<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-14029
AMRESCO CAPITAL TRUST
(Exact name of Registrant as specified in its charter)
TEXAS 75-2744858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 N. PEARL STREET, SUITE 1900, LB 342, DALLAS, TEXAS 75201-7424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 953-7700
Securities registered pursuant to Section 12(b) of the Act:
NONE
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES OF BENEFICIAL INTEREST, $0.01 PAR VALUE PER SHARE
PREFERRED SHARE PURCHASE RIGHTS
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 10, 2000, 10,015,111 shares of the registrant's common stock, par
value $.01 per share, were outstanding. As of that date, the aggregate market
value of the shares of common stock held by non-affiliates of the registrant
(based upon the closing price of $9.031 per share on March 10, 2000 as reported
on The Nasdaq Stock Market(R)) was approximately $75.6 million. Shares of common
stock held by each executive officer and trust manager have been excluded in
that such persons may be deemed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None
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This Form 10-K/A is being filed to amend and restate Items 6 and 7 in their
entirety.
PART II
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below for the year ended December 31, 1999
and the period from February 2, 1998 (date of initial capitalization) through
December 31, 1998 has been derived from the Company's audited consolidated
financial statements. This information should be read in conjunction with "Item
1. Business" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations", as well as the audited consolidated
financial statements and notes thereto included in "Item 8. Financial Statements
and Supplementary Data".
<TABLE>
<CAPTION>
Period from
February 2, 1998
Year Ended through
(In thousands, except per share and ratio data) December 31, 1999 December 31, 1998
------------------ --------------------
<S> <C> <C>
Revenues ............................................................. $ 23,393 $ 8,745
Net income ........................................................... $ 7,320 $ 3,952
Earnings per common share:
Basic ............................................................. $ 0.73 $ 0.56
Diluted ........................................................... $ 0.73 $ 0.56
Dividends declared per common share .................................. $ 1.59 $ 0.74
Total assets ......................................................... $231,244 $190,926
Total debt ........................................................... $105,097 $ 46,838
Long-term debt ....................................................... $ 34,600 $ 46,838
Total shareholders' equity ........................................... $117,951 $130,266
Debt to equity ratio ................................................. 0.9 to 1 0.4.to 1
Debt to equity ratio (excluding non-recourse debt on real estate) .... 0.6 to 1 0.3 to 1
</TABLE>
The Company believes that the following additional financial data is also
meaningful to users of its financial reports. Although the Company was initially
capitalized on February 2, 1998 (with $1,000), it did not commence operations
until its initial public offering was completed on May 12, 1998. As a result,
the Company had no earnings prior to the commencement of its operations.
Accordingly, the 1998 data set forth below reflects operations and earnings per
common share for the period from May 12, 1998 (inception of operations) through
December 31, 1998.
<TABLE>
<CAPTION>
Period from
May 12, 1998
through
(In thousands, except per share data) December 31, 1998
-------------------
<S> <C>
Revenues...................................... $8,745
Net income.................................... $3,952
Earnings per common share:
Basic..................................... $ 0.39
Diluted .................................. $ 0.39
</TABLE>
2
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
AMRESCO Capital Trust (the "Company") is a real estate investment trust ("REIT")
which was formed in early 1998 to take advantage of certain mid- to high-yield
lending and investment opportunities in real estate related assets, including
various types of commercial mortgage loans (including, among others,
participating loans, mezzanine loans, acquisition loans, construction loans,
rehabilitation loans and bridge loans), commercial mortgage-backed securities
("CMBS"), commercial real estate, equity investments in joint ventures and/or
partnerships, and certain other real estate related assets. Subject to the
direction and oversight of the Board of Trust Managers, the Company's day-to-day
operations are managed by AMREIT Managers, L.P. (the "Manager"), an affiliate of
AMRESCO, INC. (together with its affiliated entities, the "AMRESCO Group").
The Company commenced operations on May 12, 1998 concurrent with the completion
of its initial public offering ("IPO") of 9,000,000 common shares and private
placement of 1,000,011 common shares with AMREIT Holdings, Inc., a wholly-owned
subsidiary of AMRESCO, INC. (the "Private Placement"). To date, the Company's
investment activities have been focused in three primary areas: loan
investments, CMBS and equity investments in real estate.
The Company may experience high volatility in financial statement net income and
tax basis income from quarter to quarter and year to year, primarily as a result
of the size of its investment portfolio, fluctuations in interest rates,
borrowing costs, prepayment rates and favorable and unfavorable credit related
events such as profit participations or credit losses. The operating results of
the Company will depend, in part, upon the ability of the Company to manage its
interest rate, prepayment and credit risks, while maintaining its status as a
REIT. Additionally, the Company's accounting for some real estate loan
arrangements as either real estate or joint venture investments may contribute
to volatility in financial statement net income. Furthermore, as described
below, the Company intends to sell its non-core assets, including its CMBS
holdings and its equity investments in real estate. These transactions, should
they occur, are expected to contribute significantly to volatility in the
Company's future financial statement net income and tax basis income. Also, the
Board of Trust Managers has approved a Plan of Liquidation and Dissolution (the
"Plan") which provides for the complete liquidation of the Company.
The liquidation and dissolution of the Company requires the affirmative vote of
at least two-thirds of the Company's outstanding common shares. The Company
plans to submit this matter to its shareholders at its Annual Meeting which is
expected to be held in June 2000. If the Plan receives shareholder approval at
the Annual Meeting, the Company will adopt liquidation basis accounting
immediately thereafter. Under liquidation basis accounting, the Company's assets
would be adjusted to their net realizable values and the Company's liabilities
would be adjusted to their expected settlement amounts. These adjustments, if
any, would be recognized in earnings at that time.
In early 2000, the Board of Trust Managers approved a course of action to market
and sell the Company's non-core assets, which include its CMBS investments and
its equity investments in real estate. To date, the Company has entered into a
non-binding letter agreement for the sale of its ownership interest in one
partnership that holds title to real estate. Additionally, the Company has
identified potential buyers for its ownership interests in two other
partnerships as further described below. In January 2000, the Company sold one
of its CMBS investments (a "B" rated bond) for $3.6 million, which approximated
its carrying value at December 31, 1999. In March 2000, the Company's
unconsolidated taxable subsidiary sold its only CMBS investment for $3.1
million. This bond was sold at a price which was approximately $0.1 million less
than its carrying value at December 31, 1999 (excluding tax effects). The
reduction in value (from December 31, 1999) was attributable to a combination of
higher interest rates and an increase in the spread demanded by purchasers for
this particular security in early 2000. The Company is continuing to market the
balance of its CMBS holdings.
