10-K 1 amac.txt 12 MONTHS 2000 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, 2000 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23972 AMERICAN MORTGAGE ACCEPTANCE COMPANY (Formerly American Mortgage Investors Trust) (Exact name of registrant as specified in its charter) Massachusetts 13-6972380 ----------------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 -------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-5333 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest, par value $.10 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The approximate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of March 9, 2001 was $39,923,541, based on a price of $10.61 per share, the closing sales price for the Registrant's shares of beneficial interest on the American Stock Exchange on that date. As of March 9, 2001 there were 3,838,630 outstanding shares of the Registrant's shares of beneficial interest. DOCUMENTS INCORPORATED BY REFERENCE Part III: Those portions of the Registrant's Proxy Statement for Annual Meeting of Shareholders to be held on June 14, 2001, which are incorporated into Items 10, 11, 12 and 13. Index to exhibits may be found on page 37 Page 1 of 61 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. PART I Item 1. Business. General American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (together with its consolidated subsidiary, the "Company") was formed on June 11, 1991 as a Massachusetts business trust for the primary purpose of investing in government-insured mortgages and guaranteed mortgage-backed certificates. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On April 6, 1999, the Company received the necessary consent from its shareholders to approve proposals (the "Proposals") to, among other things, restructure the Company from a closed-ended, finite-life REIT to a publicly traded, open-ended, infinite-life operating REIT. In addition to restructuring the Company, the Proposals, among other matters, permit the Company to modify its investment objectives, to incur a specified amount of indebtedness and to list the Company's shares on a national exchange. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of December 31, 2000, there were 3,838,630 Shares outstanding. The Company's business plan as a publicly traded REIT focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Federal National Mortgage Association ("Fannie Mae"), and 3) acquisition of direct and indirect subordinated interests in commercial mortgage-backed securities. The current composition of the Company's investment portfolio reflects the Company's business plan and is not comparable to its investment portfolio prior to April 1999. Furthermore, the Company is still in the process of implementing its new business plan and, therefore, the current portfolio should not be considered indicative of the composition of the portfolio that might be expected in the future. The Company is governed by a board of trustees comprised of two independent trustees and one trustee who is affiliated with Related Capital Company ("Related"). The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. The Advisor has subcontracted with Related to provide the services contemplated. Through the Advisor, Related offers the Company a core group of experienced staff and executive management providing the Company with services on both a full and part-time basis. These services include, among other things, acquisition, financial, accounting, capital markets, asset monitoring, portfolio management, investor relations and public relations services. The Company believes that it benefits significantly from its relationship with Related, since Related provides the Company with resources that are not generally available to smaller-capitalized, self-managed companies. The Company has entered into an agreement with Fannie Mae whereby the company will provide first loss protection ("First Loss Obligation") on certain loans originated by Fannie Mae pursuant to a Master Financing and Loss Sharing Agreement (See Note 11 of the Company's financial statements). Through an unconsolidated subsidiary, AMAC/FM Corporation ("AMAC/FM"), and pursuant to a Guaranty and Security Agreement with Fannie Mae, the payment of the First Loss Obligation is guaranteed and secured by AMAC/FM's pledge and grant to Fannie Mae of a security interest on certain assets of AMAC/FM. During January, 2001, all of the voting common stock of AMAC/FM, previously owned by the Advisor, was purchased by the Company, the effect of which is to make AMAC/FM a wholly owned subsidiary of the Company. This change was possible due to a change in federal REIT legislation passed in December 1999, allowing REITS to directly own taxable subsidiaries, beginning after the year 2000. Mortgage Loans Information relating to the Company's investments in Mortgage Loans as of December 31, 2000 is as follows:
Date of Invest- ment/ Interest Amounts Advanced Final Interest--------------------------- Outstanding Rental Matu Rate on Total Loan Occu- Rates at Descrip -rity Mortgage Mortgage Additional Amounts Balance pancy December Property -tion Date Loan(A) Loans Loans(B) Advanced 12/31/00 3/4/01 31, 2000 -------- -- ------------ ----------------- --------- -------- ------ -------- Columbiana 204 4/94 (D) $9,106,099 $563,000 $9,669,099 $9,563,501 93% 564-959 Lakes Apts. Apt. 11/35 Columbia, SC Units (C) (J) Stony Brook 125 12/95 7.75%- (I) 763,909 763,909 748,665 98.4% 895-1225 Village II Apt. 6/37 9.128% Apts. Units (C) (E) East Haven,CT Hollows Apts.184 4/00 7.875%- 3,564,064 1,549,200 5,113,264 4,927,740 (K) (K) Greenville, Apt. 1/42 9.6083% NC Units (F) Elmhurst 313 6/00 8.0%- 7,694,310 2,874,000 10,568,310 10,087,809 (K) (K) Village Apt. 1/42 9.3232% Oveide, FL Units (G) Reserve at 212 8/00 8.0%- 4,583,939 1,987,000 6,570,939 6,501,018 (K) (K) Autumn Creek Apt. (J) 9.202% Friendswood, Units (H) TX ------------------------------------------------------- Total $24,948,412 $7,737,109 $32,685,521 $31,828,733 =======================================================
(A) The minimum interest rate shown represents base interest, which is fully insured by HUD ("Base Interest"). The additional interest rate represents interest which is not contingent upon cash flow and is secured by partnership interests in the partnerships which own the Developments ("Additional Interest"). (B) Additional loans are non-interest bearing. (C) The mortgages have terms of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (D) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan period and was 7.4% during the construction period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 25% of the cash flow remaining after payment of 8.678% interest. The operations of Columbiana had not been able to support the payment of Additional Interest for the period October 1, 1997 through June 30, 1998 which amounted to $48,760. Accordingly, the accrued interest income that was deemed doubtful of collection was fully reserved and reversed from interest income from mortgage loans in the fourth quarter of 1998. As a result of the Company's final advance and conversion of the construction loan to a permanent loan during the second quarter of 1999, Columbiana was able to repay construction period advances from the developer as well as Additional Interest due to the Company through the second quarter. As a result, the Additional Interest which had been fully reserved was recorded as interest income in the second quarter of 1999. (E) In addition to the interest rate, the Company is entitled to 40% of the cash flow remaining after payment of Base and Additional Interest. (F) The interest rates for Hollows Apartments are 9.6083% per annum during the permanent loan period and 7.875% during the construction period. The Note rate of 7.875% is fully insured by HUD, and is secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.6083%, are secured by a second mortgage deed of trust and are guaranteed until August 2004 by an entity related to the general partner of the partnership which owns Hollows Apartments. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is comprised of the mortgage loan of $8,946,100 and the additional loan of $1,549,200. As of December 31, 2000, $3,564,064 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in January, 2042, have 5-year lockouts against prepayment, and have a prepayment penalty structure during the second 5-year period of the loans. (G) The interest rates for Elmhurst Village are 9.3232% per annum during the permanent loan period and 8% during the construction period. The Note rate of 8% is fully insured by HUD, and is secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.3232%, are secured by a second mortgage deed of trust and are guaranteed until December 2004 by an entity related to the general partner of the partnership which owns the Elmhurst Village Apartments. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is comprised of the mortgage loan of $21,748,200 and the additional loan of $2,874,000. As of December 31, 2000, $7,694,310 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in January, 2042 and have 5-year lockouts against prepayment, as well as a prepayment penalty structure during the second 5-year period of the loans. (H) The interest rates for the Reserve at Autumn Creek are 9.202% during the permanent loan period and 8% during the construction period. The Note rate of 8% is fully insured by HUD and is secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.202%, are secured by a second mortgage deed of trust and are guaranteed until January 2005 by an entity related to the general partner of the partnership which owns The Reserve at Autumn Creek. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is compromised of the mortgage loan of $16,538,700 and the additional loan of $1,987,000. As of December 31, 2000, $4,583,939 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in December 2041 and have 5 year lockouts against prepayment, as well as a prepayment penalty structure during the second 5 year period of the loans. (I) The Company contributed the mortgage loan to capitalize AMAC/FM Corporation, an unconsolidated subsidiary. The principal amount contributed was $8,404,092. The Company retained the additional loan and the right to collect the additional interest. (J) Pledged as collateral in connection with a secured credit repurchase facility with Nomura Asset Capital Corporation (See Note 6 of the Company's financial statements). (K) The Underlying Properties for these mortgages are currently under construction. GNMA Certificates Information relating to the Company's investments in GNMA Certificates as of December 31, 2000 is as follows:
Principal Balances at Fair Stated Final Certificate Date 12/31/00 Value at Interest Payment Seller Number Purchased Purchise Price Including 12/31/00 % Amount (Discount) Rate Date ------ --------- ---------- ----- ---- Bear Stearns & Co. 0355540 7/27/94 90.7500% $2,407,102 $2,284,046 $2,498,175 7.125% 3/15/2029 Malone Mortgage Co. 0382486 7/28/94 99.6250% 2,197,130 2,116,748 2,159,906 8.500 8/15/2029 SunCoast Capital Group, G22412 6/23/97 99.34375% 1,981,566 1,185,679 1,193,138 7.000 4/20/2027 Ltd. --------- --------- --------- $6,585,798 $5,586,473 $5,851,219 -========= ========= -=========
