-----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, P0SAly7awTCBWzLL4bOmYNmcl6HGE5uLA8CWFAo1HNXaHx/GCEWW2DUocjPKZ9SG Zcn2oCtffbxE1ezkpnMyYg== 0001215811-04-000023.txt : 20040510 0001215811-04-000023.hdr.sgml : 20040510 20040510151708 ACCESSION NUMBER: 0001215811-04-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE ACCEPTANCE CO CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14583 FILM NUMBER: 04792733 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 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST DATE OF NAME CHANGE: 19931013 10-Q 1 f10q_mar2004-amac.txt 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, 2004 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) dentification 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 ----- ----- Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes X No ----- ----- PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands)
============ ============ March 31, December 31, 2004 2003 ------------ ------------ (Unaudited) ASSETS Investments in debt securities - available for sale $ 157,262 $ 167,260 Real estate owned - held and used 7,602 -- Real estate owned - subject to sales contracts 52,112 51,616 Real estate owned - held for sale 17,924 25,802 Notes receivable, net 33,392 35,946 Investment in ARCap 20,240 20,240 Investments in mortgage loans, net 13,894 13,864 Revenue bonds - available for sale 7,569 7,586 Cash and cash equivalents 10,861 2,028 Other assets 2,222 2,765 --------- --------- Total assets $ 323,078 $ 327,107 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facilities payable $ 145,794 $ 149,529 Warehouse facility payable 35,030 34,935 Mortgage payable on real estate owned 15,993 15,993 Interest rate derivatives 871 278 Accounts payable and accrued expenses 538 1,552 Due to Advisor and affiliates 642 590 Distributions payable 3,335 3,335 --------- --------- Total liabilities 202,203 206,212 --------- --------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest; $.10 par value; 25,000,000 shares authorized; 8,713,376 issued and 8,338,180 outstanding in 2004 and 2003 871 871 Treasury shares of beneficial interest; 375,196 shares (38) (38) Additional paid-in capital 126,832 126,779 Deferred compensation - stock options (66) (29) Distributions in excess of net income (15,148) (15,138) Accumulated other comprehensive income 8,424 8,450 --------- --------- Total shareholders' equity 120,875 120,895 --------- --------- Total liabilities and shareholders' equity $ 323,078 $ 327,107 ========= =========
See accompanying notes to consolidated financial statements. 2 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Dollars in the thousands except per share amounts) (Unaudited)
========================= Three Months Ended March 31, ------------------------- 2004 2003 ------------------------- Revenues: Interest income: Debt securities $ 2,337 $ 1,872 Mortgage loans 418 1,407 Notes receivable 667 918 Revenue bonds 168 -- Temporary investments 12 8 Rental income 263 -- Other income 1,129 28 ----------- ----------- Total revenues 4,994 4,233 ----------- ----------- Expenses: Interest 892 407 General and administrative 268 243 Fees to Advisor 482 443 Property operations 239 -- Depreciation 249 -- Amortization and other 139 157 ----------- ----------- Total expenses 2,269 1,250 ----------- ----------- Other income: Equity in earnings of ARCap 600 600 Net loss on sale or repayment of debt securities -- (391) ----------- ----------- Total other income 600 209 ----------- ----------- Net income $ 3,325 $ 3,192 =========== =========== Net income per share (basic and diluted) $ .40 $ .50 =========== =========== Weighted average shares outstanding Basic 8,338,180 6,363,630 =========== =========== Diluted 8,362,247 6,363,630 =========== ===========
See accompanying notes to consolidated financial statements. 3 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Equity (Dollars in thousands) (Unaudited)
Treasury Shares of Shares of Beneficial Interest Beneficial Interest Additional ----------------------------- -------------------------- Paid-in Shares Amount Shares Amount Capital ----------- ----------- ----------- ----------- ---------- Balance at January 1, 2004 $ 8,713,376 $ 871 (375,196) $ (38) $ 126,779 Comprehensive income: Net income Other comprehensive income: Net unrealized loss on interest rate derivatives Unrealized holding gain arising during the period Total other comprehensive income Comprehensive income Issuance of stock options 53 Deferred compensation costs Distributions ----------- ----------- ----------- ----------- ---------- Balance at March 31, 2004 $ 8,713,376 $ 871 (375,196) $ (38) $ 126,832 =========== =========== =========== =========== ========== Deferred Distributions Accumulated Other Compensation in Excess Comprehensive Comprehensive Stock Options of Net Income Income Income Total ------------- ------------- ------------- ----------------- ----------- Balance at January 1, 2004 $ (29) $ (15,138) $ 8,450 $ 120,895 Comprehensive income: Net income 3,325 $ 3,325 3,325 ------------- Other comprehensive income: Net unrealized loss on interest rate derivatives (871) Unrealized holding gain arising during the period 845 ------------- Total other comprehensive income (26) (26) (26) ------------- Comprehensive income $ 3,299 ============= Issuance of stock options (53) Deferred compensation costs 16 16 Distributions (3,335) (3,335) ------------- ------------- ----------- ----------- Balance at March 31, 2004 $ (66) $ (15,148) $ 8,424 $ 120,875 ============= ============= =========== ===========
See accompanying notes to consolidated financial statements. 4 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
========================== Three Months Ended March 31, -------------------------- 2004 2003 ----------- ----------- Cash flows from operating activities: Net income $ 3,325 $ 3,192 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 249 -- Net loss on repayments of debt securities -- 391 Amortization - deferred financing costs 52 -- Amortization - deferred compensation costs 16 -- Amortization - loan premium and origination costs and fees (70) (204) Accretion of discount on debt securities 23 8 Changes in operating assets and liabilities: Accrued interest receivable 560 (166) Other assets (70) (71) Due to (from) Advisor and affiliates 52 (79) Accounts payable and accrued expenses (465) (410) Accrued interest payable (549) 127 ----------- ----------- Net cash provided by operating activities 3,123 2,788 ----------- ----------- Cash flows from investing activities: Funding of mortgage loans (94) (7,049) Repayments of mortgage loans 79 9,350 Funding of notes receivable (95) (20,502) Repayment of notes receivable 2,703 4,057 Principal repayments of debt securities 14,742 5,960 Investment in debt securities (4,199) (4,532) Principal repayments on revenue bonds 17 -- Increase in restricted cash -- (8,282) Additions to real estate owned (468) -- ----------- ----------- Net cash provided by (used in) investing activities 12,685 (20,998) ----------- -----------
continued 5 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
========================== Three Months Ended March 31, -------------------------- 2004 2003 ----------- ----------- Cash flows from financing activities: Proceeds from repurchase facilities payable 6,060 21,184 Proceeds from warehouse facility payable 95 8,209 Repayments of repurchase facility payable (9,795) (15,499) Distribution paid to shareholders (3,335) (2,545) Increase in deferred financing costs -- 102 ----------- ----------- Net cash provided by (used in) financing activities (6,975) 11,451 ----------- ----------- Net increase (decrease) in cash and cash equivalents 8,833 (6,759) Cash and cash equivalents at the beginning of the period 2,028 10,404 ----------- ----------- Cash and cash equivalents at the end of the period $ 10,861 $ 3,645 =========== =========== Supplemental information: Interest paid $ 771 $ 430 =========== =========== Conversion of mortgage loans to real estate owned: Increase in real estate owned $ 7,920,000 Decrease in mortgage loans (7,920,000) ----------- $ -- -----------