3
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A majority of the Company's loans are expected to be fully repaid at or prior to
their scheduled maturities (including extension options) in accordance with the
terms of the underlying loan agreements. Initially, proceeds from loan
repayments and the asset sales described above will be used to repay the
Company's existing credit facilities. As of December 31, 1999, amounts
outstanding under these facilities totaled $70.5 million. After these credit
facilities have been fully repaid and assuming that the Plan has received
shareholder approval, liquidating distributions will then be made to the
Company's shareholders as, and when, additional loans are repaid and assets are
sold, provided that the Board of Trust Managers believes that adequate reserves
are available for the payment of the Company's liabilities and expenses. Given
the short duration of the Company's loans and the quality of most of its assets,
the Company believes that the liquidation process will be completed in 18 to 24
months, although there can be no assurances that this time table will be met or
that the anticipated proceeds from the liquidation will be achieved.
RESULTS OF OPERATIONS
The following discussion of results of operations should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
"Item 8. Financial Statements and Supplementary Data".
Under generally accepted accounting principles, net income for the year ended
December 31, 1999 and the period from May 12, 1998 (inception of operations)
through December 31, 1998 was $7,320,000 and $3,952,000, respectively, or $0.73
and $0.39 per common share, respectively. The Company had no income or expenses
during the period from February 2, 1998 (date of initial capitalization) through
May 11, 1998. The Company's sources of revenue for the year ended December 31,
1999 and the period from May 12, 1998 through December 31, 1998, totaling
$23,393,000 and $8,745,000, respectively, are set forth below.
o $16,099,000 and $4,834,000, respectively, from loan investments. As some of
the Company's loan investments are accounted for as either real estate or
joint venture investments for financial reporting purposes, these revenues
are included in the consolidated statements of income for the year ended
December 31, 1999 and the period from February 2, 1998 through December 31,
1998 as follows: interest income on mortgage loans of $14,568,000 and
$4,278,000, respectively; operating income from real estate of $1,531,000
and $211,000, respectively; and equity in earnings of other real estate
ventures of $0 and $345,000, respectively.
o $3,699,000 and $1,563,000, respectively, from investments in CMBS.
o $3,327,000 and $181,000, respectively, of operating income from real estate
owned by the Company (through a majority-owned partnership).
o $17,000 and $243,000, respectively, of equity in earnings from its
unconsolidated subsidiary, partnerships and other real estate ventures.
o $251,000 and $1,924,000, respectively, of interest income from short-term
investments.
Additionally, the Company realized a gain of $584,000 during the year ended
December 31, 1999 in connection with the repayment of an ADC loan arrangement.
The gain was comprised principally of interest income earned at the accrual rate
over the life of the loan investment. No gains were realized during 1998.
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The Company incurred expenses of $16,631,000 and $4,793,000 during the year
ended December 31, 1999 and the period from May 12, 1998 through December 31,
1998, respectively. These expenses are set forth below.
o $2,206,000 and $1,187,000, respectively, of management fees, including
$2,066,000 and $835,000, respectively, of base management fees payable to
the Manager pursuant to the Management Agreement and $140,000 and $352,000,
respectively, of expense associated with compensatory options granted to
the Manager. Costs associated with the compensatory options decreased
during the year ended December 31, 1999 primarily as a result of a decrease
in the expected volatility of the Company's stock. No incentive fees were
incurred during either period.
o $1,437,000 and $1,294,000, respectively, of general and administrative
costs, including $200,000 and $0, respectively, of resolution costs
associated with a non-performing loan, $0 and $330,000, respectively, of
due diligence costs associated with an abandoned transaction, $304,000 and
$396,000, respectively, for professional services, $234,000 and $162,000,
respectively, for directors and officers' insurance, $192,000 and $140,000,
respectively, of reimbursable costs pursuant to the Management Agreement,
$(8,000) and $68,000, respectively, related to compensatory options granted
to some members of the AMRESCO Group, $114,000 and $0, respectively, of
dividend equivalent costs, $23,000 and $0, respectively, of fees paid to
the Company's Independent Trust Managers for their participation at special
meetings of the Board of Trust Managers, $91,000 and $56,000, respectively,
related to restricted stock awards to the Company's Independent Trust
Managers and $111,000 and $57,000, respectively, of travel costs. Costs
associated with the compensatory options decreased during the year ended
December 31, 1999 primarily as a result of a decrease in the expected
volatility of the Company's stock. These categories do not represent all
general and administrative expenses.
o $1,737,000 and $0, respectively, of costs associated with an abandoned
merger.
o $5,593,000 and $567,000, respectively, of interest expense (net of
capitalized interest totaling $593,000 and $57,000, respectively)
associated with the Company's credit facilities and five non-recourse loans
secured by real estate.
o $1,084,000 and $277,000, respectively, of participating interest associated
with amounts due to an affiliate.
o $1,252,000 and $100,000, respectively, of depreciation expense, including
$810,000 and $56,000, respectively, related to five grocery-anchored
shopping centers and $442,000 and $44,000, respectively, related to loan
investments accounted for as real estate.
o $3,322,000 and $1,368,000, respectively, of provision for loan losses.
During the year ended December 31, 1999, the Company charged-off $500,000
against an existing allowance for losses related to the non-performing loan
referred to above. This loan is discussed further in this section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the sub-heading "Loan Investments". No charge-offs were
recorded during the period from May 12, 1998 through December 31, 1998.
During the year ended December 31, 1999 and the period from May 12, 1998 through
December 31, 1998, minority interest in a subsidiary partnership's net income
totaled $26,000 and $0, respectively.
