<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ------- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ------- EXCHANGE ACT OF 1934
Commission File Number 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest, par value $.10 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The approximate market value of the voting and non-voting common equity
held by non-affiliates of the Registrant as of March 9, 2000 was $33,159,869,
based on a price of $8 13/16 per share, the closing sales price for the
Registrant's shares of beneficial interest on the American Stock Exchange on
that date.
As of March 9, 2000 there were 3,838,630 outstanding shares of the
Registrant's shares of beneficial interest.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's prospectus dated March 29, 1993, as supplemented April 22,
1993, August 9, 1993, November 9, 1993, January 31, 1994, April 25, 1994,
September 2, 1994, November 9, 1994 and January 31, 1995, as filed with the
Commission pursuant to Rules 424(b) and 424(c) of the Securities Act of 1933,
but only to the extent expressly incorporated by reference in Parts I, II, III
and IV.
Part III: Those portions of the Registrant's Proxy Statement for Annual Meeting
of Shareholders to be held on June 14, 2000, which are incorporated into Items
10, 11, 12 and 13.
Index to exhibits may be found on page
Page 1 of
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.
-2-
<PAGE>
PART I
Item 1. Business.
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 "Code").
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.
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 of beneficial interest (the
"Shares") commenced trading on the American Stock Exchange on July 1, 1999 under
the symbol "AMC". As of December 31, 1999, there were 3,838,630 Shares
outstanding.
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 Federal National
Mortgage Association ("Fannie Mae"), and 3) acquisition of subordinated
interests in commercial mortgage-backed securities.
As of December 31, 1999 the Company's mortgage investments consisted of three
mortgage loans originated by or on behalf of the Company, four GNMA
mortgage-backed securities and pass-through certificates and one commercial
mortgage-backed security ("CMBS")-related investment. Due to the complexity
of the GNMA and CMBS 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 or the CMBS-realted investment 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 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.
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<PAGE>
MORTGAGE LOANS
Information relating to the Company's investments in Mortgage Loans as of
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Date of
Invest-
ment/ Amounts Advanced
Final Interest ----------------------------------------- Outstanding
Matu Rate on Total Loan
Descrip -rity Mortgage Mortgage Additional Amounts Balance at
Property -tion Date Loan (A) Loans Loans (B) Advanced 12/31/99
- - -------- ------- -------- -------- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Cove 308 Dec-93 7.625%- $6,800,000 $840,500 $ 7,640,500 $ 0
Apts. Apt 29-Jan 9.13%
Houston, TX Units (C)
(J)
Oxford on 405 Dec-93 7.625%- 9,350,000 1,156,000 10,506,000 0
Greenridge Apt. 29-Jan 9.13%
Apts. Units (C)
Houston, TX
(J)
Town & 330 Apr-94 7.375%- 9,348,000 1,039,000 10,387,000 9,936,476
Country IV Apt. 29-May 9.17%
Apts. Units (D) (K) (E) (F)
Urbana, IL
Columbiana 204 Apr-94 (H) 9,106,099 563,000 9,669,099 9,705,686
Lakes Apts. Apt. Nov-35
Columbia, SC Units (G) (K)
Stony Brook 125 Dec-95 7.75%- 8,500,000 763,909 9,263,909 9,251,320
Village II Apt. Jun-37 9.13%
Apts. Units (G) (K) (I)
East Haven,CT
--------------------------------------------------------------
Total $43,104,099 $4,362,409 $47,466,508 $28,893,482
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparable
Rental Year of Competing
Occu- Rates at Construc- Properties
pancy at December tion Com- Within
Property 3/1/00 31, 1999 pletion Location
- - -------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C>
The Cove - - - -
Apts.
Houston, TX
(J)
Oxford on - - - -
Greenridge
Apts.
Houston, TX
(J)
Town & 95.00% $455-605 1988 8
Country IV
Apts.
Urbana, IL
Columbiana 94.50% 549-949 1994 107
Lakes Apts.
Columbia, SC
Stony Brook 98.40% 845-1175 1996 3
Village II
Apts.
East Haven,CT
----------------------------------------------------------
Total
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
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 April 29, 1999, the Company made its final advance, in the amount of
$829,204, on the Columbiana Mortgage. At the time of the final advance,
construction loan extension fees, intended to compensate the Company for the
difference between the construction period interest rate and the higher
permanent loan interest rate during the extension period, in the amount of
$195,958 were received by the Company. The fees received are classified as
"interest income from mortgage loans" 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 had not been able to support the
payment of Additional Interest for the period July 1, 1997 through December
31, 1999 which amounted to $411,911. Accordingly, the accrued interest income
that was doubtful of collection was fully reserved and excluded from interest
income from mortgage loans in previous quarters. On January 21, 2000, the
general partner of the Town and Country obligor, in exchange for the waiving
of the prepayment penalty and future Additional Interest and also because the
obligation was secured by its partnership interest in the obligor, repaid the
additional loan and Additional Interest due through January 21, 2000 in the
amounts of
-4-
<PAGE>
$1,039,000 and $421,273, respectively. As a result, the Additional Interest
which had been fully reserved was deemed to be fully collectible and recorded as
interest income in the fourth quarter of 1999.
(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 was 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 doubtful of collection
was fully reserved and 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 fully reserved 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) In order for the Company to exercise an acceleration option it must
terminate the mortgage insurance contract with FHA not later than the
accelerated payment date and, in certain circumstances, must terminate the
mortgage insurance contract upon the exercise of the acceleration option. Since
the exercise of such option would be at the Company's discretion, it is intended
to be exercised only where the value of the Development has increased by an
amount which would justify accelerating payment in full and assuming the risks
of foreclosure if the mortgagor failed to make the accelerated payment.
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<PAGE>
GNMA CERTIFICATES
Information relating to the Company's investments in GNMA Certificates as of
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Principal
Balances
At
Purchase Price 12/31/99 Fair Stated Final
Certificate Date --------------------- Including Value At Interest Payment
Seller Number Purchased % Amount (Discount) 12/31/99 Rate Date
- - ------ ----------- --------- -------- ----------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bear Stearns & Co. 0355540 7/27/94 90.7500% $2,407,102 $2,307,238 $2,431,778 7.125% 3/15/2029
Malone Mortgage Co. 0382486 7/28/94 99.6250% 2,197,130 2,132,565 2,168,686 8.500 8/15/2029
Goldman Sachs 0328502 7/29/94 99.9063% 3,928,615 3,548,408 3,565,054 8.250 7/15/2029
SunCoast Capital Group,Ltd. G22412 6/23/97 99.34375% 1,981,566 1,340,671 1,298,919 7.000 4/20/2027
---------- ---------- ----------
$10,514,413 $9,328,882 $9,464,437
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
COMMERCIAL MORTGAGE-BACKED SECURITY-RELATED INVESTMENT AND SHORT SALE On
September 30, 1999, the Company acquired from ARCap Investors, L.L.C.
("ARCap") a "BB+" rated subordinated commercial mortgage-backed security
("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial
Mortgage Trust (the "Chase-First Union 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. In connection with this
acquisition, the Company entered into an agreement (the "Agreement") with
ARCap. ARCap acquired from 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, all based on the then fair value of the CMBS investment.
As of December 31, 1999, the 205 mortgage loans underlying the CMBS were
secured by 217 properties of the types and in the states identified below:
<TABLE>
<CAPTION>
Property Type Percentage (1)
- - ------------- --------------
<S> <C>
Multifamily 38%
Retail 25
Office 18
Health Care 4
Hospitality 4
Industrial 4
Other 7
</TABLE>
<TABLE>
<CAPTION>
State Percentage (1)
- - ----- --------------
<S> <C>
CA 23%
NY 14
FL 6
PA 6
Others (2) 51
</TABLE>
(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.
As of December 31, 1999, there are no unpaid principal balances of loans that
are underlying the CMBS investment which are more than 60 days delinquent.
As of December 31, 1999 the CMBS-related investment had an estimated fair value
of $34,347,403 and an amortized cost of $35,766,419, resulting in an unrealized
loss of $1,419,016 at that date (partially offset by an unrealized gain of
$1,201,317 on the Short Sale - see below) which is included in "net unrealized
losses on subordinated commercial mortgage-backed security and government
security sold short" in the statements of income. The fair value of the
Company's CMBS-related 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 liquidation of
this investment.
At December 31, 1999, the un-leveraged, un-hedged, weighted average yield to
maturity of the Company's CMBS-related investment was approximately 10%.
The yield to maturity on the Company's CMBS-related investment depends on, among
other things, the rate and timing of principal payments, the pass-through rate
and interest rate fluctuations. The subordinated CMBS interest provides credit
support to the more senior interests of the
-6-
<PAGE>
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 a 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-related investment due
to changes in interest rates. This contract involved the sale of a U.S. Treasury
Note with a face amount of $39,327,000 and an annual coupon rate of 5.625%
borrowed from Bear Stearns & Co., Inc. ("Bear Stearns") for net proceeds of
$39,028,841 (which included accrued interest of $835,565). Bear Stearns will
retain proceeds from the sale until the Company replaces the borrowed security.
As of December 31, 1999, the U.S. Treasury Note had an estimated fair value of
$36,991,959, resulting in an unrealized gain of $1,201,317 at that date which is
included in "net unrealized loss on commercial mortgage-backed security-related
investment and government security sold short" in the statements of income. The
Company earned $471,262 on Short Sale proceeds held by Bear Stearns ($37,733,101
at December 31, 1999) and incurred interest of $547,025 on the Short Sale
contract during the period September 30, 1999 to December 31, 1999.
REPURCHASE FACILITY
On September 30, 1999, the Company entered into a repurchase facility (the
"Repurchase Facility") with Bear Stearns, whereby Bear Stearns advanced
$19,568,000 (55% of the purchase price) in cash towards the purchase of a
CMBS-related investment. The Repurchase Facility has a variable interest rate
based on the one-month LIBOR rate plus 1.5% (7.98% at December 31, 1999), which
is adjusted on the first day of each month, and terminates on March 17, 2000. In
March 2000, the Repurchase Facility was renewed through June 17, 2000. The
Repurchase Facility is collateralized by the Company's CMBS-related 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 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. The outstanding balance of the Repurchase Facility
(based on 55% of the market of the CMBS at December 1, 1999) was $19,127,000 at
December 31, 1999.
LOAN VENTURE WITH FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Company is currently in the process of completing a 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.
COMPETITION
The Company competes with various financial institutions in each of its lines
of business. For CMBS investments, competitors include major financial
institutions that sponsor CMBS conduits, pension funds, REITs and finance
companies that specialize in CMBS investment management. The Company competes
with banks and quasi-governmental agencies such as Fannie Mae, Freddie Mac
and HUD, as well as their designated mortgages, for multifamily loan product.
The Company's business is also affected by competition to the extent that
Underlying Properties from which it derives interest and, ultimately,
principal payments may be subject to rental rates and relative levels of
amenities from comparable neighboring properties.
