FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 1-13991
AMERICA FIRST MORTGAGE INVESTMENTS,INC.
(Exact name of registrant as specified in its charter)
Maryland 133-974868
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
399 Park Avenue, 36th Floor, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 935-8760
(Registrant's telephone number, including area code)
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 NO X
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Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
BALANCE SHEET
(UNAUDITED)
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<CAPTION>
Mar. 31, 1998
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<S> <C>
Assets
Cash $ 1,000
==============
Stockholders' Equity
Common stock, $.01 par value; 10,000,000 shares authorized
90,621 shares issued and outstanding $ 906
Additional Paid-In Capital 94
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Total Stockholders' Equity 1,000
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The accompanying notes are an integral part of the financial statement.
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AMERICA FIRST MORTGAGE INVESTMENTS, INC.
NOTES TO BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
1. Organization
America First Mortgage Investments, Inc. (the Company) was incorporated in
Maryland on July 24, 1997.
Other than to issue 90,621 shares of its common stock, $.01 par value, at par,
the Company had not commenced any material business operations as of March 31,
1998. Accordingly, the Company had earned no income or incurred any expenses
as of that date. However, as of that date the Company had entered into a
merger agreement with, among others, America First Participating/Preferred
Equity Mortgage Fund (PREP Fund 1), America First PREP 2 (PREP Fund 2) and
America First PREP Fund 2 Pension Series Limited Partnership (Pension Fund)
(collectively referred to as the "PREP Funds") under which the Company intends
to issue up to 8,971,506 additional shares of common stock to holders of
Exchangeable Units ("Units") and Beneficial Unit Certificates ("BUCs") of the
PREP Funds (the "Merger Agreement"). The merger is subject to the approval of
the holders of Units of PREP 1 and BUCs of PREP 2 (but not necessarily the
holders of BUCs of Pension) and the Company has submitted a registration
statement with the Securities and Exchange Commission in connection
therewith. The Company will be the surviving entity of the merger and will
commence operations upon consummation of the Merger. See Note 4.
2. Federal Income Taxes
The Company expects to elect and qualify to be taxed as a real estate
investment trust (REIT) under the provisions of the Internal Revenue Code and
the corresponding provisions of the state law. Accordingly, the Company will
not be subject to federal or state income tax to the extent of its
distributions to stockholders. In order to maintain its status as REIT, the
Company is required, among other things, to distribute at least 95% of its
taxable income.
3. Related Party Transactions
America First Mortgage Advisory Corporation (the Advisor) will manage the
operations and investments of the Company and perform administrative services
for the Company for which it will receive an annual management fee payable
monthly in arrears in an amount equal to 1.10% per annum of the first $300
million of Stockholders' Equity of the Company, plus .80% per annum of the
portion of Stockholders' Equity of the Company above $300 million. The
Company will also pay the Advisor, as incentive compensation for each fiscal
quarter, an amount equal to 20% of the dollar amount by which the annualized
Return on Equity for such fiscal quarter exceeds the amount necessary to
provide an annualized Return on Equity equal to the Ten-Year U.S. Treasury
Rate plus 1%.
America First Properties Management Company L.L.C. (the Manager), will provide
property management services for certain of the multifamily properties to be
obtained by the Company. The Manager will receive a management fee equal to a
stated percentage of the gross revenues generated by the property under
management, ranging from 3.75% to 5% of gross revenues. The Manager is an
affiliate of the advisor.
4. Subsequent Event
On April 10, 1998, the Company merged with PREP Fund 1 and PREP Fund 2 and
Pension Fund became a partnership subsidiary of the Company pursuant to the
terms of the Merger Agreement. The Company issued a total of 9,032,239 shares
of Common Stock in connection therewith and acquired the assets of PREP Fund 1
and PREP Fund 2 and controls in excess of 98% of the partnership interests of
the Pension Fund.
<PAGE> -2-
Item 2.
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company had not commenced its business operations as of March 31, 1998.
Accordingly, the Company did not earn any income or incur any expenses during
the quarter ended March 31, 1998. In addition, the Company was only
nominally capitalized as of that date.