5
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Year Ended December 31, 1999 Compared to Period from February 2, 1998 (Date of
Initial Capitalization) through December 31, 1998
The Company was initially capitalized through the sale of 100 common shares to
AMRESCO, INC. on February 2, 1998 and it commenced operations on May 12, 1998
concurrent with the completion of its initial public offering of 9,000,000
common shares and private placement of 1,000,011 common shares with AMREIT
Holdings, Inc., a wholly-owned subsidiary of AMRESCO, INC. The following
comparisons reflect the fact that during the entire year ended December 31,
1999, the Company's net proceeds from the issuance of its common shares were
fully invested and it (and its consolidated partnerships) had outstanding
borrowings under several credit facilities. By contrast, during the period from
February 2, 1998 (date of initial capitalization) through December 31, 1998, the
Company was actively investing the $139.7 million of net proceeds received from
the issuance of its common shares. These proceeds were not fully invested until
September 30, 1998. Additionally, the Company did not begin to borrow under its
credit facilities until September 30, 1998. During the period from February 2,
1998 (date of initial capitalization) through December 31, 1998, the Company had
operations for only 234 days (from May 12, 1998 through December 31, 1998). The
Company had no income or expenses during the period from February 2, 1998
through May 11, 1998.
The Company's revenues increased by $14,648,000, or 168%, from $8,745,000 to
$23,393,000, due primarily to increases in interest income derived from mortgage
loan investments, income from commercial mortgage-backed securities, and
operating income from real estate. More specifically, the higher revenues were
attributable to the following (amounts in parentheses represent incremental
revenues earned in 1999 as compared to 1998):
o mortgage loans that were originated during 1998 and those that were
acquired immediately after the closing of the IPO (other than loans
accounted for as real estate or joint venture investments for financial
reporting purposes) were outstanding for a longer period of time during the
year ended December 31, 1999 and at higher average balances due to
additional fundings under these commitments ($7,197,000);
o some of the loans that contributed to 1999 revenues were acquired on
September 30, 1998 and therefore they generated only three months of
revenues in the earlier period ($1,746,000);
o three new loan originations that occurred in mid 1999 ($1,347,000);
o acquisitions of CMBS that occurred on May 27, 1998, June 30, 1998 and
September 1, 1998 ($2,136,000);
o acquisitions of real estate that occurred on October 23, 1998, April 30,
1999 and August 25, 1999 ($3,146,000);
o the properties underlying two of the Company's ADC loan arrangements
accounted for as real estate were substantially completed in 1999 and began
producing operating income ($1,112,000); and
o a property underlying one of the Company's ADC loan arrangements accounted
for as real estate was operating during the entire year ended December 31,
1999 as compared to a period of just over six months during 1998
($208,000).
The higher revenues described above were offset by declines in interest income
from short-term investments and equity in earnings from the Company's
unconsolidated subsidiary, partnerships and other real estate ventures. Interest
income declined by $1,673,000, from $1,924,000 to $251,000, as the uninvested
portion of the net proceeds received from the issuance of the Company's common
shares were temporarily invested in short-term investments during the period
from May 12, 1998 through September 30, 1998. Equity in earnings from
unconsolidated subsidiary, partnerships and other real estate ventures declined
by $571,000, from $588,000 to $17,000. For the most part, this decline was
attributable to the non-performing loan referred to above. This loan was
performing until late in the fourth quarter of 1998. Prior to its
reclassification, which is described below, this loan was accounted for as a
joint venture investment for financial reporting purposes.
During the year ended December 31, 1999, the average book value of the Company's
assets, excluding cash and cash equivalents, approximated $204 million. During
the period from February 2, 1998 through December 31, 1998, the average book
value of the Company's assets, excluding cash and cash equivalents, approximated
$91 million.
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The Company's expenses increased by $11,838,000, or 247%, from $4,793,000 to
$16,631,000, due primarily to increases in borrowing costs (including
participating interest in mortgage loans), base management fees, depreciation
expense and the Company's provision for loan losses. Additionally, the Company's
1999 expenses included $1,737,000 of costs associated with an abandoned merger.
These costs included financial advisors' fees, legal and accounting fees, filing
fees and expenses associated with printing preliminary proxy materials. The
Company and the prospective merger partner each bore one-half of the related
filing fees and printing costs. The Company was not required to pay or reimburse
any of the expenses incurred by the prospective merger partner nor was it
required to pay any type of break-up or termination fee to such party.
During the year ended December 31, 1999, the Company incurred borrowing costs,
including participating interest in mortgage loans, of $6,677,000 (net of
amounts capitalized of $593,000). During the period from May 12, 1998 (inception
of operations) through December 31, 1998, the Company incurred borrowing costs,
including participating interest in mortgage loans, of only $844,000 (net of
amounts capitalized of $57,000) as it did not begin to leverage its assets until
September 30, 1998. As of December 31, 1999 and 1998, obligations under the
Company's various financing arrangements totaled $105,097,000 and $52,647,000,
including amounts due to an affiliate of $0 and $5,809,000, respectively.
Amounts due to the affiliate were fully extinguished on November 1, 1999. Base
management fees increased by $1,231,000, from $835,000 to $2,066,000, as a
result of the Company's larger average asset base upon which the fee is
calculated. Depreciation expense increased by $1,152,000, from $100,000 to
$1,252,000, as a result of the real estate acquisitions described above and the
fact that the projects securing two of the Company's ADC loan arrangements
accounted for as real estate were substantially completed and held available for
occupancy during 1999. Finally, the Company's provision for loan losses
increased by $1,954,000, from $1,368,000 to $3,322,000. The increase was
attributable to one investment, an ADC loan arrangement, that was deemed to be
impaired as of December 31, 1999. This loan is discussed further in this section
of Management's Discussion and Analysis of Financial Condition and Results of
Operations under the sub-heading "Loan Investments". The higher expenses
enumerated above were offset, in part, by a decline in compensatory option
charges. For the reasons cited above, the aggregate costs associated with
compensatory options declined by $288,000, from $420,000 to $132,000.
For the reasons cited above, income before gains and minority interests
increased by $2,810,000, or 71%, from $3,952,000 to $6,762,000.
Net income increased by $3,368,000, or 85%, from $3,952,000 to $7,320,000. In
addition to the factors cited above, net income increased partially as a result
of a $584,000 gain realized in connection with the repayment of an ADC loan
arrangement. During 1999, the Company's net income was reduced by a minority
interest in a subsidiary partnership's net income totaling $26,000.
