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 June 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-23972
AMERICAN MORTGAGE ACCEPTANCE COMPANY
(Formerly American Mortgage Investors Trust)
(Exact name of registrant as specified in its charter)
Massachusetts 13-6972380
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- -------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
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 |_|
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Balance Sheets
============ ============
June 30, December 31,
1999 1998
------------ ------------
(unaudited)
ASSETS
Investments in mortgage loans
(Note 2) $ 29,126,204 $ 45,965,488
Investments in GNMA Certificates
(Note 3) 9,834,312 10,303,002
Note receivable (Note 4) 1,900,000 0
Cash and cash equivalents 18,808,669 2,953,125
Deferred costs (net of accumulated
amortization of $50,000) 0 4,723
Accrued interest receivable 380,576 766,702
Other assets 9,281 0
------------ ------------
Total assets $ 60,059,042 $ 59,993,040
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and
accrued expenses $ 99,133 $ 73,372
Due to affiliates (Note 4) 243,031 1,715,094
------------ ------------
Total liabilities 342,164 1,788,466
------------ ------------
Commitments and Contingencies
(Note 5)
Shareholders' equity:
Shares of beneficial interest;
$.10 par value; 12,500,000
shares authorized; 4,213,826
and 4,172,790 shares issued
and outstanding, respectively 421,384 417,280
Treasury shares of beneficial
interest; $.10 par value; 374,583
and 333,545 shares, respectively (37,459) (33,355)
Additional paid-in capital 68,849,719 68,849,730
Distributions in excess of net income (9,477,831) (11,191,614)
Accumulated other comprehensive
income (38,935) 162,533
------------ ------------
Total shareholders' equity 59,716,878 58,204,574
------------ ------------
Total liabilities and
shareholders' equity $ 60,059,042 $ 59,993,040
============ ============
See accompanying notes to financial statements
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<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
----------------------- -----------------------
Revenues:
Interest income:
Mortgage loans
(Note 2) $ 470,627 $ 802,370 $1,018,992 $1,648,069
REMIC and
GNMA
Certificates
(Note 3) 196,898 230,184 396,544 463,569
Note receivable 26,860 0 26,860 0
Cash and cash
equivalents 262,386 27,196 358,914 51,619
Other income
(Note 2) 200,190 0 200,190 0
---------- ---------- ---------- ----------
Total revenues 1,156,961 1,059,750 2,001,500 2,163,257
---------- ---------- ---------- ----------
Expenses:
General and
administrative 298,729 167,901 436,263 308,433
Realized loss
on sale of
GNMA
Certificates
(Note 3) 331 249 417 617
Amortization 0 2,500 0 5,000
Organization
costs 348,413 0 348,413 0
---------- ---------- ---------- ----------
Total expenses 647,473 170,650 785,093 314,050
---------- ---------- ---------- ----------
Income before
gain on
repayment of
mortgage loans 509,488 889,100 1,216,407 1,849,207
Gain on repayment
of mortgage
loans (Note 2) 0 0 3,273,202 0
---------- ---------- ---------- ----------
Net income $ 509,488 $ 889,100 $4,489,609 $1,849,207
========== ========== ========== ==========
Basic net income
per weighted
average share $ .13 $ .23 $ 1.17 $ .48
========== ========== ========== ==========
See accompanying notes to financial statements
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<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statement of Changes in Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Treasury Shares of
Shares of Beneficial Interest Beneficial Interest Additional Distributions
----------------------------- -------------------- Paid-in in Excess
Shares Amount Shares Amount Capital of Net Income
----------- --------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 4,172,790 $ 417,280 (333,545) $(33,355) $ 68,849,730 $(11,191,614)
Comprehensive income:
Net income 0 0 0 0 0 4,489,609
Other comprehensive loss:
Net unrealized loss on first mortgage bonds:
Net unrealized holding loss arising during
the period
Add: reclassification adjustment for losses
included in net income
Other comprehensive loss
Comprehensive income
Issuance of shares of beneficial interest 41,036 4,104 0 0 629,833 0
Purchase of treasury shares 0 0 (41,038) (4,104) (629,844) 0
Distributions 0 0 0 0 0 (2,775,826)
--------- ---------- -------- -------- ------------ ------------
Balance at June 30, 1999 4,213,826 $ 421,384 (374,583) $(37,459) $ 68,849,719 $ (9,477,831)
========= ========= ======== ======== ============ ============
<CAPTION>
Accumulated
Other
Comprehensive Comprehensive
Income Income (Loss) Total
------------- ------------- ------------
<S> <C> <C> <C>
Balance at January 1, 1999 $ 162,533 $ 58,204,574
Comprehensive income:
Net income $ 4,489,609 0 4,489,609
-----------
Other comprehensive loss:
Net unrealized loss on first mortgage bonds:
Net unrealized holding loss arising during
the period (201,885)
Add: reclassification adjustment for losses
included in net income 417
Other comprehensive loss (201,468) (201,468) (201,468)
-----------
Comprehensive income $ 4,288,141
===========
Issuance of shares of beneficial interest 0 633,937
Purchase of treasury shares 0 (633,948)
Distributions 0 (2,775,826)
----------- ------------
Balance at June 30, 1999 $ (38,935) $ 59,716,878
=========== ============
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statements of Cash Flows
(Unaudited)
==========================
Six Months Ended
June 30,
--------------------------
1999 1998
--------------------------
Cash flows from operating activities:
Net income $ 4,489,609 $ 1,849,207
----------- -----------
Adjustments to reconcile net income
to net cash provided by