Commercial Mortgage-Backed Security-Related Investment and Short Sale; Investment in ARCap On September 30, 1999, the Company acquired from ARCap Investors, ("ARCap"), a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust. The CMBS investment, which was purchased for $35,622,358, has a face amount of $50,399,711 and an annual coupon rate of 6.4%. The Company purchased the CMBS investment using cash and debt provided through the Bear Stearns Repurchase Facility (see Repurchase Facilities below). In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. Under the Agreement, the Company had the right to sell the CMBS investment to ARCap and purchase a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. ARCap, incorporated in January 1999, invests primarily in subordinated CMBS. As of December 31, 2000, ARCap had over $310 million in assets. This investment was accounted for as a trading asset and carried at estimated fair value, with changes in fair value included in earnings. Interest income was accrued as it became receivable, and included accretion of discounts, computed using the effective yield method, after considering estimated prepayments and credit losses. The Company recognized gains on this investment totaling $1,496,017 in 2000 and losses of $1,419,016 in 1999, due to mark-to-market adjustments. On September 30, 1999, in order to mitigate the potential income statement effect of changes in the fair value of its CMBS investment caused by changes in interest rates, the Company entered into a short sale involving the sale of a U.S. Treasury Note with a face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from Bear Stearns & Co., Inc. ("Bear Stearns"). On March 16, 2000, the Company replaced the borrowed security by purchasing such security through Bear Stearns, and entered into an additional short sale contract involving the sale of a U.S. Treasury Note with a face amount of $34,512,000 and an annual coupon rate of 6.0% borrowed from Bear Stearns. On November 1, 2000, the Company terminated the short sale in connection with its sale of the associated CMBS investment. The Company earned $1,498,627 and $471,262 on short sale proceeds held by Bear Stearns during 2000 and 1999, respectively (included in interest income from temporary investments) and incurred interest of $1,757,648 and 547,025 on its short sale contracts during 2000 and 1999, respectively (included in interest expense. Short sale positions were carried at estimated fair value, with changes in fair value included in earnings. The Company recognized losses on these positions totaling $1,795,572 in 2000 and gains of $1,201,317 in 1999 due to mark-to-market adjustments. On November 1, 2000, the Company, in accordance with the Agreement, sold the CMBS investment to ARCap and repaid its borrowing under the Bear Stearns Repurchase Facility, closed out its short sale position (see below) and purchased a preferred equity interest in ARCap in the face amount of $20,000,000, with a preferred dividend rate of 12%. This preferred equity interest was recorded at $19,640,637, representing the fair value of the CMBS investment at the date of the transaction, less the Bear Stearns Repurchase Facility repayment plus approximately $3.5 million in cash paid to ARCap. Repurchase Facilities On September 30, 1999, the Company entered into a repurchase facility with Bear Stearns (the "Bear Stearns Repurchase Facility"), whereby Bear Stearns advanced $19,568,000 in cash towards the purchase of the CMBS-related investment (see Note 5). The Bear Stearns Repurchase Facility had a variable interest rate based on the one-month LIBOR rate plus 1.5%, which is adjusted on the first day of each month. The Bear Stearns Repurchase Facility was repaid November 1, 2000 in connection with the CMBS sale discussed above. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility (the "Nomura Repurchase Facility") with Nomura Asset Capital Corporation. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value of FHA loans owned by the Company. The Nomura Repurchase Facility has a term of 364 days and bears interest at LIBOR plus 1.25%. As of December 31, 2000, the amount outstanding under this facility was $7,138,940, and the interest rate was 7.87%. This repurchase facility was renewed for $40 million in February 2001, for a term of one year. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International, Inc. (the "Nomura Securities Repurchase Facility"). This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company. Generally, borrowings bear interest at LIBOR plus 0.50%. As of December 31, 2000, the amount outstanding under this facility was $5,517,000, the interest rate was 7.12%. Loan Venture with Federal National Mortgage Association The Company completed a loan venture with Federal National Mortgage Association ("Fannie Mae") which has agreed to fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Fannie Mae is the nation's largest source of financing for home mortgages and the largest investor in multifamily mortgages. Under the terms of the loan venture, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. As of December 31, 2000, 4 loans totaling $4,937,511 have been originated under this loan venture. Competition The Company competes with various financial institutions in each of its lines of business. For CMBS investments, competitors include major financial institutions that sponsor CMBS conduits, pension funds, REITs and finance companies that specialize in CMBS investment management. The Company competes with banks and quasi-governmental agencies such as Fannie Mae, Freddie Mac and HUD, as well as their designated mortgagees, for multifamily loan product. The Company's business is also affected by competition to the extent that Underlying Properties from which it derives interest and, ultimately, principal payments may be subject to rental rates and relative levels of amenities from comparable neighboring properties. Employees and Management 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. Information Regarding Other Companies Managed by Affiliates of the Advisor On or about February 8, 2001, a complaint was filed in the New York Supreme Court, County of New York, against the external adviser of Aegis Realty, Inc. ("Aegis"), a public company which, like the Company, is externally advised by affiliates of the Manager. Also individually named in the suit were Messrs. Boesky, Hirmes, Ross, Brenner, Allen and Fisch. Messrs. Boesky, Allen and Fisch are trustees of the Company. Aegis was also named as a nominal defendant. The action is entitled Paul v. The Related Companies, L.P., Index No. 01-600669, and is purportedly a class and derivative action. On or about March 23, 2001 a second action, entitled Schnipper v. Aegis Realty, Inc., Case No. 219736-V, was filed in the Circuit Court for Montgomery County, Maryland against Aegis and each of Aegis's five directors (Messrs. Boesky, Brenner, Hirmes, Allen and Fisch). Schnipper is purportedly brought as a class action. Each of these two actions challenges Aegis' proposed acquisition of a property portfolio and development business owned by a third party, which transaction also involves the acquisition by Aegis of its external advisor from affiliates of the Manager. Each suit alleges that the defendants breached their fiduciary duty to the Aegis stockholders by, among other things, committing Aegis to pay unwarranted fees and other consideration to affiliates of the Manager. The actions seek money damages, injunctive and declaratory relief and attorneys' fees. The transaction at issue in each suit, however, was approved by Aegis' independent directors (Messrs. Allen and Fisch), who first obtained legal advice and two fairness opinions from nationally recognized investment banking firms before approving those transactions. Additionally, the transaction at issue is subject to Aegis stockholders approval and will be submitted for a vote of the Aegis stockholders after proxy materials describing that transaction are disseminated to the Aegis stockholders. The defendants have advised the Company that they intend to defend both actions vigorously. With respect to the allegations in the lawsuits, the defendants have advised that they continue to believe that the transaction is fair and reasonable and in the best interests of Aegis and its stockholders and will be submitted for approval by a vote of the Aegis stockholders. The Company believes the lawsuit against Aegis will not have a material impact on the Company's operations or financial condition. Item 2. Properties. The Company does not own or lease any properties. Item 3. Legal Proceedings. The Company is not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Shareholders. None. PART II Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters. As of March 9, 2001, there were 273 registered shareholders owning 3,838,630 Shares. The Company's Shares have been listed on the American Stock Exchange since July 1, 1999 under the symbol "AMC". Prior to July 1, 1999, there was no established public trading market for the Company's Shares. The high and low prices for each quarterly periods in which the Shares were traded is as follows: 2000 2000 1999 1999 Quarter Ended Low High Low High March 31 7 15/16 8 7/8 - - June 30 8 1/8 9 11/16 - - September 30 7 7/8 8 15/16 9 13/16 12 15/16 December 31 7 1/4 8 15/16 8 5/8 11 3/8 The last reported sale price of Shares on the American Stock Exchange on March 9, 2001 was $10.61. In December 1992, the Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from the Advisor. On March 29, 1993, the Company commenced a public offering (the "Offering") through Related Equities Corporation, an Affiliate of the Advisor, and other broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of beneficial interest, at an initial offering price of $20 per share. The Offering terminated November 30, 1994, with a total of 3, 809,601 shares 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). The Reinvestment Plan became effective March 29, 1993. 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 price per share under the Reinvestment Plan was lowered to $19. Effective November 30, 1997, the Board adopted a policy to adjust the reinvestment price annually to reflect the net asset value of a share of the Company's shares of beneficial interest. Since November 30, 1994, 355,744 shares have been sold through the Reinvestment Plan, the proceeds of which (the "Reinvestment Proceeds") were restricted for use in connection with the Company's redemption plan and were not included in Gross Proceeds. The Redemption Plan became effective on November 30, 1994. Under the Redemption Plan, Eligible Shares could be presented to the Company for redemption. Eligible Shares were shares acquired directly from the Company or through the Reinvestment Plan owned by the original holder. The Company was required to redeem such Eligible Shares presented from redemption for cash to the extent it had sufficient Reinvestment Proceeds. Through the quarter ended March 31, 1997, the redemption price pursuant to the Redemption Plan was $19 per Eligible Share. For the quarter ended June 30, 1997, the Board of Trustees reduced the $19 redemption price to $17.47 to reflect that shareholders had received, through that date, $1.53 in return of capital distributions. The Board subsequently adopted a policy to adjust the redemption price annually to reflect the then net asset value of a share of the Company's shares of beneficial interest. Pursuant to the Redemption Plan, 374,412 shares have been redeemed for an aggregate price of $6,575,799. During the Offering, the Advisor received 38,481 restricted shares (including 717 from the Reinvestment Plan) in addition to the 10,000 purchased which the Advisor (pursuant to the terms of the Offering) valued at $14.75 per share. As a result of shares being redeemed, the Advisor was required to return 172 shares as of December 31, 1994; no additional shares were required to be returned since then. As a result of the adoption of the Proposals (see "Item 1. Business. - General"), the Company's Reinvestment Plan and Redemption Plan have been terminated, effective with the distribution for the quarter ended March 31, 1999. The final reinvestment of shares occurred on May 15, 1999. The final redemption of shares occurred on May 24, 1999. In addition, in connection with the listing of the Company's Shares on the American Stock Exchange, fractional shares totaling approximately 612 were redeemed on July 1, 1999. Distribution Information Cash distributions per share for the years ended December 31, 2000 and 1999 are as set forth in the following table: Cash Distribution Total Amount for Quarter Ended Date Paid Per Share Distributed ----------------- --------- --------- ---------------- March 31, 2000 5/15/00 $ .3625 $1,391,504 June 30, 2000 8/14/00 .3625 1,391,504 September 30, 2000 11/14/00 .3625 1,391,504 December 31, 2000 2/14/01 .3625 1,391,503 ------ --------- Total for 2000 $1.4500 $5,566,015 ====== ========= March 31, 1999 5/15/99 $ .3575 $1,372,661 June 30, 1999 8/14/99 .3615 1,387,912 September 30, 1999 11/14/99 .3625 1,391,504 December 31, 1999 2/14/00 .3625 1,391,503 ------- --------- Total for 1999 $1.4440 $5,543,580 ====== ========= There are no material legal restrictions upon the Company's present or future ability to make distributions in accordance with the provisions of the Declaration of Trust. Future distributions paid by the Company will be at the discretion of the Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements and such other factors as the Trustees deem relevant. In order to qualify as a REIT under the Internal Revenue Code, as amended, the Company must, among other things, distribute at least 95% (90% commencing in 2001) of its taxable income. The Company believes that it is in compliance with the REIT-related provisions of the Code. Of the total distributions of $5,566,015 and $6,946,745 for the years ended December 31, 2000 and 1999, respectively, $2,248,259 ($.59 per share or 40%) and $686,445 ($.18 per share or 10%), respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of December 31, 2000, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $14,117,727. The portion of the distributions which constituted a return of capital was made in order to maintain level distributions to shareholders. Item 6. Selected Financial Data. The information set forth below presents selected financial data of the Company. Additional financial information is set forth in the audited financial statements and footnotes thereto contained in Item 8, Financial Statements and Supplementary Data.
