SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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
------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 13-6972380
-------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
-------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
MARCH 31, DECEMBER 31,
2002 2001
----------- ------------
(UNAUDITED)
ASSETS
Investments in mortgage loans $ 22,044 $ 17,799
Investments in GNMA certificates-
available for sale 72,911 50,060
Investment in ARCap 20,233 20,246
Cash and cash equivalents 836 1,018
Notes receivable 18,727 11,373
Accrued interest receivable 849 570
Other assets 9,922 916
----------- ----------
Total assets $ 145,522 $ 101,982
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Repurchase facilities payable $ 54,860 $ 43,610
Accrued interest payable 50 22
Accounts payable and accrued expenses 1,366 1,348
Due to Advisor and affiliates 403 331
Distributions payable 2,307 1,392
----------- ----------
Total liabilities 58,986 46,703
----------- ----------
Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest; $.10 par value;
12,500,000 shares authorized; 6,738,826
issued and 6,363,630 outstanding and
4,213,826 issued and 3,838,630 outstanding
in 2002 and 2001, respectively 674 421
Treasury shares of beneficial interest;
375,196 shares (38) (38)
Additional paid-in capital 99,555 68,841
Distributions in excess of net income (14,673) (14,505)
Accumulated other comprehensive income 1,018 560
----------- ----------
Total shareholders' equity 86,536 55,279
----------- ----------
Total liabilities and shareholders' equity $ 145,522 $ 101,982
=========== ==========
See accompanying notes to consolidated financial statements.
-2-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in the thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2002 2001
----------- -----------
Revenues:
Interest income:
Mortgage loans $ 401 $ 888
GNMA certificates 1,084 116
Notes receivable 487 45
Temporary investments 11 17
Equity in earnings of ARCap 592 592
Other income 60 6
----------- -----------
Total revenues 2,635 1,664
----------- -----------
Expenses:
Interest 272 275
General and administrative 120 120
Fees to advisor 357 118
FNMA loan program 355 -
Amortization 6 20
----------- -----------
Total expenses 1,110 533
----------- -----------
Net gain on repayments of GNMA certificates
and mortgage loans 614 -
----------- -----------
Net income $ 2,139 $ 1,131
=========== ===========
Net income per share (basic and diluted) $ .43 $ .29
=========== ===========
Weighted average shares outstanding
(basic and diluted) 4,960,852 3,838,630
=========== ===========
See accompanying notes to consolidated financial statements.
-3-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
(Dollars in thousands)
(Unaudited)
TREASURY SHARES OF
SHARES OF BENEFICIAL INTEREST BENEFICIAL INTEREST ADDITIONAL DISTRIBUTIONS
----------------------------- ----------------------- PAID-IN IN EXCESS
SHARES AMOUNT SHARES AMOUNT CAPITAL OF NET INCOME
------------ ------------ ---------- ---------- ---------- -------------
Balance at January 1, 2002 4,213,826 $ 421 (375,196) $ (38) $ 68,841 $(14,505)
Comprehensive income:
Net income -- -- -- -- -- 2,139
Other comprehensive income:
Unrealized holding gain arising
during the period
Less: reclassification adjustment
for gain included in net income
Total other comprehensive gain
Comprehensive income
Common share issue 2,525,000 253 30,714
Distributions -- -- -- -- -- (2,307)
--------- --------- -------- ------ --------- -------
Balance at March 31, 2002 6,738,826 $ 674 (375,196) $ (38) $ 99,555 $(14,673)
========= ========= ======== ====== ========= =======
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
INCOME INCOME TOTAL
------------- -------------- ----------
Balance at January 1, 2002 $ 560 $55,279
Comprehensive income:
Net income $ 2,139 -- 2,139
Other comprehensive income:
Unrealized holding gain arising
during the period 1,072
Less: reclassification adjustment
for gain included in net income (614)
---------
Total other comprehensive gain 458 458 458
---------
Comprehensive income $ 2,597
=========
Common share issue 30,967
Distributions -- (2,307)
----- -------
Balance at March 31, 2002 $1,018 $ 86,536
===== =======
See accompanying notes to consolidated financial statements.