operating activities
Gain on repayment of mortgage
loans (3,273,202) 0
Amortization expense -
organization costs 0 5,000
Amortization expense - loan
premium and origination costs 194,370 250,655
Accretion of REMIC
and GNMA discount (11,652) (20,808)
Loss on sale of GNMA Certificates 417 617
Changes in operating assets and liabilities:
Increase in other assets (9,281) 0
Decrease (increase) in accrued
interest receivable 386,126 (197,873)
(Decrease) increase in due to
affiliates (1,472,063) 252,599
Increase in accounts payable and
accrued expenses 25,761 13,425
----------- -----------
Total adjustments (4,159,524) 303,615
----------- -----------
Net cash provided by
operating activities 330,085 2,152,822
----------- -----------
(continued)
See accompanying notes to financial statements
-5-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statements of Cash Flows
(continued)
(Unaudited)
============================
Six Months Ended
June 30,
----------------------------
1999 1998
----------------------------
Cash flows from investing activities:
Increase in investment in
mortgage loans (829,204) 0
Proceeds from repayments of
mortgage loans 20,752,045 132,784
Increase in note receivable (1,900,000) 0
Principal repayments of GNMA
Certificates 278,455 145,511
Principal repayments of REMIC
Certificates 0 806,972
------------ -----------
Net cash provided by
investing activities 18,301,296 1,085,267
------------ -----------
Cash flows from financing activities:
Distributions to shareholders (2,775,826) (2,775,826)
Proceeds from issuance of shares
of beneficial interest 633,937 681,009
Purchase of treasury shares (633,948) (680,995)
------------ -----------
Net cash used in financing
activities (2,775,837) (2,775,812)
------------ -----------
Net increase in cash and
cash equivalents 15,855,544 462,277
Cash and cash equivalents at
the beginning of the period 2,953,125 1,840,715
------------ -----------
Cash and cash equivalents at
the end of the period $ 18,808,669 $ 2,302,992
============ ===========
Supplemental schedule of non-cash
investing activities:
Decrease in deferred costs $ 4,723 $ 0
Increase in investments in
mortgage loans (4,723) 0
------------ -----------
$ 0 $ 0
============ ===========
See accompanying notes to financial statements
-6-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 1 - General
American Mortgage Acceptance Company (formerly American Mortgage Investors
Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business
trust for the primary purpose of investing in government-insured mortgages and
guaranteed mortgage-backed certificates. The Company elected to be treated as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended. The Company operates in one segment, investment in mortgages or
mortgage-backed securities.
On April 6, 1999, the Company received the necessary consent from its
shareholders to approve proposals (the "Proposals") to restructure the Company
from a closed-ended, finite-life REIT to a publicly traded, open-ended,
infinite-life operating REIT.
The Proposals were presented in a definitive consent solicitation statement that
was mailed on February 12, 1999 to shareholders of record on February 5, 1999.
In addition to restructuring the Company to a publicly traded, open-ended,
infinite-life REIT, the Proposals, among other matters, permit the Company to
modify its investment objectives, to incur a specified amount of indebtedness
and to list the Company's shares on a national exchange. As required by the
Company's Declaration of Trust (the "Trust Agreement"), the Proposals were
approved by shareholders holding a majority of the outstanding shares entitled
to vote. The Proposals, each of which was voted upon separately, received
consents averaging 55.96% of the total outstanding shares and 75.36% of the
shares for which the Company received responses.
As a result of the adoption of the Proposals, the Company was liable for the
transaction expenses. Such expenses amounted to approximately $348,000 and are
classified as organization costs in the accompanying statements of income.
Effective April 26, 1999, upon authorization by the Board of Trustees, the
Company's name was changed from American Mortgage Investors Trust to American
Mortgage Acceptance Company. The Company's shares commenced trading on the
American Stock Exchange on July 1, 1999 under the symbol "AMC".
-7-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
The Company's new business plan as a publicly traded REIT focuses on three types
of mortgage products: 1) origination of participating FHA insured multifamily
mortgages, 2) origination of construction and permanent mortgage financing for
affordable multifamily housing pursuant to the new venture with Fannie Mae, and
3) acquisition of subordinated interests in commercial mortgage-backed
securities.
The unaudited financial statements have been prepared on the same basis as the
audited financial statements included in the Company's Form 10-K for the year
ended December 31, 1998. In the opinion of the Advisor, the accompanying
unaudited financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
of the Company as of June 30, 1999, the results of its operations for the three
and six months ended June 30, 1999 and 1998 and its cash flows for the six
months ended June 30, 1999 and 1998. However, the operating results for the
interim periods may not be indicative of the results for the full year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, the disclosure of
contingent assets and liabilities and the reporting of revenues and expenses to
prepare these financial statements in conformity with generally accepted
accounting principals. Actual results could differ from those estimates.