Year ended December 31, OPERATIONS 2000 1999 1998 1997 1996 ---------- ------ ------------------------ ------ ---------- Total revenues $8,311,139 $5,507,582 $4,031,515 $4,244,854 $4,424,815 Total expenses 4,765,841 2,301,293 647,047 632,304 721,209 --------- --------- ---------- --------- ---------- Income before other gain (loss) 3,545,298 3,206,289 3,384,468 3,612,550 3,703,606 Total other gain (loss) (227,541) 3,054,011 12,144 (66,735) (415,975) -------- --------- -------- --------- ---------- Net income $3,317,757 $6,260,300 $3,396,612 $3,545,815 $3,287,631 ========= ========= ========= ========= ========= Net income per share (basic and diluted) $ .86 $ 1.63 $ .88 $ .92 $ .83 ========= ========= ========= ========= ========= Weighted average shares outstanding (basic and diluted) 3,838,630 3,841,931 3,845,101 3,851,029 3,972,625 ========= ========= ========= ========= ========= Year ended December 31, FINANCIAL POSITION 2000 1999 1998 1997 1996 ------------------ - ------ ------------------------ ------ --------- Total assets $70,438,313 $115,565,441 $59,993,040 $61,645,922 $63,147,215 ========== =========== ========== ========== ========== Repurchase facility payable $12,655,940 $19,127,000 $ 0 $ 0 $ 0 ========== ========== ========= =========== ========== Total liabilities $15,362,440 $ 58,474,076 $ 1,788,466 $ 1,259,997 $ 986,551 ========== ========== ========= ========= ========= Total shareholders' equity $55,075,873 $ 57,091,365 $58,204,574 $60,385,925 $62,160,664 ========== ========== ========== ========== ========== DISTRIBUTIONS Distributions to shareholders $5,566,015 $5,543,580 $5,566,903 $5,574,932 $5,569,283 ========== ========= ========= ========= ========= Distribution per share $ 1.4500 $ 1.4440 $ 1.4500 $ 1.4500 $ 1.4500 ====== ====== ====== ====== ======
The results for the year ended December 31, 1999 reflect a gain on repayment of two mortgage loans. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of December 31, 2000, there were 3,838,630 Shares outstanding. The Company's business plan as a publicly traded REIT focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Federal National Mortgage Association ("Fannie Mae"), and 3) acquisition of direct and indirect subordinated interests in commercial mortgage-backed securities. The current composition of the Company's investment portfolio reflects the Company's business plan and is not comparable to its investment portfolio prior to April 1999. Furthermore, the Company is still in the process of implementing its new business plan and, therefore, the current portfolio should not be considered indicative of the composition of the portfolio that might be expected in the future. During the year ended December 31, 2000, cash and cash equivalents decreased approximately $2,170,000 primarily due to principal repayments of a mortgage loan and GNMA Certificates ($13,921,000), proceeds from the sale of the CMBS investment ($36,764,000), refund of the deposit held with broker as collateral for securities sold short ($37,733,000) and funds from repurchase facilities ($13,698,940) which was less than cash used to acquire the investment in ARCap preferred equity interest ($20,000,000), distributions paid to shareholders ($5,566,000), repayments of the repurchase facility payable ($20,170,000) and an increase in investment in mortgage loans ($21,487,000). Net unrealized losses on GNMA investments included in shareholders' equity pursuant to Statement of Financial Accounting Standards No. 115 aggregated $22,173 at December 31, 2000. This represents a decrease of $232,766 in the unrealized loss for the year ended December 31, 2000, of which a decrease of $112,370 is attributable to the repayments of GNMA investments (which resulted in a net realized loss of $119,384 and a decrease of $120,396 is attributable to a decrease in market prices for GNMA investments held at December 31, 2000 and December 31, 1999. On January 18, 2000, one of the Company's GNMA certificates in the original amount of $3,928,615 (including the discount), with an amortized cost basis of $3,671,107 at December 31, 1999, was repaid in the amount of $3,551,736 along with a prepayment penalty of $177,587 which was received in February 2000. The yield on the GNMA Certificates will depend, in part, upon the rate and timing of principal prepayments on the underlying mortgages in the asset pool. Generally, as market interest rates decrease, mortgage prepayment rates increase and the market value of interest rate sensitive obligations like the GNMA Certificates increases. As market interest rates increase, mortgage prepayment rates tend to decrease and the market value of interest rate sensitive obligations like the GNMA certificates tends to decrease. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. The yield on the mortgage loans will depend, in part, on when, and if, the Company disposes of the mortgage loans prior to maturity or the obligor fully repays the outstanding debt. The mortgage loans have fixed interest rates, the base amount of which is insured by HUD, resulting in a minimal amount of interest rate risk. The effects of prepayment on yield is greater the earlier a prepayment of principal is received. Due to the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effects of future events upon the yield to maturity or the market value of the mortgage loans upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the current mortgage loan rates. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility (the "Nomura Repurchase Facility") with Nomura Asset Capital Corporation. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value of FHA loans owned by the Company. The Nomura Repurchase Facility has a term of 364 days and bears interest at LIBOR plus 1.25%. As of December 31, 2000, the amount outstanding under this facility was $7,138,940, and the interest rate was 7.87%. This repurchase facility was renewed for $40 million in February 2001, for a term of one year. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International, Inc. (the "Nomura Securities Repurchase Facility"). This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of December 31, 2000, the amount outstanding under this facility was $5,517,000, the interest rate was 7.12%. In order to qualify as a REIT under the Internal Revenue Code, as amended, the Company must, among other things, distribute at least 95% (90% commencing in 2001) of its taxable income. The Company believes that it is in compliance with the REIT-related provisions of the Code. The Company expects that cash generated from the Company's investments will meet its needs for short-term liquidity, and will be sufficient to pay all of the Company's expenses and to make distributions to its shareholders in amounts sufficient to retain the Company's REIT status in the foreseeable future. Pursuant to the Redemption Plan which became effective November 30, 1994, the Company was required to redeem eligible shares presented for redemption for cash to the extent it had sufficient net proceeds from the sale of shares under the Reinvestment Plan. As a result of the adoption of the Proposals, the Company's Reinvestment Plan and Redemption Plan have been terminated, effective with the distribution for the quarter ended March 31, 1999. The final reinvestment of shares occurred on May 15, 1999. The final redemption of shares occurred on May 24, 1999. During the year ended December 31, 2000, the Company acquired the following mortgage loans: On April 18, 2000, the Company acquired a 100% participation interest in an FHA-insured first mortgage loan and an additional loan, secured by Hollows Apartments, a multifamily market-rate housing apartment complex located in North Carolina. The interest rates for Hollows Apartments are 9.6083% per annum during the permanent loan period and 7.875% during the construction period. The Note rate of 7.875% is fully insured by HUD, and secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.6083% are secured by a second mortgage deed of trust and are guaranteed until August 2004 by an entity related to the general partner of the partnership which owns Hollows Apartments. The principal balance of the Additional Loan is secured by a non-interest bearing third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is comprised of the mortgage loan of $8,946,100 and the additional loan of $1,549,200. As of December 31, 2000, $3,564,064 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in January, 2042 and have 5-year lockouts against prepayment, as well as a prepayment penalty structure during the second 5-year period of the loans. On June 28, 2000 the Company acquired a 100% participation interest in an FHA-insured first mortgage loan and an additional loan, secured by Elmhurst Village Apartments, a multifamily market-rate housing apartment complex located in Florida. The interest rates for Elmhurst Village are 9.3232% per annum during the permanent loan period and 8% during the construction period. The Note rate of 8% is fully insured by HUD, and secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.3232% are secured by a second mortgage deed of trust and are guaranteed until December 2004 by an entity related to the general partner of the partnership which owns the Elmhurst Village Apartments. The principal balance of the Additional Loan is secured by a non-interest bearing third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is comprised of the mortgage loan of $21,748,200 and the additional loan of $2,874,000. As of December 31, 2000, $7,694,310 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in January, 2042 and have 5-year lockouts against prepayment, as well as a prepayment penalty structure during the second 5-year period of the loans. On August 3, 2000, the Company acquired 100% participation interest in an FHA insured first mortgage loan and an additional loan, secured by The Reserve at Autumn Creek, a multifamily market-rate housing apartment complex located in Texas. The interest rates for the Reserve at Autumn Creek are 9.202% during the permanent loan period and 8% during the construction period. The Note rate of 8% is fully insured by HUD and secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.202% are secured by a second mortgage deed of trust and are guaranteed until January 2005 by an entity related to the general partner of the partnership which owns The Reserve at Autumn Creek. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is compromised of the mortgage loan of $16,538,700 and the additional loan of $1,987,000. As of December 31, 2000, $4,583,939 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in and have 5 year lockouts against prepayment, as well as, a prepayment penalty structure during the second 5 year period of the loans. The Company completed a loan venture with Federal National Mortgage Association ("Fannie Mae") which has agreed to fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Fannie Mae is the nation's largest source of financing for home mortgages and the largest investor in multifamily mortgages. Under the loan venture transaction, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. As of December 31, 2000, the Company originated 4 loans totaling $4,937,511 under this loan venture. 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 Comparison of Years Ended December 31, 2000 and 1999 Interest income from mortgage loans decreased approximately $1,005,000 for the year ended December 31, 2000 as compared to 1999 primarily due to the repayment of the Town and Country mortgage loan, contribution of Stonybrook FHA Loan to an unconsolidated subsidiary and the recognition in 1999 of additional interest income related to the Columbiana loan, which had been reserved in 1998. This was partially offset by increases due to the three new loans acquired during 2000. Interest income from GNMA certificates decreased approximately $313,000 for the year ended December 31, 2000 as compared to 1999 primarily due to the repayment of one of the GNMA certificates in January 2000. Interest income from commercial mortgage-backed security-related investment increased approximately $2,239,000 for the year ended December 31, 2000 due to a longer holding period for the investment. Interest income from note receivable increased approximately $361,000 for the year ended December 31, 2000 primarily due to a loan made to an unconsolidated subsidiary in March 2000. Interest income from temporary investments increased $992,000 for the year ended December 31, 2000 as compared to 1999 due to an increase in the amounts invested. Dividend income in the amount of $401,000 was reported for the year ended December 31, 2000 due to the investment in ARCap preferred stock. Other income increased approximately $128,000 for the year ended December 31, 2000 as compared to 1999 due to a loan origination fee and the interest income of a bridge loan. Interest expense increased $2,465,000 for the year ended December 31, 2000 as compared to 1999 due to the repurchase facilities and the US treasury note transactions. General and administrative expenses increased approximately $280,000 for the year ended December 31, 2000 as compared to 1999 due to a usage fee for the Nomura repurchase facilities, increased asset management fees and increased advertising. This was partially offset by