-----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, SF0x4Z19I1kw7Op+Jtm4ogH3Ks8kgD0DNEQ9gx7sRQ9524eYlwV+XOyZpYSxZont jnRKlhdSYDhFANVXwFPLoA== 0000950146-98-001948.txt : 19981116 0000950146-98-001948.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950146-98-001948 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14583 FILM NUMBER: 98749399 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR - ------- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 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 charter) Massachusetts 13-6972380 ------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - -------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ PART I Item 1. Financial Statements AMERICAN MORTGAGE INVESTORS TRUST Balance Sheets
September 30, December 31, 1998 1997 ------------ ------------ (unaudited) ASSETS Investments in mortgage loans (Note 2) $ 46,214,163 $ 46,792,853 Investments in REMIC and GNMA Certificates (Note 3) 10,903,548 12,495,878 Cash and cash equivalents 2,726,148 1,840,715 Deferred costs (net of accumulated amortization of $50,000 and $45,000, respectively) 9,549 14,549 Accrued interest receivable 759,155 501,927 ------------ ------------ Total assets $ 60,612,563 $ 61,645,922 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 71,510 $ 49,123 Due to affiliates (Note 4) 1,610,666 1,210,874 ------------ ------------ Total liabilities 1,682,176 1,259,997 ------------ ------------ Commitments (Note 5) Shareholders' equity: Shares of beneficial interest; $.10 par value; 12,500,000 shares authorized; and 4,087,583 shares issued and outstanding, respectively 415,225 408,759 Treasury shares of beneficial interest; $.10 par value; 312,998 and 248,339 shares, respectively (31,300) (24,834) Additional paid-in capital 68,849,747 68,849,725 Distributions in excess of net income (10,477,935) (9,021,323) Accumulated other comprehensive income: Net unrealized gain on marketable securities (Note 3) 174,650 173,598 ------------ ------------ Total shareholders' equity 58,930,387 60,385,925 ------------ ------------ Total liabilities and shareholders' equity $ 60,612,563 $ 61,645,922 ============ ============
See Accompanying Notes to Financial Statements -2- AMERICAN MORTGAGE INVESTORS TRUST Statements of Income (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ----------- ---------- ----------- ---------- Revenues: Interest income: Mortgage loans (Note 2) $ 787,949 $ 793,562 $ 2,436,018 $2,354,292 REMIC and GNMA Certificates and FHA Insured Project Loan (Note 3) 217,714 245,286 681,283 731,318 Temporary investments 31,336 28,155 82,955 124,421 ----------- ---------- ----------- ---------- Total revenues 1,036,999 1,067,003 3,200,256 3,210,031 ----------- ---------- ----------- ---------- Expenses: General and administrative 186,345 126,384 494,778 493,667 Realized (gain) loss on sale of REMIC and GNMA Certificates and FHA Insured Project Loan (Note 3) (7,265) 3,614 (6,648) 65,386 Amortization 0 2,500 5,000 7,500 ----------- ---------- ----------- ---------- Total expenses 179,080 132,498 493,130 566,553 ----------- ---------- ----------- ---------- Net income $ 857,919 $ 934,505 $ 2,707,126 $2,643,478 =========== ========== =========== ========== Basic net income per weighted average share $ .22 $ .24 $ .70 $ .69 =========== ========== =========== ==========
See Accompanying Notes to Financial Statements -3- AMERICAN MORTGAGE INVESTORS TRUST Statement of Changes in Shareholders' Equity (Unaudited)
Shares of Treasury Shares of Beneficial Interest Beneficial Interest Shares Amount Shares Amount ------ ------ ------ ------ Balance at January 1, 4,087,583 $ 408,759 (248,339) $(24,834) 1998 Net Income 0 0 0 0 Distributions 0 0 0 0 Purchase of 0 0 (64,659) (6,466) treasury shares Issuance of shares 64,660 6,466 0 0 of beneficial interest Change in net 0 0 0 0 unrealized gain on securities available for sale ----------------------------------------------------------- Balance at 4,152,243 $415,225 (312,998) $(31,300) September 30, 1998 =========================================================== Net Unrealized Gain (Loss) on Additional Distributions in Securities Paid-in Excess of Available Capital Net Income for Sale Total ------- ---------- -------- ----- Balance at January 1, $68,849,725 $(9,021,323) $173,598 $60,385,925 1998 Net Income 0 2,707,126 0 2,707,126 Distributions 0 (4,163,738) 0 (4,163,738) Purchase of (1,007,311) 0 (1,013,777) treasury shares Issuance of shares 1,007,333 0 0 1,013,799 of beneficial interest Change in net 0 0 1,052 1,052 unrealized gain on securities available for sale ----------------------------------------------------------------------- Balance at $68,849,747 $(10,477,935) $174,650 $58,930,387 September 30, 1998 =======================================================================