-4-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2002 2001
----------- -----------
Cash flows from operating activities:
Net income $ 2,139 $ 1,131
Adjustments to reconcile net income to net cash
provided by operating activities:
Net gain on repayments of GNMA
Certificates and mortgage loans (614) -
Equity in earnings of ARCap, in excess of
(less than) distributions received 13 (191)
Amortization - deferred financing costs 6 20
Amortization expense-loan premium and
origination costs (20) 1
Accretion of GNMA discount (5) (6)
Changes in operating assets and liabilities:
Accrued interest receivable (280) 222
Other assets 41 10
Due to Advisor and affiliates 72 (715)
Accounts payable and accrued expenses (9) 38
Accrued interest payable 29 (2)
----------- -----------
Net cash provided by operating activities 1,372 508
----------- -----------
Cash flows from investing activities:
Increase in investment in mortgage loans (4,209) (8,796)
Periodic principal payments of mortgage loans 11 54
Funding of notes receivable (7,354) -
Principal repayments of GNMA Certificates 109 73
Increase in investment in GNMA Certificates (31,438) -
Decrease (increase) in other assets 502 (63)
----------- -----------
Net cash used in investing activities (42,379) (8,732)
----------- -----------
continued
-5-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2002 2001
----------- -----------
Cash flows from financing activities:
Proceeds from repurchase facilities payable 11,250 8,872
Distribution paid to shareholders (2,307) (1,392)
Increase in deferred loan costs - (49)
Increase from distribution payable 915 -
Issuance of common shares 30,967 -
----------- -----------
Net cash provided by financing activities 40,825 7,431
----------- -----------
Net decrease in cash and cash equivalents (182) (793)
Cash and cash equivalents at the beginning
of the period 1,018 1,632
----------- -----------
Cash and cash equivalents at the end of the
period $ 836 $ 839
=========== ===========
Supplemental information:
Interest paid $ 243 $ 278
=========== ===========
Non-cash items related to sale of GNMA certificate:
Decrease in investment in GNMA certificate -
available for sale $ (9,555)
Increase in Other Assets 9,555
-----------
$ 0
-----------
Consolidation of former unconsolidated
subsidiary:
Increase in investment in mortgage loans $ 8,374,205
Decrease in notes receivable (7,264,092)
Decrease in investment in unconsolidated
subsidiary (1,110,113)
-----------
$ 0
-----------
See accompanying notes to consolidated financial statements.
-6-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
Note 1 - General
American Mortgage Acceptance Company (formerly American Mortgage Investors
Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business
trust for the primary purpose of investing in government-insured mortgages and
guaranteed mortgage-backed certificates. The Company elected to be treated as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended.
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".
In February 2002, the Company sold to the public 2.5 million common shares at a
price of $13.50 per share. The net proceeds from this offering, approximately
$31 million, net of underwriter's discount and expenses, has been used to make
additional investments.
The Company's business plan focuses on government insured and uninsured
mortgages secured by multifamily properties, which may take the form of
government insured first mortgages and uninsured mezzanine loans, construction
loans and bridge loans. Additionally, the Company has indirectly invested in
subordinate commercial mortgage-backed securities and may invest in other real
estate assets, including non-multifamily mortgages.
The Company is governed by a board of trustees comprised of three independent
trustees and two trustees who are affiliated with Related Capital Company
("Related"). The Company has engaged Related AMI Associates, Inc. (the
"Advisor"), an affiliate of Related, to manage its day-to-day affairs. The
Advisor has subcontracted with Related to provide the services contemplated.
Through the Advisor, Related offers the Company a core group of experienced
staff and executive management providing the Company with services on both a
full and part-time basis. These services include, among other things,
acquisition, financial, accounting, capital markets, asset monitoring, portfolio
management, investor relations and public relations services. The Company
believes that it benefits significantly from its relationship with Related,
because Related provides the Company with resources that are not generally
available to smaller-capitalized, self-managed companies.
The consolidated financial statements include the accounts of the Company and
two wholly-owned subsidiaries which it controls: AMAC Repo Seller and AMAC/FM
Corporation. All intercompany accounts and transactions have been eliminated in
consolidation. Unless otherwise indicated, the "Company" as hereinafter used,
refers to American Mortgage Acceptance Company and its subsidiaries.
The consolidated financial statements of the Company have been prepared without
audit. In the opinion of management, the financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of March 31, 2002 and
the results of its operations and its cash flows for the three months ended
March 31, 2002 and 2001. However, the operating results for the interim periods
may not be indicative of the results for the full year.
-7-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP") have been condensed or
omitted. It is suggested that these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 2001.
The preparation of the consolidated 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.
In June 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business Combinations (SFAS 141) and Statement No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). These statements establish new standards for
accounting and reporting for business combinations and for goodwill and
intangible assets resulting from business combinations. SFAS 141 applies to all
business combinations initiated after June 30, 2001; the Company implemented
SFAS 142 on January 1, 2002. Implementation of these statements did not have a
material impact on the Company's financial statements.
In June of 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (effective January 1, 2003). SFAS No. 143 requires the recording of
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. Management does not believe the implementation of SFAS
No. 143 will have a material impact on the Company's financial statements.
In August 2001, the Financial Accounting Standards Board issued Statement No.