See accompanying notes to consolidated financial statements. 6 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 1 - General American Mortgage Acceptance Company (the "Company") was formed on June 11, 1991 as a Massachusetts business trust. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company's business plan focuses on originating and acquiring mortgages secured by multifamily properties, which may take the form of government insured first mortgages, insured mortgage pass-through certificates or insured mortgage backed securities, and uninsured mezzanine loans, construction loans, and bridge loans. Additionally, the Company has indirectly invested in subordinate commercial mortgage-backed securities and may invest in other real estate assets, including non-multifamily mortgages. The Company also issues guarantees of construction and permanent financing and makes standby loan commitments. The Company is governed by a board of trustees comprised of three independent trustees and two non-independent trustees who are affiliated with CharterMac, an American Stock Exchange listed company (AMEX:CHC). The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of CharterMac, to manage its day-to-day affairs. The Advisor has subcontracted with Related Capital Company ("Related"), a subsidiary of CharterMac, 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, tax, capital markets, asset monitoring, portfolio management, investor relations and public relations services. Effective November 17, 2003, CharterMac, an affiliate of the Advisor, acquired Related, which included the Advisor. This acquisition did not affect the Company's day-to-day operations or the services provided to the Company by the Advisor. Ownership of the Advisor was transferred to CharterMac, but management of the Advisor remained unchanged as the principals of Related who managed the Advisor became executive officers of CharterMac and remain executive officers of the Advisor. The consolidated financial statements include the accounts of the Company and three wholly-owned subsidiaries which it controls: AMAC Repo Seller, LLC, AMAC/FM Corporation ("AMAC/FM") and AMAC Credit Facility, LLC. 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. Effective October 2003, the Company dissolved AMAC/FM due to the assignment of all rights and obligations under the Fannie Mae loan program to PW Funding Inc., a subsidiary of CharterMac (see Note 11). AMAC/FM was formed to manage this program. 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, 2004 and the results of its operations and its cash flows. 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, 2003. The preparation of the consolidated financial statements in conformity with GAAP requires the Company 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. 7 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) There are no new accounting pronouncements pending adoption that would have a significant impact on the Company's consolidated financial statements. The adoption of the following pronouncements during 2003 did not have a significant impact on the consolidated financial statements: o FASB Statement No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections". o FASB Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". o FASB Interpretation No. 45, "Guarantors' Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". The Interpretation elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. o FASB Statement SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123". o FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46") as amended and interpreted by FIN 46(R). Such Interpretation addresses the consolidation of variable interest entities ("VIEs"), including special purpose entities ("SPFs"), that are not controlled through voting interests or in which the equity investors do not bear the residual economic risks and rewards. o FASB Statement SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". o FASB Statement SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity". Certain prior year amounts have been reclassified to conform to the current year presentation. 8 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 2 - Investments in Debt Securities-Available for Sale Information relating to Debt Securities owned by the Company as of March 31, 2004 is as follows: (Dollars in thousands)
Date Purchased/ Amortized Certificate Final Stated Cost at Name Number Payment Date Interest Rate March 31, 2004 - ------------------- ----------- --------------- ------------- --------------- GNMA CERTIFICATES Western Manor (1) 355540 7/27/94 7.125% $ 2,454 3/15/29 SunCoast Capital Group, Ltd. (1) G002412 6/23/97 7.000% 199 4/20/27 Elmhurst Village (1) 549391 6/28/01 7.745% 21,572 1/15/42 Reserve at Autumn Creek (1)(2) 448748 6/28/01 7.745% 1,484 1/15/42 Village at Marshfield (1) 519281 3/11/02 7.475% 21,339 1/15/42 Cantera Crossing (1) 532663 3/28/02 6.500% 6,402 6/1/29 Filmore Park (1) 536740 3/28/02 6.700% 1,431 10/15/42 Northbrooke (1) 548972 5/24/02 7.080% 14,002 8/1/43 Ellington Plaza (1) 585494 7/26/02 6.835% 31,645 6/1/44 Burlington (1) 595515 11/1/02 5.900% 6,789 4/15/31 FNMA DUS CERTIFICATES Cambridge (1) 385971 4/11/03 5.560% 3,653 3/1/33 Bayforest (1) 381974 4/21/03 7.430% 4,289 10/1/28 Coventry Place (1) 384920 5/9/03 6.480% 788 3/1/32 Rancho de Cieto (1) 385229 5/13/03 6.330% 2,598 9/1/17 Elmwood Gardens (1) 386113 5/15/03 5.350% 5,528 5/1/33 Interest Income Earned Applicable Unrealized to the Three Months Gain (Loss) at Balance at Ended Name March 31, 2004 March 31, 2004 March 31, 2004 - ------------------- -------------- -------------- ------------------- GNMA CERTIFICATES Western Manor (1) $ (33) $ 2,421 $ 48 SunCoast Capital Group, Ltd. (1) 13 212 4 Elmhurst Village (1) 1,031 22,603 418 Reserve at Autumn Creek (1)(2) -- 1,484 29 Village at Marshfield (1) 738 22,077 360 Cantera Crossing (1) 916 7,318 105 Filmore Park (1) 157 1,588 24 Northbrooke (1) 2,106 16,108 245 Ellington Plaza (1) 4,253 35,898 479 Burlington (1) 183 6,972 99 FNMA DUS CERTIFICATES Cambridge (1) 47 3,700 48 Bayforest (1) 57 4,346 63 Coventry Place (1) 7 795 12 Rancho de Cieto (1) (32) 2,566 32 Elmwood Gardens (1) 9 5,537 72
9 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited)
Date Purchased/ Amortized Certificate Final Stated Cost at Name Number Payment Date Interest Rate March 31, 2004 - ------------------- ----------- --------------- ------------- --------------- 30 West (1) 380751 5/27/03 6.080% 1,355 10/1/16 Jackson Park (1) 386139 5/30/03 5.150% 2,768 6/1/18 Courtwood (1) 386274 6/26/03 4.690% 1,759 6/1/33 Sultana (1) 386259 6/30/03 4.650% 4,090 6/1/23 Buena (1) 386273 6/30/03 4.825% 3,041 6/1/33 Allegro (1) 386324 6/30/03 5.380% 2,567 7/1/33 Village West (1) 386243 6/30/03 4.910% 784 6/1/21 Westwood/Monterey (1) 386421 9/15/03 5.090% 2,712 8/1/33 Euclid (1) 386446 9/15/03 5.310% 2,367 8/1/33 Edgewood (1) 386458 9/15/03 5.370% 2,351 9/1/33 --------------- Total $147,967 =============== Interest Income Earned Applicable Unrealized to the Three Months Gain (Loss) at Balance at Ended Name March 31, 2004 March 31, 2004 March 31, 2004 - ------------------- -------------- -------------- ------------------- 30 West (1) (64) 1,291 15 Jackson Park (1) 20 2,788 35 Courtwood (1) (95) 1,664 20 Sultana (1) (267) 3,823 47 Buena (1) (149) 2,892 36 Allegro (1) (27) 2,540 34 Village West (1) (26) 758 9 Westwood/Monterey (1) 172 2,884 37 Euclid (1) 146 2,513 33 Edgewood (1) 133 2,484 33 --------------------------------------------------------- Total $ 9,295 $ 157,262 $ 2,337 =========================================================
(1)These GNMA and FNMA DUS certificates are partially or wholly-pledged as collateral for borrowings under the repurchase facilities (see Note 7). (2)In January 2004, the Company received proceeds in the approximate amount of $14.5 million from HUD in relation to the paydown of the Reserve at Autumn Creek GNMA certificate. This paydown approximated 90% of the total outstanding balance of the underlying mortgage loan, which was the initial payment pursuant to the FHA insurance claim made by the Company when the borrower missed debt service payments. The remaining balance of approximately $1.5 million is expected to be received in the second quarter 2004, from the remaining amounts of the insurance and potentially the guarantee from GNMA. 10 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) The amortized cost, unrealized gain and fair value for the investment in debt securities at March 31, 2004 and December 31, 2003 were as follows:
(Dollars in thousands) March 31, December 31, 2004 2003 ------------ ------------ Amortized cost $147,967 $158,533 Net unrealized gain 9,295 8,727 -------- -------- Fair Value $157,262 $167,260 ======== ========
