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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, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-13237
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(Exact name of Registrant as specified in its Trust Agreement)
Delaware 13-3949418
- - ------------------------------- -------------------
(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:
Title of each class
------------------------------------------
Shares of Beneficial Interest
Name of each exchange on which registered:
------------------------------------------
American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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, 1999 was $262,831,309,
based on a price of $13 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, 1999 there were 20,580,986 outstanding shares of the
Registrant's shares of beneficial interest.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Those portions of the Registrant's Proxy Statement for Annual Meeting
of Shareholders to be held on June 16, 1999, which are incorporated into Items
10, 11, 12 and 13.
Index to exhibits may be found on page 40
Page 1 of 97
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. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS
OR CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
PART I
Item 1. Business.
General
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Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which is engaged in the acquisition and ownership (either
directly or indirectly) of tax-exempt participating and non-participating First
Mortgage Bonds ("FMBs") issued by various state or local governments or other
agencies or authorities and secured by participating and non-participating
mortgage loans on the underlying properties ("Underlying Properties"). As of
December 31, 1998, the Company owned a portfolio of 49 FMBs. The Company is
organized and managed as a single business segment.
The Underlying Properties securing the bonds are garden apartments located in
nineteen metropolitan markets in fourteen states. The properties range in size
from 70 units to 550 units with an average size of 231 units. All of the
properties have an amenity package, competitive for their respective markets,
with many including swimming pools, clubhouses, exercise rooms and tennis
courts. There are 18 FMBs, which were acquired in 1997 and 1998, with Underlying
Properties either under construction or undergoing major rehabilitation. The
remaining 31 properties in the portfolio average 9-11 years in age. The
portfolio reports an average occupancy of 94.3% as of February 28, 1999. Net
operating income, in the aggregate, at the Underlying Properties has increased
an average of approximately 3% per annum since 1992.
The Company does not operate as a mortgage REIT, which generally utilize high
levels of leverage and acquire subordinated interests in commercial and/or
residential mortgage- backed securities. Rather, the Company utilizes low levels
of leverage and generally originates and acquires long-term, fixed-rate,
tax-exempt FMBs. As a result, the Company did not expect to experience the
ill-effects associated with the volatile interest rate environment during 1998.
Pursuant to its Trust Agreement, the Company is only able to incur leverage or
other financing up to 50% of the Company's Total Market Value (as defined in the
Trust Agreement) as of the date incurred (the "50% Limit"). The Company expects
to seek shareholder approval at the 1999 annual meeting to amend the Trust
Agreement to permit the Company to exceed the 50% Limit with respect to short
term borrowings of no more than approximately 5% of Total Market Value. Mortgage
REITs typically incur leverage at ratios ranging from between 3:1 to 10:1. In
general, the FMBs that the Company either originates or acquires call for
ten-year restrictions from prepayments, eliminating the Company's susceptibility
to significant levels of repayment risk as a result of interest rate reductions.
Consistent with the foregoing, the Company focuses on providing investors with a
stable level of distributions, even through unstable markets.
Due to the Company's low level of leverage, the Company has not been affected by
the recent lack of liquidity that is currently impairing mortgage REITs and its
portfolio does not contain assets that are especially vulnerable to volatility
during periods of interest rate fluctuations.
Organization
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The Company was formed on October 1, 1997 as the result of the consolidation
(the "Consolidation") of three publicly registered limited partnerships, Summit
Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax
Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III") (the
"Partnerships", and each individually a "Partnership"). One of the general
partners of the Partnerships was an affiliate of Related Capital Company
("Related"). Unless otherwise indicated, the "Company", as hereinafter used,
refers to Charter Municipal Mortgage Acceptance Company and its subsidiary and,
for references prior to October 1, 1997, refers to Tax Exempt II. Pursuant to
the Consolidation, the Company issued shares of beneficial interest (the
"Shares") to all partners in each of the Partnerships in exchange for their
interests in the Partnerships based upon each partner's proportionate interest
in the Shares issued to their Partnership in the Consolidation. The Shares
commenced trading on the American Stock Exchange on October 1, 1997 under the
symbol "CHC". As of December 31, 1998, there were 20,579,448 Shares outstanding.
For financial accounting and reporting purposes, the Consolidation was accounted
for using the purchase method of accounting. Under this method, the Partnership
with the investor group receiving the largest ownership in the Company, in this
case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for
accounting purposes, Tax Exempt II's assets and liabilities were recorded by the
Company at their historical cost, with the assets and liabilities of the other
Partnerships recorded at their estimated fair values for each Partnership (an
aggregate of approximately $158,129,000) as set forth in the Solicitation
Statement of the Company dated June 18, 1997 (the "Solicitation Statement").
Results of operations and other operating financial data for the Company for the
years ended December 31, 1998, 1997 and 1996 include information for the entire
periods presented with respect to Tax Exempt II, but only include information
for the period October 1, 1997 to December 31, 1998 with respect to the other
Partnerships. Prior to the Consolidation, Tax Exempt II was a limited
partnership which was formed under the laws of the State of Delaware on April
11, 1986. The general partners of Tax Exempt II were Related Tax Exempt
Associates II, Inc., a Delaware corporation (the "Related General Partner"), and
Prudential Bache Properties, Inc. ("PBP"). The general partners managed and
controlled the affairs of Tax Exempt II prior to the Consolidation.
The Company is governed by a board of trustees comprised of two independent
managing trustees and three managing trustees who are affiliated with Related.
The Company has engaged Related Charter LP (the "Manager"), an affiliate of
Related, to manage its day-to-day affairs. Each independent trustee is entitled
to receive annual compensation for serving as a trustee in the aggregate amount
of $15,000, payable in cash (maximum of $5,000 per year) and/or Shares valued
based on the fair market value at the date of issuance. On June 4, 1998, 186
shares, having an aggregate value of $2,500 as of that date, were issued to each
independent trustee as compensation for their services for the quarter ended
December 31, 1997. Through the Manager, Related offers the Company
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a core group of experienced staff and executive management, who provide 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, since Related provides the Company with resources
that are not generally available to small-capitalized, self-managed companies.
As part of the settlement of class action litigation relating to the
Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had
the right to petition the United States District Court for the Southern District
of New York (the "Court") for additional attorneys' fees ("Counsel's Fee
Shares") in an amount to be determined in the Court's sole discretion. The
Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed
to be 25%) of the increase in value of the Company, ("the Added Value") if any,
as of October 1, 1998 based upon the difference between (i) the trading prices
of the Company's shares of beneficial interest during the six month period ended
October 1, 1998 and (ii) the trading prices of the limited partnership units and
the asset values of the Partnerships prior to October 1, 1997. As of October 1,
1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an
Order and Stipulation of Settlement by the Court on February 18, 1999, Class
Counsel is entitled to receive 608,955 shares of beneficial interest in the
Company. The shares will be distributed to Class Counsel quarterly in eight
equal distributions commencing within ten business days after Class Counsel
advises the Company in writing of the persons in whose name the shares are to be
issued. One-half of such shares will be in the form of Restricted Securities
(restricted only with respect to the sale, assignment, pledge or other transfer
of such securities) and the remaining one-half of such shares will be
unrestricted. Restrictions on the Restricted Securities expire one year from the
date of issuance. Management is currently negotiating a discounted cash
settlement with Class Counsel in lieu of the issuance of shares; however, any
such settlement would require the approval of the Board of Trustees and there
can be no assurance that such negotiations will be successful.
Business Plan
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The Company has initiated a focused business/strategic plan designed to increase
cash available for distribution ("CAD"), generate increased tax-exempt income
and as a result enhance the value of its stock. The plan concentrates
principally on the origination and acquisition of additional tax-exempt FMBs
secured by multfamily properties. The Company believes that it can earn above
market rates of interest on its bond acquisitions by focusing its efforts
primarily on affordable housing. The Manager estimates that nearly 50% of all
new multifamily development contains an affordable component which produces tax
credits pursuant to Section 42 of the Internal Revenue Code. The Manager also
believes that each year a growing number of these properties are financed with
tax-exempt bonds. The Company has designed a Direct Purchase Program
specifically designed to appeal to developers of such properties. In general,
these properties are smaller than traditional multifamily housing properties,
averaging 150 units. The traditional method of financing tax-exempt properties
requires the involvement of credit enhancement, rating agencies and investment
bankers. Therefore, the up-front cost of such financing is generally much higher
than traditional multifamily financing. Through its Direct Purchase Program, the
Company will originate and acquire tax-exempt bonds without the cost associated
with credit enhancement, rating agencies and investment bankers. The Company
believes that the up-front cost savings to the developer will translate into a
higher than market interest rate on the bonds acquired by the Company.
The Company is positioned to market its Direct Purchase Program as a result of
the Manager's affiliation with Related. Related and its predecessor companies
have specialized in offering debt and equity products to mid-market multifamily
owners and developers for over 25 years. Related has provided debt and equity
financing to properties valued at over $7.8 billion. In addition, since 1987
Related has been one of the nation's leading provider of equity to developers of
multifamily housing which benefits from tax credits. During 1998, the Manager's
affiliation with Related allowed it to become one of the dominant lenders to
developers and owners of affordable housing financed with tax-exempt bonds.
During 1998, the Company's growth was financed by the Private Label Tender
Option Program ("TOP") or similar programs, borrowings under the Interim Credit
Facility (see below), funds generated from operations in excess of distributions
and placements of equity. The Company is currently negotiating an increase in
its TOP from $150 million to $200 million and, before the end of 1999, the
Company expects to raise funds through an equity offering; however, there can be
no assurance that either of these initiatives will be successful. During the
period January 1, 1998 through December 31, 1998, the Company acquired 17 FMBs
(see Note 3 to the financial statements in "Item 8. Financial Statements and
Supplementary Data").
Structure of Existing First Mortgage Bonds
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The principal and interest payments on each FMB are payable only from the cash
flows of the Underlying Properties, including proceeds from a sale of an
Underlying Property or the refinancing of the mortgage loan securing such FMBs
(the "Mortgage Loans"). None of the FMBs constitute a general obligation of any
state or local government, agency or authority. The structure of each Mortgage
Loan mirrors the structure of the corresponding FMB which it secures.
The seasoned original 31 FMBs call for interest only debt service payments
during their respective terms (which generally are 24 to 30 years from issuance
or re-issuance) with repayment of principal due in a lump sum "balloon" payment
at the expiration of their respective terms or upon sale or refinancing. The
newly acquired bonds (bonds acquired in 1997 and 1998) call for amortization or
"sinking fund" payments, generally at the completion of rehabilitation or
construction, of principal based on thirty to forty year level debt service
amortization schedules. On all the FMBs the Company generally has the right to
require redemption approximately 12 to 15 years from issuance or re-issuance and
obligors generally are locked out of prepayment for seven to ten years from
issuance or re-issuance.
In addition to the stated base rates of interest of the FMBs which range from
4.87% to 8.5% per annum, certain of the FMBs provide for "contingent interest"
which is equal to: (i) an amount equal to 50% to 100% of net property cash flow
and 50% to 100% of net sale or refinancing proceeds until the borrower has paid,
during the post-construction period, annual compound interest at a rate
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ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (ii) an
amount equal to 25% to 50% of the remaining net property cash flow and 25% to
50% of the remaining net sale or refinancing proceeds, until the borrower has
paid interest at a simple annual rate of 16% over the term of the FMB. Both the
stated and contingent interest on the FMBs are exempt from federal income
taxation. During the years ended December 31, 1998, 1997 and 1996, six, five and
two FMBs, paid contingent interest amounting to approximately $960,000, $353,000
and $220,000, respectively.
Structure of Modified First Mortgage Bonds
- - ------------------------------------------
Certain of the FMB's have been modified reflecting current market conditions.
These modifications have generally encompassed an extension of the maturity
(10-20 years) together with a prepayment lock-out feature and/or prepayment
penalties together with an extension of the mandatory redemption feature (5-10
years from modification). Stated interest rates have also been adjusted together
with a change in the participation and contingent interest features. Base
interest rates, contingent interest, prepayment lock-outs, mandatory redemption
and maturity features vary dependent on the facts of a particular FMB, the
developer, the Underlying Property's performance and requirements of bond
counsel and local issuers. During 1998, the Highland Ridge, Willow Creek,
Bristol Village, Thomas Lake and Mansion FMBs were modified (see Note 3 to the
financial statements in "Item 8. Financial Statements and Supplementary Data").
The Company currently anticipates that it will modify certain other FMBs to
reflect generally similar terms as those modified previously and in 1998, where
and as appropriate.
Structure of New First Mortgage Bonds
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Newly acquired FMBs will generally bear a fixed base interest rate and, to the
extent permitted by existing regulations, they may or may not also provide for
contingent interest. Terms are expected to be 5 to 35 years, although the
Company may have the right to cause repayment prior to maturity through a
mandatory redemption feature (5 to 7 years with up to 6 month's notice). In some
cases, the principal of an FMB may amortize.
New FMBs are generally not expected to be subject to optional prepayment during
the first 5-10 years of the Company's ownership of the bonds and may carry
prepayment penalties thereafter beginning at 5% of the outstanding principal
balance, declining by 1% per annum. Certain new FMBs may be purchased at a
discount from their face value. Up to 15% of the Total Market Value of the
Company may be invested in FMBs secured by Underlying Properties in which
affiliates of the Manager have a controlling interest, equity interest or
security interest. The 15% limit is not applicable to properties to which the
Manager or its affiliates have taken title for the benefit of the Company and
only applies to new FMBs acquired after the consolidation. In selected
circumstances and only in connection with the acquisition of tax-exempt FMBs the
Company may acquire a small amount of taxable bonds to fund certain costs
associated with the issuance of FMBs, that under current law cannot be funded by
FMBs.
First Mortgage Bonds - General
- - ------------------------------
In order to protect the tax exempt status of the FMBs, the owners of the
Underlying Properties are required to enter into certain agreements to own,
manage and operate such Underlying Properties in accordance with requirements of
the Internal Revenue Code of 1986, as amended.
No single FMB provided interest income which exceeded 10% of the Company's total
revenue for the years ended December 31, 1998, 1997 and 1996, except for the
Bristol Village and Pelican Cove FMBs which provided 14% and 11%, respectively,
of total revenue in 1996.
Based on the face amount of FMBs at December 31, 1998, approximately 23% of the
Underlying Properties are located in California, 15% are located in Florida, 14%
are located in Missouri, 10% are located in Georgia and 10% are located in
Minnesota. No other states comprise more than 10% of the total face amount.
From time to time the Company has advanced funds to owners of certain Underlying
Properties in order to preserve the underlying asset including completion of
construction and/or when Underlying Properties have experienced operating
difficulties including past due real estate taxes and/or deferred maintenance
items. Such advances typically are secured by promissory notes and/or second
mortgages. As of December 31, 1998, the face amount of such advances was
$12,845,308, and their carrying value was $7,628,920, which is net of purchase
accounting adjustments, and a reserve for collectibility of $138,000.
The original obligors and owners of the Underlying Properties of the Cedar
Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove,
Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced
with affiliates of the Manager who have not made equity investments. These
entities have assumed the day-to-day responsibilities and obligations of the
Underlying Properties. Buyers are being sought who would make equity investments
in the Underlying Properties and assume the nonrecourse obligations for the FMB.
These properties are generally paying as interest an amount equal to the net
cash flow generated by operations, which in some cases is less than the stated
rate of the FMB. The Company has no present intention of declaring a default on
these FMBs. The aggregate carrying value of these ten FMBs at December 31, 1998
was approximately $105,402,000 and the income earned from them for the year
ended December 31, 1998 was approximately $7,497,000.
From time to time, the Company enters into forbearance agreements and/or
permanent modifications with certain borrowers. The determination as to whether
it is in the best interest of the Company to enter into permanent modifications
or forbearance agreements on the FMBs, advance second mortgages, or
alternatively, to pursue its remedies under the loan documents, including
foreclosure, is based upon several factors. These factors include, but are not
limited to, Underlying Property performance, owner cooperation and projected
costs of foreclosure and litigation. Payments under each of the existing
forbearance agreements are current as of December 31, 1998.