EMPLOYEES
The Company does not directly employ anyone. All services are performed for the
Company by the Advisor and its affiliates. The Advisor receives compensation in
connection with such activities as set forth in Item 8, Financial Statements and
Supplementary Data, Item 11, Executive Compensation and Item 13, Certain
Relationships and Related Transactions. In addition, the Company reimburses the
Advisor and certain of its affiliates for expenses incurred in connection with
the performance by their employees of services for the Company in accordance
with the Declaration of Trust.
Item 2. Properties.
The Company does not own or lease any properties.
Item 3. Legal Proceedings.
The Company is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Shareholders.
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters.
As of March 9, 2000, there were 941 registered shareholders owning 3,838,630
Shares. The Company's Shares have been listed on the American Stock Exchange
since July 1, 1999 under the symbol "AMC". Prior to July 1, 1999, there was no
established public trading market for the Company's Shares.
-7-
<PAGE>
The high and low prices for each quarterly periods in which the Shares were
traded is as follows:
<TABLE>
<CAPTION>
1999 1999
Quarter Ended Low High
- - ------------- --- ----
<S> <C> <C>
September 30 9 13/16 12 15/16
December 31 8 5/8 11 3/8
</TABLE>
The last reported sale price of Shares on the American Stock Exchange on March
9, 2000 was $8 13/16.
In December 1992, the Company issued 10,000 shares of beneficial interest at
$20 per share in exchange for $200,000 cash from the Advisor.
On March 29, 1993, the Company commenced a public offering (the "Offering")
through Related Equities Corporation, an affiliate of the Advisor, and other
broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of
beneficial interest at an initial offering price of $20 per share. The Offering
terminated as of November 30, 1994. As of November 30, 1994, a total of
3,809,601 shares had been sold to the public, either through the Offering or the
Company's dividend reinvestment plan (the "Reinvestment Plan") which became
effective on March 29, 1993, representing Gross Proceeds (the "Gross Proceeds")
of $76,192,021 (before volume discounts of $40,575). 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 has
sufficient net proceeds from the sale of shares under the Reinvestment Plan.
Since November 30, 1994, 355,744 shares were sold through the Reinvestment Plan,
the proceeds of which were restricted for use in connection with the Redemption
Plan and were not included in gross proceeds. Pursuant to the Redemption Plan,
since November 30, 1994, 374,412 shares have been redeemed for an aggregate
price of $6,575,799. Of such redemptions, 16,931 shares were redeemed from
proceeds from the Reinvestment Plan before the termination of the Offering and
therefore, the proceeds available for future investment were reduced by
$319,987. During the Offering, the Advisor received 38,481 restricted shares
(including 717 from the Reinvestment Plan) in addition to the 10,000 shares
purchased, which the Advisor has valued at $14.75 per share, pursuant to the
terms of the Offering. As a result of the shares being redeemed the Advisor was
required to return 172 shares as of December 31, 1994; no additional shares were
required to be returned since then.
During the offering period the price per share purchased pursuant to the
Reinvestment Plan equaled $20. From November 30, 1994 (the termination of the
offering period) until November 30, 1997 (the third anniversary of the final
closing date), the price per share purchased pursuant to the Reinvestment Plan
was equal to $19. Effective November 30, 1997, the Board adopted a policy to
adjust the reinvestment price annually to reflect the net asset value of a share
of the Company's shares of beneficial interest ($15.16 at December 31, 1998).
Shares received pursuant to the Reinvestment Plan entitled participants to the
same rights and treatment in the same manner as those issued pursuant to the
Offering. In connection with shares issued pursuant to the Company's
Reinvestment Plan which were not used for the Redemption Plan, the Company
issued shares to the Advisor in an amount which equalled (after such issuance)
1% of the outstanding shares.
Through the quarter ended March 31, 1997, the redemption price pursuant to the
Redemption Plan was $19 per Eligible Share. As permitted by the provisions of
the Redemption Plan, the Board of Trustees implemented the following change to
the calculation of the redemption price for the quarter ended June 30, 1997: the
original $19 per share redemption price was reduced to reflect any return of
principal received by shareholders. As of June 30, 1997, the amount of principal
which had been distributed to shareholders was $1.53 per share and, therefore,
the redemption price was $17.47 per share ($19 per share less $1.53 per share)
for redemptions which occurred in October 1997 for the quarter ended June 30,
1997. The Board subsequently adopted a policy to adjust the redemption price
annually to reflect the then net asset value of a share of the Company's shares
of beneficial interest ($15.16 at December 31, 1998). This new policy was
effective for redemptions with respect to quarters ended September 30, 1997 and
thereafter.
Under the Redemption Plan, any shareholder (except the Advisor who could not
participate in the Redemption Plan) who acquired or received shares directly
from the Company or the Reinvestment Plan (such shares, for so long as owned by
the original holder, were called "Eligible Shares") could present such Eligible
Shares to the Company for redemption. The Company was required to redeem such
Eligible Shares presented for redemption for cash to the extent it had
sufficient net proceeds ("Reinvestment Proceeds") from the sale of shares under
the Reinvestment Plan. The full amount of Reinvestment Proceeds in any quarter
was used to redeem Eligible Shares presented for redemption during such quarter.
If the full amount of Reinvestment Proceeds available for redemption in any
given quarter was insufficient to redeem all Eligible Shares presented for
redemption during such quarter, the Company would redeem the Eligible Shares
presented for redemption on a pro rata whole share basis, without redemption of
fractional shares.
A shareholder could present less than all their Eligible Shares to the Company
for redemption, provided, however, that (i) they presented the lesser of all of
their Eligible Shares or 125 Eligible Shares (50 Eligible Shares for an
Individual Retirement Account or Keogh Plan) for redemption, and (ii) if they
retained any Eligible Shares, they must have retained at least 125 Eligible
Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan).
As a result of the adoption of the Proposals (see "Item 1. Business. -
General"), the Company's Reinvestment Plan and Redemption Plan have been
terminated, effective with the distribution for the quarter ended March 31,
1999. The final reinvestment of shares occurred on May 15, 1999. The final
redemption of shares occurred on May 24, 1999. In addition, in connection with
the listing of the Company's Shares on the American Stock Exchange, fractional
shares totaling approximately 612 were redeemed on July 1, 1999.
-8-
<PAGE>
DISTRIBUTION INFORMATION
Cash distributions per share for the years ended December 31, 1999 and 1998 are
as set forth in the following table:
<TABLE>
<CAPTION>
Cash Distribution Total Amount
for Quarter Ended Date Paid Per Share Distributed
- - ----------------- --------- --------- -----------
<S> <C> <C> <C>
March 31, 1999 5/15/99 $ .3575 $1,372,661
June 30, 1999 8/14/99 .3615 1,387,912
September 30, 1999 11/14/99 .3625 1,391,504
December 31, 1999 2/14/00 .3625 1,391,503
------- ---------
Total for 1999 $1.4440 $5,543,580
------- ---------
------- ---------
March 31, 1998 5/15/98 $ .3575 $1,372,660
June 30, 1998 8/14/98 .3615 1,387,913
September 30, 1998 11/14/98 .3655 1,403,165
December 31, 1998* 2/14/99 .3655 1,403,165
------- ----------
Total for 1998 $1.4500 $5,566,903
------- ----------
------- ----------
</TABLE>
* Dividend was declared in 1999.
There are no material legal restrictions upon the Company's present or future
ability to make distributions in accordance with the provisions of the
Declaration of Trust. Future distributions paid by the Company will be at the
discretion of the Trustees and will depend on the actual cash flow of the
Company, its financial condition, capital requirements and such other factors
as the Trustees deem relevant.
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.
Of the total distributions of $6,946,745 and $5,566,903 for the years ended
December 31, 1999 and 1998, respectively, $686,445 ($.18 per share or 10%) and
$2,170,291 ($.56 per share or 39%), respectively, represented a return of
capital determined in accordance with generally accepted accounting principles.
As of December 31, 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
$11,869,468. 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.
-9-
<PAGE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the Company.
Additional financial information is set forth in the audited financial
statements and footnotes thereto contained in Item 8, Financial Statements and
Supplementary Data.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
OPERATIONS 1999 1998 1997 1996 1995
- - ---------- ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $2,569,901 $3,037,882 $3,118,027 $2,866,017 $2,257,883
REMIC and GNMA certificates and the
FHA Insured Project Loan 785,591 880,680 975,599 1,306,658 1,582,724
Commercial mortgage-backed security - related investment 950,456 0 0 0 0
Note receivable 85,786 0 0 0 0
Temporary investments 1,092,617 112,953 151,228 252,140 515,295
Other income 23,231 0 0 0 0
------------ ------------ ------------ ------------- ------------
Total revenues 5,507,582 4,031,515 4,244,854 4,424,815 4,355,902
------------ ------------ ------------ ------------- ------------
Total expenses 2,301,293 647,047 632,304 721,209 769,523
------------ ------------ ------------ ------------- ------------
Other gain (loss):
Net realized gain (loss) on repayment of REMIC and GNMA
certificates and the FHA Insured Project Loan (1,492) 12,144 (66,735) (87,080) 8,225
Net realized loss on sale of REMIC certificates 0 0 0 (328,895) (447,472)
Net unrealized loss on commercial mortgage-backed
security-related investment and government security sold short (217,699) 0 0 0 0
Gain on repayment of mortgage loans 3,273,202 0 0 0 0
------------ ------------ ------------ ------------- ------------
Total other gain (loss) 3,054,011 12,144 (66,735) (415,975) (439,247)
------------ ------------ ------------ ------------- ------------
Net income $6,260,300 $3,396,612 $3,545,815 $3,287,631 $3,147,132
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Net income per share (basic and diluted) $1.63 $0.88 $0.92 $0.83 $0.81
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
Weighted average shares outstanding (basic and diluted) 3,841,931 3,845,101 3,851,029 3,972,625 3,896,620
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
FINANCIAL POSITION 1999 1998 1997 1996 1995
- - ------------------ ------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Total assets $115,565,441 $59,993,040 $61,645,922 $63,147,215 $65,517,610
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
Repurchase facility payable $19,127,000 $0 $0 $0 $0
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
Total liabilities $58,474,076 $1,788,466 $1,259,997 $986,551 $1,002,976
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
Total shareholders' equity $57,091,365 $58,204,574 $60,385,925 $62,160,664 $64,514,634
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
DISTRIBUTIONS
Distributions to shareholders $5,543,580 $5,566,903 $5,574,932 $5,569,283 $5,569,555
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
Distribution per share $1.44 $1.45 $1.45 $1.45 $1.45
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
</TABLE>
The results for the year ended December 31, 1999 reflect a gain on repayment
of the Cove and Oxford mortgage loans.
-10-
<PAGE>
Item 7. 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. The Company elected to be treated as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended (the "Code").
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.
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 of beneficial interest (the
"Shares") commenced trading on the American Stock Exchange on July 1, 1999 under
the symbol "AMC". As of December 31, 1999, there were 3,838,630 Shares
outstanding.
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.