See accompanying notes to financial statements. -4- AMERICAN MORTGAGE INVESTORS TRUST Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, ---------------------------- 1998 1997 Cash flows from operating activities: Net income $ 2,707,126 $ 2,643,478 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities Amortization expense - organization costs 5,000 7,500 Amortization expense - loan premium and origination costs 376,082 357,513 Amortization of REMIC premium 0 3,055 Accretion of REMIC and GNMA and FHA Insured Project Loan discount (20,298) (24,274) (Gain) loss on sale of REMIC certificates (7,560) 21,070 Loss on sale of GNMA Certificates 912 1,236 Loss on sale of FHA Insured Project Loan 0 43,080 Changes in operating assets and liabilities: Increase in accrued interest receivable (257,228) (74,801) Increase in due to affiliates 399,792 365,164 Increase (decrease) in accounts payable and accrued expenses 22,387 (23,442) ----------- ----------- Total adjustments 519,087 676,101 ----------- ----------- Net cash provided by operating activities 3,226,213 3,319,579 ----------- -----------
-5- AMERICAN MORTGAGE INVESTORS TRUST Statements of Cash Flows (continued) (Unaudited)
Nine Months Ended September 30, -------------------------- 1998 1997 -------------------------- Cash flows from investing activities: Investments in mortgage loans 0 (2,242,671) Principal repayments of mortgage loans 202,608 149,726 Purchase of REMIC Certificates 0 (1,889,817) Purchase of GNMA Certificate 0 (1,981,566) Principal repayments of GNMA certificates 233,583 86,164 Principal repayments of REMIC certificates 1,386,745 646,291 Principal repayments of FHA Insured Project Loan 0 3,408,238 ----------- ----------- Net cash provided by (used in) investing activities 1,822,936 (1,823,635) ----------- ----------- Cash flows from financing activities: Distributions to shareholders (4,163,738) (4,172,266) Proceeds from issuance of shares of beneficial interest 1,013,799 1,054,250 Purchase of treasury shares (1,013,777) (704,874) ----------- ----------- Net cash used in financing activities (4,163,716) (3,822,890) ----------- ----------- Net increase (decrease) in cash and cash equivalents 885,433 (2,326,946) Cash and cash equivalents at beginning of period 1,840,715 4,828,561 ----------- ----------- Cash and cash equivalents at end of period $ 2,726,148 $ 2,501,615 =========== =========== Supplemental schedule of noncash investing activities: Decrease in deferred costs $ 0 $ 3,032 Increase in investments in mortgage loans 0 (3,032) ----------- ----------- $ 0 $ 0 =========== ===========
-6- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) 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. 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. As of September 30, 1998, the backlog of shares to be redeemed is 164,481. 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 principals. Actual results could differ from those estimates. The fair value of investments in mortgage loans and investments in REMIC and GNMA Certificates and FHA Insured Project Loan is based on actual market price quotes, or by determining the present value of the projected future cash flows using appropriate discount rates, credit losses and prepayment assumptions. The unaudited financial statements have been prepared on the same basis as the audited financial statements included in the Company's Form 10-K for the year ended December 31, 1997. In the opinion of the Advisor, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 1998, the results of its operations for the three and nine months ended September 30, 1998 and 1997 and its cash flows for the nine months ended September 30, 1998 and 1997. However, the operating results for the interim periods may not be indicative of the results for the full year. -7- Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Basic 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 three and nine months ended September 30, 1998 and 1997 were 3,845,453 and 3,849,480 and 3,845,043 and 3,849,772, respectively. The Company adopted SFAS No. 130, Reporting Comprehensive