Pursuant to the Redemption Plan which became effective November 30, 1994, the
Company was required to redeem eligible shares presented for redemption for cash
to the extent it had sufficient net proceeds from the sale of shares under the
Reinvestment Plan. As a result of the adoption of the Proposals, the Company's
Reinvestment Plan and Redemption Plan have been terminated, effective with the
distribution for the quarter ended March 31, 1999.
-8-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
The final reinvestment of shares occurred on May 15, 1999. The final redemption
of shares occurred on May 24, 1999.
Basic net income per weighted average share equals net income for the period,
divided by the weighted average number of shares outstanding for the period. The
weighted average number of shares outstanding for the three and six months ended
June 30, 1999 and 1998 were 3,841,699 and 3,840,656 and 3,845,287 and 3,844,835,
respectively.
Certain prior year amounts have been reclassified to conform with current year
presentation.
-9-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 2 - Investments in Mortgage Loans
Information relating to investments in mortgage loans as of June 30, 1999 and
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Accum
Date of -ulated
Invest- Amor-
ment/ Amounts Advanced tization-
Final Interest ------------------------------------- Out- Additional
Matu Rate on Total standing Origi- Loans and Balance at
Descrip -rity Mortgage Mortgage Additional Amounts Loan nation Origina- June
Property -ion Date Loan (A) Loans Loans (B) Advanced Balance Costs tion Costs 30, 1999
- -------- ------- ------- -------- ----------- ---------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Cove 308 12/93 7.625%- $ 6,800,000 $ 840,500 $ 7,640,500 $ 0 $ 0 $ 0 $ 0
Apts Apt 1/29 9.129%
Houston, TX Units (C)
(J)
Oxford on 405 12/93 7.625%- 9,350,000 1,156,000 10,506,000 0 0 0 0
Greenridge Apt 1/29 9.129%
Apts Units (C)
Houston,
TX (J)
Town & 330 4/94 7.375%- 9,348,000 1,039,000 10,387,000 10,037,176 603,895 604,616 10,036,455
Country IV Apt 5/29 9.167%
Apts Units (D) (E) (F)
Urbana, IL
Columbiana 204 4/94 (H) 9,106,099 563,000 9,669,099 9,605,714 537,558 367,450 9,775,822
Lakes Apts. Apt 11/35
Columbia, Units (G)
SC
Stony Brook 125 12/95 7.75%- 8,500,000 763,909 9,263,909 9,196,211 413,492 295,776 9,313,927
Village II Apt 6/37 9.128%
Apts Units (G) (I)
East Haven,
CT
----------------------------------------------------------------------------------------
Total $43,104,099 $4,362,409 $47,466,508 $28,839,101 $1,554,945 $1,267,842 $29,126,204
========================================================================================
<CAPTION>
Interest
Earned Less
Balance by the 1999 Net
December Company Amor- Interest
Property 31, 1998(K) for 1999 tization Earned
- -------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C>
The Cove $ 7,343,073 $ 117,242 $ 16,789 $ 100,453
Apts
Houston, TX
(J)
Oxford on 10,096,915 155,267 23,090 132,177
Greenridge
Apts
Houston,
TX (J)
Town & 10,134,960 156,299 58,015 98,284
Country IV
Apts
Urbana, IL
Columbiana 9,014,698 404,228 52,480 351,748
Lakes Apts.
Columbia,
SC
Stony Brook 9,375,842 380,326 43,996 336,330
Village II
Apts
East Haven,
CT
-----------------------------------------------
Total $45,965,488 $1,213,362 $194,370 $1,018,992
===============================================
</TABLE>
-10-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
On March 1, 1999, Cove Apartments L.L.C. (the "Cove Obligor"), the owner of Cove
Apartments ("Cove"), sold Cove to a third party for $10.25 million. The Cove
Obligor then fully repaid its outstanding debt due to the Company totaling
$8,676,849 including the outstanding balance of an FHA first mortgage loan in
the amount of $6,558,872, an $840,500 additional loan, a $327,944 prepayment
premium due the Company on the FHA loan, an $814,465 sales proceeds
participation payment and accrued Base Interest and Additional Interest through
the repayment date of $135,068 resulting in a gain on the repayment in the
amount of $1,224,968.
On March 1, 1999, Oxford Apartments, L.L.C. (the "Oxford Obligor"), the owner of
Oxford on Greenridge Apartments ("Oxford"), sold Oxford to a third party for
$15.25 million. The Oxford Obligor then fully repaid its outstanding debt due to
the Company totaling $12,288,813 including the outstanding balance of an FHA
first mortgage loan in the amount of $9,018,450, a $1,156,000 additional loan, a
$450,922 prepayment premium due the Company on the FHA loan, a $1,483,664 sales
proceeds participation payment and accrued Base Interest and Additional Interest
through the repayment date of $179,777 resulting in a gain on the repayment in
the amount of $2,048,234.
The Town and Country mortgage loan is considered an impaired loan, as it has not
performed in accordance with the contractual terms of the loan agreement. No
allowance for loan losses has been provided for this loan.
On April 29, 1999, the Company made its final advance, in the amount of
$829,204, on the Columbiana Originated Mortgage. At the time of the final
advance, construction loan extension fees in the amount of $195,958 were
received by the Company and $122,418, were waived. The fees received are
classified as other income in the accompanying statements of operations.
