of the REMIC Certificate which were sold. Also on March 30, 1995, the Company sold $4,500,000 of the temporary portion at the discounted price of 90.9375% or $4,092,188. The realized loss on this sale was $447,472. Also on August 15, 1996, the Company sold the remaining balance of the temporary and permanent portion of the REMIC Certificate which totaled $5,100,000. The realized loss on this sale was $328,895. The REMIC Certificate represented beneficial ownership interest in Fannie Mae REMIC Trust 1992-17. The assets of the trust consisted primarily of interests in a separate trust which held Fannie Mae Guaranteed Pass-Through Certificates (the "MBS Certificates"), each of which represented a beneficial interest in a pool of first lien, fixed-rate residential mortgage loans (the "Mortgage Loans"). The Company was entitled to monthly interest payments on the outstanding principal amount of the REMIC Certificate. (2) Represented an FHLMC Mortgage Participation Certificate. On May 4, 1994, the Company allocated $2,419,300 of the principal face value as a permanent Acquired Mortgage based on the expectation that a majority of the investment would be held for at least two years. Based upon such allocation, compensation was paid to the Advisor. On May 5, 1994, the Company sold $1,000,000 of the permanent portion of the Mortgage Participation Certificate and on October 11, 1994, the Company sold the remaining balance of the temporary and permanent portions of the Mortgage Participation Certificate which totaled $3,838,600. Pursuant to the Advisor's Reimbursement Undertaking, the Advisor has reimbursed the Company for the fees previously paid and the trading loss incurred with respect to the permanent investment portion of the certificate which was sold. A loss of $297,836 was recorded on these sales in 1994. (3) Purchased as a permanent investment using a portion of the proceeds from the sale of FHLMC REMIC Certificate #G-024C. See (2) above. -33- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 4 - Investment in REMIC and GNMA Certificates and FHA Insured Project Loan (continued) The amortized cost, unrealized gain (loss) and fair value for the investment in REMIC and GNMA Certificates and FHA Insured Project Loan at December 31, 1996 and 1995 are as follows:
Unrealized Unrealized Amortized Gain Fair Amortized Gain Fair Cost at (Loss) at Value at Cost at (Loss) at Value at December December December December December December Security 31, 1996 31, 1996 31, 1996 31, 1995 31, 1995 31, 1995 - - -------- ------------ ------------ ------------ ------------ ------------ ------------ FHA Insured Project Loan $ 3,443,808 $ 40,050 $ 3,483,858 $ 3,471,806 $ 99,936 $ 3,571,742 Fannie Mae REMICs 63,467 (2,386) 61,081 5,450,047 (200,253) 5,249,794 Federal Home Loan REMICs 601,749 (20,121) 581,628 1,729,483 (87,269) 1,642,214 Ginnie Mae Certificates 8,655,693 (98,929) 8,556,764 8,735,245 128,523 8,863,768 ------------ ------------ ------------ ------------ ------------ ------------ $ 12,764,717 $ (81,386) $ 12,683,331 $ 19,386,581 $ (59,063) $ 19,327,518 ============ ============ ============ ============ ============ ============
The change in the unrealized loss for the years ended December 31, 1996 and 1995 were as follows: Unrealized loss at December 31, 1994 $ (2,631,197) Sale of securities during the year ended December 31, 1995 included in unrealized loss at December 31, 1994 887,415 Unrealized gain on securities purchased during the year ended December 31, 1995 99,936 Unrealized gain on securities held at December 31, 1995 and December 31, 1994 1,584,783 ------------ Unrealized loss at December 31, 1995 (59,063) ------------ Sale of securities during the year ended December 31, 1996 included in unrealized loss at December 31, 1995 248,254 Unrealized loss on securities held at December 31, 1996 and December 31, 1995 (270,577) ------------ Unrealized loss at December 31, 1996 $ (81,386) ============ -34- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 4 - Investment in REMIC and GNMA Certificates and FHA Insured Project Loan (continued) For the year ended December 31, 1996, proceeds from the sale of REMICs were $4,940,625 from the August 15, 1996 sale. The realized loss on this sale in the amount of $328,895 (including acquisition fees and expenses) in addition to losses of $87,080 (including acquisition fees and expenses) on principal repayments of REMICs, GNMAs and FHA Insured Project Loan, resulted in a net loss of $415,975 for the year ended December 31, 1996. NOTE 5 - Related Party Transactions The Company has entered into an agreement with the Advisor pursuant to which the Advisor receives compensation consisting primarily of (i) compensation in connection with the organization and start-up of the Company and the Company's investment in the Mortgage Investments; (ii) asset management fees calculated as a percentage of total assets invested by the Company which totaled approximately $376,000, $340,000 and $233,000 for the years ended December 31, 1996, 1995 and 1994, respectively; (iii) a subordinated incentive fee based on the economic gain on the sale of Mortgage Investments; (iv) an amount, payable in shares of the Company which, after issuance, will equal 1% of all shares of the Company issued during the offering period or pursuant to the Company's Reinvestment Plan as compensation for services rendered. During the Offering the Advisor received 38,481 shares, in addition to the 10,000 shares purchased, however as a result of the shares being redeemed the Advisor was required to return 172 shares. (As of December 31, 1996 and 1995, shares received by the Advisor totaled 38,309 at a total value of $565,058 ($14.75 per share)); (v) acquisition expense allowance and acquisition fees calculated as a percentage of the Gross Proceeds applicable to the origination of Originated Mortgages and related Additional Loans and the acquisition of Acquired Mortgages and Additional Loan; (acquisition fees and acquisition expense allowance approximated $2,545,000 and $722,000 as of December 31, 1996 and $2,545,000 and $664,000 as of December 31, 1995); and (vi) certain other fees. In addition to the costs, fees and expenses discussed above, the Company will reimburse affiliates of the Advisor for certain administrative and other costs incurred on behalf of the Company. The costs and expenses incurred for the years ended December 31, 1996, 1995 and 1994 were approximately $131,000, $187,000 and $227,000, respectively. The Company paid commissions of up to 6% of the aggregate purchase price of shares sold, subject to quantity discounts, as well as a non-accountable due diligence expense reimbursement in an amount up to .5% of Gross Proceeds to certain broker-dealers selected by the Dealer Manager and approved by the Advisor. The Dealer Manager received commissions of 6% of the aggregate purchase price of shares sold through the Reinvestment Plan during the Offering. At December 31, 1996 and 1995, the Company has paid $4,943,069 of commissions and due diligence to broker-dealers (including $98,655 to the Dealer Manager). In order to minimize the possible adverse effects of the investment and distribution policy described above, the Company has made the following undertakings: (a) the Advisor has agreed not to retain acquisition fees or loan disposition fees with respect to any portion of REMICs or CMOs which are sold pursuant to the distribution policy; such fees totaled $96,112 as of December 31, 1996 and 1995; (b) the Advisor has agreed to contribute to the Company funds equal to the amount by which all trading losses exceed the gains resulting from the sale of REMICs and CMOs investments to supplement the distribution policy; such funds totaled $97,221 as of December 31, 1996 and 1995 and is included in other income during the year ended December 31, 1994; and (c) the Company has agreed to limit the total amount which can be returned to investors from the early sale of investments to support the distributions policy to less than 3% of the Gross Proceeds. -35- AMERICAN MORTGAGE INVESTORS TRUST NOTES TO FINANCIAL STATEMENTS NOTE 6 - Subsequent Event On February 14, 1997, a distribution of $1,403,765 and $17,656 was paid to the Investors and the Advisor, respectively, representing the 1996 fourth quarter distribution. The distribution has been funded from cash collections of debt service payments and interest income through approximately the distribution date, February 14, 1997. -36- Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The Trustees are responsible for the management and control of the affairs of the Company but have retained the Advisor to manage the Company's day-to-day affairs and have delegated to the Advisor responsibilities with respect to, among other things, overseeing the portfolio of Mortgage Investments and the acquisition and disposition of investments. The Trustees and Executive Officers of the Company are as follows: Name Age Offices Held Year First Became ---- --- ------------ Officer/Trustee ----------------- J. Michael Fried 52 Trustee, President, 1991 Chairman of the Board and Chief Executive Officer Peter T. Allen 51 Trustee 1991 Arthur P. Fisch 55 Trustee 1991 Stuart J. Boesky 40 Executive Vice President 1991 and Chief Operating Officer Alan P. Hirmes 42 Senior Vice President and 1991 Chief Financial Officer Mark J. Schlacter46 Vice President 1993 Richard A. Palermo36 Treasurer and Chief Accounting Officer 1997 Lynn A. McMahon 41 Secretary 1993 J. MICHAEL FRIED, age 52, is Trustee, President, Chairman of the Board and Chief Executive Officer of the Company, is Director and President of the Advisor and is the sole shareholder of one of the general partners of Related, the real estate finance affiliate of The Related Companies, L.P. In that capacity, he is generally responsible for all syndication, finance, acquisition and investor reporting activities of Related and its Affiliates. Mr. Fried practiced corporate law in New York City with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Related in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude; from Long Island University Graduate School with a Master of Science degree in Psychology; and from Michigan State University with a Bachelor of Arts degree in History. PETER T. ALLEN, age 51, is President of Peter Allen & Associates, Inc., a real estate development, consulting, brokerage and management firm, in which capacity he has been responsible for the leasing, refinancing and development of major commercial properties. Mr. Allen has also been an Adjunct Professor of the Graduate School of Business at the University of Michigan since 1981. Mr. Allen received a Bachelor of Arts Degree in history/economics from DePauw University and a Masters Degree in Business Administration with Distinction from the University of Michigan. Mr. Allen is an Independent Trustee. -37- ARTHUR P. FISCH, age 55, has been an attorney in private practice specializing in real property and securities law since October 1987, with Arthur P. Fisch, P.C. and Fisch & Kaufman. From 1975-1987, Mr. Fisch was employed by E.F. Hutton & Company, serving as First Vice President in the Direct Investment Department from 1981-1987 and associate general counsel from 1975-1980 in the legal department. As First Vice President, he was responsible for the syndication and acquisition of millions of dollars in residential real estate. Mr. Fisch was the Corporate General Partner in four public real estate funds and responsible for the acquisition of several thousand apartment units. He was also in charge of the Subsidized Housing and Cable TV groups at E.F. Hutton's Direct Investment Department. Mr. Fisch received a B.B.A. from Bernard Baruch College of the City University of New York and a Juris Doctor degree from New York Law School. Mr. Fisch is admitted to practice law in New York and Pennsylvania. Mr. Fisch is an Independent Trustee. STUART J. BOESKY, age 40, is Executive Vice President and Chief Operating Officer of the Company and is a Senior Vice President and a Managing Director of the Advisor. Mr. Boesky practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Related. From 1983 to 1984, Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow, Richmond & Rothstein (which subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky is the sole shareholder of one of the general partners of Related. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Laws degree in Taxation from Boston University School of Law. ALAN P. HIRMES, age 42, is a Senior Vice President and Chief Financial Officer of the Company and is Senior Vice President of the Advisor. Mr. Hirmes has been a Certified Public Accountant in New York since 1978. Prior to joining Related in October 1983, Mr. Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes is also the sole shareholder of one of the general partners of Related. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. MARK J. SCHLACTER, age 46, is a Vice President of the Company. Mr. Schlacter is a Vice President of Mortgage Acquisitions of Related, and has been with Related since June 1989. Mr. Schlacter is responsible for the origination of Related's taxable participating debt programs and low-income housing tax credit debt programs. Prior to joining Related, Mr. Schlacter garnered 16 years of direct real estate experience covering commercial and residential construction, single and multifamily mortgage origination and servicing, commercial mortgage origination and servicing, multifamily property acquisition and financing, and multifamily mortgage lending program underwriting and development. He was a Vice President with Bankers Trust Company from 1986 to June 1989, and held prior positions with Citibank, Anchor Savings Bank and the Pyramid Companies covering the 1972-1986 period. Mr. Schlacter holds a Bachelor of Arts degree in Political Science from Pennsylvania State University and periodically teaches multifamily underwriting at the New York University School of Continuing Education, Real Estate Institute. RICHARD A. PALERMO, 36, is Treasurer and Chief Accounting Officer of the Company and is Treasurer of the Advisor. Mr. Palermo has been a Certified Public Accountant in New York since 1985. Prior to joining Related in September 1993, Mr. Palermo was employed by Sterling Grace Capital Management from October 1990 to September 1993, Integrated Resources, Inc. from October 1988 to October 1990 and E.F. Hutton & Company, Inc. from June 1986 to October 1988. From October 1982 to June 1986, Mr. Palermo was employed by Marks Shron & Company and Mann Judd Landau, certified public accountants. Mr. Palermo graduated from Adelphi University with a Bachelor of Business Administration degree. LYNN A. McMAHON, age 41, is Secretary of the Company and of the Advisor. She has served since 1983 as assistant to J. Michael Fried. From 1978 to 1983, she was employed at Sony Corporation of America in the Government Relations Department. -38- Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "Commission"). These persons are required by regulation of the Commission to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during the fiscal year ended December 31, 1996, the Company's officers, directors and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements. The Advisor The Advisor is Related AMI Associates, Inc. The directors and executive officers of the Advisor are set forth below. These officers of the Advisor may also provide services to the Company on behalf of the Advisor. Related AMI Associates, Inc. Year First Became Name Age Offices Held Officer/Director ---- --- ------------ ---------------- J. Michael Fried 52 Director and President 1991 Stuart J. Boesky 40 Director and Senior Vice President 1991 Alan. P. Hirmes 42 Senior Vice President 1991 Richard A. Palermo 36 Treasurer 1997 Lynn A. McMahon 41 Secretary 1991 Biographical information with respect to Messrs. Fried, Boesky, Hirmes, Palermo and Ms. McMahon is set forth above. Item 11. Executive Compensation. The Company has six executive officers and three Trustees (two of whom are Independent Trustees). The Company does not pay or accrue any fees, salaries or other forms of compensation to its officers. Independent Trustees receive compensation for serving as Trustees at the rate of $10,000 per year. Certain directors and officers of the Advisor and certain officers of the Company receive compensation from the Advisor and its affiliates for services performed for various affiliated entities, which may include services performed for the Company. Such compensation may be based in part on the performance of the Company; however, the Advisor believes that any compensation attributable to services performed for the Company is immaterial. See also Note 5 to the financial statements above in Item 8, Financial Statements and Supplementary Data, which is incorporated herein by reference. -39- Item 12. Security Ownership of Certain Beneficial Owners and Management. As of December 31, 1996, no person was known by the Company to be the beneficial owner of more than five percent of the outstanding shares of the Company. The Advisor purchased 10,000 Shares at an aggregate purchase price of $200,000 prior to the Offering. In addition, pursuant to the terms of the Offering and the Advisory Services Agreement, the Company will issue shares to the Advisor in an amount which will equal (after such issuance) 1% of the shares of the Company as compensation for services rendered in connection with the organization of the Company. During the Offering the Advisor received 38,481 shares, in addition to the 10,000 shares purchased by the Advisor, however as a result of shares being redeemed the Advisor was required to return 172 shares. As of December 31, 1996, shares received by the Advisor totaled 38,309 at a total value of $565,058 ($14.75 per share). Such costs have been charged directly to shareholders' equity as part of offering costs. As of December 31, 1996, J. Michael Fried, Trustee of the Trust, owned 1,920 shares of the Trust. No other directors and officers or trustees of the Advisor or the Company own any shares of the Company. Item 13. Certain Relationships and Related Transactions. The Company has and will continue to have certain relationships with the Advisor and its affiliates, as discussed in Item 11, Executive Compensation and Note 5 to Item 8, Financial Statements and Supplementary Data. However, there have been no direct financial transactions between the Company and the directors and officers of the Advisor. -40- PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential (a) 1. Financial Statements Page -------------------- ---- Independent Auditors' Report 17 Balance Sheets at December 31, 1996 and 1995 18 Statements of Income for the years ended December 31, 19 1996, 1995 and 1994 Statements of Changes in Shareholders' Equity for the 20 years ended December 31, 1996, 1995 and 1994 Statements of Cash Flows for the years ended December 22 31, 1996, 1995 and 1994 Notes to Financial Statements 24 (a) 2. Financial Statement Schedules All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto. (a) 3. Exhibits 1(a) Dealer Manager Agreement, dated March 29, 1993 as previously filed as an Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's Registration Statement No. 33-42481. 1(b) Form of Soliciting Dealer Agreement as previously filed as an Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's Registration Statement No. 33-42481. 3,4 Amended and Restated Declaration of Trust, dated as of March 29, 1993, as amended as of July 1, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. Amendment No. 2 to Amended and Restated Declaration of Trust, dated as of April 5, 1994 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. 10(a) Escrow Agreement, dated as of April 16, 1993 and amended as of August 25, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. 10(b) Advisory Services Agreement, dated as of March 29, 1993, as amended as of October 26, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993.
-41- Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) (a)3. Exhibits (continued)
Amendment to Advisory Services Agreement, dated as of December 31, 1993 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. Third Amendment to Advisory Services Agreement, dated as of March 29, 1994 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. 10(c) TRI Capital Corporation Mortgage Note in the principal amount of $9,350,000 dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(d) Equity Loan Note in the principal amount of $1,156,000 dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(e) Bridge Loan Note in the principal amount of $115,790, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(f) Subordinated Promissory Note by Oxford Apartments, L.C., dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(g) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers, Allied Realty Services, Ltd. and American Mortgage Investors Trust, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(h) TRI Capital Corporation Mortgage Note in the principal amount of $6,800,000, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(i) Equity Loan Note in the principal amount of $840,500, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(j) Bridge Loan Note in the principal amount of $84,210, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(k) Subordinated Promissory Note by Cove Apartments, L.C., dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(l) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers, Allied Realty Services, Ltd. and American Mortgage Investors Trust, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993.
-42- Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) (a)3. Exhibits (continued)
10(m) Cambridge Realty Capital LTD Mortgage Note in the principal amount of $9,348,000, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(n) Equity Loan Note in the principal amount of $1,039,000, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(o) Subordinated Promissory Note by Town and Country IV Apartments, L.C., dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(p) Limited Operating Guaranty between Leonard E. Wineburgh, Arnold H. Dwinn and the Company, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(q) American Capital Resource, Inc. Mortgage Note in the principal amount of $8,683,000 dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(r) Equity Loan Note in the principal amount of $563,000 dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(s) Subordinated Promissory Note by Columbiana Lakes Apartments, L.C., dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(t) Limited Operating Guaranty between Anderson G. Wise, Ronald P. Curry and the Company, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(u) Rockport Mortgage Corporation Mortgage Note in the principal amount of $8,500,000 dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(v) Equity Loan Note in the principal amount of $1,039,000 dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(w) Subordinated Promissory Note by SCI-ROEV East Haven Land Limited Partnership, dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(x) Limited Operating Guaranty between SCI Real Estate Development, Ltd., and Euro General East Haven, Inc., and the Company dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995.
-43- Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) (a)3. Exhibits (continued)
Sequential Page ----------- 23(a) Consent of KPMG Peat Marwick LLP with respect to incorporation by reference in its report in the Company's Registration Statement on Form S-3 47 23(b) Consent of Hidalgo, Banfill, Zlotnick and Kermali, P.C. with respect to incorporation to reference on its report in the Company's Registration Statement on Form S-3. 48 27 Financial Data Schedule (filed herewith) 107 99. Additional Exhibits 99(a) The Financial Statements of Cove Apartments, L.L.C., a Limited Liability Company which owns and operates a multifamily housing project known as the Cove Apartments located in Houston, Texas, as required by Staff Accounting Bulletin No. 71. 51 99(b) The Financial Statements of Oxford Apartments, L.L.C., a Limited Liability Company which owns and operates a multifamily housing project known as the Oxford Apartments located in Houston, Texas, as required by Staff Accounting Bulletin No. 71. 80 (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarterly period ended December 31, 1996.