With respect to the FMBs which are subject to forbearance agreements with the
respective obligors, the difference between the stated interest rates and the
rates paid (whether deferred and payable out of available future cash flow or,
ultimately, from sale or refinancing proceeds) on FMBs is not accrued for
financial statement purposes. The accrual of interest at the stated interest
rate
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will resume once an Underlying Property's ability to pay the stated rate
has been adequately demonstrated. Unrecorded contractual interest income was
approximately $3,047,000, $2,415,000 and $1,407,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
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CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
The following table lists the FMBs that the Company owns together with the
occupancy and rental rates of the Underlying Properties:
Carrying Average Minimum
Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of
Closing Amount at December Rate Paid Interest December 31, February 14, at December Rental
Property Date of Bond 31, 1998 (G) for 1998* Rate* 1998* 1999 31, 1998 Units
- - ------------------ ------- ----------- ----------- -------- -------- ----------- ------------ ------------ ------
The Mansion,
Independence, MO 5/13/86 $19,450,000 $20,084,000 7.68%(C) 7.25% 7.25% 92.3% $460-805 550
Martin's Creek,
Summerville, SC 5/20/86 7,300,000 8,443,000 8.25 8.25 8.25 99.0 450-710 200
East Ridge,
Mt. Pleasant, SC 5/20/86 8,700,000 10,063,000 8.25 8.25 8.25 99.0 565-820 200
Highpointe Club,
Harrisburg, PA 7/29/86 8,900,000 5,888,000 6.12 8.50 (B) 90.3 530-725 240
Cypress Run,
Tampa, FL 8/14/86 15,402,428 13,067,000 5.84 8.50 (B) 87.6 460-775 408
Thomas Lake,
Eagan, MN 9/02/86 12,975,000 13,643,000 7.50 7.50 7.50 98.6 758-1,247 216
North Glen,
Atlanta, GA 9/30/86 12,400,000 12,914,000 7.00 7.00 7.00(K) 94.3 560-875 284
Greenway Manor,
St. Louis, MO 10/09/86 12,850,000 15,313,000 8.93(D) 8.50 8.50 90.6 495-595 312
Clarendon Hills,
Hayward, CA 12/08/86 17,600,000 13,880,000 6.31(I) 5.52 5.52 96.4 925-1,395 285
Cedar Creek,
McKinney, TX 12/29/86 8,100,000 9,653,000 8.50 8.50 8.50 89.8 525-845 250
Sunset Terrace,
Lancaster, CA 2/12/87 10,350,000 7,981,000 5.23 8.00 (B) 96.2 485-740 184
Bay Club,
Mt. Pleasant, SC 9/11/86 6,400,000 7,403,000 8.25 8.25 8.25 97.5 620-680 164
Loveridge,
Contra Costa, CA 11/13/86 8,550,000 6,593,000 5.00 8.00 (B) 86.3 640-875 148
The Lakes,
Kansas City, MO 12/30/86 13,650,000 10,024,000 5.64(E) 4.87 4.87 92.9 435-630 400
Crowne Pointe,
Olympia, WA 12/31/86 5,075,000 5,692,000 8.00 8.00 8.00 95.5 495-795 160
Orchard Hills,
Tacoma, WA 12/31/86 5,650,000 6,337,000 8.00 8.00 8.00 98.8 465-755 174
Highland Ridge,
St. Paul, MN 2/02/87 15,000,000 15,247,000 7.30(C) 7.25 7.25 97.4 775-1,285 228
Newport Village,
Tacoma, WA 2/11/87 13,000,000 14,581,000 8.77(D) 8.00 8.00 90.7 460-600 402
Sunset Downs,
Lancaster, CA 2/11/87 15,000,000 11,566,000 5.07 8.00 (B) 94.7 485-740 264
Pelican Cove,
St. Louis, MO 2/27/87 18,000,000 20,189,000 7.89 8.00 (B) 95.7 495-680 402
Willow Creek,
Ames, IA 2/27/87 6,100,000 6,200,000 7.44(C) 7.25 7.25 100.0 525-825 138
Cedar Pointe,
Nashville, TN 4/22/87 9,500,000 9,323,000 7.00 7.00 7.00 96.2 525-810 210
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Carrying Average Minimum
Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of
Closing Amount at December Rate Paid Interest December 31, February 14, at December Rental
Property Date of Bond 31, 1998 (G) for 1998* Rate* 1998* 1999 31, 1998 Units
- - ------------------ ------- ----------- ----------- -------- -------- ----------- ------------ ------------ ------
Shannon Lake,
Atlanta, GA 6/26/87 $12,000,000 $11,536,000 6.00% (M) 6.00% 94.5% $405-810 294
Bristol Village,
Bloomington, MN 7/31/87 17,000,000 17,875,000 7.50 7.50% 7.50 96.5 735-1,269 290
Suntree,
Ft. Myers, FL 7/31/87 7,500,000 7,586,000 6.59 8.00 6.50(F) 97.5 465-620 240
River Run,
Miami, FL 8/07/87 7,200,000 8,075,000 9.11(I) 8.00 8.00 92.6 673-890 164
Players Club,
Ft. Myers, FL 8/14/87 9,700,000 8,704,000 6.22 8.00 6.25(F) 75.7 460-600 288
Lakepoint,
Dekalb City, GA 11/18/87 15,100,000 12,702,000 6.00 6.00 6.00 95.3 575-825 360
Sunset Village,
Lancaster, CA 3/25/88 11,375,000 8,771,000 5.45 8.50 (B) 94.4 485-740 204
Sunset Creek,
Lancaster, CA 3/25/88 8,275,000 6,381,000 5.14 8.50 (B) 94.4 485-740 148
Orchard Mill,
Atlanta, GA 5/1/89 10,500,000 10,252,000 6.57 7.50 5.00(J) 96.6 535-745 238
Countryside North
Memphis, TN 12/11/97 5,000,000 5,100,000 7.50 7.50 7.50 86.0 431-586 152
Ocean Air
Norfolk, VA 4/20/98 10,000,000 10,000,000 7.25 7.25 7.25 85.0(L) 320-395 434
Phoenix
Stockton, CA 4/28/98 3,250,000 3,250,000 7.125 7.125 7.125 38.0(H) 409-562 184
Stone Creek
Watsonville, CA 4/28/98 8,820,000 8,820,000 7.125 7.125 7.125 (H) (H) 120
Cedarbrook
Hanford, CA 4/28/98 2,840,000 2,840,000 7.125 7.125 7.125 100 434-554 70
Marsh Landings
Portsmouth, VA 5/20/98 6,050,000 6,050,000 7.25 7.25 7.25 16.8(L) 295-335 250
College Park
Naples, FL 7/15/98 10,100,000 10,100,000 7.00 (N) 7.00 (H) (H) 210
Gulfstream
Dania, FL 7/22/98 3,500,000 3,500,000 7.25 7.25 7.25 31.3(L) 575-650 96
Bedford Square
Clovis, CA 8/25/98 3,850,000 3,850,000 7.00 (O) 7.00 55.5(L) 381-456 130
Northpointe Villag
Fresno, CA 8/25/98 13,250,000 13,250,000 8.085 (P) 8.125 43.3(L) 381-456 406
Falcon Creek
Indianapolis, IN 9/14/98 6,144,600 6,144,600 7.00 (Q) 7.00 (H) (H) 131
Jubilee Courtyards
Florida City, FL 9/15/98 4,150,000 4,150,000 7.00 (A) 7.00 (H) (H) 98
Silvercrest
Clovis, CA 9/24/98 2,275,000 2,275,000 7.125 7.125 7.125 (H) (H) 100
Carrington Pointe
Los Banos, CA 9/24/98 3,375,000 3,375,000 6.375 6.375 6.375 (H) (H) 80
Madalyn Landing
Palm Bay, FL 11/13/98 14,000,000 14,000,000 7.00 7.00 7.00 (H) (H) 304
-8-
Carrying Average Minimum
Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of
Closing Amount at December Rate Paid Interest December 31, February 14, at December Rental
Property Date of Bond 31, 1998 (G) for 1998* Rate* 1998* 1999 31, 1998 Units
- - ------------------ ------- ----------- ----------- -------- -------- ----------- ------------ ------------ ------
Forest Hills
Garner, NC 12/15/98 $ 5,930,000 $ 5,930,000 7.125% 7.125% 7.125% 83.0%(L) $540-650 136
Lake Jackson
Lake Jackson, TX 12/22/98 10,934,000 10,934,000 7.00 7.00 7.00 (H) (H) 160
Mountain Ranch
Austin, TX 12/23/98 9,128,000 9,128,000 7.125 7.125 7.125 (H) (H) 212
----------- -----------
$471,199,028 $458,662,600
============ ============
*The average interest rate paid represents the interest recorded by the Company
while the stated interest rate represents the coupon rate of the FMB and the
minimum pay rate represents the minimum rate payable pursuant to the applicable
forbearance agreement, if any.
(A) The interest rates for Jubilee Courtyards are 7% through September 30,
2000 and 7.125% thereafter.
(B) The minimum pay rate is the current cash flow of the property.
(C) Includes contingent interest paid during 1998.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated
interest rate over the remaining term of the FMB.
(G) The FMBs are carried at their estimated fair values at December 31, 1998.
(H) The property is still in the construction phase.
(I) Includes receipt of primary contingent interest.
(J) Pursuant to a bond modification as of October 1, 1997 which lowered the
base interest rate to 7.50% effective October 1, 1997, subject to a
minimum pay rate of 5% through June 30, 2000.
(K) Pursuant to a forbearance agreement as of October 1, 1997 which lowered
the base interest rate to 7% through June 30, 2000 and 7.50% thereafter.
(L) The property is still in the rehabilitation phase.
(M) Pursuant to a bond modification as of October 1, 1997, the base interest
rate was lowered to 6% through July 31, 2000 and 7% thereafter.
(N) The interest rates for College Park are 7% during the construction period
and 7.25% thereafter.
(O) The interest rates for Bedford Square are 7% during the construction
period and 6.375% thereafter.
(P) The interest rates for Northpointe Village are 7.965% through September
23, 1998, 8.125% during the remainder of the construction period and 7.5%
thereafter.
(Q) The interest rates for Falcon Creek are 7% through August 31, 2000 and
7.25% thereafter.
-9-
Private Label Tender Option Program
- - -----------------------------------
On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital of $150 million to acquire
additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the
aggregate principal amount of approximately $385,907,000 to a Delaware business
trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which
then contributed 27 of those FMBs with an aggregate principal amount of
approximately $233,105,000, to another Delaware business trust (the "Owner
Trust"). The Owner Trust issued two equity certificates: ( i) a Senior
Certificate, with an outstanding face amount of $150,000,000 at December 31,
1998, which has been deposited into another Delaware business trust (the
"Certificate Trust") which issued and sold Floater Certificates representing
proportional interests in the Senior Certificate to new investors; and (ii) a
Residual Certificate representing the remaining beneficial ownership interest in
the Owner Trust, which has been issued to the Origination Trust, whose sole
owner is the Company. In addition, the Owner Trust obtained a municipal bond
insurance policy from MBIA to credit enhance Certificate distributions for the
benefit of the holders of the Floater Certificates and has also arranged for a
liquidity facility, issued by a consortium of highly rated European banks, with
respect to the Floater Certificates.
The end result of these transactions is that a portion of the interest received
by the Owner Trust on the FMBs it holds is distributed through the Senior
Certificate to the holders of the Floater Certificates in an amount determined
each week by the remarketing agent, Goldman Sachs & Co., at the distribution
amount that is required to enable the remarketing agent to sell the Floater
Certificates at par on any weekly determination date.
Currently, the maximum amount of Floater Certificates that can be issued to
raise capital under the TOP is $150 million and as of December 31, 1998 such
maximum has been issued. The Company is currently negotiating an increase in its
TOP to $200 million; however, there can be no assurance that such negotiations
will be successful.
The Company's cost of funds relating to the TOP (calculated as income allocated
to the minority interest plus current fees as a percentage of the weighted
average amount of the outstanding Senior Certificate) was approximately 4.9% for
the period May 21, 1998 (inception) through December 31, 1998.
Note Payable
- - ------------
During 1998, an interim credit facility with Goldman Sachs & Company (the
"Interim Credit Facility") was available to the Company at prevailing rates of
interest for such accounts (5.98% at December 14, 1998). At December 31, 1998
there were no borrowings outstanding. The Company is currently negotiating with
Goldman Sachs & Company and various other lenders the renewal or replacement of
this facility.
The outstanding face amount of the Senior Certificate and indebtedness under the
Interim Credit Facility, together with any other leveraging of the Company, will
not exceed 50% of the Company's total Market Value (as defined in the Trust
Agreement) as of the date incurred.
Competition
- - -----------
The Manager and/or its affiliates have formed, and may continue to form, various
entities to engage in businesses which may be competitive with the Company.
The Company's business is affected by competition to the extent that the
Underlying Properties from which it derives interest and, ultimately, principal
payments may be subject to competition relating to rental rates and relative
levels of amenities from offered by comparable neighboring properties.
Employees
- - ---------
The Company has no employees. Management and administrative services for the
Company are performed by the Manager and its affiliates pursuant to the
Management Agreement between the Company and the Manager dated October 1, 1997
(the "Management Agreement"). The Manager receives compensation for such
services and the Company reimburses the Manager 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 Management Agreement (see Note 7
to the Company's Financial Statements included in "Item 8. Financial Statements
and Supplementary Data").
Recent Legislation
- - ------------------
The State of California recently adopted an administrative amendment to the
allocation plan pursuant to which they award bond value capital to developers
of multifamily housing. The amendment will require, in many cases, up to 15% of
debt financing for such properties to be a form of taxable financing. Therefore,
in certain cases, the Company may be required to offer taxable financing to
California developers in order to be competitive.
Item 2. Properties
The Company does not own or lease any property.
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.
-10-
PART II
Item 5. Market for the Company's Shares and Related Shareholder Matters.
As of March 24, 1999, there were 4,044 holders of record owning 20,580,975
Shares. The Company's Shares have been listed on the American Stock Exchange
since October 1, 1997 under the symbol "CHC". Prior to October 1, 1997, there
was no established public trading market for the Company's Shares.
The high and low prices for each quarterly period of the last two years for
which the Shares were traded is as follows:
1998 1998 1997 1997
Quarter Ended Low High Low High
- - ------------- ---- ---- ---- ----
March 31 12 11/16 14 1/2
June 30 12 7/8 14 7/16
September 30 12 9/16 14 1/4
December 31 11 11/16 13 11 1/8 13 5/16
The last reported sale price of Shares on the American Stock Exchange on March
26, 1999 was $12 3/8.
Incentive Share Option Plan
- - ---------------------------
The Company has adopted an incentive Share option plan (the "Incentive Share
Option Plan"), the purpose of which is to (i) attract and retain qualified
persons as trustees and officers and (ii) to incentivize and more closely align
the financial interests of the Manager and its employees and officers with the
interests of the shareholders by providing the Manager with substantial
financial interest in the Company's success. The Compensation Committee
administers the Incentive Share Option Plan. Pursuant to the Incentive Share
Option Plan, if the Company's distributions per Share in the immediately
preceding calendar year exceed $0.9517 per Share, the Compensation Committee has
the authority to issue options to purchase, in the aggregate, that number of
Shares which is equal to three percent of the Shares outstanding as of December
31 of the immediately preceding calendar year (or in the initial year, as of
October 1, 1997), provided that the Compensation Committee may only issue, in
the aggregate, options to purchase a maximum number of Shares over the life of
the Incentive Shares Option Plan equal to 10% of the Shares outstanding on
October 1, 1997.
Subject to the limitations described in the preceding paragraph, if the
Compensation Committee does not grant the maximum number of options in any year,
then the excess of the number of authorized options over the number of options
granted in such year will be added to the number of authorized options in the
next succeeding year and will be available for grant by the Compensation
Committee in such succeeding year.
All options granted by the Compensation Committee will have an exercise price
equal to or greater than the fair market value of the Shares on the date of the
grant. The maximum option term is ten years from the date of grant. All Share
options granted pursuant to the Incentive Share Option Plan may vest immediately
upon issuance or in accordance with the determination of the Compensation
Committee. No options were granted for the year ended December 31, 1997. In
1998, the Company distributed $.93 per Share, thus prohibiting the Compensation
Committee from issuing options. Three percent of the Shares outstanding as of
the effective date of the Consolidation are equal to 617,624 Shares.
Share Repurchase Plan
- - ---------------------
On October 9, 1998, the Board of Trustees authorized the implementation of a
share repurchase plan, enabling the Company to repurchase, from time to time, up
to 1,500,000 of its Shares. The repurchases will be made in the open market and
the timing will be dependant on the availability of Shares and other market
conditions. During the period October 9, 1998 through December 31, 1998, the
Company acquired 8,400 of its Shares for an aggregate purchase price of $103,359
(including commissions and service charges). Repurchased Shares are accounted
for as treasury shares of beneficial interest.
-11-
Distribution Information
- - ------------------------
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
- - -----------------------------------------------------------------------
Distributions Per Share
- - -----------------------
Quarterly cash distributions per share for the year ended December 31, 1998 and
the quarter ended December 31, 1997 were as follows:
Cash Distribution Total Amount
for Quarter Ended Date Paid Per Share Distributed
- - ----------------- --------- --------- -----------
March 31, 1998 5/15/98 $ .23 $ 4,735,119
June 30, 1998 8/14/98 $ .23 4,735,205
September 30, 1998 11/14/98 $ .23 4,735,205
December 31, 1998 2/14/99 $ .24 4,939,068
------ -----------
Total for 1998 $ .93 $19,144,597
====== ==========
December 31, 1997 2/14/98 $ .23 $ 4,735,120
====== ===========
In addition to the distributions set forth in the table above, the Company paid
the Manager a special distribution (equal to .375% of the total invested assets
of the Company) which amounted to $1,477,797 and $330,580 for the year ended
December 31, 1998 and the three months ended December 31, 1997, respectively.
There are no material legal restrictions upon the Company's present or future
ability to make distributions in accordance with the provisions of the Company's
Amended and Restated Trust Agreement. 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.
Tax Exempt II (Prior to the Consolidation)
- - ------------------------------------------
Distributions per BUC
- - ---------------------
Cash distributions per BUC of Tax Exempt II for the nine months ended September
30, 1997 were as follows:
Cash Distribution Approximate Total Quarterly Total Amount
for Quarter Ended Date Paid Distribution Per BUC of Distribution
- - ----------------- --------- -------------------- ---------------
March 31, 1997 5/14/97 $ .26 $2,379,421
June 30, 1997 8/14/97 .26 2,379,421
September 30, 1997 11/12/97 .26 2,379,421
------ ---------
Total for 1997 $ .78 $7,138,263
====== =========
Approximately $2,400,000 of the $9,518,000 paid to the BUC$holders of Tax Exempt
II in 1997, represented a return of capital on a generally accepted accounting
principles ("GAAP") basis. The return of capital on a GAAP basis is calculated
as BUC$holder distributions less net income allocated to BUC$holders.
-12-
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 notes thereto contained in "Item 8. Financial Statements and
Supplementary Data".
Year ended December 31,
OPERATIONS ------------------------------------------------------------------------------
- - ---------- 1998* 1997* 1996* 1995* 1994*
------------- ------------- ------------- ------------- -------------
Total revenues $ 28,179,048 $ 14,414,625 $ 11,812,316 $ 12,039,287 $ 11,870,490
Loss on impairment of assets 0 (1,843,135) (4,000,000) (1,000,000) (500,000)
Other expenses and minority interest (6,153,176) (2,515,682) (1,967,275) (1,851,484) (1,747,441)
------------- ------------- ------------- ------------- -------------
Net income $ 22,025,872 $ 10,055,808 $ 5,845,041 $ 9,187,803 $ 9,623,049
============= ============= ============= ============= =============
Net income applicable to shareholders
of beneficial $ 20,342,594 $ 2,437,538***
============= =============
Net income per share (1)
Basic** $ .99 $ .12***
============= =============
Diluted** $ .98 $ .12***
============= =============
Weighted average shares outstanding:
Basic** 20,587,151 20,587,465***
============= =============
Diluted** 20,740,641 20,587,465***
============= =============
FINANCIAL POSITION Year ended December 31,
- - ------------------ ------------------------------------------------------------------------------
1998* 1997* 1996* 1995* 1994*
------------- ------------- ------------- ------------- --------------
Total assets $ 492,585,806 $ 362,390,563 $ 154,896,475 $ 157,019,314 $ 157,436,945
============= ============= ============= ============= =============
Notes payable $ 0 $ 21,445,340 $ 0 $ 0 $ 0
============= ============= ============= ============= =============
Total liabilities $ 15,091,600 $ 30,722,364 $ 573,874 $ 652,350 $ 1,088,738
============= ============= ============= ============= =============
Minority interest $ 150,000,000 $ 0 $ 0 $ 0 $ 0
============= ============= ============= ============= =============
Total shareholders' equity/partners' capital $ 327,494,206 $ 331,668,199 $ 154,322,601 $ 156,366,964 $ 156,348,207
============= ============= ============= ============= =============
DISTRIBUTIONS
- - -------------
Distributions to BUC$holders N/A $ 7,138,263 $ 9,517,685 $ 9,517,685 $ 9,517,685
============= ============= ============= =============
Distributions to shareholders of beneficial interest $ 19,144,597 $ 4,735,120***
============= =============
Distributions per share $ .93 $ .23***
============= =============
-13-
OTHER DATA
- - ----------
Year Ended Three Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
Cash Available for Distribution (2) $ 22,243,193 $ 4,624,279
Less: distributions to the Manager (1,477,807) (330,582)
------------- -----------
Cash available for distribution to
shareholders $ 20,765,386 $ 4,293,697
============= ===========
Distributions to shareholders $ 19,144,587 $ 4,735,117
============= ===========
Payout ratio 92.2% 110.3%
============= ===========
Cash flows from:
Operating activities $ 22,651,186 $ 4,465,552
============= ===========
Investing activities $(117,243,543) $(8,497,439)
============= ===========
Financing activities $ 105,388,481 $ 2,144,509
============= ===========
*Information prior to October 1, 1997 (the date of the Consolidation) is only
with respect to Tax Exempt II. Information subsequent to September 30, 1997 is
with respect to the Company which includes Tax Exempt II and the other
Partnerships pursuant to the Consolidation.
**Net income and distribution per unit information for periods prior to October
1, 1997 is not presented because it is not indicative of the Company's
continuing capital structure.
***Represents amount for the three months ended December 31, 1997.
(1) Net income per Share equals net income, less the special allocations to the
Manager, divided by the weighted average Shares (basic and diluted) outstanding
for the period.
(2) See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a definition of Cash Available for Distribution.