(A) The minimum interest rate shown represents base interest, which is fully
insured by HUD ("Base Interest"). The additional interest rate represents
interest which is not contingent upon cash flow and is secured by partnership
interests in the partnerships which own the Developments ("Additional
Interest").
-11-
<PAGE>
(B) Additional loans are non-interest bearing.
(C) In addition to the interest rate, the Company was entitled to 30% of the
cash flow remaining after payment of Base Interest and Additional Interest and
35% of net sale or refinancing proceeds.
(D) The Originated Mortgage has a term of 35 years, subject to mandatory
prepayment at any time after 12 years and upon one year's notice.
(E) In addition to the interest rate, the Company is entitled to 30% of the cash
flow remaining after payment of Base Interest and Additional Interest.
(F) The operations of Town and Country have not been able to support the payment
of Additional Interest which amounted to $329,718. Accordingly, the accrued
interest income that was deemed uncollectible was reversed from interest income
from mortgage loans in the fourth quarter of 1998, the first quarter of 1999 and
the second quarter of 1999 in the amounts of $83,628, $164,866, and $81,224,
respectively.
(G) The Originated Mortgages have terms of 40 years, subject to mandatory
prepayment at any time after 10 years and upon one year's notice.
(H) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan
period and 7.4% during the construction period. In addition to the interest rate
during the permanent loan period, the Company will be entitled to 25% of the
cash flow remaining after payment of 8.678% interest. The operations of
Columbiana had not been able to support the payment of Additional Interest for
the period October 1, 1997 through June 30, 1998 which amounted to $48,760.
Accordingly, the accrued interest income that was deemed uncollectible was
reversed from interest income from mortgage loans in the fourth quarter of 1998.
As a result of the final advance and conversion of the construction loan to a
permanent loan during the second quarter of 1999, Columbiana was able to repay
construction period advances from the developer as well as Additional Interest
due to the Company through the current period. As a result, the Additional
Interest which had
-12-
<PAGE>
been reversed from interest income in previous quarters was recorded as interest
income in the second quarter of 1999.
(I) In addition to the interest rate, the Company is entitled to 40% of the cash
flow remaining after payment of Base and Additional Interest.
(J) On March 1, 1999 the outstanding debt due to the Company was fully repaid
(see above).
(K) Aggregate cost for federal income tax purposes is $47,121,296.
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<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
Note 3 - Investments in GNMA Certificates
Information relating to investments in GNMA Certificates as of June 30, 1999 and
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Accum-
Date Original ulated
Purchased Purchase Amorti- Loan Origi-
/Final Stated Price Principal (Discount) zation nation Costs
Certificate Payment Interest Including at June at June June at June
Seller Number Date Rate (Discount) 30, 1999 30, 1999 30, 1999 30, 1999
- ------ ----------- -------- -------- ------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GNMA Certificates
Bear Stearns 0355540 7/27/94 7.125% $ 2,407,102 $2,554,502 $(236,291) $ 98,200 $ 79,030
3/15/29
Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,148,026 (8,055) 3,494 72,954
8/15/29
Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 3,594,623 (3,368) 1,590 122,430
7/15/29
SunCoast Capital Group, Ltd. G22412 6/23/97 7.000% 1,981,566 1,451,404 (9,525) 4,233 0
4/20/27
--------------------------------------------------------------
Total $10,514,413 $9,748,555 $(257,239) $ 107,517 $ 274,414
==============================================================
<CAPTION>
Unreal-
ized Interest
Gain/ Earned
(Loss) Balance at Balance at by the Net
at June June December Company 1999 Interest
Seller 30, 1999 30, 1999 31, 1998 for 1999 Accretion Earned
- ------ ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
GNMA Certificates
Bear Stearns $ 13,162 $2,508,603 $ 2,589,414 $ 91,178 $ 10,007 $ 101,185
Malone Mortgage 74 2,216,493 2,252,798 91,420 356 91,776
Goldman Sachs (39,773) 3,675,502 3,761,846 148,988 163 149,151
SunCoast Capital Group, Ltd. (12,398) 1,433,714 1,698,944 53,306 1,126 54,432
-------------------------------------------------------------------------
Total $ (38,935) $9,834,312 $10,303,002 $ 384,892 $ 11,652 $ 396,544
=========================================================================
</TABLE>
-14-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
June 30, 1999
(Unaudited)
The amortized cost, unrealized gain and fair value for the investment in GNMA
Certificates at June 30, 1999 and December 31, 1998 were as follows:
June 30, December 31,
1999 1998
----------- -----------
Amortized cost $ 9,873,247 $10,140,469
Gross unrealized gain (loss) (38,935) 162,533
----------- -----------
Fair Value $ 9,834,312 $10,303,002
=========== ===========
For the six months ended June 30, 1999, there were gains and losses of $1,188
and $1,605, respectively, (including acquisition fees and expenses) on principal
repayments of GNMAs.
Note 4 - Related Party Transactions
The Company has an agreement with the Advisor pursuant to which the Advisor
currently receives compensation consisting primarily of (i) asset management
fees calculated as a percentage of total assets invested by the Company; (ii) a
subordinated incentive fee based on the economic gain on the sale of Mortgage
Investments; and (iii) certain other fees. In addition to the fees discussed
above, the Company reimburses affiliates of the Advisor for certain
administrative and other costs incurred on behalf of the Company.