a decrease in the incentive management fee. Amortization costs in the amount of $85,000 were expensed for the year ended December 31, 2000 relating to Nomura deferred costs of the Nomura repurchase facilities. A net loss on the commercial mortgage-backed security-related investment and government security sold short position in the amount of approximately $300,000 was recorded for the year ended December 31, 2000, as opposed to $218,000 for 1999. This was due to fluctuations in the market values of those positions during 1999 and 2000, until their sale on October 31, 2000. Comparison of Years Ended December 31, 1999 and 1998 Interest income from mortgage loans decreased approximately $468,000 for the year ended December 31, 1999 as compared to 1998 primarily due to the repayment of the Cove and Oxford mortgage loans on March 1, 1999 which was partially offset by increases due to the receipt of Additional Interest relating to Columbiana and the accrual of Additional Interest (received in January 2000) relating to Town and Country, both of which had been fully reserved and reversed from interest in 1998. Interest income from REMIC and GNMA certificates decreased approximately $95,000 for the year ended December 31, 1999 as compared to 1998 primarily due to the repayment of one of the REMICs in October 1998 and a decrease in the balances of the GNMA certificates due to principal payments received during 1999 and 1998. Interest income from commercial mortgage-backed security-related investment in the amount of approximately $950,000 was recorded for the year ended December 31, 1999; such investment was made on September 30, 1999. Interest income from note receivable in the amount of approximately $86,000 was recorded for the year ended December 31, 1999 relating to a loan made in May 1999 which was repaid in September 1999. Interest income from temporary investments increased approximately $980,000 for the year ended December 31, 1999 as compared to 1998 primarily due to proceeds from the repayment of the Cove and Oxford mortgage loans on March 1, 1999 which were temporarily invested in 1999. Other income in the amount of approximately $23,000 was recorded for the year ended December 31, 1999 relating primarily to origination points (fees) relating to the note receivable. Interest expense in the amount of approximately $907,000 was recorded for the year ended December 31, 1999 relating to interest on a repurchase facility payable entered into on September 30, 1999 and interest on a government security sold short on September 30, 1999. General and administrative expenses increased approximately $388,000 for the year ended December 31, 1999 as compared to 1998 primarily due to an incentive fee payable to the Advisor, an increase in the reimbursements of certain administrative and other costs incurred by the Advisor on behalf of the Company and an increase in public relations expenses due to the restructuring of the Company. Organization costs in the amount of approximately $365,000 were expensed for the year ended December 31, 1999 relating to the restructuring of the Company. A net loss on the commercial mortgage-backed security-related investment and government security sold short position in the amount of approximately $218,000 was recorded for the year ended December 31, 1999 due to changes in the fair values of such positions since they originated on September 30, 1999. A gain on repayment of mortgage loans in the amount of approximately $3,273,000 was recorded for the year ended December 31, 1999 relating to the repayment of the Cove and Oxford mortgage loans on March 1, 1999. Distributions Of the total distributions of $5,566,015 and $6,946,745 for the years ended December 31, 2000 and 1999, respectively, $2,248,259 ($.59 per share or 40%) and $686,445 ($.18 per share or 10%), respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of December 31, 2000, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $14,117,727. The portion of the distributions which constituted a return of capital was made in order to maintain level distributions to shareholders. Recently Issued Accounting Standards SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2001. Because the Company does not currently utilize derivatives, implementation of this statement did not have a material effect on the Company's financial statements. In September of 2000, the FASB issued SFAS No. 140, "Accounting for Transfers of Financial Assets and Extinguishment of Liabilities". This statement replaces SFAS No. 125 which had the same name. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. The Company's management does not believe that application of this statement will have a material impact on the Company's financial statements. Forward-Looking Statements Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Inflation Inflation did not have a material effect on the Company's results for the periods presented. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which the investments of the Company is exposed is interest rate risk, which is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the control of the Company. Cash flows and income from the Company's investments at December 31, 2000, consisting primarily of mortgage loans, GNMA certificates, a preferred equity interest, notes receivable and cash and cash equivalents, would not be significantly affected by changes in interest rates, because these instrument bear interest at fixed rates. Other than the GNMA investments, all of these investments are carried at amortized cost, so their carrying values are not impacted by changes in interest rates. The GNMA investments are adjusted to market value through comprehensive income in the equity statement, but changes in their value have not historically been significant to shareholders' equity. The Company's borrowings under repurchase agreements bear interest at rates that fluctuate with LIBOR. Based on the $12.7 million of borrowings outstanding under these facilities at December 31, 2000, a 1% change in LIBOR would impact the Company's net income by approximately $127,000. -14- Item 8. Financial Statements and Supplementary Data. Page --------------- (a) 1. Financial Statements Independent Auditors' Report - Deloitte & Touche LLP 15 Independent Auditors' Report - KPMG LLP 16 Consolidated Balance Sheets as of December 31, 2000 and 1999 17 Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998 18 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998 19 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 21 Notes to Consolidated Financial Statements 23 (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. To the Board of Trustees And Shareholders of American Mortgage Acceptance Company New York, New York We have audited the accompanying consolidated balance sheets of American Mortgage Acceptance Company and subsidiary (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of American Mortgage Acceptance Company and subsidiary as of December 31, 2000 and 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP New York, New York March 16, 2001 INDEPENDENT AUDITORS' REPORT To the Board of Trustees American Mortgage Acceptance Company: We have audited the accompanying statements of income, changes in shareholders' equity, and cash flows of American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) for the year ended December 31, 1998. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of American Mortgage Acceptance Company for the year ended December 31, 1998, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP New York, New York January 15, 1999 See accompanying notes to financial statements
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS December 31, ---------------------- 2000 1999 ----------- ----------- Investments in mortgage loans $31,828,733 $ 28,893,482 Investments in GNMA certificates-available for sale 5,851,219 9,464,437 Investment in ARCap 20,041,733 0 Investment in unconsolidated subsidiary 1,149,182 0 Commercial mortgage-backed security-related investment 0 34,347,403 Deposit with broker as collateral for security sold short 0 37,733,101 Cash and cash equivalents 1,632,652 3,802,298 Notes receivable 8,677,843 0 Accrued interest receivable 680,728 1,180,115 Other assets 576,223 144,605 ------------ ------------ Total assets $70,438,313 $115,565,441 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facilities payable $12,655,940 $ 19,127,000 Accrued interest payable 27,850 407,952 Accounts payable and accrued expenses 278,760 122,397 Due to Advisor and affiliates 1,008,387 433,265 Distributions payable 1,391,503 1,391,503 Government security sold short 0 36,991,959 --------- ------------ Total liabilities 15,362,440 58,474,076 ---------- ------------ Commitments and contingencies Shareholders' equity: Shares of beneficial interest; $.10 par value; 12,500,000 shares authorized; 4,213,826 issued and 3,838,630 outstanding 421,383 421,383 Treasury shares of beneficial interest; 375,916 shares (37,520) (37,520) Additional paid-in capital 68,840,500 68,840,500 Distributions in excess of net income (14,126,317) (11,878,059) Accumulated other comprehensive losss (22,173) (254,939) ------------- -------------- Total shareholders' equity 55,075,873 57,091,365 ---------- ------------ Total liabilities and shareholders' equity $70,438,313 $115,565,441 ========== ===========
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 2000 1999 1998 ------------- ---------- -------- Revenues: Interest income: Mortgage loans $1,565,219 $2,569,901 $3,037,882 REMIC and GNMA certificates and the FHA Insured Project Loan 472,693 785,591 880,680 Commercial mortgage-backed security-related investment 3,189,407 950,456 0 Note receivable 446,625 85,786 0 Temporary investments 2,084,417 1,092,617 112,953 Equity in earnings of ARCap 401,096 0 0 Other income 151,682 23,231 0 ---------- ----------- ---------- Total revenues 8,311,139 5,507,582 4,031,515 --------- --------- --------- Expenses: Interest 3,371,906 906,581 0 General and administrative 1,309,398 1,029,840 642,047 Amortization 84,537 0 5,000 Organization costs 0 364,872 0 ----------- ----------- ----------- Total expenses 4,765,841 2,301,293 647,047 --------- --------- ---------- Other gain (loss): Net loss on commercial mortgage-backed security- related investment and government security sold short (299,555) (217,699) 0 Gain on repayment of mortgage loans and GNMA certificiates 72,014 3,271,710 12,144 ----------- --------- ----------- Total other gain (loss) (227,541) 3,054,011 12,144 ---------- --------- ----------- Net income $3,317,757 $6,260,300 $3,396,612 ========= ========= ========= Net income per share (basic and diluted) $ .86 $ 1.63 $ .88 ========= ========== ========== Weighted average shares outstanding (basic and diluted) 3,838,630 3,841,931 3,845,101 ========= ========= ========= (continued) AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Treasury Shares of Additional Distributions Comprehen- Shares of Beneficial Beneficial Paid-in in Excess sive Interest Interest Shares Amount Shares Amount Capital of Net Income Income --------- ------ -------- -------- ----- ------------- ------------ Balance at December 31, 1997 4,087,583 $408,759 (248,339) $(24,834) $68,849,725 $(9,021,323) Comprehensive income: Net income 3,396,612 $3,396,612 --------- Other comprehensive loss: Net unrealized holding gain arising during the period 1,079 Less: reclassification adjustment for gains included in net income (12,144) ---------- Other comprehensive loss (11,065) ---------- Comprehensive income $3,385,547 ========= Issuance of shares of beneficial 85,207 8,521 0 0 1,328,465 0 interest Distributions 0 0 0 0 0 (5,566,903) Purchase of treasury shares 0 0 (85,206) (8,521) (1,328,460) 0 ------------ -------- ---------- ------- ----------- ------------ Balance at December 31, 1998 4,172,790 417,280 (333,545) (33,355) 68,849,730 (11,191,614) Comprehensive income: Net income 6,260,300 $6,260,300 Other comprehensive loss: Net unrealized holding loss arising during the period (418,964) Add: reclassification adjustment for losses included in net income 1,492 ------------ Other comprehensive loss (417,472) --------- Comprehensive income $ 5,842,828 ========== Issuance of shares of beneficial 41,036 4,103 0 0 629,834 0 interest Purchase of treasury shares 0 0 (41,651) (4,165) (639,064) 0 Distributions 0 0 0 0 0 (6,946,745) --------- ----------- -------- --------- ----------- ---------- Balance at December 31, 1999 4,213,826 421,383 (375,196) (37,520) 68,840,500 (11,878,059) Comprehensive income: Net income 3,317,757 $3,317,757 Other comprehensive income: Net unrealized holding gain arising during the period 291,175 Less: reclassification adjustment for gains included in net income (58,409) ----------- Other comprehensive income 232,766 ---------- Comprehensive income $3,550,523 ========= Distributions (5,566,015) ----------- Balance at December 31, 2000 4,213,826 $ 421,383 $ (375,196) $ (37,520) $68,840,500 $(14,126,317) ========= ========= ======== ======== ========== ===========