-14-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
- - -------------------------------
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which is engaged in the acquisition and ownership (either
directly or indirectly) of tax-exempt participating and non-participating First
Mortgage Bonds ("FMBs") issued by various state or local governments or other
agencies or authorities and secured by participating and non-participating
mortgage loans on the Underlying Properties. As of December 31, 1998, the
Company owned 49 FMBs and had net assets of approximately $332,102,000.
The Company was formed by the consolidation (the "Consolidation"), on October 1,
1997, of Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt
L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III"),
three publicly registered limited partnerships (the "Partnerships") one of the
general partners of the Partnerships was an affiliate of Related Capital Company
("Related").
For a discussion of the Company's Incentive Share Option Plan and Share
Repurchase Plan, see "Item 5. Market for the Company's Common stock and Related
Shareholder Matters".
In order to generate increased tax exempt income and as a result enhance the
value of the Company's Shares, the Company intends to originate and acquire
additional tax-exempt bonds secured by multifamily properties. The Company
believes that it can earn above market rates of interest on its bond
acquisitions by focusing its efforts primarily on affordable housing. The
Manager estimates that nearly 50% of all new multifamily development contains an
affordable component which produces tax credits pursuant to Section 42 of the
Internal Revenue Code. The Company has designed a Direct Purchase Program
specifically designed to appeal to developers of such properties. In general,
these properties are smaller than traditional multifamily housing properties,
averaging 150 units. The traditional method of financing tax-exempt properties
requires the involvement of credit enhancement, rating agencies and investment
bankers. Therefore, the up-front cost of such financing is generally much higher
than traditional multifamily financing. Through its Direct Purchase Program, the
Company will originate and acquire tax-exempt bonds without the cost associated
with credit enhancement, rating agencies and investment bankers. The Company
believes that the up-front cost savings to the developer will translate into a
higher than market interest rate on the bonds acquired by the Company.
The Company is positioned to market its Direct Purchase Program as a result of
the Manager's affiliation with Related. Related and its predecessor companies
have specialized in offering debt and equity products to mid-market multifamily
owners and developers for over 25 years. Related has provided debt and equity
financing to properties valued at over $7.8 billion. In addition, since 1987
Related has been one of the nation's leading provider of equity to developers of
multifamily housing which benefits from tax credits. During 1998, the Manager's
affiliation with Related allowed it to become one of the dominant lenders to
developers and owners of affordable housing financed with tax-exempt bonds.
The Company does not operate as a mortgage REIT, which generally utilize high
levels of leverage and acquire subordinated interests in commercial and/or
residential mortgage- backed securities. Rather, the Company utilizes low levels
of leverage and generally originates and acquires long-term, fixed-rate,
tax-exempt FMBs. As a result, the Company did not experience the ill-effects
associated with the volatile interest rate environment during 1998.
Pursuant to its Trust Agreement, the Company is only able to incur leverage or
other financing up to 50% of the Company's Total Market Value (as defined in the
Trust Agreement) as of the date incurred (the "50% Limit"). The Company expects
to seek shareholder approval at the 1999 annual meeting to amend the Trust
Agreement to permit the Company to exceed the 50% Limit with respect to short
term borrowings of no more than approximately 5% of Total Market Value. Mortgage
REITs typically incur leverage at ratios ranging from between 3:1 to 10:1. In
general, the FMBs that the Company either originates or acquires call for
ten-year restrictions from prepayments, eliminating the Company's susceptibility
to significant levels of repayment risk as a result of interest rate reductions.
Consistent with the foregoing, the Company focuses on providing investors with a
stable level of distributions, even through unstable markets.
Due to the Company's low level of leverage, the Company has not been affected by
the recent lack of liquidity that is currently impairing mortgage REITs and its
portfolio does not contain assets that are especially vulnerable to volatility
during periods of interest rate fluctuations.
On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital of $150 million to acquire
additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the
aggregate principal amount of approximately $385,907,000 to a Delaware business
trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which
then contributed 27 of those FMBs, with an aggregate principal amount of
approximately $233,105,000, to another Delaware business trust (the "Owner
Trust"). The Owner Trust issued two equity certificates: (i) a Senior
Certificate, with an outstanding face amount of $150,000,000 at December 31,
1998, which has been deposited into another Delaware business trust (the
"Certificate Trust") which issued and sold Floater Certificates representing
proportional interests in the Senior Certificate to new investors; and (ii) a
Residual Certificate representing the remaining beneficial ownership interest in
the Owner Trust, which has been issued to the Origination Trust, whose sole
owner is the Company. In addition, the Owner Trust obtained a municipal bond
insurance policy from MBIA to credit enhance Certificate distributions for the
benefit of the holders of the Floater Certificates and has also arranged for a
liquidity facility, issued by a consortium of highly rated European banks, with
respect to the Floater Certificates.
-15-
The end result of these transactions is that a portion of the interest received
by the Owner Trust on the FMBs it holds is distributed through the Senior
Certificate to the holders of the Floater Certificates in an amount determined
each week by the remarketing agent, Goldman Sachs & Co., at the distribution
amount that is required to enable the remarketing agent to sell the Floater
Certificates at par on any weekly determination date.
Currently, the maximum amount of Floater Certificates that can be issued to
raise capital under the TOP is $150 million and as of December 31, 1998, such
maximum has been issued. The Company is currently negotiating an increase in its
TOP to $200 million and, before the end of 1999, the Company expects to raise
funds through an equity offering; however, there can be no assurance that either
of these initiatives will be successful. If the Company is unable to access
additional capital through the foregoing initiatives, the Company's ability to
grow will be restricted.
The Company's cost of funds relating to the TOP (calculated as income allocated
to the minority interest plus current fees as a percentage of the weighted
average amount of the outstanding Senior Certificate) was approximately 4.9% for
the period May 21, 1998 (inception) through December 31, 1998.
During 1998, an interim credit facility with Goldman Sachs & Company (the
"Interim Credit Facility") was available to the Company at prevailing rates of
interest for such accounts (5.98% at December 14, 1998). At December 31, 1998
there were no borrowings outstanding. The Company is currently negotiating with
Goldman Sachs & Company and various other lenders the renewal or replacement of
this facility.
During the period January 1, 1998 through March 30, 1999 the Company acquired 18
FMBs for an aggregate purchase price of approximately $123,997,000, not
including bond selection fees and expenses of approximately $2,669,000. The
purchases were financed by the TOP and from borrowings under the Interim Credit
Facility.
During the year ended December 31, 1998, cash and cash equivalents of the
Company and its consolidated subsidiary increased approximately $10,796,000.
This increase was primarily due to cash provided by operating activities
($22,651,000), the net sale of temporary investments ($3,500,000), principal
payments received from loans made to properties ($507,000) and an increase in
minority interest ($150,000,000) which exceeded the purchase of FMBs
($117,597,000), an increase in deferred bond selection costs ($2,598,000), loans
made to properties ($1,056,000), net repayments of note payable ($21,445,000),
an increase in deferred costs relating to the TOP ($2,513,000) and distributions
paid ($20,331,000). Included in the adjustments to reconcile the net income to
cash provided by operating activities is amortization in the amount of $217,000.
The Company's growth will be financed by the TOP or similar programs, borrowings
under the Interim Credit Facility, funds generated from operations in excess of
distributions and by placements of equity. The Company has entered into
forbearance agreements on several FMBs and may be required to extend these
agreements or enter into new agreements in the future. Such agreements may
adversely impact liquidity; however interest payments from FMBs are anticipated
to provide sufficient liquidity to fund the Company's operating expenditures,
debt service and distributions in future years.
Effective January 1, 1998, the Highland Ridge, Willow Creek, Bristol Village and
Thomas Lake FMBs were modified to (i) reflect a change in their stated interest
rates, (ii) allow for deferred base and other interest accrued and unpaid
through December 1997 to be paid at maturity or upon an event of sale or
refinancing and (iii) extend the mandatory call and prepayment lock-out dates.
In addition, the maturities of the Highland Ridge and Willow Creek FMBs were
extended to 2018 and 2022, respectively, and the maturities of the Bristol
Village and Thomas Lake FMBs were extended to 2027 with mandatory call dates at
January 2010. On December 23, 1998, the Mansion FMB was modified to (i) reflect
a change in base interest rate, effective December 31, 1998 (from 5.23% to
7.25%), (ii) allow for certain equal quarterly payments of supplemental
contingent interest ($150,000 per quarter) to be paid initially at closing and
then quarterly over the second, third and fourth quarters of 1999 and (iii)
extend the maturity date, the mandatory call date and the prepayment lock-out
dates (to 2029, 2011 and 2006, respectively). Pursuant to the modified terms of
the Mansion FMB, no additional contingent interest is to be paid from this FMB.
The Company currently anticipates that it will modify certain other FMBs in
generally similar terms as Mansion and those done previously and effective in
1998, where and as appropriate.
As part of the settlement of class action litigation relating to the
Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had
the right to petition the United States District Court for the Southern District
of New York (the "Court") for additional attorneys' fees ("Counsel's Fee
Shares") in an amount to be determined in the Court's sole discretion. The
Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed
to be 25%) of the increase in value of the Company, ("the Added Value") if any,
as of October 1, 1998 based upon the difference between (i) the trading prices
of the Company's Shares of beneficial interest during the six month period ended
October 1, 1998 and (ii) the trading prices of the limited partnership units and
the asset values of the Partnerships prior to October 1, 1997. As of October 1,
1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an
Order and Stipulation of Settlement by the Court on February 18, 1999, Class
Counsel is entitled to receive 608,955 Shares. The Shares will be distributed to
Class Counsel quarterly in eight equal distributions commencing within ten
business days after Class Counsel advises the Company in writing of the persons
in whose name the Shares are to be issued. One-half of such Shares will be in
the form of Restricted Securities (restricted only with respect to the sale,
assignment, pledge or other transfer of such securities) and the remaining
one-half of such Shares will be unrestricted. Restrictions on the Restricted
Securities expire one year from the date of issuance. Management is currently
attempting to negotiate a discounted cash settlement with Class Counsel in lieu
of the issuance of Shares; however, there can be no assurance that such
negotiations will be successful.
In February 1999, a distribution of $4,939,068 ($.24 per share), which was
declared in December 1998, was paid to the shareholders from cash flow from
operations for the quarter ended December 31, 1998.
-16-
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, 1998, 1997 and 1996. The net income for the years ended
December 31, 1998, 1997 and 1996 was $22,025,872, $10,055,808 and $5,845,041,
respectively.
1998 vs. 1997
- - -------------
For the year ended December 31, 1998 as compared to 1997, total revenues, total
expenses and net income increased and the results of operations are not
comparable due to (i) the Consolidation of Tax Exempt II with two other
Partnerships on October 1, 1997, which resulted in the formation of the Company
and (ii) the acquisition of 18 FMBs after the Consolidation. The Company's
results of operations for the year ended December 31, 1998 consisted primarily
of the results of the Company's investment in 49 FMBs. The Company's results of
operations for the year December 31, 1997 consisted primarily of the results of
Tax Exempt II's investment in 16 FMBs. In addition, the results of operations
are not reflective of future operations due to the anticipated continued
acquisition of FMBs.
Interest income from FMBs increased approximately $13,276,000 for the year ended
December 31, 1998 as compared to 1997. An increase of $9,815,000 was due to the
16 FMBs (including Tax Exempt III's portion of the Players Club FMB) acquired
from Tax Exempt I and Tax Exempt III in the Consolidation (the "Tax Exempt I and
III Acquisitions") and an increase of $3,252,000 was due to the acquisition of
18 FMBs after the Consolidation (the "New Acquisitions"). Excluding these
acquisitions, interest income from FMBs increased approximately 2% for the year
ended December 31, 1998 as compared to 1997.
Interest income from temporary investments increased approximately $66,000 for
the year ended December 31, 1998 as compared to 1997 primarily due to higher
invested cash balances in 1998.
Interest income from promissory notes increased approximately $422,000 for the
year ended December 31, 1998 as compared to 1997. An increase of $405,000 was
due to the Tax Exempt I and III Acquisitions. Excluding these acquisitions,
interest income from promissory notes increased approximately $17,000 for the
year ended December 31, 1998 as compared to 1997 primarily due to loans to the
owners of the Suntree and Bristol Village Underlying Properties in November 1997
and June 1998, respectively.
Interest expense increased approximately $1,075,000 for the year ended December
31, 1998 as compared to 1997 primarily due to higher outstanding balances of the
Interim Credit Facility during 1998.
Management fees incurred to the general partners of Tax Exempt II in the amount
of approximately $608,000 were recorded in 1997.
Loan servicing fees increased approximately $462,000 for the year ended December
31, 1998 as compared to 1997 due to increases of $349,000 and $113,000 relating
to the Tax Exempt I and III Acquisitions and the New Acquisitions, respectively.
General and administrative expenses increased approximately $973,000 for the
year ended December 31, 1998 as compared to 1997. This increase was primarily
due to current fees relating to the TOP, an increase in printing and investor
service expenses resulting from an increase in investors, an increase in
insurance expense, an increase in audit/tax fees and expense reimbursements to
the Manager and its affiliates due to the Tax Exempt I and III Acquisitions and
the New Acquisitions and fees to the independent trustees relating to their
services for 1998.
Amortization increased approximately $171,000 for the year ended December 31,
1998 as compared to 1997 primarily due to amortization of deferred bond
selection costs relating to the New Acquisitions and amortization of deferred
costs relating to the TOP.
A loss on impairment of assets in the amount of approximately $1,843,000 was
recorded in 1997 to recognize other than temporary impairment of the Shannon
Lake, Players Club and Lakepoint FMBs based upon operating difficulties at the
properties securing the FMBs.
Minority interest in income of subsidiary in the amount of approximately
$1,564,000 was recorded in 1998, relating to the TOP.
1997 vs. 1996
- - -------------
For the year ended December 31, 1997 as compared to 1996, total revenues, total
expenses (excluding loss on impairment of assets) and net income increased and
the results of operations are not comparable due to the Consolidation of Tax
Exempt II with two other Partnerships on October 1, 1997, which resulted in the
formation of the Company. The Company's results of operations for the year ended
December 31, 1997 consisted primarily of the results of the Company's investment
in sixteen FMBs for the nine months ended September 30, 1997 and the results of
the Company's investment in thirty-two FMBs for the three months ended December
31, 1997. The Company's results of operations for the year December 31, 1996
consisted primarily of the results of Tax Exempt II's investment in sixteen
FMBs. In addition, the results of operations are not reflective of future
operations due to the anticipated continued acquisition of FMBs.
Interest income from FMBs increased approximately $2,440,000 for the year ended
December 31, 1997 as compared to 1996. An increase of $2,996,000 was due to the
sixteen FMBs (including Tax Exempt III's portion of the Players Club FMB)
acquired from Tax Exempt I and Tax Exempt III in the Consolidation (the "Tax
Exempt I and III Acquisitions"). Excluding these acquisitions, interest income
from FMBs decreased approximately 5% for the year ended December 31, 1997 as
compared to 1996.
-17-
Interest income from temporary investments increased approximately $17,000 for
the year ended December 31, 1997 as compared to 1996 primarily due to higher
invested cash balances in 1997.
Interest income from promissory notes increased approximately $145,000 for the
year ended December 31, 1997 as compared to 1996. An increase of $140,000 was
due to the Tax Exempt I Acquisitions. Excluding these acquisitions, interest
income from promissory notes increased approximately $5,000 for the year ended
December 31, 1997 as compared to 1996.
Interest expense in the amount of approximately $429,000 was recorded in 1997
relating to the Interim Credit Facility.
Management fees incurred to the general partners of Tax Exempt II decreased
approximately $203,000 for the year ended December 31, 1997 as compared to 1996
due to the Consolidation on October 1, 1997.
Loan servicing fees increased approximately $118,000 for the year ended December
31, 1997 as compared to 1996 due to the Tax Exempt I and III Acquisitions.
General and administrative expenses increased approximately $162,000 for the
year ended December 31, 1997 as compared to 1996. This increase was primarily
due to an increase in printing and investor service expenses resulting from an
increase in investors, an increase in insurance expense and an increase in
audit/tax fees and expense reimbursements to the Manager and its affiliates due
to the Tax Exempt I and III Acquisitions.
Amortization increased approximately $42,000 for the year ended December 31,
1997 as compared to 1996 primarily due to amortization of deferred loan costs
relating to debt assumed from Tax Exempt I in the Consolidation.
Losses on impairment of assets in the amounts of approximately $1,843,000 and
$4,000,000 were recorded for the years ended December 31, 1997 and 1996,
respectively, to recognize other than temporary impairment of the Shannon Lake,
Players Club and Lakepoint FMBs and the Cedar Pointe, Sunset Downs and Loveridge
FMBs, respectively, based upon operating difficulties at the properties securing
the FMBs.
General
- - -------
The determination as to whether it is in the best interest of the Company to
enter into forbearance agreements on the FMBs or, alternatively, to pursue its
remedies under the loan documents, including foreclosure, is based upon several
factors including, but not limited to, Underlying Property performance, owner
cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid by FMBs is
not accrued as interest income for financial reporting purposes. The accrual of
interest at the stated interest rate will resume once an Underlying Property's
ability to pay the stated rate has been adequately demonstrated. Interest income
of approximately $3,047,000, $2,415,000 and $1,407,000 was not recognized for
the years ended December 31, 1998, 1997 and 1996, respectively.
Cash Available for Distribution
- - -------------------------------
The Company uses cash available for distribution ("CAD") as the primary measure
of its dividend paying ability. The difference between CAD and net income
results from variations between generally accepted accounting principles
("GAAP") and cash received. One difference between CAD and GAAP is the
amortization of loan origination costs, the costs of the TOP and other
intangible assets. These amounts have been excluded from CAD due to their
noncash nature. Another difference is the noncash gain and loss associated with
bond impairments and sales for GAAP purposes, which are not included in the
calculation of CAD. During the year ended December 31, 1998 and the three months
ended December 31, 1997, there were FMB impairments in the amounts of $0 and
$1,843,135, respectively. CAD should not be considered an alternative to net
income as a measure of the Company's financial performance or to cash flow from
operating activities (computed in accordance with GAAP) as a measure of the
Company's liquidity, nor is it necessarily indicative of sufficient cash flow to
fund all of the Company's needs.
-18-
Cash available for distribution ("CAD") for the year ended December 31, 1998 and
the three months ended December 31, 1997 is summarized in the following table:
Year Ended Three Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
Sources of Cash
Interest income:
First mortgage bonds $ 27,363,595 $ 5,560,321
Temporary investments 221,270 49,483
Promissory notes 594,183 140,180
Less: Accretion of amounts included
in income (180,179) (99,406)
------------- -----------
Total sources of cash 27,998,869 5,650,578
------------- -----------
Uses of Cash
Total expenses and minority interest 6,153,176 2,957,244
Less: Amortization of amounts included
in expenses (397,500) (87,810)
Loss on impairment of assets 0 (1,843,135)
------------- -----------
Total uses of cash 5,755,676 1,026,299
------------- -----------
Cash available for distribution $ 22,243,193 $ 4,624,279
Less: distributions to the Manager (1,477,807) (330,582)
------------- -----------
Cash available for distribution to
shareholders $ 20,765,386 $ 4,293,697
============= ===========
Distributions to shareholders $ 19,144,587 $ 4,735,117
============= ===========
Payout ratio 92.2% 110.3%
============= ===========
Cash flows from:
Operating activities $ 22,651,186 $ 4,465,552
============= ===========
Investing activities $(117,243,543) $(8,497,439)
============= ===========
Financing activities $ 105,388,481 $ 2,144,509
============= ===========
Recently Issued Accounting Standards
- - ------------------------------------
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It is effective for the Company
beginning with the first quarter of 2000. Because the Company does not currently
utilize derivatives or engage in hedging activities, 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 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.
