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 September 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
(Unaudited)
<TABLE>
<CAPTION>
============= ============
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Investments in mortgage loans $ 29,009,478 $ 45,965,488
Investments in GNMA certificates-
available for sale 9,676,340 10,303,002
Investment in subordinated commercial
mortgage-backed security-trading 35,623,708 0
Receivable from broker 38,933,730 0
Cash and cash equivalents 20,183,836 2,953,125
Deferred costs (net of accumulated
amortization of $50,000) 27,113 4,723
Accrued interest receivable 400,525 766,702
Other assets 113,853 0
------------- -------------
Total assets $ 133,968,583 $ 59,993,040
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 140,166 $ 73,372
Due to Advisor and affiliates 226,854 1,715,094
Payable for subordinated commercial
mortgage-backed security purchased 35,622,358 0
Accrued interest payable 841,626 0
Distributions payable 1,391,503 0
Government security sold short 38,193,276 0
------------- -------------
Total liabilities 76,415,783 1,788,466
------------- -------------
Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest; $.10 par value; 12,500,000 shares
authorized; 4,213,826 issued and 3,838,630 outstanding, and 4,172,790
issued and 3,839,245 outstanding in 1999 and 1998,
respectively 421,383 417,280
Treasury shares of beneficial interest;
375,196 and 333,545 shares in 1999 and
1998, respectively (37,520) (33,355)
Additional paid-in capital 68,840,500 68,849,730
Distributions in excess of net income (11,560,157) (11,191,614)
Accumulated other comprehensive income (loss) (111,406) 162,533
------------- -------------
Total shareholders' equity 57,552,800 58,204,574
------------- -------------
Total liabilities and shareholders' equity $ 133,968,583 $ 59,993,040
============= =============
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
============================= =============================
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $ 465,994 $ 787,949 $ 1,484,986 $ 2,436,018
REMIC and GNMA
certificates 195,315 217,714 591,859 681,283
Subordinated commercial
mortgage-backed
security 10,187 0 10,187 0
Note receivable 58,926 0 85,786 0
Cash and cash equivalents 221,459 31,336 580,373 82,955
Other income 19,000 0 219,190 0
----------- ----------- ----------- -----------
Total revenues 970,881 1,036,999 2,972,381 3,200,256
----------- ----------- ----------- -----------
Expenses:
Interest 6,061 0 6,061 0
General and administrative 250,841 186,345 687,104 494,778
Amortization 0 0 0 5,000
Organization costs 16,405 0 364,818 0
----------- ----------- ----------- -----------
Total expenses 273,307 186,345 1,057,983 499,778
----------- ----------- ----------- -----------
Other gain (loss):
Realized gain (loss) on sale
of GNMA certificates (485) 7,265 (902) 6,648
Gain on repayment of
mortgage loans 0 0 3,273,202 0
----------- ----------- ----------- -----------
Total other gain (loss) (485) 7,265 3,272,300 6,648
----------- ----------- ----------- -----------
Net income $ 697,089 $ 857,919 $ 5,186,698 $ 2,707,126
=========== =========== =========== ===========
Net income per share
(basic and diluted) $ .18 $ .22 $ 1.35 $ .70
=========== =========== =========== ===========
Weighted average
shares outstanding
(basic and diluted) 3,838,630 3,845,453 3,843,044 3,845,043
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statement of Changes in Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Treasury Shares of
Shares of Beneficial Interest Beneficial Interest Additional
----------------------------- ------------------- Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 4,172,790 $ 417,280 (333,545) $(33,355) $68,849,730
Comprehensive income:
Net income 0 0 0 0 0
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 4,103 0 0 629,834
Purchase of treasury shares 0 0 (41,651) (4,165) (639,064)
Distributions 0 0 0 0 0
--------- --------- -------- -------- -----------
Balance at September 30, 1999 4,213,826 $ 421,383 (375,196) $(37,520) $68,840,500
========= ========= ======== ======== ===========
<CAPTION>
Accumulated
Distributions Other
in Excess Comprehensive Comprehensive
of Net Income Income Income (Loss) Total
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 $(11,191,614) $ 162,533 $58,204,574
Comprehensive income:
Net income 5,186,698 $5,186,698 0 5,186,698
Other comprehensive loss:
Net unrealized loss on first
mortgage bonds:
Net unrealized holding loss
arising during the period (274,841)
Add: reclassification adjustment
for losses included in net income 902
----------
Other comprehensive loss (273,939) (273,939) (273,939)
Comprehensive income $4,912,759
==========
Issuance of shares of beneficial
interest 0 0 633,937
Purchase of treasury shares 0 0 (643,229)
Distributions (5,555,241) 0 (5,555,241)
------------ ---------- -----------
Balance at September 30, 1999 $(11,560,157) $ (111,406) $57,552,800
============ ========== ===========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
===============================
Nine Months Ended
September 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,186,698 $ 2,707,126
------------ ------------
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 271,936 376,082
Accretion of REMIC and GNMA discount (17,414) (20,298)
Accretion of discount on subordinated commercial
mortgage-backed security (1,350) 0
Gain on sale of REMIC Certificates 0 (7,560)
Loss on sale of GNMA Certificates 902 912
Changes in operating assets and liabilities:
Investment in subordinated commercial
mortgage-backed security (35,622,358) 0
Receivable from broker (38,933,730) 0
Accrued interest receivable 366,177 (257,228)
Other assets (113,853) 0
Due to Advisor and affiliates (1,488,240) 399,792
Accounts payable and accrued expenses 66,794 22,387
Accrued interest payable 841,626 0
Government security sold short 38,193,276 0
Payable for subordinated commercial
mortgage-backed security purchased 35,622,358 0
------------ ------------
Total adjustments (4,087,078) 519,087
------------ ------------
Net cash provided by operating activities 1,099,620 3,226,213
------------ ------------
Cash flows from investing activities:
Increase in investment in mortgage loans (829,204) 0
Proceeds from repayments of mortgage loans 20,791,203 202,608
Increase in notes receivable (1,900,000) 0
Repayment of notes receivable 1,900,000 0
Increase in deferred costs (27,113) 0
Principal repayments of GNMA Certificates 369,235 233,583
Principal repayments of REMIC Certificates 0 1,386,745
------------ ------------
Net cash provided by investing activities 20,304,121 1,822,936
------------ ------------
Cash flows from financing activities:
Distributions paid to shareholders (4,163,738) (4,163,738)
Proceeds from issuance of shares of beneficial
interest 633,937 1,013,799
Purchase of treasury shares (643,229) (1,013,777)
------------ ------------
Net cash used in financing activities (4,173,030) (4,163,716)
------------ ------------
Net increase in cash and cash equivalents 17,230,711 885,433
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 $ 20,183,836 $ 2,726,148
============ ============
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Statements of Cash Flows
(continued)
(Unaudited)
<TABLE>
<CAPTION>
=============================
Nine Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Supplemental schedule of non-cash investing and financing activities:
Decrease in deferred costs $ 4,723 $ 0
Increase in investments in mortgage loans (4,723) 0
----------- -----------
$ 0 $ 0
=========== ===========
Distributions to shareholders declared $(5,555,241) $(4,163,738)
Increase in distributions payable
to shareholders 1,391,503 0
----------- -----------
Distributions paid to shareholders $(4,163,738) $(4,163,738)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 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 is organized and operates as one business segment,
investment in mortgages and mortgage-backed securities.
On April 6, 1999, the Company received the necessary consent from its
shareholders to approve proposals (the "Proposals") to, among other things,
restructure the Company from a closed-ended, finite-life REIT to a publicly
traded, open-ended, infinite-life operating REIT. In addition to restructuring
the Company, the Proposals, among other matters, permit the Company to modify
its investment objectives, to incur a specified amount of indebtedness and to
list the Company's shares on a national exchange.
As a result of the adoption of the Proposals, the Company was liable for the
transaction expenses. Such expenses amounted to approximately $365,000 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".
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 a new venture with Fannie Mae, and 3)
acquisition of subordinated interests in commercial mortgage-backed securities.
The current composition of the Company's investment portfolio reflects the
recent change in the Company's business plan and is not comparable to its
investment portfolio prior to April 1999. Furthermore, the Company is still in
the process of implementing its new business plan and, therefore, the current
portfolio should not be considered indicative of the composition of the
portfolio that might be expected in the future.
The Company is governed by a board of trustees comprised of two independent
trustees and one trustee who is affiliated with Related Capital Company
("Related"). The Company has engaged Related AMI Associates, Inc. (the
"Advisor"), an affiliate of Related, to manage its day-to-day affairs.
The accompanying financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of the Company as of September 30, 1999, the results of
its operations for the three and nine months ended September 30, 1999 and 1998
and its cash flows for the nine months ended September 30, 1999 and 1998.
However, the operating results for the interim periods may not be indicative of
the results for the full year.
-7-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
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. The final reinvestment of
shares occurred on May 15, 1999. The final redemption of shares occurred on May
24, 1999.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for the
Company beginning with the first quarter of 2001. Company management is
currently evaluating the impact that this statement will have on its hedging
strategies and is currently unable to predict the effect, if any, it will have
on the Company's financial statements.
Certain prior year amounts have been reclassified to conform with current year
presentation.
-8-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
Note 2 - Investments in Mortgage Loans
Information relating to investments in mortgage loans as of September 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
Descrip -rity Mortgage Mortgage Additional Amounts Loan nation Origina-
Property -tion Date Loan (A) Loans Loans (B) Advanced Balance Costs tion Costs
- -------- ------- ------ -------- -------- ---------- -------- ------- ------ ----------
<S> <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
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
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 10,016,366 603,895 633,608
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 9,593,491 537,558 394,030
Lakes Apts Apt. 11/35
Columbia, Units (G)
SC
Stony Brook 125 12/95 7.75%- 8,500,000 763,909 9,263,909 9,190,083 413,492 317,769
Village II Apt. 6/37 9.128%
Apts Units (G) (I)
East Haven,
CT
-------------------------------------------------------------------------------------
Total $43,104,099 $ 4,362,409 $47,466,508 $28,799,940 $ 1,554,945 $ 1,345,407
=====================================================================================
<CAPTION>
Interest
Earned Less
Balance at Balance at by the 1999 Net
September December Company Amor- Interest
Property 30, 1999 31, 1998(K) for 1999 tization Earned
- -------- ---------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
The Cove $ 0 $ 7,343,073 $ 117,242 $ 16,789 $ 100,453
Apts
Houston, TX
(J)
Oxford on 0 10,096,915 155,267 23,090 132,177
Greenridge
Apts
Houston, TX
(J)
Town & 9,986,653 10,134,960 316,332 87,008 229,324
Country IV
Apts
Urbana, IL
Columbiana 9,737,019 9,014,698 597,412 79,060 518,352
Lakes Apts
Columbia,
SC
Stony Brook 9,285,806 9,375,842 570,667 65,987 504,680
Village II
Apts
East Haven,
CT
-------------------------------------------------------------------
Total $29,009,478 $45,965,488 $ 1,756,920 $ 271,934 $ 1,484,986
===================================================================
</TABLE>
-9-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 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").
(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 $370,863 at September 30, 1999.