As of March 31, 2004, there were gross unrealized gains and losses of approximately $9,988,000 and approximately $693,000, respectively. As of December 31, 2003, there were gross unrealized gains and losses of approximately $10,040,000 and approximately $1,313,000, respectively. Due to the complexity of the GNMA and FNMA DUS structure and the uncertainty of future economic events 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 debt securities upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the coupon rate. The fair value and gross unrealized losses of the Company's debt securities aggregated by length of time that individual debt securities have been in a continuous unrealized loss position, at March 31, 2004, is summarized in the table below:
(Dollars in thousands) 12 Less than Months 12 Months or More Total ------------------------------------------------------------------ Fair value $17,955 -- $17,955 Gross unrealized loss $ 693 -- $ 693
Of the Company's portfolio of debt securities, eight are in an unrealized loss position at March 31, 2004. All of these securities have been in an unrealized position for less than one year. These unrealized losses are as a result of increases in interest rates subsequent to the acquisition of these securities. All of the debt securities are performing according to their terms. Accordingly, the Company has concluded that these impairments are only temporary. 11 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 3 - Notes Receivable The Company's notes receivable are collateralized by equity interests in the owner of the underlying property and consist of the following as of March 31, 2004:
(Dollars in thousands) Remaining Outstanding Committed Principal Unamortized Carrying Balance to Interest Property Location Balance Fees Amount Fund (1) Rate Maturity - ------------------------------------------------------------------------------------------------------------------------------------ Noble Towers (2)(3) Oakland, CA $ 3,581 $ 25 $ 3,556 $3,719 9.75% July 2005 Clark's Crossing (2) Laredo, TX 1,074 -- 1,074 -- 12.00% October 2004 Valley View (2) North Little Rock, AR 400 -- 400 -- 12.00% July 2004 Georgia King (2) Newark, NJ 1,495 7 1,488 5 11.50% May 2004 Reserve at Thornton (2) Thornton, CO 260 8 252 690 11.00% August 2006 Concord at Gessner Land Houston, TX 188 -- 188 -- 8.00% December 2008 Del Mar Villas (4) Dallas, TX 5,554 -- 5,554 -- LIBOR + 4.625%(6) October 2004 Mountain Valley (5) Dallas, TX 6,306 22 6,284 -- LIBOR + 4.750%(6) November 2004 Baywoods (5) Antioch, CA 10,990 32 10,958 -- LIBOR + 4.000%(6) March 2005 Oaks of Baytown (5) Baytown, TX 2,432 13 2,419 1,393 LIBOR + 4.500%(6) August 2005 Quay Point (5) Houston, TX 1,223 4 1,219 -- LIBOR + 3.600%(6) August 2005 ----------------------------------------------- Total $ 33,503 $111 $33,392 $5,807 ===============================================
(1) Funded on an as needed basis. (2) These loans are to limited partnerships that are affiliated with the Advisor (see Note 9). (3) Affiliate of the Advisor has provided a full guarantee on the payment of principal and interest due on this note. (4) Effective April 2004, this note is no longer pledged as collateral in connection with the warehouse facility with Fleet National Bank (see Note 8). (5) Pledged as collateral in connection with the warehouse facility with Fleet National Bank (see Note 8). (6) 30-day LIBOR at March 31, 2004 was 1.09%. 12 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 4 - Investments in Mortgage Loans Information relating to the Company's investments in mortgage loans as of March 31, 2004 is as follows:
(Dollars in thousands) Final Maturity Lifetime Property Description Date Call Date (A) Interest Rate Interest Cap (C) - -------- ----------- -------- ------------- -------------- ---------------- FIRST MORTGAGE LOANS: Sunset Gardens Eagle Pass, TX 60 Units 6/04 N/A 11.50% N/A Alexandrine (G) Detroit, MI 30 Units 12/03 N/A 11.00% N/A Desert View (H) Coolidge, AZ 45 Units 5/04 N/A 11.00% N/A Subtotal First Mortgage Loans MEZZANINE LOANS (I): Properties in Lease-Up The Hollows (J) Greenville, NC 184 Units 1/42 1/12 10.00% (B) 16% Elmhurst Village (K) (L) Oveido, FL 313 Units 1/42 3/19 10.00% (B) 16% Club at Brazos (J) (M) Rosenberg, TX 200 Units 5/43 4/13 10.00% (B) 14% Northbrooke (K) (L) Harris County, TX 240 Units 8/43 7/13 11.50% (B) 14% Subtotal Properties in Lease-Up Properties in Construction/Rehabilitation - ----------------------------------------- Del Mar Villas Dallas, TX 260 Units 10/04 N/A LIBOR + 4.625% (N) Mountain Valley Dallas, TX 312 Units 11/04 N/A LIBOR + 4.750% (N) Villas at Highpoint Lewisville, TX 304 Units 4/33 TBD 14.57% N/A Villas at Highpoint Lewisville, TX 304 units 4/33 TBD 23.76% N/A Share of Share of Excess Sale or Excess Operating Refinancing Periodic Property Cash Flows Proceeds Payment Terms Prior Liens - -------- ---------------- -------------- ------------- ----------- FIRST MORTGAGE LOANS: Sunset Gardens Eagle Pass, TX N/A N/A (F) -- Alexandrine (G) Detroit, MI N/A N/A (F) -- Desert View (H) Coolidge, AZ N/A N/A (F) -- Subtotal First Mortgage Loans MEZZANINE LOANS (I): Properties in Lease-Up The Hollows (J) Greenville, NC 50% 25% (F) $ 8,871 Elmhurst Village (K) (L) Oveido, FL 50% 25% (F) 21,572 Club at Brazos (J) (M) Rosenberg, TX 50% 25% (F) 14,326 Northbrooke (K) (L) Harris County, TX 50% 50% (F) 13,857 Subtotal Properties in Lease-Up Properties in Construction/Rehabilitation - ----------------------------------------- Del Mar Villas Dallas, TX N/A N/A (F) 5,554 Mountain Valley Dallas, TX N/A N/A (F) 6,306 Villas at Highpoint Lewisville, TX N/A N/A (F) 18,800 Villas at Highpoint Lewisville, TX N/A N/A (F) -- Interest Earned Applicable Outstanding Carrying to the Three Months Face Amount of Unamortized Amount of Ended Property Mortgages (D) Costs and Fees Mortgages (E) March 31, 2004 - -------- -------------- -------------- ------------- ------------------- FIRST MORTGAGE LOANS: Sunset Gardens Eagle Pass, TX $ 1,479 $ -- $ 1,479 $ 43 Alexandrine (G) Detroit, MI 342 -- 342 12 Desert View (H) Coolidge, AZ 881 -- 881 26 ------------------------------------------------------------------ Subtotal First Mortgage Loans 2,702 -- 2,702 81 ------------------------------------------------------------------ MEZZANINE LOANS (I): Properties in Lease-Up The Hollows (J) Greenville, NC 1,549 (129) 1,420 43 Elmhurst Village (K) (L) Oveido, FL 2,875 (382) 2,492 80 Club at Brazos (J) (M) Rosenberg, TX 1,962 (75) 1,887 49 Northbrooke (K) (L) Harris County, TX 1,500 (132) 1,368 45 ------------------------------------------------------------------ Subtotal Properties in Lease-Up 7,885 (718) 7,167 217 ------------------------------------------------------------------ Properties in Construction/Rehabilitation - ----------------------------------------- Del Mar Villas Dallas, TX 765 -- 765 11 Mountain Valley Dallas, TX 776 -- 776 11 Villas at Highpoint Lewisville, TX 2,599 (144) 2,455 98 Villas at Highpoint Lewisville, TX 68 (39) 29 -- ------------------------------------------------------------------ Subtotal Properties in Construction/Rehabilitation 4,208 (183) 4,025 120 ------------------------------------------------------------------ Subtotal Mezzanine Loans 12,093 (901) 11,192 337 ------------------------------------------------------------------ Total Mortgage Loans $14,795 $ (901) $13,894 $ 418 ==================================================================
13 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) (A) Loans are subject to mandatory prepayment at the option of the Company ten years after construction completion, with one year's notice. Loans with a call date of "TBD" are still under construction. (B) Interest on the mezzanine loans is based on a fixed percentage of the unpaid principal balance of the related first mortgage loans. The amount shown is the approximate effective rate earned on the balance of the mezzanine loan. The mezzanine loans also provide for payments of additional interest based on a percentage of cash flow remaining after debt service and participation in sale or refinancing proceeds and certain provisions that cap the Company's total yield, including additional interest and participations, over the term of the loan. (C) Lifetime interest cap represents the maximum annual return, including interest, fees and participations, that can be earned by the Company over the life of the mezzanine loan, computed as a percentage of the balance of the first mortgage loan plus the mezzanine loan. (D) As of March 31, 2004, all interest payments on the mortgage loans are current, except as noted. (E) Carrying amounts of the loans are net of unamortized origination costs and fees and loan discounts. (F) Interest only payments are due monthly, with loan balance due at