-19-
Year 2000 Compliance
- - --------------------
The Company utilizes the computer services of an affiliate of the Manager. The
affiliate of the Manager has upgraded its computer information systems to be
year 2000 compliant and beyond. The year 2000 compliance issue concerns the
inability of a computerized system to accurately record dates after 1999. The
affiliate of the Manager recently underwent a conversion of its financial
systems applications and upgraded all of its non-compliant, in-house software
and hardware inventory. The work stations that experienced problems from the
testing process were corrected with an upgrade patch. The costs incurred by the
Manager are not being charged to the Company. The most likely worst case
scenario that the Company faces is that computer operations will be suspended
for a few days to a week at January 1, 2000. The Company's contingency plan is
to have a complete backup done on December 31, 1999 and to have both electronic
and printed reports generated for all critical data up to and including December
31, 1999.
With regard to third parties, the Company's Manager is in the process of
evaluating the potential adverse impact that could result from the failure of
material service providers to be year 2000 compliant. A detailed survey and
assessment was sent to material third parties in the fourth quarter of 1998. The
Company has received assurances from a majority of its third parties with which
it interacts that they have addressed the year 2000 issues and is evaluating
these assurances for their adequacy and accuracy. In cases where the Company has
not received assurances from third parties, it is initiating further mail and/or
phone correspondence. The Company relies heavily on third parties and is
vulnerable to the failures of third parties to address their year 2000 issues.
There can be no assurance given that the third parties will adequately address
their issues.
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
The nature of the Company's investments and the instruments used to raise
capital for their acquisition expose the Company to gains and losses due to
fluctuations in market interest rates. Market interest rates are highly
sensitive to many factors, including governmental policies, domestic and
international political considerations and other factors beyond the control of
the Company.
The FMBs generally bear interest at fixed rates, or pay interest according to
the cash flows of the underlying property, which do not fluctuate with changes
in market interest rates. In contrast, payments required under the TOP program
vary based on market interest rates, primarily BMA, and are re-set weekly. Thus,
an increase in market interest rates would result in increased payments under
the TOP program, without a corresponding increase in cash flows from the
investments in FMBs. For example, based on the $150,000,000 outstanding under
the TOP program at December 31, 1998, the Company estimates that an increase of
0.5% in the BMA rate would decrease the Company's annual net income by
approximately $750,000; a 1.0% increase in BMA would decrease annual net income
by approximately $1,500,000. For the same reasons, a decrease in market interest
rates would generally benefit the Company, as a result of decreased allocations
to the minority interest without corresponding decreases in interest received on
the FMBs. For example, based on the $150,000,000 outstanding under the TOP
program at December 31, 1998, the Company estimates that a 0.5% decline in BMA
rates would increase the Company's annual net income by approximately $750,000,
and a 1.0% decline in BMA would increase net income by approximately
$1,500,000. Various financial vehicles exist which would allow Company
management to mitigate the impact of interest rate fluctuations on the Company's
cash flows and earnings. Although management has not engaged in any of these
hedging strategies in the past, it may do so in the future, depending on
management's analysis of the interest rate environment and the costs and risks
of such strategies.
Changes in market interest rates would also impact the estimated fair value of
the company's portfolio of FMBs. The Company estimates the fair value for each
bond as the present value of its expected cash flows, using a discount rate for
comparable tax-exempt investments. Therefore, as market interest rates for
tax-exempt investments increase, the estimated fair value of the company's FMBs
will generally decline, and a decline in interest rates would be expected to
result in an increase in the estimated fair values. For example, the Company
projects that a 1% increase in market rates for tax-exempt investments would
decrease the estimated fair value of its portfolio of FMBs from its December 31,
1998 value of $458,662,600 to approximately $417,353,000. A 1% decline in
interest rates would increase the value of the December 31, 1998 portfolio to
approximately $513,446,000. Changes in the estimated fair value of the FMBs do
not impact the Company's reported net income, earnings per share, distributions
or cash flows, but are reported as components of other comprehensive income and
affect reported shareholders' equity.
-20-
Item 8. Financial Statements and Supplementary Data.
Page
----
(a) 1. Financial Statements
--------------------
Independent Auditors' Report 22
Consolidated Balance Sheets as of December 31, 1998 and 1997 23
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996 24
Consolidated Statements of Changes in Shareholders'
Equity/Partners' Capital (Deficit) for the years ended
December 31, 1998, 1997 and 1996 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 27
Notes to Consolidated Financial Statements 29
-21-
INDEPENDENT AUTITORS' REPORT
To the Board of Trustees
And Shareholders of
Charter Municipal Mortgage Acceptance Company
New York, New York
We have audited the accompanying consolidated balance sheets of Charter
Municipal Mortgage Acceptance Company and subsidiary as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in
shareholders' equity/partners' capital (deficit) and cash flows for each of the
three years in the period ended December 31, 1998. Our audits also included the
financial statement schedule listed in Item 14(a)2. These financial statements
and the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Charter Municipal Mortgage
Acceptance Company and subsidiary as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
DELOITTE & TOUCHE LLP
New York, New York
March 19, 1999
-22-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------------------
1998 1997
------------- ------------
ASSETS
First mortgage bonds-at fair value $ 458,662,600 $346,300,000
Temporary investments 0 3,500,000
Cash and cash equivalents 13,093,023 2,296,899
Interest receivable, net 1,512,562 879,519
Promissory notes receivable 7,628,920 7,080,265
Deferred costs, net 7,005,965 2,292,409
Goodwill, net 4,671,236 0
Other assets 11,500 41,471
------------- ------------
Total assets $ 492,585,806 $362,390,563
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $ 0 $ 21,445,340
Accounts payable, accrued expenses and other liabilities 8,993,174 635,691
Due to Manager and affiliates 1,159,358 674,947
Distributions payable 4,939,068 4,735,119
Excess of acquired net assets over cost, net 0 3,231,267
------------- ------------
Total liabilities 15,091,600 30,722,364
------------- ------------
Minority interest in subsidiary (subject to mandatory
redemption) 150,000,000 0
------------- ------------
Commitments and Contingencies
Shareholders' equity:
Beneficial owner's equity-manager 230,259 24,788
Beneficial owners' equity-other shareholders
(50,000,000 shares authorized; 20,587,837 issued and
20,579,437 outstanding and 20,587,465 shares issued
and outstanding in 1998 and 1997, respectively) 312,307,115 311,322,765
Treasury shares of beneficial interest
(8,400 shares, in 1998) (103,359) 0
Accumulated other comprehensive income 15,060,191 20,320,646
------------- ------------
Total shareholders' equity 327,494,206 331,668,199
------------- ------------
Total liabilities and shareholders' equity $ 492,585,806 $362,390,563
============= ============
See accompanying notes to consolidated financial statements
-23-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
Revenues:
Interest income:
First mortgage bonds $27,363,595 $14,087,443 $11,647,431
Temporary investments 221,270 155,460 138,088
Promissory notes 594,183 171,722 26,797
----------- ----------- -----------
Total revenues 28,179,048 14,414,625 11,812,316
----------- ----------- -----------
Expenses:
Interest expense 1,504,334 429,012 0
Management fees 0 607,969 810,625
Loan servicing fees 985,198 523,538 405,313
General and administrative 1,702,145 728,812 566,616
Amortization 397,500 226,351 184,721
Loss on impairment of assets 0 1,843,135 4,000,000
Minority interest in income of subsidiary 1,563,999 0 0
----------- ----------- -----------
Total expenses 6,153,176 4,358,817 5,967,275
----------- ----------- -----------
Net income $22,025,872 $10,055,808 $ 5,845,041
=========== =========== ===========
Special allocation of net income
to the Manager $ 1,683,278 355,202**
=========== =======
Net income applicable to shareholders $20,342,594 2,437,538**
=========== =======
Net income per share:
Basic* $ .99 $ .12**
=========== ===========
Diluted* $ .98 $ .12**
=========== ===========
Weighted average shares outstanding:
Basic** 20,587,151 20,587,465***
=========== ===========
Diluted** 20,740,641 20,587,465***
=========== ===========
*Net income per unit information for periods before October 1, 1997 is not
presented because it is not indicative to the Company's continuing capital
structure.
**Represents amount for the three months ended December 31, 1997.
See accompanying notes to consolidated financial statements
-24-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL (DEFICIT)
Beneficial
Beneficial Owners'
Owner's Equity
General Equity Other
BUC$holders Partners Manager Shareholders
----------- -------- ------- ------------
Balance at January 1, 1996 $ 164,412,008 $(106,923) $ 0 $ 0
Comprehensive income:
Net income 5,728,140 116,901 0 0
Other comprehensive income (loss):
Net unrealized gain (loss) on first mortgage bonds:
Net unrealized holding loss arising during the period
Add: reclassification adjustment for losses included in net
income
Other comprehensive income
Comprehensive income
Distributions (9,517,685) (194,238) 0 0
------------- --------- ----------- ------------
Balance at December 31, 1996 160,622,463 (184,260) 0 0
Net income - January 1, 1997 to September 30, 1997 7,117,807 145,261 0 0
Distributions - January 1, 1997 to September 30, 1997 (9,517,685) (194,238) 0 0
Consolidation and issuance of shares (158,222,585) 233,237 169 316,117,946
Consolidation costs 0 0 (1) (2,497,602)
Net income - October 1, 1997 to December 31, 1997 0 0 355,202 2,437,538
Comprehensive income:
Net Income - January 1, 1997 to December 31, 1997
Other comprehensive income (loss):
Net unrealized gain (loss) 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
Distributions - October 1, 1997 to December 31, 1997 0 0 (330,582) (4,735,117)
------------- --------- ----------- ------------
Balance at December 31, 1997 0 0 24,788 311,322,765
Treasury Accumulated
Shares of Other
Beneficial Comprehensive Comprehensive
Interest Income Income Total
-------- ------ ------ -----
Balance at January 1, 1996 $ 0 $(7,938,121) $156,366,964
Comprehensive income:
Net income 0 $5,845,041 0 5,845,041
----------
Other comprehensive income (loss):
Net unrealized gain (loss) on first mortgage bonds:
Net unrealized holding loss arising during the period (2,177,481)
Add: reclassification adjustment for losses included in net
income 4,000,000
----------
Other comprehensive income 1,822,519 1,822,519 1,822,519
----------
Comprehensive income 7,667,560
==========
Distributions 0 0 (9,711,923)
---------- ----------- ------------
Balance at December 31, 1996 0 (6,115,602) 154,322,601
Net income - January 1, 1997 to September 30, 1997 0 7,263,068 0 7,263,068
Distributions - January 1, 1997 to September 30, 1997 0 0 (9,711,923)
Consolidation and issuance of shares 0 0 158,128,767
Consolidation costs 0 0 (2,497,603)
Net income - October 1, 1997 to December 31, 1997 0 2,792,740 0 2,792,740
----------
Comprehensive income:
Net Income - January 1, 1997 to December 31, 1997 10,055,808
----------
Other comprehensive income (loss):
Net unrealized gain (loss) on first mortgage bonds:
Net unrealized holding gain arising during the period 24,593,113
Add: reclassification adjustment for losses included in net
income 1,843,135
----------
Other comprehensive income 26,436,248 26,436,248 26,436,248
----------
Comprehensive income 36,492,056
==========
Distributions - October 1, 1997 to December 31, 1997 0 0 (5,065,699)
---------- ----------- ------------
Balance at December 31, 1997 0 20,320,646 331,668,199
-25-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL (DEFICIT)
Beneficial
Beneficial Owners'
Owner's Equity
General Equity Other
BUC$holders Partners Manager Shareholders
----------- -------- ------- ------------
Comprehensive income:
Net income 0 0 1,683,278 20,342,594
Other comprehensive income (loss):
Net unrealized gain (loss) on first mortgage bonds:
Net unrealized holding loss arising during the period
Comprehensive income
Issuance of shares of beneficial interest 0 0 0 5,000
Purchase of treasury shares of beneficial interest 0 0 0 0
Consolidation costs 0 0 0 (218,657)
Distributions 0 0 (1,477,807) (19,144,587)
------------- --------- ----------- ------------
Balance at December 31, 1998 $ 0 $ 0 $ 230,259 $312,307,115
============= ========= =========== ============
Treasury Accumulated
Shares of Other
Beneficial Comprehensive Comprehensive
Interest Income Income Total
-------- ------ ------ -----
Comprehensive income:
Net income 0 22,025,872 0 22,025,872
Other comprehensive income (loss):
Net unrealized gain (loss) on first mortgage bonds:
Net unrealized holding loss arising during the period (5,260,455) (5,260,455) (5,260,455)
----------
Comprehensive income 16,765,417
==========
Issuance of shares of beneficial interest 0 0 5,000
Purchase of treasury shares of beneficial interest (103,359) 0 (103,359)
Consolidation costs 0 0 (218,657)
Distributions 0 0 (20,622,394)
---------- ----------- ------------
Balance at December 31, 1998 $ (103,359) $15,060,191 $327,494,206
========== =========== ============
See accompanying notes to consolidated financial statements
-26-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
-------------------------------------------------------
1998 1997 1996
------------- ------------ ------------
Cash flows from operating activities:
Net income $ 22,025,872 $ 10,055,808 $ 5,845,041
------------- ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on impairment of assets 0 1,843,135 4,000,000
Amortization 397,500 226,351 184,721
Amortization of goodwill 134,592 0 0
Amortization of excess of acquired net
assets over cost (248,559) (82,853) 0
Amortization of deferred income (66,212) (66,212) (66,212)
Changes in assets and liabilities:
(Increase) decrease in interest receivable (633,043) 449,808 163,956
Decrease in promissory notes receivable 0 0 21,620
Decrease (increase) in other assets 29,971 (5,503) (11,277)
Increase (decrease) in accounts payable,
accrued expenses and other liabilities 608,704 69,393 (25,232)
Decrease in deferred income 0 0 (21,620)
Increase (decrease) in due from affiliates 0 84,225 (84,225)
Increase (decrease) in due to Manager and
affiliates 402,361 (162,178) 8,133
------------- ------------ ------------
Total adjustments 625,314 2,356,166 4,169,864
------------- ------------ ------------
Net cash provided by operating activities 22,651,186 12,411,974 10,014,905
------------- ------------ ------------
Cash flows from investing activities:
Purchase of first mortgage bonds (117,596,600) (5,000,000) 0
Increase in deferred bond selection costs (2,598,288) (130,091) 0
Net sale (purchase) of temporary investments 3,500,000 100,000 (800,000)
Loans made to properties (1,055,695) (324,000) (300,000)
Principal payments received from loans made to
properties 507,040 129,257 73,321
------------- ------------ ------------
Net cash used in investing activities (117,243,543) (5,224,834) (1,026,679)
------------- ------------ ------------
Cash flows from financing activities:
Proceeds from note payable 96,039,231 23,945,340 0
Repayments of note payable (117,484,571) (16,180,866) 0
Distributions paid (20,331,395) (12,164,011) (9,711,923)
Increase in deferred costs relating to the Private
Label Tender Option Program (2,512,768) (583,727) 0
Increase in minority interest 150,000,000 0 0
Purchase of treasury shares of
beneficial interest (103,359) 0 0
Consolidation costs (218,657) (2,497,603) 0
Cash effect of Consolidation and issuance
of shares 0 2,341,434 0
------------- ------------ ------------
Net cash provided by (used in) financing
activities 105,388,481 (5,139,433) (9,711,923)
------------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents 10,796,124 2,047,707 (723,697)
Cash and cash equivalents at the
beginning of the year 2,296,899 249,192 972,889
------------- ------------ ------------
Cash and cash equivalents at the
end of the year $ 13,093,023 $ 2,296,899 $ 249,192
============= ============ ============
(continued)
See accompanying notes to consolidated financial statements
-27-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
------------------------------------------------
1998 1997 1996
------------ ------------- -----------
Supplemental information:
Interest paid $ 1,507,871 $ 400,009 $ 0
============ ============= ===========
Supplemental disclosure of noncash investing
and financing activities:
Issuance of shares of beneficial interest for
trustee fees $ 5,000 $ 0 $ 0
============ ============= ===========
Shares of beneficial interest required to be
issued to counsel for the partners in the
Partnerships
Increase in goodwill $ (4,805,828) $ 0 $ 0
Decrease in excess of acquired net
assets over cost (2,982,708) 0 0
Increase in accounts payable, accrued
expenses and other liabilities 7,788,536 0 0
------------ ------------- -----------
$ 0 $ 0 $ 0
============ ============= ===========
Consolidation and issuance of shares:
Increase in first mortgage bonds $ 0 $(168,557,007) $ 0
Increase in interest receivable 0 (593,984) 0
Increase in promissory notes receivable 0 (6,609,950) 0
Increase in other assets 0 (12,193) 0
Increase in notes payable 0 13,680,866 0
Increase in accounts payable, accrued
expenses and other liabilities 0 104,376 0
Increase in due to affiliates 0 434,351 0
Increase in distributions payable 0 2,452,088 0
Increase in excess of acquired net assets over cost 0 3,314,120 0
Decrease in BUC$holders' capital 0 (158,222,585) 0
Increase in general partners' capital 0 233,237 0
Issuance of shares of beneficial interest 0 313,776,681 0
------------ ------------- -----------
$ 0 $ 0 $ 0
============ ============= ===========
Distributions $(20,622,394) $ (14,777,622) $(9,711,923)
Increase in special distribution payable to the
Manager 87,050 330,580 0
Increase in distributions payable to
shareholders/partners 203,949 2,283,031 0
------------ ------------- -----------
Distributions paid $(20,331,395) $ (12,164,011) $(9,711,923)
============ ============= ===========
See accompanying notes to consolidated financial statements
-28-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - General
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which is engaged in the acquisition and ownership (either
directly or indirectly) of tax-exempt participating and non-participating First
Mortgage Bonds ("FMBs") issued by various state or local governments or other
agencies or authorities and secured by participating and non-participating
mortgage loans on the underlying properties ("Underlying Properties"). As of
December 31, 1998 the Company owned a portfolio of 49 FMBs. The Company is
organized and managed as a single business segment.
The Company was formed on October 1, 1997 as the result of the Consolidation
(the "Consolidation") of three publicly registered limited partnerships, Summit
Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax
Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III") (the
"Partnerships", and each individually a "Partnership"). One of the general
partners of the Partnerships was an affiliate of Related Capital Company
("Related"). Unless otherwise indicated, the "Company", as hereinafter used,
refers to Charter Municipal Mortgage Acceptance Company and its subsidiary and,
for references prior to October 1, 1997, refers to Tax Exempt II. Pursuant to
the Consolidation, the Company issued shares of beneficial interest (the
"Shares") to all partners in each of the Partnerships in exchange for their
interests in the Partnerships based upon each partner's proportionate interest
in the Shares issued to their Partnership in the Consolidation. The Shares
commenced trading on the American Stock Exchange on October 1, 1997 under the
symbol "CHC". As of December 31, 1998, there were 20,579,448 Shares outstanding.
The Company is governed by a board of trustees comprised of two independent
managing trustees and three managing trustees who are affiliated with Related.