Accordingly, the accrued interest income that was deemed uncollectible was
reversed from interest income from mortgage loans. The amount of accrued
interest income reversed during the three and nine months ended September 30,
1999 and 1998 was $41,145 and $0 and $287,235 and $0, respectively.
-10-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
(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 second quarter. As a result, the Additional
Interest which had 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.
-11-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
Note 3 - Investments in GNMA Certificates-Available for Sale
Information relating to investments in GNMA Certificates as of September 30,
1999 and December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Date Pur-
chased Original Accumulated
/Final Stated Purchase Price Principal at (Discount) at Amortization
Certificate Payment Interest Including September September at September
Seller Number Date Rate (Discount) 30, 1999 30, 1999 30, 1999
- ------ ------ ---- ---- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GNMA Certificates
Bear Stearns 0355540 7/27/94 7.125% $ 2,407,102 $2,548,512 $(235,737) $ 102,954
3/15/29
Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,144,349 (8,041) 3,666
8/15/29
Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 3,573,406 (3,348) 1,661
7/15/29
SunCoast Capital Group, Ltd. G22412 6/23/97 7.000% 1,981,566 1,391,509 (9,132) 4,566
4/20/27
----------------------------------------------------------
Total $10,514,413 $9,657,776 $(256,258) $ 112,847
==========================================================
<CAPTION>
Unrealized Interest
Loan Origination Loss at Balance at Balance at Earned Net
Costs at September September September December by the Company 1999 Interest
Seller 30, 1999 30, 1999 30, 1999 31, 1998 for 1999 Accretion Earned
- ------ -------- -------- -------- -------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
GNMA Certificates
Bear Stearns $ 78,845 $ (15,945) $2,478,629 $ 2,589,414 $136,609 $14,993 $151,602
Malone Mortgage 72,829 (12,166) 2,200,637 2,252,798 137,012 533 137,545
Goldman Sachs 121,707 (59,160) 3,634,266 3,761,846 222,836 243 223,079
SunCoast Capital Group, Ltd. 0 (24,135) 1,362,808 1,698,944 77,989 1,644 79,633
------------------------------------------------------------------------------------------------
Total $ 273,381 $(111,406) $9,676,340 $10,303,002 $574,446 $17,413 $591,859
================================================================================================
</TABLE>
-12-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
The amortized cost, unrealized gain and fair value for the investment in GNMA
Certificates at September 30, 1999 and December 31, 1998 were as follows:
September 30, December 31,
1999 1998
------------- ------------
Amortized cost $ 9,787,746 $10,140,469
Gross unrealized gain (loss) (111,406) 162,533
----------- -----------
Fair Value $ 9,676,340 $10,303,002
=========== ===========
For the nine months ended September 30, 1999, there were gains and losses of
$1,532 and $2,434, respectively, (including acquisition fees and expenses) on
principal repayments of GNMAs.
Note 4 - Investment in Subordinated Commercial Mortgage-Backed Security-Trading
and Short Sales
On September 30, 1999, for settlement on October 1, 1999, the Company acquired a
"BB+" rated subordinated commercial mortgage-backed security ("CMBS") from a
Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage Trust. The CMBS
investment, which was purchased for $35,622,358, has a face amount of
$50,399,711 and an annual coupon rate of 6.4%. The Company purchased the CMBS
investment using cash and debt provided through a repurchase facility (see Note
5).
At the date of acquisition, the Company elected to designate its CMBS investment
as a trading asset. Such securities are carried at their estimated fair value,
with the net unrealized gains or losses included in earnings. Interest income is
recognized as it becomes receivable, and includes accretion of discounts,
computed using the effective yield method, after considering estimated
prepayments and credit losses. Actual credit loss and prepayment experience will
be reviewed periodically and effective yields will be adjusted if necessary.
-13-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
As of September 30, 1999, the 205 mortgage loans underlying the CMBS interest
held by the Company were secured by 217 properties of the types and in the
states identified below:
Property Type Percentage (1)
- ------------- --------------
Multifamily 35%
Retail 25
Office 18
Health Care 4
Hospitality 4
Mixed Use 4
Other 10
State Percentage (1)
- ----- --------------
CA 23%
NY 19
FL 6
PA 6
Others (2) 46
(1) Based on a percentage of the total unpaid principal balance of the
underlying loans.
(2) No other state comprises more than 5% of the total.
The fair value of the Company's CMBS investment is generally estimated by
management based on market prices provided by certain dealers who make a market
in these financial instruments. The market for CMBS investments periodically
suffers from a lack of liquidity. Accordingly, the fair value reported may not
necessarily be indicative of the amount the Company could realize in a current
sale.
At September 30, 1999, the un-leveraged, un-hedged, weighted average yield to
maturity of the Company's CMBS investment was approximately 15%.
The yield to maturity on the Company's CMBS interest depends on, among other
things, the rate and timing of principal payments, the pass-through rate and
interest rate fluctuations. The subordinated CMBS interest owned by the Company
provides credit support to the more senior interests of the related commercial
securitization. Cash flow from the mortgages underlying the CMBS interest
generally is allocated first to the senior interests, with the most senior
interest having a priority entitlement to cash flow. Remaining cash flow is
allocated generally among the other CMBS interests in order of their relative
seniority. To the extent that there are defaults and unrecoverable losses on the
underlying mortgages, resulting in reduced cash flows, the most subordinate CMBS
interest will bear this loss first. To the extent there are losses in excess of
the most subordinated interest's stated entitlement to principal and interest,
then the remaining CMBS interests will bear such losses in order of their
relative subordination. There is, therefore no assurance that the yield to
maturity discussed above will be achieved.
On September 30, 1999, the Company entered into an agreement (the "Agreement")
with ARCap Investors, L.L.C. ("ARCap"), a privately held investment fund which
is managed by an entity controlled by Apollo ARCap, L.L.C. and RemiCap
Investments, L.L.C. ARCap acquired
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<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
from a Chase Manhattan Bank-First Union National Bank Commercial Mortgage Trust
(the "Chase-First Union Trust") all of the commercial mortgage backed securities
that are subordinate to the CMBS investment (the "Subordinate Bonds") acquired
by the Company. Under the Agreement, the Company has the right to acquire a
portion of the Subordinate Bonds from ARCap and to exchange a portion or all of
the CMBS investment and Subordinate Bonds for a preferred equity interest in
ARCap. Furthermore, the Company has the right to participate on the same terms
with ARCap in any subsequent resecuritization by ARCap of the Chase-First Union
Trust bond issuance. In connection with such resecuritization, ARCap has the
right to cause the Company to choose between three alternative options: (i) to
sell the CMBS investment to ARCap; (ii) to participate with ARCap in the
resecuritization; or (iii) to exchange the CMBS investment for a preferred
equity position in ARCap.
On September 30, 1999, for settlement on October 1, 1999, the Company entered
into a contract to sell a security that it did not own at the time of the sale,
at a specified price, at a specified time ("Short Sale"). The Company is
utilizing this contract as a means of mitigating the potential financial
statement impact of changes in the fair value of its CMBS investment due to
changes in interest rates. This contract involved the sale of U.S. Treasury
Notes with a face amount of $39,327,000 borrowed from Bear Stearns & Co., Inc.
("Bear Stearns") for net proceeds of $39,028,841. Bear Stearns will retain
$38,933,730 of proceeds from the sale until the Company replaces the borrowed
security. Risks in these contracts arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
securities values and interest rates. If the market value of the securities
involved in the short sale increases, the Company may be required to meet a
"margin call". The Company accounts for its liability to return the borrowed
security under its Short Sale contract at its market value, with unrealized
gains or losses recorded in earnings. Income earned on the proceeds on deposit
with Bear Stearns will be included in interest income from cash and cash
equivalents and interest due on securities borrowed under the Short Sale is
included in interest expense.
The Company is exposed to credit loss in the event of nonperformance by the
broker that holds a deposit as collateral for securities sold short. However the
Company does not anticipate nonperformance by such broker.
Note 5 - Repurchase Facility
On September 30, 1999, the Company entered into a repurchase facility (the
"Repurchase Facility") with Bear Stearns, whereby Bear Stearns, on October 1,
1999, advanced $19,568,000 (55% of the purchase price) in cash towards the
purchase of a CMBS investment (see Note 4). The Repurchase Facility has a
variable interest rate based on the one-month LIBOR rate plus 1.5%, which is
adjusted on the first day of each month, and terminates on March 17, 2000. The
Repurchase Facility is collateralized by the Company's CMBS investment and
contains restrictions based on the then current market value of such investment
as calculated by Bear Stearns. A decline in the market value of the CMBS
investment could result in cash flow from such investment being diverted to
reduce the outstanding borrowing, the requirement to post additional collateral,
or the sale of such investment.
Note 6 - Related Party Transactions
Prior to the adoption of the Proposals, the Company had an agreement with the
Advisor pursuant to which the Advisor received compensation consisting primarily
of (i) asset management fees calculated as .625% of total assets invested by the
Company; (ii) a subordinated incentive fee based on the economic gain on the
sale of Mortgage Investments; (iii) reimbursement of certain administrative and
other costs incurred by the Advisor on behalf of the Company; and (iv) certain
other fees. In addition, with respect to Mortgage Loans acquired by the
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<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
Company, the Advisor was entitled to receive loan placement fees paid by
borrowers equal to up to 1.5% of the principal amount of each mortgage loan.
As a result of the adoption of the Proposals (see Note 1), the Board of Trustees
amended 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) modify the annual asset management fee payable to
the Advisor as set forth below; and (c) include an annual incentive fee payable
to the Advisor as also set forth below. The modified annual asset management fee
is calculated as follows: (i) .355% for investments in Mortgage Loans; (ii)
.355% for certain investment grade investments; (iii) .750% for certain
non-investment grade investments; (iv) 1.000% for unrated investments; and (v)
.625% for investments held prior to the adoption of the Proposals. The annual
incentive fee is calculated as follows: subject to a minimum annual distribution
being made to shareholders from cash available for distribution of approximately
$1.45 per Share, the Advisor will be entitled to receive incentive compensation
for each fiscal year in an amount equal to the product of (A) 25% of the dollar
amount by which (1)(a) Funds From Operations of the Company (before the
incentive fee) per Share (based on the weighted average number of Shares
outstanding) plus (b) gains (or minus losses) from debt restructuring and sales
of property per Share (based on the weighted average number of Shares
outstanding), exceed (2) an amount equal to (a) the weighted average of the
price per Share of the initial offering (i.e. $20 per Share) and the prices per
Share of any secondary offerings by the Company multiplied by (b) the ten-year
U.S. Treasury rate plus two percent per annum multiplied by (B) the weighted
average number of Shares outstanding during such fiscal year. For any period
less than a fiscal year during which the amended Advisory Agreement is in
effect, the incentive fee will be prorated according to the proportion which
such period bears to a full fiscal year, taking into account, however, the
Company's cash available for distribution for the entire fiscal year.
In addition, the Advisory Agreement's fee structure was also changed so that
with respect to the first $100 million of new Mortgage Loans acquired by the
Company, the Advisor will receive origination points paid by borrowers equal to
up to 1% of the principal amount of each Mortgage Loan and the Company will
receive origination points paid by borrowers in excess of 1%. After the first
$100 million of additional Mortgage Loans is acquired, the Company will retain
100% of the origination points paid by borrowers.