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Distributions
Historically, the Company's policy has been to distribute at least 95% of its
REIT taxable income to shareholders each year. To that end, dividends have been
paid quarterly. For a discussion of future distributions, see caption entitled
"Distribution Information" in Item 5. "Market for Registrant's Common Equity and
Related Shareholder Matters". Tax basis income differs from income reported for
financial reporting purposes due primarily to differences in methods of
accounting for ADC loan arrangements and stock-based compensation awards and the
nondeductibility, for tax purposes, of the Company's loan loss reserve (for a
discussion of ADC loan arrangements and a reconciliation of financial statement
net income to tax basis income, see the notes to the audited consolidated
financial statements included in Item 8 of this report). As a result of these
accounting differences, net income under generally accepted accounting
principles is not necessarily an indicator of distributions to be made by the
Company. Dividends declared to date, as well as their federal income tax status,
are as follows (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
DIVIDEND PER RETURN
DECLARATION RECORD PAYMENT DIVIDEND COMMON ORDINARY OF
DATE DATE DATE PAID SHARE INCOME CAPITAL
----------------- ----------------- ----------------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Period from May 12, 1998
through June 30, 1998 July 23, 1998 July 31, 1998 August 17, 1998 $ 1,001 $0.10 $ 0.1000 $ -
Third Quarter October 22, 1998 October 31, 1998 November 16, 1998 2,401 0.24 0.2400 -
Fourth Quarter December 15, 1998 December 31, 1998 January 27, 1999 4,002 0.40 0.4000 -
------- ----------- --------- ----------
$ 7,404 $0.74 $ 0.7400 $ -
======= =========== ========= ==========
1999
First Quarter April 22, 1999 April 30, 1999 May 17, 1999 $ 3,602 $0.36 $ 0.3268 $0.0332
Second Quarter July 22, 1999 July 31, 1999 August 16, 1999 3,906 0.39 0.3466 0.0434
Third Quarter October 21, 1999 October 31, 1999 November 15, 1999 4,006 0.40 0.3555 0.0445
Fourth Quarter December 15, 1999 December 31, 1999 January 27, 2000 4,407 0.44 0.3911 0.0489
------- ----------- --------- ----------
$15,921 $1.59 $ 1.4200 $0.1700
======= =========== ========= ==========
</TABLE>
A portion of each of the distributions declared in 1999 was classified as a
non-taxable return of capital as a result of the merger related charges
described above.
Loan Investments
During the period from May 12, 1998 through December 31, 1998, the Company
assembled a portfolio of 21 loans, representing $209.6 million in aggregate
commitments; eleven of these loans were originated by the Company while two of
the loans were acquired from AMRESCO Funding Corporation ("AFC") and eight of
the loans were acquired from AMRESCO Commercial Finance, Inc. ("ACFI"), both of
whom are members of the AMRESCO Group. As of December 31, 1998, $136.8 million
had been advanced under these facilities. During the year ended December 31,
1999, six of the Company's loans were fully repaid, three loan originations were
closed and four loans were sold to ACFI. Additionally, one loan was
reclassified, net of a $500,000 charge-off, to investment in unconsolidated
subsidiary following the subsidiary's acquisition (through foreclosure on
February 25, 1999) of the partnership interests of one of the Company's
borrowers. Excluding the loan classified as an investment in unconsolidated
subsidiary, the Company had 13 loans representing $168.9 million in aggregate
commitments as of December 31, 1999; $143.6 million had been advanced under
these facilities at December 31, 1999. A portion of the commitments may expire
without being drawn upon and therefore the total commitment amounts do not
necessarily represent future cash requirements.
The two loans were acquired from AFC immediately after the closing of the IPO at
an aggregate cash purchase price of $5,433,000, including accrued interest and
as adjusted for unamortized loan commitment fees.
The eight loans were acquired from ACFI on September 30, 1998 pursuant to two
separate agreements. The first agreement provided for the purchase of three
loans at an aggregate cash purchase price of $11,314,000, including accrued
interest of $137,000. The second agreement provided for the purchase of five
loans at an aggregate cash purchase price of $22,978,000, including accrued
interest of $675,000. Immediately following the purchase of the five loans, the
Company sold to ACFI a contractual right to collect from the Company an amount
equal to the economic equivalent of all amounts collected from the five loans in
excess of (i) $17,958,000 and (ii) a return on this amount, or so much of it as
was outstanding from time to time, equal to 12% per annum. The aggregate cash
sales price of $5,020,000 had the effect of reducing the Company's credit
exposure with respect to such loans. The sales price was comprised of $4,345,000
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which had the effect of reducing the Company's net investment in such loans; the
balance of the sales price, or $675,000, equated to the amount of interest which
was accrued under the five loan agreements as of September 30, 1998. As
additional consideration, ACFI agreed to immediately reimburse the Company for
any additional advances which were required to be made under the five loan
agreements. The proceeds received from ACFI were accounted for as a financing.
In January 1999 and November 1999, the Company sold one loan and three loans,
respectively, to ACFI. Prior to their sale, these investments had been subject
to the ACFI economic interest described above. The fifth loan was fully repaid
by the borrower in May 1999. The proceeds from the sales, which produced no gain
or loss for the Company, totaled $13,340,000. In connection with the most recent
sale, amounts due to ACFI were fully extinguished; additionally, ACFI's
contingent reimbursement obligations were discharged.
During the year ended December 31, 1999, the Company advanced a total of $71.2
million under its loan commitments. The proceeds from the six loan repayments
and the four loan sales totaled $48.5 million, including accrued interest, a
profit participation and a prepayment fee aggregating $1.2 million. Principal
collections on the Company's other loan investments totaled $3.5 million during
the year ended December 31, 1999.
In cases where the Company has originated loans, the borrowers paid a commitment
fee to the Company that is in addition to interest payments due under the terms
of the loan agreements. Commitment fees are deferred and recognized over the
life of the loan as an adjustment of yield or, in those cases where loan
investments are classified as either real estate or joint ventures for financial
reporting purposes, such fees are deferred and recognized upon the disposition
of the investment.