The Company has engaged Related Charter LP (the "Manager"), an affiliate of
Related, to manage its day-to-day affairs. Each independent trustee is entitled
to receive annual compensation for serving as a trustee in the aggregate amount
of $15,000, payable in cash (maximum of $5,000 per year) and/or Shares valued
based on the fair market value at the date of issuance. On June 4, 1998, 186
Shares, having an aggregate value of $2,500 as of that date, were issued to each
independent trustee as compensation for their services for the quarter ended
December 31, 1997. On February 22, 1999, 769 Shares, having an aggregate value
of $10.000 as of that date, were issued to each independent trustee as
compensation for their services for the year ended December 31, 1998.
NOTE 2 - Summary of Significant 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").
For financial accounting and reporting purposes, the Consolidation was accounted
for using the purchase method of accounting. Under this method, the Partnership
with the investor group receiving the largest ownership in the Company, in this
case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for
accounting purposes, Tax Exempt II's assets and liabilities were recorded by the
Company at their historical cost, with the assets and liabilities of the other
Partnerships recorded at their estimated fair values for each Partnership (an
aggregate of approximately $158,129,000) as set forth in the Solicitation
Statement of the Company dated June 18, 1997 (the "Solicitation Statement").
Results of operations and other operating financial data for the Company for the
years ended December 31, 1998, 1997 and 1996 include information for the entire
periods presented with respect to Tax Exempt II, but only include information
for the period October 1, 1997 to December 31, 1998 with respect to the other
Partnerships. Prior to the Consolidation, Tax Exempt II was a limited
partnership which was formed under the laws of the State of Delaware on
April 11, 1986.
b) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiary business trust (see Note 5). All intercompany
accounts and transactions have been eliminated in consolidation.
c) Participating FMBs and Promissory Notes Receivable
The Company accounts for its investments in the FMBs as debt securities
available for sale under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115").
In most cases the Company has a right to require redemption of the FMBs prior to
their maturity, although it can and may elect to hold them up to their maturity
dates unless otherwise modified. As such, SFAS 115 requires the Company to
classify these investments as "available for sale." Accordingly, investments in
FMBs are carried at their estimated fair values, with unrealized gains and
losses reported as items of other comprehensive income and in a separate
component of shareholders' equity. Unrealized gains or losses do not affect the
cash flow generated from property operations, distributions to shareholders, the
characterization of the tax-exempt income stream or the financial obligations
under the FMBs.
The Company periodically evaluates each FMB to determine whether a decline in
fair value below the FMB's cost basis is other than temporary. Such a decline is
considered to be other than temporary if, based on current information and
events, it is probable that the Company will be unable to collect all amounts
due according to the existing contractual terms of the FMBs. If the decline is
judged to be other than temporary, the cost basis of the FMB is written down to
its then estimated fair value, with the amount of the write-down accounted for
as a realized loss.
Because the FMBs are not readily marketable, the Company estimates fair value
for each FMB using its expected cash flows and an interest rate for comparable
tax exempt investments. This process is based upon projections of future
economic events affecting the
-29-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Underlying Properties, such as occupancy rates, rental rates, operating cost
inflation and market capitalization rates, and upon determination of an
appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Company's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
From time to time, the Company has advanced funds to the owners of certain
Underlying Properties in the form of promissory notes, generally collateralized
by second mortgages on such properties. These promissory notes are carried at
cost less a valuation allowance where appropriate. The Company periodically
evaluates the collectibility of both interest and principal of these investments
to determine whether a reserve is necessary.
For both FMBs and promissory notes, interest income is recognized at the stated
rate when collectibility of future amounts is reasonably assured. Interest
income from FMBs with modified terms or where the collectibility of future
amounts is uncertain is recognized based upon expected cash receipts.
d) Temporary Investments
Temporary investments at December 31, 1997 represent tax-exempt municipal
preferred stock which is carried at cost.
e) Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and investments in short-term
instruments with an original maturity of three months or less.
f) Deferred Bond Selection Costs
Prior to the Consolidation the general partners of Tax Exempt II were paid, and
after the Consolidation the Advisor is paid, bond selection fees for evaluating
and selecting FMBs, negotiating the terms of mortgage loans and coordinating the
development effort with property developers and government agencies. These fees
have been capitalized and are being amortized over the terms of the FMBs.
g) Deferred Costs Relating to the Private Label Tender Option Program
Costs incurred in connection with the Company's Private Label Tender Option
Program (see Note 5) have been capitalized and are being amortized over the life
of the program using the effective yield method.
h) Goodwill/Excess of Acquired Net Assets Over Cost
The application of purchase accounting to the Consolidation resulted in the
Company recording a deferred credit for the excess of the fair value of the net
assets acquired from Tax Exempt I and Tax Exempt III over their cost. This
deferred credit was being accreted to interest income from FMBs using the
straight-line method over 10 years, which approximated the average remaining
term to maturity of the FMBs. The accrual of the estimated value of the Counsel
Fee Shares (see Note 9) at October 1, 1998 is considered to be a purchase price
adjustment and, in accordance with the application of purchase accounting to the
Consolidation, results in the reversal of the carrying value of the excess of
acquired net assets over cost and the recognition of goodwill at October 1, 1998
in the amount of $4,805,828. Goodwill is being amortized to interest income from
FMBs using the straight-line method over nine years, which approximates the
average remaining term to maturity of the FMBs.
i) Fair Value of Financial Instruments
As described above, the Company's investments in FMBs are carried at estimated
fair values. The Company has determined that the fair value of its remaining
financial instruments, including its temporary investments, cash and cash
equivalents, promissory notes receivable and notes payable approximate their
carrying values at December 31, 1998 and 1997, due to their generally short-term
nature.
j) Consolidation Costs
Costs incurred in the Consolidation including legal, accounting and registration
fees, amounting to $2,716,260, were charged directly to shareholders' equity.
k) Income Taxes
The Company is not required to provide for, or pay, any federal income taxes.
Income tax attributes that arise from its operations are passed directly to the
Company's shareholders. The Company may be subject to state and local taxes in
jurisdictions in which it operates. At December 31, 1998, the net tax basis of
the Company's assets and liabilities exceeded the net book basis by
approximately $55,699,000.
-30-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) 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 FMBs, by their nature in the financial statements and display the
accumulated balance of other comprehensive income (loss) separately from
beneficial owners' equity in the shareholders' equity section of the
consolidated balance sheet. 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.
m) Use of Estimates
The preparation of financial statements in conformity with GAAP requires the
Manager 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.
n) New Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It is effective for the Company
beginning with the first quarter of 2000. Because the Company does not currently
utilize derivatives or engage in hedging activities, management does not
anticipate that implementation of this statement will have a material effect on
the Company's financial statements.
o) Reclassifications
Certain amounts in the 1997 and 1996 financial statements have been reclassified
to conform to the 1998 presentation.
NOTE 3 - Participating First Mortgage Bonds
As of December 31, 1998, the Company owned 49 FMBs which are secured by
mortgages on apartment complexes in fourteen states across the continental
United States. The face amount of the FMBs ranges from $2,275,000 to $19,450,000
with carrying amounts from $2,275,000 to $20,189,000. The FMBs have maturity
dates from December 2003 to January 2041, however, seven FMBs are callable as of
December 31, 1998 and the remainder are callable from January 1999 to October
2025. The stated interest rates range from 4.87% to 8.5%. The weighted average
interest rates recognized on the face amount of the portfolio of FMBs for the
years ended December 31, 1998, 1997 and 1996 were 6.94%, 6.75% and 7.18%,
respectively, based on weighted average face amounts of approximately
$394,079,000, $208,744,000 and $162,125,000, respectively.
The principal and interest payments on each FMB are payable only from the cash
flows of the the Underlying Properties, including proceeds from a sale of an
Underlying Property or the refinancing of the mortgage loan securing such FMBs
(the "Mortgage Loans"). None of the FMBs constitute a general obligation of any
state or local government, agency or authority. The structure of each Mortgage
Loan mirrors the structure of the corresponding FMB which it secures.
The seasoned original 31 FMBs call for interest only debt service payments
during their respective terms (which generally are 24 to 30 years from issuance
or re-issuance) with repayment of principal due in a lump sum "balloon" payment
at the expiration of their respective terms or upon sale or refinancing. The
newly acquired bonds (bonds acquired in 1997 and 1998) call for amortization or
"sinking fund" payments, generally at the completion of rehabilitation or
construction, of principal based on thirty to forty year level debt service
amortization schedules. On all the FMBs the Company generally has the right to
require redemption approximately 12 to 15 years from issuance or re-issuance and
obligors generally are locked out of prepayment for seven to ten years from
issuance or re-issuance.
The original obligors and owners of the Underlying Properties of the Cedar
Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove,
Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced
with affiliates of the Manager who have not made equity investments. These
entities have assumed the day-to-day responsibilities and obligations of the
Underlying Properties. Buyers are being sought who would make equity investments
in the Underlying Properties and assume the nonrecourse obligations for the FMB.
These properties are generally paying as interest an amount equal to the net
cash flow generated by operations, which in some cases is less than stated rate
of the FMB. The Company has no present intention of declaring a default on these
FMBs. . The aggregate carrying value of these ten FMBs at December 31, 1998 was
approximately $105,402,000 and the income earned from them for the year ended
December 31, 1998 was approximately $7,497,000.
From time to time, the Company enters into forbearance agreements and/or
permanent modifications with certain borrowers. The determination as to whether
it is in the best interest of the Company to enter into permanent modifications
or forbearance agreements on the FMBs, advance second mortgages, or
alternatively, to pursue its remedies under the loan documents, including
foreclosure, is based upon several factors. These factors include, but are not
limited to, Underlying Property performance, owner cooperation and projected
costs of foreclosure and litigation. Payments under each of the existing
forbearance agreements are current as of December 31, 1998.
-31-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective January 1, 1998, the Highland Ridge, Willow Creek, Bristol Village and
Thomas Lake FMBs were modified to (i) reflect a change in their stated interest
rates, (ii) allow for deferred base and other interest accrued and unpaid
through December 1997 to be paid at maturity or upon an event of sale or
refinancing and (iii) extend the mandatory call and prepayment lock-out dates.
In addition, the maturities of the Highland Ridge and Willow Creek FMBs were
extended to 2018 and 2022, respectively, and the maturities of the Bristol
Village and Thomas Lake FMBs were extended to 2027 with mandatory call dates at
January 2010. On December 23, 1998, the Mansion FMB was modified to (i) reflect
a change in base interest rate, effective December 31, 1998 (from 5.23% to
7.25%), (ii) allow for certain equal quarterly payments of supplemental
contingent interest ($150,000 per quarter) to be paid initially at closing and
then quarterly over the second, third and fourth quarters of 1999 and (iii)
extend the maturity date, the mandatory call date and the prepayment lock-out
dates (to 2029, 2011 and 2006, respectively). Pursuant to the modified terms of
the Mansion FMB, no additional contingent interest is to be paid from this FMB.
The Company currently anticipates that it will modify certain other FMBs to
reflect generally similar terms as those modified previously and effective in
1998, where and as appropriate.
Certain of the Company's other FMBs have been previously modified. These
modifications have generally encompassed an extension of the maturity together
with a prepayment lock out feature and/or prepayment penalties together with an
extension of the mandatory redemption feature (5-10 years from modification).
Stated interest rates have also been adjusted together with a change in the
participation and contingent interest features. Base interest rates, contingent
interest, prepayment lock-outs, mandatory redemption and maturity features vary
dependent on the facts of a particular FMB, the developer, the Underlying
Property's performance and requirements of bond counsel and local issuers.
In addition to the stated base rates of interest, certain of the FMBs provide
for "contingent interest" which is equal to: (i) an amount equal to 50% to 100%
of net property cash flow and 50% to 100% of net sale or refinancing proceeds
until the borrower has paid, during the post-construction period, annual
compound interest at a rate ranging from 8.875% to 9.34% on a cumulative basis,
and thereafter (ii) an amount equal to 25% to 50% of the remaining net property
cash flow and 25% to 50% of the remaining net sale or refinancing proceeds,
until the borrower has paid interest at a simple annual rate of 16% over the
term of the FMB. Both the stated and contingent interest on the FMBs are exempt
from federal income taxation. During the years ended December 31, 1998, 1997 and
1996, six, five and two FMBs, paid contingent interest amounting to
approximately $960,000, $353,000 and $220,000, respectively.
With respect to the FMBs which are subject to forbearance agreements with the
respective obligors, the difference between the stated interest rates and the
rates paid (whether deferred and payable out of available future cash flow or,
ultimately, from sale or refinancing proceeds) on FMBs is not accrued for
financial statement purposes. The accrual of interest at the stated interest
rate will resume once an Underlying Property's ability to pay the stated rate
has been adequately demonstrated. Unrecorded contractual interest income was
approximately $3,047,000, $2,415,000 and $1,407,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
Newly acquired FMBs will generally bear a fixed base interest rate and, to the
extent permitted by existing regulations, and other features, they may or may
not also provide for contingent interest. Terms are expected to be 5 to 35
years, although the Company may have the right to cause repayment prior to
maturity through a mandatory redemption feature (5 to 7 years with up to 6
month's notice). In some cases, the principal of an FMB may amortize.
New FMBs are generally not expected to be subject to optional prepayment during
the first 5-10 years of the Company's ownership of the bonds and may carry
prepayment penalties thereafter beginning at 5% of the outstanding principal
balance, declining by 1% per annum. Certain new FMBs may be purchased at a
discount from their face value. Up to 15% of the Total Market Value of the
Company may be invested in FMBs secured by Underlying Properties in which
affiliates of the Manager have a controlling interest, equity interest or
security interest. The 15% limit is not applicable to properties to which the
Manager or its affiliates have taken title for the benefit of the Company and
only applies to new FMBs acquired after the Consolidation. In selected
circumstances and only in connection with the acquisition of tax-exempt FMBs the
Company may acquire a small amount of taxable bonds to fund certain costs
associated with the issuance of FMBs, that under current law cannot be funded by
FMBs.
In order to protect the tax exempt status of the FMBs, the owners of the
Underlying Properties are required to enter into certain agreements to own,
manage and operate such Underlying Properties in accordance with requirements of
the Internal Revenue Code of 1986, as amended.
From time to time the Company has advanced funds to owners of certain Underlying
Properties in order to preserve the underlying asset including completion of
construction and/or when Underlying Properties have experienced operating
difficulties including past due real estate taxes and/or deferred maintenance
items. Such advances typically are secured by promissory notes and/or second
mortgages. As of December 31, 1998, the face amount of such advances was
$12,845,308, and their carrying value was $7,628,920, which is net of purchase
accounting adjustments, and a reserve for collectibility of $138,000.
-32-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the period January 1, 1998 through December 31, 1998 the Company acquired
17 FMBs for an aggregate purchase price of $117,596,600, not including bond
selection fees and expenses of approximately $2,541,000. Further information
regarding the 17 FMBs is as follows:
Stated No. of
Project Closing Call Date/ Face Interest Rental
Name Date Maturity Date Amount of Bond Rate Units
---- ---- ------------- -------------- ---- -----
Ocean Air 1/1/16
Norfolk, VA 4/20/98 11/1/30 $ 10,000,000 7.250% 434
Phoenix 11/1/16
Stockton, CA 4/28/98 10/1/29 3,250,000 7.125% 184
Stone Creek 5/1/17
Watsonville, CA 4/28/98 4/1/40 8,820,000 7.125% 120
Cedarbrook 5/1/17
Hanford, CA 4/28/98 5/1/40 2,840,000 7.125% 70
Marsh Landings 7/1/17
Portsmouth, VA 5/20/98 7/1/30 6,050,000 7.250% 250
College Park 7/1/25
Naples, FL 7/15/98 7/1/40 10,100,000 (a) 210
Gulfstream 4/1/16
Dania, FL 7/22/98 7/1/38 3,500,000 7.250% 96
Bedford Square 9/1/17
Clovis, CA 8/25/98 8/1/40 3,850,000 (b) 130
Northpointe Village 9/1/17
Fresno, CA 8/25/98 8/1/40 13,250,000 (c) 406
Falcon Creek 9/1/16
Indianapolis, IN 9/14/98 8/31/38 6,144,600 (d) 131
Jubilee Courtyards 10/1/25
Florida City, FL 9/15/98 9/1/40 4,150,000 (e) 98
Silvercrest 10/1/17
Clovis, CA 9/24/98 9/1/40 2,275,000 7.125% 100
Carrington Pointe 10/1/17
Los Banos, CA 9/24/98 9/1/40 3,375,000 6.375% 80
Madalyn Landing 12/1/17
Palm Bay, FL 11/13/98 11/1/40 14,000,000 7.000% 304
Forest Hills 6/1/16
Garner, NC 12/15/98 6/1/34 5,930,000 7.125% 136
Lake Jackson 1/1/18
Lake Jackson, TX 12/22/98 1/1/41 10,934,000 7.000% 160
Mountain Ranch 1/1/18
Austin, TX 12/23/98 1/1/41 9,128,000 7.125% 212
------------
$117,596,600
============
(a) The interest rates for College Park are 7% during the construction period
and 7.25% thereafter.
(b) The interest rates for Bedford Square are 7% during the construction period
and 6.375% thereafter.
(c) The interest rates for Northpointe Village are 7.965% through September 23,
1998, 8.125% during the remainder of the construction period and 7.5%
thereafter.
-33-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25%
thereafter.
(e) The interest rates for Jubilee Courtyards are 7% through September 30, 2000
and 7.125% thereafter.
No single FMB provided interest income which exceeded 10% of the Company's total
revenue for the years ended December 31, 1998, 1997 and 1996, except for the
Bristol Village and Pelican Cove FMBs which provided 14% and 11%, respectively,
of total revenue in 1996.
Based on the face amount of FMBs at December 31, 1998, approximately 23% of the
Underlying Properties are located in California, 15% are located in Florida, 14%
are located in Missouri, 10% are located in Georgia and 10% are located in
Minnesota. No other states comprise more than 10% of the total face amount.
The cost basis of the Company's portfolio of 49 and 32 FMBs at December 31, 1998
and 1997 was $443,602,409 and $325,979,354, respectively. The net unrealized
gain on FMBs at December 31, 1998 consisted of gross unrealized gains and losses
of $22,256,064 and $7,195,873, respectively. The net unrealized gain on FMBs at
December 31, 1997 consisted of gross unrealized gains and losses of $28,984,175
and $8,663,529, respectively.
During December of 1997, an unrelated publicly-registered partnership sold a
portfolio of nine bonds similar to the Company's FMBs. Based on the information
available to Company management regarding the pricing of this sale, management
determined that market conditions for the Company's FMBs were much more
favorable than was previously believed. Accordingly, the estimated fair values
of the FMBs calculated by management at December 31, 1997 increased by a total
of approximately $22,700,000 over the estimated fair values at December 31,
1996.