The costs incurred to related parties for the three and nine months ended
September 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -----------------------
1999 1998 1999 1998
------------------------- -----------------------
<S> <C> <C> <C> <C>
Expense reimbursement $ 76,028 $ 31,944 $ 152,521 $ 100,029
Asset management fees 63,485 90,329 205,588 272,118
Incentive management fee (18,522) 0 81,139 0
--------- --------- --------- ---------
$ 120,991 $ 122,273 $ 439,248 $ 372,147
========= ========= ========= =========
</TABLE>
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<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
Notes to Financial Statements
September 30, 1999
(Unaudited)
Asset management fees, the incentive management fee and expense reimbursements
owed to the Advisor and its affiliates amounting to approximately $221,000 and
$1,327,000 were accrued and unpaid at September 30, 1999 and December 31, 1998,
respectively.
On May 19, 1999, the Company made a loan in the amount of $1,900,000 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 bore interest at 12% which was
payable, along with the principal, at maturity on September 15, 1999. The note
was secured by all of the membership interest in the Borrower, was guaranteed by
Related Capital Company and could be prepaid in whole or in part at any time. In
September 1999 the loan was repaid and the Advisor and the Company each received
origination points (fees) in the amount of $19,000.
Note 7 - Earnings Per Share
Basic net income per share in the amount $.18 and $.22 and $1.35 and $.70 for
the three and nine months ended September 30, 1999 and 1998, respectively,
equals net income for the periods ($697,089 and $857,919 and $5,186,698 and
$2,707,126, respectively), divided by the weighted average number of shares
outstanding for the periods (3,838,630 and 3,845,453 and 3,843,044 and
3,845,043, respectively).
As the Company has only one type of equity security outstanding at September 30,
1999, diluted net income per share is the same as basic net income per share.
Note 8 - Commitments and Contingencies
The Company is currently in the process of completing a $250 million loan
venture with Federal National Mortgage Association ("Fannie Mae") which has
agreed to fund the origination of $250 million of Delegated Underwriter and
Servicer loans for apartment properties that qualify for low income housing tax
credits under Section 42 of the Internal Revenue Code. Fannie Mae is the
nation's largest source of financing for home mortgages and the largest investor
in multifamily mortgages. Under the proposed transaction, the Company will
originate and contract for individual loans of up to $6 million dollars each
over a two-year period and will work with American Property Financing, which
will underwrite and service the loans for Fannie Mae. Each property in the
transaction will benefit from 9% low income housing tax credits for no less than
90% of its units. The Company will guaranty a first loss position of up to 10%
of the pool of $250 million and will receive guaranty and other fees.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
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.
On April 6, 1999, the Company received the necessary consent from its
shareholders to approve proposals (the "Proposals") to, among other things,
restructure the Company from a closed-ended, finite-life REIT to a publicly
traded, open-ended, infinite-life operating REIT. In addition to restructuring
the Company, the Proposals, among other matters, permit the Company to modify
its investment objectives, to incur a specified amount of indebtedness and to
list the Company's shares on a national exchange.
As a result of the adoption of the Proposals, the Company was liable for the
transaction expenses. Such expenses amounted to approximately $365,000 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".
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 a new venture with Fannie Mae, and 3)
acquisition of subordinated interests in commercial mortgage-backed securities.
The current composition of the Company's investment portfolio reflects the
recent change in the Company's business plan and is not comparable to its
investment portfolio prior to April 1999. Furthermore, the Company is still in
the process of implementing its new business plan and, therefore, the current
portfolio should not be considered indicative of the composition of the
portfolio that might be expected in the future.
Also as a result of the adoption of the Proposals, the Board of Trustees amended
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) modify the annual asset management fee payable to the Advisor as
set forth below; and (c) include an annual incentive fee payable to the Advisor.
The modified annual asset management fee is calculated as follows: (i) .355% for
investments in Mortgage Loans; (ii) .355% for certain investment grade
investments; (iii) .750% for certain non-investment grade investments; (iv)
1.000% for unrated investments; and (v) .625% for investments held prior to the
adoption of the Proposals.
In addition, the Advisory Agreement's fee structure was also changed so that
with respect to the first $100 million of new Mortgage Loans acquired by the
Company, the Advisor will receive origination points paid by borrowers equal to
up to 1% of the principal amount of each Mortgage Loan and the Company will
receive origination points paid by borrowers in excess of 1%. After the first
$100 million of additional Mortgage Loans is acquired, the Company will retain
100% of the origination points paid by borrowers.
These changes are intended 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.
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<PAGE>
As of September 30, 1999, the Company owned three participating FHA insured
mortgage loans, three uninsured additional loans to the developers of the
underlying properties, four GNMA Certificates, one subordinated commercial
mortgage-backed security and had net assets of approximately $57,553,000. For a
description of the Company's investments, see notes 2, 3 and 4 of Notes to
Financial Statements.
Due to the recent change in the Company's business plan, the current composition
of the Company's investment portfolio should not be considered indicative of the
composition of the portfolio that might be expected in the future.
During the nine months ended September 30, 1999, cash and cash equivalents
increased approximately $17,231,000 primarily due to cash provided by operating
activities ($1,100,000) and principal repayments of mortgage loans and GNMA
Certificates ($21,160,000) which exceeded distributions paid to shareholders
($4,164,000) 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 ($254,000).
Net unrealized losses on GNMA investments included in shareholders' equity
pursuant to Statement of Financial Accounting Standards No. 115 aggregated
$111,406 at September 30, 1999. This represents a decrease of $273,939 in the
unrealized gain for the nine months ended September 30, 1999, of which a
decrease of $6,905 is attributable to the sale of securities (which resulted in
a net realized loss of $902) and a decrease of $267,034 is attributable to a
decrease in market prices for the investments held at September 30, 1999 and
December 31, 1998. As of November 4, 1999, the net unrealized loss was
approximately $130,689.
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 $370,863 at September 30, 1999.
Accordingly, the accrued interest income that was deemed uncollectible was
reversed from interest income from mortgage
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<PAGE>
loans. The amount of accrued interest income reversed during the three and nine
months ended September 30, 1999 and 1998 was $41,145 and $0 and $287,235 and $0,
respectively.
The yield to maturity on the Company's CMBS interest depends on, among other
things, the rate and timing of principal payments, the pass-through rate and
interest rate fluctuations. The subordinated CMBS interest owned by the Company
provides credit support to the more senior interests of the related commercial
securitization. Cash flow from the mortgages underlying the CMBS interest
generally is allocated first to the senior interests, with the most senior
interest having a priority entitlement to cash flow. Remaining cash flow is
allocated generally among the other CMBS interests in order of their relative
seniority. To the extent that there are defaults and unrecoverable losses on the
underlying mortgages, resulting in reduced cash flows, the most subordinate CMBS
interest will bear this loss first. To the extent there are losses in excess of
the most subordinated interest's stated entitlement to principal and interest,
then the remaining CMBS interests will bear such losses in order of their
relative subordination. There is, therefore no assurance that the yield to
maturity discussed above will be achieved.
On September 30, 1999, the Company entered into an agreement (the "Agreement")
with ARCap Investors, L.L.C. ("ARCap"), a privately held investment fund which
is managed by an entity controlled by Apollo ARCap, L.L.C. and RemiCap
Investments, L.L.C. ARCap acquired from a Chase Manhattan Bank-First Union
National Bank Commercial Mortgage Trust (the "Chase-First Union Trust") all of
the commercial mortgage backed securities that are subordinate to the CMBS
investment (the "Subordinate Bonds") acquired by the Company. Under the
Agreement, the Company has the right to acquire a portion of the Subordinate
Bonds from ARCap and to exchange a portion or all of the CMBS investment and
Subordinate Bonds for a preferred equity interest in ARCap. Furthermore, the
Company has the right to participate on the same terms with ARCap in any
subsequent resecuritization by ARCap of the Chase-First Union Trust bond
issuance. In connection with such resecuritization, ARCap has the right to cause
the Company to choose between three alternative options: (i) to sell the CMBS
investment to ARCap; (ii) to participate with ARCap in the resecuritization; or
(iii) to exchange the CMBS investment for a preferred equity position in ARCap.
On September 30, 1999, for settlement on October 1, 1999, the Company entered
into a contract to sell a security that it did not own at the time of the sale,
at a specified price, at a specified time ("Short Sale"). The Company is
utilizing this contract as a means of mitigating ("Hedging") the potential
financial statement impact of changes in the fair value of its CMBS investment
due to changes in interest rates. This contract involved the sale of U.S.
Treasury Notes with a face amount of $39,327,000 borrowed from Bear Stearns &
Co., Inc. ("Bear Stearns") for net proceeds of $39,028,841. Bear Stearns will
retain $38,933,730 of proceeds from the sale until the Company replaces the
borrowed security. Risks in these contracts arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
securities values and interest rates. If the market value of the securities
involved in the short sale increases, the Company may be required to meet a
"margin call". The Company accounts for its liability to return the borrowed
security under its Short Sale contract at its market value, with unrealized
gains or losses recorded in earnings. Income earned on the proceeds on deposit
with Bear Stearns will be included in interest income from cash and cash
equivalents and interest due under the Short Sale is included in interest
expense.
The Company is exposed to credit loss in the event of nonperformance by the
broker that holds a deposit as collateral for securities sold short. However the
Company does not anticipate nonperformance by such broker.
On September 30, 1999, the Company entered into a repurchase facility (the
"Repurchase Facility") with Bear Stearns, whereby Bear Stearns, on October 1,
1999, advanced $19,568,000 (55% of the purchase price) in cash towards the
purchase of a CMBS investment. The Repurchase Facility has a variable interest
rate based on the one-month LIBOR rate plus 1.5%, which is adjusted on the first
day of each month, and terminates on March 17, 2000. The Repurchase Facility is
collateralized by the Company's CMBS investment and contains restric-
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<PAGE>
tions based on the then current market value of such investment as calculated by
Bear Stearns. A decline in the market value of the CMBS investment could result
in cash flow from such investment being diverted to reduce the outstanding
borrowing, the requirement to post additional collateral, or the sale of such
investment.
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 believes that it is in compliance with the REIT-related provisions
of the Code.
The Company expects that cash generated from the Company's investments will be
sufficient to pay all of the Company's expenses and to make distributions to its
shareholders in amounts sufficient to retain the Company's REIT status in the
foreseeable future.
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.
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.
On May 19, 1999, the Company made a loan in the amount of $1,900,000 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 bore interest at 12% which was
payable, along with the principal, at maturity on September 15, 1999. The note
was secured by all of the membership interest in the Borrower, was guaranteed by
Related Capital Company and could be prepaid in whole or in part at any time. In
September 1999 the loan was repaid and the Advisor and the Company each received
origination points (fees) in the amount of $19,000.
The Company is currently in the process of completing a $250 million loan
venture with Federal National Mortgage Association ("Fannie Mae") which has
agreed to fund the origination of $250 million of Delegated Underwriter and
Servicer loans for apartment properties that qualify for low income housing tax
credits under Section 42 of the Internal Revenue Code. Fannie Mae is the
nation's largest source of financing for home mortgages and the largest investor
in multifamily mortgages. Under the proposed transaction, the Company will
originate and contract for individual loans of up to $6 million dollars each
over a two-year period and will work with American Property Financing, which
will underwrite and service the loans for Fannie Mae. Each property in the
transaction will benefit from 9% low income housing tax credits for no less than
90%
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<PAGE>
of its units. The Company will guaranty a first loss position of up to 10% of
the pool of $250 million and will receive guaranty and other fees.