maturity. (G) The first mortgage loan, which matured in December 2003, was paid off in April 2004. (H) Loan purchased in April 2003 in connection with the performance under a guarantee made by the Company. (I) The principal balance of the mezzanine loans is secured by the partnership interests of the entity that owns the underlying property and a third mortgage deed of trust. Interest payments on the mezzanine loans are secured by a second mortgage deed of trust and are guaranteed for the first 36 months after construction completion by an entity related to the general partner of the entity that owns the underlying property. (J) The Company does not have an interest in the first lien position relating to this mezzanine loan. (K) The Company has an interest in the first lien position relating to this mezzanine loan. (L) The first mortgage loans related to these properties were converted from participations in FHA loans to ownership of the GNMA certificates and are held by the Company - see Note 2. (M) The funding of this mezzanine loan is based on property level operational achievements. (N) Interest cap on these loans is the maximum rate permitted by law. 14 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 5 - Real Estate Owned The Company foreclosed on certain mortgage loans and notes receivable during 2003. The Company's real estate owned at March 31, 2004 consisted of the following:
(Dollars in thousands) Number of Carrying Units Location Value ----------- ------------- ----------- Real estate owned - held and used - --------------------------------- Plaza at San Jacinto (1) (net of accumulated depreciation) 132 La Porte, TX $ 7,602 === ======== Real estate owned - subject to sales contracts - ---------------------------------------------- Concord at Little York (2) 276 Houston, TX $16,423 Concord at Gessner (2) 288 Houston, TX 17,447 Concord at Gulfgate (2) 288 Houston, TX 18,242 --- -------- Total real estate owned - subject to sales contracts 852 $ 52,112 === ======== Real estate owned -- held for sale - ---------------------------------- Reserve at Autumn Creek (3) 212 Friendswood, TX $ 17,924 === ========
(1) On March 7, 2003, the Company exercised its rights under the subordinated promissory note and other documents to take possession of the real estate collateral of the Plaza at San Jacinto. On May 6, 2003, the Company acquired the real estate at a foreclosure auction. The Company classified its investment in this property as real estate owned - held for sale. However, the Company has been focused on increasing the occupancy and the operating income generated from the property. The Company has reclassified the property as real estate owned - held and used on March 7, 2004 and has begun to depreciate the property. The Company has also recaptured depreciation for the period the property had been classified as held for sale. Depreciation on the property at March 31, 2004 totaled approximately $249,000 and is recorded on the consolidated statement of income. As operations begin to improve, the property will be marketed for sale. Operations of the property at March 31, 2004, have also been recorded on the consolidated statement of income. (2) The three properties underlying these notes receivable stopped making interest payments in May 2003. The Company subsequently exercised its rights under the subordinated promissory notes and other documents and took possession of all three properties. The Company purchased the first mortgages and acquired the real estate at foreclosure auctions. The Company subsequently sold all three properties to a qualified 501 (c)(3) entity during 2003. Due to the fact that the Company provided 100% financing, these properties continue to be carried as real estate owned - subject to sales contracts. Income from operations of all three properties at March 31, 2004, totaled approximately $1.1 million and is recorded as other income on the consolidated statement of income. (3) Certain required debt service payments have been missed, causing the Reserve at Autumn Creek mezzanine loan to be in default. During October 2003, the Company exercised its rights under the subordinated promissory note and other documents to take possession of the real estate collateral of the Reserve at Autumn Creek property, subject to the first mortgage loan. The first mortgage loan, in the approximate amount of $15,993,000, bears interest at a fixed rate of 8% per annum and matures January 2042. The Company has reclassified its investment in the Reserve at Autumn Creek to real estate owned - held for sale on the consolidated balance sheet. The Company is currently focused on 15 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) increasing the occupancy and the operating income generated from the property. As operations begin to improve, the property will be marketed for sale. NOTE 6 - Taxable Revenue Bonds During October 2003, the Company purchased nine taxable revenue bonds at a discount (99% of par) from CharterMac in the amount of $7.6 million. The nine taxable revenue bonds, each of which is secured by a first mortgage position held by CharterMac on a multifamily property, carry a weighted average interest rate of 8.69%. The price paid was determined by an independent third party valuation of the taxable revenue bonds. This transaction was approved by the Company's Board of Trustees. The Company's estimate of each revenue bond's fair value was equal to its amortized cost at March 31, 2004. NOTE 7 - Repurchase Facilities The Company had a repurchase facility with Nomura Securities International Inc. ("Nomura"). In January 2004, Nomura notified the Company that it intended to terminate the repurchase facility. In February 2004, the Company executed repurchase agreements with Greenwich Capital, Bear Stearns and RBC Capital Markets ("the Counterparties"), and in the first week of March 2004, the Company executed multiple transactions whereby the repurchase transactions outstanding with Nomura were paid off from the funds of three new transactions with the Counterparties. The terms of the Nomura facility allowed the Company to borrow up to 97% of the fair market value of GNMA and FNMA DUS certificates owned by the Company. Interest on borrowings were at a 30-day LIBOR plus 0.02%. As of December 31, 2003, the amounts outstanding under this facility were $149.5 million, and weighted average interest rates were 1.56%. Deferred costs relating to this facility have been fully amortized. The terms of the Greenwich Capital, Bear Stearns and RBC Capital Markets repurchase agreements offer advance rates between 94% and 97% of the fair market value of GNMA and FNMA DUS certificates, determined by the Counterparties and borrowing rates between 30-day LIBOR minus 3 basis points and 30-day LIBOR plus 10 basis points, which may change at the discretion of the Counterparties. The borrowings are subject to 30-day settlement terms. As of March 31, 2004, amounts outstanding under these repurchase facilities were $18.8, $19.1 and $107.9 million, respectively, at interest rates of 1.07%, 1.10% and 1.20%, respectively. A significant risk associated with these facilities is that the market value of the securities sold by the Company may decline and that the Company will be required to post additional collateral. See Note 2 for securities posted as collateral in connection with these facilities. NOTE 8- Warehouse Facility In October 2002, the Company entered into a mortgage warehouse line of credit with Fleet National Bank (the "Fleet Warehouse Facility") in the amount of up to $40 million. Under the terms of the Fleet Warehouse Facility, Fleet will advance up to 83% of the total loan package, to be used to fund notes receivable, which the Company will make to its customers for the acquisition/refinancing and minor renovation of existing, lender-approved multifamily properties. This facility, which matures April 2006, bears interest at a rate of 30-, 60-, 90- or 180-day LIBOR + 200 basis points, or prime, at the discretion of the Company, payable monthly on the total amounts advanced. Principal is due upon the earlier of refinance or sale of the underlying project or upon maturity. The Company pays a fee of 12.5 basis points, paid quarterly, on any unused portion of the facility. From time to time, the Company will use this facility to finance real estate owned. As of March 31, 2004 and December 31, 2003, the Company had approximately $35.0 and $34.9 million, respectively, in borrowings outstanding under this program. As of April 2004, the Company's borrowing period under this facility has expired. 16 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) During April 2004, the Company repaid the outstanding balance of the Del Mar Villas loan from Fleet in the approximate amount of $4.6 million. The Del Mar Villas note receivable is no longer pledged as collateral in connection with this warehouse facility. NOTE 9 - Related Party Transactions The costs incurred to related parties for the three months ended March 31, 2004 and 2003 were as follows:
Three Months Ended March 31, --------------------- 2004 2003 --------------------- Expense reimbursement $169 $147 Asset management fees 313 249 Incentive fee -- 47* ---- ---- $482 $443 ==== ====
* During September 2003, the Company and its Advisor agreed to amend its management agreement regarding the payment of an incentive management fee to the Advisor. Under the terms of the amended agreement, there is no change to the calculation of the incentive management fee. However, the incentive management fee is only earned by the Advisor if the Company attains $1.60 in GAAP earnings per share for the calendar year. Based on the amendment to the agreement and the Company's 2003 earnings per share of $1.52, the Company did not incur an incentive management fee in 2003. The $47,000 accrual made in the first quarter of 2003 was reversed out in the third quarter of 2003. Some of the Company's notes receivable (see Note 3), the stabilization loan guarantees and the standby loan commitments described in Note 11 are to limited partnerships in which the general partner is an unaffiliated third party and the limited partner is itself a limited partnership in which an affiliate of the Advisor is the general partner. The Noble Towers note receivable is guaranteed by an affiliate of the Advisor (see Note 3). The Company has indemnified an affiliate of the Advisor (see Note 11). NOTE 10 - Earnings Per Share Basic net income per share in the amount $.40 and $.50 for the three months ended March 31, 2004 and 2003, respectively, equals net income for the periods ($3,324,469 and $3,192,151, respectively), divided by the weighted average number of shares outstanding, which were 8,338,180 and 6,363,630, respectively. Diluted net income per share is calculated using the weighted average number of shares outstanding during the period plus the additional dilutive effect of common share equivalents. The dilutive effect of outstanding share options is calculated using the treasury stock method. Diluted net income per share in the amount of $.40 for the three months ended March 31, 2004 equals net income for the period ($3,324,469), divided by the weighted average number of shares outstanding for the period (8,362,247). Diluted net income per share equaled basic net income per share. 17 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 11 - Commitments and Contingencies Upon taking possession of the real estate collateral supporting the Concord at Gulfgate loan, the Company has been named in a lawsuit filed by the limited partners of partnership that owned the property. Subsequently, the Company has filed a countersuit against the limited partners seeking to recover unpaid taxes and misappropriated property receipts. The Company is currently unable to determine the possible outcome of the litigation, but does not believe it will have a material impact on the consolidated financial statements. In September 2003, the Company entered into a letter of agreement with PW Funding Inc. ("PWF"), a subsidiary of CharterMac, each of which are affiliates of the Advisor, under which the Company transferred and assigned all of its rights and obligations to two loans it originated to PWF. There was no payment made or received by the Company in connection with this transfer. CharterMac has agreed to guarantee PWF's performance with regard to these two loans, which in turn, allowed for the release of approximately $8.3 million in collateral pledged by the Company to secure its obligations under the loan program. In turn, the Company indemnified PWF against any losses to Fannie Mae on the loans and indemnified CharterMac against any obligation under its guaranty. The maximum aggregate exposure to the Company under the agreement is approximately $7.5 million. However, the Company believes that it will not be called upon to fund any of these guarantees and, accordingly, that the fair value of the guarantees is insignificant. 18 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) Standby and Forward Loan and GNMA Commitments - --------------------------------------------- The Company has issued the following standby and forward bridge and permanent loan commitments for the purpose of constructing/rehabilitating certain multifamily apartment complexes in various locations.
(Dollars in thousands) STANDBY AND FORWARD BRIDGE LOAN COMMITMENTS - --------------------------------------- MAXIMUM AMOUNT OF COMMITMENTS ------------------------------------------------- ISSUE DATE PROJECT LOCATION NO. OF APT. UNITS LESS THAN 1 YEAR 1-3 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Feb-03 Noble Towers Oakland, CA 195 $ -- $ 3,719 (1) Aug-03 Oaks of Baytown Baytown, TX 248 1,393 (2) -- Nov-03 Georgia King Newark, NJ 422 5 -- Dec-03 Reserve at Thornton Thornton, CO 216 690 (2) -- ---------------------------------------------------------------------- TOTAL STANDBY AND FORWARD BRIDGE LOAN COMMITMENTS 1,081 $2,088 $ 3,719 ====================================================================== STANDBY AND FORWARD MEZZANINE LOAN COMMITMENTS ---------------------------------------- MAXIMUM AMOUNT OF COMMITMENTS ------------------------------------------------- ISSUE DATE PROJECT LOCATION NO. OF APT. UNITS LESS THAN 1 YEAR 1-3 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ April-03 Villas at Highpoint Lewisville, TX 304 $ -- $ 625 ---------------------------------------------------------------------- TOTAL STANDBY AND FORWARD MEZZANINE LOAN COMMITMENTS 304 $ -- $ 625 ======================================================================
19 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited)
FORWARD GNMA COMMITMENTS - ------------------------ MAXIMUM AMOUNT OF COMMITMENTS ----------------------------------------------- DATE PURCHASED PROJECT LOCATION LESS THAN 1 YEAR 1-3 YEARS - ---------------------------------------------------------------------------------------------------------- May-02 Ellington Plaza Washington, DC $ 6,079 (2) $ -- ----------------------------------------------- TOTAL FORWARD GNMA COMMITMENTS $ 6,079 -- ----------------------------------------------- TOTAL STANDBY AND FORWARD LOAN AND GNMA COMMITMENTS $ 8,167 $ 4,344 ===============================================
(1) Fundings will be on an as needed basis to complete rehabilitation of the property. (2) Funding has already begun. Amount represents remaining commitment expected to be funded. 20 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) Stabilization Loan Guarantees - ----------------------------- During 2002, the Company guaranteed the following loans in relation to the construction of affordable multifamily apartment complexes in various locations. The construction loan guarantees will provide credit support for the following projects after construction completion, through the date on which the borrower obtains permanent financing. During October 2002, the Company entered into an agreement with Wachovia Bank, National Association ("Wachovia") to provide stabilization guarantees for new construction of multifamily properties under the Low Income Housing Tax Credit ("LIHTC") program. Wachovia already provides construction and stabilization guarantees to Fannie Mae, for loans Wachovia originates under the Fannie Mae LIHTC forward commitment loan program, but only for loans within regions of the country Wachovia has designated to be within its territory. For loans outside Wachovia's territory, the Company has agreed to issue a stabilization guarantee, for the benefit of Wachovia. The Company is guarantying that properties which have completed construction will stabilize and the associated construction loans will convert to permanent Fannie Mae loans. The Company receives origination and guarantee fees from the developers for providing the guarantees. If the properties do not stabilize with enough Net Operating Income for Fannie Mae to fully fund its commitment for a permanent loan, the Company may be required to purchase the construction loan from Wachovia or to fund the difference between the construction loan amount and the reduced Fannie Mae permanent loan amount.