144, "Accounting for the Impairment or Disposal of Long Lived Assets" (effective
January 1, 2002). SFAS No. 144 supercedes existing accounting literature dealing
with impairment and disposal of long-lived assets, including discontinued
operations. It addresses financial accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed of, and expands
current reporting for discontinued operations to include disposals of a
"component" of an entity that has been disposed of or is classified as held for
sale. The Company implemented SFAS No. 144 on January 1, 2002. Implementation of
SFAS No. 144 did not have a material impact on the Company's financial
statements.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
-8-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
Note 2 - Investments in Mortgage Loans
Information relating to investments in mortgage loans as of March 31, 2002 is as
follows
PERIODIC PAYMENT
PROPERTY DESCRIPTION FINAL MATURITY DATE CALL DATE (A) INTEREST RATE (B) TERMS
-------- ----------- ------------------- ------------- ----------------- ----------------
FIRST MORTGAGE LOANS (E):
Stabilized Properties
Stony Brook II
East Haven, CT 125 Units 6/37 12/06 7.625% (F)
Sunset Gardens
Eagle Pass, TX 60 Units 9/03 TBD 11.50% (H)
Northbrooke
Harris County, TX 240 Units 8/43 TBD 7.45% (H)
Subtotal First Mortgage Loans
MEZZANINE LOANS (G):
Stabilized Properties
Stony Brook II
East Haven, CT 125 Units 6/37 12/06 15.33% (H)
Plaza at San Jacinto
Houston, TX (I) 132 Units 1/43 6/11 11.00% (H)
Subtotal Stabilized Mezzanine Loans
Properties in Construction
The Hollows
Greenville, NC 184 Units 1/42 TBD 10.00% (H)
Elmhurst Village
Oveido, FL 313 Units 1/42 TBD 10.00% (H)
The Reserve at Autmn Creek
Friendswood, TX 212 Units 1/42 TBD 10.00% (H)
Club at Brazos (I)
Rosenberg, TX 200 Units 5/43 TBD 10.00% (H)
Northbrooke
Harris County, TX 240 Units 8/43 TBD 11.50% (H)
Subtotal Construction Mezzanine Loans
Subtotal Mezzanine Loans
Total Mortgage Loans
OUTSTANDING INTEREST INCOME
FACE AMOUNT OF CARRYING AMOUNT EARNED APPLICABLE
PROPERTY PRIOR LIENS MORTGAGES (C) OF MORTGAGES (D) TO THE PERIOD
-------- -------------- -------------- ---------------- -----------------
FIRST MORTGAGE LOANS (E):
Stabilized Properties
Stony Brook II
East Haven, CT -- $ 8,320,374 $ 8,320,374 $ 158,678
Sunset Gardens
Eagle Pass, TX -- 431,358 402,885 4,007
Northbrooke
Harris County, TX -- 2,308,114 2,308,114 1,911
----------------------------------------------------
Subtotal First Mortgage Loans 11,059,846 11,031,373 164,596
----------------------------------------------------
MEZZANINE LOANS (G):
Stabilized Properties
Stony Brook II
East Haven, CT 8,320,374 763,909 669,438 22,637
Plaza at San Jacinto
Houston, TX (I) 6,638,300 1,250,000 1,220,588 35,959
----------------------------------------------------
Subtotal Stabilized Mezzanine Loans 2,013,909 1,890,026 58,596
----------------------------------------------------
Properties in Construction
The Hollows
Greenville, NC 8,481,092 1,549,200 1,385,434 4,303
Elmhurst Village
Oveido, FL 20,844,888 (J) 2,874,000 2,430,967 75,270
The Reserve at Autmn Creek
Friendswood, TX 15,538,670 (J) 1,987,000 1,923,265 46,878
Club at Brazos (I)
Rosenberg, TX 14,363,800 1,962,000 1,883,299 49,510
Northbrooke
Harris County, TX 2,308,114 1,500,000 1,500,000 1,917
----------------------------------------------------
Subtotal Construction Mezzanine Loans 9,872,200 9,122,965 177,878
----------------------------------------------------
Subtotal Mezzanine Loans 11,886,109 11,012,991 236,474
----------------------------------------------------
Total Mortgage Loans $22,945,955 $22,044,364 $401,070
====================================================
-9-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
(A) Loans are subject to mandatory prepayment at the option of the Company 10
years after construction completion, with one year's notice.
(B) Interest on the mezzanine loans is based on a fixed percentage of the
unpaid principal balance of the related first mortgage loan (prior liens).
The amount shown is the approximate effective rate earned on the balance of
the mezzanine loan. The mezzanine loans also provide for payments of
additional interest based on a percentage of cash flow remaining after debt
service (generally 50%) and participation in sale or refinancing proceeds
(generally 25%) and certain provisions that cap the Company's total yield,
including additional interest and participations, over the term of the
loan.