NOTE 4 - Deferred Costs
The components of deferred costs are as follows:
December 31,
-------------------------
1998 1997
---------- ----------
Deferred bond selection costs $6,355,252 $3,756,964
Deferred costs relating to the Private Label Tender Option
Program (see Note 5) 3,054,995 542,227
--------- ----------
9,410,247 4,299,191
Less: Accumulated amortization (2,404,282) (2,006,782)
---------- ----------
$7,005,965 $2,292,409
========== ==========
NOTE 5 - Minority Interest In Subsidiary
On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital of $150 million to acquire
additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the
aggregate principal amount of approximately $385,907,000 to a Delaware business
trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which
then contributed 27 of those FMBs, with an aggregate principal amount of
approximately $233,105,000, to another Delaware business trust (the "Owner
Trust"). The Owner Trust issued two equity certificates: ( i) a Senior
Certificate, with an outstanding face amount of $150,000,000 at December 31,
1998, which has been deposited into another Delaware business trust (the
"Certificate Trust") which issued and sold Floater Certificates representing
proportional interests in the Senior Certificate to new investors; and (ii) a
Residual Certificate representing the remaining beneficial ownership interest in
the Owner Trust, which has been issued to the Origination Trust, whose sole
owner is the Company. In addition, the Owner Trust obtained a municipal bond
insurance policy from MBIA to credit enhance Certificate distributions for the
benefit of the holders of the Floater Certificates and has also arranged for a
liquidity facility, issued by a consortium of highly rated European banks, with
respect to the Floater Certificates.
The end result of these transactions is that a portion of the interest received
by the Owner Trust on the FMBs it holds is distributed through the Senior
Certificate to the holders of the Floater Certificates in an amount determined
each week by the remarketing agent, Goldman Sachs & Co., at the distribution
amount that is required to enable the remarketing agent to sell the Floater
Certificates at par on any weekly determination date.
For financial accounting and reporting purposes, the equity in the Owner Trust
represented by the Senior Certificate is classified as "minority interest in
subsidiary (subject to mandatory redemption)" in the accompanying consolidated
balance sheets. Income earned by the Owner Trust is allocated to the minority
interest in an amount equal to the distributions through the Senior Certificate
to the holders of the Floater Certificates. Such allocation of income is
classified as "minority interest in income of subsidiary" in the accompanying
consolidated statements of income. Deferred costs relating to the TOP are being
amortized using the straight line method over 10 years, which approximates the
average remaining term to maturity of the FMBs contributed or expected to be
contributed to the Owner Trust.
-34-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Currently, the maximum amount of Floater Certificates that can be issued to
raise capital under the TOP is $150 million and as of December 31, 1998 such
maximum has been issued. The Company is currently negotiating an increase in its
TOP to $200 million and, before the end of 1999, the Company expects to raise
funds through an equity offering; however, there can be no assurance that either
of these initiatives will be successful.
The Company's cost of funds relating to the TOP (calculated as income allocated
to the minority interest plus current fees as a percentage of the weighted
average amount of the outstanding Senior Certificate) was approximately 4.9% for
the period May 21, 1998 (inception) through December 31, 1998.
NOTE 6 - Note Payable
During 1998, an interim credit facility with Goldman Sachs & Company (the
"Interim Credit Facility") was available to the Company at prevailing rates of
interest for such accounts (5.98% at December 14, 1998). At December 31, 1998
there were no borrowings outstanding. The Company is currently negotiating with
Goldman Sachs & Company and various other lenders the renewal or replacement of
this facility.
NOTE 7 - Related Parties
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
- - -----------------------------------------------------------------------
Pursuant to the Management Agreement, the Manager receives (i) bond selection
fees equal to 2% of the principal amount of each FMB or other tax-exempt
instrument acquired or originated by the Company; (ii) special distributions
equal to .375% of the total invested assets of the Company; (iii) loan servicing
fees equal to .25% of the outstanding principal amount of FMBs; (iv) a
liquidation fee based on the gross sales price of assets sold by the Company in
connection with a liquidation of the Company's assets; and (v) reimbursement of
certain administrative costs incurred by the Manager and its affiliates on
behalf of the Company. In addition, the Manager receives bond placement fees
from the borrower in an amount equal to 1% of the principal amount of each FMB
or other tax-exempt instrument acquired or originated by the Company and
affiliates of the Manager are part of a joint venture which has a development
services agreement with the obligors of three FMBs.
The original term of the Management Agreement will terminate on October 1, 2001.
Thereafter, the Management Agreement will be renewed annually by the Company,
subject to majority approval of the Company's Board of Trustees. The Management
Agreement cannot be terminated by the Company prior to October 1, 2001, other
than for gross negligence or willful misconduct of the Manager and by a majority
vote of the Company's independent trustees. The Management Agreement may be
terminated without cause by a majority vote of the Company's independent
trustees following October 1, 2001 or by the Manager at any time.
The costs, expenses and the special distribution incurred to the Manager and its
affiliates for the year ended December 31, 1998 and the three months ended
December 31, 1997 (after the Consolidation) were as follows:
Year Three Months
Ended Ended
December 31, December 31,
1998 1997
Bond selection fees $2,351,932 $ 100,000
Expense reimbursement 374,315 36,747
Loan servicing fees 985,198 220,386
Special distribution 1,477,797 330,580
---------- ----------
$5,189,242 $ 687,713
========== ==========
Tax Exempt II (Prior to the Consolidation)
- - ------------------------------------------
Prior to the Consolidation, the general partners of Tax Exempt II were Related
Tax Exempt Associates II, Inc., a Delaware corporation (the "Related General
Partner"), and Prudential Bache Properties, Inc. ("PBP"). The general partners
managed and controlled the affairs of Tax Exempt II prior to the Consolidation.
The general partners and their affiliates performed services for Tax Exempt II
which included, but were not limited to: accounting and financial management;
registrar, transfer and assignment functions; asset management; investor
communications; printing and other administrative services. The general partners
and their affiliates received reimbursements for costs incurred in connection
with these services, the amount of which was limited by the provisions of the
partnership agreement of Tax Exempt II. The general partners were paid, in
aggregate, an annual management fee equal to .5% of the total invested assets
(which equaled the total original face amount of the FMBs). An affiliate of the
Related General Partner received loan servicing fees in an amount of .25% per
annum of the principal amount outstanding on mortgage loans serviced by the
affiliate.
-35-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The expenses incurred by Tax Exempt II to related parties for the nine months
ended September 30, 1997 and the year ended December 31, 1996 were as follows:
Nine Months Year
Ended Ended
September 30, December 31,
1997 1996
PBP and affiliates
General and administrative $ 58,170 $ 67,483
Management fee 303,984 405,312
---------- ----------
362,154 472,795
---------- ----------
Related General Partner and affiliates
General and administrative 66,222 46,725
Management fee 303,984 405,313
Loan servicing fee 303,152 405,313
---------- ----------
673,358 857,351
---------- ----------
$1,035,512 $1,330,146
========== ==========
General
- - -------
The obligors of the Suntree, Players Club, River Run, Ocean Air, Phoenix, Stone
Creek, Cedarbrook, Marsh Landings, Gulfstream, Bedford Square, Northpointe
Village, Falcon Creek, Jubilee Courtyards, Silvercrest, Carrington Pointe,
Madalyn Landing, Forest Hills, Lake Jackson and Mountain Ranch FMBs are local
partnerships in which investment partnerships, whose general partners are
affiliates of the Manager, own a controlling partnership interest.
As of December 31, 1998, the original owners of the Underlying Properties and
obligors of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset
Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village
FMBs had been replaced with affiliates of the Manager who have not made equity
investments. These entities have assumed the day-to-day responsibilities and
obligations of the Underlying Properties. Buyers are being sought who would make
equity investments in the Underlying Properties and assume the nonrecourse
obligations for the FMBs.
NOTE 8 - Earnings Per Share, Profit and Loss Allocations and Distributions
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
- - -----------------------------------------------------------------------
Pursuant to the Management Agreement, the Manager receives a special
distribution equal to a .375% per annum of the total invested assets of the
Company (which equals the face amount of the FMBs), payable quarterly, for
managing the affairs of the Company. After payment of the special distribution,
distributions are made to the shareholders in accordance with their percentage
interests.
Income is allocated first to the Manager in an amount equal to the special
distribution. The net remaining profits or losses, after a special allocation of
1% to the Manager, are then allocated to shareholders in accordance with their
percentage interests.
Basic net income per Share in the amount of $.99 and $.12 for the year ended
December 31, 1998 and the three months ended December 31, 1997, respectively,
equals net income for the periods ($22,025,872 and $2,792,740, respectively),
less the special allocations to the Manager ($1,683,278 and $355,202,
respectively), divided by the weighted average number of Shares outstanding for
the periods (20,587,151 and 20,587,465, respectively).
Diluted net income per Share in the amount of $.98 and $.12 for the year ended
December 31, 1998 and the three months ended December 31, 1997, respectively,
equals net income for the periods, less the special allocations to the Manager,
divided by the weighted average number of diluted Shares outstanding for the
periods (20,740,641 and 20,587,465, respectively). The weighted average number
of diluted Shares outstanding for the year ended December 31, 1998 reflects the
weighted average impact of an additional 608,955 Shares presumed to be issued to
counsel for the Partnerships pursuant to an Order and Stipulation of Settlement
by the United States District Court for the Southern District of New York on
February 18, 1999 (see Note 9).
Net income per unit information for periods before the Consolidation is not
presented because it is not indicative of the Company's continuing capital
structure.
Tax Exempt II (Prior to the Consolidation)
- - ------------------------------------------
Net profits or losses and distributions were allocated 98% to the BUC$holders
and 2% to the general partners of Tax Exempt II in accordance with the Agreement
of Limited Partnership of Tax Exempt II.
NOTE 9 - Capital Stock and Share Option Plan
The Company has adopted an incentive Share option plan (the "Incentive Share
Option Plan"), the purpose of which is to (i) attract and retain qualified
persons as trustees and officers and (ii) to incentivize and more closely align
the financial interests of the Manager and its employees and officers with the
interests of the shareholders by providing the Manager with substantial
financial interest in the Company's success. The Compensation Committee
administers the Incentive Share Option Plan. Pursuant to the Incentive Share
Option Plan, if the Company's distributions per Share in the immediately
preceding calendar year exceed $0.9517 per
-36-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Share, the Compensation Committee has the authority to issue options to
purchase, in the aggregate, that number of Shares which is equal to three
percent of the Shares outstanding as of December 31 of the immediately preceding
calendar year (or in the initial year, as of October 1, 1997), provided that the
Compensation Committee may only issue, in the aggregate, options to purchase a
maximum number of Shares over the life of the Incentive Shares Option Plan equal
to 10% of the Shares outstanding on October 1, 1997.
Subject to the limitations described in the preceding paragraph, if the
Compensation Committee does not grant the maximum number of options in any year,
then the excess of the number of authorized options over the number of options
granted in such year will be added to the number of authorized options in the
next succeeding year and will be available for grant by the Compensation
Committee in such succeeding year.
All options granted by the Compensation Committee will have an exercise price
equal to or greater than the fair market value of the Shares on the date of the
grant. The maximum option term is ten years from the date of grant. All Share
options granted pursuant to the Incentive Share Option Plan may vest immediately
upon issuance or in accordance with the determination of the Compensation
Committee. No options were granted for the year ended December 31, 1997. In
1998, the Company distributed $.93 per Share, thus prohibiting the Compensation
Committee from issuing options. Three percent of the Shares outstanding as of
the effective date of the Consolidation are equal to 617,624 Shares.
On October 9, 1998, the Board of Trustees authorized the implementation of a
Share repurchase plan, enabling the Company to repurchase, from time to time, up
to 1,500,000 of its Shares. The repurchases will be made in the open market and
the timing will be dependant on the availability of Shares and other market
conditions. During the period October 9, 1998 through December 31, 1998, the
Company acquired 8,400 of its Shares for an aggregate purchase price of $103,359
(including commissions and service charges). Repurchased Shares are accounted
for as treasury Shares of beneficial interest.
As part of the settlement of class action litigation relating to the
Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had
the right to petition the United States District Court for the Southern District
of New York (the "Court") for additional attorneys' fees ("Counsel's Fee
Shares") in an amount to be determined in the Court's sole discretion. The
Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed
to be 25%) of the increase in value of the Company, ("the Added Value") if any,
as of October 1, 1998 based upon the difference between (i) the trading prices
of the Company's shares of beneficial interest during the six month period ended
October 1, 1998 and (ii) the trading prices of the limited partnership units and
the asset values of the Partnerships prior to October 1, 1997. As of October 1,
1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an
Order and Stipulation of Settlement by the Court on February 18, 1999, Class
Counsel is entitled to receive 608,955 shares of beneficial interest in the
Company. The shares will be distributed to Class Counsel quarterly in eight
equal distributions commencing within ten business days after Class Counsel
advises the Company in writing of the persons in whose name the shares are to be
issued. One-half of such shares will be in the form of Restricted Securities
(restricted only with respect to the sale, assignment, pledge or other transfer
of such securities) and the remaining one-half of such shares will be
unrestricted. Restrictions on the Restricted Securities expire one year from the
date of issuance. Management is currently negotiating a discounted
cash settlement with Class Counsel in lieu of the issuance of shares; however,
any such settlement would require the approval of the Board of Trustees and
there can be no assurance that such negotiations will be successful.
-37-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - Selected Quarterly Financial Data (unaudited)
1998 Quarter Ended 1997
---------------------------------------------------------------- Quarter Ended
March 31 June 30 September 30 December 31 December 31
---------- ---------- ------------ ----------- -----------
Revenues:
Interest income:
Participating first mortgage
bonds $5,890,264 $6,561,808 $7,128,239 $7,783,284 $5,560,321
Temporary investments 41,526 62,868 57,655 59,221 49,483
Promissory notes 145,799 144,631 148,551 155,202 140,180
---------- ---------- ---------- ---------- ----------
Total revenues 6,077,589 6,769,307 7,334,445 7,997,707 5,749,984
---------- ---------- ---------- ---------- ----------
Expenses:
Interest expense 344,770 328,875 305,326 525,363 429,012
Loan servicing fees 217,974 233,604 255,200 278,420 220,387
General and administrative 220,027 347,854 610,091 524,173 376,900
Amortization 46,856 74,134 123,802 152,708 87,810
Loss on impairment of assets 0 0 0 0 1,843,135
Minority interest in income
of subsidiary 0 256,757 534,442 772,800 0
---------- ---------- ---------- ---------- ----------
Total expenses 829,627 1,241,224 1,828,861 2,253,464 2,957,244
---------- ---------- ---------- ---------- ----------
Net income $5,247,962 $5,528,083 $5,505,584 $5,744,243 $2,792,740
========== ========== ========== ========== ==========
Special allocation of net
income to the Manager $ 376,171 $ 402,183 $ 434,027 $ 470,897 $ 355,202
========== ========== ========== ========== ==========
Net income applicable to
shareholders $4,871,791 $5,125,900 $5,071,557 $5,273,346 $2,437,538
========== ========== ========== ========== ==========
Net income per share:
Basic $ .24 $ .25 $ .25 $ .26 $ .12
========== ========== ========== ========== ==========
Diluted $ .24 $ .25 $ .25 $ .25 $ .12
========== ========== ========== ========== ==========
NOTE 11 - Subsequent Event (unaudited)
-38-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 26, 1999, the Company acquired one FMB for a purchase price
of $6,400,000, not including bond selection fees and expenses of
approximately $128,000. The obligor of the FMB is a local partnership
in which an investment partnership, whose general partner is as
affiliate of the Manager, owns a controlling partnership interest.
Further information regarding the FMB is as follows:
Stated No. of
Project Closing Call Date/ Face Interest Rental
Name Date Maturity Date Amount of Bond Rate Units
---- ---- ------------- -------------- ---- -----
Hamilton Garden 4/1/15
Hamilton, NJ 3/26/99 3/1/35 $6,400,000 (a) 174
(a) The interest rates for Hamilton Garden are 7.625% during the construction
period and 7.125% thereafter.
-39-
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.
-40-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Sequential
(a) 1. Financial Statements Page
-------------------- ----------
Independent Auditors' Report 22
Consolidated Balance Sheets as of December 31,
1998 and 1997 23
Consolidated Statements of Income for the years
ended December 31, 1998, 1997 and 1996 24
Consolidated Statements of Changes in
Shareholders' Equity/Partners' Capital (Deficit)
for the years ended December 31, 1998, 1997 and
1996 25
Consolidated Statements of Cash Flows for the
years ended December 31, 1998, 1997 and 1996 27
Notes to Consolidated Financial Statements 29
(a) 2. Financial Statement Schedules
Schedule IV - Mortgage Loans on Real Estate at
December 31, 1998 56
All other schedules have been omitted because
they are not applicable or the required
information is included in the financial
statements and the notes thereto.
(a) 3. Exhibits
3.1(a) Certificate of Business Trust dated as of August
12, 1996 (incorporated by reference to the
Company's Registration Statement on Form 10,
File No. 001-13237)
3.1(b) Certificate of Amendment of Certificate of
Business Trust dated as of April 30, 1997
(incorporated by reference to the Company's
Registration Statement on Form 10, File No.
001-13237)
3.1(c) Trust Agreement dated as of August 12, 1996
(incorporated by reference to the Company's
Registration Statement on Form 10, File No.