-44- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE INVESTORS TRUST (Registrant) Date: March 27, 1997 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Senior Vice President and Chief Financial Officer Date: March 27, 1997 By: /s/ Richard A. Palermo ---------------------- Richard A. Palermo Treasurer and Chief Accounting Officer -45- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ J. Michael Fried Trustee, President, Chairman of the Board, March 27, 1997 - - ------------------------- and Chief Executive Officer J. Michael Fried /s/ Peter T. Allen - - ------------------------- Trustee March 27, 1997 Peter T. Allen /s/ Arthur P. Fisch - - ------------------------- Trustee March 27, 1997 Arthur P. Fisch /s/ Alan P. Hirmes Senior Vice President and Chief Financial Officer March 27, 1997 - - ------------------------- Alan P. Hirmes /s/ Richard A. Palermo - - ------------------------- Treasurer and Chief Accounting Officer March 27, 1997 Richard A. Palermo
-46- EX-23 2 EXHIBIT 23(A) EXHIBIT 23(a) ACCOUNTANTS' CONSENT The Board of Trustees Amencan Mortgage Investors Trust We consent to incorporation by reference in the registration statement on Form S-3 (No. 33-42481) of American Mortgage Investors Trust of our report dated January 24, 1997, relating to the balance sheets of American Mortgage Investors Trust as of December 31, 1996 and 1995. and the related statements of income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report on Form 10-K of American Mortgage Investors Trust /s/ KPMG PEAT MARWICK LLP New York, New York March 28, 1997 EX-23 3 EXHIBIT 23(B) Exhibit 23(b) Hidalgo, Banfill, Zlotnik & Kermali, P.C. CERTIFIED PUBLIC ACCOUNTANTS (originally Founded in 1949) March 22, 1997 The Board of Trustees American Mortgage Investors Trust The Board of Directors Related AMI Associates, Inc. We consent to the use of our reports dated February 7, 1997 accompanying the Financial Statements and supplemental Supporting Data for the year ended December 31, 1996 of Oxford Apartments, L.C. and Cove Apartments, L.C. contained in this form 10-K filed by American Mortgage Investors Trust for the year ended December 31, 1996. /s/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. HIDALGO,BANFILL, ZLOTNIK & RERMALI, P.C. Houston, Texas March 22, 1997, 3555 TIMMONS LANE, SUITE 460 - HOUSTON.TEXAS 77027 -(713)963-8008 EX-99.(A) 4 COVE APARTMENTS, LC. COVE APARTMENTS, LC. (HUD Protect Number 114-11122-REF) Financial Statements and Supplemental Supporting Data For the Year Ended December 31, 1996 COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) Form Year Ended December 31, 1996 Page Independent Auditors' Report 1 Financial Statements: Balance Sheet 2 - 3 Statement of Profit and Loss 4 - 5 Statement of Changes in Members' Equity 6 Statement of Cash Flows 7 Notes to Financial Statements 8 - 10 Supplemental Supporting Data Required by HUD 11 - 21 Hidalgo, Banfill, Zlotnik & Kermali, P.C. CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS REPORT The Members Cove Apartments, L.C. We have audited the accompanying balance sheet of Cove Apartments, L.C. (a Texas Limited Liability Company), U.S. Department of Housing and Urban Development ("HUD") Project Number 114-1112-REF, as of December 31, 1996 and the related statements of profit and loss, changes in members' equity and cash flows for the year ended December 31, 1996. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in a material respects, the financial position of Cove Apartments, L.C. (the Company) as of December 31, 1996 and the results of its operations, changes in members' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated February 7, 1997, on its compliance and specific requirements applicable to major HUD programs and specific requirements applicable to Affirmative Fair Housing. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 11-21 are presented for purposes of additional analysis and is not a required part of the basic financial statements of the Company. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material in relation to the basic financial statements taken as a whole. /s/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. ------------------------------------------- Certified Public Accounts February 7, 1997 355 TIMMONS LAND, SUITE 460 - HOUSTON, TEXAS 77027 - (713) 963-8008 COVE APARTMENTS, L.C. (HUD Project Number 114-11122-REF) BALANCE SHEET DECEMBER 31, 1996 ASSETS CURRENT ASSETS: 1110 Petty Cash $ 300 1120 TCB depository account 167,752 1130 Tenant accounts receivable 109 1140 Accounts receivable -other -- 1900 Deposits 200 1240 Prepaid insurance 36,408 1250 Mortgage insurance $ 30,442 ----------- Total current assets $ 235,211 ----------- Deposits Held in Trust - Funded: 1191 Tenant security deposits: 53,529 ----------- Restricted Deposits and Funded Reserves: 1310 Mortgage escrow deposits: MIP escrow -- FHA repair escrow -- Property tax escrow 202,581 Insurance escrow 11,545 1320 Reserve for replacements - Note 2 117,835 ----------- Total restricted deposits and funded reserves 331,961 ----------- Fixed Assets: 1410 Land 1,354,280 1420 Buildings 5,175,669 1450 Furniture and equipment 352,410 6,882,359 ----------- Less accumulated depreciation (563,373) ----------- Total fixed assets 6,318,986 ----------- Other Assets: 1800 Financing and organization costs net of accumulated amortization of $33,167 341.726 ----------- Total Assets $ 7,281,413 =========== See accompanying notes to financial statements. 2 COVE APARTMENTS LC. (HUD Project Number 114-11122-REF) BALANCE SHEET DECEMBER 31, 1996 LIABILITIES AND MEMBERS' EQUITY Current Liabilities: 2110 Accounts payable $ 59,766 2120 Accrued wages and payroll taxes payable 3,829 2130 Mortgage interest payable 42,402 2150 Accrued property taxes 228,482 2210 Prepaid rents 5,107 2320 Current portion of mortgage loan payable - Note 2 50.395 ---------- Total current liabilities 389,981 Deposits Liabilities: 2191 Tenant security deposits: 43,154 Long-Term Liabilities: 2310 Mortgage loan payable, net of current portion - Note 2 6,622,718 ---------- Total Liabilities 7,055,853 ---------- Members' Equity 225.560 ---------- Total Liabilities and Members' Equity $7,281,413 ========== See accompanying notes to financial statements. 3 Statement or U.S. Department of Housing Profit and Loss and Urban Development Office of Housing 0MB Approval No. Federal Housing Commissioner 2502-0052 (Exp. 1/31/95) - - -------------------------------------------------------------------------------- Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S. Department of Housing and Urban Development, Washington, D.C. 20410-3600 and to the Office of Management and Budget, Paperwork Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses. - - --------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------ For Monthly Period Beginning: Ending: Project Number: Project Name; 01/01/96 12/31/96 114-11122-REF COVE APARTMENTS, L.C. - - ------------------------------------------------------------------------------------------------------------------------------------ Part I Description of Account Acct. No. Amount - - ------------------------------------------------------------------------------------------------------------------------------------ Apartments or Member Carrying Charges (Coops) 5120 $ 1,944,500 Rental Tenant Assistance Payments 5121 $ Income Furniture and Equipment 5140 $ 5100 Garage and Parking Spaces 5170 $ Flexible Subsidy Income 5160 $ Miscellaneous (specify) 5190 $ Total Rent Revenue Potential at 100% Occupancy $ l ,944,500 - - ------------------------------------------------------------------------------------------------------------------------------------ Apartments 5220 (319,453) Furniture and Equipment 5230 $ Vacancies Stores and Commercial 5240 $ 5200 Garage and Parking Spaces 5270 $ Miscellaneous (Specify) 5290 $ Total Vacancies (319,453) Net Rental Revenue Rent Revenue Less Vacancies $ 1,625,047 Elder and Congregate Services Income_5300 $ Total Service Income (Schedule Attached) 5300 - - ------------------------------------------------------------------------------------------------------------------------------------ Interest Income-Project Operations 5410 $ 1,334 Financial Income from Investments-Residual Receipts 5430 $ Revenue Income from Investments-Reserve for Replacement 5440 $ 7,302 5400 Income from Investments-Miscellaneous 5490 $ Total Financial Revenue $ 8,636 - - ------------------------------------------------------------------------------------------------------------------------------------ Laundry and Vending 5910 34,280 NSF and Late Charges 5920 $ 2,849 Other Damages and Cleaning Fees 5930 $ 8,635 Revenue Forfeited Tenant Security Deposits 5940 $ 12,749 5900 Other Revenue (specify) 5990 $ 4,550 Total Other Revenue $ 63,063 Total Revenue $ l ,696,746 - - ------------------------------------------------------------------------------------------------------------------------------------ Advertising 6210 $ 58,318 Other Administrative Expense 6250 $ 6,780 Office Salaries 6310 $ 87,992 Office Supplies 6311 $ 3,940 Office or Model Apartment Rent 6312 $ 6,240 Administrative Management 6320 $ 67,475 Expenses Manager or Superintendent Salaries 6330 $ 6200/6300 Manager or Superintendent Rent Free Unit 6331 $ Legal Expenses (Project) 6340 $ 525 Auditing Expenses (Project) 6350 $ 5,000 Bookkeeping Fees/Accounting Services 6351 $ 1,900 Telephone and Answering Service 6360 $ 6,582 Bad Debts 6370 $ Miscellaneous Administrative Expenses (specify) 6390 $ 5,034 Total Administrative Expenses $ 249,786 - - ------------------------------------------------------------------------------------------------------------------------------------ Utilities Fuel Oil/Coal 6420 $ Expense Electricity (Light and Misc. Power) 6450 $ 30,276 6400 Water 6451 $ 22,176 Gas 6452 $ 28,692 Sewer 6453 $ Total Utilities Expenses $ 81,144 - - ------------------------------------------------------------------------------------------------------------------------------------
* All amounts must be rounded to the nearest dollar; form HUD-92410 (7/91) $.50 and over, round up - $.49 and below, round down. ref Handbook 4370.2 Page 1 of 2 4
- - ------------------------------------------------------------------------------------------------------------------------------------ For Monthly Period Beginning: Ending: Project Number: Project Name; 01/01/96 12/31/96 114-11122-REF COVE APARTMENTS, L.C. - - ------------------------------------------------------------------------------------------------------------------------------------ Part I Description of Account Acct. No. Amount - - ------------------------------------------------------------------------------------------------------------------------------------ Janitor and Cleaning Payroll 6510 $ Janitor and Cleaning Supplies 6515 $ 1,155 Janitor and Cleaning Contract 6517 $ Exterminating Payroll/Contract 6519 $ 4,621 Exterminating Supplies 6520 $ Garbage and Trash Removal 6525 $ 11,750 Security Payroll/Contract 6530 $ 10,272 Grounds Payroll 6535 $ Operating and Grounds Supplies 6536 $ Maintenance Grounds Contract 6537 $ 28,957 Expenses Repairs Payroll 6540 $ 86,366 6500 Repairs Material 6541 $ 49,259 Repairs Contract 6542 $ Elevator Maintenance/Contract 6545 $ 31,572 Heating/Cooling Repairs and Maintenance 6546 $ 8,772 Swimming Pool Maintenance/Contract 6547 2,442 Snow Removal 6548 $ Decorating Payroll/Contract 6560 $ Decorating Supplies 6561 $ Other 6570 $ Miscellaneous Operating and Maintenance Expenses 6590 $ 37 Total Operating and Maintenance Expenses $ 235,203 - - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Taxes 6710 $ 232,231 Payroll Taxes (FICA) 6711 $ 16,981 Miscellaneous Taxes, Licenses and Permits 6719 $ Taxes Property and Liability Insurance (Hazard) 6720 $ 45,164 and Fidelity Bond Insurance 6721 $ Insurance Workmen's Compensation 6722 $ 15,747 6700 Health Insurance and Other Employee Benefits 6723 $ 14,109 Other Insurance (specify) 6729 $ Total Taxes and Insurance $ 324,232 - - ------------------------------------------------------------------------------------------------------------------------------------ Interest on Bonds Payable 6810 $ Financial Interest on Mortgage Payable 6820 $ 510,480 Expenses Interest on Notes Payable (Long-Term) 6830 $ 6800 Interest on Notes Payable (Short Term) 6840 $ Mortgage Insurance Premium/Service Charge 6850 $ 33,454 Miscellaneous Financial Expenses 6890 $ Total Financial Expenses $ 543,934 - - ------------------------------------------------------------------------------------------------------------------------------------ Elderly Total Service Expenses_Schedule Attached 6900 $ Congregate Total Cost of Operations Before Depreciation $ 1,434,299 Service Profit (Loss) Before Depreciation $ 262,447 Expenses Depreciation (Total)_6600 (specify) 6600 $ 206.132 6900 Operating Profit or (Loss) $ 56,315 - - ------------------------------------------------------------------------------------------------------------------------------------ Corporate Officer Salaries 7110 $ Mortgagor Legal Expenses (Entity) 7120 $ Entity Taxes (Federal-State-Entity) 7130-32 $ Expenses Other Expenses (Entity) 7190 $ 7100 Total Corporate Expenses $ Net Profit or (Loss) $ 56,315 - - ------------------------------------------------------------------------------------------------------------------------------------ Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties. (18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense. - - ------------------------------------------------------------------------------------------------------------------------------------ Part II - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less or more than those required under the mortgage $ 46,707 - - ------------------------------------------------------------------------------------------------------------------------------------ 2. Replacenent Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments may be temporarily suspended or waived. $ 37,528 - - ------------------------------------------------------------------------------------------------------------------------------------ 3. Replacement or Painting Reserve release which are included as expense items on this Profit and Loss statement. $ -0- - - ------------------------------------------------------------------------------------------------------------------------------------ 4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. $ -0- - - ------------------------------------------------------------------------------------------------------------------------------------