As of December 31, 1999 the Company's mortgage investments consisted of three
mortgage loans originated by or on behalf of the Company, four GNMA
mortgage-backed securities and pass-through certificates and one commercial
mortgage-backed security ("CMBS")-related investment. Due to the complexity
of the GNMA and CMBS 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 or the CMBS-related investment 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 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
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 (fees) 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.
During the year ended December 31, 1999, cash and cash equivalents increased
approximately $849,000 primarily due to principal repayments of mortgage loans
and GNMA Certificates ($21,284,000) and proceeds from a repurchase facility
payable ($19,568,000) which exceeded cash used in operating activities,
primarily due to the acquisition of the CMBS-related investment ($33,057,000),
distributions paid to shareholders ($5,555,000), repayments of the repurchase
facility payable ($441,000), an increase in other assets relating to investing
activities ($111,000) and an increase in investment in mortgage loans
($829,000). Included in the adjustments to reconcile the net income to cash used
in operating activities is a gain on repayment of mortgage loans ($3,273,000), a
realized loss on repayments of GNMA certificates, an unrealized loss on a
subordinated commercial mortgage-backed security ($1,419,000), an unrealized
gain on a government security sold short ($1,201,000) and net amortization
($170,000).
-11-
<PAGE>
Net unrealized losses on GNMA investments included in shareholders' equity
pursuant to Statement of Financial Accounting Standards No. 115 aggregated
$254,939 at December 31, 1999. This represents a decrease of $417,472 in the
unrealized gain for the year ended December 31, 1999, of which a decrease of
$8,114 is attributable to the repayments of GNMA investments (which resulted
in a net realized loss of $1,492) and a decrease of $409,358 is attributable
to a decrease in market prices for GNMA investments held at December 31, 1999
and December 31, 1998. On January 18, 2000, one of the Company's GNMA
certificates in the original amount of $3,928,615 (including the discount),
with an amortized cost basis of $3,671,107 at December 31, 1999, was repaid
in the amount of $3,551,736 along with a prepayment penalty of $177,587 which
was received in February 2000. This repayment (including the prepayment
penalty) resulted in a realized gain in the amount of approximately $58,000.
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.
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.
On September 30, 1999, the Company acquired from ARCap Investors, L.L.C.
("ARCap") a "BB+" rated subordinated commercial mortgage-backed security
("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage
Trust (the "Chase-First Union 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. In connection with this acquisition, the Company
entered into an agreement (the "Agreement") with ARCap. ARCap acquired from 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, all based on the then fair value of the CMBS
investment. As of December 31, 1999 the CMBS-related investment had an estimated
fair value of $34,347,403 and an amortized cost of $35,766,419, resulting in an
unrealized loss of $1,419,016 at that date (partially offset by an unrealized
gain of $1,201,317 on the Short Sale - see below) which is included in "net
unrealized losses on commercial mortgage-backed security-related investment and
government security sold short" in the statements of income. The fair value of
the Company's CMBS-related 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 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 liquidation of
this investment.
The yield to maturity on the Company's CMBS-related investment depends on, among
other things, the rate and timing of principal payments, the pass-through rate
and interest rate fluctuations. The subordinated CMBS interest 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 a contract to sell a security it
did not own at the time of the sale ("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-related investment due to changes in
interest rates. This contract involved the sale of a U.S. Treasury Note with a
face amount of $39,327,000 and an annual coupon rate of 5.625% borrowed from
Bear Stearns & Co., Inc. ("Bear Stearns") for net proceeds of $39,028,841 (which
included accrued interest of $835,565). Bear Stearns will retain proceeds from
the sale until the Company replaces the borrowed security. As of December 31,
1999, the U.S. Treasury Note had an estimated fair value of $36,991,959,
resulting in an unrealized gain of $1,201,317 at that date which is included in
"net unrealized loss on commercial mortgage-backed security-related investment
and government security sold short" in the statements of income. The Company
earned $471,262 on Short Sale proceeds held by Bear Stearns ($37,733,101 at
December 31, 1999) and incurred interest of $547,025 on the Short Sale contract
during the period September 30, 1999 to December 31, 1999.
On September 30, 1999, the Company entered into a repurchase facility (the
"Repurchase Facility") with Bear Stearns, whereby Bear Stearns advanced
$19,568,000 (55% of the purchase price) in cash towards the purchase of a
CMBS-related investment. The Repurchase Facility has a variable interest rate
based on the one-month LIBOR rate plus 1.5% (7.98% at December 31, 1999),
which is adjusted on the first day of each month, and terminates on March 17,
2000. In March 2000, the Repurchase Facility was renewed through June 17,
2000. The Repurchase Facility is collateralized by the Company's CMBS-related
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 could result in cash flow from such investment
-12-
<PAGE>
being diverted to reduce the outstanding borrowing, the requirement to post
additional collateral, or the sale of such investment. The Repurchase Facility
currently represents the Company's sole source of liquidity needed to finance
its long-term CMBS-related investment. If the lender fails to renew the
Repurchase Facility, the Company will be required to seek new financing or may
have to liquidate the CMBS or other investments. The outstanding balance of the
Repurchase Facility (based on 55% of the market of the CMBS at December 1, 1999)
was $19,127,000 at December 31, 1999.
Effective February 15, 2000, the Company entered into a $60 million FHA
repurchase facility with Nomura Asset Capital Corporation. This agreement
enables the Company to borrow up to 90% with a qualified hedge or 80% without
a qualified hedge of the fair market value of FHA loans owned by the Company.
This facility has a term of 364 days and bears interest at LIBOR plus 1.25%.
As of March 20, 2000, no amounts are outstanding under this facility.
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 meet
its needs for short-term liquidity, and will be sufficient to pay all of the
Company's expenses and to make distributions to its shareholders in amounts
sufficient to retain the Company's REIT status in the foreseeable future.
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 earned interest
income of approximately $86,000 from this loan.
The Company is currently in the process of completing a 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.
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 following is a summary of the results of operations of the Company for the
years ended December 31, 1999, 1998 and 1997. The net income for the years ended
December 31, 1999, 1998 and 1997 was $6,260,300, $3,396,612 and $3,545,815,
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. There was no such excess for the years ended December 31,
1999, 1998 and 1997.
1999 VS. 1998
Interest income from mortgage loans decreased approximately $468,000 for the
year ended December 31, 1999 as compared to 1998 primarily due to the repayment
of the Cove and Oxford mortgage loans on March 1, 1999 which was partially
offset by increases due to the receipt of Additional Interest relating to
Columbiana and the accrual of Additional Interest (received in January 2000)
relating to Town and Country, both of which had been fully reserved and reversed
from interest in 1998.
Interest income from REMIC and GNMA certificates decreased approximately $95,000
for the year ended December 31, 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 during 1999 and 1998.
-13-
<PAGE>
Interest income from commercial mortgage-backed security-related investment in
the amount of approximately $950,000 was recorded for the year ended December
31, 1999; such investment was made on September 30, 1999.
Interest income from note receivable in the amount of approximately $86,000 was
recorded for the year ended December 31, 1999 relating to a loan made in May
1999 which was repaid in September 1999.
Interest income from temporary investments increased approximately $980,000 for
the year ended December 31, 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 $23,000 was recorded for the year
ended December 31, 1999 relating primarily to origination points (fees) relating
to the note receivable.
Interest expense in the amount of approximately $907,000 was recorded for the
year ended December 31, 1999 relating to interest on a repurchase facility
payable entered into on September 30, 1999 and interest on a government security
sold short on September 30, 1999.
General and administrative expenses increased approximately $388,000 for the
year ended December 31, 1999 as compared to 1998 primarily due to an incentive
fee payable to the Advisor, an increase in the reimbursements of certain
administrative and other costs incurred by the Advisor on behalf of the Company
and an increase in public relations expenses due to the restructuring of the
Company.
Organization costs in the amount of approximately $365,000 were expensed for the
year ended December 31, 1999 relating to the restructuring of the Company.
A net unrealized loss on the commercial mortgage-backed security-related
investment and government security sold short position in the amount of
approximately $218,000 was recorded for the year ended December 31, 1999
relating to such securities purchased and sold, respectively, on September 30,
1999.
A gain on repayment of mortgage loans in the amount of approximately $3,273,000
was recorded for the year ended December 31, 1999 relating to the repayment of
the Cove and Oxford mortgage loans on March 1, 1999.
1998 VS. 1997
Interest income from mortgage loans decreased approximately $80,000 for the
year ended December 31, 1998 as compared to 1997 primarily due to the
reversal of Additional Interest in 1998 relating to Town and Country and
Columbiana, partially offset by an increase due to additional advances on the
Stonybrook mortgage loan during 1997.
Interest income from REMIC and GNMA certificates and the FHA Insured Project
Loan decreased approximately $95,000 for the year ended December 31, 1998 as
compared to 1997 primarily due to the repayment of the FHA Insured Project Loan
in May 1997.
Interest income from temporary investments decreased approximately $38,000 for
the year ended December 31, 1998 as compared to 1997 primarily due to a decrease
in temporarily invested proceeds earning interest during 1998.
Realized (gain) loss on sale of REMIC and GNMA certificates and the FHA Insured
Project Loan decreased approximately $79,000 for the year ended December 31,
1998 as compared to 1997 primarily due to the repayment, in 1997, of four REMICs
and the FHA Insured Project Loan on which losses had been recognized and a gain
on a repayment of one REMIC in 1998.
DISTRIBUTIONS
Of the total distributions of $6,946,745 and $5,566,903 for the years ended
December 31, 1999 and 1998, respectively, $686,445 ($.18 per share or 10%) and
$2,170,291 ($.56 per share or 39%), respectively, represented a return of
capital determined in accordance with generally accepted accounting principles.
As of December 31, 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
$11,869,468. 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
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. Because the Company does not currently utilize derivatives,
management does not anticipate that implementation of this statement will have a
material effect 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 prospec-
-14-
<PAGE>
tive tenants, lease rents and the terms and availability of financing; adverse
changes in the real estate markets including, among other things, competition
with other companies; risks of real estate development and acquisition;
governmental actions and initiatives; and environment/safety requirements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof.
INFLATION
Inflation did not have a material effect on the Company's results for the
periods presented.
Item 7A. 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 following table demonstrates the estimated effect
that changes in interest rates would have on the net interest income from,
and the value of the Company's CMBS-related investment and short positions in
government securities. All changes in income and value are measured as
percentage changes from the projected income and value if no change in
interest rates were to occur.
CHANGE IN EXPECTED INCOME FROM AND VALUE OF THE CMBS-RELATED INVESTMENT AND
SHORT POSITIONS, FROM CHANGES IN INTEREST RATES
<TABLE>
<CAPTION>
Change in Income
------------------------------
Change in Interest Rates Amount Percentage
- - ------------------------ -------- ----------
<S> <C> <C>
- - -250 Basis Points $733,437 21.2%
- - -200 Basis Points 586,749 16.9
- - -150 Basis Points 440,062 12.7
- - -100 Basis Points 293,375 8.5
- - -50 Basis Points 146,687 4.2
No Change 0 0.0
+50 Basis Points -146,687 -4.2
+100 Basis Points -293,375 -8.5
+150 Basis Points -440,062 -12.7
+200 Basis Points -586,749 -16.9
+250 Basis Points -733,437 -21.2
</TABLE>
* Income includes expected interest income from the CMBS-related investment,
amortization of market discount on CMBS, net interest income on short positions
in government securities and mark to market adjustments to the CMBS-related
investment and government securities from changes in interest rates.