Accumulated Other Comprehen- sive Income Total ------------ ----------- Balance at December 31, 1997 $173,598 $60,385,925 Comprehensive income: Net income 3,396,612 Other comprehensive loss: Net unrealized holding gain arising during the period Less: reclassification adjustment for gains included in net income Other comprehensive loss (11,065) (11,065) Comprehensive income Issuance of shares of beneficial 0 1,336,986 interest Distributions 0 (5,566,903) Purchase of treasury shares 0 (1,336,981) -------- ----------- Balance at December 31, 1998 162,533 58,204,574 Comprehensive income: Net income 6,260,300 Other comprehensive loss: Net unrealized holding loss arising during the period Add: reclassification adjustment for losses included in net income Other comprehensive loss (417,472) (417,472) Comprehensive income Issuance of shares of beneficial 0 633,937 interest Purchase of treasury shares 0 (643,229) Distributions (6,946,745) --------- ----------- -- Balance at December 31, 1999 (254,939) 57,091,365 Comprehensive income: Net income 3,317,757 Other comprehensive income: Net unrealized holding gain arising during the period Less: reclassification adjustment for gains included in net income Other comprehensive income 232,766 232,766 Comprehensive income Distributions 0 (5,566,015) ---------- ---------- Balance at December 31, 2000 $ (22,173) $55,075,873 ======== ========== See accompanying notes to financial statements
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2000 1999 1998 ------------- ------------ ---------- Cash flows from operating activities: Net income $ 3,317,757 $ 6,260,300 $ 3,396,612 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Unrealized (gain) loss on commercial mortgage- backed security-related investment (1,496,017) 1,419,016 0 Unrealized (gain) loss on government security sold short 1,795,572 (1,201,317) 0 Gain on repayment of mortgage loans (13,582) (3,273,202) 0 Equity in earnings of ARCap (401,096) 0 0 Equity in income of unconsolidated subsidiary (9,182) 0 0 Amortization expense-organization costs 0 5,000 Amortization - deferred financing costs 92,022 0 0 Amortization expense-loan premium and origination costs 163,371 337,590 553,608 Accretion of GNMA discount (22,356) (23,145) (26,272) Accretion of discount on commercial mortgage-backed security-related investment (652,968) (144,061) 0 (Gain) on repayment of REMIC certificates 0 0 (12,986) (Gain) loss on repayment of GNMA certificates (58,432) 1,492 842 Government security sold short 33,541,350 38,193,276 0 Purchase of government securities sold short (72,328,881) 0 0 Changes in operating assets and liabilities: Investment in commercial mortgage- backed security-related investment 36,764,227 (35,622,358) 0 Deposit with broker as collateral for security sold short 37,733,101 (37,733,101) 0 Accrued interest receivable 499,388 (413,413) (264,775) Other assets 18,863 (33,159) 0 Due to Advisor and affiliates 575,122 (1,281,829) 504,220 Accounts payable and accrued expenses 240,402 49,025 24,249 Accrued interest payable (380,102) 407,952 0 --------- ------------ ------------ Net cash provided by (used in) operating activities 39,378,559 (33,056,934) 4,180,498 ------------ ------------ ------------ Cash flows from investing activities: Increase in investment in mortgage loans (21,486,788) (829,204) 0 Proceeds from repayments of mortgage loans 9,995,170 20,841,545 273,757 Periodic principal payments of mortgage loans 62,069 0 0 Increase in note receivable (7,413,750) (1,900,000) 0 Repayment of note receivable 6,000,000 1,900,000 0 Investment in ARCap preferred stock (20,000,000) 0 0 (Increase) decrease in other assets (375,178) (111,446) 4,826 Principal repayments of GNMA certificates 3,926,772 442,746 413,254 Principal repayments of REMIC certificates 0 0 1,806,973 Costs relating to repayment of mortgage loan (59,583) 0 0 ------------ ------------ ------------ Net cash provided by (used in) investing activities (29,351,288) 20,343,641 2,498,810 ------------ ------------ ------------ Cash flows from financing activities: Proceeds from repurchase facilities payable 13,698,940 19,568,000 0 Repayments of repurchase facilities payable (20,170,000) (441,000) 0 Increase in deferred loan costs (159,842) 0 0 Distributions paid to shareholders (5,566,015) (5,555,242) (5,566,903) Proceeds from issuance of shares of beneficial interest 0 633,937 1,336,986 Purchase of treasury shares 0 (643,229) (1,336,981) ----------------- ----------- ---------- Net cash provided by (used in) financing activities (12,196,917) 13,562,466 (5,566,898) ----------- ---------- ---------- Net increase (decrease) in cash and cash equivalents (2,169,646) 849,173 1,112,410 Cash and cash equivalents at the beginning of the year $ 3,802,298 $ 2,953,125 $1,840,715 =========== =========== ========= Cash and cash equivalents at the end of the year $ 1,632,652 $ 3,802,298 $2,953,125 =========== =========== ========= Supplemental information: Interest paid $ 3,752,008 $ 498,629 $ 0 =========== =========== =========== Adjustments due to contribution of mortgage loan to unconsolidated subsidiary: Increase in investment in unconsolidated subsidiary $1,140,000 Increase in note receivable 7,264,092 Decrease in investment in mortgage loans (8,404,092) ---------- $ 0 ----------------
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - General American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business trust for the primary purpose of investing in government-insured mortgages and guaranteed mortgage-backed certificates. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On April 6, 1999, the Company received the necessary consent from its shareholders to approve proposals (the "Proposals") to, among other things, restructure the Company from a closed-ended, finite-life REIT to a publicly traded, open-ended, infinite-life operating REIT. In addition to restructuring the Company, the Proposals, among other matters, permit the Company to modify its investment objectives, to incur a specified amount of indebtedness and to list the Company's shares on a national exchange. As a result of the adoption of the Proposals, the Company was liable for the transaction expenses. Such expenses amounted to approximately $365,000 and are classified as organization costs in the accompanying statements of income. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's business plan focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Federal National Mortgage Association "Fannie Mae"), and 3) acquisition of direct and indirect subordinated interests in commercial mortgage-backed securities. The current composition of the Company's investment portfolio reflects the recent change in the Company's business plan and is not comparable to its investment portfolio prior to April 1999. Furthermore, the Company is still in the process of implementing its new business plan and, therefore, the current portfolio should not be considered indicative of the composition of the portfolio that might be expected in the future. The Company is governed by a board of trustees comprised of two independent trustees and one trustee who is affiliated with Related Capital Company ("Related"). The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. NOTE 2 - Accounting Policies a) Basis of Presentation The consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires the Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of amortized assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The consolidated financial statements include the accounts of the Company and one wholly owned subsidiary, AMAC Repo/Seller. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, the "Company" as herein after used, refers to American Mortgage Acceptance Company and its subsidiary. b) Investments in Mortgage Loans The Company accounts for its investments in mortgage loans under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"). Under SFAS 114, a loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. SFAS No. 114 requires lenders to measure impaired loans based on: (i) the present value of expected future cash flows discounted at the loans' effective interest rate; (ii) the loan's observable market price; or (iii) the fair value of the collateral if the loan is collateral-dependent. An allowance for loan losses is maintained if the measure of an impaired loan is less than its recorded investment. Adjustments to the allowance are made through corresponding charges or credits to the provision for loan losses. Interest on mortgage loans is recognized on the accrual basis. Interest which was accrued but not received is reversed from income if deemed to be uncollectible. c) Investments in Mortgage-Backed Securities The Company accounts for its investments in mortgage-backed securities under the provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities". At the date of acquisition, the Company elected to designate its GNMA certificates as available-for-sale securities. Available-for-sale securities are carried at fair value with net unrealized gain (loss) reported as a separate component of other comprehensive income until realized. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to interest income using the effective yield method. Dividend and interest income are recognized when earned. Realized gains and losses on securities are included in earnings and are derived using the specific identification method for determining the cost of the securities sold. d) Investment in ARCap The Company's preferred equity investment in ARCap Investors, L.L.C. ("ARCap") is accounted for using the equity method because the Company has the ability to exercise significant influence, but not control, over ARCap's operating and financial policies. e) Cash and Cash Equivalents Cash and cash equivalents include cash in banks and temporary investments in short-term instruments with original maturity dates equal to or less than three months. f) Loan Origination Costs Acquisition fees and other direct expenses incurred for activities performed to originate or acquire mortgage loans have been capitalized and are included in Investment in Mortgage Loans in the balance sheets. Loan origination costs are being amortized to interest income using the effective yield method over the lives of the respective mortgages. g) Fair Value of Financial Instruments As described above, the Company's GNMA certificates are carried at estimated fair values. The Company has determined that the fair value of its remaining financial instruments, including its mortgage loans and cash and cash equivalents, notes receivable, investment in ARCap, and secured borrowings approximate their carrying values at December 31, 2000 and 1999. The fair value of investments in mortgage loans and GNMA certificates are based on actual market price quotes or by determining the present value of the projected future cash flows using appropriate discount rates, credit losses and prepayment assumptions. Other financial instruments carry interest rates which are deemed to approximate market rates. h) Income Taxes The Company has qualified as a REIT under the Code. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income ("Taxable Income") which is distributed to its shareholders provided that at least 95% of Taxable Income is distributed and provided that such income meets certain other conditions. Accordingly, no provision for federal income taxes is required. The Company may be subject to state taxes in certain jurisdictions. During 2000, the Company declared distributions of $1.45 per share. For federal income tax purposes, $1.20 and $.25 of the distributions were reported as ordinary income and return of capital, respectively, to shareholders for 2000. i) Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income," requires the Company to classify items of "other comprehensive income", such as unrealized gains and losses on its investment in GNMA certificates, by their nature in the financial statements and display the accumulated balance of other comprehensive income (loss) separately from shareholders' equity in the shareholders' equity section of the balance sheets. In accordance with SFAS No. 130, cumulative unrealized gains and losses on securities available-for-sale are classified as accumulated other comprehensive income in shareholders' equity and current period unrealized gains and losses are included as a component of comprehensive income. j) Use of Estimates The preparation of financial statements in conformity with GAAP requires the Advisor to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. k) Segment Information SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", requires enterprises to report certain financial and descriptive information about their reportable operating segments, and certain enterprise-wide disclosures regarding products and services, geographic areas and major customers. The Company is an investor in mortgage products and operates in only one reportable segment. The Company does not have or rely upon any major customers. All of the Company's investments are secured by real estate properties located in the United States; accordingly, all of its revenues were derived from U.S. operations. l) New Pronouncements In December of 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". This bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company's management believes that the guidance expressed in the bulletin does not affect the Company's correct revenue recognition policies. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2001. Because the Company does not currently utilize derivatives, implementation of this statement has not had a material effect on the Company's financial statements. In September of 2000, the FASB issued SFAS No. 140, "Accounting for Transfers of Financial Assets and Extinguishment of Liabilities". This statement replaces SFAS No. 125 which had the same name. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. The Company's management does not believe that application of this statement will have a material impact on the Company's financial statements. l) Reclassifications Certain amounts in the 1999 and 1998 financial statements have been reclassified to conform to the 2000 presentation. AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 3 - Investments in Mortgage Loans Information relating to investments in mortgage loans as of December 31, 2000 and 1999 is as follows:
Accum -ulated Amor- Date tization- of Invest- Amounts Advanced Additional ------------------------ ment/ Interest Final Interest Out- Loans Earned Less Matu Rate Total standinOrigi- and Balance Balance by the 2000 Net on at at Descrip -rity Mortga Mortgage Addition Amounts Loan nation Origina Decembe December Company Amor- Interest Property Loan Advanced Balance Costs tion 31, 31, for tizatio Earned -tion Date (A) Loans Loans(B) Costs 2000(G) 1999 2000 ------------ --- ------ ------ ----- ------- ---- ---- Town & 330 4/94 7.375%$9,348,000 $1,039,000 $10,387,000 $(C) $0 $0 $0 $9,936,476 $168,643 $(14,470) $154,173 Country Apt. 5/29 9.167% IV Apts. Units(D) (E) (F) Urbana, IL Columbiana204 4/94 (E) 9,106,099 563,000 9,669,099 9,524,355 537,558 498,412 9,563,501 9,705,686 533,987 (89,701) 444,286 Lakes Apt. 5/29 Apts. Columbia, Units(C) (M) SC (H) Stony 125 12/95 7.75%- (I) 763,909 763,909 763,909 413,492 428,736 748,665 9,251,320 278,010 (88,978) 189,032 Brook Village Apt. 6/37 9.128% II Apts. Units(C) (F) East Haven, CT (H) Hollows 184 4/00 7.875% 3,564,064 1,549,200 5,113,264 5,113,264 (197,829) (12,305) 4,927,740 0 185,087 12,305 197,392 Apts. Apt. 1/42 9.3232% GreenvilleUnits (J) SC Elmhurst 313 6/00 8.00%- 7,694,310 2,874,000 10,568,310 10,568,310 (495,940)(15,439) 10,087,809 0 371,060 15,439 386,499 Village Apt. 1/42 9.3232% Oveida, Units (K) FL Reserve 212 8/00 8.00%- 4,583,939 1,987,000 6,570,939 6,570,939 (71,955) (2,034) 6,501,018 0 191,803 2,034 193,837 at Autumn Apt. (M) 9.202% Creek Units (L) Friends- wood, TX ------------------------------------------------------------------------------------- Total $34,296,412$8,776,109$43,072,521$32,540,777$185,326$897,370$31,828,733$28,893,482$1,728,590$(163,371)$1,565,219 =====================================================================================
AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS (A) The minimum interest rate shown represents base interest, which is fully insured by HUD ("Base Interest"). The additional interest rate represents interest which is not contingent upon cash flow and is secured by partnership interests in the partnerships which own the Developments ("Additional Interest"). (B) Additional loans are non-interest bearing. (C) The operations of Town and Country had not been able to support the payment of Additional Interest for the period July 1, 1997 through December 31, 1999 which amounted to $411,911. Accordingly, the accrued interest income that was doubtful of collection was fully reserved and excluded from interest income from mortgage loans in previous quarters. On January 21, 2000, the general partner of the Town and Country obligor, in exchange for the waiving of the prepayment penalty and future Additional Interest repaid the additional loan and Additional Interest due through January 21, 2000 in the amounts of $1,039,000 and $421,273, respectively. As a result, the Additional Interest which had been fully reserved was deemed to be fully collectible and recorded as interest income in the fourth quarter of 1999. On March 31, 2000, the Town and Country obligor fully repaid the FHA insured mortgage and accrued Base Interest in the amounts of $8,934,581 and $53,040, respectively, resulting in a gain on the repayment in the amount of $28,165 (including a $45,000 loan termination fee due from the Company to the loan servicing agent and unamortized origination costs). (D) The Mortgages have terms of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (E) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan period and was 7.4% during the construction period. In addition to the interest rate during the permanent loan period, the Company will be entitled to 25% of the cash flow remaining after payment of 8.678% interest. The operations of Columbiana had not been able to support the payment of Additional Interest for the period October 1, 1997 through June 30, 1998 which amounted to $48,760. Accordingly, the accrued interest income that was deemed doubtful of collection was fully reserved and reversed from interest income from mortgage loans in the fourth quarter of 1998. As a result of the Company's final advance and conversion of the construction loan to a permanent loan during the second quarter of 1999, Columbiana was able to repay construction period advances from the developer as well as Additional Interest due to the Company through the second quarter. As a result, the Additional Interest which had been fully reserved was recorded as interest income in the second quarter of 1999. (F) In addition to the interest rate, the Company is entitled to 40% of the cash flow remaining after payment of Base and Additional Interest. (G) Aggregate cost for federal income tax purposes is $29,766,598. (H) In order for the Company to exercise an acceleration option it must terminate the mortgage insurance contract with FHA not later than the accelerated payment date and, in certain circumstances, must terminate the mortgage insurance contract upon the exercise of the acceleration option. Since the exercise of such option would be at the Company's discretion, it is intended to be exercised only where the value of the underlying property has increased by an amount which would justify accelerating payment in full and assuming the risks of foreclosure if the mortgagor failed to make the accelerated payment. (I) The Company contributed the FHA portion of this loan to capitalize AMAC/FM, an unconsolidated subsidiary. The principal amount contributed was $8,404,092 (See Note 12). The Company retained the additional loan. (J) The interest rates for Hollows Apartments are 9.6083% per annum during the permanent loan period and 7.875% during the construction period. The Note rate of 7.875% is fully insured by HUD, and is secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.6083%, are secured by a second mortgage deed of trust and are guaranteed until August 2004 by an entity related to the general partner of the partnership which owns Hollows Apartments. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is comprised of the mortgage loan of $8,946,100 and the additional loan of $1,549,200. As of December 31, 2000, $3,564,064 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in January, 2042, have 5-year lockouts against prepayment, and have a prepayment penalty structure during the second 5-year period of the loans. (K) The interest rates for Elmhurst Village are 9.3232% per annum during the permanent loan period and 8% during the construction period. The Note rate of 8% is fully insured by HUD, and is secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.3232%, are secured by a second mortgage deed of trust and are guaranteed until December 2004 by an entity related to the general partner of the partnership which owns the Elmhurst Village Apartments. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is comprised of the mortgage loan of $21,748,200 and the additional loan of $2,874,000. As of December 31, 2000, $7,694,310 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in January, 2042 and have 5-year lockouts against prepayment, as well as a prepayment penalty structure during the second 5-year period of the loans. (L) The interest rates for the Reserve at Autumn Creek are 9.202% during the permanent loan period and 8% during the construction period. The Note rate of 8% is fully insured by HUD and is secured by a first mortgage deed of trust. Payments in excess of the Note rate, up to a rate of 9.202%, are secured by a second mortgage deed of trust and are guaranteed until January 2005 by an entity related to the general partner of the partnership which owns The Reserve at Autumn Creek. The principal balance of the Additional Loan is secured by a third mortgage deed of trust. In addition to the interest rate during the permanent loan period, the Company is entitled to 50% of cash flow, if any, remaining after the payment of debt service and 25% of the sale or refinancing proceeds. The total loan is compromised of the mortgage loan of $16,538,700 and the additional loan of $1,987,000. As of December 31, 2000, $4,583,939 of the mortgage loan and the full amount of the additional loan had been funded. Both loans mature in December 2041 and have 5 year lockouts against prepayment, as well as a prepayment penalty structure during the second 5 year period of the loans. (M) Pledged as collateral in connection with a secured credit repurchase facility with Nomura Asset Capital Corporation (See Note 6). Further information relating to investments in mortgage loans for the years ended December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998 --------------- -------- ------------ Reconciliation of mortgage loans: Balance at beginning of period $28,893,482 $45,965,488 $46,792,853 Advances made during the period 22,252,512 829,204 0 Loan origination fees (net of acquisition expenses) (765,724) 4,723 0 Proceeds from repayment of mortgage loans (9,995,170) (20,841,545) (273,757) Periodic principal payments of mortgage loans (62,069) 0 0 Loan contributed to unconsolidated subsidiary (8,404,092) 0 0 Excess of proceeds over carrying value of mortgage loans 13,582 3,273,202 0 Costs relating to repayment of mortgage loan 59,583 0 0 Amortization of acquisition expenses (38,680) (103,318) (180,692) Amortization of additional loans (124,691) (234,272) (372,916) ------------ ------------ ------------ Investments in mortgage loans - December 31, $31,828,733 $28,893,482 $45,965,488 ========== ========== ==========
AMERICAN MORTGAGE ACCEPTANCE COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 4 - Investments in GNMA Certificates-Available for Sale Information relating to investments in GNMA Certificates as of December 31, 2000 and 1999 is as follows:
Accumulated Date Original Amorti- Unrealized Interest Purchased Purchase azation at Loan Gain Earned /Final Stated Price Principal Discount December Origination Loss Balance Balance by the CertificatePayment Including at at Costs at at at at Company Interest December December December December December December Seller Number Date Rate Discount 31,2000 31,2000 31,2000 31,2000 31,2000 31,2000 31,1999 for 2000 ------ --------- -------------- ------- ----- ------ ------ -------- ------- ------------- ----- GNMA Certificates Bear Stearns 0355540 7/27/94 7.125% $2,407,102 $2,516,855 $(232,809 $126,289 $77,865 $9,975 $2,498,17 $2,431,778 $180,128 3/15/29 Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,124,715 (7,967) 4,511 72,162 (33,516) 2,159,906 2,168,686 181,179 8/15/29 Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 0 0 0 0 0 0 3,565,054 0 7/15/29 SunCoast Capital G22412 6/23/97 7.000% 1,981,566 1,193,511 (7,832) 6,092 0 1,368 1,193,138 1,298,919 89,030 Group, Ltd. 4/20/27 -------- --------- -------- ------- --------- -------- -------- -------- ------- Total $10,514,413 $5,835,081 $(248,608) $136,892 $150,027$(22,173) $5,851,219 $9,464,437 $450,337 ======== ========= ======== ======= ========= ======== ======== ======== =======