As of March 31, 1998, the Company was a party to a merger agreement with,
among other, America First Participating Preferred Equity Mortgage Fund
Limited Partnership (PREP Fund 1), America First PREP Fund 2 Limited
Partnership (PREP Fund 2) and America First PREP Fund 2 Pension Series
(Pension Fund), (collectively referred to as the "PREP Funds") pursuant to
which the Company expects to acquire by merger, substantially, all of the
assets and liabilities of the PREP Funds in exchange for up to 9,062,127
shares of the Company's common stock. Upon consummation of the merger, the
Company will commence its business operations. The merger is subject to
various conditions, including consent of the holders of Units and BUCs of the
PREP Funds; provided that this merger with PREP 1 and PREP 2 may proceed
without the consent of the BUC holders of Pension Fund.
This report contains forward looking statements that reflect management's
current beliefs and estimates of future economic circumstances, industry
conditions, the Partnership's performance and financial results. All
statements, trend analysis and other information concerning possible or
assumed future results of operations of the Partnership and the real estate
investments it has made (including, but not limited to, the information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations"), constitute forward-looking statements. BUC holders
and others should understand that these forward looking statements are subject
to numerous risks and uncertainties and a number of factors could affect the
future results of the Partnership and could cause those results to differ
materially from those expressed in the forward looking statements contained
herein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The requirements of Item 3 of Form 10-Q are not applicable to the Partnership
prior to its Annual Report on Form 10-K for the year ended December 31, 1998.
<PAGE> -3-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger by and among the Registrant,
America First Participating/Preferred Equity Mortgage Fund
Limited Partnership, America First Prep Fund 2 Limited
Partnership, America First Prep Fund 2 Pension Series
Limited Partnership and certain other parties, dated as of
July 29, 1997 (incorporated herein by reference to Exhibit
2.1 of the Registration Statement on Form S-4 dated
February 12, 1998, filed by the Registrant pursuant to the
Securities Act of 1933 (Commission File No. 333-46179)).
3.1 Amended and Restated Articles of Incorporation of the
Registrant (incorporated herein by reference from Form 8-K
dated April 10, 1998, filed by the Registrant pursuant to
the Securities Exchange Act of 1934 (Commission File No.
1-13991)).
3.2 Amended and Restated Bylaws of the Registrant (incorporated
herein by reference from Form 8-K dated April 10, 1998,
filed by the Registrant pursuant to the Securities Exchange
Act of 1934 (Commission File No. 1-13991)).
3.3 Agreement of Limited Partnership, dated May 25, 1988, of
America First Prep Fund 2 Pension Series Limited
Partnership (incorporated herein by reference to Form
10-K, dated December 31, 1988, filed with the
Securities and Exchange Commission (File No. 33-13407)).
3.4 Agreement of Limited Partnership of AF Merger, L.P.
(incorporated herein by reference to Exhibit 3.6 of the
Registration Statement on Form S-4 dated February 12, 1998,
filed by the Registrant pursuant to the Securities Act of
1933 (Commission File No. 333-46179)).
4.1 Specimen of Common Stock Certificate of the Company.
(incorporated herein by reference to Exhibit 4.1 of the
Registration Statement on Form S-4 dated February 12, 1998,
filed by the Registrant pursuant to the Securities Act of
1933 (Commission File No. 333-46179)).
10.1 Form of Advisory Agreement by and between the company and
America First Mortgage Advisory Corporation (incorporated
herein by reference to Exhibit 10.1 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Registrant pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.2 Employment Agreement of Stewart Zimmerman (incorporated
herein by reference to Exhibit 10.2 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Registrant pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.3 Employment Agreement of William S. Gorin (incorporated
herein by reference to Exhibit 10.3 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Registrant pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.4 Employment Agreement of Ronald A Freydberg (incorporated
herein by reference to Exhibit 10.4 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Registrant pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.5 Form of 1997 Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 10.5 of the
Registration Statement on Form S-4 dated February 12,
1998, filed by the Registrant pursuant to the Securities
Act of 1933 (Commission File No. 333-46179)).
<PAGE> -4-
10.6 Form of Dividend Reinvestment Plan (incorporated herein by
reference to Appendix C of the Registration Statement on
Form S-4 dated February 12, 1998, filed by the Registrant
pursuant to the Securities Act of 1933 (Commission File No.
333-46179)).
(b) Form 8-K
The Registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<PAGE> -5-
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.
Dated: May 13, 1998 AMERICA FIRST MORTGAGE INVESTMENTS, INC.
By /s/ Stewart Zimmerman
Stewart Zimmerman
President
and Chief Executive Officer
By /s/ Gary Thompson
Gary Thompson
Chief Financial Officer
<PAGE> -6-
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