001-13237)
3.1(d) Amendment No. 1 to Trust Agreement dated as of
April 30, 1997 (incorporated by reference to the
Company's Registration Statement on Form 10,
File No. 001-13237)
3.1(e) Amended and Restated Trust Agreement dated as of
September 30, 1997 (incorporated by reference to
the Company's Current Report on Form 8-K, filed
with the Commission on March 19, 1998)
3.2 Bylaws (incorporated by reference to the
Company's Current Report on Form 8-K, filed with
the Commission on March 19, 1998)
-41-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
4.1 Specimen Copy of Share Certificate for shares of
beneficial interest of the Company (incorporated
by reference to the Company's Amendment No. 1 on
Form 10/A to the Company's Registration
Statement on Form 10, File No. 001-13237)
10(a) First Mortgage Bond, dated May 13, 1986, with
respect to The Mansion project, in the principal
amount of $19,450,000 (incorporated by reference
to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated May 13, 1986)
10(b) First Mortgage Bond, dated May 20, 1986, with
respect to the Martin's Creek project, in the
principal amount of $7,300,000 (incorporated by
reference to Exhibit 10(c) in Tax Exempt I's
Current Report on Form 8-K dated May 20, 1986)
10(c) First Mortgage Bond, dated May 20, 1986, with
respect to the East Ridge project, in the
principal amount of $8,700,000 (incorporated by
reference to Exhibit 10(b) in Tax Exempt I's
Current Report on Form 8-K dated May 20, 1986)
10(d) First Mortgage Bond, dated July 29, 1986, with
respect to the High Pointe Club project
(formerly named Greenhill), in the principal
amount of $8,900,000 (incorporated by reference
to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated July 29, 1986)
10(e) First Mortgage Bond, dated August 14, 1986, with
respect to the Cypress Run project at Tampa
Palms, in the principal amount of $15,750,000
(incorporated by reference to Exhibit 10(a) in
Tax Exempt I's Current Report on Form 8-K dated
August 14, 1986)
10(f) First Mortgage Bond, dated September 2, 1986,
with respect to the Thomas Lake Place Apartments
project, in the principal amount of $12,975,000
(incorporated by reference to Exhibit 10(a) in
Tax Exempt I's Current Report on Form 8-K dated
September 2, 1986)
10(g) First Mortgage Bond, dated September 30, 1986,
with respect to the North Glen Apartments
project (formerly named Tempo Northridge), in
the principal amount of $12,400,000
(incorporated by reference to Exhibit 10(a) in
Tax Exempt I's Current report on Form 8-K dated
September 30, 1986)
10(h) First Mortgage Bond, dated October 9, 1986, with
respect to Greenway Manor project, in the
principal amount of $12,850,000 (incorporated by
reference to Exhibit 10(a) in Tax Exempt I's
Current Report on Form 8-K dated October 9,
1986)
10(i) First Mortgage Bond, dated December 8, 1986,
with respect to the Clarendon Hills Apartments
project, in the principal amount of $17,600,000
(incorporated by reference to Exhibit 10(a) in
Tax Exempt I's Current Report on Form 8-K dated
December 8, 1986)
-42-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(j) First Mortgage Bond, dated December 29, 1986,
with respect to the Cedar Creek Village
Apartments project, in the principal amount of
$8,100,000 (incorporated by reference to Exhibit
10(a) in Tax Exempt I's Current Report on Form
8-K dated December 29, 1986)
10(k) First Mortgage Bond, dated February 12, 1987,
with respect to the Sunset Terrace project, in
the principal amount of $10,350,000
(incorporated by reference to Exhibit 10(a) in
Tax Exempt I's Current Report on Form 8-K dated
February 12, 1987)
10(l) Loan Agreement dated September 19, 1990 between
River Bank America and the Tax Exempt I
(incorporated by reference to Exhibit 10(a) in
Tax Exempt I's Current Report on Form 8-K dated
September 19, 1990)
10(m) Note dated September 19, 1990 from the Tax
Exempt I to River Bank America (incorporated by
reference to Exhibit 10(b) in Tax Exempt I's
Current Report on Form 8-K dated September 19,
1990)
10(n) Pledge Agreement dated September 19, 1990
between River Bank America and the Tax Exempt I
(incorporated by reference to Exhibit 10(c) in
Tax Exempt I's Current Report on Form 8-K dated
September 19, 1990)
10(o) Indemnity and Reimbursement Agreement dated
September 19, 1990 between Stephen M. Ross and
the Tax Exempt I (incorporated by reference to
Exhibit 10(d) in Tax Exempt I's Current Report
on Form 8-K dated September 19, 1990)
10(p) Settlement Agreement for the North Glen First
Mortgage Bond dated December 3, 1990
(incorporated by reference to Exhibit 10(p) in
Tax Exempt I's Annual Report on Form 10-K dated
December 31, 1991)
10(q) Settlement Agreement for the Thomas Lake
Mortgage Bond dated July 11, 1991 (incorporated
by reference to Exhibit 10(q) in Tax Exempt I's
Annual Report on Form 10-K dated December 31,
1991)
10(r) Settlement Agreement for the Sunset Terrace
First Mortgage Bond dated July 10, 1992
(incorporated by reference to Exhibit 10(r) in
Tax Exempt I's Annual Report on Form 10-K dated
December 31, 1992)
10(s) Assignment and Assumption Agreement for the
Clarendon Hills First Mortgage Bond dated May 1,
1992 (incorporated by reference to Exhibit 10
(s) in Tax Exempt I's Annual report on Form 10-K
dated December 31, 1992)
-43-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(t) First Supplemental Indenture between City of
Hayward and Seattle-First National Bank relating
to the Clarendon Hills First Mortgage Bond dated
May 1, 1992 (incorporated by reference to
Exhibit 10(t) in Tax Exempt I's Annual Report on
Form 10-K dated December 31, 1992)
10(u) Loan Agreement dated as of January 14, 1993
between Tax Exempt I and U.S. West Financial
Services, Inc. (incorporated by reference to
Exhibit 10(u) in Tax Exempt I's Quarterly Report
on Form 10-Q dated June 30, 1993)
10(v) Pledge and Security Agreement dated as of
January 14, 1993 between Tax Exempt I and U.S.
West Financial Service, Inc. (incorporated by
reference to Exhibit 10(v) in Tax Exempt I's
Quarterly Report on Form 10-Q dated June 30,
1993)
10(w) Secured Promissory Note dated January 14, 1993
between Tax Exempt I and U.S. West Financial
Services, Inc. (incorporated by reference to
Exhibit 10(w) in Tax Exempt I's Quarterly Report
on Form 10-Q dated June 30, 1993)
10(x) Promissory Note dated January 15, 1993 between
Tax Exempt I and RHA Inc. (incorporated be
reference to Exhibit 10(x) in Tax Exempt I's
Quarterly Report on Form 10-Q dated June 30,
1993)
10(y) Nonrecourse Promissory Note Secured by Deed of
Trust dated January 28, 1993 between Stephen P.
Diamond and Clarendon Hills Investors, Inc.
assigned to Tax Exempt I (incorporated by
reference to Exhibit 10(y) in Tax Exempt I's
Quarterly Report on Form 10-Q dated June 30,
1993)
10(z) Assignment Agreement dated January 15, 1993
between Summit Tax Exempt Funding Corporation
and Tax Exempt I (incorporated by reference to
Exhibit 10(z) in Tax Exempt I's Quarterly Report
on Form 10-Q dated June 30, 1993)
10(aa) Amended Settlement Agreement for the North Glen
First Mortgage dated June 1, 1993 (incorporated
by reference to Exhibit 10 (aa) in Tax Exempt
I's Annual Report on Form 10-K dated December 31,
1993)
10(ab) Sale-Purchase Agreement between Mansion
Apartment Project Investors, Inc., Seller and
Independence Apartments Associates, L.P.,
Purchaser dated November 30,1993 (incorporated
by reference to Exhibit 10 (ab) in Tax Exempt
I's Quarterly Report on Form-Q dated March 31,
1994)
10(ac) Addendum to Sale-Purchase Agreement between
Mansion Apartment Project Investors, Inc.,
Seller and Independence Apartments Associates,
L.P., Purchase dated March 31, 1994
(incorporated by reference to Exhibit 10(ac) in
Tax Exempt I's Quarterly Report on Form 10-Q
dated March 31, 1994)
-44-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(ad) First Supplemental Indenture, dated as of
October 18, 1994, between The Industrial
Development Authority of the City of
Independence, Missouri and Boatman's First
National Bank of Kansas City relating to The
Mansion project (incorporated by reference to
Exhibit 10(ad) in Tax Exempt I's Annual Report
on Form 10-K dated December 31, 1994)
10(ae) First Mortgage Bond, dated May 13, 1986 and
revised as of October 18, 1994 with respect to
The Mansion project, in the principal amount of
$19,450,000 (incorporated by reference to
Exhibit 10(ae) in Tax Exempt I's Annual Report
on Form 10-K dated December 31, 1994)
10(af) Amended Settlement Agreement for the North Glen
First Mortgage dated May 1, 1996 (incorporated
by reference to Exhibit 10(af) in Tax Exempt I's
Annual Report on Form 10-K/A-1 dated December
31, 1995)
10(ag) First Mortgage Bond, dated September 11, 1986,
with respect to the Bay Club project, in the
principal amount of $6,400,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated September 11,
1986)
10(ah) First Mortgage Bond, dated November 13, 1986,
with respect to the Loveridge project, in the
principal amount of $8,550,000 (incorporated by
reference to exhibit 10(d) in Tax Exempt II's
Form 8 Amendment No. 1 to Current Report on Form
8-K, dated February 10, 1987)
10(ai) First Mortgage Bond, dated December 30, 1986
with respect to The Lakes project, in the
principal amount of $13,650,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated December 30,
1986)
10(aj) First Mortgage Bond, dated December 31, 1986,
with respect to the Crowne Pointe project, in
the principal amount of $5,075,000 (incorporated
by reference to exhibit 10(b) in Tax Exempt II's
Current Report on Form 8-K dated December 31,
1986)
10(ak) First Mortgage Bond, dated December 31, 1986,
with respect to the Orchard Hills project, in
the principal amount of $5,650,000 (incorporated
by reference to exhibit 10(c) in Tax Exempt II's
Current Report on Form 8-K dated December 31,
1986)
10(al) First Mortgage Bond, dated February 2, 1987,
with respect to the Highland Ridge project, in
the principal amount of $15,000,000
(incorporated by reference to exhibit 10(a) in
Tax Exempt II's Current Report on Form 8-K dated
February 2, 1987)
-45-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(am) First Mortgage Bond, dated February 11, 1987,
with respect to the Newport Village project, in
the principal amount of $13,000,000
(incorporated by reference to exhibit 10(a) in
Tax Exempt II's Current Report on Form 8-K dated
February 11, 1987)
10(an) First Mortgage Bond, dated February 11, 1987,
with respect to the Sunset Downs project, in the
principal amount of $15,000,000 (incorporated by
reference to exhibit 10(b) in Tax Exempt II's
Current Report on Form 8-K dated February 11,
1987)
10(ao) First Mortgage Bond, dated February 27, 1987,
with respect to the Pelican Cove project, in the
principal amount of $18,000,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated February 27,
1987)
10(ap) First Mortgage Bond, dated February 27, 1987,
with respect to the Willow Creek project, in the
principal amount of $6,100,000 (incorporated by
reference to exhibit 10(c) in Tax Exempt II's
Current Report on Form 8-K dated February 27,
1987)
10(aq) First Mortgage Bond, dated April 22, 1987, with
respect to the Cedar Pointe project, in the
principal amount of $9,500,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated April 22, 1987)
10(ar) First Mortgage Bond, dated June 26, 1987, with
respect to the Shannon Lake project, in the
principal amount of $12,000,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated June 26, 1987)
10(as) First Mortgage Bond, dated July 31, 1987, with
respect to the Bristol Village project, in the
principal amount of $17,000,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated July 31,1987)
10(at) First Mortgage Bond, dated July 31, 1987, with
respect to the Suntree project, in the principal
amount of $7,500,000 (incorporated by reference
to exhibit 10(b) in Tax Exempt II's Current
Report on Form 8-K dated July 31, 1987)
10(au) First Mortgage Bond, dated August 7, 1987, with
respect to the River Run project, in the
principal amount of $6,700,000 (incorporated by
reference to exhibit 10(b) in Tax Exempt II's
Current Report on Form 8-K dated August 7, 1987)
10(av) First Mortgage Bond, dated August 14, 1987, with
respect to the Players Club project, in the
principal amount of $2,500,000 (incorporated by
reference to exhibit 10(a) in Tax Exempt II's
Current Report on Form 8-K dated August 14,
1987)
-46-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aw) Settlement Agreement for the Shannon Lake First
Mortgage Bond dated December 3, 1990
(incorporated by reference to Exhibit 10(q) in
Tax Exempt II's 1991 Annual Report on Form 10K)
10(ax) Settlement Agreement for the Newport Village
First Mortgage Bond dated October 9, 1992
(incorporated by reference to Exhibit 10(r) in
Tax Exempt II's 1992 Annual Report on Form 10K)
10(ay) Settlement Agreement for the Sunset Downs First
Mortgage Bond dated July 10, 1992 (incorporated
by reference to Exhibit 10(s) in Tax Exempt II's
1992 Annual Report on Form 10K)
10(az) Settlement Agreement for the Suntree First
Mortgage Bond dated February 1, 1992
(incorporated by reference to Exhibit 10(t) in
Tax Exempt II's 1992 Annual Report on Form 10K)
10(aaa) Settlement Agreement for the Players Club First
Mortgage Bond dated February 1, 1992
(incorporated by reference to Exhibit 10(w) in
Tax Exempt II's 1992 Annual Report on Form 10K)
10(aab) Settlement Agreement for the Bristol Village
First Mortgage Bond dated March 2, 1993
(incorporated by reference to Exhibit 10(x) in
Tax Exempt II's 1992 Annual Report on Form 10K)
10(aac) Amended Settlement Agreement for the Shannon
Lake First Mortgage Bond dated June 1, 1993
(incorporated by reference to Exhibit 10(y) in
Tax Exempt II's 1993 Annual Report on Form 10K)
10(aad) Amended Settlement Agreement for the Player's
Club First Mortgage Bond dated December 1, 1993
(incorporated by reference to Exhibit 10(z) in
Tax Exempt II's 1993 Annual Report on Form 10K)
10(aae) Amended Settlement Agreement for the Suntree
First Mortgage Bond dated December 1, 1993
(incorporated by reference to Exhibit 10(aa) in
Tax Exempt II's 1993 Annual Report on Form 10K)
10(aaf) First Supplemental Indenture between The
Industrial Development Authority of the City of
Kansas City, Missouri and Boatmen's First
National Bank of Kansas City dated January 24,
1994 (incorporated by reference to Exhibit
10(ab) in Tax Exempt II's Quarterly Report on
Form 10Q dated March 31, 1994)
10(aag) Option Agreement between The Lakes Project
Investors, Inc., Seller and ZIPCO, Inc.,
Purchaser, dated January 27, 1994 (incorporated
by reference to Exhibit 10(ac) in Tax Exempt
II's Quarterly Report on Form 10Q dated
September 30, 1994)
10(aah) Assignment and Assumption Agreements between The
Lakes Apartments, Inc., Seller, and ZIPCO, Inc.,
Purchaser, dated August 31, 1994 (incorporated
by reference to Exhibit 10(ad) in Tax Exempt
II's Quarterly Report on Form 10Q dated
September 30, 1994)
-47-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aai) Sale-Purchase Agreement between The Lakes
Project Investors, Inc., Seller, and ZIPCO,
Inc., Purchaser, dated August 31, 1994
(incorporated by reference to Exhibit 10(ae) in
Tax Exempt II's Quarterly Report on Form 10Q
dated September 30, 1994)
10(aaj) Amended Settlement Agreement for the Player's
Club First Mortgage Bond dated December 1, 1994
(incorporated by reference to Exhibit 10(af) in
Tax Exempt II's 1994 Annual Report on Form 10K)
10(aak) Amended Settlement Agreement for the Suntree
First Mortgage Bond dated December 1, 1994
(incorporated by reference to Exhibit 10(ag) in
Tax Exempt II's 1994 Annual Report on Form 10K)
10(aal) Amended Settlement Agreement for the Loveridge
First Mortgage Bond dated July 31, 1995
(incorporated by reference to Exhibit 10(ah) in
Tax Exempt II's Quarterly Report on Form 10Q
dated September 30, 1995)
10(aam) Amended Settlement and Forbearance Agreement for
the Sunset Downs First Mortgage Bond dated July
31, 1995 (incorporated by reference to Exhibit
10(ai) in Tax Exempt II's Quarterly Report on
Form 10Q dated September 30, 1995)
10(aan) Amended Settlement Agreement for the Suntree
First Mortgage Bond dated January 26, 1996
(incorporated by reference to Exhibit 10(aj) in
Tax Exempt II's 1995 Annual Report on Form
10K/A-1)
10(aao) Amended Settlement Agreement for the Shannon
Lake First Mortgage Bond dated May 1, 1996
(incorporated by reference to Exhibit 10(ak) in
Tax Exempt II's 1995 Annual Report on Form
10K/A-1)
10(aap) Amended Settlement Agreement for the Player's
Club First Mortgage Bond date January 26, 1996
(incorporated by reference to Exhibit 10(al) in
Tax Exempt II's 1995 Annual Report on Form
10K/A-1)
10(aaq) Forbearance Agreement for the Highland Ridge
First Mortgage Bond dated May 14, 1996
(incorporated by reference to Exhibit 10(am) in
Tax Exempt II's 1995 Annual Report on Form
10K/A-1)
10(aar) Forbearance Agreement for the Cedar Pointe First
Mortgage Bond dated February 1, 1997
(incorporated by reference to Exhibit 10(an) in
Tax Exempt II's 1996 Annual Report on Form 10-K)
10(aas) First Mortgage Bond, dated as of August 14,
1987, with respect to the Players Club project
at Fort Myers in the principal amount of
$7,200,000 (incorporated by reference to Exhibit
10(a) in Tax Exempt III's Current Report on Form
8-K dated August 14, 1987)
-48-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aat) First Mortgage Bond, dated as of November 18,
1987, with respect to the Lakepoint project, in
the principal amount of $15,100,000
(incorporated by reference to Exhibit 10(a) in
Tax Exempt III's Current Report on Form 8-K
dated November 18, 1987)
10(aau) First Mortgage Bonds, dated March 25, 1988, with
respect to the Sunset Village and Sunset Creek
projects in the principal amounts of $11,375,000
and $8,275,000, respectively (incorporated by
reference to Exhibits 10(a) and 10(b) in Tax
Exempt III's Current Report on Form 8-K dated
March 25, 1988)
10(aav) First Mortgage Bond, dated as of May 1, 1989,
with respect to the Ashley Knoll project (now
named Orchard Mill) in the principal amount of
$10,500,000 (incorporated by reference to
Exhibits 10(a), 10(b) and 10(c) in Tax Exempt
III's Current Report on Form 8-K dated May 1,
1989)
10(aaw) Settlement Agreement for the Lakepoint First
Mortgage Bond dated June 28, 1991 (incorporated
by reference to Exhibit 10(e) in Tax Exempt
III's 1991 Annual Report on Form 10-K)
10(aax) Settlement Agreement for the Players Club First
Mortgage Bond dated February 1, 1992
(incorporated by reference to exhibit 10(f) in
Tax Exempt III's 1992 Annual Report on Form
10-K)
10(aay) Settlement Agreement for the Sunset Village
First Mortgage Bond dated July 10, 1992
(incorporated by reference to Exhibit 10(g) in
Tax Exempt III's 1992 Annual Report in Form
10-K)
10(aaz) Settlement Agreement for the Sunset Creek First
Mortgage Bond dated July 10,1992 (incorporated
by reference to exhibit 10(h) in Tax Exempt
III's 1992 Annual Report on Form 10-K)
10(aaaa) Amended Settlement Agreement for the Lakepoint
First Mortgage Bond dated June 1, 1993
(incorporated by reference to Exhibit 10(i) in
Tax Exempt III's 1993 Annual Report on Form
10-K)
10(aaab) Amended Settlement Agreement for the Players
Club First Mortgage Bond dated December 1, 1993
(incorporated by reference to Exhibit 10(j) in
Tax Exempt III's 1993 Annual Report on Form
10-K)
10(aaac) Amended Settlement Agreement for the Players
Club First Mortgage Bond dated December 1, 1994
(incorporated by reference to Exhibit 10(k) in
Tax Exempt III's 1994 Annual Report on Form
10-K)
10(aaad) Amended Settlement Agreement for the Lakepoint
First Mortgage Bond dated May 1, 1996
(incorporated by reference to Exhibit 10(l) in
Tax Exempt III's 1995 Annual Report on Form
10-K/A-1)
-49-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aaae) Settlement Agreement for Orchard Mill First
Mortgage Bond dated May 1, 1995 (incorporated by
reference to Exhibit 10(m) in Tax Exempt III's
September 30, 1996 Quarterly Report on Form
10-Q)
10(aaaf) Management Agreement dated as of October 1,
1997, between the Company and Related Charter
L.P. (incorporated by reference to the Company's
Current Report on Form 8-K, filed with the
Commission on March 19, 1998)
10(aaag) Agreement and Plan of Merger dated as of October
1, 1997, by and among the Company, Summit Tax
Exempt Bond Fund, L.P., Summit Tax Exempt L.P.