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 nine months ended September 30, 1999 and 1998
was $697,089 and $857,919 and $5,186,698 and $2,707,126, 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 nine months
ended September 30, 1999 and 1998.
Interest income from mortgage loans decreased approximately $322,000 and
$951,000 for the three and nine months ended September 30, 1999 as compared to
1998 primarily due to the reversal of Additional Interest in 1999 relating to
Town and Country and the repayment of the Cove and Oxford mortgage loans on
March 1, 1999.
Interest income from REMIC and GNMA Certificates decreased approximately $22,000
and $89,000 for the three and nine months ended September 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 September 30, 1998.
Interest income from note receivable in the amounts of approximately $59,000 and
$86,000 was recorded for the three and nine months ended September 30, 1999
relating to a loan made in May 1999 which was repaid in September 1999.
Interest income from cash and cash equivalents increased approximately $190,000
and $497,000 for the three and nine months ended September 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 $19,000 and $219,000 was recorded
for the three and nine months ended September 30, 1999 relating primarily to the
receipt of construction loan extension fees with respect to Columbiana mortgage
loan in the second quarter of 1999 and origination points (fees) relating to the
note receivable in the third quarter of 1999.
General and administrative expenses increased approximately $43,000 and $171,000
for the three and nine months ended September 30, 1999 as compared to 1998
primarily due to an incentive fee payable to the Advisor in the nine months and
an increase in the reimbursements of certain administrative and other costs
incurred by the Advisor on behalf of the Company, an increase in the estimate
for accounting and an increase in public relations expenses due to the
restructuring of the Company.
Distributions
Of the total distributions of $5,555,241 and $4,163,738 for the nine months
ended September 30, 1999 and 1998, respectively, $368,543 ($.10 per share or 7%)
and $1,456,612 ($.38 per share or
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<PAGE>
35%), respectively, represented a return of capital determined in accordance
with generally accepted accounting principles. As of September 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 $11,551,566. The portion of the
distributions which constituted a return of capital was significant during the
initial acquisition stage in order to maintain level distributions to
shareholders.
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 of Trustees on a quarterly basis.
Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for the
Company beginning with the first quarter of 2001. Company management is
currently evaluating the impact that this statement will have on its hedging
strategies and is currently unable to predict the effect, if any, it will have
on the Company's financial statements.
Forward-Looking Statements
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things, affect the availability and creditworthiness of prospective tenants,
lease rents and the terms and availability of financing; adverse changes in the
real estate markets including, among other things, competition with other
companies; risks of real estate development and acquisition; governmental
actions and initiatives; and environment/safety requirements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. 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 year 2000 compliance issue concerns the potential inability of certain
computerized systems to accurately record dates after 1999. 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 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
-23-
<PAGE>
parties to address their year 2000 issues. There can be no assurance given that
the third parties will adequately address their issues.
Inflation
Inflation did not have a material effect on the Company's results for the
periods presented.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to loss resulting from changes in interest rates,
changes in spreads on CMBS, foreign currency exchange rates, commodity prices
and equity prices. The primary market risks to which the investments of the
Company are exposed are interest rate risk and CMBS spread risk, which are
highly sensitive to many factors, including governmental monetary and tax
policies, domestic and international economic and political considerations and
other factors beyond the control of the Company.
Changes in the general level of interest rates can affect the net interest
income of the Company.
The Company is further exposed to interest rate risk through its short term
financing through a repurchase facility at a rate that is based on the one-month
LIBOR. The repurchase facility into which the Company has entered is for a term
of 30 days terminates on March 17, 2000. Changes in interest rates may increase
the Company's cost of financing its investments. Furthermore, if the Company
were unable to replace its short term financing, it may be forced to sell its
assets in order to pay down its repurchase facility at a time when the market
for the sale of such assets is unfavorable. If this were to occur, the company
could realize substantial losses.
The investments of the Company are also exposed to spread risk. The price of a
fixed income security is generally determined by adding an interest rate spread
to a benchmark interest rate, such as the U.S. Treasury rate. As the spread on a
security widens (or increases), the price (or value) of the security falls. As
spreads on CMBS widen, the fair value of the Company's portfolio falls. Spread
widening in the market for CMBS can occur as a result of market concerns over
the stability of the commercial real estate market, excess supply of CMBS, or
general credit concerns in other markets.
The Company has entered into a contract to sell a security that it did not own
at the time of the sale, at a specified price at a specified time (short sales).
The Company utilizes this contract as a means of mitigating ('hedging') the
potential financial statement impact of changes in the fair value of its CMBS
investment due to changes in interest rates. As the value of the Company's CMBS
declines (increases) with increases (decreases) in interest rates, the value of
the contract increases (decreases). There can be no guarantee, however, that the
change in value of the contract will completely offset the change in value of
the fixed-rate interest earning asset. This contract involves the short sale of
a U.S. Treasury security. Risks in this contract arises from the possible
inability of the counterparty to meet the terms of its contract and from
movements in securities values and interest rates. If the market value of the
security involved in the short sale increases, the Company may be required to
meet a 'margin call'.
-24-
<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 permanent 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%)
-25-
<PAGE>
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%)
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
-26-
<PAGE>
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).
10 (y) Supplemental Mortgage Note by Columbiana Lakes Limited
Partnership, dated as of April 1, 1999 (filed herewith).
10 (z) Amended and Restated Advisory Services Agreement,
effective as of April 6, 1999 (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
Current report on Form 8-K relating to the commencement of trading
on the American Stock Exchange on July 1, 1999 was dated July 1,
1999 and was filed on July 9, 1999.
Current Report Form 8-K relating to the dismissal of the accounting
firm of KPMG LLP and the retention of the accounting firm of
Deloitte & Touche LLP as the Company's independent auditor to audit
the Company's financial statements was dated September 9, 1999 and
was filed on September 15, 1999.
-27-
<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: November 12, 1999
By: /s/ Stuart J. Boesky
------------------------------------
Stuart J. Boesky
President and Chief Operating Officer
Date: November 12, 1999
By: /s/ John B. Roche
------------------------------------
John B. Roche
Senior Vice President and
Chief Financial Officer
Date: November 12, 1999
By: /s/ Richard A. Palermo
------------------------------------
Richard A. Palermo
Vice President, Treasurer, Controller
and Chief Accounting Officer
Exhibit 10(y)
SUPPLEMENTAL
MORTGAGE NOTE
$423,100.00 Columbia, South Carolina
As of April 1, 1999
FOR VALUE RECEIVED, the undersigned COLUMBIANA LAKES LIMITED PARTNERSHIP,
a South Carolina limited partnership, promises to pay to AMERICAN CAPITAL
RESOURCE, INC., a Delaware corporation, or order, at its office is c/o APF, 5607
Glenridge Drive, 5th Floor, Atlanta, Georgia 30342, or at such other place as
may be designated in writing by the holder of this Note, the principal sum of
FOUR HUNDRED TWENTY-THREE THOUSAND ONE HUNDRED AND 00/100THS DOLLARS
($423,100.00), with interest thereon from the date hereof at the rate of seven
and four tenths percent (7.4%) per annum on the unpaid balance until paid. The
principal and interest under this Note shall be due and payable in monthly
installments as follows:
Commencing on the first day of May, 1999, installments of interest
and principal shall be due and payable in the sum of Two Thousand
Seven Hundred Ninety Seven and 33/100ths Dollars ($2,797.33) each,
such payments to continue monthly thereafter on the first day of
each succeeding month until the entire indebtedness has been paid in
full. In any event, the balance of principal, if any, remaining
unpaid, plus accrued interest, shall be due and payable on November
1, 2035. The installments of interest and principal shall be applied
first to interest at the rate of seven and four tenths percent
(7.4%) per annum upon the principal sum or so much thereof as shall
from time to time remain unpaid, and the balance thereof shall be
applied on account of principal.
Both principal and interest under this Note shall be payable at the office
of AMERICAN CAPITAL RESOURCE, INC. at its office is c/o APF, 5607 Glenridge
Drive, 5th Floor, Atlanta, Georgia 30342, or such other place as the holder may
designate in writing.
If default be made in the payment of any installment under this Note, and
if such default is not made good prior to the due date of the next such
installment, the entire principal sum and accrued interest shall at once become
due and payable without notice, at the option of the holder of this Note.
Failure to exercise this option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default. In the event of
default in the payment of this Note, and if the same is collected by an attorney
at law, the undersigned hereby agree(s) to pay all costs of collection,
including a reasonable attorney's fee.
This Note is secured by a Mortgage on real estate situated in Lexington
and Richland Counties, South Carolina.
Prepayment of this Note is subject to the terms and provisions set forth
in the Rider attached hereto and incorporated herein by this reference.
It is further agreed that each maker and endorser jointly and severally
hereby consents to any extensions or renewals of this Note or any part thereof
without notice, and each maker and endorser agrees that he/she will remain
liable as such during any extension or renewal hereof until the debt represented
hereby is fully paid.
All parties to this Note, whether principal, surety, guarantor, or
endorser, hereby waive presentment for payment, demand, protest, notice of
protest, and notice of dishonor.
<PAGE>
SIGNED AND SEALED, as of this 1st day of April, 1999.
COLUMBIANA LAKES [SEAL]
LIMITED PARTNERSHIP
a South Carolina limited partnership
By: /s/ Ronald P. Curry
-------------------------------
Ronald P. Curry
General Partner
THIS IS TO CERTIFY that this is the Note described in and secured by a
Mortgage of even date herewith and in the same principal amount as herein stated
and secured by real estate situated in Lexington and Richland Counties, South
Carolina.
Dated this 29 day of April, 1999.
[SEAL] /s/ [ILLEGIBLE]
-------------------------------
Notary Public
My Commission Expires: 4-20-05
------------------
STATE OF
SOUTH CAROLINA
LOAN NO. 054- 35550-PM
----------------------
SUPPLEMENTAL
MORTGAGE NOTE
----------------------
COLUMBIANA LAKES LIMITED PARTNERSHIP
TO
AMERICAN CAPITAL RESOURCE, INC.
No. 054-35550-PM
------------------
Section
Insured under 221(d)(4) of the National Housing Act and Regulations
thereunder of the Federal Housing Commissioner
In effect on January 10, 1994
--------------------
as amended
A total sum of $423,100.00 has been approved for insurance hereunder by
the Commissioner
FEDERAL HOUSING COMMISSIONER
By /s/ Robert A. Rifenberick
--------------------------------
(Authorized Agent)
Director, Columbia
Multifamily Program Center
Date April 29, 1999
---------------------------
- --------------------------------------------------------------------------------
Reference is made to the Act and the Regulations thereunder covering
assignments of the insurance protection on this note.
76497-P Rev. 12/83 FHA-Wash., D.C.