Income on January 1, 1998. SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. The statement also requires the accumulated balance of other comprehensive income to be displayed separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. Total comprehensive income for the three and nine months ended September 30, 1998 and 1997 was $902,524 and $1,102,952 and $2,697,311 and $2,795,237, respectively. The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information on January 1, 1998. SFAS No. 131 establishes standards for reporting information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating officer in deciding how to allocate resources and in assessing performance. Categories required to be reported as well as reconciled to the financial statements are segment profit or loss, certain specific revenue and expense items, and segment assets. The Company operates in one segment, investment in mortgages or mortgage backed securities. Certain prior year amounts have been reclassified to conform with current year presentation. -8- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) Note 2 - Investments in Loans The Company originally funded five Originated Mortgages (excluding GNMAs-see Note 3), five noninterest bearing Additional Loans and two additional loan-bridge loans in the aggregate amount of $46,837,304. Information relating to investments in Originated Mortgages and Additional Loans as of September 30, 1998 and December 31, 1997 is as follows:
Date of Invest- ment/ Amounts Advanced Total Final --------------------------------- Amounts Out- Matu- Total Advanced standing Origi- Descrip rity Mortgage Additional Amounts Amounts and Loan nation Property tion Date Loans Loans Advanced Unadvanced Unadvanced Balance Costs - -------- ---- ---- ----- ----- -------- ---------- ---------- ------- ----- The Cove 308 12/93 $6,800,000 $840,500 $7,640,500 $ 0 $ 7,640,500 $ 7,422,827 $444,215 Apts. Apt. 1/29 Houston, Units (D) TX(A) Oxford on 405 12/93 9,350,000 1,156,000 10,506,000 0 10,506,000 10,206,700 610,814 Greenridge Apt. 1/29 Apts. Units (D) Houston, TX(A) Town & 330 4/94 9,348,000 1,039,000 10,387,000 0 10,387,000 10,097,359 603,895 Country IV Apt. 5/29 Apts. Units (E) Urbana, IL(B) Columbiana 204 4/94 8,276,895 563,000 8,839,895 406,105 9,246,000 8,806,376 532,835 Lakes Apts. Apt. 11/35 Columbia, Units (F) SC(C) Stony Brook 125 12/95 8,500,000 763,909 9,263,909 0 9,263,909 9,222,831 413,492 Village II Apt. 6/37 Apts. Units (F) East Haven, CT(G) ----------------------------------------------------------------------------------------------- Total $42,274,895 $4,362,409 $46,637,304 $406,105 $47,043,409 $45,756,093 $2,605,251 =============================================================================================== Accum- ulated Amor- tization Interest Additional Balance Earned Less Loans and at Balance at by the 1998 Net Origina- September December Company Amor- Interest Property tion Costs 30, 1998 31,1997(H) for 1998 tization Earned - -------- ------------------- ---------- -------- -------- ------ The Cove $484,775 $7,382,267 $7,498,346 $446,556 $75,690 $370,866 Apts. Houston, TX(A) Oxford on 666,701 10,150,813 10,310,443 685,473 104,095 581,378 Greenridge Apts. Houston, TX(A) Town & 517,554 10,183,700 10,327,840 608,866 87,186 521,680 Country IV Apts. Urbana, IL(B) Columbiana 247,564 9,091,647 9,158,473 497,291 42,225 455,066 Lakes Apts. Columbia, SC(C) Stony Brook 230,587 9,405,736 9,497,751 573,914 66,886 507,028 Village II Apts. East Haven, CT(G) ---------------------------------------------------------------------- Total $2,147,181 $46,214,163 $46,792,853 $2,812,100 $376,082 $2,436,018 ======================================================================
-9- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) (A) The interest rates for The Cove and Oxford are 7.625%-9.129%. In addition to the interest rate, the Company is entitled to 30% of the cash flow remaining after payment of 9.129% interest and accrued interest, if any. (B) The interest rates for Town and Country are 7.375%-9.167%. In addition to the interest rate, the Company is 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. Payments at the rate of 8.678% are guaranteed by the developer until December 1998. (D) The Originated Mortgages have terms of 35 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (E) 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. (F) 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. (G) The interest rates for Stony Brook are 7.75%-9.128%. In addition to the interest rate, the Company is entitled to 40% of the cash flow remaining after payment of 9.128% interest. (H) Aggregate cost for federal income tax purposes is $45,707,370. -10- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) Note 3 - Investment in REMIC and GNMA Certificates Information relating to investments in REMIC and GNMA Certificates as of September 30, 1998 and December 31, 1997 is as follows:
Original Accum- Date Purchase ulated Purchased Price (Discount) Amorti- /Final Stated Including Principal at at zation at Seller Certificate Payment Interest Prem/ September September September GNMA Certificates Number Date Rate (Disc) 30, 1998 30, 1998 30, 1998 - ----------------- ------ ---- ---- ------ -------- -------- -------- Bear Stearns 0355540 7/27/94 7.125% $2,407,102 $2,571,825 $(237,894) $83,777 3/15/29 Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,158,587 (8,094) 2,976 8/15/29 Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 3,655,642 (3,425) 1,370 7/15/29 SunCoast Capital Group, Ltd. G22412(6) 6/23/97 7.000% 1,981,566 1,820,629 (11,948) 3,319 4/20/27 REMIC Certificates SunCoast Capital Group, Ltd. FHLMC 3/30/97 7.000% 507,288 0 0 0 17218 2/1/98 SunCoast Capital Group, Ltd. FHLMC 5/30/97 6.500% 251,967 0 0 0 17161 2/1/98 SunCoast Capital Group, Ltd. FHLMC 6/23/97 7.000% 147,437 0 0 0 17125 4/20/27(1) SunCoast Capital Group, Ltd. FNMA 6/30/97 7.500% 983,125 420,228 (7,091) 1,611 1997-42V 10/18/09 ------------------------------------------------- Total $12,404,230 $10,626,911 $(268,452) $93,053 ================================================= Loan Interest Origination Unrealized Balance Earned Costs at Gain at at Balance at by the Net Seller September September September December Company 1998 Interest GNMA Certificates 30, 1998 30, 1988 30, 1998 31, 1997 for 1998 Accretion Earned - ----------------- -------- -------- -------- -------- -------- --------- ------ Bear Stearns $ 79,566 $95,247 $2,592,521 $2,604,394 $137,824 $15,126 $152,950 Malone Mortgage 73,312 17,475 2,244,256 2,253,185 137,894 537 138,431 Goldman Sachs 124,508 925 3,779,020 3,833,576 227,783 249 228,032 SunCoast Capital Group, Ltd. 0 56,705 1,868,705 1,982,055 99,598 2,085 101,683 REMIC Certificates SunCoast Capital Group, Ltd. 0 0 0 473,051 767 0 767 SunCoast Capital Group, Ltd. 0 0 0 198,075 869 0 869 SunCoast Capital Group, Ltd. 0 0 0 148,495 0 0 0 SunCoast Capital Group, Ltd. 0 4,298 419,046 1,003,047 56,250 2,301 58,551 ---------------------------------------------------------------------------------- Total $277,386 $174,650 $10,903,548 $12,495,878 $660,985 $20,298 $681,283 ==================================================================================
(1) The stated final payment date was April 20, 2027. The actual final payment amounting to $145,942 was received January 22, 1998. -11- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) Note 3 - Investment in REMIC and GNMA Certificates (continued) The amortized cost, unrealized gain (loss) and fair value for the investment in REMIC and GNMA Certificates at September 30, 1998 and December 31, 1997 were as follows:
Gross Amortized Unrealized Fair Value Amortized Cost at Gain at at Cost at September September September December Security 30, 1998 30, 1998 30, 1998 31, 1997 - -------- ------------- ------------ ------------ ------------ Fannie Mae REMICs $ 414,748 $ 4,298 $ 419,046 $ 984,659 Federal Home Loan REMICs 0 0 0 806,972 Ginnie Mae Certificates 10,314,150 170,352 10,484,502 10,530,649 ----------- -------- ----------- ----------- $10,728,898 $174,650 $10,903,548 $12,322,280 =========== ======== =========== =========== Gross Gross Unrealized Unrealized Fair Gain at (Loss) at Value at December December December Security 31, 1997 31, 1997 31, 1997 - -------- ------------ ---- -------- ------------ Fannie Mae REMICs $ 18,388 $ 0 $ 1,003,047 Federal Home Loan REMICs 12,649 0 819,621 Ginnie Mae Certificates 146,012 (3,451) 10,673,210 ------- ------- ---------- $177,049 $ (3,451) $12,495,878 ======= ======= ==========