As a result of the adoption of the Proposals (see Note 1), the Board of Trustees
intends to amend the Advisory Agreement between the Company and the Advisor to,
among other matters, reflect the Proposals and change the Advisory Agreement's
fee structure to (a) eliminate the acquisition and disposition fees currently
payable to the Advisor; (b) provide that with respect to the first $100 million
of new mortgage investments acquired by the Company, the Company will initially
pay to the Advisor origination points with the Company thereafter receiving all
origination points; (c) modify the annual asset management fee payable to the
Advisor; as set forth below and (d) include an annual incentive fee payable to
the Advisor. Such changes would reduce the annual asset management fee payable
with respect to newly acquired investments which are authorized under the
Company's current investment policy from the current asset management fee of
.625% to .355%. The asset management fee for certain (i) investment grade
invest-
-15-
<PAGE>
ments will be .355%, (ii) for certain non-investment grade investments will be
.750%, (iii) for unrated investments will be 1.000% and (iv) for investments
held prior to the adoption of the Proposals will be .625%.
The costs incurred to related parties for the three and six months ended June
30, 1999 and 1998 were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
Expense reimburse-
ment $ 45,105 $ 47,625 $ 76,493 $ 68,085
Asset management
fees 63,349 91,826 142,103 181,789
Incentive management
fee 99,661 0 99,661 0
-------- -------- -------- --------
$208,115 $139,451 $318,257 $249,874
======== ======== ======== ========
Asset management fees and expense reimbursements owed to the Advisor and its
affiliates amounting to approximately $240,000 and $1,327,000 were accrued and
unpaid at June 30, 1999 and December 31, 1998, respectively.
On May 19, 1999, the Company made a loan to Patterson Hope '98 Urban Renewal
L.L.C. (the "Borrower"), an entity in which an affiliate of the Advisor is a
member. The note bears interest at 12% which is payable, along with the
principal, at maturity on September 15, 1999. The note is secured by all of the
membership interest in the Borrower, is guaranteed by Related Capital Company
and may be prepaid in whole or in part at any time.
Note 5 - Subsequent Events
On August 13, 1999, distributions of $1,370,448 and $17,464 were paid to the
Investors and the Advisor, respectively, representing the 1999 second quarter
distribution. The distributions were funded from cash collections of debt
service payments.
-16-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Company has primarily invested in Originated Mortgages and Acquired
Mortgages ("Mortgage Investments") and has also invested in uninsured Additional
Loans made directly to the developers or sponsors of Developments. The Company's
liquidity is based primarily on interest or repayment of principal received from
its Mortgage Investments.
For a description of the Company's investments in mortgage loans and GNMA
Certificates see Notes 2 and 3 of Notes to Financial Statements.
On April 6, 1999, the Company received the necessary consent from its
shareholders to approve proposals (the "Proposals") to restructure the Company
from a closed-ended, finite-life REIT to a publicly traded, open-ended,
infinite-life operating REIT.
The Proposals were presented in a definitive consent solicitation statement that
was mailed on February 12, 1999 to shareholders of record on February 5, 1999.
In addition to restructuring the Company to a publicly traded, open-ended,
infinite-life REIT, the Proposals, among other matters, permit the Company to
modify its investment objectives, to incur a specified amount of indebtedness
and to list the Company's shares on a national exchange. As required by the
Company's Declaration of Trust (the "Trust Agreement"), the Proposals were
approved by shareholders holding a majority of the outstanding shares entitled
to vote. The Proposals, each of which was voted upon separately, received
consents averaging 55.96% of the total outstanding shares and 75.36% of the
shares for which the Company received responses.
As a result of the adoption of the Proposals, the Company was liable for the
transaction expenses. Such expenses amounted to approximately $348,000 and are
classified as organization costs in the accompanying statements of income.
Effective April 26, 1999, upon authorization by the Board of Trustees, the
Company's name was changed from American Mortgage Investors Trust to American
Mortgage Acceptance Company. The Company's shares commenced trading on the
American Stock Exchange on July 1, 1999 under the symbol "AMC".
-17-
<PAGE>
The Company's new business plan as a publicly traded REIT focuses on three types
of mortgage products: 1) origination of participating FHA insured multifamily
mortgages, 2) origination of construction and permanent mortgage financing for
affordable multifamily housing pursuant to the new venture with Fannie Mae, and
3) acquisition of subordinated interests in commercial mortgage-backed
securities.
As a result of the adoption of the Proposals, the Board of Trustees intends to
amend the Advisory Agreement between the Company and the Advisor to, among other
matters, reflect the Proposals and change the Advisory Agreement's fee structure
to (a) eliminate the acquisition and disposition fees currently payable to the
Advisor; (b) provide that with respect to the first $100 million of new mortgage
investments acquired by the Company, the Company will initially pay to the
Advisor origination points with the Company thereafter receiving all origination
points; (c) modify the annual asset management fee payable to the Advisor; as
set forth below and (d) include an annual incentive fee payable to the Advisor.