The Company is further exposed to interest rate risk through its short term
financing through repurchase agreements at rates that are based on 30-day LIBOR.
Changes in interest rates may increase the Company's cost of financing its
investments. The following table demonstrates the estimated effect that changes
in interest rates would have on the interest expense of the Company:
CHANGE IN INTEREST EXPENSE UNDER REPURCHASE AGREEMENT FROM CHANGES IN LIBOR
<TABLE>
<CAPTION>
Change in Interest Expense
------------------------------
Change in LIBOR Amount Percentage
- - ------------------------ -------- ----------
<S> <C> <C>
- - -250 Basis Points $-489,200 -31%
- - -200 Basis Points -391,360 -25
- - -150 Basis Points -293,520 -19
- - -100 Basis Points -195,680 -13
- - -50 Basis Points -97,840 -6
No change in LIBOR 0 0
+50 Basis Points 97,840 6
+100 Basis Points 195,680 13
+150 Basis Points 293,520 19
+200 Basis Points 391,360 25
+250 Basis Points 489,200 31
</TABLE>
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
gen-
-15-
<PAGE>
eral credit concerns in other markets. The following table demonstrates the
estimated effect that changes in CMBS spreads would have on the value of the
Company's CMBS-related investment:
CHANGE IN VALUE OF CMBS-RELATED INVESTMENT FROM CHANGES IN CMBS SPREADS
<TABLE>
<CAPTION>
Change in CMBS Portfolio Value
---------------------------------
Change in CMBS Spreads Amount Percentage
- - ---------------------- ---------- ----------
<S> <C> <C>
- - -250 Basis Points $6,410,158 18.8%
- - -200 Basis Points 5,128,126 15.1
- - -150 Basis Points 3,846,095 11.3
- - -100 Basis Points 2,564,063 7.5
- - -50 Basis Points 1,282,032 3.8
No change in CMBS Spreads 0 0.0
+50 Basis Points -1,282,032 -3.8
+100 Basis Points -2,564,063 -7.5
+150 Basis Points -3,846,095 -11.3
+200 Basis Points -5,128,126 -15.1
+250 Basis Points -6,410,158 -18.8
</TABLE>
The above tables show the possible impact of changes in interest rates and CMBS
spreads on the Company's CMBS-related investment, the financing related to that
investment, and the associated hedging instruments. Cash flows and income from
the Company's other financial instruments, consisting primarily of mortgage
loans, GNMA certificates, and cash and cash equivalents, would not be
significantly affected by changes in interest rates, because most of these
instrument bear interest at fixed rates, and are not subject to financing or
hedged. Cash and cash equivalents and the mortgage loans are carried at
amortized cost, and so their carrying values are not impacted by changes in
interest rates. The GNMA investments are adjusted to market value through
comprehensive income in the equity statement, but changes in their value have
not historically been significant to shareholders' equity.
The Company's analysis of risks is based on management's experience, estimates
and assumptions. These analyses rely on financial models, which utilize
estimates of fair value and interest rate sensitivity. Actual economic
conditions or implementation of investment decisions by management may produce
results significantly different from the projected results shown in the above
tables.
-16-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
-------------------- ----
Independent Auditors' Report - Deloitte & Touche LLP
Independent Auditors' Report - KPMG LLP 13
Balance Sheets as of December 31, 1999 and 1998 14
Statements of Income for the years ended December 31, 1999,
1998 and 1997 15
Statements of Changes in Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997 16
Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997 18
Notes to Financial Statements 20
(a) 2. Financial Statement Schedules
-----------------------------
All schedules have been omitted because they are not required or
because the required information is contained in the financial
statements or notes thereto.
-17-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
And Shareholders of
American Mortgage Acceptance Company
New York, New York
We have audited the accompanying balance sheet of American Mortgage Acceptance
Company (the "Company") as of December 31, 1999 and the related statements of
income, changes in shareholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of American Mortgage Acceptance Company as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
New York, New York
March 20, 2000
-18-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
American Mortgage Acceptance Company:
We have audited the accompanying balance sheet of American Mortgage Acceptance
Company (formerly American Mortgage Investors Trust) as of December 31, 1998,
and the related statements of income, changes in shareholders' equity, and cash
flows for each of the years in the two-year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Mortgage Acceptance
Company as of December 31, 1998, and the results of its operations and its
cash flows for each of the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
January 15, 1999, except as to Note 3
which is as of March 1, 1999
-19-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
-----------------------------
1999 1998
------------ -----------
<S> <C> <C>
Investments in mortgage loans $ 28,893,482 $45,965,488
Investments in GNMA certificates-available for sale 9,464,437 10,303,002
Commercial mortgage-backed security-related investment 34,347,403 0
Deposit with broker as collateral for security sold short 37,733,101 0
Cash and cash equivalents 3,802,298 2,953,125
Accrued interest receivable 1,180,115 766,702
Other assets 144,605 4,723
------------ -----------
Total assets $115,565,441 $59,993,040
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Repurchase facility payable $ 19,127,000$ 0
Accrued interest payable 407,952 0
Accounts payable and accrued expenses 122,397 73,372
Due to Advisor and affiliates 433,265 1,715,094
Distributions payable 1,391,503 0
Government security sold short 36,991,959 0
------------ -----------
Total liabilities 58,474,076 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 (11,878,059) (11,191,614)
Accumulated other comprehensive income (loss) (254,939) 162,533
------------ -----------
Total shareholders' equity 57,091,365 58,204,574
------------ -----------
Total liabilities and shareholders' equity $115,565,441 $59,993,040
============ ===========
</TABLE>
See accompanying notes to financial statements
-20-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $2,569,901 $3,037,882 $3,118,027
REMIC and GNMA certificates and the
FHA Insured Project Loan 785,591 880,680 975,599
Commercial mortgage-backed
security-related investment 950,456 0 0
Note receivable 85,786 0 0
Temporary investments 1,092,617 112,953 151,228
Other income 23,231 0 0
---------- ---------- ----------
Total revenues 5,507,582 4,031,515 4,244,854
---------- ---------- ----------
Expenses:
Interest 906,581 0 0
General and administrative 1,029,840 642,047 622,304
Amortization 0 5,000 10,000
Organization costs 364,872 0 0
---------- ---------- ----------
Total expenses 2,301,293 647,047 632,304
---------- ---------- ----------
Other gain (loss):
Net realized gain (loss) on
repayments of REMIC and GNMA
certificates and the FHA
Insured Project Loan (1,492) 12,144 (66,735)
Net unrealized loss on
commercial mortgage-backed
security-related investment
and government security
sold short (217,699) 0 0
Gain on repayment of
mortgage loans 3,273,202 0 0
---------- ---------- ----------
Total other gain (loss) 3,054,011 12,144 (66,735)
---------- ---------- ----------
Net income $6,260,300 $3,396,612 $3,545,815
========== ========== ==========
Net income per share
(basic and diluted) $ 1.63 $ .88 $ .92
========== ========== ==========
Weighted average
shares outstanding
(basic and diluted) 3,841,931 3,845,101 3,851,029
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
-21-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Treasury Shares of
Shares of Beneficial Interest Beneficial Interest Additional Distributions
----------------------------- ----------------------- Paid-in in Excess
Shares Amount Shares Amount Capital of Net Income
---------- --------- --------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 4,010,000 $401,001 (169,115) $(16,912) $68,849,567 $ (6,991,606)
Comprehensive income:
Net income 3,545,815
Other comprehensive income
Net unrealized gain on first mortgage
bonds:
Net unrealized holding gain arising
during the period
Add: reclassification adjustment for
losses included in net income
Other comprehensive income
Comprehensive income
Issuance of shares of beneficial interest 77,583 7,758 0 0 1,390,751 0
Distributions 0 0 0 0 0 (5,575,532)
Purchase of treasury shares 0 0 (79,224) (7,922) (1,390,593) 0
---------- --------- --------- ---------- -------------- ---------------
Balance at December 31, 1997 4,087,583 408,759 (248,339) (24,834) 68,849,725 (9,021,323)
Comprehensive income:
Net income 3,396,612
Other comprehensive loss:
Net unrealized gain on first mortgage
bonds:
Net unrealized holding gain arising
during the period
Less: reclassification adjustment for
gains included in net income
Other comprehensive loss
Comprehensive income
Issuance of shares of beneficial interest 85,207 8,521 0 0 1,328,465 0
Distributions 0 0 0 0 0 (5,566,903)
Purchase of treasury shares 0 0 (85,206) (8,521) (1,328,460) 0
---------- --------- --------- ---------- -------------- ---------------
Balance at December 31, 1998 4,172,790 417,280 (333,545) (33,355) 68,849,730 (11,191,614)
<CAPTION>
Accumulated
Other
Comprehen- Comprehen-
sive sive
Income Income Total
---------- ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1997 $ (81,386) $62,160,664
Comprehensive income:
Net income $3,545,815 3,545,815
---------
Other comprehensive income
Net unrealized gain on first mortgage
bonds:
Net unrealized holding gain arising
during the period 188,249
Add: reclassification adjustment for
losses included in net income 66,735
---------
Other comprehensive income 254,984 254,984 254,984
---------
Comprehensive income $3,800,799
=========
Issuance of shares of beneficial interest 0 1,398,509
Distributions 0 (5,575,532)
Purchase of treasury shares 0 (1,398,515)
------------ ------------
Balance at December 31, 1997 173,598 60,385,925
Comprehensive income:
Net income $3,396,612 3,396,612
---------
Other comprehensive loss:
Net unrealized gain on first mortgage
bonds:
Net unrealized holding gain arising
during the period 1,079
Less: reclassification adjustment for
gains included in net income (12,144)
Other comprehensive loss (11,065) (11,065) (11,065)
---------
Comprehensive income $3,385,547
=========
Issuance of shares of beneficial interest 0 1,336,986
Distributions 0 (5,566,903)
Purchase of treasury shares 0 (1,336,981)
------------ ------------
Balance at December 31, 1998 162,533 58,204,574
(continued)
See accompanying notes to financial statements
-22-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
Treasury Shares of
Shares of Beneficial Interest Beneficial Interest Additional Distributions
----------------------------- ----------------------- Paid-in in Excess
Shares Amount Shares Amount Capital of Net Income
---------- --------- --------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Comprehensive income:
Net income 6,260,300
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 0
Purchase of treasury shares 0 0 (41,651) (4,165) (639,064) 0
Distributions 0 0 0 0 0 (6,946,745)
---------- ---------- --------- ---------- ----------- ------------
- - - -
Balance at December 31, 1999 4,213,826 $ 421,383 (375,196) $ (37,520) $68,840,500 $(11,878,059)
=========== ========== ========= ========= ========== ===========
<CAPTION>
Accumulated
Other
Comprehen- Comprehen-
sive sive
Income Income Total
---------- ------------ ------------
<S> <C> <C> <C>
Comprehensive income:
Net income 6,260,300 6,260,300
Other comprehensive loss:
Net unrealized loss on first mortgage
bonds:
Net unrealized holding loss arising
during the period (418,964)
Add: reclassification adjustment for
losses included in net income 1,492
Other comprehensive loss (417,472) (417,472) (417,472)