form HUD-92410 (7/91) ref Handbook 4370.2 Page 2 of 2 5 COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) STATEMENT OF CHANGES IN MEMBERS EQUITY FOR THE YEAR ENDED DECEMBER 31, 1996 Balance, December 31, 1995 $ 317,134 Contributions - Distributions (147,889) Net Profit for the Period 56,315 --------- Balance, December 31, 1996 $ 225,560 ========= See accompanying notes to financial statements. 6 COVE APARTMENTS, L.C. (HUD Project Number 114-11122-REF) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996 Cash Flows from Operating Activities: Net Income (Loss) $ 56,315 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 206,132 (Increase) decrease in: Accounts receivable - tenants 333 Mortgage insurance 599 Prepaid insurance (12,908) Escrow accounts 177,642 Security deposits (1,191) Accounts receivable - other - Increase (decrease) in: Accounts payable and accrued liabilites 52,242 Accrued interest payable (297) Accrued taxes payable 7,484 Deposit liabilities (3,490) Prepaid rents (2.785) --------- 480,076 --------- Cash Flows from Investing Activities: Property improvements (234,714) --------- Cash Flows from Financing Activities: Mortgage principal payments (46,707) Distributions (147,889) --------- (194,596) ========= Increase in Cash 50,766 Cash, Beginning of Year 117,286 --------- Cash, End of Year $ 168,052 ========= Supplemental Disclosures of Cash Flow Information: Interest Paid During the Year $ 510,480 =========
See accompanying notes to financial statements 7 COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 Note 1 Organization and Summary of Significant Accounting Policies Organization Cove Apartments, L.C. (the "Company") was organized as a Limited Liability Company on June 25, 1992, under the laws of the State of Texas, for the purpose of acquiring and operating a housing project or projects with the assistance of mortgage insurance under the National Housing Act, Section 223F. Such projects are regulated by the Department of Housing and Urban Development ("HUD"). The Regulatory Agreement limits distributions of net operating income to "surplus cash" available for distribution at the end of a semiannual or annual fiscal period. The Limited Liability Company will terminate June 24, 2032, according to the terms of the Articles of Organization. On December 16, 1993, the Members of Cove Apartments, L.C. contributed a 308 unit multifamily project located at 2000 Bay Area Blvd. in Houston, Texas known as the Cove Apartments (the "Project') and certain other assets to the Company. Concurrently, the Company obtained a mortgage loan in the amount of $6,800,000, collateralized by the Project and other assets. The Project was recorded by the Company at the members' net carrying basis of $6,127,303 which represents cost less accumulated depreciation. The proceeds of the mortgage loan were used to repay the members' existing debt on the Project, fund escrow balances and pay closing costs all of which were funded at closing and did not flow through the cash accounts of the Company. The aggregate amount of the assets contributed, including the Project and other assets and escrow balances, in excess of the mortgage loan totaled $378,206 and was recorded as a capital contribution. Revenue Recognition The Company recognizes real estate rental revenue in accordance with the terms of the respective leases. Property, Furniture and Equipment Property, furniture and equipment are carried at cost and are depreciated using the straight line method over the estimated useful lives of 5 to 10 years for furniture and equipment and 20 to 40 years for building and building improvements. 8 COVE APARTMENTS, L.C. (HUD Project Number 114-11122-REF) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,1996 Note 1 Organization and Summary of Significant Accounting Policies (Continued) Financing Costs Financing costs consist principally of fees incurred in conjunction with obtaining the permanent mortgage loan and are being amortized over the 35 year term of the mortgage loan using the straight-line method. Income Taxes No provision for Federal income taxes is made in the accounts of the Company since taxes on its operations are the obligations of individual members. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 Mortgage Loan Payable The mortgage loan payable to TRI Capital Corporation bears interest at 7.625% and is due in monthly installments of $46,457, including interest, through January 1, 2029. The Company's property and equipment and the various funded reserves collateralize the mortgage loan. Annual principal payments for years subsequent to December 31, 1996 are as follows: Years Ending December 31. Amount ------------------------- ------------ 1997 $ 50,395 1998 54,375 1999 58,669 2000 63,302 2001 68,301 Thereafter 6,378,071 ------------ $ 6.673.113 ============ Note 3 Real Estate Leases At December 31, 1996 approximately 80% of the Projects 308 units were committed under either month-to-month leases or noncancelable operating leases with terms varying from-six to twelve months. Future minimum real estate rental income under the noncancelable operating leases existing at December 31, 1996, expected during the year ending December 31, 1997 is approximately $477,933. 9 COVE APARTMENTS,LC. (HUD Project Number 114-11122-REF) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 Note 4 Related Party Transactions Operations of the Prided are managed by Bradley Apartment Homes ("BAH"), which is affiliated with the members of the Cove Apartments, L.C. Management fees paid to BAH are based on four percent of rents collected. Such fees aggregated $67,475 for the year ended December 31, 1996. Consulting services related to contracting for repair/replacement expenditures on the project were provided during the year by Allied Construction Services, which is also affiliated with the members of Cove Apartments, L.C. Consulting fees paid to Allied Construction during the year ended December 31, 1996 aggregated $15,441 and were calculated on a percentage of the repair/replacement cost basis. Note 5 Concentration of Credit Risk The Company maintains unrestricted cash balances at a bank. Cash accounts at the bank are insured by the FDIC for up to $100,000. Amounts in excess of the insured limits were $ 67,752 at December 31, 1996. 10 SUPPLEMENTAL SUPPORTING DATA REQUIRED BY HUD COVE APARTMENTS, LC. (HUD Protect Number 114-11122-REF) Supplemental Supporting Data Required by HUD December 31, 1996 Accounts Receivable (other than from regular [tenants): None Delinquent Tenant Accounts Receivable: 1996 ----------------------------- Number of Amount Tenants Past Due -------- -------- Delinquent 30 days 1 $ 107 Delinquent 31 to 60 days 0 0 Delinquent 61 to 90 days 0 0 Delinquent over 90 days 0 0 -------- -------- 1 $ 107 -------- -------- Mortgage Escrow Deposits: Estimated amount required as of December 31, 1996 for future payment of: 1996 -------------- Property insurance, 8 months $ 20,794 Mortgage insurance, 11 months 33,209 Real estate taxes, 12 months 228.482 ------------ Total 282,485 Amount confirmed by mortgagee 244.567 ------------ Amount on deposit in excess (deficient) of estimated requirements (37,918) Check in transit at December 31,1996 23,304 ------------ Deficiency $ (14,614) ============ An additional escrow check of $15,000 was paid on January 27,1997 to offset the deficiency. 11 COVE APARTMENTS, L.C. (HUD Project Number 11-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Reserve for Replacements: In accordance with the provisions of the Regulatory Agreement restricted cash is held by the TRI Capital Corporation to be used for replacement of property with the approval of HUD as follows: Balance, beginning of period $ 278,250 Deposits made during period 44,830 Withdrawals made during period (205,245) ----------------- Balance, end of period $ 117,835 ================= The following information pertains to withdrawals made from the Reserve for Replacements during the year.
Interior Date Decoration Exterior A/C Misc. Total ---- ---------- ------------ ------------- ---------- ------------ February 13, 1996 $ 29,111 $ 18,980 $ 9,714 $ 4,690 $ 62,495 July 9, 1996 9,746 26,579 3,605 - 39,930 October 1, 1996 66,220 - - 66,220 December 10, 1996 _ 36.600 - - 36.600 ----------- ------------ ------------ ---------- ----------- $ 38,857 148,379 13,319 4,690 205,245 =========== ============ ============ ========== ===========
Accounts Payable (other than to trade creditors): None Compensation of Partners: None from Project funds Changes in Fixed Assets:
Furniture Land Buildings Equipment Total -------------- --------------- -------------- --------------- Cost: December 31, 1995 $ 1,354,280 $ 4,990,383 $ 302,982 $ 6,647,645 Additions - 185,287 49,427 234,714 -------------- --------------- ------------ --------------- Dispositions December 31, 1996 $ 1,354,280 $ 5,175,670 $ 352,409 $ 6,882,359 ============== =============== ============ =============== Accumulated Depreciation: December 31, 1995 $ 288,142 $ 79,815 $ 367,957 Additions 147,631 47,785 195,416 Dispositions _ _ - --------------- ------------ -------------- December 31, 1996 $ 435,773 $ 127,600 $ 563 373 =============== ============ ==============
12 COVE APARTMENTS, L.C. (HUD Project Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996
Accrued Taxes: Description of Basis for Period Amount Tax Accrual Covered Date Due Accrued -------------- --------- ------------ ----------- -------- Houston ISD Tax January 1, 1996 Statement though January 31, 1997 December 31, 1996 $ 126,157 City of Houston and Tax January 1, 1996 Hams County Statement though January 31,1997 December 31, 1996 102,325 ----------- Total $ 228,482 ===========
Tenant Security Deposits: Tenant security deposits are held in account # 25526-00219 at Bank of America Texas NA, Houston, Texas. This federally insured account, in the name of the Project had a balance of $43,154 at December 31,1996, including earned interest that does not inure to the tenants. Schedule of Unauthorized Distributions of Project Income: None Changes in Ownership Interests: No ownership changes occurred during the period covered by the financial statements. Distributions paid to the members: Date Declared and Paid Period Covered Amount Declared and Paid ---------------------- -------------- ------------------------ February 1996 2nd half 1995 $ 32,969 July 1996 1st half 1996 $ 114.920 --------- $ 147,889 ========= 13 - - -------------------------------------------------------------------------------- U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING - FEDERAL HOUSING COMMISSIONER OFFICE Of MULTIFAMILY HOUSING Management AND OCCUPANCY COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS - - --------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER COVE APARTMENTS, L.C. - 06/60/96 114-11122-REF - - ------------------------------------------------------------------------------------------------------------------------------------ PART A - COMPUTE SURPLUS CASH - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Cash (Accounts 1110, 1120, 1191, 1192) $ 146,121 Cash 2. Tenant subsidy vouchers due for period covered $ by financial statement 3. Other (describe) Approved Hud Replacement Reserve Draw Not Received $ 39,929 (a) Total Cash (Add Lines 1, 2, and 3) $ 186,050 - - ------------------------------------------------------------------------------------------------------------------------------------ 4. Accrued mortgage interest payable $ _ 5. Delinquent mortgage principal payments $ _ Current 6. Delinquent deposits to reserve for replacements $ _ Obliga- 7. Accounts payable (due within 30 days) $ _ tions 8. Loans and nonpayable _ (due within 30 days) $ _ 9. Deficient Tax Insurance or MIP Escrow Deposits $ _ 10.Accrued expenses (not escrowed) $ 13 079 11.Prepaid Rents (Account 2210) $ 8,484 12.Tenant security deposits liability (Account 2191) $ 49,567 13.Other (Describe) $ _ (b) Less Total Current Obligations (Add Lines 4 through 13) $ 71,130 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 114,920 - - ------------------------------------------------------------------------------------------------------------------------------------ PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO TO RESIDUAL RECEIPTS - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Surplus Cash $ 114,920 2a. Annual Distribution Earned During Fiscal Period Covered by the Statement $ Limited 2b.Distribution Accrued and Unpaid as of the Dividend End of the Prior Fiscal Period $ Projects 2c.Distributions Paid During Fiscal Period Covered by Statement $ 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c) $ 4. Amount Available for Distribution During Next Fiscal Period $ 114, 920 5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ - - ------------------------------------------------------------------------------------------------------------------------------------ PREPARED BY REVIEWED BY - - ------------------------------------------------------------------------------------------------------------------------------------ LOAN TECHNICIAN LOAN SERVICER - - ------------------------------------------------------------------------------------------------------------------------------------ DATE DATE - - ------------------------------------------------------------------------------------------------------------------------------------