Net 2000 Interest Accretion Earned --------- --- Bear Stearns $ 19,775 $199,903 Malone Mortgage 706 181,885 Goldman Sachs 13 13 SunCoast Capital 1,862 90,892 Group, Ltd. -------- ------ Total $22,356 $472,693 ======== ====== AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The amortized cost, unrealized gain and fair value for the investment in GNMA Certificates at December 31, 2000 and 1999 were as follows: December 31, ------------------------------ 2000 1999 ------------- -------------- Amortized cost $5,873,392 $9,719,376 Gross unrealized gain (loss) (22,173) (254,939) ---------- ---------- Fair Value $5,851,219 $9,464,437 ========= ========= For the year ended December 31, 2000, there were gains and losses of $741 and $119,895, respectively, (including acquisition fees and expenses) on principal repayments of GNMA certificates. For the year ended December 31, 1999, there were gains and losses of $1,790 and $3,282, respectively, (including acquisition fees and expenses) on principal repayments of REMIC and GNMA certificates. Due to the complexity of the GNMA structure and the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effect of future events upon the yield to maturity or the market value of the GNMA Certificates 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. NOTE 5 - Commercial Mortgage-Backed Security-Related Investment and Short Sale; Investment in ARCap On September 30, 1999, the Company acquired from ARCap a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust. The CMBS investment, which was purchased for $35,622,358, has a face amount of $50,399,711 and an annual coupon rate of 6.4%. This investment was accounted for as a trading asset and carried at estimated fair value, with changes in fair value included in earnings. The Company purchased the CMBS investment using cash and debt provided through the Bear Stearns Repurchase Facility (see Note 6). In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. Under the Agreement, the Company had the right to sell the CMBS investment to ARCap and purchase a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. This investment was accounted for as a trading asset and carried at estimated fair value, with changes in fair value included in earnings. Interest income was accrued as it became receivable, and included accretion of discounts, computed using the effective yield method, after considering estimated prepayments and credit losses. The Company recognized gains on this investment totaling $1,496,017 in 2000 and losses of $1,419,016 in 1999, due to mark-to-market adjustments. On September 30, 1999, in order to mitigate the potential income statement effect of changes in the fair value of its CMBS investment caused by changes in interest rates, the Company entered into a short sale involving the sale of a U.S. Treasury Note with a face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from Bear Stearns & Co., Inc. ("Bear Stearns"). On March 16, 2000, the Company replaced the borrowed security by purchasing such security through Bear Stearns, and entered into an additional short sale contract involving the sale of a U.S. Treasury Note with a face amount of $34,512,000 and an annual coupon rate of 6.0% borrowed from Bear Stearns. On November 1, 2000, the Company terminated the short sale in connection with its sale of the associated CMBS investment. The Company earned $1,498,627 and $471,262 on short sale proceeds held by Bear Stearns during 2000 and 1999, respectively (included in interest income from temporary investments) and incurred interest of $1,757,648 and 547,025 on its short sale contracts during 2000 and 1999, respectively (included in interest expense. Short sale positions were carried at estimated fair value, with changes in fair value included in earnings. The Company recognized losses on these positions totaling $1,795,572 in 2000 and gains of $1,201,317 in 1999 due to mark-to-market adjustments. On November 1, 2000, the Company, in accordance with the Agreement, sold the CMBS investment to ARCap and repaid its borrowing under the repurchase facility (see Note 6), closed out its short sales position and purchased a preferred equity interest in ARCap in the face amount of $20,000,000, with a preferred dividend rate of 12%. This preferred equity interest was recorded at $19,640,637, representing the fair value of the CMBS investment at the date of the transaction, less the Bear Stearns Repurchase Facility repayment plus approximately $3.5 million in cash paid to ARCap. Summarized information for ARCap as of December 31, 2000 and the year then ended is as follows: Investment securities - trading $214,000,516 Investment securities - available for sale 76,092,175 Other assets 20,249,212 ------------ Total assets $310,341,903 =========== Repurchase agreements and other liabilities$133,314,684 Members' equity 177,027,219 ----------- Total liabilities and equity $310,341,903 =========== Total revenues $ 19,931,055 Total expenses 8,105,265 ------------- Net income $ 11,825,790 ============ NOTE 6 - Repurchase Facilities On September 30, 1999, the Company entered into a repurchase facility with Bear Stearns (the "Bear Stearns Repurchase Facility"), whereby Bear Stearns advanced $19,568,000 in cash towards the purchase of the CMBS-related investment (see Note 5). The Bear Stearns Repurchase Facility had a variable interest rate based on the one-month LIBOR rate plus 1.5%, which is adjusted on the first day of each month. The Bear Stearns Repurchase Facility was repaid November 1, 2000 in connection with the CMBS sale discussed above. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility (the "Nomura Repurchase Facility") with Nomura Asset Capital Corporation. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value of FHA loans owned by the Company. The Nomura Repurchase Facility has a term of 364 days and bears interest at LIBOR plus 1.25%. As of December 31, 2000, the amount outstanding under this facility was $7,138,940, and the interest rate was 7.87%. Deferred costs of $79,815 relating to the Nomura Repurchase Facility are being amortized using the straight-line method over 364 days, which is the term of the facility. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International, Inc. (the "Nomura Securities Repurchase Facility"). This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of December 31, 2000, the amount outstanding under this facility was $5,517,000, and the interest rate was 7.12%. Deferred costs of $79,815 relating to the Nomura Securities Repurchase Facility are being amortized using the straight-line method over five years. NOTE 7 - Related Party Transactions Prior to the adoption of the Proposals on April 6, 1999, the Company had an agreement with the Advisor pursuant to which the Advisor received compensation consisting primarily of (i) asset management fees calculated as .625% of total assets invested by the Company; (ii) a subordinated incentive fee based on the economic gain on the sale of Mortgage Investments; (iii) reimbursement of certain administrative and other costs incurred by the Advisor on behalf of the Company; and (iv) certain other fees. In addition, with respect to Mortgage Loans acquired by the Company, the Advisor was entitled to receive loan placement fees paid by borrowers equal to up to 1.5% of the principal amount of each mortgage loan. As a result of the adoption of the Proposals (see Note 1), the Board of Trustees amended the Advisory Agreement between the Company and the Advisor to, among other matters, reflect the Proposals and change the Advisory Agreement's fee structure to (a) eliminate the acquisition and disposition fees payable to the Advisor; (b) modify the annual asset management fee payable to the Advisor as set forth below; and (c) include an annual incentive fee payable to the Advisor as also set forth below. The modified annual asset management fee is calculated as follows: (i) .355% for investments in Mortgage Loans; (ii) .355% for certain investment grade investments; (iii) .750% for certain non-investment grade investments; (iv) 1.000% for unrated investments; and (v) .625% for investments held prior to the adoption of the Proposals. The annual incentive fee is calculated as follows: subject to a minimum annual distribution being made to shareholders from cash available for distribution of approximately $1.45 per Share, the Advisor will be entitled to receive incentive compensation for each fiscal year in an amount equal to the product of (A) 25% of the dollar amount by which (1)(a) Funds From Operations of the Company (before the incentive fee) per Share (based on the weighted average number of Shares outstanding) plus (b) gains (or minus losses) from debt restructuring and sales of property per Share (based on the weighted average number of Shares outstanding), exceed (2) an amount equal to (a) the weighted average of the price per Share of the initial offering (i.e. $20 per Share) and the prices per Share of any secondary offerings by the Company multiplied by (b) the ten-year U.S. Treasury rate plus two percent per annum multiplied by (B) the weighted average number of Shares outstanding during such fiscal year. For any period less than a fiscal year during which the amended Advisory Agreement is in effect, the incentive fee will be prorated according to the proportion which such period bears to a full fiscal year, taking into account, however, the Company's cash available for distribution for the entire fiscal year. In addition, the Advisory Agreement's fee structure was also changed so that with respect to the first $100 million of new Mortgage Loans acquired by the Company, the Advisor will receive origination points paid by borrowers equal to up to 1% of the principal amount of each Mortgage Loan and the Company will receive origination points paid by borrowers in excess of 1%. After the first $100 million of additional Mortgage Loans is acquired, the Company will retain 100% of the origination points paid by borrowers. The costs incurred to related parties for the years ended December 31, 2000, 1999 and 1998 were as follows: Years Ended December 31, 2000 1999 1998 ----------- ----------- ----------- Expense reimbursement $374,751 $255,616 $120,029 Asset management fees 386,112 335,682 362,280 Incentive fee 0 122,270 0 ------------ ------- ------------ $760,863 $713,568 $482,309 ======= ======= ======= Asset management fees, the incentive management fee and expense reimbursements owed to the Advisor and its affiliates amounting to approximately $243,000 and $431,000 were accrued and unpaid at December 31, 2000 and 1999, respectively. On May 19, 1999, the Company made a loan in the amount of $1,900,000 to Patterson Hope '98 Urban Renewal L.L.C. (the "Borrower"), an entity in which an affiliate of the Advisor is a member. The note bore interest at 12% which was payable, along with the principal, at maturity on September 15, 1999. The note was secured by all of the membership interest in the Borrower, was guaranteed by Related Capital Company and could be prepaid in whole or in part at any time. In September 1999, the loan was repaid and the Advisor and the Company each received origination points in the amount of $19,000. The Company earned interest income of approximately $86,000 from this loan. NOTE 8 - Earnings Per Share Basic net income per share in the amount of $.86, $1.63 and $.88 for the years ended December 31, 2000, 1999 and 1998, respectively, equals net income for the periods ($3,317,757, $6,260,300 and $3,396,612, respectively), divided by the weighted average number of shares outstanding for the periods (3,838,630, 3,841,931 and 3,845,101, respectively). Because the Company has no dilutive securities outstanding at December 31, 2000, diluted net income per share is the same as basic net income per share. NOTE 9 - Capital Shares In December 1992, the Company issued 10,000 shares of beneficial interest at $20 per share in exchange for $200,000 cash from the Advisor. On March 29, 1993, the Company commenced a public offering (the "Offering") through Related Equities Corporation, an Affiliate of the Advisor, and other broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of beneficial interest, at an initial offering price of $20 per share. The Offering terminated November 30, 1994, with a total of 3,809,601 shares 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). The Reinvestment Plan became effective March 29, 1993. 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 price per share under the Reinvestment Plan was lowered to $19. Effective November 30, 1997, the Board adopted a policy to adjust the reinvestment price annually to reflect the net asset value of a share of the Company's shares of beneficial interest. Since November 30, 1994, 355,744 shares have been sold through the Reinvestment Plan, the proceeds of which (the "Reinvestment Proceeds") were restricted for use in connection with the Company's redemption plan and were not included in Gross Proceeds. The Redemption Plan became effective on November 30, 1994. Under the Redemption Plan, Eligible Shares could not be presented to the Company for redemption. Eligible Shares were shares acquired directly from the Company or through the Reinvestment Plan owned by the original holder. The Company was required to redeem such Eligible Shares presented from redemption for cash to the extent it had sufficient Reinvestment Proceeds. Through the quarter ended March 31, 1997, the redemption price pursuant to the Redemption Plan was $19 per Eligible Share. For the quarter ended June 30, 1997, the Board of Trustees reduced the $19 redemption price to $17.47 to reflect that shareholders had received, through that date, $1.53 in return of capital distributions. The Board subsequently adopted a policy to adjust the redemption price annually to reflect the then net asset value of a share of the Company's shares of beneficial interest. Pursuant to the Redemption Plan, 375,916 shares have been redeemed for an aggregate price of $6,575,799. During the Offering, the Advisor received 38,481 restricted shares (including 717 from the Reinvestment Plan) in addition to the 10,000 purchased which the Advisor (pursuant to the terms of the Offering) valued at $14.75 per share. As a result of shares being redeemed, the Advisor was required to return 172 shares as of December 31, 1994; no additional shares were required to be returned since then. As a result of the adoption of the Proposals (see Note 1), the Company's Reinvestment Plan and Redemption Plan have been terminated, effective with the distribution for the quarter ended March 31, 1999. The final reinvestment of shares occurred on May 15, 1999. The final redemption of shares occurred on May 24, 1999. In addition, in connection with the listing of the Company's Shares on the American Stock Exchange, fractional shares totaling approximately 612 were redeemed on July 1, 1999.