---------
Comprehensive income $5,842,828
==========
Issuance of shares of beneficial interest 0 633,937
Purchase of treasury shares 0 (643,229)
Distributions 0 (6,946,745)
------------ ------------
Balance at December 31, 1999 $ (254,939) $57,091,365
============ ===========
</TABLE>
See accompanying notes to financial statements
-23-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1999 1998 1997
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,260,300 $ 3,396,612 $ 3,545,815
----------- ------------ -----------
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Unrealized loss on commercial mortgage-
backed security-related investment 1,419,016 0 0
Unrealized gain on government security
sold short (1,201,317) 0 0
Gain on repayment of mortgage loans (3,273,202) 0 0
Amortization expense-organization costs 0 5,000 10,000
Amortization expense-loan premium and
origination costs 337,590 553,608 510,101
Amortization of REMIC premium 0 0 3,181
Accretion of REMIC, GNMA and FHA
Insured Project Loan discount (23,145) (26,272) (31,860)
Accretion of discount on commercial
mortgage-backed security-related investment (144,061) 0 0
(Gain) loss on repayment of REMIC certificates 0 (12,986) 21,849
Loss on repayment of GNMA certificates 1,492 842 1,807
Loss on repayment of FHA Insured Project Loan 0 0 43,080
Changes in operating assets and liabilities:
Investment in commercial mortgage-
backed security-related investment (35,622,358) 0 0
Deposit with broker as collateral for security
sold short (37,733,101) 0 0
Accrued interest receivable (413,413) (264,775) 56,219
Other assets (33,159) 0 0
Due to Advisor and affiliates (1,281,829) 504,220 324,091
Accounts payable and
accrued expenses 49,025 24,249 (50,645)
Accrued interest payable 407,952 0 0
Government security sold short 38,193,276 0 0
----------- ------------ -----------
Total adjustments (39,317,234) 783,886 887,823
----------- ------------ -----------
Net cash (used in) provided by operating activities (33,056,934) 4,180,498 4,433,638
----------- ------------ -----------
Cash flows from investing activities:
Increase in investment in mortgage loans (829,204) 0 (2,466,104)
Proceeds from repayments of mortgage loans 20,841,545 273,757 215,778
Increase in note receivable (1,900,000) 0 0
Repayment of note receivable 1,900,000 0 0
Purchase of REMIC certificates 0 0 (1,981,566)
Purchase of GNMA certificates 0 0 (1,889,817)
Principal repayments of GNMA certificates 442,746 413,254 127,621
Principal repayments of REMIC certificates 0 1,806,973 739,904
Principal repayments of FHA Insured Project Loan 0 0 3,408,238
(Increase) decrease in other assets (111,446) 4,826 0
----------- ------------ -----------
Net cash provided by (used in) investing activities 20,343,641 2,498,810 (1,845,946)
----------- ------------ -----------
(continued)
See accompanying notes to financial statements
-24-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CASH FLOWS
(continued)
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1999 1998 1997
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from repurchase facility payable 19,568,000 0 0
Repayments of repurchase facility payable (441,000) 0 0
Distributions paid to shareholders (5,555,242) (5,566,903) (5,575,532)
Proceeds from issuance of shares of
beneficial interest 633,937 1,336,986 1,398,509
Purchase of treasury shares (643,229) (1,336,981) (1,398,515)
----------- ------------ -----------
Net cash provided by (used in)
financing activities 13,562,466 (5,566,898) (5,575,538)
----------- ------------ -----------
Net increase (decrease) in cash and cash
equivalents 849,173 1,112,410 (2,987,846)
Cash and cash equivalents at the beginning
of the year 2,953,125 1,840,715 4,828,561
----------- ------------ -----------
Cash and cash equivalents at the end of
the year $ 3,802,298 $ 2,953,125 $ 1,840,715
============ ============ ============
Supplemental information:
Interest paid $ 498,629 $ 0 $ 0
============ ============ ============
</TABLE>
See accompanying notes to financial statements
-25-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
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 "Code").
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 of beneficial interest (the
"Shares") commenced trading on the American Stock Exchange on July 1, 1999 under
the symbol "AMC". As of December 31, 1999, there were 3,838,630 Shares
outstanding.
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.
As of December 31, 1999 the Company's mortgage investments consisted of three
mortgage loans originated by or on behalf of the Company, four GNMA
mortgage-backed securities and pass-through certificates and one commercial
mortgage-backed security ("CMBS")-related investment. Due to the complexity
of the GNMA and CMBS 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 or the CMBS-related investment 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 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.
NOTE 2 - Accounting Policies
a) Basis of Accounting
The books and records of the Company are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles
("GAAP").
b) Investments in Mortgage Loans
The Company accounts for its investments in mortgage loans under the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114"). Under SFAS 114, a loan is
impaired when, based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the contractual
terms of the loan agreement. SFAS No. 114 requires lenders to measure impaired
loans based on: (i) the present value of expected future cash flows discounted
at the loans' effective interest rate; (ii) the loan's observable market price;
or (iii) the fair value of the collateral if the loan is collateral-dependent.
An allowance for loan losses is maintained if the measure of an impaired loan is
less than its recorded investment. Adjustments to the allowance are made through
corresponding charges or credits to the provision for loan losses.
Interest on mortgage loans is recognized on the accrual basis. Interest which
was accrued but not received is reversed from income if deemed to be
uncollectible.
c) Investments in Mortgage-Backed Securities
The Company accounts for its investments in mortgage-backed securities under the
provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities".
At the date of acquisition, the Company elected to designate its GNMA
certificates as available-for-sale securities. Available-for-sale securities
are carried at fair value with net unrealized gain (loss) reported as a
separate component of other comprehensive income until realized. A decline in
the market value of any available-for-sale security below cost that is deemed
other than temporary is charged to earnings resulting in the establishment of
a new cost basis for the security. Premiums and discounts are amortized or
accreted over the life of the related security
-26-
<PAGE>
as an adjustment to interest income using the effective yield method. Dividend
and interest income are recognized when earned. Realized gains and losses on
securities are included in earnings and are derived using the specific
identification method for determining the cost of the securities sold.
At the date of acquisition, the Company elected to designate its CMBS-related
investment as a trading asset (see Note 5). This investment is carried at its
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 are reviewed periodically and effective yields adjusted if
necessary.
d) Short Sales
The Company has entered into a contract to sell a security that it did not own
at the time of the sale ("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-related investment due to changes in interest rates.
This contract involved the sale of a U.S. Treasury Note borrowed from a broker.
The broker will retain the 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. The Company does not anticipate
nonperformance by any counterparty. 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 the broker is included in interest income from temporary investments and
interest due on securities borrowed under the Short Sale is included in interest
expense.
e) Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, and temporary investments in
short-term instruments with original maturity dates equal to or less than three
months.
f) Loan Origination Costs
Acquisition fees and other direct expenses incurred for activities performed to
originate or acquire mortgage loans have been capitalized and are included in
Investment in Mortgage Loans in the balance sheets. Loan origination costs are
being amortized to interest income using the effective yield method over the
lives of the respective mortgages.
g) Fair Value of Financial Instruments
As described above, the Company's GNMA certificates, commercial mortgage-backed
security-related investment, and government security sold short are carried at
estimated fair values. The Company has determined that the fair value of its
remaining financial instruments, including its mortgage loans, cash and cash
equivalents, deposit with broker as collateral for security sold short and the
repurchase facility payable, approximate their carrying values at December 31,
1999 and 1998. The fair value of investments in Mortgage Loans and GNMA
certificates are based on actual market price quotes or by determining the
present value of the projected future cash flows using appropriate discount
rates, credit losses and prepayment assumptions.
h) Income Taxes
The Company has qualified as a REIT under the Code. A REIT is generally not
subject to federal income tax on that portion of its REIT taxable income
("Taxable Income") which is distributed to its shareholders provided that at
least 95% of Taxable Income is distributed and provided that such income meets
certain other conditions. Accordingly, no provision for federal income taxes is
required. The Company may be subject to state taxes in certain jurisdictions.
During 1999, the Company declared distributions of $1.44 per share. For
federal income tax purposes, 100% of the distributions were reported as
ordinary income to shareholders for 1999.
i) Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income," requires the Company to classify
items of "other comprehensive income", such as unrealized gains and losses on
its investment in GNMA certificates, by their nature in the financial statements
and display the accumulated balance of other comprehensive income (loss)
separately from shareholders' equity in the shareholders' equity section of the
balance sheets. In accordance with SFAS No. 130, cumulative unrealized gains and
losses on securities available-for-sale are classified as accumulated other
comprehensive income in shareholders' equity and current period unrealized gains
and losses are included as a component of comprehensive income.
j) Use of Estimates
The preparation of financial statements in conformity with GAAP requires the
Advisor to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
-27
<PAGE>
k) Segment Information
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", requires enterprises to report certain financial and descriptive
information about their reportable operating segments, and certain
enterprise-wide disclosures regarding products and services, geographic areas
and major customers. The Company is an investor in mortgage products and
operates in only one reportable segment. The Company does not have or rely upon
any major customers. All of the Company's investments are secured by real estate
properties located in the United States; accordingly, all of its revenues were
derived from U.S. operations.
l) New Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
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. Because the Company does not currently utilize derivatives,
management does not anticipate that implementation of this statement will have a
material effect on the Company's financial statements.
m) Reclassifications
Certain amounts in the 1998 and 1997 financial
statements have been reclassified to conform to the 1999 presentation.
