-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZs+8YAMhO2OAF7ozUNSxdurKuq8sM19XtugXSSpZ8XtaMpcYo9uR3CLuPuBHqzn edyAN4rZwfsn/amRGpZzXw== 0001133517-01-500025.txt : 20010515 0001133517-01-500025.hdr.sgml : 20010515 ACCESSION NUMBER: 0001133517-01-500025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14583 FILM NUMBER: 1633196 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-Q 1 amac.txt 3 MONTHS 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------- EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23972 AMERICAN MORTGAGE ACCEPTANCE COMPANY (Exact name of registrant as specified in its charter) Massachusetts 13-6972380 - ---------------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - -------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ PART I. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets ------------ ------------ March 31, December 31, 2001 2000 ------------- ---------- (Unaudited) ASSETS Investments in mortgage loans $ 48,943,115$ 31,828,733 Investments in GNMA certificates- available for sale 5,781,622 5,851,219 Investment in ARCap 20,232,637 20,041,733 Investment in unconsolidated subsidiary 0 1,149,182 Cash and cash equivalents 839,321 1,632,652 Note receivable 1,413,750 8,677,843 Accrued interest receivable 458,895 680,728 Other assets 658,756 576,223 -------------- ------------ Total assets $ 78,328,096$ 70,438,313 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facilities payable $ 21,527,610$ 12,655,940 Accrued interest payable 25,634 27,850 Accounts payable and accrued expenses 316,403 278,760 Due to Advisor and affiliates 253,925 1,008,387 Distributions payable 1,391,503 1,391,503 ------------ ------------ Total liabilities 23,515,075 15,362,440 ------------ ------------ Commitments and contingencies Shareholders' equity: Shares of beneficial interest; $.10 par value; 12,500,000 shares authorized; 4,213,826 issued and 3,838,630 outstanding 421,383 421,383 Treasury shares of beneficial interest; 375,196 shares (37,520) (37,520) Additional paid-in capital 68,840,500 68,840,500 Distributions in excess of net income (14,386,672) (14,126,317) Accumulated other comprehensive loss (24,670) (22,173) --------------- ------------ Total shareholders' equity 54,813,021 55,075,873 ------------ ------------ Total liabilities and shareholders' equity $ 78,328,096 $ 70,438,313 ============ ============ AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) -------------------------- Three Months Ended March 31, ------------------------- 2001 2000 ----------- ---------- Revenues: Interest income: Mortgage loans $ 888,252 $ 491,400 GNMA certificates 115,624 119,631 Commercial mortgage- backed security-related investment 0 950,662 Note receivable 45,313 0 Temporary investments 16,979 547,104 Equity in earnings of ARCap 592,000 0 Other income 6,067 0 ---------- ----------- Total revenues 1,664,235 2,108,797 --------- --------- Expenses: Interest 275,625 909,107 General and administrative 237,778 332,220 Amortization 19,684 13,651 ----------- ----------- Total expenses 533,087 1,254,978 ---------- --------- Other gain (loss): Net gain on repayments of GNMA certificates and mortgage loans 0 86,439 Net loss on commercial mortgage- backed security-related investment and government securities sold short 0 (457,042) ----------- ---------- Total other gain (loss) 0 (370,603) --------- ---------- Net income $1,131,148 $ 483,216 ========= ========== Net income per share (basic and diluted) $ .29 $ .13 =========== ============= Weighted average shares outstanding (basic and diluted) 3,838,630 3,838,630 ========= ========= AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
Shares of Beneficial Treasury Shares of Interest Beneficial Interest Additional Distributions Comprehensive --------------------- -------------------- Paid-in in Excess Shares Amount Shares Amount Capital of Net Income Income --------- -------- ---------- -------- ----- ------------- --------------- Balance at January 1, 2001 4,213,826 $421,383 (375,196) $(37,520) $68,840,500 $(14,126,317) Comprehensive income: Net income 0 0 0 0 0 1,131,148 $1,131,148 Other comprehensive income: Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period (2,497) ------------ Comprehensive income $1,128,651 ========= Distributions 0 0 0 0 0 (1,391,503) -------- -------- -------- ------- ----------- ------------ Balance at March 31, 2001 4,213,826 $421,383 (375,196) $(37,520) $68,840,500 $(14,386,672) ========= ======= ======== ======= ========== ===========