-12- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) The change in the unrealized gain (loss) for the nine months ended September 30, 1998 and the year ended December 31, 1997 were as follows: Unrealized loss at January 1, 1997 $ (81,386) Sale of securities during the year ended December 31, 1997 included in unrealized loss at December 31, 1996 15,647 Unrealized gain on securities purchased during the twelve months ended December 31, 1997 53,925 Unrealized gain on securities held at December 31, 1997 and 1996 185,412 --------- Unrealized gain at December 31, 1997 $ 173,598 Sale of securities during the nine months ended September 30, 1998 included in unrealized gain at December 31, 1997 (25,749) Unrealized gain on securities held at September 30, 1998 and December 31, 1997 26,801 --------- Unrealized gain at September 30, 1998 $ 174,650 =========
For the nine months ended September 30, 1998, there were gains and losses of $8,875 and $2,227, respectively, (including acquisition fees and expenses) on principal repayments of REMICs and GNMAs. Note 4 - Related Party Transactions The Company has an agreement with the Advisor pursuant to which the Advisor receives compensation consisting primarily of (i) asset management fees calculated as a percentage of total assets invested by the Company, (ii) a subordinated incentive fee based on the economic gain on the sale of Mortgage Investments; (iii) certain other fees. In addition to the fees discussed above, the Company will reimburse affiliates of the Advisor for certain administrative and other costs incurred on behalf of the Company. -13- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) The costs incurred to related parties for the three and nine months ended September 30, 1998 and 1997 were as follows:
Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ------------------- ------------------- Expense reimburse- ment $ 31,944 $ 9,537 $100,029 $ 91,460 Asset manage- ment fees 90,329 93,958 272,118 273,203 -------- -------- -------- -------- $122,273 $103,495 $372,147 $364,663 ======== ======== ======== ========
Asset management fees and expense reimbursements owed to the Advisor and its affiliates amounting to approximately $1,216,000 and $844,000 were accrued and unpaid at September 30, 1998 and December 31, 1997, respectively. Note 5 - Commitments and Contingencies The Company has filed preliminary proxy materials with the Securities and Exchange Commission ("SEC") regarding, among other matters, proposals to restructure the Company from a finite to infinite life-REIT, modify the investment objectives of the Company, permit the Company to incur a specified amount of indebtedness and list the Company's shares on a national exchange. The SEC is currently reviewing these preliminary materials and the Company anticipates that it will present the proposals to shareholders late in the fourth quarter of 1998 or in the first quarter of 1999 after the SEC has completed its review. There can be no assurance, however, as to when or if the Company will mail definitive proxy materials to shareholders or as to the content and scope of the final proposals. Note 6 - Subsequent Event On October 18, 1998, the Company received the final payment of a REMIC Certificate with a principal balance of $420,228 at September 30, 1998 and a stated final payment date of October 18, 2009. On November 13, 1998, a distribution of $1,385,509 and $17,656 was paid to the Investors and the Advisor, respectively, representing the 1998 third quarter distribution. The distribution was -14- AMERICAN MORTGAGE INVESTORS TRUST Notes to Financial Statements September 30, 1998 (Unaudited) funded from cash collections of debt service payments, the continued accrual without payment of asset management fees and expense reimbursements to the Advisor and its affiliates and interest income through approximately the distribution date, November 13, 1998. -15- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. When used in this quarterly report on Form 10-Q, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Statements looking forward in time are included in this quarterly report on Form 10-Q 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 occurring after the date hereof or to reflect the occurrence of unanticipated events. Liquidity and Capital Resources The Company has utilized the Net Proceeds of the Offering primarily to invest in Originated Mortgages and Acquired Mortgages ("Mortgage Investments") and has also invested in uninsured Additional Loans made directly to the developers or sponsors of Developments. The Company's liquidity is based primarily on interest received from its Mortgage Investments. For a description of the Company's investments in Originated Mortgages, REMIC and GNMA Certificates (see Notes 2 and 3 