Such changes would reduce the annual asset management fee payable with respect
to newly acquired investments which are authorized under the Company's current
investment policy from the current asset management fee of .625% to .355%. The
asset management fee for certain (i) investment grade investments will be .355%,
(ii) for certain non-investment grade investments will be .750%, (iii) for
unrated investments will be 1.000% and (iv) for investments held prior to the
adoption of the Proposals will be .625%. The effect of these four changes would
be to make such fees comparable to fees paid by other publicly traded,
open-ended infinite-life REITs with investment strategies similar to the
Company's new investment strategy.
During the six months ended June 30, 1999, cash and cash equivalents increased
approximately $15,856,000 primarily due to cash provided by operating activities
($330,000) and principal repayments of mortgage loans and GNMA Certificates
($21,031,000) which exceeded distributions to shareholders ($2,776,000), an
increase in note receivable ($1,900,000) and an increase in investment in
mortgage loans ($829,000). Included in the adjustments to reconcile the net
income to cash provided by operating activities is a gain on repayment of
mortgage loans ($3,273,000) and net amortization ($183,000).
Net unrealized losses on REMIC and GNMA investments included in shareholders'
equity pursuant to Statement of Financial Accounting Standards No. 115
aggregated $38,935 at June 30, 1999. This represents a decrease of $201,468 in
the unrealized gain
-18-
<PAGE>
for the six months ended June 30, 1999, of which a decrease of $5,313 is
attributable to the sale of securities (which resulted in a net realized loss of
$417) and a decrease of $196,155 is attributable to a decrease in market prices
for the investments held at June 30, 1999 and December 31, 1998. As of August
11, 1999, the net unrealized loss was approximately $265,140.
The yield on the GNMA Certificates will depend, in part, upon the rate and
timing of principal prepayments on the underlying mortgages in the asset pool.
Generally, as market interest rates decrease, mortgage prepayment rates increase
and the market value of interest rate sensitive obligations like the GNMA
Certificates increases. As market interest rates increase, mortgage prepayment
rates tend to decrease and the market value of interest rate sensitive
obligations like the GNMAs tends to decrease. The effect of prepayments on yield
is greater the earlier a prepayment of principal is received. Due to the
complexity of the GNMA structure and the uncertainty of future economic and
other factors that affect interest rates and mortgage prepayments, it is not
possible to predict the effect of future events upon the yield to maturity or
the market value of the GNMA Certificates upon any sale or other disposition or
whether the Company, if it chose to, would be able to reinvest proceeds from
prepayments at favorable rates relative to the coupon rate.
The yield on the mortgage loans will depend, in part, on when, and if, the
Company disposes of the mortgage loans prior to maturity or the obligor fully
repays the outstanding debt. The mortgage loans have fixed interest rates, the
base amount of which is insured by HUD, resulting in a minimal amount of
interest rate risk. The effects of prepayment on yield is greater the earlier a
prepayment of principal is received. Due to the uncertainty of future economic
and other factors that affect interest rates and mortgage prepayments, it is not
possible to predict the effects of future events upon the yield to maturity or
the market value of the mortgage loans upon any sale or other disposition or
whether the Company, if it chose to, would be able to reinvest proceeds from
prepayments at favorable rates relative to the current mortgage loan rates. As
described below, two mortgage loans were repaid and the Company is still in the
process of reinvesting the proceeds of such repaid mortgage loans.
The operations of Town and Country have not been able to support the payment of
Additional Interest which amounted to $329,718. Accordingly, the accrued
interest income that was deemed uncollectible was reversed from interest income
from mortgage loans in the fourth quarter of 1998, the first quarter of
-19-
<PAGE>
1999 and the second quarter of 1999 in the amounts of $83,628, $164,866, and
$81,224, respectively.
The Company expects that cash generated from the Company's investments will be
sufficient to pay all of the Company's expenses in the foreseeable future.
Pursuant to the Redemption Plan which became effective November 30, 1994, the
Company was required to redeem eligible shares presented for redemption for cash
to the extent it had sufficient net proceeds from the sale of shares under the
Reinvestment Plan. As a result of the adoption of the Proposals, the Company's
Reinvestment Plan and Redemption Plan have been terminated, effective with the
distribution for the quarter ended March 31, 1999. The final reinvestment of
shares occurred on May 15, 1999. The final redemption of shares occurred on May
24, 1999.
In order to qualify as a REIT under the Internal Revenue Code, as amended, the
Company must, among other things, distribute at least 95% of its taxable income.
The Company is in compliance with the Code.
On March 1, 1999, Cove Apartments L.L.C. (the "Cove Obligor"), the owner of Cove
Apartments ("Cove"), sold Cove to a third party for $10.25 million. The Cove
Obligor then fully repaid its outstanding debt due to the Company totaling
$8,676,849 including the outstanding balance of an FHA first mortgage loan in
the amount of $6,558,872, an $840,500 additional loan, a $327,944 prepayment
premium due the Company on the FHA loan, an $814,465 sales proceeds
participation payment and accrued Base Interest and Additional Interest through
the repayment date of $135,068 resulting in a gain on the repayment in the
amount of $1,224,968.