Accumulated Other Comprehensive Income (Loss) Total --------------- -------------- Balance at January 1, 2001 $ (22,173) $55,075,873 Comprehensive income: Net income 0 1,131,148 Other comprehensive income: Net unrealized gain on first mortgage bonds: Net unrealized holding gain arising during the period (2,497) (2,497) Comprehensive income Distributions 0 (1,391,503) ------------ ----------- Balance at March 31, 2001 $ (24,670) $54,813,021 ======== ========== See accompanying notes to financial statements. AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) -------------------------- Three Months Ended March 31, -------------------------- 2001 2000 ------------ ------------ Cash flows from operating activities: Net income $ 1,131,148 $ 483,216 Adjustments to reconcile net income to net cash provided by operating activities: Gain on commercial mortgage-backed security-related investment 0 (432,590) Loss on government securities sold short 0 889,632 Net gain on repayments of GNMA certificates and mortgage loans 0 (86,439) Equity in earnings of ARCap, in excess of distributions received (190,904) 0 Amortization - deferred financing costs 19,684 13,651 Amortization expense-loan premium and origination costs 1,689 59,163 Accretion of GNMA discount (5,511) (5,639) Accretion of discount on commercial mortgage-backed security-related investment 0 (147,952) Amortization of deferred costs relating to the CMBS-related investment 0 3,685 Purchase of government security 0 (37,299,201) Government security sold short 0 33,541,350 Changes in operating assets and liabilities: Deposit with broker as collateral for security sold short 0 3,868,201 Accrued interest receivable 221,832 500,895 Other assets 9,949 33,159 Due to Advisor and affiliates (715,412) 331,499 Accounts payable and accrued expenses 37,644 39,649 Accrued interest payable (2,215) (88,093) Deferred costs relating to the CMBS-related investment 0 (53,139) ------------- ---------- Net cash provided by operating activities 507,904 1,651,047 ------------ ----------- Cash flows from investing activities: Increase in investment in mortgage loans (8,795,948) 0 Proceeds from repayments of mortgage loans 0 1,074,884 Periodic principal payments of mortgage loans 54,082 0 Principal repayments of GNMA Certificates 72,628 3,767,573 Costs relating to repayment of mortgage loan 0 (45,000) Increase in other assets (62,580) (14,400) ---------- ----------- Net cash (used in) provided by investing activities (8,731,818) 4,783,057 ------------ ----------- Cash flows from financing activities: Proceeds from repurchase facilities payable 8,871,670 541,000 Repayments of repurchase facilities payable 0 (399,000) Distribution paid to shareholders (1,391,503) (1,391,504) Increase in deferred loan costs (49,584) (108,024) ----------- ----------- Net cash provided by (used in) financing activities 7,430,583 (1,357,528) --------- ---------- Net (decrease) increase in cash and cash equivalents (793,331) 5,076,576 Cash and cash equivalents at the beginning of the period 1,632,652 3,802,298 --------- --------- Cash and cash equivalents at the end of the period $ 839,321 $8,878,874 ========= ========= Supplemental information: Interest paid $ 277,840 $ 997,200 ========== ========== Supplemental disclosure of noncash activities: Proceeds from repayment of mortgage loan which are due from loan servicing agent $8,942,630 ========= AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2001 (Unaudited) Note 1 - General American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business trust for the primary purpose of investing in government-insured mortgages and guaranteed mortgage-backed certificates. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. On April 6, 1999, the Company received the necessary consent from its shareholders to approve proposals (the "Proposals") to, among other things, restructure the Company from a closed-ended, finite-life REIT to a publicly traded, open-ended, infinite-life operating REIT. In addition to restructuring the Company, the Proposals, among other matters, permit the Company to modify its investment objectives, to incur a specified amount of indebtedness and to list the Company's shares on a national exchange. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's business plan focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Federal National Mortgage Association ("Fannie Mae"), and 3) acquisition of direct and indirect subordinated interests in commercial mortgage-backed securities. The Company is governed by a board of trustees comprised of two independent trustees and one trustee who is affiliated with Related Capital Company ("Related"), a nationwide, fully integrated real estate financial services firm. The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. The consolidated financial statements include the accounts of the Company and two wholly owned subsidiaries which it controls: AMAC Repo Seller and (effective January 2001) AMAC/FM Corporation. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, the "Company" as hereinafter used, refers to American Mortgage Acceptance Company and its subsidiaries. The consolidated financial statements of the Company have been prepared without audit. In the opinion of management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of March 31, 2001 and the results of its operations and its cash flows for the three months ended March 31, 2001 and 2000. However, the operating results for the interim periods may not be indicative of the results for the full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. It is suggested that these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2000. The preparation of financial statements in conformity with GAAP requires the Advisor to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It was implemented by the Company on January 1, 2001. Because the Company does not utilize derivatives, implementation of this statement did not have a material effect on the Company's financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2001 (Unaudited) Note 2 - Investments in Mortgage Loans Information relating to investments in mortgage loans as of March 31, 2001 and December 31, 2000 is as follows:
Base Interest Rate on Amounts Advanced ------------------------------------- Final Mortgage Non-interest Date Ma- Loan Additional Bearing Total Balance of at Invest- turitu (HUD Participa Interest Mortgage Additional Amounts March Descrip ment -tion Property -tion Date Insured) Rates(C) Rate Loans Loans Advanced 31, 2001 - -------- -------- ----------- ------ -------- --------------- ------- ------ -------- ------------- --------- Columbiana 204 4/94 8/29 7.90% 25%/- 0.778% $9,106,099 $563,000 $9,669,099 $9,527,371 Lakes Apt. 5/29 Apts. Columbia, Units (A)(B) SC Stony 125 12/95 6/37 7.75% 1.378% 8,500,000 763,909 9,263,909 9,090,292 Brook Village Apt. 6/37 II Apts. Units (A) East Haven, CT Hollows 184 4/00 1/42 7.875% 50%/25% 1.4482% 5,914,855 1,549,200 7,464,055 7,282,834 Apts. Apt. 1/42 GreenvilleUnits (B) NC Elmhurst 313 6/00 1/42 8.00% 50%/25% 1.3232% 11,813,217 2,874,000 14,687,217 14,214,127 Village Apt. 1/42 Oveida, Units (B) FL Reserve 212 8/00 12/41 8.00% 50%/25% 1.202% 6,910,189 1,987,000 8,897,189 8,828,491 at Autumn Apt. (B) Creek Units Friends- wood, TX ---------------------------------------------------- Total $42,244,360 $7,737,109 $49,981,469 $48,943,115 ====================================================
Interest Earned Less Balance at by the 2001 Net December Company Amor- Interest Property 31,2000 for 2001 tization Earned - -------- --------------- ------ -------- ------- Columbiana $9,563,501 $190,876 $(22,396) $168,480 Lakes Apts. Columbia, SC Stony Brook 748,665 188,690 (22,223) 166,467 Village II Apts. East Haven, CT Hollows Apts. 4,927,740 122,594 4,304 126,898 Greenville NC Elmhurst Village 10,087,809 263,998 7,411 271,409 Oveida, FL Reserve at 6,501,018 153,774 1,224 154,998 Autumn Creek Friends- wood, TX ---------------------------------------------------- Total $31,828,733 $919,932 $(31,680) $888,252 ===================================================== (A) The Mortgages have terms of 40 years, subject to mandatory prepayment at any time after 10 years and upon one year's notice. (B) Pledged as collateral in connection with a secured credit repurchase facility with Nomura Asset Capital Corporation (See Note 5). (C) In addition to the interest due at the base and additional interest rates, the Company is entitled to participation in certain cash flows from the underlying properties. The first percentage listed represents the Company's participation in cash flows remaining, if any, after payment of debt service: the second represents the Company's participation in sale or refinancing proceeds. AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2001 (Unaudited) Note 3 - Investments in GNMA Certificates-Available for Sale Information relating to investments in GNMA certificates as of March 31, 2001 and December 31, 2000 is as follows:
Accum-ulated Date Original Amorti-zation Unrealized Purchased Purchase at Loan Loss /Final Stated Price Principal Discount March Origination at Balance Certificate Payment Interest Including at March at March Costs at March at March Seller Number Date Rate Discount 31,2001 31,2001 31,2001 March 31,2001 31,2001 31,2001 - ------ --------- -------- ------- -------- --------- ------- -------- ----------- ------- -------- GNMA Certificates Bear Stearns 0355540 7/27/94 7.125% $2,407,102 $2,510,167 $(232,190) $130,863 $ 77,658 $14,658 $2,501,156 3/15/29 Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,120,525 (7,952) 4,678 72,020 (27,501) 2,161,770 8/15/29 SunCoast Capital G22412 6/23/97 7.000% 1,981,566 1,131,761 (7,427) 6,189 0 (11,827) 1,118,696 Group, Ltd. 4/20/27 -------- --------- -------- ------- --------- -------- -------- -------- ----- Total $6,585,798 $5,762,453 $(247,569) $141,730 $149,678 $(24,670) $5,781,622 ======== ========= ======== ======= ========= ======== ======== ======== =====
Interest Earned Balance at by the Net December Company 2001 Interest Seller 31, 2000 for 2001 Accretion Earned - ------ ----------- ------- ------- ------ GNMA Certificates $2,498,175 $44,792 $4,912 $49,704 Bear Stearns 2,159,906 45,121 176 45,297 Malone Mortgage 1,193,138 20,200 423 20,623 SunCoast Capital Group, Ltd. -- -------- ------ $5,851,219 $110,113 $5,511 $115,624 Total == ======== ====== AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2001 (Unaudited) The amortized cost, unrealized gain and fair value for the investment in GNMA Certificates at March 31, 2001 and December 31, 2000 were as follows: March 31, December 31, 2001 2000 ------------- --------- Amortized cost $5,806,292 $5,873,392 Gross unrealized loss (24,670) (22,173) ----------- ---------- Fair Value $5,781,622 $5,851,219 ========= ========= Note 4 - Commercial Mortgage-Backed Security-Related Investment and Short Sale; Investment in ARCap On September 30, 1999, the Company acquired from ARCap a "BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust. The CMBS investment, which was purchased for $35,622,358, 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 Note 5). In connection with this acquisition, the Company entered into an agreement (the "Agreement") with ARCap. Under the Agreement, the Company had the right to sell the CMBS investment to ARCap and purchase a preferred equity position in ARCap, all based on the then fair value of the CMBS investment. This investment was accounted for as a trading asset and carried at estimated fair value, with changes in fair value included in earnings. Interest income was accrued as it became receivable, and included accretion of discounts, computed using the effective yield method, after considering estimated prepayments and credit losses. The Company recognized gains on this investment totaling $432,590 during the three months ended March 31, 2000 due to mark-to-market adjustments. On September 30, 1999, in order to mitigate the potential income statement effect of changes in the fair value of its CMBS investment caused by changes in interest rates, the Company entered into a short sale involving the sale of a U.S. Treasury Note with a face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from Bear Stearns & Co., Inc. ("Bear Stearns"). On March 16, 2000, the Company replaced the borrowed security by purchasing such security through Bear Stearns, and entered into an additional short sale contract involving the sale of a U.S. Treasury Note with a face amount of $34,512,000 and an annual coupon rate of 6.0% borrowed from Bear Stearns. On November 1, 2000, the Company terminated the short sale in connection with its sale of the associated CMBS investment. Short sale positions were carried at estimated fair value, with changes in fair value included in earnings. The Company recognized losses on these positions totaling $889,632 during the three months ended March 31, 2000 due to mark-to-market adjustments. On November 1, 2000, the Company, in accordance with the Agreement, sold the CMBS investment to ARCap and repaid its borrowing under the repurchase facility (see Note 5), closed out its short sales position and purchased a preferred equity interest in ARCap in the face amount of $20,000,000, with a preferred dividend rate of 12%. This preferred equity interest was recorded at $19,640,637, representing the fair value of the CMBS investment at the date of the transaction, less the Bear Stearns Repurchase Facility repayment plus approximately $3.5 million in cash paid to ARCap. NOTE 5 - Repurchase Facilities On September 30, 1999, the Company entered into a repurchase facility with Bear Stearns (the "Bear Stearns Repurchase Facility"), whereby Bear Stearns advanced $19,568,000 in cash towards the purchase of a CMBS-related investment (see Note 4). The Bear Stearns Repurchase Facility had a variable interest rate based on the one-month LIBOR rate plus 1.5%, which was adjusted on the first day of each month. The Bear Stearns Repurchase Facility was repaid November 1, 2000 in connection with the CMBS sale discussed above. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility with Nomura Asset Capital Corporation (the "Nomura Repurchase Facility") with a term of 1 year. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value of FHA loans owned by the Company. The Nomura Repurchase Facility was renewed February 15, 2001 for $40 million, with a one time option to increase to $60 million, a one year term and interest at LIBOR plus 1.25%. As of March 31, 2001 and December 31, 2000, $16,028,609 and $7,138,940, respectively, were outstanding under The Nomura Repurchase Facility and interest rates were 6.33% and 7.87%, respectively. Deferred costs relating to the Nomura Repurchase Facility are being amortized using the straight-line method over 364 days, which is the term of the facility. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International Inc. (the "Nomura Securities Repurchase Facility"). This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of March 31, 2001 and December 31, 2000, the amount outstanding under this facility was $5,499,000 and $5,517,000 and interest rates were 5.55% and 7.12%, respectively. Deferred costs of $101,169 relating to the Nomura Securities Repurchase Facility are being amortized using the straight-line method over five years. NOTE 6 - Related Party Transactions The costs incurred to related parties for the three months ended March 31, 2001 and 2000 were as follows: Three Months Ended March 31, 2001 2000 ---------------------- Expense reimbursement $ 61,000 $115,646 Asset management fees 57,047 121,944 -------- ------- $118,047 $237,590 ======== ======== Note 7 - Earnings Per Share Basic net income per share in the amount $.29 and $.13 for the three months ended March 31, 2001 and 2000, respectively, equals net income for the periods ($1,131,148 and $483,216, respectively), divided by the weighted average number of shares outstanding for the periods (3,838,630 and 3,838,630, respectively). Because the Company had no dilutive securities outstanding during the three months ended March 31, 2001 or 2000, diluted net income per share is the same as basic net income per share. Note 8 - Commitments and Contingencies The Company completed a loan venture with Fannie Mae which has agreed to fully fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code (see Note 9). Under the loan venture, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. As of March 31, 2001, the Company had originated loans totaling $4,933,503 under this program. Note 9 - Investment in Unconsolidated Subsidiary and Note Receivable The Company has entered into an agreement with Fannie Mae whereby the Company will provide first loss protection ("First Loss Obligation") on certain loans originated by Fannie Mae pursuant to a Master Financing and Loss Sharing Agreement. Through a consolidated subsidiary, AMAC/FM Corporation ("AMAC/FM"), and pursuant to a Guaranty and Security Agreement with Fannie Mae, the payment of the First Loss Obligation is guaranteed and secured by AMAC/FM's pledge and grant to Fannie Mae of a security interest on certain assets of AMAC/FM. AMAC/FM was capitalized by a contribution by the Company to AMAC/FM of the mortgage loan secured by Stony Brook Village II Apartments with a principal amount of $8,404,092. This contribution was recorded by AMAC/FM as a $7,264,093 loan from the Company via a subordinated promissory note, with a stated interest rate of 7.75% and a $1,140,000 capital contribution through the issuance of AMAC/FM non-voting common stock. During 2000, the Company accounted for its $1,140,000 investment in AMAC/FM under the equity method of accounting, because all of AMAC/FM's voting common shares were held by the Advisor and, therefore, the Company did not control AMAC/FM. During January 2001, all of the voting common stock of AMAC/FM, previously owned by the Advisor, was purchased by the Company, the effect of which is to make AMAC/FM a wholly owned, consolidated subsidiary of the Company. This change was due to the REIT Modernization Act of 1999, allowing REITS to directly own taxable REIT subsidiaries, beginning after the year 2000. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources - ------------------------------- Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of March 31, 2001, there were 3,838,630 Shares outstanding. The Company's business plan as a publicly traded REIT focuses on three types of mortgage products: 1) origination of participating FHA insured multifamily mortgages, 2) origination of construction and permanent mortgage financing for affordable multifamily housing pursuant to a new venture with Federal National Mortgage Association ("Fannie Mae"), and 3) acquisition of direct and indirect subordinated interests in commercial mortgage-backed securities. As of March 31, 2001, the Company's mortgage investments consisted of five mortgage loans originated by or on behalf of the Company, three GNMA mortgage-backed securities and pass-through certificates and a preferred equity investment in ARCap Investors, L.L.C. ("ARCap"). 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. During the three months ended March 31, 2001, cash and cash equivalents decreased approximately $793,000 primarily due to cash provided by operating activities ($508,000), an increase in investment in mortgage loans ($8,796,000), proceeds from repurchase facilities payable ($8,872,000) and distribution paid to shareholders ($1,392,000). The yield on the GNMA Certificates will depend, in part, upon the rate and timing of principal prepayments on the underlying mortgages in the asset pool. Generally, as market interest rates decrease, mortgage prepayment rates increase and the market value of interest rate sensitive obligations like the GNMA Certificates increases. As market interest rates increase, mortgage prepayment rates tend to decrease and the market value of interest rate sensitive obligations like the GNMAs tends to decrease. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. The yield on the mortgage loans will depend, in part, on when, and if, the Company disposes of the mortgage loans prior to maturity or the obligor fully repays the outstanding debt. The mortgage loans have fixed interest rates, the base amount of which is insured by HUD, resulting in a minimal amount of interest rate risk. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. Due to the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effects of future events upon the yield to maturity or the market value of the mortgage loans upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the current mortgage loan rates. The Company's equity in the earnings of ARCap will generally be equal to the Company's preferred equity dividend rate of 12%, unless ARCap does not have earnings and cash flows adequate to meet this dividend requirement. ARCap's investment portfolio consists of subordinated commercial mortgage backed securities, whose yields depend, among other things, on the rate and timing of principal payments, the pass through rate, interest rate fluctuations and defaults on the underlying mortgages. The Company's investment in ARCap is illiquid and its carrying amount is not necessarily representative of the amount the Company would receive upon a sale of this investment. Effective February 15, 2000, the Company entered into a $60 million FHA repurchase facility with the Nomura Asset Capital Corporation (the "Nomura Repurchase Facility"), with a term of one year. This agreement enables the Company to borrow up to 90% with a qualified hedge or 80% without a qualified hedge of the fair market value of FHA loans owned by the Company. The Nomura Repurchase Facility was renewed February 15, 2001, for $40 million, with a one time option to increase to $60 million, a one year term, and interest at LIBOR plus 1.25%. As of March 31, 2001 and December 31, 2000, $16,028,609 and $7,138,940, respectively, were outstanding under The Nomura Repurchase 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 March 31, 2001 and December 31, 2000, the amount outstanding under this facility was $5,499,000 and $5,517,000 and interest rates were 6.63125% and 7.12%, respectively. In order to qualify as a REIT under the Code, the Company must, among other things, distribute at least 90% of its taxable income. The Company believes that it is in compliance with the REIT-related provisions of the Code. The Company expects that cash generated from the Company's investments will meet its needs for short-term liquidity, and will be sufficient to pay all of the Company's expenses and to make distributions to its shareholders in amounts sufficient to retain the Company's REIT status in the foreseeable future. The Company completed a loan venture with Fannie Mae which has agreed to fully fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Under the transaction, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, which will underwrite and service the loans for Fannie Mae. Each property in the transaction will benefit from 9% low income housing tax credits for no less than 90% of its units. The Company will guaranty a first loss position of up to 10% of the pool of $250 million and will receive guaranty and other fees. As of March 31, 2001, the Company has originated loans totaling $4,933,503 under this program. In May 2001, a distribution of $1,391,503, which was declared in March 2001, was paid to the shareholders for the quarter ended March 31, 2001. Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Results of Operations - --------------------- The net income for the three months ended March 31, 2001 and 2000 was $1,131,148 and $483,216, respectively. The total of the annual operating expenses of the Company may not exceed the greater of (i) 2% of the Average Invested Assets of the Company or (ii) 25% of the Company's net income, unless such excess is approved by the Independent Trustees. On an annualized basis, there was no such excess for the three months ended March 31, 2001 and 2000. Interest income from mortgage loans increased approximately $397,000 for the three months ended March 31, 2001 as compared to 2000 primarily due to increases in the principal advances to Elmhurst Village, Autumn Creek and The Hollows which were partially offset by the repayment of the Town and Country mortgage loan. Interest income from commercial mortgage-backed security-related investment in the amount of approximately $951,000 was recorded for the three months ended March 31, 2000; such investment was sold in October 2000. Interest income from temporary investments decreased approximately $530,000 for the three months ended March 31, 2001 as compared to 2000 primarily due to the closing of interest bearing bank accounts and termination of the deposits with brokers held as collateral for short sales. Interest income from notes receivable in the amount of approximately $45,000 was recorded for the three months ended March 31, 2001; such investments were made since September 2000. Equity in earnings of ARCap in the amount of $592,000 was recorded for the three months ended March 31, 2001. This investment was acquired in October 2000. Other income in the amount of $6,000 was recorded for the three months ended March 31, 2001 due to the loss sharing fees of Valley View, Alexandrine, Maple Ridge, and Hillside Apartments. Interest expense decreased approximately $633,000 for the three months ended March 31, 2001 as compared to 2000 due to the termination of the Bear Stearns Repurchase Facility and closing out of government securities sold short positions partially offset by interest on the Nomura Securities repurchase facilities. General and administrative expenses decreased approximately $94,000 for the three months ended March 31, 2001 as compared to 2000 primarily due to a decrease in asset management fees payable to the Advisor due to the sale of commercial mortgage-backed security-related investment and a decrease in the reimbursements of certain administrative and other costs incurred by the Advisor on behalf of the Company. Amortization increased approximately $6,000 for the three months ended March 31, 2001 as compared to 2000 due to amortization of deferred costs relating to the Nomura Repurchase Facility and the Nomura Securities Repurchase Facility. A gain on the repayment of mortgage loans in the amount of approximately $28,000 was recorded for the three months ended March 31, 2000, relating to the repayment of the Town & Country additional loan and FHA insured mortgage loan on January 21, 2000. A gain of approximately $58,000 was recognized during the three months ended March 31, 2000 from the repayment of a GNMA certificate. There were no similar repayments or gains during the first quarter of 2001. A net loss on the commercial mortgage-backed security-related investment and government securities sold short in the amount of approximately $457,000 was recorded for the three months ended March 31, 2000. These positions were liquidated in October of 2000. Distributions - ------------- Of the total distributions of $1,391,503 and $1,391,504 for the three months ended March 31, 2001 and 2000, respectively, $260,356 ($.07 per share or 19%) and $908,288, respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of March 31, 2001, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $14,378,083. The portion of the distributions which constituted a return of capital was significant during the initial acquisition stage in order to maintain level distributions to shareholders. Forward-Looking Statements - -------------------------- Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Inflation - --------- Inflation did not have a material effect on the Company's results for the periods presented. Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------- Market risk is the exposure to loss resulting from changes in interest rates, changes in spreads on CMBS, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which the investments of the Company is exposed is interest rate risk which is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the control of the Company. The Company's borrowings under repurchase agreements bear interest at rates that fluctuate with LIBOR. Based on the $21.5 million of borrowings outstanding under these facilities at March 31, 2001, a 1% change in LIBOR would impact the Company's net income by approximately $215,000. Cash flows and income from the Company's other financial instruments, consisting primarily of mortgage loans, GNMA certificates, and cash and cash equivalents, would not be significantly affected by changes in interest rates, because most of these instruments bear interest at fixed rates, and are not subject to financing or hedged. Cash and cash equivalents and the mortgage loans are carried at amortized cost, and so their carrying values are not impacted by changes in interest rates. The GNMA investments are adjusted to market value through comprehensive income in the equity statement, but changes in their value have not historically been significant to shareholders' equity. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any material pending legal proceedings. Information Regarding Other Companies Managed by affiliates of the Advisor. - --------------------------------------------------------------------------- On or about February 8, 2001, a complaint was filed in the New York Supreme Court, County of New York, against the external advisor of Aegis Realty, Inc. ("Aegis"). Aegis is a public company which, like the Company, is externally advised by affiliates of the Advisor. Also named as defendants in the suit were certain affiliates of Aegis' advisor and 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., et al., Index No. 01-600669, and is purportedly a class and derivative action. On or about March 23, 2001, a second action, entitled Schnipper v. Aegis Realty, Inc., et al., Case No. 219736-V, was filed in the Circuit Court for Montgomery County, Maryland against Aegis and each of Aegis' five directors (Messrs. Boesky, Brenner, Hirmes, Allen and Fisch). Schnipper is purportedly brought as a class action. On or about April 2, 2001, a third action, entitled Opportunity Partners, L.P. v. Stuart J. Boesky, et al., Civ. No. 24-C-01-001579, was filed in the Circuit Court for Baltimore County, Maryland against, among others, Aegis, each of its five directors, and Aegis' external advisors, which are affiliates of our Advisor. Opportunity Partners is purportedly a class and derivative action. Each of these three actions challenges Aegis' proposed acquisition of a property portfolio and development business owned by a third party, which transaction also involves the termination by Aegis of its external advisory agreements with affiliates of the Advisor and the purchase by Aegis of various assets owned by those external advisors. Each suit alleges that the defendants breached their fiduciary duties to the Aegis stockholders by, among other things, committing Aegis to pay unwarranted fees and other consideration to affiliates of the Advisor. All three actions seek money damages, injunctive and declaratory relief and attorney's 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 this transaction. Additionally, the transaction at issue is subject to Aegis stockholder approval after proxy materials describing that transaction are disseminated to the Aegis stockholders. The defendants have advised the Company that they intend to defend all three actions vigorously. The defendants filed motions to dismiss the complaint in Paul on or about April 16, 2001. The defendants' times to answer in Schnipper and Opportunity Partners have not yet expired. The Company believes the lawsuit against Aegis will not have a material impact on the Company's operations or financial condition. Item 2. Changes in Securities - None. Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE ACCEPTANCE COMPANY (Registrant) Date: May 12, 2001 By: ___________________________________ Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Date: May 12, 2001 By: _______________________________ Michael I. Wirth Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE ACCEPTANCE COMPANY (Registrant) Date: May 12, 2001 By: /s/ Stuart J. Boesky ------------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Date: May 12, 2001 By: /s/ Michael I. Wirth ------------------------- Michael I. Wirth Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----