II and Summit Tax Exempt L.P. III (incorporated
by reference to the Company's Current Report on
Form 8-K, filed with the Commission on March 19,
1998)
10(aaah) Incentive Share Option Plan (incorporated by
reference to the Company's Current Report on
Form 8-K, filed with the Commission on March 19,
1998)
10(aaai) Restated First Mortgage Bond, dated as of
September 30, 1986, with respect to the Tempo
Northridge Apartments Project in the principal
amount of $12,400,000 (incorporated by reference
to Exhibit 10 (aaai) in the Company's Annual
Report on Form 10-K for the year ended December
31, 1997)
10(aaaj) Restated First Mortgage Bond, dated as of June
26, 1987, with respect to the Shannon Lake
Project in the principal amount of $12,000,000
(incorporated by reference to Exhibit 10 (aaaj)
in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997)
10(aaak) Restated First Mortgage Bond, dated as of
November 18, 1987, with respect to the
Lakepointe Project in the principal amount of
$15,100,000 (incorporated by reference to
Exhibit 10 (aaak) in the Company's Annual Report
on Form 10-K for the year ended December 31,
1997)
10(aaal) Restated First Mortgage Bond, dated as of May 1,
1989, with respect to the Ashley Knoll Project
in the principal amount of $10,500,000
(incorporated by reference to Exhibit 10 (aaal)
in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997)
10(aaam) First Mortgage Bond, dated as of December 11,
1997, with respect to the Countryside Apartments
Project in the principal amount of $5,000,000
(incorporated by reference to Exhibit 10 (aaam)
in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997)
10(aaan) Restated First Mortgage Bond, dated as of
February 2, 1987, with respect to the Highland
Ridge Project in the principal amount of
$15,000,000 (incorporated by reference to
Exhibit 10 (aaan) in the Company's March 31,
1998 Quarterly Report on Form 10-Q)
-50-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aaao) Restated First Mortgage Bond, dated as of March
2, 1987, with respect to the Mortenson I Project
in the principal amount of $6,100,000
(incorporated by reference to Exhibit 10 (aaao)
in the Company's March 31, 1998 Quarterly Report
on Form 10-Q)
10(aaap) Restated First Mortgage Bond, dated as of
September 2, 1986, with respect to the Thomas
Lake Place Apartments Project in the principal
amount of $12,975,000 (incorporated by reference
to Exhibit 10 (aaap) in the Company's June 30,
1998 Quarterly Report on Form 10-Q)
10(aaaq) Restated First Mortgage Bond, dated as of July
31, 1987, with respect to the Bristol Village
Apartments Project in the principal amount of
$17,000,000 (incorporated by reference to
Exhibit 10 (aaaq) in the Company's June 30, 1998
Quarterly Report on Form 10-Q)
10(aaar) First Mortgage Bond, dated as of April 20, 1998,
with respect to the Ocean Air Apartments Project
in the principal amount of $10,000,000
(incorporated by reference to Exhibit 10 (aaar)
in the Company's June 30, 1998 Quarterly Report
on Form 10-Q)
10(aaas) First Mortgage Bond, dated as of April 28, 1998,
with respect to the Cedarbrook Apartments
Project in the principal amount of $2,840,000
(incorporated by reference to Exhibit 10 (aaas)
in the Company's June 30, 1998 Quarterly Report
on Form 10-Q)
10(aaat) First Mortgage Bond, dated as of April 28, 1998,
with respect to the Phoenix Apartments Project
in the principal amount of $3,250,000
(incorporated by reference to Exhibit 10 (aaat)
in the Company's June 30, 1998 Quarterly Report
on Form 10-Q)
10(aaau) First Mortgage Bond, dated as of April 28, 1998,
with respect to the Stone Creek Project in the
principal amount of $8,820,000 (incorporated by
reference to Exhibit 10 (aaau) in the Company's
June 30, 1998 Quarterly Report on Form 10-Q)
10(aaav) First Mortgage Bond, dated as of May 20, 1998,
with respect to the Lee Hall Project (Marsh
Landings) in the principal amount of $6,050,000
(incorporated by reference to Exhibit 10 (aaav)
in the Company's June 30, 1998 Quarterly Report
on Form 10-Q)
10(aaaw) Contribution Agreement between CharterMac and
CharterMac Origination Trust ("Origination
Trust") dated as of May 21, 1998 (incorporated
by reference to Exhibit 10 (aaaw) in the
Company's June 30, 1998 Quarterly Report on Form
10-Q)
10(aaax) Contribution Agreement between Origination Trust
and CharterMac Owner Trust ("Owner Trust") dated
as of May 21, 1998 (incorporated by reference to
Exhibit 10 (aaax) in the Company's June 30, 1998
Quarterly Report on Form 10-Q)
-51-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aaay) Insurance Agreement among MBIA, CharterMac,
Origination Trust, Owner Trust, CharterMac
Floater Certificate Trust ("Floater Certificate
Trust"), First Tennessee Bank National
Association ("First Tennessee"), Related Charter
LP, and Bayerische Landesbank Girozentrale, New
York Branch ("Bayerische") dated as of May 21,
1998 (incorporated by reference to Exhibit 10
(aaay) in the Company's June 30, 1998 Quarterly
Report on Form 10-Q)
10(aaaz) Liquidity Agreement among Owner Trust, Floater
Certificate Trust, First Tennessee, MBIA and
Bayerische dated as of May 21, 1998
(incorporated by reference to Exhibit 10 (aaaz)
in the Company's June 30, 1998 Quarterly Report
on Form 10-Q)
10(aaaaa) Liquidity Pledge and Security Agreement among
Origination Trust, Owner Trust, Floater
Certificate Trust, MBIA, First Tennessee and
Bayerische dated as of May 21, 1998
(incorporated by reference to Exhibit 10 (aaaaa)
in the Company's June 30, 1998 Quarterly Report
on Form 10-Q)
10(aaaab) Fee Agreement among Wilmington Trust Company,
Floater Certificate Trust and CharterMac dated
as of May 21, 1998 (incorporated by reference to
Exhibit 10 (aaaab) in the Company's June 30,
1998 Quarterly Report on Form 10-Q)
10(aaaac) Certificate Placement Agreement (incorporated by
reference to Exhibit 10 (aaaac) in the Company's
June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaad) Remarketing Agreement (incorporated by reference
to Exhibit 10 (aaaad) in the Company's June 30,
1998 Quarterly Report on Form 10-Q)
10(aaaae) First Mortgage Bond, dated as of July 15, 1998,
with respect to the College Park Apartments
Project in the principal amount of $10,100,000
(incorporated by reference to Exhibit 10 (aaaae)
in the Company's September 30, 1998 Quarterly
Report on Form 10-Q)
10(aaaaf) First Mortgage Bond, dated as of July 22, 1998,
with respect to Gulfstream Apartments in the
principal amount of $3,500,000 (incorporated by
reference to Exhibit 10 (aaaaf) in the Company's
September 30, 1998 Quarterly Report on Form
10-Q)
10(aaaag) First Mortgage Bond, dated as of August 25,
1998, with respect to the Lexington Square
Project (Bedford Square) in the principal amount
of $3,850,000 (incorporated by reference to
Exhibit 10 (aaaag) in the Company's September
30, 1998 Quarterly Report on Form 10-Q)
-52-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
10(aaaah) First Mortgage Bond, dated as of August 25,
1998, with respect to the Northpointe Village
Project in the principal amount of $13,250,000
(incorporated by reference to Exhibit 10 (aaaah)
in the Company's September 30, 1998 Quarterly
Report on Form 10-Q)
10(aaaai) First Mortgage Bond, dated as of September 14,
1998, with respect to the Falcon Creek Place
Apartments Project in the principal amount of
$6,144,600 (incorporated by reference to Exhibit
10 (aaaai) in the Company's September 30, 1998
Quarterly Report on Form 10-Q)
10(aaaaj) First Mortgage Bond, dated as of September 15,
1998, with respect to the Jubilee Courtyards
Apartments Project in the principal amount of
$4,150,000 (incorporated by reference to Exhibit
10 (aaaaj) in the Company's September 30, 1998
Quarterly Report on Form 10-Q)
10(aaaak) First Mortgage Bond, dated as of September 24,
1998, with respect to the Silvercrest at Clovis
Project in the principal amount of $2,275,000
(incorporated by reference to Exhibit 10 (aaaak)
in the Company's September 30, 1998 Quarterly
Report on Form 10-Q)
10(aaaal) First Mortgage Bond, dated as of September 24,
1998, with respect to the Carrington Pointe
Project in the principal amount of $3,375,000
(incorporated by reference to Exhibit 10 (aaaal)
in the Company's September 30, 1998 Quarterly
Report on Form 10-Q)
10(aaaam) First Mortgage Bond, dated as of November 13,
1998, with respect to Madalyn Landing Apartments
in the principal amount of $14,000,000 (filed
herewith) 59
10(aaaan) First Mortgage Bond, dated as of December 15,
1998, with respect to the Forest Hills
Apartments Project in the principal amount of
$5,930,000 (filed herewith) 71
10(aaaao) First Mortgage Bond, dated as of December 1,
1998, with respect to the Gateway at Lake
Jackson Apartments Project in the principal
amount of $10,934,000 (filed herewith) 77
10(aaaap) First Mortgage Bond, dated as of December 1,
1998, with respect to the Mountain Ranch
Apartments Project in the principal amount of
$9,128,000 (filed herewith) 83
10(aaaaq) Restated First Mortgage Bond, dated as of May
13, 1986, with respect to the Mansion Project in
the principal amount of $19,450,000 (filed
herewith) 89
21 Subsidiary of the Company (filed herewith) 96
27 Financial Data Schedule (filed herewith) 97
-53-
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K (continued)
Sequential
Page
----------
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter.
-54-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(COMPANY)
Date: March 30, 1999 By: /s/ J. Michael Fried
--------------------
J. Michael Fried
Managing Trustee,
Chairman of the Board and
Chief Executive Officer
-55-
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 Company
and in the capacities and on the dates indicated:
Signature Title Date
- - ---------------------- ---------------------------------- --------------
/s/ J. Michael Fried Managing Trustee, Chairman of the
- - ---------------------- Board and Chief Executive Officer March 30, 1999
J. Michael Fried
/s/ Peter T. Allen
- - ----------------------
Peter T. Allen Managing Trustee March 30, 1999
/s/ Arthur P. Fisch
- - ----------------------
Arthur P. Fisch Managing Trustee March 30, 1999
/s/ Stuart J. Boesky Managing Trustee, President
- - ---------------------- and Chief Operating Officer March 30, 1999
Stuart J. Boesky
/s/ Alan P. Hirmes Managing Trustee, Executive
- - ---------------------- Vice President and Secretary March 30, 1999
Alan P. Hirmes
/s/ John B. Roche Chief Financial Officer and
- - ---------------------- Chief Accounting Officer March 30, 1999
John B. Roche
-56-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
ITEM 14, SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Company at December 31, 1998 are
as follows:
Minimum Carrying
Average Pay Rate Stated Amount
Interest Rate at December Interest Maturity at December
Property Location Paid for 1998* 31, 1998* Rate* Call Date Date Face Amount 31, 1998 (G)(A)
- - ---- ----------- -------------- ---------- ------- ---------- ---------- ------------ ---------------
The Mansion Independence, MO 7.68%(C) 7.25% 7.25% April 2006 April 2025 $ 19,450,000 $ 20,084,000
Martin's Creek Summerville, SC 8.25 8.25 8.25 Mar. 2000 May 2010 7,300,000 8,443,000
East Ridge Mt. Pleasant, SC 8.25 8.25 8.25 Mar. 2000 May 2010 8,700,000 10,063,000
Highpointe Club Harrisburg, PA 6.12 (B) 8.50 June 1998 June 2006 8,900,000 5,888,000
Cypress Run Tampa, FL 5.84 (B) 8.50 Aug. 1998 Aug. 2006 15,402,428 13,067,000
Thomas Lake Eagan, MN 7.50 7.50 7.50 Jan. 2010 Dec. 2027 12,975,000 13,643,000
North Glen Atlanta, GA 7.00 7.00 (K) 7.00 Jul. 2005 Jun. 2017 12,400,000 12,914,000
Greenway Manor St. Louis, MO 8.93 (D) 8.50 8.50 Oct. 1998 Sept. 2006 12,850,000 15,313,000
Clarendon Hills Hayward, CA 6.31 (I) 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 13,880,000
Cedar Creek McKinney, TX 8.50 8.50 8.50 Dec. 1998 Dec. 2006 8,100,000 9,653,000
Sunset Terrace Lancaster, CA 5.23 (B) 8.00 Feb. 1999 May 2007 10,350,000 7,981,000
Bay Club Mt. Pleasant, SC 8.25 8.25 8.25 Sep. 2000 Sep. 2006 6,400,000 7,403,000
Loveridge Contra Costa, CA 5.00 (B) 8.00 Nov. 1998 Nov. 2006 8,550,000 6,593,000
The Lakes Kansas City, MO 5.64 (E) 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000 10,024,000
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000 5,692,000
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000 6,337,000
Highland Ridge St. Paul, MN 7.30 (C) 7.25 7.25 Jan. 2010 Jun. 2018 15,000,000 15,247,000
Newport Village Tacoma, WA 8.77 (D) 8.00 8.00 Jan. 1999 Jan. 2007 13,000,000 14,581,000
Sunset Downs Lancaster, CA 5.07 (B) 8.00 May 1999 May 2007 15,000,000 11,566,000
Pelican Cove St Louis, MO 7.89 (B) 8.00 Feb. 1999 Feb. 2007 18,000,000 20,189,000
Willow Creek Ames, IA 7.44 (C) 7.25 7.25 Jan. 2010 Jun. 2022 6,100,000 6,200,000
Cedar Pointe Nashville, TN 7.00 7.00 7.00 Apr. 2006 Apr. 2017 9,500,000 9,323,000
Shannon Lake Atlanta, GA 6.00 6.00 (M) Jul. 2005 Jun. 2017 12,000,000 11,536,000
Bristol Village Bloomington, MN 7.50 7.50 7.50 Jan. 2010 Dec. 2027 17,000,000 17,875,000
Suntree Ft. Myers, FL 6.59 6.50 (F) 8.00 Jul. 1999 Jul. 2007 7,500,000 7,586,000
River Run Miami, FL 9.11 (I) 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000 8,075,000
Players Club Ft. Myers, FL 6.22 6.25 (F) 8.00 Aug. 1999 Aug. 2007 9,700,000 8,704,000
Lakepoint Dekalb City, GA 6.00 6.00 6.00 Jul. 2005 Jun. 2017 15,100,000 12,702,000
Sunset Village Lancaster, CA 5.45 (B) 8.50 Mar. 2000 Mar. 2008 11,375,000 8,771,000
Sunset Creek Lancaster, CA 5.14 (B) 8.50 Mar. 2000 Mar. 2008 8,275,000 6,381,000
Orchard Mill Atlanta, GA 6.57 5.00 (J) 7.50 Jul. 2005 Jun. 2017 10,500,000 10,252,000
Countryside North Memphis, TN 7.50 7.50 7.50 Dec. 2017 Dec. 2034 5,000,000 5,100,000
Ocean Air Norfolk, VA 7.25 7.25 7.25 Jan. 2016 Nov. 2030 10,000,000 10,000,000
Phoenix Stockton, CA 7.125 7.125 7.125 Nov. 2016 Oct. 2029 3,250,000 3,250,000
Stone Creek Watsonville, CA 7.125 7.125 7.125 May 2017 Apr. 2040 8,820,000 8,820,000
Cedarbrook Hanford, CA 7.125 7.125 7.125 May 2017 May 2040 2,840,000 2,840,000
Marsh Landings Portsmouth, VA 7.25 7.25 7.25 Jul. 2017 Jul. 2030 6,050,000 6,050,000
College Park Naples, FL 7.00 7.00 (N) Jul. 2025 Jul. 2040 10,100,000 10,100,000
Gulfstream Dania, FL 7.25 7.25 7.25 Apr. 2016 Jul. 2038 3,500,000 3,500,000
Bedford Square Clovis, CA 7.00 7.00 (O) Sep. 2017 Aug. 2040 3,850,000 3,850,000
-57-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
ITEM 14, SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
Participating First Mortgage Bonds
Minimum Carrying
Average Pay Rate Stated Amount
Interest Rate at December Interest Maturity at December
Property Location Paid for 1998* 31, 1998* Rate* Call Date Date Face Amount 31, 1998 (G)(A)
- - ---- ----------- -------------- ---------- ------- ---------- ---------- ------------ ---------------
Northpointe Village Fresno, CA 8.085% 8.125% (P) Sep. 2017 Aug. 2040 $ 13,250,000 $ 13,250,000
Falcon Creek Indianapolis, IN 7.00 7.00 (H) Sep. 2016 Aug. 2038 6,144,600 6,144,600
Jubilee Courtyards Florida City, FL 7.00 7.00 (L) Oct. 2025 Sep. 2040 4,150,000 4,150,000
Silvercrest Clovis, CA 7.125 7.125 7.125% Oct. 2017 Sep. 2040 2,275,000 2,275,000
Carrington Pointe Los Banos, CA 6.375 6.375 6.375 Oct. 2017 Sep. 2040 3,375,000 3,375,000
Madalyn Landing Palm Bay, FL 7.00 7.00 7.00 Dec. 2017 Nov. 2040 14,000,000 14,000,000
Forest Hills Garner, NC 7.125 7.125 7.125 Jun. 2016 Jun. 2034 5,930,000 5,930,000
Lake Jackson Lake Jackson, TX 7.00 7.00 7.00 Jan. 2018 Jan. 2041 10,934,000 10,934,000
Mountain Ranch Austin, TX 7.125 7.125 7.125 Jan. 2018 Jan. 2041 9,128,000 9,128,000
------------ ------------
$471,199,028 $458,662,600
============ ============
*The average interest rate paid represents the interest recorded by the Company
while the stated interest rate represents the coupon rate of the FMB and the
minimum pay rate represents the minimum rate payable pursuant to the applicable
forbearance agreement, if any.
(A) Aggregate cost for federal income tax purposes is $174,925,192.
(B) The minimum pay rate is the current cash flow of the property.
(C) Includes contingent interest paid during 1998.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated
interest rate over the remaining term of the FMB.
(G) The FMBs are carried at their estimated fair values at December 31, 1998.
(H) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25%
thereafter.
(I) Includes receipt of primary contingent interest.
(J) Pursuant to a bond modification as of October 1, 1997 which lowered the
base interest rate to 7.50% effective October 1, 1997, subject to a minimum
pay rate of 5% through June 30, 2000.
(K) Pursuant to a forbearance agreement as of October 1, 1997 which lowered
the base interest rate to 7% through June 30, 2000 and 7.50% thereafter.
(L) The interest rates for Jubilee Courtyards are 7% through September 30, 2000
and 7.125% thereafter.
(M) Pursuant to a bond modification as of October 1, 1997, the base interest
rate was lowered to 6% through July 31, 2000 and 7% thereafter.
(N) The interest rates for College Park are 7% during the construction period
and 7.25% thereafter.
(O) The interest rates for Bedford Square are 7% during the construction period
and 6.375% thereafter.
(P) The interest rates for Northpointe Village are 7.965% through September 23,
1998, 8.125% during the remainder of the construction period and 7.5%
thereafter.
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CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
ITEM 14, SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
Participating First Mortgage Bonds
Reconciliation of FMBs:
1998 1997 1996
------------- ------------- -------------
Balance at beginning of period: $ 346,300,000 $ 148,123,426 $ 150,274,452
Acquisitions 117,596,600 173,557,007 0
Realized loss on impairment
of assets 0 (1,843,135) (4,000,000)
Net change in fair value of
participating first mortgage bonds (5,260,455) 26,436,248 1,822,519
Accretion of deferred income 26,455 26,454 26,455
------------- ------------- -------------
Balance at close of period: $ 458,662,600 $ 346,300,000 $ 148,123,426
============= ============= =============
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