-28-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - Investments in Mortgage Loans
Information relating to investments in mortgage loans as of December 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
Date of
Invest-
ment/ AMOUNTS ADVANCED
Final Interest ---------------------------------------- Out-
Matu Rate on Total standing Origi-
Descrip -rity Mortgage Mortgage Additional Amounts Loan nation
Property -tion Date Loan (A) Loans Loans(b) Advanced Balance Costs
- - ------------- -------- ------- ---------- ----------- ----------- ------------ ----------- ---------
<S> <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
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
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 9,995,170 603,895
Country IV Apt. 5/29 9.167%
Apts. Units (D)(M) (E)(F)
Urbana, IL
Columbiana 204 4/94 (H) 9,106,099 563,000 9,669,099 9,576,839 537,558
Lakes Apts. Apt. 11/35
Columbia, Units (G)(M)
SC
Stony Brook 125 12/95 7.75%- 8,500,000 763,909 9,263,909 9,177,588 413,492
Village II Apt. 6/37 9.128%
Apts. Units (G)(M) (I)
East Haven,
CT
----------- ----------- ------------ ----------- ----------
Total $43,104,099 $4,362,409 $47,466,508 $28,749,597 $1,554,945
=========== ========== ============ =========== ==========
<CAPTION>
Accum
-ulated
Amor-
tization- Interest
Additional Earned Less
Loans and Balance at Balance at by the 1999 Net
Descrip Origina- December December Company Amor- Interest
Property -tion tion Costs 31, 1999(K) 31, 1998 for 1999 Tization Earned
- - ------------- -------- ---------- ----------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
The Cove 308 $ 0 $ 0 $ 7,343,073 $ 117,242 $ 16,789 $ 100,453
Apts. Apt
Houston, TX Units
(J)
Oxford on 405 0 0 10,096,915 155,267 23,090 132,177
Greenridge Apt.
Apts. Units
Houston, TX
(J)
Town & 330 662,589 9,936,476 10,134,960 887,897 115,989 771,908
Country IV Apt.
Apts. Units
Urbana, IL
Columbiana 204 408,711 9,705,686 9,014,698 986,289 93,741 892,548
Lakes Apts. Apt.
Columbia, Units
SC
Stony Brook 125 339,760 9,251,320 9,375,842 760,796 87,981 672,815
Village II Apt.
Apts. Units
East Haven,
CT
---------- ----------- ------------ ---------- -------- ----------
Total $1,411,060 $28,893,482 $45,965,488 $2,907,491 $337,590 $2,569,901
========== =========== ============ ========== ======== ==========
</TABLE>
-29-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
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.
Due to the waiving of future additional interest (see Note F below), the Town
and Country mortgage loan is considered an impaired loan, as it will not perform
in accordance with the contractual terms of the original 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 Mortgage. At the time of the final advance,
construction loan extension fees, intended to compensate the Company for the
difference between the construction period interest rate and the higher
permanent loan interest rate during the extension period, in the amount of
$195,958 were received by the Company. The fees received are classified as
"interest income from mortgage loans" 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 had not been able to support the payment
of Additional Interest for the period July 1, 1997 through December 31, 1999
which amounted to $411,911. Accordingly, the accrued interest income that was
doubtful of collection was fully reserved and excluded from interest income from
mortgage loans in previous quarters. On January 21, 2000, the general partner of
the Town and Country obligor, in exchange for the waiving of the prepayment
penalty and future Additional Interest and also because the obligation was
secured by its partnership interest in the obligor, repaid the additional loan
and Additional Interest due through January 21, 2000 in the amounts of
$1,039,000 and $421,273, respectively. As a result, the Additional Interest
which had been fully reserved was deemed to be fully collectible and recorded as
interest income in the fourth quarter of 1999.
(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 was 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 doubtful of collection was fully reserved and 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 fully reserved 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 $29,766,598.
(M) In order for the Company to exercise an acceleration option it must
terminate the mortgage insurance contract with FHA not later than the
accelerated payment date and, in certain circumstances, must terminate the
mortgage insurance contract upon the exercise of the acceleration option. Since
the exercise of such option would be at the Company's discretion, it is intended
to be exercised only where the value of the Development has increased by an
amount which would justify accelerating payment in full and assuming the risks
of foreclosure if the mortgagor failed to make the accelerated payment.
Further information relating to investments in mortgage loans and Additional
Loans for the years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Investments in mortgage loans - January 1, $45,965,488 $46,792,853 $45,049,596
----------- ----------- -----------
Additions:
Columbiana - advance 829,204 0 260,767
Columbiana - loan origination costs 4,723 0 3,032
Stonybrook - advances 0 2,205,337
Stonybrook - loan origination costs 0 0 0
Accumulated amortization of additional
loans at March 1, 1999 included in
gain on repayment of mortgage loans
- Cove 365,219 0 0
- Oxford 502,315 0 0
Accumulated amortization of loan
origination costs at March 1, 1999 included
in gain on repayment of mortgage loans
- Cove 161,555 0 0
- Oxford 222,148 0 0
----------- ----------- -----------
2,085,164 0 2,469,136
----------- ----------- -----------
Deductions:
Amortization of Additional Loans (234,272) (372,916) (372,916)
Amortization of loan origination costs (103,318) (180,692) (137,185)
Collection of principal - FHA loans
- Cove (6,568,343) (54,375) (50,395)
- Oxford (9,031,473) (74,765) (69,293)
- Town and Country (82,496) (76,648) (71,215)
- Columbiana (49,198) (34,145) (8,918)
- Stonybrook (36,541) (33,824) (15,957)
Collection of principal-
Additional Loans - Cove (840,500) 0 0
- Oxford (1,156,000) 0 0
Loan origination costs at March 1, 1999
included in gain on repayment of
mortgage loans - Cove (444,215) 0 0
- Oxford (610,814) 0 0
----------- ----------- -----------
(19,157,170) (827,365) (725,879)
Investments in mortgage loans - December 31, $28,893,482 $45,965,488 $46,792,853
=========== =========== ===========
</TABLE>
-30-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Investments in GNMA Certificates-Available for Sale
Information relating to investments in GNMA Certificates as of December 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
Accum
Date Original -ulated
Purchased Purchase Amorti
Final Stated Price Principal at Discount at -zation
Certificate Payment Interest Including December December at December
SELLER Number Date Rate Discount 31, 1999 31, 1999 31, 1999
- - ----------------------------- ----------- ------------- --------- -------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
GNMA CERTIFICATES
Bear Stearns 0355540 7/27/94 7.125% $2,407,102 $2,542,411 $(235,173) $107,681
3/15/29
Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,140,592 (8,027) 3,837
8/15/29
Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 3,551,736 (3,328) 1,730
7/15/29
SunCoast Capital Group, Ltd. G22412 6/23/97 7.000% 1,981,566 1,349,527 (8,856) 4,920
4/20/27
-------------- -------------- --------------- ------------
Total $10,514,413 $9,584,266 $(255,384) $118,168
============== ============== =============== ============
<CAPTION>
Loan Unrealized Interest
Origination Loss at Earned
Costs at December Balance at Balance at by the Net
December December December Company 1999 Interest
SELLER 31, 1999 31, 1999 31, 1999 31, 1998 for 1999 Accretion Earned
- - ----------------------------- --------------- -------------- -------------- -------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
GNMA CERTIFICATES
Bear Stearns $78,656 $(61,797) $2,431,778 $ 2,589,414 $181,932 $19,968 $201,900
Malone Mortgage 72,701 (40,417) 2,168,686 2,252,798 182,527 711 183,238
Goldman Sachs 120,969 (106,053) 3,565,054 3,761,846 296,240 323 296,563
SunCoast Capital Group, Ltd. 0 (46,672) 1,298,919 1,698,944 101,747 2,143 103,890
--------------- -------------- -------------- -------------- ------------ ------------- -----------
Total $272,326 $(254,939) $9,464,437 $10,303,002 $762,446 $23,145 $785,591
=============== ============== ============== ============== ============ ============= ===========
</TABLE>
-31-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
The amortized cost, unrealized gain and fair value for the investment in GNMA
Certificates at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Amortized cost $9,719,376 $10,140,469
Gross unrealized gain (loss) (254,939) 162,533
----------- -----------
Fair Value $9,464,437 $10,303,002
=========== ===========
</TABLE>
For the year ended December 31, 1999, there were gains and losses of $1,791 and
$3,283, respectively, (including acquisition fees and expenses) on principal
repayments of GNMA certificates. For the year ended December 31, 1998, there
were gains and losses of $15,148 and $3,004, respectively, (including
acquisition fees and expenses) on principal repayments of REMIC and GNMA
certificates.
NOTE 5 - Commercial Mortgage-Backed Security-Related Investment and Short Sale
On September 30, 1999, the Company acquired from ARCap Investors, L.L.C.
("ARCap") a "BB+" rated subordinated commercial mortgage-backed security
("CMBS") from a Chase Manhattan Bank-First Union Nation Bank Commercial Mortgage
Trust (the "Chase-First Union 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 6). In connection with this acquisition,
the Company entered into an agreement (the "Agreement") with ARCap. ARCap
acquired from 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, all based on the then fair value of the CMBS
investment.
Because the Company is required to return the CMBS to ARCap upon request by
ARCap, this transaction has been accounted for as a secured loan from the
Company to ARCap under SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities". This loan can be
contractually settled in such a way that the Company would not recover its
recorded investment, so, under SFAS 125, the Company measures its investment in
the loan like an investment in a debt security. The Company has elected to
utilize the "trading" classification for this investment, and measures the value
of the investment as the estimated value of the CMBS collateralizing the loan.
As of December 31, 1999, the 205 mortgage loans underlying the CMBS were secured
by 217 properties of the types and in the states identified below:
<TABLE>
<CAPTION>
Property Type Percentage (1)
- - ------------- -------------
<S> <C>
Multifamily 38%
Retail 25
Office 18
Health Care 4
Hospitality 4
Industrial 4
Other 7
<CAPTION>
State Percentage (1)
- - ----- --------------
<S> <C>
CA 23%
NY 14
FL 6
PA 6
Others (2) 51
</TABLE>
(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.
As of December 31, 1999, there are no unpaid principal balances of loans that
are underlying the CMBS investment which are more than 60 days delinquent.
As of December 31, 1999 the CMBS-related investment had an estimated fair value
of $34,347,403 and an amortized cost of $35,766,419, resulting in an unrealized
loss of $1,419,016 at that date (partially offset by an unrealized gain of
$1,201,317 on the Short Sale - see below) which is included in "net unrealized
losses on commercial mortgage-backed security-related investment and government
security sold short" in the statements of income. The fair value of the
Company's CMBS-related investment is generally estimated by management based on
market
-32-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
prices provided by certain dealers who make a market in these financial
instruments. The market for CMBS 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 liquidation of this investment.
At December 31, 1999, the un-leveraged, un-hedged, weighted average yield to
maturity of the Company's CMBS-related investment was approximately 10%.
The yield to maturity on the Company's CMBS-related investment depends on, among
other things, the rate and timing of principal payments, the pass-through rate
and interest rate fluctuations. The subordinated CMBS interest 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 a 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-related investment due
to changes in interest rates. This contract involved the sale of a U.S. Treasury
Note with a face amount of $39,327,000 and an annual coupon rate of 5.625%
borrowed from Bear Stearns & Co., Inc. ("Bear Stearns") for net proceeds of
$39,028,841 (which included accrued interest of $835,565). Bear Stearns will
retain proceeds from the sale until the Company replaces the borrowed security.
As of December 31, 1999, the U.S. Treasury Note had an estimated fair value of
$36,991,959, resulting in an unrealized gain of $1,201,317 at that date which is
included in "net unrealized loss on commercial mortgage-backed security-related
investment and government security sold short" in the statements of income. The
Company earned $471,262 on Short Sale proceeds held by Bear Stearns ($37,733,101
at December 31, 1999) and incurred interest of $547,025 on the Short Sale
contract during the period September 30, 1999 to December 31, 1999.
