SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-23972
AMERICAN MORTGAGE ACCEPTANCE COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 13-6972380
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) dentification No.)
625 Madison Avenue, New York, New York 10022
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes X No
----- -----
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
============ ============
March 31, December 31,
2004 2003
------------ ------------
(Unaudited)
ASSETS
Investments in debt securities - available for sale $ 157,262 $ 167,260
Real estate owned - held and used 7,602 --
Real estate owned - subject to sales contracts 52,112 51,616
Real estate owned - held for sale 17,924 25,802
Notes receivable, net 33,392 35,946
Investment in ARCap 20,240 20,240
Investments in mortgage loans, net 13,894 13,864
Revenue bonds - available for sale 7,569 7,586
Cash and cash equivalents 10,861 2,028
Other assets 2,222 2,765
--------- ---------
Total assets $ 323,078 $ 327,107
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Repurchase facilities payable $ 145,794 $ 149,529
Warehouse facility payable 35,030 34,935
Mortgage payable on real estate owned 15,993 15,993
Interest rate derivatives 871 278
Accounts payable and accrued expenses 538 1,552
Due to Advisor and affiliates 642 590
Distributions payable 3,335 3,335
--------- ---------
Total liabilities 202,203 206,212
--------- ---------
Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest; $.10 par value; 25,000,000
shares authorized; 8,713,376 issued and 8,338,180
outstanding in 2004 and 2003 871 871
Treasury shares of beneficial interest;
375,196 shares (38) (38)
Additional paid-in capital 126,832 126,779
Deferred compensation - stock options (66) (29)
Distributions in excess of net income (15,148) (15,138)
Accumulated other comprehensive income 8,424 8,450
--------- ---------
Total shareholders' equity 120,875 120,895
--------- ---------
Total liabilities and shareholders' equity $ 323,078 $ 327,107
========= =========
See accompanying notes to consolidated financial statements.
2
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in the thousands except per share amounts)
(Unaudited)
=========================
Three Months Ended
March 31,
-------------------------
2004 2003
-------------------------
Revenues:
Interest income:
Debt securities $ 2,337 $ 1,872
Mortgage loans 418 1,407
Notes receivable 667 918
Revenue bonds 168 --
Temporary investments 12 8
Rental income 263 --
Other income 1,129 28
----------- -----------
Total revenues 4,994 4,233
----------- -----------
Expenses:
Interest 892 407
General and administrative 268 243
Fees to Advisor 482 443
Property operations 239 --
Depreciation 249 --
Amortization and other 139 157
----------- -----------
Total expenses 2,269 1,250
----------- -----------
Other income:
Equity in earnings of ARCap 600 600
Net loss on sale or repayment of debt securities -- (391)
----------- -----------
Total other income 600 209
----------- -----------
Net income $ 3,325 $ 3,192
=========== ===========
Net income per share (basic and diluted) $ .40 $ .50
=========== ===========
Weighted average shares outstanding
Basic 8,338,180 6,363,630
=========== ===========
Diluted 8,362,247 6,363,630
=========== ===========
See accompanying notes to consolidated financial statements.
3
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
(Dollars in thousands)
(Unaudited)
Treasury Shares of
Shares of Beneficial Interest Beneficial Interest Additional
----------------------------- -------------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- ----------- ----------
Balance at January 1, 2004 $ 8,713,376 $ 871 (375,196) $ (38) $ 126,779
Comprehensive income:
Net income
Other comprehensive income:
Net unrealized loss on interest rate derivatives
Unrealized holding gain arising during the
period
Total other comprehensive income
Comprehensive income
Issuance of stock options 53
Deferred compensation costs
Distributions
----------- ----------- ----------- ----------- ----------
Balance at March 31, 2004 $ 8,713,376 $ 871 (375,196) $ (38) $ 126,832
=========== =========== =========== =========== ==========
Deferred Distributions Accumulated Other
Compensation in Excess Comprehensive Comprehensive
Stock Options of Net Income Income Income Total
------------- ------------- ------------- ----------------- -----------
Balance at January 1, 2004 $ (29) $ (15,138) $ 8,450 $ 120,895
Comprehensive income:
Net income 3,325 $ 3,325 3,325
-------------
Other comprehensive income:
Net unrealized loss on interest rate derivatives (871)
Unrealized holding gain arising during the
period 845
-------------
Total other comprehensive income (26) (26) (26)
-------------
Comprehensive income $ 3,299
=============
Issuance of stock options (53)
Deferred compensation costs 16 16
Distributions (3,335) (3,335)
------------- ------------- ----------- -----------
Balance at March 31, 2004 $ (66) $ (15,148) $ 8,424 $ 120,875
============= ============= =========== ===========
See accompanying notes to consolidated financial statements.