Based upon the amounts outstanding under these facilities, the Company's
portfolio of commercial mortgage loans had a weighted average interest pay rate
of 10.7% and a weighted average interest accrual rate of 11.8% as of December
31, 1999. At December 31, 1999, three of the 13 loans provided the Company with
the opportunity for profit participation above the contractual accrual rate. For
a tabular summary of the Company's loan investments as of December 31, 1999 and
1998, reference is made to Note 3 to the audited consolidated financial
statements included in Item 8 of this report.
The Company provides financing through certain real estate loan arrangements
that, because of their nature, qualify either as real estate or joint venture
investments for financial reporting purposes. For a discussion of these loan
arrangements, see the notes to the audited consolidated financial statements
included in "Item 8. Financial Statements and Supplementary Data". For all loan
investments, payments of interest only are due monthly at the interest pay rate.
All principal and all remaining accrued and unpaid interest are due at the
scheduled maturities of the loans. One loan provides for the payment of accrual
rate interest quarterly.
A mezzanine loan with an outstanding balance of $8,262,000 and a recorded
investment of $7,191,000 was impaired as of December 31, 1999. The allowance for
loan losses related to this investment, which is secured by partnership
interests in the borrower, totaled $4,190,000 at December 31, 1999. In addition
to the Company's mortgage, the property is encumbered by a $45.5 million first
lien mortgage provided by an unaffiliated third party, of which $44 million is
currently outstanding. The first lien mortgage, which matures on June 30, 2001,
requires interest only payments through June 30, 2000. From July 1, 2000 through
maturity, the first lien mortgage also requires monthly principal reductions of
approximately $42,000. To date, all interest payments have been made in
accordance with the terms of the first lien mortgage and the Company's loan. On
February 15, 2000, the Company entered into a Conditional Agreement with the
borrower. Under the terms of the Conditional Agreement, which is subject to
approval by the first lien lender, the Company has agreed to accept $3,000,000
in complete satisfaction of all amounts owed to it by the borrower provided that
such payment is received by the Company on or before May 15, 2000. Although the
Company believes that its loan loss reserves related to this investment are
adequate for financial reporting purposes, tax basis income will be adversely
affected in the event that this discounted payoff is received.
9
<PAGE> 10
A mezzanine (second lien) loan with an outstanding balance of $6,839,000 and a
recorded investment of $6,659,000 was over 30 days past due as of December 31,
1998. The allowance for loan losses related to this investment totaled $500,000
at December 31, 1998. On February 25, 1999, an unconsolidated taxable subsidiary
of the Company assumed control of the borrower (a partnership) through
foreclosure of the partnership interests. In addition to the second lien
mortgage, the property is encumbered by a $17 million first lien mortgage
provided by an unaffiliated third party. The first lien mortgage, which matures
on March 1, 2001, requires interest only payments throughout its term. On March
11, 1999, the first lien lender notified the Company that it considered the
first lien loan to be in default because of defaults under the Company's
mezzanine loan; however, it did not give notice of an intention to accelerate
the balance of the first lien loan at that time. On September 21, 1999, a
subsidiary of the Company entered into a non-binding letter agreement with a
prospective investor who intends to make a substantial equity commitment to the
project. Under the terms of the agreement, the Company would continue to have an
interest in the project as an equity owner. On March 16, 2000, the first lien
lender gave notice to the partnership of its intention to accelerate the first
lien loan in the event that certain alleged non-monetary events of default are
not cured. In addition to the alleged default described above, the first lien
lender has now asserted that the borrower permitted a transfer of a beneficial
interest in the partnership in violation of the loan agreement and that it has
failed to perform certain obligations under the Intercreditor Agreement. The
notice also specified that, as a result of the alleged defaults, interest has
accrued at the default rate from the date of the earliest event of default. To
date, all interest payments have been made in accordance with the terms of the
first lien mortgage. Management has attempted to negotiate with the first lien
lender in an effort to, among other things, obtain its approval to permit the
to-be-formed investment partnership to assume the first lien mortgage. The first
lien lender has thus far refused to entertain any negotiations unless the
partnership agrees to waive all of its claims and defenses and pay the default
interest claimed by the first lien lender to be due. The prospective investor is
negotiating with other lenders in an effort to secure take-out financing for the
first lien mortgage; however, there can be no assurances that such financing
will be obtained. During the first quarter of 1999, the Company charged-off
$500,000 against the allowance for losses related to this investment which
amount represented management's estimate at that time of the amount of the
expected loss which could result upon a disposition of the collateral. If the
first lien lender issues can be satisfactorily resolved and the proposed
transaction with the prospective investor is consummated, the Company currently
believes that it will fully recover its original investment, although there can
be no assurances that this will be the case. Aside from the $500,000 charge-off
described above, no additional impairment losses have been recognized on this
investment.
At December 31, 1999, the Company's commercial mortgage loan commitments were
geographically dispersed as follows:
<TABLE>
<CAPTION>
Location Percent
------------------ ------------
<S> <C>
Texas 50%
Massachusetts 30%
California 16%
Washington, D.C. 4%
</TABLE>
The underlying collateral for these loans at December 31, 1999 was comprised of
the following property types:
<TABLE>
<CAPTION>
Property Type Percent
------------------ ------------
<S> <C>
Office 76%
Multifamily 10%
R&D/Bio-Tech 6%
Residential 5%
Medical Office 3%
</TABLE>
The Company's loan portfolio was comprised of the following loan types as of
December 31, 1999:
<TABLE>
<CAPTION>
Loan Type Percent
------------------------------- ------------
<S> <C>
Acquisition/Rehabilitation 38%
Construction 31%
Acquisition 26%
Single-Family Lot Development 5%
</TABLE>
10
<PAGE> 11
Eighty-five percent of the portfolio is comprised of first lien loans while the
balance of the portfolio (15%) is secured by second liens and/or partnership
interests. The percentages reflected above are based upon committed loan amounts
and exclude the loan that was reclassified to investment in unconsolidated
subsidiary in February 1999.
As the loan investment portfolio is expected to contract as a result of
repayments, geographic and product type concentrations will persist. Geographic
and product type concentrations present additional risks, particularly if there
is a deterioration in the general condition of the real estate market or in the
sub-market in which the loan collateral is located, or if demand for a
particular product type does not meet expectations due to adverse market
conditions that are different from those projected by the Company.