<PAGE>
RIDER TO SUPPLEMENTAL MORTGAGE NOTE
FOR COLUMBIANA LAKES APARTMENTS
FEDERAL HOUSING ADMINISTRATION
PROJECT NO. 054-35550-PM
1. Incorporation by Reference. This Rider is incorporated by reference in and
made a part of that certain Supplemental Mortgage Note (The Note), dated
as of April 1, 1999 executed by COLUMBIANA LAKES LIMITED PARTNERSHIP (the
"Borrower' or "Mortgagor"), as maker, and payable to the order of AMERICAN
CAPITAL RESOURCE, INC. (the "Holder") in connection with the following
housing project (the "Project"):
Columbiana Lakes Apartments
FHA Project No. 054-35550-PM
Capitalized terms used herein shall have the same meaning given to such terms in
the Note.
2. Conflicts. In the event of any conflict between the terms and provisions
of the Note and this Rider, the terms and provisions of this Rider shall
be controlling in all respects.
3. Mandatory Prepayments. The indebtedness evidenced by the Note shall be
subject to mandatory prepayment in whole or in part at any time, without
premium or penalty: from the proceeds of any casualty insurance or
condemnation award received, to the extent required by applicable rules,
regulations, policies or procedures of the U.S. Department of Housing and
Urban Development ("HUD")
4. HUD Required Prepayments. Notwithstanding any prepayment prohibition
imposed and/or penalty required by this Note with respect to prepayments
made prior to May 26, 2004 the indebtedness may be prepaid in part or in
full without the consent of the holder and without prepayment penalty if
HUD determines that prepayment will avoid a mortgage insurance claim and
is, therefore, in the best interest of the Federal Government.
5. Other Prepayments. Any prepayment as to which Paragraphs 3 and 4 above are
inapplicable shall be subject to the terms and provisions of this
paragraph 5.
a. Prepayment Limitations. Except as provided in Paragraphs 3 and 4
above, the Note may not be prepaid in whole or in part on or prior
to May 26, 2000.
During the period following May 26, 2000 the Note may be prepaid in
whole or in part at any time, provided that (i) all of the
requirements and conditions of this Paragraph 5 are complied with
and (ii) said prepayment is accompanied by the applicable prepayment
premium (expressed as a percentage of the principal amount so
prepaid) set forth below:
Prepayment Premium Prepayment Limitation Period
------------------ ----------------------------
(a) Five Percent (5%) if prepaid during the period of May 27, 2000
to May 26, 2001;
(b) Four Percent (4%) if prepaid during the period of May 27, 2001
to May 26, 2002;
(c) Three Percent (3%) if prepaid during the period of May 27, 2002
to May 26, 2003;
1
<PAGE>
(d) Two Percent (2%) if prepaid during the period of May 27, 2003 to
May 26, 2004:
(e) One Percent (1%) if prepaid during the period of May 27, 2004 to
May 26, 2005.
No prepayment penalty shall be imposed thereafter.
Notwithstanding any partial prepayment of principal made pursuant to
the privilege of prepayment set forth in this Note, the borrower
shall not be relieved of its obligations to make scheduled monthly
installments of principal and interest as and when such payments are
due and payable under this Note.
b. Applicability. The provisions of this Paragraph 5 shall apply to any
prepayment made during the Prepayment Limitation Period specified
above, irrespective of whether said prepayment is voluntary or
involuntary, including any prepayment occurring due to an
acceleration of the debt by the Holder as a result of any default by
the Borrower or in the event the debt is satisfied or released by
foreclosure (whether by power of sale or by judicial proceeding),
deed in lieu of foreclosure, or by any other means. The restrictions
on prepayment contained in this Paragraph 5 shall not be waived,
modified, altered, amended or deleted without the written consent of
the Holder.
c. Notice Requirements. The Borrower shall give the Holder not less
than thirty (30) days advance written notice of any prepayment,
which notice shall specify the date on which prepayment is to be
made, the principal amount of such prepayment and the total amount
to be tendered.
d. Date of Payment. Any prepayment made hereunder shall be made to the
Holder only on the last day of any given month.
e. Amount of Payment. Any prepayment made under this Paragraph 5 shall
be accompanied by an amount of money that is sufficient to provide
for the payment of the following:
i. The applicable prepayment premium as provided for in Paragraph
5a hereof; and
ii. Interest accrued and unpaid on the principal balance of the
Note, to and including the date of prepayment; and
iii. All other sums due or owing under the Note or the Mortgage at
the time of prepayment.
f. Special Conditions and Regulation. Any prepayment made under this
Paragraph 5 shall be subject to the following additional conditions,
requirements and understandings:
i. There shall be no default under the Note or the Mortgage securing
same at the time of prepayment.
ii. Such prepayment shall be in any whole multiple of $5,000.00.
iii. Such payment shall be made in Federal funds.
iv. The Holder shall not be required to accept any prepayment tendered
under this Paragraph 5 which is not in compliance with all of the
conditions and requirements specified in this paragraph 5.
2
<PAGE>
6. Late Charge. In the event any installment or part of any installment due
hereunder becomes delinquent for more than fifteen (15) days, there shall
be due at the option of the Holder hereof, in addition to other sums then
due hereunder, a sum equal to two percent (2%) of the amount of principal
and interest so delinquent. Whenever, under the law of the State of Texas,
the amount of any such late charges is considered to be additional
interest, this provision shall not be used if the rate of interest
specified is in excess of the maximum rate of interest permitted by law.
7. Exculpatory Provision. Notwithstanding any other provision contained in
this Note, it is agreed that the execution of this Note shall impose no
personal liability on the Borrower for payment of the indebtedness
evidenced hereby and in the event of a default, the Holder of this Note
shall look solely to the property described in the Mortgage and to the
rents, issues and profits therefor in satisfaction of the indebtedness
evidenced hereby and will not seek or obtain any deficiency or personal
judgment against the Borrower hereof except such judgment or decree as may
be necessary to foreclose and bar its interest in the property and all
other property mortgaged, pledged, conveyed or assigned to secure payment
of this Note except as set out in the Mortgage of even date given to
secure this indebtedness.
COLUMBIANA LAKES LIMITED PARTNERSHIP
By: /s/ Ronald P. Curry
------------------------------------
Ronald P. Curry, General Partner
3
AMENDED AND RESTATED
ADVISORY SERVICES AGREEMENT
BETWEEN
AMERICAN MORTGAGE ACCEPTANCE COMPANY
(formerly known as "AMERICAN MORTGAGE INVESTORS TRUST")
AND
RELATED AMI ASSOCIATES, INC.
AGREEMENT dated March 29, 1993, as AMENDED AND RESTATED on November __,
1999, but such amendment and restatement to be effective as of April 6, 1999,
between AMERICAN MORTGAGE ACCEPTANCE COMPANY (formerly known as "American
Mortgage Investors Trust") (the "Company"), a Massachusetts business trust, and
RELATED AMI ASSOCIATES, INC. (the "Advisor"), a Delaware corporation. All
capitalized terms used herein, and not otherwise defined, shall have the
meanings ascribed to them in Section 10 hereof.
W I T N E S S E T H:
WHEREAS, the Company is a business trust organized under the laws of the
Commonwealth of Massachusetts, which has qualified as a real estate investment
trust as defined in the Internal Revenue Code of 1986, as the same may be
amended or modified from time to time (which, together with any regulations and
rulings thereunder, is hereafter called the "Code");
WHEREAS, the Company and the Advisor originally entered into an Advisory
Services Agreement dated as of March 29, 1993, as amended on October 26, 1993,
December 31, 1993 and March 29, 1994, pursuant to which the Advisor has been
providing services to the Company since such date;
WHEREAS, the Advisory Services Agreement was most recently renewed by the
Company's board of directors at its April 26, 1999 meeting for an additional one
year period to run through March 28, 2000;
WHEREAS, the Company's shareholders have approved certain amendments to
the Company's Amended and Restated Declaration of Trust pursuant to which the
Company will, among other things, become an operating company and is permitted
to invest its funds in the investments permitted in its Declaration of Trust
(the "Reorganization");
<PAGE>
WHEREAS, in connection with the Reorganization, the Company advised its
shareholders that it would amend the terms of the Advisory Services Agreement to
reflect the revisions set forth in the Consent Solicitation;
WHEREAS, the Company has changed its name from "American Mortgage
Investors Trust" to "American Mortgage Acceptance Company";
WHEREAS, the Company desires to continue to avail itself of the
experience, sources of information, advice, assistance and certain facilities
available to the Advisor and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of and subject to the
supervision of the Trustees of the Company, all as provided herein;
WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
IT IS AGREED that the Advisory Services Agreement is amended and restated as
follows:
1. Duties of Advisor. The Company hereby continues to retain the Advisor
as the advisor of the Company to perform the services hereinafter set forth, and
the Advisor hereby accepts such appointment, subject to the terms and conditions
hereinafter set forth. In performance of this undertaking, subject to the
supervision of the Trustees and consistent with the provisions of the Company's
Declaration of Trust, the Advisor shall:
(1) obtain for the Company, furnish and/or supervise the services
necessary to perform any ministerial functions in connection with the management
of the day-to-day operations of the Company subject to the supervision of the
Trustees;
(2) seek out and present to the Company, whether through its own efforts
or those of third parties retained by it, suitable and a sufficient number of
investment opportunities which are consistent with the investment objectives and
policies of the Company as adopted by the Trustees from time to time;
(3) exercise absolute discretion, subject to the Trustees' review, in
decisions to originate, acquire, retain, sell or negotiate for the prepayment or
restructuring of mortgages and other investments of the Company;
(4) recommend investment opportunities consistent with the Company's
investment objectives and policies and negotiate on behalf of the Company with
respect to potential investments or the disposition thereof;
2
<PAGE>
(5) upon request, cause an Affiliate to serve as the mortgagee of record
for the Mortgages of the Company if such Affiliate is qualified to do so and in
that capacity to hold escrows on behalf of mortgagors in connection with the
servicing of mortgages, which it may deposit with various banks including banks
with which it may be affiliated;
(6) obtain for the Company such other services as may be required in
acquiring or disposing of investments, disbursing and collecting the funds of
the Company, paying the debts and fulfilling the obligations of the Company, and
handling, prosecuting and settling any claims of the Company, including
foreclosing and otherwise enforcing mortgages and other liens securing
investments;
(7) obtain for the Company such services as may be required for property
management, mortgage brokerage and servicing, and other activities relating to
the investment portfolio of the Company;
(8) evaluate, structure and negotiate potential prepayments or sales of
mortgages and other investments and, if applicable, coordinate with government
agencies and Fannie Mae and Freddie Mac in connection therewith;
(9) monitor annual Participating Interest Payments, monitor operations and
expenses of the Developments, and verify computations of annual Participating
Interest Payments;
(10) from time to time, or as requested by the Trustees, make reports to
the Company as to its performance of the foregoing services; and
(11) do all things necessary to assure its ability to render the services
contemplated herein.
2. Fiduciary Relationship. The Advisor, as a result of its relationship
with the Company pursuant to this Agreement, stands in a fiduciary relationship
with the Shareholders of the Company.
3. No Partnership or Joint Venture. The Company and the Advisor are not
partners or joint venturers with each other and nothing herein shall be
construed to make them partners or joint venturers or impose any liability as
such on either of them.
4. Records. At all times, the Advisor shall keep books of account and
records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Company at any time during the
ordinary business hours of the Advisor.