4
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
==========================
Three Months Ended
March 31,
--------------------------
2004 2003
----------- -----------
Cash flows from operating activities:
Net income $ 3,325 $ 3,192
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 249 --
Net loss on repayments of debt securities -- 391
Amortization - deferred financing costs 52 --
Amortization - deferred compensation costs 16 --
Amortization - loan premium and
origination costs and fees (70) (204)
Accretion of discount on debt securities 23 8
Changes in operating assets and liabilities:
Accrued interest receivable 560 (166)
Other assets (70) (71)
Due to (from) Advisor and affiliates 52 (79)
Accounts payable and accrued expenses (465) (410)
Accrued interest payable (549) 127
----------- -----------
Net cash provided by operating activities 3,123 2,788
----------- -----------
Cash flows from investing activities:
Funding of mortgage loans (94) (7,049)
Repayments of mortgage loans 79 9,350
Funding of notes receivable (95) (20,502)
Repayment of notes receivable 2,703 4,057
Principal repayments of debt securities 14,742 5,960
Investment in debt securities (4,199) (4,532)
Principal repayments on revenue bonds 17 --
Increase in restricted cash -- (8,282)
Additions to real estate owned (468) --
----------- -----------
Net cash provided by (used in) investing activities 12,685 (20,998)
----------- -----------
continued
5
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
==========================
Three Months Ended
March 31,
--------------------------
2004 2003
----------- -----------
Cash flows from financing activities:
Proceeds from repurchase facilities payable 6,060 21,184
Proceeds from warehouse facility payable 95 8,209
Repayments of repurchase facility payable (9,795) (15,499)
Distribution paid to shareholders (3,335) (2,545)
Increase in deferred financing costs -- 102
----------- -----------
Net cash provided by (used in) financing activities (6,975) 11,451
----------- -----------
Net increase (decrease) in cash and cash equivalents 8,833 (6,759)
Cash and cash equivalents at the beginning
of the period 2,028 10,404
----------- -----------
Cash and cash equivalents at the end of the
period $ 10,861 $ 3,645
=========== ===========
Supplemental information:
Interest paid $ 771 $ 430
=========== ===========
Conversion of mortgage loans to real estate owned:
Increase in real estate owned $ 7,920,000
Decrease in mortgage loans (7,920,000)
-----------
$ --
-----------
See accompanying notes to consolidated financial statements.
6
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 1 - General
American Mortgage Acceptance Company (the "Company") was formed on June 11, 1991
as a Massachusetts business trust. The Company elected to be treated as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code").
The Company's business plan focuses on originating and acquiring mortgages
secured by multifamily properties, which may take the form of government insured
first mortgages, insured mortgage pass-through certificates or insured mortgage
backed securities, and uninsured mezzanine loans, construction loans, and bridge
loans. Additionally, the Company has indirectly invested in subordinate
commercial mortgage-backed securities and may invest in other real estate
assets, including non-multifamily mortgages. The Company also issues guarantees
of construction and permanent financing and makes standby loan commitments.
The Company is governed by a board of trustees comprised of three independent
trustees and two non-independent trustees who are affiliated with CharterMac, an
American Stock Exchange listed company (AMEX:CHC). The Company has engaged
Related AMI Associates, Inc. (the "Advisor"), an affiliate of CharterMac, to
manage its day-to-day affairs. The Advisor has subcontracted with Related
Capital Company ("Related"), a subsidiary of CharterMac, to provide the services
contemplated. Through the Advisor, Related offers the Company a core group of
experienced staff and executive management providing the Company with services
on both a full and part-time basis. These services include, among other things,
acquisition, financial, accounting, tax, capital markets, asset monitoring,
portfolio management, investor relations and public relations services.
Effective November 17, 2003, CharterMac, an affiliate of the Advisor, acquired
Related, which included the Advisor. This acquisition did not affect the
Company's day-to-day operations or the services provided to the Company by the
Advisor. Ownership of the Advisor was transferred to CharterMac, but management
of the Advisor remained unchanged as the principals of Related who managed the
Advisor became executive officers of CharterMac and remain executive officers of
the Advisor.
The consolidated financial statements include the accounts of the Company and
three wholly-owned subsidiaries which it controls: AMAC Repo Seller, LLC,
AMAC/FM Corporation ("AMAC/FM") and AMAC Credit Facility, LLC. All intercompany
accounts and transactions have been eliminated in consolidation. Unless
otherwise indicated, the "Company" as hereinafter used, refers to American
Mortgage Acceptance Company and its subsidiaries.
Effective October 2003, the Company dissolved AMAC/FM due to the assignment of
all rights and obligations under the Fannie Mae loan program to PW Funding Inc.,
a subsidiary of CharterMac (see Note 11). AMAC/FM was formed to manage this
program.
The consolidated financial statements of the Company have been prepared without
audit. In the opinion of management, the financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of March 31, 2004 and
the results of its operations and its cash flows. However, the operating results
for the interim periods may not be indicative of the results for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP") have been condensed or
omitted. It is suggested that these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 2003.