(Dollars in thousands) MAXIMUM AMOUNT OF GUARANTEE LOAN ADMINISTRATION FEE (1) STABILIZATION LESS THAN (ANNUAL GUARANTEE FEE DATE CLOSED PROJECT LOCATION NO. OF UNITS 1 YEAR 1-3 YEARS PERCENTAGE) (2) - ------------------------------------------------------------------------------------------------------------------------------------ Jul-02 Clark's Crossing Laredo, TX 160 $ 4,790 $ -- 0.500% 0.625% Sep-02 Creekside Apts. Colorado Springs, CO 144 7,500 -- 0.375% -- Oct-02 Village at Meadowbend (3) Temple, TX 138 -- 3,675 0.500% 0.750% Nov-02 Mapleview Apartments (3) Saginaw, MI 104 -- 3,240 0.625% 0.247% --------------------------------------------------------------------- Total Stabilization Loan Guarantees 546 $12,290 $ 6,915 -- -- =====================================================================
(1) Loan Administration Fee is paid on quarterly basis during the guarantee period. (2) Stabilization Guarantee Fee is an up-front fee - paid at closing and amortized over the guarantee period. (3) Guarantee was made under Wachovia Bank, National Association Guarantee Agreement. For each of these guarantees, and for the guarantees issued under the Fannie Mae program discussed in the second paragraph of this Note 11, the Company monitors the status of the underlying properties and evaluates its exposure under the guarantees. To date, the Company has concluded that no accrual for probable losses is required under SFAS 5. 21 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2004 (Unaudited) NOTE 12 - Financial Risk Management and Derivatives In March 2003, the Company entered into a five-year interest rate swap in order to reduce the Company's exposure to any possible increases in the floating interest rate on its Repurchase Facilities (Note 7). Under the interest rate swap agreement, the Company is required to pay Fleet National Bank (the "Counterparty") a fixed rate of 3.48% on a notional amount of $30 million. In return, the Counterparty will pay the Company a floating rate equivalent to 30-day LIBOR. The average 30-day LIBOR rate for the three months ended March 31, 2004, was 1.09%. A possible risk of such swap agreements is the possible inability of the Counterparty to meet the terms of the contracts with the Company; however, there is no current indication of such an inability. The Company accounts for this swap under Statement of Financial Accounting Standards No. 133, as amended and interpreted. Accordingly, the Company has documented its established policy for risk management and its objectives and strategies for the use of derivative instruments to potentially mitigate such risks. The Company evaluates its interest rate risk on an ongoing basis to determine whether or not it would be advantageous to engage in any further hedging transactions. At inception, the Company designated the interest rate swap as cash flow hedges on the variable interest payments on its floating rate financing. Accordingly, the interest rate swap will be recorded at the fair market value at the end of each accounting period, with changes in the market value being recorded in other comprehensive income to the extent that the hedge is effective in achieving offsetting cash flows. Amounts accumulated in other comprehensive income are reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The Company assesses, both at the inception of the hedge and on an ongoing basis whether the swap agreement is highly effective in offsetting changes in the cash flows of the hedged financing. Any ineffectiveness in the hedging relationship is immediately recorded in earnings. The Company's assessment is that this swap will be highly effective. At March 31, 2004, this interest rate swap was recorded as a liability with a fair market value of approximately $871,248, included in interest rate derivatives on the consolidated balance sheet. NOTE 13 - Subsequent Events During April 2004, the Alexandrine first mortgage was paid down. The Company received total proceeds of $342,000. During April 2004, the Company repaid the outstanding balance of the Del Mar Villas loan from Fleet in the approximate amount of $4.6 million. In May 2004, a distribution of $3,335,272, ($0.40 per share), which was declared in March 2004, will be paid to shareholders for the quarter ended March 31, 2004. 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview - -------- The Company is a real estate investment trust specializing in multifamily housing finance. The Company originates and acquires mezzanine loans, bridge loans, and government-insured first mortgages secured by multifamily housing properties throughout the United States. The Company seeks to increase the return on its asset base by investing in higher yielding assets while balancing risk by maintaining a portion of its investments in government-insured or agency-guaranteed loans. The Company primarily generates revenue from the collection of interest income from mezzanine loans, bridge loans, and debt securities. The Company also earns fees on standby loan commitments and stabilization guarantees that it makes. The Company is managed by an affiliate of CharterMac, which provides services including, among other things, acquisition, financial, accounting, tax, capital markets, asset monitoring, portfolio management, investor relations, and public relation services. A significant amount of the expenditures made by the Company are in the form of fees paid to the Advisor for these services rendered. The Company also incurs costs relating to interest expense on debt. Results of Operations - --------------------- 2003 was a challenging year for the Company as several of its loans went into default and the Company took aggressive steps to protect its investments. In certain instances this required the Company to invest additional capital to acquire senior mortgage positions and subsequently foreclose its position to acquire the real estate securing the loans. The Company believes that to date it has been successful in protecting its investments and over time it will recover all its invested capital. As a result of the foreclosures, the Company now has a significant amount of real estate owned on its balance sheet. The Company has been focused on, and has achieved, in some cases, increasing the occupancy level and operating income of the properties to projected stabilization levels. During the first quarter of 2004, the Company has experienced increasing yields on several of its foreclosed assets. As property level operations continue to improve, the Company will seek to sell or refinance the properties with third parties such that the Company can redeploy the capital invested in higher yielding investments. Interest income from debt securities increased approximately $465,000 for the three months ended March 31, 2004 as compared to 2003 primarily due to the purchase of fifteen FNMA DUS certificates during 2003 at an average interest rate yield of 5.49%. Interest income from mortgage loans decreased approximately $989,000 for the three months ended March 31, 2004 as compared to 2003 primarily due to the receipt of additional interest and prepayment penalties from the repayment of the Stonybrook II first mortgage and mezzanine loan in 2003. Interest income from notes receivable decreased approximately $251,000 for the three months ended March 31, 2004 as compared to 2003 primarily due to the default of required debt service payments from Concord at Gessner, Concord at Little York and Concord at Gulfgate notes. Interest income from revenue bonds in the approximate amount of $168,000, relating to the purchase of nine taxable revenue bonds in October 2003, was recorded for three months ended March 31, 2004. The nine taxable revenue bonds carry a weighted average interest rate of 8.69%. Rental income of approximately $263,000 was recorded for the three months ended March 31, 2004 due to the reclassification of Plaza San Jacinto as real estate owned - held and used. Other income increased approximately $1,101,000 for the three months ended March 31, 2004 as compared to 2003 due to the increase in net operating income picked up from the operations of foreclosed properties. Interest expense increased approximately $485,000 for the three months ended March 31, 2004 as compared to 2003 due to the increased borrowings on the Fleet Warehouse Facility (approximately $202,000), additional borrowings under the repurchase facilities (approximately $112,000), as well as the addition of an interest rate swap agreement (approximately $172,000), put into place in April 2003 to mitigate the impact of interest rate fluctuations on the Company's cash flows and earnings. 23 Property operations of approximately $239,000 were recorded for the three months ended March 31, 2004 due to the reclassification of Plaza San Jacinto as real estate owned - held and used. Depreciation expense of approximately $249,000 was recorded for the three months ended March 31, 2004 relating to the reclassification of the Plaza at San Jacinto property from real estate-held for sale to real estate owned - held and used. Depreciation was captured for the first quarter of 2004, as well as for the full year that the property was classified as held for sale. A loss on the repayment of debt securities in the amount of approximately $391,000 was recorded for the three months ended March 31, 2003, relating to the write-off of a purchase premium due to the repayment of one GNMA certificate. Funds from Operations - --------------------- Funds from operations ("FFO"), represents net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization and including funds from operations for unconsolidated joint ventures calculated on the same basis. FFO is calculated in accordance with the National Association of Real Estate Investment Trusts ("NAREIT") definition. FFO does not represent cash generated from operating activities in accordance with GAAP, which is disclosed in the consolidated statements of cash flows included in the consolidated financial statements for the applicable periods, and is not necessarily indicative of cash available to fund cash needs. There are no material legal or functional restrictions on the use of FFO. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. Management considers FFO a supplemental measure of operating performance, and, along with cash flow from operating activities, financing activities, and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, make capital expenditures, and to fund other cash needs. FFO, as calculated in accordance with the NAREIT definition, for the three months ended March 31, 2004 is summarized in the following table:
Three Months Ended (Dollars in thousands) March 31, 2004 ------------------ Net income $ 3,325 Add back: depreciation of real property 249 ----------- FFO $ 3,574 =========== Cash flows from: Operating activities $ 3,123 =========== Investing activities $ 12,685 =========== Financing activities $ (6,975) =========== Weighted average shares outstanding: Basic 8,338,180 =========== Diluted 8,362,247 ===========
During the three months ended March 31, 2003, the Company did not take depreciation expense on any of its real estate owned. Therefore, FFO for the three months ended March 31, 2003 would be equivalent to net income for the period. Liquidity and Capital Resources - ------------------------------- At March 31, 2004, the Company had total assets of approximately $323.1 million. At March 31, 2004, the Company owned approximately $157.3 million in GNMA and FNMA certificates, or representing approximately 48.7% of the Company's assets. The Company generally seeks to maintain at least 40% of its investments in government-insured or guaranteed investments. At March 31, 2004, the Company owned approximately $11.2 million in mezzanine loans, approximately $2.7 million in mortgage loans, and approximately $33.4 24 million in total bridge loans (approximately $26.4 million in floating-rate bridge loans and approximately $7.0 million in fixed-rate bridge loans) funded in connection with the development of multifamily properties. The Company also owned approximately $77.6 million in real estate that was foreclosed upon, $7.6 million in taxable revenue bonds and an indirect investment in commercial mortgage backed securities through the Company's $20.2 million preferred equity interest in ARCap. During the three months ended March 31, 2004, cash and cash equivalents increased approximately $8,833,000 primarily due to principal repayments of debt securities of $14,742,000, proceeds from repurchase facilities payable of $6,060,000 and repayment of notes receivable of $2,703,000, offset by repayment of repurchase facilities payable of $9,795,000 and investment in debt securities of $4,199,000. The Company finances the acquisition of its assets primarily through borrowing at short-term rates using demand repurchase agreements and the mortgage warehouse line of credit (see below). Under the Company's declaration of trust, the Company may incur permanent indebtedness of up to 50% of total market value calculated at the time the debt is incurred. Permanent indebtedness and working capital indebtedness may not, in the aggregate, exceed 100% of the Company's total market value. On April 23, 2003, the Company completed a public offering of 1,955,000 common shares at a price of $15.00 per share, resulting in proceeds, net of underwriters discount and expenses, of approximately $27.5 million. The net proceeds from the public offering were used to fund investments. The Company has the capacity to raise an additional approximate amount of $170 million in either common or preferred shares remaining under a shelf registration statement filed with the Securities and Exchange Commission during 2002. If market conditions warrant, the Company may seek to raise additional funds up to this amount for investment through further common and/or preferred offerings in the future, although the timing and amount of such offerings cannot be determined at this time. The Company had a repurchase facility with Nomura Securities International Inc. ("Nomura"). In January 2004, Nomura notified the Company that it intended to terminate the repurchase facility. In February 2004, the Company executed repurchase agreements with Greenwich Capital, Bear Stearns and RBC Capital Markets ("the Counterparties"), and in the first week of March 2004, the Company executed multiple transactions whereby the repurchase transactions outstanding with Nomura were paid off from the funds of three new transactions with the Counterparties. The terms of the Nomura facility allowed the Company to borrow up to 97% of the fair market value of GNMA and FNMA DUS certificates owned by the Company. Interest on borrowings were at a 30-day LIBOR plus 0.02%. As of December 31, 2003, the amounts outstanding under this facility were $149.5 million, and weighted average interest rates were 1.56%. Deferred costs relating to this facility have been fully amortized. The terms of the Greenwich Capital, Bear Stearns and RBC Capital Markets repurchase agreements offer advance rates between 94% and 97% of the fair market value of GNMA and FNMA DUS certificates, determined by the Counterparties and borrowing rates between 30-day LIBOR minus 3 basis points and 30-day LIBOR plus 10 basis points, which may change at the discretion of the Counterparties. The borrowings are subject to 30-day settlement terms. As of March 31, 2004, amounts outstanding under these repurchase facilities were $18.8, $19.1 and $107.9 million, respectively, at interest rates of 1.07%, 1.10% and 1.20%, respectively. Of the Company's portfolio of debt securities, eight are in an unrealized loss position, totaling approximately $693,000, at March 31, 2004. All of these securities have been in an unrealized position for less than one year. These unrealized losses are as a result of increases in interest rates subsequent to the acquisition of these securities. All of the debt securities are performing according to their terms. Accordingly, the Company has concluded that these impairments are only temporary. In October 2002, the Company entered into the Fleet Warehouse Facility with Fleet National Bank in the amount of $40 million. Advances under the warehouse facility, up to 83% of the total loan package, will be used to fund notes receivable, which the Company will make to its customers for the acquisition/refinancing and minor renovation of existing, lender-approved multifamily properties located in stable sub-markets. The warehouse facility, which matures April 2006, bears an interest rate of 30-, 60-, 90- or 180-day LIBOR + 200 basis points, at the discretion of the Company, payable monthly on advances. Principal is due upon the earlier of refinance or sale of the underlying property or upon maturity. The Company pays a fee of 12.5 basis points, paid quarterly, on any unused portion of the facility. From time to time, the Company will use this facility to finance real estate owned. As of March 31, 2004 and December 31, 2003, the Company had approximately $35.0 25 million and $34.9 million, respectively, in loans outstanding under this program. As of April 2004, the Company's borrowing period under this facility has expired. In order to qualify as a REIT under the Code, as amended, 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, as well as cash generated from additional borrowings from the new repurchase facilities, 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. In May 2004, a distribution of $3,335,272 ($.40 per share), which was declared in March 2004, will be paid to the shareholders for the quarter ended March 31, 2004. For a summary of the Company's commitments and contingencies at March 31, 2004, see Note 11 to the consolidated financial statements. 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. Distributions - ------------- Of the total distributions of $3,335,272 and $2,545,452 for the three months ended March 31, 2004 and 2003, respectively, $10,803 (.32%) represented a return of capital for the three months ended March 31, 2004 and there was no return of capital for the three months ended March 31, 2003 determined in accordance with GAAP. As of March 31, 2004, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with GAAP, totaling $15,148,583. 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. Critical Accounting Policies - ---------------------------- The Company's critical accounting policies are described in its Form 10-K for the year ended December 31, 2003. These critical accounting policies have not changed during 2004, but the Company has entered into certain transactions which involve new critical accounting policies as described in the following paragraphs. The Company has reclassified one of its properties out of real estate owned - held for sale to real estate owned - held and used due to the fact that the Company is currently focused on increasing the occupancy and operating income generated from the property prior to marketing the property for sale. As a result, the Company has begun depreciating the property, as well as catching up with depreciation for the period that it was classified as held for sale. It is the Company's policy to reclassify any held for sale property after one year of attempting to market the property for sale. Depreciation will be taken for the full year that the property was classified as held for sale and any current period going forward until the asset is sold. Buildings are depreciated on a straightline basis over their estimated useful lives, generally 40 years. Any furniture and fixtures are depreciated using a 7 year useful life. Off-Balance Sheet Arrangements - ------------------------------ The Company has no unconsolidated subsidiaries, special purpose off-balance sheet financing entities, or other off-balance sheet arrangements. 26 Contractual Obligations - ----------------------- In conducting business, the Company enters into various contractual obligations. Detail of these obligations, including expected settlement periods, is contained below.