3
<PAGE>
5. REIT Qualification. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, furnishing or rendering services to tenants of property or managing
or operating real property) which, in its sole judgment made in good faith, or,
in the judgment of the Trustees, provided that the Trustees give the Advisor
written notice to such effect, would (a) adversely affect the status of the
Company as a real estate investment trust pursuant to Section 856 of the Code;
(b) violate any law, rule, regulation or statement of policy of any governmental
body or agency having jurisdiction over the Company or over its securities, or
(c) be prohibited by the Company's Declaration of Trust.
6. Bank Accounts. The Advisor may establish and maintain one or more bank
accounts in the name of the Company or in its own name as agent for the Company
and may collect and deposit in and disburse from any such account, any money on
behalf of the Company, under such terms and conditions as the Trustees may
approve, provided that no funds in such account shall be commingled with funds
of the Advisor. From time to time and upon appropriate request, the Advisor
shall render appropriate accounting of such collections and payments to the
Trustee and the auditors of the Company.
7. Bond. If required by the Trustees, the Advisor will maintain a fidelity
bond with a responsible surety company in such amounts as may be required by the
Trustees, covering all partners thereof together with employees and agents of
the Advisor handling funds of the Company and investment documents or records
pertaining to investments of the Company. Such bonds shall inure to the benefit
of the Company in respect of losses from acts of such partners, employees and
agents through theft, embezzlement, fraud, negligence, error or omission or
otherwise. The premiums on such bonds shall be paid by the Company.
8. Information Furnished Advisor. (a) The Trustees shall, at all times,
keep the Advisor fully informed with regard to the investment policy of the
Company, including any specific types of Mortgages or investments desired, the
desired geographical areas of investments, and any criteria or conditions
established by the Trustees as to whether the Company will make a particular
investment, the capitalization policy of the Company (including the policy with
regard to the incurrence of indebtedness by the Company) and their intentions as
to the future operations of the Company. In particular, the Trustees shall
notify the Advisor promptly of their intention to either sell or otherwise
dispose of any of the Company's investments, to make any new investment, to
incur any indebtedness or to issue any additional Shares in the Company.
(1) The Company shall furnish the Advisor with a certified copy of all
financial statements of the Company, a signed copy of each report prepared by
the independent certified public accountants and such other information with
regard to the Company's affairs as the Advisor may from time to time reasonably
request.
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9. Consultation and Advice. In addition to the services described above,
the Advisor shall consult with the Trustees and shall, at the request of the
Trustees of the Company, furnish advice and recommendations with respect to
other aspects of the business and affairs of the Company.
10. Definitions. As used herein, the following terms shall have the
meanings set forth below:
(1) "Acquired Guaranteed Mortgage Certificate" shall mean any
mortgage-backed security guaranteed by Fannie Mae or Freddie Mac which is backed
by a conventional mortgage or mortgages and acquired by or on behalf of the
Company other than in connection with the origination of the underlying Mortgage
or Mortgages.
(2) "Acquired Insured Mortgage" shall mean (i) any Mortgage which is a
fully funded Mortgage Loan made to an entity that owns a Development insured by
FHA and acquired by or on behalf of the Company as a whole loan or a beneficial
interest or a participating interest therein or by a purchase of mortgage-backed
securities or pass-through certificates backed by indebtedness secured by FHA
insured Mortgage Loans.; and (ii) any mortgaged-backed securities guaranteed by
Fannie Mae or on behalf of the Company other than in connection with the
origination of the underlying Mortgage or Mortgages.
(3) "Acquired Mortgage" shall mean either an Acquired Insured Mortgage or
an Acquired Guaranteed Mortgage Certificate.
(4) "Additional Loan" shall mean the non-interest bearing loan made to the
developer or sponsor of a Development (or the general partners or other
principals of the owner of the Development) in connection with a Mortgage Loan.
(5) "Additional Mortgage Investments" shall mean the permanent investments
of the Company as described in the Consent Statement, (other than the Original
Mortgage Investments) which investments shall include: Uninsured Mortgage Loans,
Construction Loans, Bridge Loans, Mezzanine Loans, Mortgage Derivatives and
Subordinated Interests in CMBS.
(6) "Advisor" shall mean Related AMI Associates, Inc.
(7) "Affiliate" shall mean (i) any Person directly or indirectly
controlling, controlled by or under common control with another Person, (ii) any
Person owning or controlling 10% or more of the outstanding voting securities or
beneficial interests in such other Person, (iii) any officer, director, trustee,
or general partner of such Person, and (iv) if such other Person is an officer,
director, trustee or partner of another entity, then the entity for which that
Person acts in any such capacity.
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(8) "Affiliated Programs" shall mean Aegis Realty, Inc., Capital Mortgage
Plus L.P., any similar programs organized by the Sponsor, any successors to such
programs or a combination of such programs.
(9) "Agreement" shall mean this Amended and Restated Advisory Services
Agreement.
(10) "Annual Incentive Fee" shall have the meaning set forth in Section
12(b) of this Agreement.
(11) "Asset Management Fee" shall mean the fees payable to the Advisor
pursuant to Section 11 of this Agreement.
(12) "Average Invested Assets" shall mean the average of the aggregate
Book Value of the assets of the Company for any period invested, directly or
indirectly, in Mortgage Investments before reserves for depreciation or bad
debts or other similar non-cash reserves, computed by taking the average of such
values at the end of each month during such period.
(13) "Book Value" shall mean the value of an asset or assets of the
Company before provisions of amortization or depreciation, and before deducting
any indebtedness or other liability in respect thereto, except that no asset
shall be valued at more than its fair value as determined by the Board of
Trustees.
(14) "CAD" shall mean cash available for distribution, which shall consist
of the Company's net income (as determined pursuant to GAAP) adjusted for
certain non-cash charges (as determined pursuant to GAAP).
(15) "CMOs" shall mean collateralized mortgage obligations.
(16) "Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws (together with any
regulations and rulings thereunder).
(17) "Company" shall mean American Mortgage Acceptance Company (formerly
known as "American Mortgage Investors Trust"), a Massachusetts business trust.
(18) "Consent Statement" shall mean the Company's consent statement, dated
February 11, 1999.
(19) "Declaration of Trust" shall mean the Second Amended and Restated
Declaration of Trust of the Company, as amended and/or restated from time to
time.
(20) "Development" shall mean a multifamily, primarily residential, rental
project or health care facility.
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(21) "Distributions" shall mean any cash distributed to Shareholders
arising from their interest in the Company.
(22) "Fannie Mae" shall mean the Federal National Mortgage Association.
(23) "FHA" shall mean the Federal Housing Administration.
(24) "Freddie Mac" shall mean the Federal Home Loan Mortgage Corporation.
(25) "Funds From Operations" means net income (computed in accordance with
GAAP) excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization on mortgage assets, and after adjustments for
unconsolidated partnerships and joint ventures.
(26) "GAAP" shall mean generally accepted accounting principles applied on
a consistent basis.
(27) "Ginnie Mae" shall mean the Government National Mortgage Association.
(28) "HUD" shall mean the United States Department of Housing and Urban
Development.
(29) "Independent Trustee" shall mean the Trustees who (i) are not
affiliated, directly or indirectly, with the Advisor, whether by ownership of,
ownership interest in, employment by, any material business or professional
relationship with, or service as an officer or director of the Advisor, or its
Affiliates, (ii) do not serve as a director or Trustee for more than two other
REITs organized by the Sponsor, and (iii) perform no other services for the
Company, except as Trustees. For this purpose, an indirect relationship shall
include circumstances in which a member of the immediate family of a Trustee has
one of the foregoing relationships with the Advisor or the Company.
(30) "Mortgage Investments" shall mean, collectively, Original Mortgage
Investments and Additional Mortgage Investments.
(31) "Mortgage Loan" shall mean the interest bearing loan made to the
entity which owns a Development.
(32) "Mortgage Prepayments, Sales or Insurance" shall mean any Company
transaction (other than the receipt of base interest, Participating Interest
Payments which were calculated on net cash flow or other measure of the net
rentals or revenues from a
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Development, principal payments when due on a Mortgage or other Mortgage
Investment, the issuance of Shares, and payments by a borrower to the Advisor or
an Affiliate in respect of the Asset Management Fee in connection with a
negotiated prepayment) including, without limitation, Participating Interest
Payments calculated on the profits or proceeds realized upon the refinancing,
sale or other disposition of a Development, prepayments, sales, exchanges,
foreclosures, or other dispositions of Mortgages and other Mortgage Investments
held by the Company or the receipt of insurance proceeds from the FHA or of
guarantee proceeds from Ginnie Mae, Fannie Mae or Freddie Mac or otherwise, or
any other disposition of Company assets.
(33) "Mortgages" shall mean, in a broad sense, beneficial interests or
participation interests in whole mortgages and mortgage-backed securities,
mortgage certificates, mortgage-backed securities, participation certificates,
backed by either a simple mortgage or a pool of mortgages or interests in
pass-through entities which, under the REIT provisions of the Code, would be
considered to be qualifying real estate assets for purposes of the Company's
qualification as a REIT (e.g., regular interests in REMICs).
(34) "Net Income" shall mean, for any period, total revenues applicable to
such period, less the expense applicable to such period other than additions to
allowances or reserves for depreciation, amortization or bad debts or other
similar noncash reserves; provided, however, that Net Income shall not include
the gain from Mortgage Prepayments, Sales or Insurance.
(35) "Original Mortgage Investments" shall mean the permanent investments
of the Company as described in the Prospectus, including investments in (i)
Acquired Mortgages, (ii) Originated Mortgages, (iii) other types of Mortgages
(including interests in pass-through entities such as regular interests in
REMICs which, under the REIT Provisions of the Code, are considered to be
qualifying real estate assets for purposes of the Company's qualification as a
REIT), (iv) Additional Loans and (v) subject to restrictions imposed by certain
provisions of the Code, CMOs collateralized by mortgages insured by FHA or
mortgage certificates guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac.
(36) "Originated Guaranteed Mortgage Certificate" shall mean any
mortgage-backed security guaranteed by Fannie Mae or Freddie Mac which is backed
by a conventional mortgage or mortgages originated by or on behalf of the
Company.
(37) "Originated Insured Mortgage" shall mean a Mortgage originated by or
on behalf of the Company or by another lender and sold to the Company prior to
the time it has been fully funded, the principal of which (excluding
Participating Interest Payments) is eligible for insurance by FHA and other
programs administered by HUD and shall also include Ginnie Mae mortgage-backed
securities and pass-through certificates backed by indebtedness secured by an
Originated Insured Mortgage.
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(38) "Originated Mortgages" shall mean either Originated Insured Mortgages
or Originated Guaranteed Mortgage Certificates.
(39) "Participating Interest Payments" shall mean interest payments to be
paid in connection with Originated Mortgages or Acquired Mortgages which
payments are in addition to the base rate of interest of an Originated Mortgage
or Acquired Mortgage and are calculated as a percentage of the cash flow,
rentals, revenues and/or appreciation of the underlying project.
(40) "Person" shall mean and include individuals, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies or associations, joint ventures, companies, trusts, banks, trust
companies, land trusts, business trusts or other entities and governments and
agencies and political subdivisions thereof.