NOTE 10 - Selected Quarterly Financial Data (unaudited) 2000 Quarter Ended ----------------------------------------------------------------------- March 31 June 30 September 30 December 31 -------------- ----------------- ------------ ----------- Revenues: Interest income: Mortgage loans $ 491,400 $ 196,326 $ 500,295 $ 377,315 GNMA certificates 119,631 118,630 117,701 116,731 Commercial mortgage-backed security-related investment 950,662 956,530 960,467 321,748 Note receivable 0 146,168 131,381 169,076 Temporary investments 547,104 674,520 624,146 238,647 Dividend income 0 0 0 401,096 Other income 0 0 167,279 (15,597) --------------- --------------- ---------- ----------- Total revenues 2,108,797 2,092,174 2,501,269 1,609,016 --------- --------- --------- --------- Expenses: Interest 909,107 903,614 1,044,215 514,970 General and administrative 332,220 257,970 425,520 293,688 Amortization 13,651 20,350 26,227 24,309 ----------- ----------- ----------- ----------- Total expenses 1,254,978 1,181,934 1,495,962 832,967 --------- --------- --------- ---------- Other gain (loss): Net gain (loss) on commercial mortgage-backed security-related investment and government security sold short (457,042) (253,735) 246,341 164,881 Gain (loss) on repayment of mortgage loans and GNMA certificates 86,439 (6,077) (8,371) 23 ----------- ------------- ------------ --------------- Total other gain (loss) (370,603) (259,812) 237,970 164,904 ---------- ----------- ---------- ---------- Net income $ 483,216 $ 650,428 $1,243,277 $ 940,953 ========== ========== ========= ========= Net income per share (basic and diluted) $ .13 $ .17$ .32 $ .25 ============== ============== =============== ==============
1999 Quarter Ended ----------------------------------------------------------------------- March 31 June 30 September 30 December 31 -------------- ----------------- ------------ ----------- Revenues: Interest income: Mortgage loans $ 548,365 $ 666,585 $465,994 $ 888,957 GNMA certificates 199,646 196,898 195,315 193,732 Commercial mortgage-backed security-related investment 0 0 10,187 940,269 Note receivable 0 26,860 58,926 0 Temporary investments 96,528 262,386 221,459 512,244 Other income 0 4,231 19,000 0 --------------- ------------ -------- --------------- Total revenues 844,539 1,156,960 970,881 2,535,202 ---------- --------- ------- --------- Expenses: Interest 0 0 6,061 900,520 General and administrative 137,534 298,729 250,841 342,736 Organization costs 0 348,413 16,405 54 -------------- ---------- -------- -------------- Total expenses 137,534 647,142 273,307 1,243,310 ---------- ---------- ------- --------- Other gain (loss): Net unrealized loss on commercial mortgage-backed security-related investment and government security sold short 0 0 0 (217,699) Gain (loss) on repayment of mortgage loans and GNMA certificates 3,273,116 (331) (485) (590) --------- ------------ --------- ------------- Total other gain (loss) 3,273,116 (331) (485) (218,289) --------- ------------ --------- ---------- Net income $3,980,121 $ 509,487 $697,089 $1,073,603 ========= ---======= ======= ========= Net income per share (basic and diluted) $ 1.03$ .13 $ .18 $ .28 ============= ============== =========== ==============
NOTE 11 - Commitments and Contingencies The Company completed a loan venture with Federal National Mortgage Association ("Fannie Mae") which has agreed to fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Under the loan venture, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. As of December 31, 2000, the Company originated four loans totaling $4,937,511 under this loan venture. NOTE 12 - Investment in Unconsolidated Subsidiary and Note Receivable The Company has entered into an agreement with the Federal National Mortgage Association ("Fannie Mae") whereby the company will provide first loss protection ("First Loss Obligation") on certain loans originated by Fannie Mae pursuant to a Master Financing and Loss Sharing Agreement (See Note 11). Through an unconsolidated subsidiary, AMAC/FM Corporation ("AMAC/FM"), and pursuant to a Guaranty and Security Agreement with Fannie Mae, the payment of the First Loss Obligation is guaranteed and secured by AMAC/FM's pledge and grant to Fannie Mae of a security interest on certain assets of AMAC/FM. AMAC/FM was capitalized by a contribution by the Company to AMAC/FM of the mortgage loan secured by Stony Brook Village II Apartments with a principal amount of $8,404,092. This contribution was recorded by AMAC/FM as a $7,264,093 loan from the Company via a subordinated promissory note, with a stated interest rate of 7.75% and a $1,140,000 capital contribution through the issuance of AMAC/FM non-voting common stock. The Company accounts for its $1,140,000 investment in AMAC/FM under the equity method of accounting, because all of AMAC/FM's voting common shares are held by the Advisor and, therefore, the Company does not control AMAC/FM. During January, 2001, all of the voting common stock of AMAC/FM, previously owned by the Advisor, was purchased by the Company, the effect of which is to make AMAC/FM a wholly owned subsidiary of the Company. This change was possible due to a change in federal REIT legislation passed in December 1999, allowing REITS to directly own taxable subsidiaries, beginning after the year 2000. NOTE 13 - Subsequent Event On February 15, 2001, the Company renewed the Nomura Repurchase Facility with Nomura Asset Capital Corporation. Under the new terms, the Company may borrow up to $40 million, with a one time option to increase total borrowings to $60 million. The renewed facility bears interest at LIBOR plus $1.25% and matures February 15, 2002. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Company. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Item 11. Executive Compensation. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. Item 12. Security Ownership of Certain Beneficial Owners and Management. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. Item 13. Certain Relationships and Related Transactions. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Sequential Page --------------- (a) 1. Financial Statements American Mortgage Acceptance Company Independent Auditors' Report - Deloitte & Touche LLP 15 Independent Auditors' Report - KPMG LLP 16 Balance Sheets as of December 31, 1999 and 1998 17 Statements of Income for the years ended December 31, 1999, 1998 and 1997 18 Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997 19 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 21 Notes to Financial Statements 23 ARCap Investors, L.L.C. 99(a) Consolidated financial statements for ARCap Investors, L.L.C. (see Exhibit 99) Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) Sequential Page --------------- (a) 2. Financial Statement Schedules All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto. (a) 3. Exhibits 1(a) Dealer Manager Agreement, dated March 29, 1993 as previously filed as an Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's Registration Statement No. 33-42481. 1(b) Form of Soliciting Dealer Agreement as previously filed as an Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's Registration Statement No. 33-42481. 3.4 Amended and Restated Declaration of Trust, dated as of March 29, 1993, as amended as of July 1, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. Amendment No. 2 to Amended and Restated Declaration of Trust, dated as of April 5, 1994 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. 3.4(c) Second Amended and Restated Declaration of Trust, dated as of April 6, 1999 (incorporated by reference to Exhibit 3.4(c) in the Company's March 31, 1999 Quarterly Report on Form 10-Q). 10(a) Escrow Agreement, dated as of April 16, 1993 and amended as of August 25, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. 10(b) Advisory Services Agreement, dated as of March 29, 1993, as amended as of October 26, 1993 as previously filed as an Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993. Amendment to Advisory Services Agreement, dated as of December 31, 1993 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. Third Amendment to Advisory Services Agreement, dated as of March 29, 1994 as previously filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993. 10(c) TRI Capital Corporation Mortgage Note in the principal amount of $9,350,000 dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(d) Equity Loan Note in the principal amount of $1,156,000 dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(e) Bridge Loan Note in the principal amount of $115,790, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(f) Subordinated Promissory Note by Oxford Apartments, L.C., dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(g) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers, Allied Realty Services, Ltd. and American Mortgage Investors Trust, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(h) TRI Capital Corporation Mortgage Note in the principal amount of $6,800,000, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(i) Equity Loan Note in the principal amount of $840,500, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(j) Bridge Loan Note in the principal amount of $84,210, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(k) Subordinated Promissory Note by Cove Apartments, L.C., dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(l) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers, Allied Realty Services, Ltd. and American Mortgage Investors Trust, dated December 16, 1993 as previously filed as an Exhibit to Current Report on Form 8-K dated December 16, 1993. 10(m) Cambridge Realty Capital LTD Mortgage Note in the principal amount of $9,348,000, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(n) Equity Loan Note in the principal amount of $1,039,000, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(o) Subordinated Promissory Note by Town and Country IV Apartments, L.C., dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(p) Limited Operating Guaranty between Leonard E. Wineburgh, Arnold H. Dwinn and the Company, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 21, 1994. 10(q) American Capital Resource, Inc. Mortgage Note in the principal amount of $8,683,000 dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(r) Equity Loan Note in the principal amount of $563,000 dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(s) Subordinated Promissory Note by Columbiana Lakes Apartments, L.C., dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(t) Limited Operating Guaranty between Anderson G. Wise, Ronald P. Curry and the Company, dated April 5, 1994 as previously filed as an Exhibit to Current Report on Form 8-K dated April 28, 1994. 10(u) Rockport Mortgage Corporation Mortgage Note in the principal amount of $8,500,000 dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(v) Equity Loan Note in the principal amount of $1,039,000 dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(w) Subordinated Promissory Note by SCI-ROEV East Haven Land Limited Partnership, dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(x) Limited Operating Guaranty between SCI Real Estate Development, Ltd., and Euro General East Haven, Inc., and the Company dated December 15, 1995, as previously filed as an Exhibit to Current Report on Form 8-K dated December 15, 1995. 10(y) Supplemental Mortgage Note by Columbiana Lakes Limited Partnership, dated as of April 1, 1999 incorporated by reference to Exhibit 10(y) in the Company's September 30, 1999 Quarterly Report on Form 10-Q. 10(z) Amended and Restated Advisory Services Agreement, effective as of April 6, 1999 incorporated by reference to Exhibit 10(z) in the Company's September 30, 1999 Quarterly Report on Form 10-Q. 23(a) Consent of KPMG LLP with respect to incorporation by reference in its report in the Company's Registration Statement on Form S-3 (filed herewith). 45 23(b) Consent of Deloitte & Touche LLP with respect to incorporation by reference in its report in the Company's Registration Statement on Form S-3 (filed herewith). 46 99. Additional Exhibits 47 99(a) The Financial Statements of ARCap Investors, L.L.C. which invests primarily in subordinated commercial mortgage-backed securities, as required by Regulation S-X, Rule 3-09 (filed herewith). SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE ACCEPTANCE COMPANY (Registrant) Date: March 30, 2001 By: ______________________________ Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date -------------------------------------------------------------------------------- ____________________ Trustee, Chairman of the Board, Stuart J. Boesky President and Chief Executive Officer March 30, 2001 ------------------- Peter T. Allen Trustee March 30, 2001 ------------------- Arthur P. Fisch Trustee March 30, 2001 ___________________ Senior Vice President and Michael I. Wirth Chief Financial Officer March 30, 2001 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE ACCEPTANCE COMPANY (Registrant) Date: March 30, 2001 By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date --------------------------------------------------------------------------- /s/ Stuart J. Boesky Trustee, Chairman of the Board, -------------------- Stuart J. Boesky President and Chief Executive Officer March 30, 2001 /s/ Peter T. Allen ------------------ Peter T. Allen Trustee March 30, 2001 /s/ Arthur P. Fisch ------------------- Arthur P. Fisch Trustee March 30, 2001 /s/ Michael I. Wirth Senior Vice President and -------------------- Michael I. Wirth Chief Financial Officer March 30, 2001