Commercial Mortgage-backed Securities
As of December 31, 1999, the Company held five commercial mortgage-backed
securities ("CMBS") which were acquired at an aggregate purchase price of $34.5
million. All of these securities were acquired on or before September 1, 1998.
Due to the significant widening of spreads in the CMBS market during the latter
half of 1998, the value of the Company's CMBS holdings had declined by $6.245
million at December 31, 1998. During the year ended December 31, 1999, the value
of the Company's CMBS holdings declined by an additional $4.440 million due to
an increase in comparable-term U.S. Treasury rates and continued (albeit less
dramatic) spread widening in the CMBS market. As a result, during the year ended
December 31, 1999 and the period from May 12, 1998 (inception of operations)
through December 31, 1998, the Company recorded unrealized losses of $4.440
million and $6.245 million, respectively, on its CMBS portfolio. Additionally,
during the year ended December 31, 1999, the Company recorded an unrealized gain
of $103,000, net of tax effects, related to one commercial mortgage-backed
security owned by its unconsolidated taxable subsidiary. The security held by
this subsidiary has an investment rating of "B-". Unlike spreads for the
majority of the Company's direct CMBS investments, the spread for this
particular bond declined during the year ended December 31, 1999. During the
period from May 12, 1998 through December 31, 1998, the Company recorded an
unrealized loss of $230,000, net of tax effects, related to the security held by
the taxable subsidiary. As these securities are classified as available for
sale, the unrealized loss was reported as a component of accumulated other
comprehensive income (loss) in shareholders' equity for financial reporting
purposes. The unrealized losses had no impact on the Company's taxable income or
cash flow in 1999 or 1998. The Company's direct CMBS investments as of December
31, 1999 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Percentage of
Security Amortized Unrealized Fair Total Based on
Rating Cost Losses Value Fair Value
------------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
BB- $ 4,271 $ (1,140) $ 3,131 13%
B 19,664 (4,854) 14,810 60%
B- 11,319 (4,691) 6,628 27%
----------- ---------- ----------- ---------
$35,254 $(10,685) $24,569 100%
=========== ========== =========== =========
</TABLE>
While management believes that the fundamental value of the real estate
mortgages underlying its bonds has been largely unaffected to date, the
combination of increasing spreads and comparable-term U.S. Treasury rates have
caused the current fair value of these securities to decline. In the absence of
dramatic declines in spreads and/or comparable-term U.S. Treasury rates in the
near term, management expects to realize losses in connection with the planned
sales of these securities. These losses, should they occur, will adversely
impact the Company's earnings and tax basis income. To date, two CMBS sales have
been completed. On January 11, 2000, the Company sold one of its CMBS holdings
(a "B" rated bond) for $3.6 million. The Company realized a $0.3 million loss on
the sale of this security. On March 21, 2000, the Company's unconsolidated
taxable subsidiary sold its CMBS for $3.1 million. In connection with this sale,
the subsidiary realized a loss of $0.3 million.
In February 1999, the Company contributed $0.7 million to a newly formed
investment partnership with Olympus Real Estate Corporation. The partnership,
which is 5% owned by the Company, acquired several classes of subordinated CMBS
at an aggregate purchase price of $12.7 million. In connection with the
partnership's procurement of financing, the Company's investment in this
partnership was reduced to $0.3 million in February 2000. Currently, the Company
intends to sell its partnership interest. To that end, the Company is
negotiating a sale of its 5% interest to the partnership's majority partner (or
an affiliate thereof) although there can be no assurances that such sale will be
consummated or that it will be consummated on terms favorable to the Company.
11
<PAGE> 12
Equity Investments in Real Estate
On October 23, 1998, the Company (through a majority-owned partnership) acquired
an interest in the first of five newly constructed, grocery-anchored shopping
centers in the Dallas/Fort Worth, Texas area, an 82,730 square foot facility in
Arlington, Texas, for $10.3 million. In connection with this acquisition, the
title-holding partnership obtained non-recourse financing of $7.5 million from
an unaffiliated third party. Immediately prior to the closing, the Company
contributed $3.4 million of capital to the partnership which was used to fund
the balance of the purchase price, to pay costs associated with the financing
and to provide initial working capital to the title-holding partnership. On
April 30, 1999, the Company (through the majority-owned partnership) acquired
interests in three additional, grocery-anchored shopping centers. These newly
constructed properties, which were acquired by three subsidiary partnerships at
an aggregate purchase price of $30.2 million, include an 86,516 square foot
facility in Flower Mound, Texas, a 61,440 square foot facility in Fort Worth,
Texas and an 85,611 square foot facility in Grapevine, Texas. In connection with
these acquisitions, the three title-holding partnerships obtained non-recourse
financing totaling $19.5 million from an unaffiliated third party. Immediately
prior to the closings, the Company contributed $11.4 million of capital to the
partnership. The proceeds from this contribution were used to fund the balance
of the purchase price, to pay costs associated with the financing and to provide
initial working capital to the title-holding partnerships. On August 25, 1999,
the Company (through the majority-owned partnership) acquired an interest in the
fifth grocery-anchored shopping center. The newly constructed property, an
87,540 square foot facility in Richardson, Texas, was acquired by a subsidiary
partnership at a purchase price of $10.7 million. In connection with this
acquisition, the title-holding partnership obtained non-recourse financing of
$7.6 million from an unaffiliated third party. Immediately prior to the closing,
the Company contributed $3.4 million of capital to the partnership which was
used to fund the balance of the purchase price, to pay costs associated with the
financing and to provide initial working capital to the title-holding
partnership. The Company holds a 99.5% interest in the majority-owned (or
master) partnership. The master partnership owns, directly or indirectly, 100%
of the equity interests in each of the five title-holding partnerships. To date,
the Company has contributed a total of $18.2 million of capital to the
partnerships.
The five consolidated title-holding partnerships are indebted under the terms of
five non-recourse loan agreements with Jackson National Life Insurance Company.