On March 1, 1999, Oxford Apartments, L.L.C. (the "Oxford Obligor"), the owner of
Oxford on Greenridge Apartments ("Oxford"), sold Oxford to a third party for
$15.25 million. The Oxford Obligor then fully repaid its outstanding debt due to
the Company totaling $12,288,813 including the outstanding balance of an FHA
first mortgage loan in the amount of $9,018,450, a $1,156,000 additional loan, a
$450,922 prepayment premium due the Company on the FHA loan, a $1,483,664 sales
proceeds participation payment and accrued Base Interest and Additional Interest
through the repayment date of $179,777 resulting in a gain on the repayment in
the amount of $2,048,234.
-20-
<PAGE>
The Company anticipates that it will re-deploy the proceeds from the repayment
of the Cove and Oxford debt into additional FHA insured/co-insured mortgage
loans or other investments contemplated by the Company's new business plan.
Management is not aware of any trends or events, commitments or uncertainties,
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way.
Results of Operations
The net income for the three and six months ended June 30, 1999 and 1998 was
$509,488 and $889,100 and $4,489,609 and $1,849,207, respectively. The total of
the annual operating expenses of the Company may not exceed the greater of (i)
2% of the Average Invested Assets of the Company or (ii) 25% of the Company's
net income, unless such excess is approved by the Independent Trustees. On an
annualized basis, there was no such excess for the six months ended June 30,
1999 and 1998.
Interest income from mortgage loans decreased approximately $332,000 and
$629,000 for the three and six months ended June 30, 1999 as compared to 1998
primarily due to the reversal of Additional Interest in 1999 relating to Town
and Country, the repayment of the Cove and Oxford mortgage loans on March 1,
1999 and the receipt of cash flow interest in 1998 from Oxford.
Interest income from REMIC and GNMA Certificates decreased approximately $33,000
and $67,000 for the three and six months ended June 30, 1999 as compared to 1998
primarily due to the repayment of one of the REMICs in October 1998 and a
decrease in the balances of the GNMA Certificates due to principal payments
received since June 30, 1998.
Interest income from note receivable in the amount of approximately $27,000 was
recorded for the three and six months ended June 30, 1999 relating to a loan in
May 1999.
Interest income from cash and cash equivalents increased approximately $235,000
and $307,000 for the three and six months ended June 30, 1999 as compared to
1998 primarily due to proceeds from the repayment of the Cove and Oxford
mortgage loans on March 1, 1999 which were temporarily invested in 1999.
Other income in the amount of approximately $200,000 was recorded for the three
and six months ended June 30, 1999 relating
-21-
<PAGE>
primarily to the receipt of construction loan extension fees with respect to
Columbiana mortgage loan.
General and administrative expenses increased approximately $131,000 and
$128,000 for the three and six months ended June 30, 1999 as compared to 1998
primarily due to an incentive fee payable to the Advisor and an increase in the
estimate for accounting and printing expenses in the second quarter of 1999 due
to the restructuring of the Company.
Distribution Policy
Beginning in 1998, the Company's distribution policy calls for quarterly
distributions which more closely reflect collections of interest payments and
regularly scheduled principal amortization.
Of the total distributions of $2,775,826 for both the six months ended June 30,
1999 and 1998, $0 and $926,619 ($.24 per share or 33%), respectively,
represented a return of capital determined in accordance with generally accepted
accounting principles. As of June 30, 1999, the aggregate amount of the
distributions made since the commencement of the initial public offering
representing a return of capital, in accordance with generally accepted
accounting principles, totaled $11,183,023. The portion of the distributions
which constituted a return of capital was significant during the acquisition
stage in order to maintain level distributions to shareholders.
Management expects that cash flow from operations will be sufficient to fund the
Company's operating expenses and to make distributions as determined by the
Board on a quarterly basis.
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
-22-
<PAGE>
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. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events.
Year 2000 Compliance
The Company utilizes the computer services of an affiliate of the Advisor. The
affiliate of the Advisor has upgraded its computer information systems to be
year 2000 compliant and beyond. The year 2000 compliance issue concerns the
inability of a computerized system to accurately record dates after 1999. The
affiliate of the Advisor recently underwent a conversion of its financial
systems applications and upgraded all of its non-compliant, in-house software
and hardware inventory. The work stations which experienced problems during the
testing process were corrected with an upgrade patch. The costs incurred by the
Advisor are not being charged to the Company. The most likely worst case
scenario that the Company faces is that computer operations will be suspended
for a few days to a week at January 1, 2000. The Company's contingency plan is
to have a complete backup done on December 31, 1999 and to have both electronic
and printed reports generated for all critical data up to and including December
31, 1999.
With regard to third parties, the Company's Advisor is in the process of
evaluating the potential adverse impact that could result from the failure of
material service providers to be year 2000 compliant. A detailed survey and
assessment was sent to material third parties in the fourth quarter of 1998. The
Company has received assurances from a majority of the third parties with which
it interacts that these third parties have addressed the year 2000 issues and is
evaluating these assurances for their adequacy and accuracy. In cases where the
Company has not received assurances from third parties, it is initiating further
mail and/or phone inquiries. The Company relies heavily on third parties and is
vulnerable to the failures of third parties to address their year 2000 issues.
There can be no assurance given that the third parties will adequately address
their issues.