(41) "Prospectus" shall mean the final prospectus in connection with the
registration of the Shares filed with the Securities and Exchange Commission on
Form S-11, as amended.
(42) "Real Estate Investment Trust Provisions of the Internal Revenue
Code" shall mean part II, subchapter M, chapter 1 of the Code, as now enacted or
hereafter amended, or successor statutes, other sections of the Code
specifically applicable to REITs and regulations and rulings promulgated
thereunder.
(43) "Reinvestment Plan" shall mean the Company's dividend reinvestment
plan pursuant to which shareholders can elect to have their Distributions
reinvested in additional Shares.
(44) "REIT" shall mean a corporation or trust which qualifies as a real
estate investment trust described in Sections 856 through 860 of the Code (the
"REIT provisions").
(45) "REMIC" shall mean a real estate mortgage investment conduit
described in section 860A through 860G of the Code.
(46) "Restricted Shares" shall have the meaning set forth in Section 12(c)
of this Agreement.
(47) "Shareholder" shall mean a holder of the Shares.
(48) "Shares" shall mean the shares of beneficial interest, par value $.10
per share, of the Company.
(49) "Sponsor" shall mean any Person directly or indirectly instrumental
in organizing, wholly or in part, the Company or any Person who will manage or
participate in
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the management of the Company and any Affiliate of such Person, but does not
include (i) any Person whose only relationship with the Company is that of an
independent asset manager and whose only compensation from the Company is as
such, and (ii) wholly independent third parties such as attorneys, accountants
and underwriters whose only compensation is for professional services.
(50) "Ten Year U.S. Treasury Rate" means the arithmetic average of the
weekly average yield to maturity for actively traded current coupon U.S.
Treasury fixed interest rate securities (adjusted to constant maturities of ten
years) published by the Federal Reserve Board during a fiscal year, or, if such
rate is not published by the Federal Reserve Board, any Federal Reserve Bank or
agency or department of the federal government selected by the Company. If the
Company determines in good faith that the Ten Year U.S. Treasury Rate cannot be
calculated as provided above, then the rate will be the arithmetic average of
the per annum average yields to maturities, based upon closing asked prices on
each business day during a quarter, for each actively traded marketable U.S.
Treasury fixed interest rate security with a final maturity date not less than
eight nor more than twelve years from the date of the closing asked prices as
chosen and quoted for each business day in each such quarter in New York City by
at least three recognized dealers in U.S. government securities selected by the
Company.
(51) "Total Operating Expenses" shall mean all operating, general and
administrative expenses of the Company as determined by generally accepted
accounting principles, exclusive of the expenses of raising capital, interest
payments, taxes, non-cash expenditures (i.e., depreciation, amortization, bad
debt reserve), the Asset Management Fee, the Annual Incentive Fee, and other
costs related directly to a specific Mortgage Investment by the Company, such as
expenses for originating, acquiring, servicing or disposing of a Mortgage.
(52) "Trustees" shall mean, collectively, the Persons who constitute the
Board of Trustees of the Company.
11. Asset Management Fee.
(1) Existing Original Mortgage Investments. With respect to all Original
Mortgage Investments held by the Company prior to April 6, 1999, the Advisor
shall be entitled to receive an annual Asset Management Fee equal to .625% of
the aggregate original amount invested in such assets reduced, upon the receipt
of repayments, sales proceeds, FHA or other insurance or guarantee proceeds or
payments whether or not reinvested.
(2) New Original Mortgage Investments. With respect to Original Mortgage
Investments acquired by the Company after April 6, 1999, the Advisor shall be
entitled to receive an annual Asset Management Fee equal to .355% of the
aggregate original amount
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invested in such assets reduced, upon the receipt of repayments, sales proceeds,
FHA or other insurance or guarantee proceeds or payments, by the original amount
invested in such asset which is not reinvested in another Original Mortgage
Investment.
(3) Investment Grade Additional Mortgage Investment. With respect to
Additional Mortgage Investments which are investment grade, the Advisor shall be
entitled to receive an annual Asset Management Fee equal to .355% of the
aggregate original amount invested in such assets reduced, upon the receipt of
repayments, sales proceeds or insurance or guarantee proceeds or payments, by
the original amount invested in such asset which is not invested in an
investment grade Additional Mortgage Investment.
(4) Non-Investment Grade Additional Mortgage Investments. With respect to
Additional Mortgage Investments which are non-investment grade, the Advisor
shall be entitled to receive an annual Asset Management Fee equal to .750% of
the aggregate original amount invested in such assets reduced, upon the receipt
of repayments, sales proceeds or insurance or guarantee proceeds or payments, by
the original amount invested in such asset which is not reinvested in a
non-investment grade Additional Mortgage Investment.
(5) Unrated Proposed Mortgage Investments. With respect to Additional
Mortgage Investments which are not rated, the Advisor shall be entitled to
receive an annual Asset Management Fee equal to 1.000% of the aggregate original
amount invested in such assets reduced, upon the receipt of repayments, sales
proceeds or insurance or guarantee proceeds or payments, by the original amount
invested in such asset which is not reinvested in unrated Additional Mortgage
Investments.
(6) General. The Asset Management Fee will be payable with respect to the
Company's Mortgage Investments regardless of whether such Mortgage Investments
are held by the Company or other entities to which the Company has transferred
or assigned such Mortgage Investments to facilitate financing, ownership or
otherwise.
12. Other Fees / Compensation to the Advisor.
(1) Origination Points. With respect to the first $100 million of new
Mortgage Investments acquired by the Company after April 6, 1999, the Advisor
shall be entitled to receive, with respect to each Mortgage Investment
originated by the Company, a portion of the origination points paid by borrowers
equal to up to 1% of the principal amount of such Mortgage Investment and the
Company shall receive the portion of the origination points paid by borrowers in
excess of 1% of the principal amount of such Mortgage Investment. After the
first $100 million of additional Mortgage Investments is acquired, the Company
shall retain 100% of the origination points paid by borrowers. In connection
with the acquisition of Mortgage Investments for the Company, the Advisor may
also act as an
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advisor to third parties which participate with the Company in such Mortgage
Investments and may receive origination points from such third parties or their
borrowers.
(2) Annual Incentive Fee. Subject to a minimum annual Distributions being
made to Shareholders from CAD of $1.45 per Share, the Advisor shall be entitled
to receive incentive compensation for each fiscal year in an amount equal to the
product of (A) 25% of the dollar amount by which (1)(a) Funds From Operations of
the Company (before the Annual Incentive Fee) per Share (based on the weighted
average number of Shares outstanding) plus (b) gains (or minus losses) from debt
restructuring and sales of property per Share (based on the weighted average
number of Shares outstanding), exceed (2) an amount equal to (a) the weighted
average of the price per Share of the initial offering (i.e. $20 per Share) and
the prices per Share of any secondary offerings by the Company multiplied by (b)
the Ten-Year U.S. Treasury Rate plus two percent per annum multiplied by (B) the
weighted average number of Shares outstanding during such fiscal year. For any
period less than a fiscal year during which this Agreement is in effect, the
Annual Incentive Fee will be prorated according to the proportion which such
period bears to a full fiscal year.
(3) Share Issuance. The Advisor shall be entitled to Shares in an amount
equal (after such issuance) to l% of all Shares issued by the Company, including
those issued pursuant to the Company's Reinvestment Plan, if any. Such Shares
("Restricted Shares") shall be initially issued subject to the restrictions set
forth in Section 12(c) to this Agreement.
(i) The Restricted Shares shall be subject to the transfer
restrictions and vesting provisions set forth in clause (ii) of this
Section 12(c). If the Advisor attempts to sell, assign, transfer, pledge
or otherwise dispose of or encumber any of the Restricted Shares before
its rights in such Shares vest in accordance with clause (ii), such
purported assignment, transfer, pledge, disposition or encumbrance shall
be void and of no effect. Except for such transfer restrictions, the
Advisor shall have all of the rights of a Shareholder with respect to the
Restricted Shares, including the right to vote the Restricted Shares and
to receive any Distributions made with respect to such Shares. Any
dividends issued in the form of Shares with respect to the Restricted
Shares shall be treated as additional Restricted Shares that are subject
to the same restrictions as, and shall vest or be forfeited at the same
time as, the Restricted Shares with respect to which they were issued.
(ii) The Advisor shall become vested in a percentage of the
Restricted Shares issued to it as follows:
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Anniversary Percent
of Issuance Vested
----------- ------
1st 33 1/3%
2nd 33 1/3%
3rd 33 1/3%
If, at the time this Agreement is terminated by the Company or the Advisor
for any reason, any of the Restricted Shares have not become vested in
accordance with the foregoing schedule, the Advisor shall forfeit such
unvested Restricted Shares to the Company and shall not receive any
compensation therefor, unless the Trustees determine otherwise, in their
sole discretion.
(iii) Upon each issuance, the Advisor shall be issued a certificate
for the appropriate number of Restricted Shares which will be registered
in its name. Such certificate shall bear whatever legend the Trustees
shall determine is appropriate, including, but not limited to, the
following:
'The transfer of the Shares represented by this certificate is
restricted by the terms of an Amended and Restated Advisory Services
Agreement, dated as of April 26, 1999, copies of which are on file
at the Company's principal office; no transfer of Shares represented
by this certificate shall be valid or effective until the conditions
with respect to such transfer contained in such Agreement have been
met.'
The Trustees, in their sole discretion, may require that the share
certificates evidencing Restricted Shares be held in custody by the
Company until the restrictions have lapsed. If and to the extent that any
of the Restricted Shares become vested in accordance with clause (ii) of
this Section 12(c), the Company shall promptly deliver a certificate for
an appropriate number of unrestricted Shares to the Advisor.
(4) Special Servicer Fees and other Compensation From Third Parties. To
the extent that the Company participates with a third party in connection with
Mortgage Investments, the Advisor may receive special servicer fees and other
fees and compensation from such third party.
13. Statements. Prior to the payment of any fees hereunder, the Advisor
shall furnish to the Company a statement showing the computation of the fees, if
any, payable under Sections 11, 12 and 14 hereof.
14. Compensation for Additional Services.
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(1) Property Management. In the event the Company forecloses on a property
on which it holds a Mortgage, the Company may be required to take over the
management of the property. In such cases, the Advisor or an Affiliate of the
Advisor may be retained to provide property management services at rates and on
terms no less favorable to the Company than those customary for similar
services, if such entity has knowledge of and experience in the area. In no case
shall such fee (including all rent-up, leasing, and re-leasing fees and bonuses
paid to any person) exceed 5% of the gross revenues from such properties.
(2) Property Dispositions Following Foreclosure. If the Company forecloses
on a property securing a Mortgage and sells such property, the Advisor or an
Affiliate of the Advisor may be entitled to a subordinated real estate
commission equal to the lesser of (i) 3% of the gross sales price of such
property received by the Company or (ii) one-half of the normal and competitive
rate customarily charged by unaffiliated parties rendering similar services, and
such fees shall be paid only if the Advisor or Affiliate thereof provides a
substantial amount of services in the sales effort.