{See Reverse for Instructions) HUD-93486 (12-80) 14 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING - FEDERAL HOUSING COMMISSIONER OFFICE Of MULTIFAMILY HOUSING Management AND OCCUPANCY COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS
- - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER COVE APARTMENTS, L.C. - 12/31/96 114-11122-REF - - ------------------------------------------------------------------------------------------------------------------------------------ PART A - COMPUTE SURPLUS CASH - - ------------------------------------------------------------------------------------------------------------------------------------ Cash 1. Cash (Accounts 1110, 1120, 1191, 1192) $ 221,581 2. Tenant subsidy vouchers due for period covered $ by financial statement 3. Other (describe) $ (a) Total Cash (Add Lines 1, 2, and 3) $ 221,581 4. Accrued mortgage interest payable $ 42,402 5. Delinquent mortgage principal payments $ _ 6. Delinquent deposits to reserve for replacements $ 3,127 7. Accounts payable (due within 30 days) $ _ 8. Loans and nonpayable (due within 30 days) $ 4,055 9. Deficient Tax Insurance or MIP Escrow Deposits $ 37,917 10. Accrued expenses (not escrowed) $ 63,595 11. Prepaid Rents (Account 2210) $ 5,107 12. Tenant security deposits liability (Account 2191) $ 43,154 13. Other (Describe) $ _ (b) Less Total Current Obligations (Add Lines 4 through 13) $ 199,357 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 22,224 - - ------------------------------------------------------------------------------------------------------------------------------------ PART B COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Surplus Cash $ 137,144 2a. Annual Distribution Earned During Fiscal Period Limited Covered by the Statement $ Dividend 2b. Distribution Accrued and Unpaid as of the Projects End of the Prior Fiscal Period $ 2c. Distributions Paid During Fiscal Period Covered by Statement $ 114,920 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c) $ 22,224 4. Amount Available for Distribution During Next Fiscal Period $ 22,224 5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ - - ------------------------------------------------------------------------------------------------------------------------------------ PREPARED BY REVIEWED BY - - ------------------------------------------------------------------------------------------------------------------------------------ LOAN TECHNICIAN LOAN SERVICER - - ------------------------------------------------------------------------------------------------------------------------------------ DATE DATE - - ------------------------------------------------------------------------------------------------------------------------------------
(See Reverse for Instructions) UD-93486 (12-80) 15 COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Statement of Receipts and Disbursements: Source of Funds: Revenues: Rental income, net 1,625,047 Service commissions -- Financial 8,636 Other income 63,063 --------- 1,696,746 --------- Expenses: Administrative 182,311 Management fees 67,475 Utilities 81,144 Operating 23,177 Maintenance 125,660 Maintenance payroll 86,366 Real estate taxes 232,231 Other taxes 16,981 Insurance 59,273 Workmens' compensation 15,747 Mortgage insurance 33,454 Mortgage interest 510.480 --------- 1,434,299 --------- Cash provided by operations before principal payments and changes in assets and liabilities 262,447 Principal payments 46,707 --------- Cash provided by operations before changes in assets and liabilities 215,740 --------- 16 COVE APARTMENTS, L.C. (HUD Project Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Statement of Receipts and Disbursements (Continued) Application of Funds: (Increase) decease in: Accounts receivable - tenants $ 333 Accounts receivable - other -- Prepaid insurance (12,908) Security deposits (1,191) Escrow accounts 177,642 Mortgage insurance 599 Increase (decrease) in: Accounts payable and accrued liabilities 52,242 Accrued interest payable (297) Accrued taxes payable 7,484 Deposit and prepayment liabilities (6,275) Additions to Property (234,714) Surplus Cash Distributions (147,889) --------- (164,974) --------- Increase (decrease) in cash 50,766 Unrestricted cash, beginning period 117,286 --------- Unrestricted cash, end of period $ 168,052 ========= 17 o COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Schedule of Funds in Financial Institutions as of December 31,1996: Funds Held by Mortgagor, Regular Operating Account Texas Commerce Bank (checking)(1) $ 167,752 Funds Held by Mortgagor in Trust, Tenant Security Deposits: Bank of America(2) 53,529 Funds Held by Mortgagee, (in Trust): Reserve for Replacements(3) Sanwa Bank, (checking) 1.25% $ 38,113 Bank United (checking) 2.50% 29,722 Treasury Bill, 4.6891% 50,000 117,835 ----------- Mortgage Insurance Escrow,(3) Sanwa Bank 30,442 Property Tax Escrow,(3) Sanwa Bank 202,581 Property Insurance Escrow,(3) Sanwa Bank 11,545 ----------- Funds Held by Mortgagee 362,403 ----------- Total Funds in Financial Institutions $ 583,684 =========== 1 Balances Confirmed by Texas Commerce Bank 2 Balances Confirmed by Bank of America 3 Balances Confirmed by TRI
18 COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Listing of Identity of Interest Companies and Activities Doing Business with Owner/Agent during the year ended December 31, 1996 Company Name Type of Service Amount Received --------------------------- --------------------- --------------- Bradley Apartment Homes Property Management $ 67,475 Allied Construction Service Consulting Services 15,441 20 COVE APARTMENTS, LC. (HUD Project Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Certification of Members DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT We hereby certify that we have examined the foregoing financial statement of Cove Apartments, L.C. Project Number 11-11122-REF, and, to the best of our knowledge and belief, the same is complete and accurate. /s/ Tim Myers /s/ Al Bradley, Jr. - - ------------------------------------- ------------------------ Tim Myers Al Bradley, Jr. President Vice President 2/18/97 2/18/97 - - ------------------------------------ -------------------------- Date Date Limited Liability Company Identification Number 76-0372786 20 COVE APARTMENTS, L.C. (HUD Protect Number 114-11122-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Management Agent's Certification DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT We hereby certify that we have examined the foregoing financial statement of Cove Apartments, L.C. Project Number 11-11122-REF, and, to the best of our knowledge and belief, the same is complete and accurate. /s/ Linda handley /s/ Al Bradley, Jr. - - ------------------------------------ ---------------------------- Linda Handley Al Bradley, Jr. President Chairman Allied Development Corporation Allied Development Corporation dba, Bradley Apartment Homes dba, Bradley Apartment Homes 2/20/97 2/18/97 - - ----------------------------------- ----------------------------- Date Date Allied Development Corporation Identification Number 76 0156150 21 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) February 7,1997 To the Department of Housing and Urban Development Attached is the financial report of Cove Apartments, L.C. (HUD Project No. 11-11122-REF) for the year ended December 31, 1996. /s/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. - - ---------------------------------------------- Certified Public Accountants Houston, Texas Employer Identification No.: 74-1716599 Engagement Partner: Mr. Naushad Kermali 3555 Timmons Lane, #460 Houston, TX 77027 (713) 963-8008 3555 TIMMONS LANE, SUITE 460 - HOUSTON TEXAS 77027 - (713) 963~8008 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO AFFIRMATIVE FAIR HOUSING The Members Cove Apartments, LC. We have audited the financial statements of U.S. Department of Housing and Urban Development ("HUD") Project No. 114-11122-REF, Cove Apartments, L.C. (the Company) for the year ended December 31, 1996 and have issued our report thereon dated February 7, 1997. We have applied procedures to test the Company's compliance with the Affirmative Fair Housing requirements applicable to its HUD assisted programs for the year ended December 31, 1996. Our procedures were limited to the applicable compliance requirement described in the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of Inspector General in July 1993. Our procedures were substantially less in scope than an audit the objective of which would be the expression of an opinion on the Company's compliance with the Affirmative Fair Housing requirements. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide. This report is intended for the information of management and the U.S. Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. /S/Hidalgo, Banfill, Zlotnik & Kermali, P.C. -------------------------------------------- HIDALGO, BANFILL, BEATNIK & KERMALI, P.C. February 7, 1997 3555 TIMMONS LANE, SUITE ~ HOUSTON TEXAS 77027 - (713) 963-8008 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS The Members Cove Apartments, L.C. We have audited the financial statements of U.S. Department of Housing and Urban Development ("HUD") Project No. 114-11122-REF, Cove Apartments, L.C. (the Company) for the year ended December 31, 1996 and have issued our report thereon dated February 7, 1997. In addition, we have audited the Company's compliance with the specific program requirements governing mortgage status, replacement reserve, security deposits and cash receipts and disbursements that are applicable to each of its major HUD-assisted programs, for the year ended December 31, 1996. The management of Cove Apartments, L.C. is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide') issued by the U.S. Department of Housing and Urban Development, Office of Inspector General in July 1993. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the Companies compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures disclosed no instances of noncompliance with the requirements referred to above, that are required to be reported herein. In our opinion, Cove Apartments, L.C. complied in all material respects with the requirements governing Section 207 pursuant to Section 223(f) of the National Housing Act that are applicable to each of its HUD assisted programs for the year ended December 31, 1 996. This report is intended for the information of management and the U.S. Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. /S/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. ------------------------------------------------ HIDALGO, BANFILL, ZLOTNIK & KERMALI, P.C. February 7, 1997 3555 TIMMONS LANE, SUITE 460 - HOUSTON TEXAS 77027 - (713) 963-8008 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL STRUCTURE (COMBINED REPORT APPLICABLE TO THE FINANCIAL STATEMENTS AND HUD-ASSISTED PROGRAMS) The Members Cove Apartments, L.C. We have audited the financial statements of U.S. Department of Housing and Urban Development ("HUD") Project No. 1114-11122-REF Cove Apartments, L.C. (the Company) as of and for the year ended December 31, 1996 and have issued our report thereon dated February 7, 1997. We have also audited the Company's compliance with requirements applicable to major HUD-assisted programs and have issued our report thereon dated February 7, 1997. We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide ), issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, in July 1993. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements and about whether the Company complied with laws and regulations, noncompliance with which would be material to a major HUD assisted program. The management of Cove Apartments, L.C. is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objections of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that HUD-assisted programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the stature to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. Page 2 In planning and performing an understanding of the design of relevant Optimal control structure policies and procedures and determined whether they had been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinions on the Company's financial statements and on its compliance with specific requirements applicable to its major HUD-assisted programs and the report on the Internal control structure in accordance with the provisions of the Guide and not to provide any assurance on the Internal control structure. We performed tests of controls, as required by the Guide, to evaluate the effectiveness of the design and operation of Internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements applicable to the major HUD-assisted programs. Our procedures were less in scope than would be necessary to render an opinion on such Internal control polices and procedures. Accordingly, we do not express such an opinion. Our consideration of the Internal structure would not necessarily disclose all matters in the Internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the Internal control structure elements does not reduce to a relatively low level risk that error or irregularities in amounts that would be material in relation to the financial statements or that noncompliance laws and regulations that would be material to a HUD-assisted program may occur and not be detected within a timely period by employees in the nominal course of performing their assigned functions.. We noted no matters involving the Internal control structure and its operations that we consider to be material weaknesses as defined above. This report is intended for the information of the audit committee, management, and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. /S/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. ---------------------------------------------- HIDALGO, BANFILL, ZLOTNIK KERMALI, P.C. February 7, 1997 3555 TIMMONS LANE, SUITE 460 - HOUSTON TEXAS 77027 - (713) 963-8008 Hidalgo, Banfill, Zlotnik & Kermali, P. C. OXFORD APARTMENTS, LC. (HUD Protect Number 114-11123-REF) Financial Statements and Supplemental Supporting Data For the Year Ended December 31, 1996 OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) For the Year Ended December 31, 1996 Page ------- Independent Auditors' Report 1 Financial Statements Balance Sheet 2 - 3 Statement of Profit and Loss 4 Statement of Changes in Members' Equity 5 - 6 Statement of Cash Flows 7 Notes to Financial Statements 8 - 10 Supplemental Supporting Data Required by HUD 11 - 21 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS REPORT The Members Oxford Apartments, L.C. We have audited the accompanying balance sheet of Oxford Apartments, L.C. (a Texas Limited Liability Company), U.S. Department of Housing and Urban Development ("HUD") Project Number 114-1112-REF, as of December 31, 1996 and the related statements of profit and loss, changes in members' equity and cash flows for the year ended December 31, 1996. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in a material respects, the financial position of Cove Apartments, L.C. (the Company) as of December 31, 1996 and the results of its operations, changes in members' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated February 7, 1997, on its compliance and specific requirements applicable to major HUD programs and specific requirements applicable to Affirmative Fair Housing. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 11-21 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Company. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material in relation to the basic financial statements taken as a whole. /s/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. --------------------------------------------- Certified Public Accounts February 7, 1997 OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) BALANCE SHEET DECEMBER 31, 1996 CURRENT ASSETS: 1110 Petty Cash $ 300 1120 TCB depository account 195,296 1130 Tenant accounts receivable 1,447 1900 Deposits 2,057 1240 Prepaid insurance 46,017 1250 Mortgage insurance 41,858 ----------------- Total current assets $ 286,975 ----------------- Deposits Held in Trust - Funded: 1191 Tenant security depot: 69,519 ----------------- Restricted Deposits and Funded Renews: 1310 Mortgage escrow deposits: MIP escrow FHA repair escrow Property tax escrow 232,649 Insurance escrow 3,250 1320 Reserve for replacements - Note 2 359,609 ----------------- Total restricted deposits and funded reserves 595.508 ----------------- Fixed Assets: 1410 Land 2,304,054 1420 Buildings 6,464,316 1450 Furniture and equipment 450,814 ----------------- 9,219;184 Less accumulated depreciation (1.369.993) ----------------- Total fixed assets 7,849,191 ----------------- Over Assets: 1800 Fit and organization costs net of accumulated amortization of $43,510 455,439 ----------------- Total Assets $ 9,256,632 ================= See accompanying notes to financial statements. 2. OXFORD APARTMENTS, L.C. (HUD Protect Number 114~11123-REF) BALANCE SHEET DECEMBER 31, 1996 LIABILITIES AND MEMBERS' EQUITY Current Liabilities ties: 2110 Accounts payable $ 7,987 2120 Accrued wages and payroll taxes payable 4,370 2130 Mortgage interest payable 58,303 2150 Accrued property taxes 256,327 2210 Prepaid rents 4,149 2320 Current portion of mortgage loan payable - Note 2 69,293 -------------- Total Current liabilities 400,429 Deposits Liabilities: 2191 Tenant security deposits: 64,590 Long Term Liabilities: 2310 Mortgage loan payable, net of current portion - Note 2 9,106,238 -------------- Total Liabilities 9,571,257 Members Equity (Deficit) (314.625) -------------- Total Liabilities and Members Equity $ 9,256,632 ============== See accompanying notes to financial statements. Statement or U.S. Department of Housing Profit and Loss and Urban Development Office of Housing 0MB Approval No. 2502-0052 Federal Housing Commissioner (Exp. 1/31/95) - - -------------------------------------------------------------------------------- Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S. Department of Housing and Urban Development, Washington, D.C. 20410-3600 and to the Office of Management and Budget, Paperwork Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses. - - --------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------- For Monthly Period Beginning: Ending: Project Number: Project Name; 01/01/96 12/31/96 114-11123-REF OXFORD APARTMENTS, L.C. - - ------------------------------------------------------------------------------------------------------------------------------- Part I Description of Account Acct. No. Amount - - ------------------------------------------------------------------------------------------------------------------------------- Apartments or Member Carrying Charges (Coops) 5120 $ 2,617,040 Rental Tenant Assistance Payments 5121 $ Income Furniture and Equipment 5140 $ 5100 Garage and Parking Spaces 5170 $ Flexible Subsidy Income 5160 $ Miscellaneous (specify) 5190 $ Total Rent Revenue Potential at 100% Occupancy $ 2,617,040 - - ------------------------------------------------------------------------------------------------------------------------------- Apartments 5220 ( 393,814) Furniture and Equipment 5230 ( ) Vacancies Stores and Commercial 5240 ( ) 5200 Garage and Parking Spaces 5270 ( ) Miscellaneous (Specify) 5290 ( ) Total Vacancies (393,814) Net Rental Revenue Rent Revenue Less Vacancies $ 2,223,226 Elder and Congregate Services Income_5300 Total Service Income (Schedule Attached) 5300 - - ------------------------------------------------------------------------------------------------------------------------------- Interest Income_Project Operations 5410 $ 1,732 Financial Income from Investments_Residual Receipts 5430 $ Revenue Income from Investments_Reserve for Replacement 5440 $ 14,818 5400 Income from Investments_Miscellaneous 5490 $ Total Financial Revenue $ 16,550 - - ------------------------------------------------------------------------------------------------------------------------------- Laundry and Vending 5910 30,008 NSF and Late Charges 5920 $ 5,758 Other Damages and Cleaning Fees 5930 $ 12,327 Revenue Forfeited Tenant Security Deposits 5940 $ 12,917 5900 Other Revenue (specify) 5990 $ 5,369 Total Other Revenue $ 66,379 Total Revenue $ 2,306,155 - - ------------------------------------------------------------------------------------------------------------------------------- Advertising 6210 $ 82,280 Other Administrative Expense 6250 $ 6,456 Office Salaries 6310 $ 114,371 Office Supplies 6311 $ 5,242 Office or Model Apartment Rent 6312 $ 20,090 Administrative Management 6320 $ 90,889 Expenses Manager or Superintendent Salaries 6330 $ 6200/6300 Manager or Superintendent Rent Free Unit 6331 $ Legal Expenses (Project) 6340 $ 100 Auditing Expenses (Project) 6350 $ 5,000 Bookkeeping Fees/Accounting Services 6351 $ 1,900 Telephone and Answering Service 6360 $ 7,718 Bad Debts 6370 $ Miscellaneous Administrative Expenses (specify) 6390 $ 4,792 Total Administrative Expenses $ 338,838 - - ------------------------------------------------------------------------------------------------------------------------------- Fuel Oil/Coal 6420 $ Electricity (Light and Misc. Power) 6450 $ 50,630 Water 6451 $ 88,881 Gas 6452 $ 26,022 Sewer 6453 $ Total Utilities Expenses $ 165,533 - - -------------------------------------------------------------------------------------------------------------------------------
4
- - ------------------------------------------------------------------------------------------------------------------------------- For Monthly Period Beginning: Ending: Project Number: Project Name; 01/01/96 12/31/96 114-11123-REF OXFORD APARTMENTS, L.C. - - ------------------------------------------------------------------------------------------------------------------------------- Part I Description of Account cct. No. Amount - - ------------------------------------------------------------------------------------------------------------------------------- Janitor and Cleaning Payroll 6510 $ Janitor and Cleaning Supplies 6515 $ 1,813 Janitor and Cleaning Contract 6517 $ Exterminating Payroll/Contract 6519 $ 5,270 Exterminating Supplies 6520 $ Garbage and Trash Removal 6525 $ 10,806 Security Payroll/Contract 6530 $ 24,453 Grounds Payroll 6535 $ 28,603 Operating and Grounds Supplies 6536 $ Maintenance Grounds Contract 6537 $ Expenses Repairs Payroll 6540 $ 121,446 6500 Repairs Material 6541 $ 53,027 Repairs Contract 6542 $ 31,950 Elevator Maintenance/Contract 6545 $ Heating/Cooling Repairs and Maintenance 6546 $ 5,859 Swimming Pool Maintenance/Contract 6547 3,027 Snow Removal 6548 $ Decorating Payroll/Contract 6560 $ Decorating Supplies 6561 $ Other 6570 $ Miscellaneous Operating and Maintenance Expenses 6590 $ 110 Total Operating and Maintenance Expenses $ 286,364 - - ------------------------------------------------------------------------------------------------------------------------------- Real Estate Taxes 6710 $ 256,869 Payroll Taxes (FICA) 6711 $ 23,874 Miscellaneous Taxes, Licenses and Permits 6719 $ Taxes Property and Liability Insurance (Hazard) 6720 $ 48,448 and Fidelity Bond Insurance 6721 $ Insurance Workmen's Compensation 6722 $ 22,130 6700 Health Insurance and Other Employee Benefits 6723 $ 19,708 Other Insurance (specify) 6729 $ Total Taxes and Insurance $ 371,029 - - ------------------------------------------------------------------------------------------------------------------------------- Interest on Bonds Payable 6810 $ Financial Interest on Mortgage Payable 6820 $ 701,909 Expenses Interest on Notes Payable (Long-Term) 6830 $ 6800 Interest on Notes Payable (Short Term) 6840 $ Mortgage Insurance Premium/Service Charge 6850 $ 46,000 Miscellaneous Financial Expenses 6890 $ Total Financial Expenses $ 747,909 - - ------------------------------------------------------------------------------------------------------------------------------- Elderly Total Service Expenses_Schedule Attached 6900 $ Congregate Total Cost of Operations Before Depreciation $ 1,910,123 Service Profit (Loss) Before Depreciation $ 396,032 Expenses Depreciation (Total)_6600 (specify) 6600 $ 477,114 6900 Operating Profit or (Loss) $( 81,082) - - ------------------------------------------------------------------------------------------------------------------------------- Corporate Officer Services 7110 $ Mortgagor Legal Expenses (Entity) 7120 $ Entity Taxes (Federal-State-Entity) 7130-32 $ Expenses Other Expenses (Entity) 7190 $ 7100 Total Corporate Expenses $ Net Profit or (Loss) $ - - ------------------------------------------------------------------------------------------------------------------------------- Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties. (18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense. - - ------------------------------------------------------------------------------------------------------------------------------- Part II 1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less or more than those required under the mortgage $ 64,222.12 - - ------------------------------------------------------------------------------------------------------------------------------- 2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments may be temporarily suspended or waived. $ 48,892 - - ------------------------------------------------------------------------------------------------------------------------------- 3. Replacement or Painting Reserve release which are included as expense items on this Profit and Loss statement. $ -0- - - ------------------------------------------------------------------------------------------------------------------------------- 4. Project Improvement Reserve Release under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. $ -0- - - -------------------------------------------------------------------------------------------------------------------------------
OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) STATEMENT OF CHANGES IN MEMBERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1996 Balance, December 31, 1995 $ (79,826) Contributions - Distributions (154,167) Net Loss for the Period (80.632) --------------- Balance, December 31, 1996 $ (314,625) =============== See accompanying notes to financial statements. OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996 Cash Flows from Operating Activities: Net Income (Loss) $ (80,632) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 477,114 (Increase) deal ease in: Accounts receivable - tenants (346) Mortgage insurance (22,869) Prepaid insurance (1,859) Escrow accounts 140,285 Security deposits (1,550) Accounts receivable - other Increase (decrease) in: Accounts payable and accrued liabilities (603) Accrued interest payable (408) Accrued taxes payable 2,528 Deposit liabilities (1,485) Prepaid rents 3,813 --------- 513,988 --------- Cash Flows from Investing Activities: Property improvements (214,567) --------- Cash Flows from Financing Activities: Mortgage principal payments (64,222) Distributions (154,167) --------- (218,389) --------- Increase in Cash 81,032 Cash, Beginning of Year 114,564 --------- Cash, End of Year $ 195,596 --------- Supplemental Disclosures of Cash Flow Information: Interest Paid During the Year $ 701,909 ========= See accompanying notes to financial statements. 7 OXFORD APARTMENTS, LC. (HUD Project Number 114~11123-REF) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 Note 1 Organization and Summary of Significant Accounting Policies Organization Oxford Apartments, L.C. (the "Company") was organized as a Limited Liability Company on June 25, 1992, under the laws of the State of Texas, for the purpose of acquiring and operating a housing project or projects with the assistance of mortgage insurance under the National Housing Act, Section 223 F. Such project are regulated by the Department of Housing and Urban Development ("HUD"). The Regulatory Agreement limits distributions of net operating income to "surplus cash" available for distribution at the end of a semiannual or annual fiscal period. The Limited Liability Company will terminate June 24, 2032, according to the terms of the Articles of Organization. On December 16, 1993, the Members of Oxford Apartments, L.C. contributed a 405 unit multifamily project located at 2815 Greenridge in Houston, Texas, known as the Oxford Apartments (the "Project") and certain other assets to the Company. Concurrently, the Company obtained a mortgage loan in the amount of $9,350,000, collateralized by the Project and other assets. The Project was recorded by the Company at the members' net carrying basis of $8,614,164 which represents cost less accumulated depreciation. The proceeds of the mortgage loan were used to repay the members' existing debt on the Project, fund escrow balances and pay closing costs all of which were funded at closing and did not flow through the cash accounts of the Company. The aggregate amount of the assets contributed, including the Project and other assets and escrow balances, in excess of the mortgage loan totaled $484,789 and was recorded as a capital contribution. Revenue Recognition The Company recognizes real estate rental revenue in accordance with the terms of the respective leases. Property, Furniture and Equipment Property, furniture and equipment are carried at cost and are depreciated using the straight line method over the estimated useful lives of 5 to 10 years for furniture and equipment and 19 to 40 years for building and building improvements. 8 OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,1996 Note 1 Organization and Summary of Significant Accounting Policies (Continued) Financing Costs Financing costs consist principally of fees incurred in conjunction with obtaining the permanent mortgage loan and are being amortized over the 35 year term of the mortgage loan using the straight-line method. Income Taxes No provision for Federal income taxes is made in the accounts of the Company since taxes on its operations are the obligations of individual members. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 Mortgage Loan Payable The mortgage loan payable to TRI Capital Corporation bears interest at 7.625% and is due in monthly installments of $63,878, including interest, through January 1, 2029. The Company's property and equipment and the various funded reserves collateralize the mortgage loan. Annual principal payments for years subsequent to December 31, 1996 are as follows: Years Ending December 31, Amount ------------------------ 1997 $ 69,293 1998 74,765 1999 80,670 2000 87,041 2001 95,108 Thereafter 8,768,654 ---------- $9,175,531 ========== Note 3 Real Estate Leases At December 31, 1996 approximately 92% of the Projects 308 units were committed under either month-to-month leases or noncancelable operating leases with terms varying from six to twelve months. Future minimum real estate rental income under the noncancelable operating leases existing at December 31, 1996, expected during the year ending December 31, 1997 is approximately $824,389. 9 OXFORD APARTMENTS, LC. (HUD Project Number 114-11123-REF) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,1996 Note 4 Related Party Transactions Operations of the Project are managed by Bradley Apartment Homes ("BAH"), which is affiliated with the members of the Oxford Apartments, L.C. Management fees paid to BAH are based on four percent of rents collected. Such fees aggregated $90,889 for the year ended December 31, 1996. Consulting services related to contracting for repair/replacement expenditures on the project were provided during the year by Allied Construction Services, which is also affiliated with the members of Oxford Apartments, L.C. Consulting fees paid to Allied Construction during the year ended December 31, 1996 aggregated $15,737 and were calculated on a percentage of the repair/replacement cost basis. Note 5 Concentration of Credit Risk The Company maintains unrestricted cash balances at a bank. Cash accounts at the bank are insured by the FDIC for up to $100,000. Amounts in excess of the insured limits were $95,596 at December 31, 1996. 10 SUPPLEMENTAL SUPPORTING DATA REQUIRED BY HUD OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD December 31, 1998 Accounts Receivable (other than from regular tenants): None Delinquent Tenant Accounts Receivable: 1996 ------------------------- Number of Amount Tenants Past Due -------- -------- Delinquent 30 days 5 $ 1,447 Delinquent 31 to 60 days 0 0 Delinquent 61 to 90 days 0 0 Delinquent over 90 days 0 0 5 $ 1,447 Mortgage Escrow Deposits: Estimated amount required as of December 31, 1996 for future payment of: 1996 --------- Property insurance, 2 months $ 8,367 Mortgage insurance, 12 months 45,663 Real estate taxes, 12 months 256,327 --------- Total 310,357 Amount confirmed by mortgage 277,757 --------- Amount on deposit in excess (deficient) of estimated requirements (32,600) Check in transit at December 31, 1996 30,234 --------- Deficiency $ (2,366) ======== An additional escrow checks of $2,500 was paid on January 27, 1997 to offset the deficiency. 11 OXFORD APARTMENTS, (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Reserve for Replacements: In accordance with the provisions of the Regulatory Agreement, restricted cash is held by the TRI Capital Corporation to be used for replacement of property with the approval of HUD as follows: Balance, beginning of period $ 486,862 Deposits made during period 63,710 Withdrawals made during period (190,963) ---------- Balance, end of period $ 359,609 ========== The following information pertains to withdrawals made from the Reserve for Replacements during the year:
Interior Hot Water Date Decoration Exterior A/C System Misc Total ---- ---------- ---------- --------- --------- --------- --------- January 22, 1996 $ 48,497 $ 43,188 $ 5,361 $ 6,141 $ 6,440 $ 109,627 July 9,1996 19,629 57,283 4,424 - - 81,336 -------- --------- --------- -------- -------- --------- $ 68,126 $ 100,471 $ 9,785 $ 6,141 $ 6,440 $ 190,963 ======== ========= ========= ======== ======== =========
Accounts Payable (other than to trade creditors): None Compensation of Partners: None from Project funds Changes in Fixed Assets:
Furniture & Land Buildings Equipment Total --------------- -------------- ----------- --------------- Cost: December 31, 1995 $ 2,304,054 $ 6,313,187 $ 387,374 $ 9,004,615 Additions - 151,129 63,440 214,569 Dispositions - . - - - ---------------- --------------- ---------- ---------------- December 31, 1996 $ 2,304,054 $ 6,464,316 $ 450,814 $ 9,219,184 ================ =============== ========== ================ Accumulated Depreciation: December 31, 1995 $ 796,175 $ 110,959 $ 907,134 Additions 395,390 67,469 462,859 Dispositions _ _ _ ---------------- --------------- ---------- ---------------- December 31,1996 $ 1,191,565 $ 178,428 $ 1,369,993 ================ =============== ========== ================
12 OXFORD APARTMENTS,. L.C. (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996
Accrued Taxes: Description of Basis for Period Amount Tax Accrual Covered Date Due Accrued -------------- --------- ---------------- --------------- -------------- Houstonn ISD Tax January 1, 1996 Statement through January 31,1997 December 31, 1996 $ 128,557 City of Houston and Tax January 1,1996 Harris County Statement through January 31, 1997 December 31, 1996 127,770 ----------- Total $ 256,327 ===========
Tenant Security Deposits: Tenant security deposits are held in account # 25523-00220 at Bank of America Texas NA, Houston, Texas. The federally insured account, in the name of the Project, had a balance of $69,519 at December 31, 1996, including earned interest that does not inure to the tenants. Schedule of Unauthorized Distributions of Project Income: None Changes in Ownership interests: No ownership changes occurred during the period covers by the financial statements. Distributions paid to the members: Date Declared and Paid Period Covered Amount Declared and Paid February 1996 2nd half 1995 $ 113,906 July 1996 1st half 1996 $ 40,261 --------- $ 154,167 ========= 13 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING - FEDERAL HOUSING COMMISSIONER OFFICE Of MULTIFAMILY HOUSING management AND OCCUPANCY COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS
- - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER OXFORD APARTMENTS, L.C. 06/30/96 114-11123-REF - - ------------------------------------------------------------------------------------------------------------------------------------ PART A - COMPUTE SURPLUS CASH - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Cash (Accounts 1110, 1120, 1191, 1192) $ 44,786 2. Tenant subsidy vouchers due for period covered $ by financial statement 3. Other (describe) Approved Hud Replacement Reserve Draw Not Received $ 81,336 (a) Total Cash (Add Lines 1, 2, and 3) $ 126,122 4. Accrued mortgage interest payable $ _ 5. Delinquent mortgage principal payments $ _ 6. Delinquent deposits to reserve for replacements $ _ 7. Accounts payable (due within 30 days) $ _ 8. Loans and nonpayable _ (due within 30 days) $ _ 9. Deficient Tax Insurance or MIP Escrow Deposits $ _ 10. Accrued expenses (not escrowed) $ 12,182 11. Prepaid Rents (Account 2210) $ 6,786 12. Tenant security deposits liability (Account 2191) $ 66,894 13. Other (Describe) $ _ (b) Less Total Current Obligations (Add Lines 4 through 13) $ 85,862 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 40,260 - - ------------------------------------------------------------------------------------------------------------------------------------ PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO REQUIRED DEPOSIT TO RESIDUAL RECEIPTS - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Surplus Cash $ 40,260 2a. Annual Distribution Earned During Fiscal Period $ Covered by the Statement 2b. Distribution Accrued and Unpaid as of the $ End of the Prior Fiscal Period 2c. Distributions Paid During Fiscal Period Covered by Statement $ 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c) $ 4. Amount Available for Distribution During Next Fiscal Period $ 40,260 5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) - - ------------------------------------------------------------------------------------------------------------------------------------ PREPARED BY REVIEWED BY - - ------------------------------------------------------------------------------------------------------------------------------------ LOAN TECHNICIAN LOAN SERVICER - - ------------------------------------------------------------------------------------------------------------------------------------ DATE DATE - - ------------------------------------------------------------------------------------------------------------------------------------
(See Reverse for Instructions) HUD-93486 (12-80) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING - FEDERAL HOUSING COMMISSIONER OFFICE Of MULTIFAMILY HOUSING Management AND OCCUPANCY COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS
- - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER OXFORD APARTMENTS, L.C. 06/60/96 114-11123-REF - - ------------------------------------------------------------------------------------------------------------------------------------ PART A - COMPUTE SURPLUS CASH - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Cash (Accounts 1110, 1120, 1191, 1192) $ 265,115 2. Tenant subsidy vouchers due for period covered $ by financial statement 3. Other (describe)(Approved HUD replacement reserve draw not received) $ 55,682 (a) Total Cash (Add Lines 1, 2, and 3) $ 320,797 4. Accrued mortgage interest payable $ 58,303 5. Delinquent mortgage principal payments $ 4,074 6. Delinquent deposits to reserve for replacements $ 7. Accounts payable (due within 30 days) $ 8. Loans and nonpayable (due within 30 days) $ 5,575 9. Deficient Tax Insurance or MIP Escrow Deposits $ 32,600 10. Accrued expenses (not escrowed) $ 12,357 11. Prepaid Rents (Account 2210) $ 4,149 12. Tenant security deposits liability (Account 2191) $ 64,590 13. Other (Describe) $ _ (b) Less Total Current Obligations (Add Lines 4 through 13) $ 181,648 (c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 139,149 - - ------------------------------------------------------------------------------------------------------------------------------------ PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO REQUIRED DEPOSIT TO RESIDUAL RECEIPTS - - ------------------------------------------------------------------------------------------------------------------------------------ 1. Surplus Cash $179,409 2a. Annual Distribution Earned During Fiscal Period Covered by the Statement $ 2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $ 2c. Distributions Paid During Fiscal Period Covered by Statement $ 40,260 3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid (Line 2a plus 2b minus 2c) $ 139,149 4. ~ Amount Available for Distribution During Next Fiscal Period $ 139,149 5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ - - ------------------------------------------------------------------------------------------------------------------------------------ PREPARED BY REVIEWED BY - - ------------------------------------------------------------------------------------------------------------------------------------ LOAN TECHNICIAN LOAN SERVICER - - ------------------------------------------------------------------------------------------------------------------------------------ DATE DATE - - ------------------------------------------------------------------------------------------------------------------------------------
(See Reverse for Instructions) HUD-93486 (12-80) OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Statement of Receipts and Disbursements: Source of Funds: Revenues: Rental income, net $ 2,223,226 Service commissions - Financial 16,550 Other income 66,379 ----------- 2,306,155 ----------- Expenses: Administrative: 247,949 Management fees 90,889 Utilities 165,533 Operating 37,073 Maintenance 127,845 Maintenance payroll 121,446 Real estate taxes 256,869 Other taxes 23,874 Insurance 68,156 Workmens' compensation 22,130 Mortgage insurance 46,000 Mortgage interest 701,909 ---------- 1,909,673 ---------- Cash prodded by operations before principal payments and changes in assets and liabilities 396,482 Principal payments 64,222 ---------- Cash provided by operations before changes in assets and liabilities 332;260 16 OXFORD APARTMENTS, L.C. (HUD Protect Number 114-11123-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Statement of Receipts and Disbursements (Continued) Application of Funds: (Increase) decrease in: Accounts receivable - tenants $ (346) Prepaid insurance (1,859) Security deposits (1,550) Escrow accounts 140,285 Mortgage insurance (22,869) Increase (decrease) in: Accounts payable and accrued liabilities (603) Accrued interest payable (408) Accrued taxes payable 2,528 Deposit and prepayment liabilities 2,328 Additions to Property (214,567) Surplus Cash Distributions (154,167) ------------ Increase in cash 81,032 Unrestricted cash, beginning period 114,564 ------------ Unrestricted cash, end of period $ 195,596 ============ 17 OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD December 31,1996 Schedule of Funds in Financial Institutions as of December 31, 1996: Funds Held by Mortgagor, Regular Operating Account: Texas Commerce Bank, (checking)(1) $ 195,296 Funds Held by Mortgagor in Trust, Tenant Security Deposits: Bank of America)(2) 69,519 Funds Held by Mortgagee, (in Trust): Reserve for Replacements(3) Sanwa Bank, (checking) 1.25% $ 64,641 Bank United, (checking) 2.50% 44,968 Treasury Bill, 4.689% 250.000 359,609 ---------- Mortgage Insurance Escrow,(3) Sanwa Bank 41,858 Property Tax Escrow,(3) Sanwa Bank 232,649 Property Insurance Escrow,(3) Sanwa Bank 3,250 --------- Funds Held by Mortgagee 637,366 --------- Total Funds in Financial Institutions $ 902,181 =========
1 Balance Confirmed by Texas Commerce Bank 2 Balance Confirmed by Bank of America 3 Balance Confirmed by TRI 18 OXFORD APARTMENTS (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD Form the Year Ended December 31, 1996 Listing of Identity of Interest Companies and Activities Doing Business with Owner/Agent doing the year ended Decanter 31, 1996 Company Name Type of Service Amount Received' --------------------- ------------------- ---------------- Bradley Apartment Homes Property Management $ 90,889 Allied Construction Service Consulting Services 15,737 19 OXFORD APARTMENTS, LC. (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Certification of Members DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT We hereby certify that we have examined the foregoing financial statement of Oxford Apartments, L.C. Project Number 114-11123-REF, and, to the best of our knowledge and belief, the same is complete and accurate. /s/ Tim Myers /s/ Al Bradely, Jr. - - --------------------------- --------------------------- Tim Myers Al Bradley, Jr. President Vice President 2/18/97 2/18/97 - - ---------------------------- --------------------------- Date Date Limited Liability Company Identification Number 76-0372784 20 OXFORD APARTMENTS, L.C. (HUD Project Number 114-11123-REF) Supplemental Supporting Data Required by HUD For the Year Ended December 31, 1996 Management Agent's Certification DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT We hereby certify that we have examined the foregoing financial statement of Oxford Apartments, L.C. Project Number 114-11123-REF, and, to the best of our knowledge and belief, the same is complete and accurate. /s/ Linda Handley /s/ Al Bradley, Jr. ---------------------------------- -------------------------------- Linda Handley Al Bradley, Jr. President Chairman Allied Development Corporation Allied Development Capaabon dba, Bradley Apartment Homes dba, Bradley Apartment Homes 2/20/97 2/20/97 - - ----------------------------------- --------------------------------- Date Date Allied Development Corporation Identification Number 76-0156150 21 Hidalgo, Banfi11, Zlotnik & Kermali, P. C CERTIFIED PUBLIC ACCOUNTS (Originally Founded in 1949) February 7,1997 To the Department of Housing and Urban Development Attached is the financial report of Oxford Apartments, L.C. (HUD Project No. 114-11123-REF) for the year ended December 31, 1996. /s/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. - - -------------------------------------------- Certified Public Accountants Houston, Texas Employer Identification No.: 74-1716599 Engagement Partner Mr. Naushad Kermali 3555 Timmons Lane, #460 Houston, TX 77027 (713) 963 8008 3555 TIMMONS LANE. SUITE 460 - HOUSTON TEXAS 77027- (713) 963-8008 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO AFFIRMATIVE FAIR HOUSING The Members Oxford Apartments, LC. We have audited the financial statements of U.S. Department of Housing and Urban Development ("HUD") Project No. 114-11123-REF, Oxford Apartments, L.C. (the Company) for the year ended December 31, 1996 and have issued our report thereon dated February 7, 1997. We have applied procedures to test the Company's compliance with the Affirmative Fair Housing requirements applicable to its HUD-assisted programs for the year ended December 31, 1996. Our procedures were limited to the applicable compliance requirement described in the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of Inspector General in July 1993. Our procedures were substantially less in scope than an audit the objective of which would be the expression of an opinion on the Company's compliance with the Affirmative Fair Housing requirements. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide. This report is intended for the information of management and the U.S. Department of Housing and Urban Development. However, this report is a matter of public record and as distribution is not limited. /S/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. ------------------------------------------------ HIDALGO, BANFILL, BEATNIK & KERMALI, P.C. February 7, 1997 3555 TIMMONS LANE, SUITE ~ HOUSTON TEXAS 77027 - (713) 963-8008 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS The Members Oxford Apartments, L.C. We have audited the financial statements of U.S. Department of Housing and Urban Development (-HUD') Project No. 114-11122-REF, Oxford Apartments, L.C. (the Company) for the year ended December 31, 1996 and have issued our report thereon dated February 7, 1997. In addition, we have audited the Company's compliance with the specific program requirements governing mortgage status, replacement reserve, security deposits and cash receipts and disbursements that are applicable to each of its major HUD-assisted programs, for the year ended December 31, 1996. The management of Cove Apartments, L.C. is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide') issued by the U.S. Department of Housing and Urban Development, Office of Inspector General in July 1993. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the Companys compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures disclosed no instances of noncompliance with the requirements referred to above, that are required to be reported herein. In our opinion, Oxford Apartments, L.C. complied in all material respects with the requirements governing Section 207 pursuant to Section 223(f) of the National Housing Act that are applicable to each of its HUD assisted programs for the year ended December 31, 1996. This report is intended for the information of management and the U.S. Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. /S/ Hidalgo, Banfill, Zlotnik & Kermali, P.C. --------------------------------------------- HIDALGO, BANFILL, ZLOTNIK & KERMALI, P.C. February 7, 1997 3555 TIMMONS LANE, SUITE 460 - HOUSTON TEXAS 77027 - (713) 963-8008 Hidalgo, Banfill, Zlotnik & Kermali, P.C CERTIFIED PUBLIC ACCOUNTANTS (Originally Founded in 1949) INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL STRUCTURE (COMBINED REPORT APPLICABLE TO THE FINANCIAL STATEMENTS AND HUD^SSISTED PROGRAMS) The Members Oxford Apartments, L.C. We have audited the financial statements of U.S. Department of Housing and Urban Development ("HUD") Project No. 114-11123-REF Oxford Apartments, L.C. (the Company) as of and for the year ended December 31, 1996 and have issued our report thereon dated February 7, 1997. We have also audited the Companies compliance with requirements applicable to major HUD-assisted programs and have issued our report thereon dated February 7, 1997. We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide ), issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, in July 1993. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements and about whether the Company complied with laws and regulations, noncompliance with which would be material to a major HUD assisted program. The management of Cove Apartments, L.C. is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objections of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with managements authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that HUD-assisted programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the stature to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. Page 2 In planning and performing an understanding of the design of relevant Optimal control structure policies and procedures and determined whether they had been placed in operation, and we assessed contra risk in order to determine our auditing procedures for the purpose of expressing our opinions on the Company's financial statements and on its compliance with specific requirements applicable to its major HUD-assisted programs and the report on the internal control structure in accordance with the provisions of the Guide and not to provide any assurance on the internal control structure. We performed tests of controls, as required by the Guide, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements applicable to the major HUD-assisted programs. Our procedures were less in scope than would be necessary to render an opinion on such Internal control polices and procedures. Accordingly, we do not express such an opinion. Our consideration of the Internal structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the Internal control structure elements does not reduce to a relatively low level risk that error or irregularities in amounts that would be material in relation to the financial statements or that noncompliance laws and regulations that would be material to a HUD-assisted program may occur and not be detected within a timely period by employees in the nominal course of performing their assigned functions.. We noted no matters involving the internal control structure and its operations that we consider to be material weaknesses as defined above. This report is intended for the information of the audit committee, management, and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. /S/ Hidalgo, Banfill, Zlotnik, Kermali, P.C. ------------------------------------------ HIDALGO, BANFILL, ZLOTNIK & KERMALI, P.C. February 7, 1997 3555 TIMMONS LANE, SUITE 460 - HOUSTON TEXAS 77027 - (713) 963-8008 EX-27 5 ART. 5 FDS FOR 4TH QUARTER 10-K
5 The Schedule contains summary financial information extracted from the financial statements for American Mortgage Investors Trust and is qualified in its entirety by reference to such financial statements 0000878774 Art. 5 FDS FOR 4TH QUARTER 10-K 1 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 4,828,561 12,683,331 45,635,323 0 0 0 0 0 63,147,215 986,551 0 0 0 0 62,160,664 63,147,215 0 4,424,815 0 0 1,137,184 0 0 3,287,631 0 0 0 0 0 3,287,631 .83 0
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