(C) No principal amounts of mortgage loans are subject to delinquent interest
as of March 31, 2002.
(D) Carrying amounts of the mezzanine loans include unamortized origination
costs and fees.
(E) Interest and principal payments on first mortgage loans are insured by the
U.S. Department of Housing and Urban Development.
(F) Requires monthly payments of principal and interest based on a 40 year
amortization period. Loans are subject to 5-year lockouts against
prepayments, as well as a prepayment penalty structure during the second
5-year term of the loans.
(G) The principal balance of the mezzanine loans is secured by the partnership
interests of the entity that owns the underlying property and a third
mortgage deed of trust. Interest payments on the mezzanine loans are
secured by a second mortgage deed of trust and are guaranteed for the first
thirty six months after construction completion by an entity related to the
general partner of the entity that owns the underlying property.
(H) Interest only payments are due monthly, with loan balance due at maturity.
(I) The funding of this mezzanine loan is based on property level operational
achievements. The Company does not hold the first mortgage loan relating to
this mezzanine loan.
(J) The first mortgage loans related to those properties were converted into
GNMA Certificates and are held by the Company.
-10-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
Note 3 - Investments in GNMA Certificates-Available for Sale
Information relating to investments in GNMA certificates as of March 31, 2002 is
as follows:
AMORTIZED UNREALIZED
DATE PURCHASED/ PRINCIPAL AT COST AT GAIN (LOSS)
CERTIFICATE FINAL PAYMENT STATED MARCH MARCH MARCH
NAME NUMBER PAYMENT DATE INTEREST RATE 31, 2002 31, 2002 31, 2002
---- ----------- --------------- ------------- ------------- --------- -----------
Western Mortgage (1) 0355540 7/27/94 7.125% $2,482,150 $2,477,747 $63,360
3/15/29
Copper Commons (1) 0382486 7/28/94 8.500% 2,102,820 2,171,642 (28,501)
8/15/29
SunCoast Capital Group, Ltd. (1) G22412 6/23/97 7.000% 794,702 795,037 15,186
4/20/27
Hollows Apts. 511908 5/29/01 7.620% -- -- --
7/15/02
Elmhurst Village (1) 549390 6/28/01 7.745% 20,844,888 20,844,888 580,356
4/15/04
Reserve at Autumn Creek (1) 448747 6/28/01 7.745% 15,538,670 15,538,670 387,780
7/15/02
Casitas at Montecito 519289 3/11/02 7.300% 5,520,636 5,520,636 --
--
Village at Marshfield 519280 3/11/02 7.475% 21,045,303 21,045,303 --
--
Cantera Crossing 532662 3/28/02 6.500% 3,016,521 3,016,521 --
10/15/04
Fillmore Park 536739 3/28/02 6.700% 482,058 482,058 --
10/15/03
----------------------------------------------------------
Total $71,827,748 $71,892,502 $1,018,181
==========================================================
AT BALANCE AT INTEREST INCOME
MARCH EARNED APPLICABLE
NAME 31, 2002 TO THE PERIOD
---- ------------- -----------------
Western Mortgage (1) $2,541,107 $48,697
Copper Commons (1) 2,143,141 44,877
SunCoast Capital Group, Ltd. (1) 810,223 14,401
Hollows Apts. -- 170,373
Elmhurst Village (1) 21,425,244 403,333
Reserve at Autumn Creek (1) 15,926,450 287,179
Casitas at Montecito 5,520,636 23,111
Village at Marshfield 21,045,303 90,756
Cantera Crossing 3,016,521 1,454
Fillmore Park 482,058 297
---------------------------------
Total $72,910,683 $1,084,478
=================================
(1) These GNMA Certificates are pledged as collateral for borrowings under the
repurchase facility.
-11-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
The amortized cost, unrealized gain and fair value for the investment in GNMA
Certificates at March 31, 2002 and December 31, 2001 were as follows:
MARCH 31, DECEMBER 31,
2002 2001
------------ ----------------
Amortized cost $71,892,502 $49,499,268
Unrealized gain 1,018,181 560,387
---------- ----------
Fair Value $72,910,683 $50,059,655
========== ==========
For the three months ended March 31, 2002, there were gross unrealized gains and
losses of $1,046,682 and $28,501, respectively. For the year ended December 31,
2001, there were gross unrealized gains and losses of $579,252 and $18,865,
respectively.
On March 28, 2002, the Company sold the Hollows GNMA Certificate for
approximately $9.6 million. The carrying value at the date of the sale was
approximately $9.0 million, resulting in a gain of approximately $614,000. The
Company recorded the sale on the trade date of March 28, 2002. The settlement
date was in April 2002.