All five loans, aggregating $34.6 million, bear interest at 6.83% per annum. The
interest rates on the first four loans were adjusted in connection with the
placement of the fifth loan on August 25, 1999. Prior to that time, a $7.5
million loan bore interest at 7.28% per annum and three loans aggregating $19.5
million bore interest at 6.68% per annum. The loans require interest only
payments through January 1, 2002; thereafter, interest and principal payments
are due based upon 25-year amortization schedules. The loans, which mature on
January 1, 2014, prohibit any prepayment of the outstanding principal prior to
January 1, 2006. Thereafter, prepayment is permitted at any time, in whole or in
part, upon payment of a yield maintenance premium of at least 1% of the then
outstanding principal balance.
The Company is currently negotiating a sale of its 99.5% ownership interest for
$18.5 million. If these negotiations are successful, the Company would expect to
complete this sale in the second quarter of 2000.
On March 2, 1999, the Company acquired a 49% limited partner interest in a
partnership which owns a 116,000 square foot office building in Richardson,
Texas. The property is encumbered by a first lien mortgage with a current
outstanding balance of approximately $13.7 million. In connection with this
acquisition, the Company contributed $1.4 million of capital to the partnership.
On March 8, 2000, the Company entered into a non-binding letter agreement
pursuant to which it agreed to sell its 49% ownership interest for $1.8 million.
Currently, the Company expects to consummate this sale on March 31, 2000.
There can be no assurances that the sales discussed above will be consummated or
that they will be consummated on terms favorable to the Company.
The Company's unconsolidated taxable subsidiary holds interests (indirectly) in
a partnership which owns a 909,000 square foot mixed-use property in Columbus,
Ohio. This investment is described above under the sub-heading "Loan
Investments".
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The following discussion of liquidity and capital resources should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in "Item 8. Financial Statements and Supplementary Data".
The Company's principal demands for liquidity are cash for operations, including
funds which are required to satisfy its obligations under existing loan
commitments, interest expense associated with its indebtedness, debt repayments
and distributions to its shareholders. In the near term, the Company's principal
sources of liquidity are the funds available to it under its financing
facilities described below.
Effective as of July 1, 1998, the Company and some of its subsidiaries entered
into a $400 million credit facility (the "Line of Credit") with Prudential
Securities Credit Corporation ("PSCC"). Subject to PSCC's approval on an asset
by asset basis, borrowings under the facility could be used to finance the
Company's structured loan and equity real estate investments. As a result of the
dislocation in the capital markets in mid to late 1998, PSCC became more
restrictive in the application of its approval rights with respect to financing
for new investments sought by the Company. Accordingly, very few investments
were consummated in late 1998 and early 1999. Prior to the modifications
discussed below, borrowings under the Line of Credit bore interest at rates
ranging from LIBOR plus 1% per annum to LIBOR plus 2% per annum. At December 31,
1998, $39,338,000 had been borrowed under the Line of Credit. The weighted
average interest rate at December 31, 1998 was 6.65%.
To reduce the impact that rising interest rates would have on this floating rate
indebtedness, the Company entered into an interest rate cap agreement which
became effective on January 1, 1999. This agreement had a notional amount of
$33.6 million and was scheduled to expire on July 1, 2000. The agreement
entitled the Company to receive from a counterparty the amounts, if any, by
which one month LIBOR exceeded 6.0%. Prior to its termination (as described
below), no payments were due from the counterparty as one month LIBOR had not
exceeded 6.0%. On July 2, 1999, the agreement was terminated and replaced with
an interest rate cap agreement which became effective on August 1, 1999. The new
agreement, which was entered into to more closely match the then outstanding
borrowings, has a notional amount of $59 million. Until its expiration on
November 1, 2000, the agreement entitles the Company to receive from a
counterparty the amounts, if any, by which one month LIBOR exceeds 6.25%. During
the period from August 1, 1999 through December 31, 1999, amounts due from the
counterparty under this agreement totaled $13,000. There are no margin
requirements associated with interest rate caps and therefore there is no
liquidity risk associated with this particular hedging instrument (see Item 7A.
"Quantitative and Qualitative Disclosures About Market Risk").
Effective as of May 4, 1999, the Company and some of its subsidiaries entered
into an Amended and Restated Interim Warehouse and Security Agreement (the
"Amended Line of Credit") with PSCC. The agreement amended the Company's
existing line of credit. The Amended Line of Credit includes the following
modifications:
o a reduction in the size of the committed facility from $400 million to $300
million;
o the elimination of the requirement that assets financed with proceeds from
the facility must be securitizable;
o a reduction in the amount of capital the Company must fund with respect to
construction and rehabilitation loans before PSCC is required to begin
advancing funds;
o an extension of the maturity date from July 1, 2000 to November 3, 2000;
and
o the modification to, and addition of, sublimits on specified categories of
loans and assets, including:
o a new $40 million sublimit on mezzanine loans and equity investments;
and
o a reduction in the sublimit on construction loans from $150 million to
$115 million, with the addition of a new $50 million sublimit within
this category for construction loans that are less than 70% pre-leased
at the time the initial advance is to be made under the Amended Line
of Credit with respect to a construction loan fitting this category.
13
<PAGE> 14
Under the Amended Line of Credit, borrowings bear interest at LIBOR plus 1.25%
per annum to the extent such borrowings do not exceed the Company's Tangible Net
Worth, as defined. Borrowings in excess of the Company's Tangible Net Worth bear
interest at LIBOR plus 3% per annum. Borrowings are secured by a first lien
security interest in all assets funded with proceeds from the Amended Line of
Credit. At December 31, 1999, $60,641,000 was outstanding under the Amended Line
of Credit. All of these borrowings bear interest at LIBOR plus 1.25% per annum.
The weighted average interest rate at December 31, 1999 was 7.73%.
As compensation for amending the existing line of credit and extending the
maturity date, the Company granted warrants to Prudential Securities
Incorporated, an affiliate of PSCC, to purchase 250,002 common shares of
beneficial interest at $9.83 per share. The exercise price represents the
average closing market price of the Company's common shares for the ten-day
period ending on May 3, 1999. The warrants were issued in lieu of a commitment
fee or other cash compensation.
Following the completion of the modifications to its line of credit facility,
the Company's investment activities increased, albeit at a slower rate than was
achieved in 1998 before the capital markets deteriorated.