of Notes to Financial Statements). During the nine months ended September 30, 1998, cash and cash equivalents increased approximately $885,000 due to principal repayments of loans and GNMA and REMIC Certificates ($1,823,000) and cash provided by operating activities ($3,226,000) which exceeded distributions to shareholders ($4,164,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is net amortization in the amount of $361,000. Net unrealized gains on REMIC and GNMA investments included in shareholders' equity pursuant to Statement of Financial Accounting Standards No. 115 aggregated $174,650 at September 30, 1998. This represents an increase of $1,052 in the unrealized gain for the nine months ended September 30, 1998, of which a decrease of $25,749 is attributable to the sale of securities (which -16- resulted in a net realized gain of $6,648) and an increase of $26,801 is attributable to an increase in market prices for the investments held at September 30, 1998 and December 31, 1997. As of November 3, 1998, the net unrealized gain was approximately $154,000. 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 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. 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 and does not expect to have reinvested dividends available for investment. As of September 30, 1998, the backlog of shares to be redeemed is 164,481. Unadvanced amounts of Originated Mortgages are 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. In order to qualify as a REIT under the Internal Revenue Code, as amended, the Company must, among other things, distribute at least 95% of its taxable income. The Company is in compliance with the Code. The Company has filed preliminary proxy materials with the Securities and Exchange Commission ("SEC") regarding, among other matters, proposals to restructure the Company from a finite to infinite life-REIT, modify the investment objectives of the Company, permit the Company to incur a specified amount of indebtedness and list the Company's shares on a national exchange. The -17- SEC is currently reviewing these preliminary materials and the Company anticipates that it will present the proposals to shareholders late in the fourth quarter of 1998 or in the first quarter of 1999 after the SEC has completed its review. There can be no assurance, however, as to when or if the Company will mail definitive proxy materials to shareholders or as to the content and scope of the final proposals. Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Results of Operations Results of operations for the three and nine months ended September 30, 1998 consisted primarily of interest income from Originated Mortgages, REMIC certificates and temporary investments less administrative expenses. Results of operations for the three and nine months ended September 30, 1997 consisted primarily of interest income from Originated Mortgages, REMIC certificates, an FHA Insured Project Loan and temporary investments less administrative expenses and realized losses on sale of REMICs and GNMAs, and an FHA Insured Project Loan. The total of the annual operating expenses of the Company may not exceed the greater of (i) 2% of the Average Invested Assets of the Company or (ii) 25% of the Company's Net Income, unless such excess is approved by the Independent Trustees. On an annualized basis, there was no such excess for the nine months ended September 30, 1998 and 1997. Interest income from Originated Mortgages (excluding GNMAs) increased approximately $82,000 for the nine months ended September 30, 1998 as compared to the corresponding period in 1997 primarily due to additional advances on the Stonybrook Originated Mortgage during 1997 and the receipt of cash flow interest in the first quarter of 1998 from the Oxford Originated Mortgage. Interest income from temporary investments decreased approximately $41,000 for the nine months ended September 30, 1998 as compared to the corresponding period in 1997 primarily due to a smaller amount of temporarily invested proceeds earning interest during the six months ended June 30, 1998. General and administrative expenses increased approximately $60,000 for the three months ended September 30, 1998 as compared to the corresponding period in 1997 primarily due -18- to the timing of printing expense and expense reimbursements to the Advisor for certain administrative and other costs incurred on behalf of the Company. Realized loss