-12-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
NOTE 4 - Notes Receivable
The Company's notes receivable are collateralized by equity interest in the
owner of the related property and consists of the following as of March 31,
2002:
REMAINING
NUMBER OF OUTSTANDING COMMITTED
APARTMENT CARRYING PRINCIPAL BALANCE TO INTEREST
PROPERTY LOCATION UNITS AMOUNT BALANCE FUND RATE MATURITY
------------------------------------------------------------------------------------------------------------------------------------
Alexandrine Detroit, MI 30 $ 376,271 $ 378,000(1) $ -- 12.50% August 2002
Coronado
Terrace San Diego, CA 312 559,250 581,360(1) 1,418,640 11.00% December 2002
Miami Sunset
Bay Miami, FL 308 1,450,000 1,450,000(1) -- 12.50% May 2002
Plaza Manor National City, CA 372 1,491,606 1,499,010 990 11.00% September 2002
Rancho
Verde San Jose, CA 700 3,717,992 3,725,821 774,179 11.00% August 2002
Vista Terrace
Hills San Ysidro, CA 262 1,900,000 1,900,000 -- 11.00% March 2002
Concorde at
Palm Houston, TX 360 3,816,077 3,850,000 -- 12.00% December 2003
Parwood Long Beach, CA 528 1,957,907 2,000,000(1) 2,600,000 11.00% January 2004
Concord at
Little York Houston, TX 276 3,458,298 3,500,000 -- 12.00% February 2004
------------- --------------- ------------------ -------------
Total 3,148 $18,727,401 $18,884,191 $4,793,809
============= =============== ================== =============
(1) Funded on an as needed basis.
-13-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
NOTE 5 - Repurchase Facilities
Effective February 15, 2000, the Company entered into a $60 million FHA
repurchase facility with Nomura Asset Capital Corporation (the "Nomura
Repurchase Facility") with a term of one year. This facility 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. The Nomura Repurchase
Facility was renewed February 15, 2001 for $40 million, with a one time option
to increase to $60 million, for a one year term and interest at LIBOR plus
1.25%. As of December 31, 2001, there was no outstanding balance. Deferred costs
relating to the Nomura Repurchase Facility have been fully amortized. This
repurchase facility has not been renewed.
Effective February 15, 2000, the Company also entered into a repurchase facility
with Nomura Securities International Inc. (the "Nomura Securities Repurchase
Facility"). This facility enables the Company to borrow up to 95% of the fair
market value of GNMA Certificates and other qualified mortgage securities owned
by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of March 31,
2002 and December 31, 2001, the amounts outstanding under this facility were
$54,860,000 and $43,610,000 and interest rates were 2.37% and 2.58%,
respectively. Deferred costs relating to the Nomura Securities Repurchase
Facility have been fully amortized. All amounts outstanding at March 31, 2002,
had 30 day settlement terms.
NOTE 6 - Related Party Transactions
The costs incurred to related parties for the three months ended March 31, 2002
and 2001 were as follows, all of which are paid to the Advisor:
THREE MONTHS ENDED
MARCH 31,
------------------------
2002 2001
------------------------
Expense reimbursement $ 174,584 $ 61,000
Asset management fees 182,375 57,047
-------- ---------
$ 356,959 $ 118,047
======== ========
In December 2001, Charter Mac Corporation ("CM Corp") purchased 80% of PW
Funding Inc. ("PWF"). CM Corp is a wholly-owned subsidiary of Charter Municipal
Mortgage Acceptance Company ("Charter Mac"), who is managed by an affiliate of
Related.
The Company has also begun to use PWF as its servicing agent for mortgages.
Typically the servicing agent retains a small percentage of the interest paid in
mortgage loans as their fee for servicing the loan.
-14-
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
Note 7 - Earnings Per Share
Basic net income per share in the amount $.43 and $.29 for the three months
ended March 31, 2002 and 2001, respectively, equals net income for the periods
($2,139,024 and $1,131,148, respectively), divided by the weighted average
number of shares outstanding which was 4,960,852 and 3,838,630, respectively.
Because the Company had no dilutive securities outstanding during the three
months ended March 31, 2002 or 2001, diluted net income per share is the same as
basic net income per share.
Note 8 - Commitments and Contingencies
The Company completed a loan program with Fannie Mae which has agreed to fully
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 loan program, 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, an
unaffiliated third party, which will underwrite and service the loans for Fannie
Mae. The Company will guaranty a first loss position of up to $21.25 million,
depending on the aggregate principal amount of the loans the Company originates
under this program and will receive guaranty, loan origination and other fees.