Payments Due by Period (Dollars in thousands) Less than More than Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years -------- --------- ----------- ----------- ---------- Debt: Lines of credit: Repurchase facilities $145,794 $145,794 $ -- $ -- $ -- Fleet warehouse facility 35,030 23,853 11,177 -- -- Mortgage loan 15,993 -- -- -- 15,993 Contingent Liabilities: Standby and forward bridge loan commitments 5,807 2,088 3,719 -- -- Standby and forward mezza- nine loan commitments 625 -- 625 -- -- Forward GNMA commit- ments 6,079 6,079 -- -- -- Stabilization loan guarantees 19,205 12,290 6,915 -- -- -------- -------- -------- ------- -------- Total $228,533 $190,104 $ 22,436 $ -- $ 15,993 ======== ======== ======== ======= ========
(1) Represents contractual maturity of mortgage loan on real estate owned. However, it is the Company's intention to find a buyer who will assume this obligation in the near term. 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 3. 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. INTEREST RATE RISK Interest rate fluctuations can adversely affect the Company's income and value of its common shares in many ways and present a variety of risks, including the risk of mismatch between asset yields and borrowing rates. The Company's operating results will depend in large part on differences between the income from its assets (net of credit losses) and its borrowing costs. Most of the Company's assets generate fixed returns and have terms in excess of five years. The Company funds the origination and acquisition of a significant portion of these assets with borrowings which have interest rates that reset relatively rapidly, such as monthly or quarterly. In most cases, the income from assets will respond more slowly to interest rate fluctuations than the cost of 27 borrowings, creating a mismatch between asset yields and borrowing rates. Consequently, changes in interest rates, particularly short-term interest rates, may influence the Company's net income. The Company bears interest at rates that fluctuate with LIBOR. Various financial vehicles exist which would allow Company management to mitigate the impact of interest rate fluctuations on the Company's cash flows and earnings. During March 2003, upon management's analysis of the interest rate environment and the costs and risks of such strategies, the Company entered into an interest rate swap in order to hedge against increases in the floating interest rate on its Repurchase Facilities. On March 25, 2003, the Company entered into a five-year interest rate swap agreement with Fleet National Bank ("Fleet") whereby the Company has agreed to pay Fleet a fixed 3.48% on a notional amount of $30 million. In return, Fleet will pay the Company a floating rate equivalent to the 30-day LIBOR rate on the same notional amount. This effectively fixes $30 million of the Company's secured borrowings at 3.48%, protecting the Company in the event the 30-day LIBOR rate rises. A possible risk of such swap agreements is the possible inability of Fleet to meet the terms of the contracts with the Company; however, there is no current indication of such an inability. Based on the $150.8 million unhedged portion of $180.8 million of borrowings outstanding under these facilities at March 31, 2004, a 1% change in LIBOR would impact the Company's annual net income and cash flows by approximately $1.5 million. However, due to the fact that the interest income from loans made by the Company under the Fleet Warehouse Facility are also based on LIBOR, a 1% increase in LIBOR would increase the Company's annual net income and cash flows from such loans by approximately $210,000. Increases in these rates will decrease the net income and market value of the Company's net assets. Interest rate fluctuations that result in interest expense exceeding interest income would result in operating losses. The value of the Company's assets may be affected by prepayment rates on investments. Prepayment rates are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond the Company's control, and consequently, such prepayment rates cannot be predicted with certainty. When the Company originates mortgage loans, it expects that such mortgage loans will have a measure of protection from prepayment in the form of prepayment lock-out periods or prepayment penalties. However, such protection may not be available with respect to investments which the Company acquires, but does not originate. In periods of declining mortgage interest rates, prepayments on mortgages generally increase. If general interest rates decline as well, the proceeds of such prepayments received during such periods are likely to be reinvested by the Company in assets yielding less than the yields on the investments that were prepaid. In addition, the market value of mortgage investments may, because of the risk of prepayment, benefit less from declining interest rates than from other fixed-income securities. Conversely, in periods of rising interest rates, prepayments on mortgages generally decrease, in which case the Company would not have the prepayment proceeds available to invest in assets with higher yields. Under certain interest rate and prepayment scenarios the Company may fail to recoup fully its cost of acquisition of certain investments. REAL ESTATE RISK Multifamily and commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as an oversupply of housing, retail, industrial, office or other commercial space); changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; and increases in operating expenses (such as energy costs). In the event net operating income decreases, a borrower may have difficulty paying the Company's mortgage loan, which could result in losses to the Company. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the Company's mortgage loans, which could also cause the Company to suffer losses. RISK IN OWNING SUBORDINATED INTERESTS The Company has invested indirectly in subordinated CMBS through its ownership of a $20.2 million preferred membership interest in ARCap. Subordinated CMBS of the type in which ARCap invests include "first loss" and non-investment grade subordinated interests. A first loss security is the most subordinate class in a structure and accordingly is the first to bear the loss upon a default on restructuring or liquidation of the underlying collateral and the last to receive payment of interest and principal. Such classes are subject to special risks, including a greater risk of loss of principal and non-payment of interest than more senior, rated classes. The market values of subordinated interests in CMBS and other subordinated securities tend to be more sensitive to changes in 28 economic conditions than more senior, rated classes. As a result of these and other factors, subordinated interests generally are not actively traded and may not provide holders with liquidity of investment. With respect to the Company's investment in ARCap, the ability to transfer the membership interest in ARCap is further limited by the terms of ARCap's operating agreement. PARTICIPATING INTEREST In connection with the acquisition and origination of mortgages, the Company has, on occasion, obtained and may continue to obtain participating interests that may entitle it to payments based upon a development's cash flow, profits or any increase in the value of the development that would be realized upon a refinancing or sale of the development. Competition for participating interests is dependent to a large degree upon market conditions. Participating interests are more difficult to obtain when mortgage financing is available at relatively low interest rates. In the current interest rate environment, the Company may have greater difficulty obtaining participating interest. Participating interests are not government insured or guaranteed and are therefore subject to the general risks inherent in real estate investments. Therefore, even if the Company is successful in investing in mortgage investments which provide for participating interests, there can be no assurance that such interests will result in additional payments. REPURCHASE FACILITIES COLLATERAL RISK Repurchase agreements involve the risk that the market value of the securities sold by the Company may decline and that the Company will be required to post additional collateral, reduce the amount borrowed or suffer forced sales of the collateral. If forced sales were made at prices lower than the carrying value of the collateral, the Company would experience additional losses. If the Company is forced to liquidate these assets to repay borrowings, there can be no assurance that the Company will be able to maintain compliance with the REIT asset and source of income requirements. BRIDGE AND MEZZANINE LOAN RISK The Company has originated and expects to continue to originate bridge and mezzanine loans. These types of mortgage loans are considered to involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property due to a variety of factors, including the loan becoming unsecured as a result of foreclosure by the senior lender. The Company may not recover some or all of its investment in such loans. In addition, bridge loans and mezzanine loans may have higher loan to value ratios than conventional mortgage loans resulting in less equity in the property and increasing the risk of loss of principal. ITEM 4. CONTROLS AND PROCEDURES (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective. (b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any significant changes in the Company's internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 29 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On October 27, 2003, prior to taking possession of the real estate collateral supporting the Gulfgate loan, the Company was named in a lawsuit, Concord Gulfgate, Ltd. vs. Robert Parker, Sunrise Housing Ltd., and American Mortgage Acceptance Company, Cause No. 2003-59290 in the State District Court of Harris County, Texas. The suit claims, among other causes of action against the respective defendants, that the Company conducted wrongful foreclosure in that the Guarantor did not derive any benefit from the Company's loan and that the limited partners of the Guarantor did not authorize the loan transaction. The suit seeks, among other relief, actual, consequential, exemplary, and punitive damages, a declaration that the loan made by the Company is unenforceable, and that the Company was involved in a conspiracy to defraud the Guarantor. The suit is currently in the discovery phase. Subsequently, the Company has filed a countersuit against the limited partners seeking to recover unpaid taxes and misappropriated property receipts. The Company is currently unable to determine the possible outcome of the litigation. ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY SECURITIES - None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS - None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None ITEM 5. OTHER INFORMATION Stuart A. Rothstein resigned his position as Chief Financial Officer ("CFO") of the Company effective March 31, 2004, in order to pursue other endeavors. Alan P. Hirmes, the Executive Vice President of the Company, replaced Mr. Rothstein as the new CFO. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits 10(c) Third Amendment to Amended and Restated Advisory Services Agreement between Related AMI Associates, Inc. and the Company dated November 12, 2003. 31.1 Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Reports on Form 8-K The following 8-K reports were filed or furnished, as noted in the applicable Form 8-K, for the quarter ended March 31, 2004. Current report on form 8-K, filed on March 3, 2004, relating to the press release regarding the Company's fourth quarter and year end results for 2003. 30 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 10, 2004 By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Date: May 10, 2004 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Trustee, Chief Operating Officer and Chief Financial Officer Exhibit 31.1 CERTIFICATION I, Stuart J. Boesky, hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending March 31, 2004 of American Mortgage Acceptance Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures to ensure the material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of March 31, 2004 (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors or persons performing the equivalent functions: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 10, 2004 By: /s/ Stuart J. Boesky ------------ -------------------- Stuart J. Boesky Chief Executive Officer Exhibit 31.2 CERTIFICATION I, Alan P. Hirmes, hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending March 31, 2004 of American Mortgage Acceptance Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures to ensure the material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of March 31, 2004 (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors or persons performing the equivalent functions: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 10, 2004 By: /s/ Alan P. Hirmes ------------ ------------------ Alan P. Hirmes Chief Financial Officer Exhibit 32.1 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Mortgage Acceptance Company (the "Company") on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stuart J. Boesky, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Chief Executive Officer May 10, 2004 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 32.2 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Mortgage Acceptance Company (the "Company") on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Financial Officer May 10, 2004 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----