NOTE 6 - Repurchase Facility
On September 30, 1999, the Company entered into a repurchase facility (the
"Repurchase Facility") with Bear Stearns, whereby Bear Stearns advanced
$19,568,000 (55% of the purchase price) in cash towards the purchase of a
CMBS-related investment (see Note 5). The Repurchase Facility has a variable
interest rate based on the one-month LIBOR rate plus 1.5%,(7.98% at December
31, 1999) which is adjusted on the first day of each month, and terminates on
March 17, 2000. In March 2000, the Repurchase Facility was renewed through
June 17, 2000. The Repurchase Facility is collateralized by the Company's
CMBS-related 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 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. The outstanding
balance of the Repurchase Facility (based on 55% of the market of the CMBS at
December 1, 1999) was $19,127,000 at December 31, 1999.
NOTE 7 - 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 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 (fees) paid by borrowers
equal to up to 1% of the principal amount of
-33-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
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 years ended December 31, 1999,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Expense reimbursement $ 255,616 $ 120,029 $ 111,460
Asset management fees 335,682 362,280 367,044
Incentive fee 122,270 0 0
----------- ----------- -----------
$ 713,568 $ 482,309 $ 478,504
=========== =========== ===========
</TABLE>
Asset management fees, the incentive management fee and expense reimbursements
owed to the Advisor and its affiliates amounting to approximately $431,000 and
$1,327,000 were accrued and unpaid at December 31, 1999 and 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. The Company earned
interest income of approximately $86,000 from this loan.
NOTE 8 - Earnings Per Share
Basic net income per share in the amount of $1.63, $.88 and $.92 for the years
ended December 31, 1999, 1998 and 1997, respectively, equals net income for the
periods ($6,260,300, $3,396,612 and $3,545,815, respectively), divided by the
weighted average number of shares outstanding for the periods (3,841,931,
3,845,101 and 3,851,029, respectively).
Because the Company has no dilutive securities outstanding at December 31, 1999,
diluted net income per share is the same as basic net income per share.
NOTE 9 - Capital Shares
In December 1992, the Company issued 10,000 shares of beneficial interest at
$20 per share in exchange for $200,000 cash from the Advisor.
On March 29, 1993, the Company commenced a public offering (the "Offering")
through Related Equities Corporation, an affiliate of the Advisor, and other
broker-dealers on a "best efforts" basis, for up to 10,000,000 of its shares of
beneficial interest at an initial offering price of $20 per share. The Offering
terminated as of November 30, 1994. As of November 30, 1994, a total of
3,809,601 shares had been sold to the public, either through the Offering or the
Company's dividend reinvestment plan (the "Reinvestment Plan") which became
effective on March 29, 1993, representing Gross Proceeds (the "Gross Proceeds")
of $76,192,021 (before volume discounts of $40,575). 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 has
sufficient net proceeds from the sale of shares under the Reinvestment Plan.
Since November 30, 1994, 355,744 shares were sold through the Reinvestment Plan,
the proceeds of which were restricted for use in connection with the Redemption
Plan and were not included in gross proceeds. Pursuant to the Redemption Plan,
since November 30, 1994, 374,412 shares have been redeemed for an aggregate
price of $6,575,799. Of such redemptions, 16,931 shares were redeemed from
proceeds from the Reinvestment Plan before the termination of the Offering and
therefore, the proceeds available for future investment were reduced by
$319,987. During the Offering, the Advisor received 38,481 restricted shares
(including 717 from the Reinvestment Plan) in addition to the 10,000 shares
purchased, which the Advisor has valued at $14.75 per share, pursuant to the
terms of the Offering. As a result of the shares being redeemed the Advisor was
required to return 172 shares as of December 31, 1994; no additional shares were
required to be returned since then.
During the offering period the price per share purchased pursuant to the
Reinvestment Plan equaled $20. From November 30, 1994 (the termination of the
offering period) until November 30, 1997 (the third anniversary of the final
closing date), the price per share purchased pursuant to the Reinvestment Plan
was equal to $19. Effective November 30, 1997, the Board adopted a policy to
adjust the reinvestment price annually to reflect the net asset value of a share
of the Company's shares of beneficial interest ($15.16 at December 31, 1998).
Shares received pursuant to the Reinvestment Plan entitled participants to the
same rights and treatment in the same manner as those issued pursuant to the
Offering. In connection with shares issued pursuant to the Company's
Reinvestment Plan which were not used for the Redemption Plan, the Company
issued shares to the Advisor in an amount which equalled (after such issuance)
1% of the outstanding shares.
Through the quarter ended March 31, 1997, the redemption price pursuant to the
Redemption Plan was $19 per Eligible Share. As permitted by the provisions of
the Redemption Plan, the Board of Trustees implemented the following change to
the calculation of the redemption price for the quarter ended June 30, 1997: the
original $19 per share redemption price was reduced to reflect any return of
principal received by shareholders. As of June 30, 1997, the amount of principal
which had been distributed to shareholders was $1.53 per share and, therefore,
the redemption price was $17.47 per share ($19 per share less $1.53 per share)
for redemptions which occurred in October 1997 for the
-34-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
quarter ended June 30, 1997. The Board subsequently adopted a policy to adjust
the redemption price annually to reflect the then net asset value of a share of
the Company's shares of beneficial interest ($15.16 at December 31, 1998). This
new policy was effective for redemptions with respect to quarters ended
September 30, 1997 and thereafter.
Under the Redemption Plan, any shareholder (except the Advisor who could not
participate in the Redemption Plan) who acquired or received shares directly
from the Company or the Reinvestment Plan (such shares, for so long as owned by
the original holder, were called "Eligible Shares") could present such Eligible
Shares to the Company for redemption. The Company was required to redeem such
Eligible Shares presented for redemption for cash to the extent it had
sufficient net proceeds ("Reinvestment Proceeds") from the sale of shares under
the Reinvestment Plan. The full amount of Reinvestment Proceeds in any quarter
was used to redeem Eligible Shares presented for redemption during such quarter.
If the full amount of Reinvestment Proceeds available for redemption in any
given quarter was insufficient to redeem all Eligible Shares presented for
redemption during such quarter, the Company would redeem the Eligible Shares
presented for redemption on a pro rata whole share basis, without redemption of
fractional shares.
A shareholder could present less than all their Eligible Shares to the Company
for redemption, provided, however, that (i) they presented the lesser of all of
their Eligible Shares or 125 Eligible Shares (50 Eligible Shares for an
Individual Retirement Account or Keogh Plan) for redemption, and (ii) if they
retained any Eligible Shares, they must have retained at least 125 Eligible
Shares (50 Eligible Shares for an Individual Retirement Account or Keogh Plan).
As a result of the adoption of the Proposals (see Note 1), the Company's
Reinvestment Plan and Redemption Plan have been terminated, effective with the
distribution for the quarter ended March 31, 1999. The final reinvestment of
shares occurred on May 15, 1999. The final redemption of shares occurred on May
24, 1999. In addition, in connection with the listing of the Company's Shares on
the American Stock Exchange, fractional shares totaling approximately 612 were
redeemed on July 1, 1999.
-35-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
1999 Quarter Ended
-----------------------------------------------------------------------
March 31 June 30 September 30 December 31
--------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $ 548,365 $ 666,585 $ 465,994 $ 888,957
GNMA certificates 199,646 196,898 195,315 193,732
Commercial mortgage-backed
security-related investment 0 0 10,187 940,269
Note receivable 0 26,860 58,926 0
Temporary investments 96,528 262,386 221,459 512,244
Other income 0 4,231 19,000 0
--------- --------- --------- ---------
Total revenues 844,539 1,156,960 970,881 2,535,202
--------- --------- --------- ---------
Expenses:
Interest 0 0 6,061 900,520
General and administrative 137,534 298,729 250,841 342,736
Organization costs 0 348,413 16,405 54
--------- --------- --------- ---------
Total expenses 137,534 647,142 273,307 1,243,310
--------- --------- --------- ---------
Other gain (loss):
Net realized loss on
repayment of GNMA certificates (86) (331) (485) (590)
Net unrealized loss on commercial
mortgage-backed security-related
investment and government
security sold short 0 0 0 (217,699)
Gain on repayment of mortgage loans 3,273,202 0 0 0
--------- --------- --------- ---------
Total other gain (loss) 3,273,116 (331) (485) (218,289)
--------- ------------ --------- ----------
Net income $3,980,121 $ 509,487 $697,089 $1,073,603
========= ========= ========= =========
Net income per share
(basic and diluted) $ 1.03 $ .13 $ .18 $ .28
========= ========= ========= =========
</TABLE>
The results for the quarter ended March 31, 1999 reflect the gain on
repayment of the Cove and Oxford mortgage loans. The results for the quarter
ended June 30, 1999 reflect $348,413 of organization costs incurred in
connection with the restructuring of the Company. The results for the quarter
ended December 31, 1999 reflect Additional Interest of $411,911 on the Town
and Country mortgage loan which had been fully reserved in prior quarters but
was recognized in December of 1999 when deemed collectible. In addition,
$195,958 which was shown as other income for the quarter ended June 30, 1999
was reclassified to interest income from mortgage loans to conform to the
December 31, 1999 presentation.
-36-
<PAGE>
AMERICAN MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1999 Quarter Ended
-----------------------------------------------------------------------
March 31 June 30 September 30 December 31
--------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $ 845,699 $ 802,370 $ 787,949 $ 601,864
REMIC and GNMA certificates 233,385 230,184 217,714 199,397
Temporary investments 24,423 27,196 31,336 29,998
--------- --------- --------- ---------
Total revenues 1,103,507 1,059,750 1,036,999 831,259
--------- --------- --------- -------
Expenses:
General and administrative 140,532 167,901 186,345 147,269
Amortization 2,500 2,500 0 0
--------- --------- --------- ---------
Total expenses 143,032 170,401 186,345 147,269
--------- --------- --------- ---------
Other gain (loss):
Net realized gain (loss) on
repayment of REMIC
and GNMA certificates (368) (249) 7,265 5,496
--------- --------- --------- ---------
Net income $ 960,107 $ 889,100 $ 857,919 $ 689,486
========= ========= ========= =========
Net income per share
(basic and diluted) $ .25 $ .23 $ .22 $ .18
========= ========= ========= =========
</TABLE>
NOTE 11 - Commitments and Contingencies
The Company is currently in the process of completing a 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. 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.
NOTE 12 - Subsequent Events
On January 18, 2000, one of the Company's GNMA certificates in the original
amount of $3,928,615 (including the discount), with an amortized cost basis
of $ 3,671,107 at December 31, 1999, was repaid in the amount of $3,551,736
along with a prepayment penalty of $177,587 which was received in February
2000. This repayment (including the prepayment penalty) resulted in a
realized gain in the amount of approximately $58,000.