15. Expenses of the Company. (a) The Company shall pay all of its
expenses, except those set forth in paragraph 16 hereof. Without limiting the
foregoing, it is specifically agreed that the following expenses of the Company
shall be paid by the Company and shall not be borne by the Advisor:
(1) the cost of money borrowed by the Company;
(2) taxes an income and taxes and assessments on real property and all
other taxes applicable to the Company;
(3) fees and expenses paid to independent contractors, unaffiliated
mortgage servicers, consultants, managers and other agents employed by or on
behalf of the Company;
(4) expenses directly connected with the ownership, and disposition of
investments, or other property and with the origination or purchase of Mortgages
(including the costs of foreclosure, insurance premiums, legal services,
brokerage and sales commissions, maintenance, repair and improvement of
property);
(5) expenses of maintaining and managing real estate equity interests,
processing and servicing mortgage and other loans and managing the Company's
other investments;
(6) insurance coverage in connection with the business of the Company
(including officers' and trustees' liability insurance);
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(7) the expenses of revising, amending, converting, modifying or
terminating the Company or revising, amending or modifying its organizational
documents;
(8) expenses connected with payments of interest or Distributions in cash
or any other form made or caused to be made by the Trustees to Shareholders;
(9) all expenses connected with communications to Shareholders and other
bookkeeping and clerical work necessary in maintaining relations with the
Shareholders, including the cost of printing and mailing certificates for
securities, proxy solicitation materials and reports to holders of the Company's
securities;
(10) the cost of any accounting, statistical or bookkeeping equipment
necessary for the maintenance of the books and records of the Company;
(11) transfer agent's and registrar's fees and charges; and
(12) other legal, accounting and auditing fees and expenses as well as any
costs incurred in connection with any other litigation in which the Company is
involved and in the examination, investigation or other proceedings conducted by
any regulatory agency with respect to the Company.
(2) The Company shall reimburse the Advisor and its Affiliates for (i) the
actual costs to the Advisor or its Affiliates of goods, materials and services
used for and by the Company obtained from unaffiliated parties; (ii)
administrative services necessary to the operation of the Company and (iii) the
costs of certain personnel employed by the Company and directly involved in the
organization and business of the Company (including persons who may be employees
or officers of the Advisor and its Affiliates) and for legal, accounting,
transfer agent, reinvestment and redemption plan administration, data
processing, duplicating and investor communications services performed by
employees or officers of the Advisor and its Affiliates which could be performed
directly for the Company by independent parties. The amounts charged to the
Company for services performed pursuant to clause (ii) above will not exceed the
lesser of (a) the actual cost of such services, or (b) the amount which the
Company would be required to pay to independent parties for comparable services.
No reimbursement will be allowed to the Advisor or its Affiliates for services
performed pursuant to clause (ii) above unless the Advisor or its Affiliates
have the appropriate experience and expertise to perform such services.
(3) The Company will reimburse the Advisor for any travel expenses
incurred in connection with the services provided hereunder and for advertising
expenses incurred by it in seeking any investments or seeking the disposition of
any investments held by the Company.
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16. Expenses of the Advisor. Except as otherwise provided herein and
without regard to the amount of compensation received hereunder by the Advisor,
the Advisor shall bear the following expenses:
(1) employment expenses of the Advisor's or its Affiliates' personnel
(including partners and directors and officers thereof and employees of the
Company who are Trustees, officers and employees of the Advisor), including, but
not limited to, fees, salaries, wages, payroll taxes, travel expenses (except as
set forth pursuant to Section 15(c) above) and the cost of employee benefit
plans and temporary help expenses;
(2) advertising expenses (except as set forth pursuant to Section 15(c)
above);
(3) rent, telephone utilities, office furnishings and other office
expenses of the Advisor (except those relating to a separate office, if any,
maintained by the Company); and
(4) such other items generally falling under the category of the Advisor's
overhead directly related to performance of services for which it is otherwise
receiving fees hereunder.
Notwithstanding the provisions of Section 16, the Company shall reimburse
the Advisor for the expenses set forth in Section 15(b) and 15(c) above.
17. Limitation on Expenses and Refund by Advisor. The annual Total
Operating Expenses of the Company may not exceed in any calendar year the
greater of (1) 2% of the Average Invested Assets of the Company during such
calendar year or (2) 25% of the Company's Net Income during such calendar year.
The Independent Trustees have the fiduciary responsibility of limiting the
Company's annual Total Operating Expenses to amounts that do not exceed the
limitations described above. A majority of the Trustees (including a majority of
the Independent Trustees) may, however, determine that a higher level of Total
Operating Expenses is justified for any period.
Within 60 days after the end of any calendar year of the Company for which
Total Operating Expenses exceeded 2% of the Average Invested Assets of the
Company or 25% of the Company's Net Income, whichever is greater, there shall be
sent to Shareholders a written disclosure of such fact together with an
explanation of the Independent Trustees' conclusion. In the event the
Independent Trustees do not determine that such excess expenses are justified,
the Advisor shall reimburse the Company within 60 days after the end of such
period the excess amount. Fees payable to the Advisor, other than the Asset
Management Fee and Annual Incentive Fee, are not included as part of the Total
Operating Expenses for purposes of such reimbursement.
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18. Other Activities of Advisor. Nothing in this Agreement shall prevent
the Advisor or any of its Affiliates from engaging in other business activities
related to real estate, mortgage investments or other investments whether
similar or dissimilar to those made by the Company or from acting as advisor to
any other person or entity having investment policies whether similar or
dissimilar to those of the Company (including another real estate investment
trust). However, before the Advisor, its partners, their officers and directors,
and any person controlled by the partners of the Advisor or their officers and
directors may take advantage of an opportunity for their own account or present
or recommend it to others (except for the presentation and recommendation of
equally suitable investment opportunities to Affiliated Programs, which shall be
governed by the procedures set forth in the Prospectus), they are obligated to
present an investment opportunity to the Company if (i) such opportunity is
within the Company's investment objectives and policies, (ii) such opportunity
is of a character which could be taken by the Company, and (iii) the Company has
the financial resources to take advantage of such opportunity.
19. Term; Termination of Agreement. This Agreement shall be for an initial
term of one year, commencing March 29, 1993, and thereafter it may be renewed
for successive one year terms, subject to the approval of a majority of the
Trustees. Notice of renewal shall be given in writing by the Company to the
Advisor not less than 60 days before the expiration of this Agreement or of any
extension thereof.
Notwithstanding any other provision to the contrary, this Agreement shall
be terminable (i) without cause by the Advisor or (ii) with or without cause by
a majority of the Independent Trustees, each without penalty, each upon 60 days'
written notice prior to the end of any term of this Agreement.
In the event of the termination of this Agreement, the Advisor will
cooperate with the Company and take all reasonable steps requested to assist the
Trustees in making an orderly transition of the advisory function.
20. Amendments. This Agreement shall not be changed, modified, terminated
or discharged in whole or in part except by an instrument in writing signed by
both parties hereto, or their respective successors or permitted assigns, or
otherwise as provided herein.
21. Assignment. This Agreement may not be assigned by the Advisor without
the written consent of the Company, except to a corporation or other person
which controls, is controlled by, or is under common control with the Advisor,
or a corporation, association, trust or other successor organization which may
take over the property and carry on the affairs of the Advisor. Any assignee of
the Advisor shall be bound hereunder to the same extent as the Advisor. This
Agreement shall not be assigned by the Company without the written consent of
the Advisor, except to a corporation, association, trust or other organization
which is a successor to the Company. Such successor shall be bound hereunder
17
<PAGE>
to the same extent as the Company. Notwithstanding anything to the contrary
contained herein, the economic rights of the Advisor hereunder, including the
right to receive all compensation hereunder, may be sold, transferred or
assigned by the Advisor without the consent of the Company.
22. Action Upon Termination. From and after the effective date of
termination of this Agreement, pursuant to Section 19 hereof, the Advisor shall
not be entitled to compensation for further service rendered hereunder but shall
be paid all compensation and reimbursed for all expenses accrued through the
date of termination. The Advisor shall forthwith upon such termination:
(1) pay over to the Company all moneys collected and held for the account
of the Company pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;
(2) deliver to the Company a full accounting, including a statement
showing all payments collected by it and a statement of all moneys held by it,
covering the period following the date of the last accounting furnished to the
Company; and
(3) deliver to the Company all property and documents of the Company then
in the custody of the Advisor and, if applicable, any certificates for
Restricted Shares that are forfeited as a result of such termination in
accordance with Section 12(c) of this Agreement.
23. Incorporation of the Declaration of Trust. To the extent the
Declaration of Trust imposes obligations or restrictions on the Advisor or
grants the Advisor certain rights which are not set forth in this Agreement, the
Advisor shall abide by such obligations or restrictions and such rights shall
inure to the benefit of the Advisor with the same force and effect as if they
were set forth herein.
24. Miscellaneous. (a) The Advisor assumes no responsibility under this
Agreement other than to render the services called for hereunder in good faith,
and shall not be responsible for any action of the Company in following or
declining to follow any advice or recommendations of the Advisor. Neither the
Advisor nor its directors, officers and employees shall be liable to the
Company, the Shareholders or to any successor or assignee of the Company, except
by reason of acts constituting bad faith, gross negligence or reckless disregard
of their duties. This shall in no way affect the standard for indemnification
but shall only constitute a standard of liability. The duties to be performed by
the Advisor pursuant to this Agreement may be performed by it or by officers,
directors or by Affiliates of the foregoing under the direction of the Advisor
or delegated to unaffiliated third parties under its direction.
(1) The Advisor shall look solely to the assets of the Company for
satisfaction of all claims against the Company, and in no event shall any
Shareholder of the
18
<PAGE>
Company have any personal liability for the obligations of the Company under
this Agreement.
(2) All calculations made in accordance with this Agreement (other than
those calculations which by their terms are not based on GAAP) shall be based on
statements (which may be unaudited, except as specifically provided herein)
prepared on an accrual basis consistent with GAAP, regardless of whether the
Company may also prepare statements on a different basis.
25. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing, and shall be given by
delivering such notice by hand or by certified mail, return receipt requested,
postage pre-paid, at the following addresses of the parties hereto:
American Mortgage Acceptance Company
625 Madison Avenue
New York, New York 10022
Attn.: President
Related AMI Associates, Inc.
625 Madison Avenue
New York, New York 10022
Either party may at any time change its address for the purpose of this
Section 25 by like notice.
26. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
27. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect.
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this agreement to be
signed as of the day and year first above written.
AMERICAN MORTGAGE ACCEPTANCE COMPANY
By: /s/ Stuart J. Boesky
--------------------------------------------
Name: Stuart J. Boesky
Title: President and Chief Operating Officer
RELATED AMI ASSOCIATES, INC.
By: /s/ Alan P. Hirmes
--------------------------------------------
Name: Alan P. Hirmes
Title: Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 20,183,836
<SECURITIES> 45,300,048
<RECEIVABLES> 68,714,596
<ALLOWANCES> 370,863
<INVENTORY> 0
<CURRENT-ASSETS> 113,853
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 133,968,583
<CURRENT-LIABILITIES> 76,415,783
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 57,552,800
<TOTAL-LIABILITY-AND-EQUITY> 133,968,583
<SALES> 0
<TOTAL-REVENUES> 2,972,381
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,051,922
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,061
<INCOME-PRETAX> 5,186,698
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,186,698
<EPS-BASIC> 1.35
<EPS-DILUTED> 1.35
</TABLE>