Effective as of July 1, 1998, the Company and some of its subsidiaries entered
into a $100 million Master Repurchase Agreement (the "Repurchase Agreement")
with PSCC; subsequently, PSCC was replaced by Prudential-Bache International,
Ltd. ("PBI"), an affiliate of PSCC, as lender. Borrowings under the Repurchase
Agreement can be used to finance a portion of the Company's portfolio of
commercial mortgage-backed securities. The Repurchase Agreement provides that
the Company may borrow a varying percentage of the market value of its CMBS,
depending on the credit quality of such securities. Borrowings under the
Repurchase Agreement bear interest at rates ranging from LIBOR plus 0.20% per
annum to LIBOR plus 1.5% per annum depending upon the advance rate and the
credit quality of the securities being financed. Borrowings under the facility
are secured by an assignment to PBI of all commercial mortgage-backed securities
funded with proceeds from the Repurchase Agreement. The Repurchase Agreement
matures on June 30, 2000. At December 31, 1999, $9,856,000 was outstanding under
the Repurchase Agreement. At December 31, 1998, there were no outstanding
borrowings under this facility. The weighted average interest rate at December
31, 1999 was 7.62%.
Under the terms of the Amended Line of Credit and the Repurchase Agreement, PSCC
and PBI, respectively, retain the right to mark the underlying collateral to
market value. A reduction in the value of its pledged assets may require the
Company to provide additional collateral or fund margin calls. From time to
time, the Company may be required to provide such additional collateral or fund
margin calls.
The Company expects that proceeds generated from loan repayments and sales of
its non-core assets, including CMBS and equity investments in real estate, will
be sufficient to fully repay its two credit facilities on or before their
scheduled maturity dates. Beyond the maturity date of the Amended Line of
Credit, the Company believes that its cash flow from operations and the proceeds
from loan repayments and sales of its non-core assets will be sufficient to meet
the Company's liquidity and capital requirements.
REIT STATUS
Management believes that the Company is operated in a manner that will enable it
to continue to qualify as a REIT for federal income tax purposes. As a REIT, the
Company will not pay income taxes at the trust level on any taxable income which
is distributed to its shareholders, although AMREIT II, Inc., its "non-qualified
REIT subsidiary", may be subject to tax at the corporate level. Qualification
for treatment as a REIT requires the Company to meet specified criteria,
including specified requirements regarding the nature of its ownership, assets,
income and distributions of taxable income. The Company may, however, be subject
to tax at normal corporate rates on any ordinary income or capital gains not
distributed.
YEAR 2000 ISSUE
All of the Company's information technology infrastructure is provided by the
Manager, and the Manager's systems are supplied by AMRESCO, INC. To date,
AMRESCO, INC. has not experienced any material difficulties with respect to its
internal business-critical systems used in connection with the operations of the
Manager or the Company, nor does it anticipate any material difficulties in the
future. Under the terms of the Company's Management Agreement with the Manager,
all of the costs associated with addressing the Company's Year 2000 issue were
to be borne by the Manager. As a result, the Company did not incur any
expenditures in connection with Year 2000 readiness modifications.
14
<PAGE> 15
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K are not based on historical facts
and are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company intends that
forward-looking statements be subject to such Act and any similar state or
federal laws. Forward-looking statements, which are based on various
assumptions, include statements regarding the intent, belief or current
expectations of the Company, its Manager, and their respective Trustees or
directors and officers, and may be identified by reference to a future period or
periods or by use of forward-looking terminology such as "intends," "may,"
"could," "will," "believe," "expect," "anticipate," "plan," or similar terms or
variations of those terms or the negative of those terms. Actual results could
differ materially from those set forth in forward-looking statements due to
risks, uncertainties and changes with respect to a variety of factors,
including, but not limited to, changes in international, national, regional or
local economic environments, changes in prevailing interest rates, credit and
prepayment risks, basis and asset/liability risks, spread risk, event risk,
conditions which may affect public securities and debt markets generally or the
markets in which the Company operates, the Year 2000 issue, the availability of
and costs associated with obtaining adequate and timely sources of liquidity,
dependence on existing sources of funding, the size and liquidity of the
secondary market for commercial mortgage-backed securities, geographic or
product type concentrations of assets (temporary or otherwise), hedge mismatches
with liabilities, other factors generally understood to affect the real estate
acquisition, mortgage and leasing markets and securities investments, changes in
federal income tax laws and regulations, and other risks described from time to
time in the Company's SEC reports and filings, including its registration
statement on Form S-11 and periodic reports on Form 10-Q, Form 8-K and Form
10-K.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMRESCO CAPITAL TRUST
By: /s/ Thomas R. Lewis II
-----------------------------------
Thomas R. Lewis II
Senior Vice President, Chief Financial and Accounting Officer & Controller
Date: May 31, 2000
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Robert L. Adair III and Jonathan
S. Pettee, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him, and on his behalf
and in his name, place and stead, in any and all capacities, to sign, execute
and file this Amendment to Annual Report on Form 10-K under the Securities
Exchange Act of 1934, as amended, and any or all future amendments, with all
exhibits and any and all documents required to be filed with respect thereto,
with the Securities and Exchange Commission or any regulatory authority,
granting unto such attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same,
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date Signature
---- ---------
<S> <C>
May 31, 2000 /s/ Robert L. Adair III
-----------------------------------
Robert L. Adair III
Chairman of the Board of Trust Managers
and Chief Executive Officer
(Principal Executive Officer)
May 31, 2000 /s/ Thomas R. Lewis II
-----------------------------------
Thomas R. Lewis II
Senior Vice President, Chief Financial
and Accounting Officer & Controller
(Principal Financial and Accounting Officer)
May 31, 2000 /s/ John C. Deterding
-----------------------------------
John C. Deterding
Independent Trust Manager
May 31, 2000 /s/ Bruce W. Duncan
-----------------------------------
Bruce W. Duncan
Independent Trust Manager
May 31, 2000 /s/ Christopher B. Leinberger
-----------------------------------
Christopher B. Leinberger
Independent Trust Manager
May 31, 2000 /s/ James C. Leslie
-----------------------------------
James C. Leslie
Independent Trust Manager
May 31, 2000 /s/ Robert H. Lutz, Jr.
-----------------------------------
Robert H. Lutz, Jr.
Trust Manager
</TABLE>
16