Effective February 15, 2000, the Company entered into a $60 million FHA
repurchase facility with Nomura Asset Capital Corporation. This agreement
enables the Company to borrow up to 90% with a qualified hedge or 80% without
a qualified hedge of the fair market value FHA loans ownes by the Company.
This facility has a term of 365 days and bears interest at LIBOR plus 1.25%.
As of March 20, 2000, no amounts are outstanding under facility.
-37-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Company.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Item 11. Executive Compensation.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Exchange Act.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Exchange Act.
-38-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
<TABLE>
<CAPTION>
Sequential
Page
(a) 1. FINANCIAL STATEMENTS ----------
<S> <C> <C>
Independent Auditors' Report - Deloitte & Touche LLP
Independent Auditors' Report - KPMG LLP 13
Balance Sheets as of December 31, 1999 and 1998 14
Statements of Income for the years ended December 31, 1999, 1998
and 1997 15
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997 16
Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997 18
Notes to Financial Statements 20
</TABLE>
(a) 2. FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because they are not required or
because the required information is contained in the financial
statements or notes thereto.
(a) 3. EXHIBITS
1(a) Dealer Manager Agreement, dated March 29, 1993 as previously filed
as an Exhibit to Amendment No. 3 dated March 23, 1993 to
Registrant's Registration Statement No. 33-42481.
1(b) Form of Soliciting Dealer Agreement as previously filed as an
Exhibit to Amendment No. 3 dated March 23, 1993 to Registrant's
Registration Statement No. 33-42481.
3.4 Amended and Restated Declaration of Trust, dated as of March 29,
1993, as amended as of July 1, 1993 as previously filed as an
Exhibit to Post-Effective Amendment No. 1 dated November 9, 1993.
Amendment No. 2 to Amended and Restated Declaration of Trust, dated
as of April 5, 1994 as previously filed as an Exhibit to Annual
Report on Form 10-K for the year ended December 31, 1993.
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(a) Escrow Agreement, dated as of April 16, 1993 and amended as of
August 25, 1993 as previously filed as an Exhibit to Post-Effective
Amendment No. 1 dated November 9, 1993.
10(b) Advisory Services Agreement, dated as of March 29, 1993, as amended
as of October 26, 1993 as previously filed as an Exhibit to
Post-Effective Amendment No. 1 dated November 9, 1993.
Amendment to Advisory Services Agreement, dated as of December 31,
1993 as previously filed as an Exhibit to Annual Report on Form 10-K
for the year ended December 31, 1993.
Third Amendment to Advisory Services Agreement, dated as of March
29, 1994 as previously filed as an Exhibit to Annual Report on Form
10-K for the year ended December 31, 1993.
-39-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C> <C>
</TABLE>
10(c) TRI Capital Corporation Mortgage Note in the principal amount of
$9,350,000 dated December 16, 1993 as previously filed as an Exhibit
to Current Report on Form 8-K dated December 16, 1993.
10(d) Equity Loan Note in the principal amount of $1,156,000 dated
December 16, 1993 as previously filed as an Exhibit to Current
Report on Form 8-K dated December 16, 1993.
10(e) Bridge Loan Note in the principal amount of $115,790, dated December
16, 1993 as previously filed as an Exhibit to Current Report on Form
8-K dated December 16, 1993.
10(f) Subordinated Promissory Note by Oxford Apartments, L.C., dated
December 16, 1993 as previously filed as an Exhibit to Current
Report on Form 8-K dated December 16, 1993.
10(g) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers,
Allied Realty Services, Ltd. and American Mortgage Investors Trust,
dated December 16, 1993 as previously filed as an Exhibit to Current
Report on Form 8-K dated December 16, 1993.
10(h) TRI Capital Corporation Mortgage Note in the principal amount of
$6,800,000, dated December 16, 1993 as previously filed as an
Exhibit to Current Report on Form 8-K dated December 16, 1993.
10(i) Equity Loan Note in the principal amount of $840,500, dated December
16, 1993 as previously filed as an Exhibit to Current Report on Form
8-K dated December 16, 1993.
10(j) Bridge Loan Note in the principal amount of $84,210, dated December
16, 1993 as previously filed as an Exhibit to Current
Report on Form 8-K dated December 16, 1993.
10(k) Subordinated Promissory Note by Cove Apartments, L.C., dated
December 16, 1993 as previously filed as an Exhibit to Current
Report on Form 8-K dated December 16, 1993.
10(l) Limited Operating Guaranty between Al L. Bradley, Jr., Tim L. Myers,
Allied Realty Services, Ltd. and American Mortgage Investors Trust,
dated December 16, 1993 as previously filed as an Exhibit to Current
Report on Form 8-K dated December 16, 1993.
10(m) Cambridge Realty Capital LTD Mortgage Note in the principal amount
of $9,348,000, dated April 5, 1994 as previously filed as an Exhibit
to Current Report on Form 8-K dated April 21, 1994.
10(n) Equity Loan Note in the principal amount of $1,039,000, dated April
5, 1994 as previously filed as an Exhibit to Current Report on Form
8-K dated April 21, 1994.
-40-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C> <C>
</TABLE>
10(o) Subordinated Promissory Note by Town and Country IV Apartments,
L.C., dated April 5, 1994 as previously filed as an Exhibit to
Current Report on Form 8-K dated April 21, 1994.
10(p) Limited Operating Guaranty between Leonard E. Wineburgh, Arnold H.
Dwinn and the Company, dated April 5, 1994 as previously filed as an
Exhibit to Current Report on Form 8-K dated April 21, 1994.
10(q) American Capital Resource, Inc. Mortgage Note in the principal
amount of $8,683,000 dated April 5, 1994 as previously filed as an
Exhibit to Current Report on Form 8-K dated April 28, 1994.
10(r) Equity Loan Note in the principal amount of $563,000 dated April 5,
1994 as previously filed as an Exhibit to Current Report on Form 8-K
dated April 28, 1994.
10(s) Subordinated Promissory Note by Columbiana Lakes Apartments, L.C.,
dated April 5, 1994 as previously filed as an Exhibit to Current
Report on Form 8-K dated April 28, 1994.
10(t) Limited Operating Guaranty between Anderson G. Wise, Ronald P. Curry
and the Company, dated April 5, 1994 as previously filed as an
Exhibit to Current Report on Form 8-K dated April 28, 1994.
10(u) Rockport Mortgage Corporation Mortgage Note in the principal amount
of $8,500,000 dated December 15, 1995, as previously filed as an
Exhibit to Current Report on Form 8-K dated December 15, 1995.
10(v) Equity Loan Note in the principal amount of $1,039,000 dated
December 15, 1995, as previously filed as an Exhibit to Current
Report on Form 8-K dated December 15, 1995.
10(w) Subordinated Promissory Note by SCI-ROEV East Haven Land Limited
Partnership, dated December 15, 1995, as previously filed as an
Exhibit to Current Report on Form 8-K dated December 15, 1995.
10(x) Limited Operating Guaranty between SCI Real Estate Development,
Ltd., and Euro General East Haven, Inc., and the Company dated
December 15, 1995, as previously filed as an Exhibit to Current
Report on Form 8-K dated December 15, 1995.
10(y) Supplemental Mortgage Note by Columbiana Lakes Limited Partnership,
dated as of April 1, 1999 incorporated by reference to Exhibit 10(y)
in the Company's September 30, 1999 Quarterly Report on Form 10-Q.
10(z) Amended and Restated Advisory Services Agreement, effective as of
April 6, 1999 incorporated by reference to Exhibit 10(z) in
the Company's September 30, 1999 Quarterly Report on Form 10-Q.
-41-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C> <C>
23(a) Consent of KPMG LLP with respect to incorporation by reference in
its report in the Company's Registration Statement on Form S-3
(filed herewith). 37
23(b) Consent of Deloitte & Touche LLP with respect to incorporation by
reference in its report in the Company's Registration Statement on
Form S-3 (filed herewith).
27 Financial Data Schedule (filed herewith) 39
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K relating to the acquisition of a
subordinated commercial mortgage-backed security, a repurchase
facility payable, a government security sold short and an agreement
with ARCap Investors L.L.C. was dated October 1, 1999 and was filed
on October 19, 1999.
Current Report on Form 8-K relating to the resignation of J. Michael
Fried as Chairman of the Board of Trustees and Chief Executive
Officer and Stuart J. Boesky as Chief Operating Officer and the
unanimous appointment of Stuart J. Boesky as Chairman of the Board
of Trustees and Chief Executive Officer was dated December 16, 1999
and was filed on January 5, 2000.
</TABLE>
-42-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN MORTGAGE ACCEPTANCE COMPANY
(Registrant)
Date: March 29, 2000 By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
Trustee, Chairman of the Board,
President and Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Stuart J. Boesky
- - -------------------- Trustee, Chairman of the Board,
Stuart J. Boesky President and Chief Executive March 29, 2000
Officer
/s/ Peter T. Allen
- - ------------------
Peter T. Allen Trustee March 29, 2000
/s/ Arthur P. Fisch
- - -------------------
Arthur P. Fisch Trustee March 29, 2000
/s/ John B. Roche
- - ----------------- Senior Vice President and
John B. Roche Chief Financial Officer March 29, 2000
/s/ Richard A. Palermo
- - ------------------- Vice President, Treasurer,
Richard A. Palermo Controller and Chief Accounting March 29, 2000
Officer
<PAGE>
EXHIBIT 23(a)
ACCOUNTANTS' CONSENT
The Board of Trustees
American Mortgage Acceptance Company
We consent to incorporation by reference in the registration statement on
Form S-3 (No. 33-42481) of American Mortgage Acceptance Company (formerly
American Mortgage Investors Trust) of our report dated January 15, 1999
except as to note 3 which is as of March 1, 1999, relating to the balance
sheet of American Mortgage Acceptance Company as of December 31, 1998, and
the related statements of income, changes in shareholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 1998,
which report appears in the December 31, 1999 annual report on Form 10-K of
American Mortgage Acceptance Company.
/s/ KPMG LLP
New York, New York
March 20, 2000
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-42481 of American Mortgage Acceptance Company on Form S-3 of our report
relating to the financial statements of American Mortgage Acceptance Company
as of December 31, 1999 and for the year then ended dated March 20, 2000,
appearing in this Annual Report on Form 10-K of American Mortgage Acceptance
Company for the year ended December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
New York, New York
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR AMERICAN MORTGAGE ACCEPTANCE COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000878774
<NAME> AMERICAN MORTGAGE ACCEPTANCE COMPANY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,802,298
<SECURITIES> 43,811,840
<RECEIVABLES> 67,806,698
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,565,441
<CURRENT-LIABILITIES> 58,474,076
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 57,091,365
<TOTAL-LIABILITY-AND-EQUITY> 115,565,441
<SALES> 0
<TOTAL-REVENUES> 5,507,582
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,394,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 906,581
<INCOME-PRETAX> 6,260,300
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,260,300
<EPS-BASIC> 1.63
<EPS-DILUTED> 1.63
</TABLE>