The Company also guaranteed construction loans for which it has issued a forward
commitment to originate a loan under the Fannie Mae program, with respect to
which it guarantees repayment of 100% of such construction loans. As of March
31, 2002, the Company had originated loans totaling approximately $2.2 million
under the Fannie Mae program and has made forward commitments for an additional
approximate $6.8 million. The Company's maximum guaranty at March 31, 2002 is
$9.0 million. The Company has not acquired an interest in any of the loans the
Company originated on Fannie Mae's behalf.
Subsequent to creating this program, the level of loan origination competition
has increased, reducing the Company's projected financing value and
profitability. As a result, the Company has decided in the first quarter of 2002
to discontinue this program. The Company has reached an agreement in principle
to terminate this program and transfer its rights and obligations to a third
party. Accordingly, during the first quarter of 2002, the Company wrote off
the balance of unamortized deferred costs relating to this program. This
write-off totaled approximately $355,000 and is included in FNMA loan program
expenses in the Consolidated Statement of Income.
Note 9 - Investment in Unconsolidated Subsidiary and Note Receivable
Through a consolidated subsidiary, AMAC/FM Corporation ("AMAC/FM"), and pursuant
to a Guaranty and Security Agreement with Fannie Mae, the payment of the
Company's obligations under this program is guaranteed and secured by AMAC/FM's
pledge and grant to Fannie Mae of a security interest on certain assets of
AMAC/FM.
AMAC/FM was capitalized by a contribution by the Company to AMAC/FM of the
mortgage loan secured by Stony Brook Village II Apartments with a principal
amount of $8,404,092. This contribution was recorded by AMAC/FM as a $7,264,092
loan from the Company via a subordinated promissory note, with a stated interest
rate of 7.75% and a $1,140,000 capital contribution through the issuance of
AMAC/FM non-voting common stock. During 2000, the Com-
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AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)
pany accounted for its $1,140,000 investment in AMAC/FM under the equity method
of accounting, because all of AMAC/FM's voting common shares were held by the
Advisor and, therefore, the Company did not control AMAC/FM.
During January 2001, all of the voting common stock of AMAC/FM, previously owned
by the Advisor, was purchased by the Company, the effect of which is to make
AMAC/FM a wholly-owned, consolidated subsidiary of the Company. This change was
implemented as a result of the REIT Modernization Act of 1999, which allows
REITs to directly own taxable REIT subsidiaries, beginning after the year 2000.
Note 10 - Shareholders' Equity
On February 25, 2002, the Company completed issuance of 2,525,000 common shares,
raising net proceeds of approximately $31 million. The common shares were
offered through Friedman, Billings, Ramsy and RBC Capital Markets. The proceeds
were used to invest in GNMA Certificates.
Note 11 - Other Assets
The large increase in other assets represents funds due to the Company related
to the sale of the Hollows GNMA certificate. The trade date for the transaction
was March 28, 2002, while the settlement date was in April 2002.
Note 12 - Subsequent Events
In May 2002, a distribution of $2,306,815, ($0.3625 per share) which was
declared in March 2002, was paid to shareholders for the quarter ended March 31,
2002.
On May 8, 2002, the Company closed a bridge loan secured by a 360 unit apartment
complex located in Houston, Texas called the Concord at Gulfgate in the amount
of $3,500,000. The loan has a term of 24 months, with two 90-day extensions
exercisable at the borrower's election for a fee of 0.25% of the then
outstanding balance. The loan carries an interest rate of 12%.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES
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
commenced trading on the American Stock Exchange on July 1, 1999 under the
symbol "AMC". As of March 31, 2002, there were 6,363,630 shares outstanding.
The Company's business plan focuses on government insured and uninsured
mortgages secured by multifamily properties, which may take the form of
government insured first mortgages and uninsured mezzanine loans, construction
loans and bridge loans. Additionally, the Company has indirectly invested in
subordinate commercial mortgage-backed securities and may invest in other real
estate assets, including non-multifamily mortgages.
As of March 31, 2002, the Company's mortgage investments consisted of three
mortgage loans and seven mezzanine loans originated by or on behalf of the
Company, nine GNMA mortgage-backed securities and pass-through certificates,
nine bridge loans and a preferred equity investment in ARCap Investors, L.L.C.
("ARCap").
In February of 2002, the Company completed a common stock offering of 2,525,000
shares at $13.50 per share, raising net proceeds of approximately $31 million.
These proceeds were used to invest in GNMA Certificates. The Company anticipates
using these GNMA Certificates as collateral for future financing.
During the three months ended March 31, 2002, cash and cash equivalents
decreased approximately $182,000 primarily due to proceeds from the common stock
offering, $30,967,000, proceeds from repurchase facilities payable, $11,250,000
and cash provided by operating activities, $1,372,000, offset by investments in
mortgage loans, $4,209,000, investments in GNMA Certificates, $31,438,000,
increase in notes receivable, $7,354,000 and distributions to shareholders,
$2,307,000.