-23-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material pending legal proceedings.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
On February 12, 1999, definitive consent solicitation materials ("Consent
Statement") were sent to shareholders of record on February 5, 1999 with respect
to various proposals (the "Proposals") to restructure the Company from a
closed-ended, finite life real investment trust ("REIT") to a publicly traded,
open-ended, infinite-life operating REIT.
As of April 6, 1999 each of the Proposals was approved by shareholders holding
more than 50% of the outstanding shares of the Company. As of April 12, 1999,
the last day on which consent ballots could be submitted, the final tabulation
for each of the Proposals was as set forth below (rounded to the nearest whole
share; 3,790,936 total shares outstanding):
I. To authorize an amendment to the Company's Board of Trustees to immediately
list the Company's Shares for trading on the American Stock Exchange.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,161,801 (57.03%) 434,708 (11.47%) 218,496 (5.76%) 975,931 (25.74%)
II. To authorize an amendment to the Company's Declaration that would clarify an
ambiguity in the Declaration of Trust so as to confirm the Board of Trustees'
authority to issue various types of debt and equity securities in addition to
additional shares of beneficial interest which the Board of Trustees is
currently authorized to issue.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,122,658 (56.00%) 458,005 (12.08%) 234,342 (6.18%) 975,931 (25.74%)
III. To authorize an amendment to the Declaration of Trust that would authorize
the Company's Board of Trustees to incur per-
-24-
<PAGE>
manent debt up to an amount equal to 50% of the Company's Total Market Value (as
defined in the Consent Statement) measured at the time debt is incurred and to
incur additional debt under working capital line(s) of credit.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,059,709 (54.34%) 517,147 (13.64%) 238,149 (6.28%) 975,931 (25.74%)
IV. To authorize an amendment to the Declaration of Trust that would authorize
the Company's Board of Trustees to reinvest proceeds from repayments and
dispositions of the Company's assets.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,137,364 (56.39%) 451,630 (11.91%) 226,011 (5.96%) 975,931 (25.74%)
V. To authorize an amendment to the Declaration of Trust that would change the
Company from a finite-life, closed-ended REIT to an open-ended, infinite-life
REIT.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,119,398 (55.91%) 456,029 (12.03%) 239,578 (6.32%) 975,931 (25.74%)
VI. To authorize an amendment to the Declaration of Trust that would change the
Company's investment policy as described in the Consent Statement.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,107,579 (55.60%) 471,514 (12.44%) 235,912 (6.22%) 975,931 (25.74%)
VII. To authorize an amendment to the Declaration of Trust that would require
the consent of both a majority of the Board of Trustees and the holders of a
majority of the Shares to terminate the Company.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,149,391 (56.70%) 441,564 (11.65%) 224,050 (5.91%) 975,931 (25.74%)
-25-
<PAGE>
VIII. To authorize various conforming amendments to the Declaration of Trust to
reflect the Company's new investment policy and other items discussed in the
Consent Statement.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,135,107 (56.32%) 446,078 (11.77%) 233,820 (6.17%) 975,931 (25.74%)
IX. To adopt an incentive share option plan.
REFUSE TO
CONSENT CONSENT ABSTAIN UNVOTED
- ------- ------- ------- -------
2,099,373 (55.38%) 472,983 (12.48%) 242,649 (6.40%) 975,931 (25.74%)
A proxy and proxy statement soliciting the vote of the Company's
shareholders for the Company's annual meeting of shareholders was sent to
shareholders on or about May 1, 1999. Such meeting was held on June 16, 1999.
Peter T. Allen, Arthur P. Fisch and J. Michael Fried were reelected as trustees
(2,051,030 shares voted for reelection and 55,693 shares voted against
reelection).
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.4(c) Second Amended and Restated Declaration of Trust, dated as
of April 6, 1999 (incorporated by reference to Exhibit
3.4(c) in the Company's March 31, 1999 Quarterly Report on
Form 10-Q)
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
Current report on Form 8-K relating to the repayment of the Cove and
Oxford mortgage loans was dated March 1, 1999 and was filed on March
15, 1999.
Current Report Form 8-K relating to the approval of the Proposals
and the approval for listing on the American Stock Exchange was
dated April 6, 1999 and was filed on April 14, 1999.
-26-
<PAGE>
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: August 13, 1999
By: /s/ Stuart J. Boesky
----------------------------------------
Stuart J. Boesky
President and Chief Operating Officer
Date: August 13, 1999
By: /s/ John B. Roche
----------------------------------------
John B. Roche
Senior Vice President and
Chief Financial Officer
Date: August 13, 1999
By: /s/ Richard A. Palermo
----------------------------------------
Richard A. Palermo
Vice President, Treasurer, Controller
and Chief Accounting Officer
-27-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for American Mortgage Acceptance Company and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 18,808,669
<SECURITIES> 9,834,312
<RECEIVABLES> 31,736,498
<ALLOWANCES> 329,718
<INVENTORY> 0
<CURRENT-ASSETS> 9,281
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,059,042
<CURRENT-LIABILITIES> 342,164
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 59,716,878
<TOTAL-LIABILITY-AND-EQUITY> 60,059,042
<SALES> 0
<TOTAL-REVENUES> 2,001,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 785,093
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,489,609
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,489,609
<EPS-BASIC> 1.17
<EPS-DILUTED> 1.17
</TABLE>