on sale of REMICs and GNMAs and FHA Insured Project Loan decreased approximately $11,000 and $72,000 for the three and nine months ended September 30, 1998 as compared to the corresponding periods in 1997 primarily due to the repayment, in 1997, of four REMICs and the FHA Insured Project Loan on which losses had been recognized and a gain on a partial repayment of one REMIC during the three months ended September 30, 1998. Distribution Policy The Company has completed the offering and acquisition stage and therefore, in 1997 the Board reviewed and changed the distribution policy. Beginning in 1998, the Company's distribution policy calls for quarterly distributions which more closely reflect collections of interest payments and regularly scheduled principal amortization. Of the total distributions of $4,163,738 and $4,172,266 made for the nine months ended September 30, 1998 and 1997, $1,456,612 ($.38 per share or 35%) and $1,528,788 ($.40 per share or 37%) represents a return of capital determined in accordance with generally accepted accounting principles. As of September 30, 1998, 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 $10,469,344. The portion of the distributions which constitutes a return of capital was significant during the acquisition stage in order to maintain level distributions to shareholders. Management expects that cash flow from operations will be sufficient to fund the Company's operating expenses and to make distributions as determined by the Board on a quarterly basis. Accounting Standards Issued but not yet Adopted In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at -19- fair value. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The adoption of SFAS 133 is not expected to have any impact on the financial position or results of operations of the Company. Year 2000 Compliance The Company utilizes the computer services of an affiliate of the Advisor. The affiliate of the Advisor is in the process of upgrading its computer information systems to be year 2000 compliant and beyond. The Year 2000 compliance issue concerns the inability of a computerized system to accurately record dates after 1999. The affiliate of the Advisor recently underwent a conversion of its financial systems applications and is in the process of upgrading and testing the in house software and hardware inventory. The workstations that experienced problems from this process were corrected with an upgrade patch. The affiliate of the Advisor has incurred costs of approximately $1,000,000 to date and estimates the total costs to be approximately $2,000,000. These costs are not being charged to the Company. In regard to third parties, the Advisor is in the process of evaluating the potential adverse impact that could result from the failure of material service providers and mortgagors to be year 2000 compliant. A detailed survey and assessment of third party readiness will be sent to material third parties in the fourth quarter of 1998. The results of the surveys will be compiled in early 1999. No estimate can be made at this time as to the impact of the readiness of such third parties. The Advisor plans to have these issues fully assessed by early 1999, at which time the risks will be addressed and a contingency plan will be implemented if necessary. -20- PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information Alan P. Hirmes ceased to serve as Chief Financial Officer effective June 18, 1998. Mr. Hirmes remains as Senior Vice President. Effective June 18, 1998, John B. Roche was elected Chief Financial Officer. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (filed herewith). (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter. -21- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE INVESTORS TRUST (Registrant) Date: November 13, 1998 By: /s/ John B. Roche ----------------- John B. Roche Senior Vice President and Chief Financial Officer Date: November 13, 1998 By: /s/ Richard A. Palermo ---------------------- Richard A. Palermo Treasurer and Chief Accounting Officer EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
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 American Mortgage Investors Trust 1 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 2,726,148 10,903,548 46,973,318 0 0 0 0 0 60,612,563 1,682,176 0 0 0 0 58,930,387 60,612,563 0 3,200,256 0 0 493,130 0 0 2,707,126 0 0 0 0 0 2,707,126 .70 .70
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