The yield on the GNMA Certificates will depend, in part, upon the rate and
timing of principal prepayments on the underlying mortgages. 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. Certain of the Company's GNMAs
are collateralized by mortgage loans on multifamily properties. The effect of
prepayment 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
insured by HUD, resulting in a minimal amount of interest rate risk. The effect
of prepayments 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.
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The yield on the mezzanine loans is based on a fixed percentage of the
associated first mortgage loan, plus a percentage of the available cash flow
produced by the underlying multifamily property, and a participation in sale or
refinancing proceeds. The yield will vary based on the operating results of the
property, its requirements for capital improvements, and the ability of the
property owners to successfully sell or refinance the property.
The yield on the bridge loans will depend, in part, on when, and if, the Company
disposes of the loans prior to maturity or the obligor repays the outstanding
debt. These loans are typically of shorter tem, about 12 months, and higher
risk. However, the Company's bridge loans are collateralized by the equity
interests of the property owner. The shorter term somewhat reduces the Company's
interest rate risk.
The Company's equity in the earnings of ARCap will generally be equal to the
Company's preferred equity dividend rate of 12%, unless ARCap does not have
earnings and cash flows adequate to meet this dividend requirement. ARCap's
investment portfolio consists of subordinated commercial mortgage backed
securities, whose yields depend, among other things, on the rate and timing of
principal payments, the pass through rate, interest rate fluctuations and
defaults on the underlying mortgages. The Company's investment in ARCap is
illiquid and its carrying amount is not necessarily representative of the amount
the Company would receive upon a sale of this investment.
The Company finances the acquisition of the its assets primarily through
borrowing at short-term rates using demand repurchase agreements. Under the
Company's declaration of trust, the Company may incur permanent indebtedness of
up to 50% of total market value calculated out the time the debt is incurred.
Permanent indebtedness and working capital indebtedness may not exceed 100% of
the Company's total market value. In February of 2002, the Company sold 2.5
million common shares at price of $13.50 per share, raising net proceeds of
approximately $31 million. The Company expects to raise additional funds for
investment through further common offerings in 2002, although the timing and
amount of such offerings cannot be determined at this time.
Effective February 15, 2000, the Company entered into a repurchase facility with
Nomura Securities International Inc. This agreement enables the Company to
borrow up to 95% of the fair market value of qualified mortgage securities owned
by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of March 31,
2002 and December 31, 2001, the amount outstanding under this facility was
$54,860,000 and $43,610,000 and interest rates were 2.37% and 2.58%,
respectively. All borrowings under this facility have 30-day settlement terms,
but management believes that the Company can continue to renew its borrowings
when due.
In order to qualify as a REIT under the Code, the Company must, among other
things, distribute at least 90% 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.
The Company completed a loan program with Fannie Mae which has agreed to fully
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 loan program, 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, an
unaffiliated third party, which will underwrite and service the loans for Fannie
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Mae. The Company will guaranty a first loss position of up to $21.25 million,
depending on the aggregate principal amount of the loans the Company originates
under this program and will receive guaranty, loan origination and other fees.
The Company also guaranteed construction loans for which it has issued a forward
commitment to originate a loan under the Fannie Mae program, with respect to
which it guarantees repayment of 100% of such construction loans. As of March
31, 2002, the Company had originated loans totaling approximately $2.2 million
under the Fannie Mae program and has made forward commitments for an additional
approximate $6.8 million. The Company's maximum guaranty at March 31, 2002 is
$9.0 million.
Since the Company entered into the Fannie Mae loan program, the level of loan
origination competition has increased, reducing the projected financing volume
and profitability. As a result, the Company has decided in the first quarter of
2002 to discontinue this program. The Company has reached an agreement in
principle to terminate this program and transfer its rights and obligations
to a third party.
In May 2002, a distribution of $2,306,815 ($0.3625 per share), which was
declared in March 2002, was paid to the shareholders for the quarter ended March
31, 2002.
Management is not aware of any trends or events, commitments or uncertainties,
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way.
RESULTS OF OPERATIONS
The net income for the three months ended March 31, 2002 and 2001 was $2,139,024
and $1,131,148, respectively. The total of the annual operating expenses of the
Company may not exceed the greater of (i) 2% of the Average Invested Assets of
the Company or (ii) 25% of the Company's net income, unless such excess is
approved by the Independent Trustees. On an annualized basis, there was no such
excess for the three months ended March 31, 2002 and 2001.
Interest income from mortgage loans decreased approximately $487,000 for the
three months ended March 31, 2002 as compared to 2001 primarily due to the
conversion of Hollows, Elmhurst Village and Autumn Creek mortgages to GNMA
Certificates and the sale of the Columbiana mortgage during 2001.
Interest income from GNMA certificates increased approximately $969,000 for the
three months ended March 31, 2002, primarily due to the conversion of three
mortgage loans to GNMA certificates in 2001 and the purchase of an additional
four GNMA Certificates in 2002.
Interest income from notes receivable increased approximately $442,000 for the
three months ended March 31, 2002 as compared to 2001 due to the addition of
seven notes receivable during 2001 and 2002.
Other income increased in the amount of $54,000 for the three months ended March
31, 2002 as compared to 2001 due to the guaranty fees earned on loans in the
Fannie Mae program.
During the three months ended March 31, 2002, the Company recognized
approximately $355,000 in FNMA loan program expenses associated with the
write-off of the unamortized deferred costs related to the Fannie Mae loan
program.
Fees to advisor expenses increased approximately $239,000 for the three months
ended March 31, 2002 as compared to 2001 primarily due to an increase in asset
management fees payable to
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the Advisor due an increase in the assets under and an increase in the
reimbursements of certain administrative and other costs incurred by the Advisor
on behalf of the Company.
Amortization decreased approximately $15,000 for the three months ended March
31, 2002 due to the deferred costs relating to the Nomura repurchase facility
being fully amortized during 2001.
A gain on the repayment of GNMAs and mortgage loans in the amount of
approximately $614,000 was recorded for the three months ended March 31, 2002,
relating to the repayment of the Hollows GNMA on March 25, 2002.
DISTRIBUTIONS
Of the total distributions of $2,306,815 and $1,391,503 for the three months
ended March 31, 2002 and 2001, respectively, $167,792 ($.03 per share or 7.27%)
and $260,356 ($.07 per share or 19%), respectively, represented a return of
capital determined in accordance with generally accepted accounting principles.
As of March 31, 2002, 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 $14,664,471.
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.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things, affect the availability and creditworthiness of prospective tenants,
lease rents and the terms and availability of financing; adverse changes in the
real estate markets including, among other things, competition with other
companies; risks of real estate development and acquisition; governmental
actions and initiatives; and environment/safety requirements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof.
INFLATION
Inflation did not have a material effect on the Company's results for the
periods presented.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. The primary
market risk to which the investments of the Company is exposed is interest rate
risk, which is 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.
The Company's borrowings under repurchase agreements bear interest at rates that
fluctuate with LIBOR. Based on the $54,860,000 million of borrowings outstanding
under these facilities
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at March 31, 2002, a 1% change in LIBOR would impact the Company's net income by
approximately $548,600.
Cash flows and income from the Company's other financial instruments, consisting
primarily of mortgage loans, a preferred equity interest, GNMA certificates, and
cash and cash equivalents, would not be significantly affected by changes in
interest rates, because most of these instruments 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 shareholders' equity, but changes
in their value have not historically been significant to shareholders' equity.
The preferred equity interest is carried on the equity method; although changes
in interest rates would not directly impact the carrying value of this asset,
they might adversely affect the ability of the underlying entity to meet its
preferred distribution requirements.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material pending legal proceedings.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information -
Michael Wirth has resigned his position as Chief Financial Officer of
the Company effective May 15, 2002, in order to pursue other
endeavors. The Company has begun a search for a new CFO and
anticipates that the position will be filled within 90 days. In the
interim, Alan Hirmes, the Executive Vice President of the Company,
will function as the CFO.
-22-
Item 6. Exhibits and Reports on Form 8-K
The Company filed the following reports in form 8-K during the quarter ended
March 31, 2002:
DATE ITEM REPORTED
---------------------------------------------------------------------------------------
January 25, 2002 Item 5. Other Events.
Notice of updated and restated press release
issued by Related Capital Company.
Item 7. Financial Statements, Proforma
Financial Information and Exhibits.
Copy of the Related Capital Company press
release.
February 12, 2002 Item 5. Other Events.
Notification of amendment to an Amended
and Restated Advisory Services Agreement,
dated March 29, 1993, as amended and restated
effective April 10, 1999 and further amended
November 29, 2001. Amending the terms of the
Annual Incentive Fee paid to the Advisor.
Item 7. Financial Statements, Proforma
Financial Information and Exhibits.
Second Amendment to Amended and Restated
Advisory Services Agreement, dated as of
February 8, 2002.
February 19, 2002 Item 5. Other Events.
Specimen of common share certificate of
the Company
Item 7. Financial Statements, Proforma
Financial Information and Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN MORTGAGE ACCEPTANCE COMPANY
(Registrant)
Date: May 15, 2002
By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
Trustee, Chairman of the Board,
President and Chief Executive Officer
Date: May 15, 2002
By: /s/ Michael I. Wirth
--------------------
Michael I. Wirth
Chief Financial Officer