The preparation of the consolidated financial statements in conformity with GAAP
requires the Company 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.
7
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
There are no new accounting pronouncements pending adoption that would have a
significant impact on the Company's consolidated financial statements. The
adoption of the following pronouncements during 2003 did not have a significant
impact on the consolidated financial statements:
o FASB Statement No. 145 "Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13 and Technical Corrections".
o FASB Statement No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities".
o FASB Interpretation No. 45, "Guarantors' Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others". The Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements
about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee.
o FASB Statement SFAS No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure, an amendment of FASB Statement No. 123".
o FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46") as amended and interpreted by FIN 46(R). Such
Interpretation addresses the consolidation of variable interest
entities ("VIEs"), including special purpose entities ("SPFs"), that
are not controlled through voting interests or in which the equity
investors do not bear the residual economic risks and rewards.
o FASB Statement SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities".
o FASB Statement SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity".
Certain prior year amounts have been reclassified to conform to the current year
presentation.
8
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 2 - Investments in Debt Securities-Available for Sale
Information relating to Debt Securities owned by the Company as of March 31,
2004 is as follows: (Dollars in thousands)
Date Purchased/ Amortized
Certificate Final Stated Cost at
Name Number Payment Date Interest Rate March 31, 2004
- ------------------- ----------- --------------- ------------- ---------------
GNMA CERTIFICATES
Western Manor (1) 355540 7/27/94 7.125% $ 2,454
3/15/29
SunCoast Capital Group, Ltd. (1) G002412 6/23/97 7.000% 199
4/20/27
Elmhurst Village (1) 549391 6/28/01 7.745% 21,572
1/15/42
Reserve at Autumn Creek (1)(2) 448748 6/28/01 7.745% 1,484
1/15/42
Village at Marshfield (1) 519281 3/11/02 7.475% 21,339
1/15/42
Cantera Crossing (1) 532663 3/28/02 6.500% 6,402
6/1/29
Filmore Park (1) 536740 3/28/02 6.700% 1,431
10/15/42
Northbrooke (1) 548972 5/24/02 7.080% 14,002
8/1/43
Ellington Plaza (1) 585494 7/26/02 6.835% 31,645
6/1/44
Burlington (1) 595515 11/1/02 5.900% 6,789
4/15/31
FNMA DUS CERTIFICATES
Cambridge (1) 385971 4/11/03 5.560% 3,653
3/1/33
Bayforest (1) 381974 4/21/03 7.430% 4,289
10/1/28
Coventry Place (1) 384920 5/9/03 6.480% 788
3/1/32
Rancho de Cieto (1) 385229 5/13/03 6.330% 2,598
9/1/17
Elmwood Gardens (1) 386113 5/15/03 5.350% 5,528
5/1/33
Interest Income
Earned Applicable
Unrealized to the Three Months
Gain (Loss) at Balance at Ended
Name March 31, 2004 March 31, 2004 March 31, 2004
- ------------------- -------------- -------------- -------------------
GNMA CERTIFICATES
Western Manor (1) $ (33) $ 2,421 $ 48
SunCoast Capital Group, Ltd. (1) 13 212 4
Elmhurst Village (1) 1,031 22,603 418
Reserve at Autumn Creek (1)(2) -- 1,484 29
Village at Marshfield (1) 738 22,077 360
Cantera Crossing (1) 916 7,318 105
Filmore Park (1) 157 1,588 24
Northbrooke (1) 2,106 16,108 245
Ellington Plaza (1) 4,253 35,898 479
Burlington (1) 183 6,972 99
FNMA DUS CERTIFICATES
Cambridge (1) 47 3,700 48
Bayforest (1) 57 4,346 63
Coventry Place (1) 7 795 12
Rancho de Cieto (1) (32) 2,566 32
Elmwood Gardens (1) 9 5,537 72
9
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
Date Purchased/ Amortized
Certificate Final Stated Cost at
Name Number Payment Date Interest Rate March 31, 2004
- ------------------- ----------- --------------- ------------- ---------------
30 West (1) 380751 5/27/03 6.080% 1,355
10/1/16
Jackson Park (1) 386139 5/30/03 5.150% 2,768
6/1/18
Courtwood (1) 386274 6/26/03 4.690% 1,759
6/1/33
Sultana (1) 386259 6/30/03 4.650% 4,090
6/1/23
Buena (1) 386273 6/30/03 4.825% 3,041
6/1/33
Allegro (1) 386324 6/30/03 5.380% 2,567
7/1/33
Village West (1) 386243 6/30/03 4.910% 784
6/1/21
Westwood/Monterey (1) 386421 9/15/03 5.090% 2,712
8/1/33
Euclid (1) 386446 9/15/03 5.310% 2,367
8/1/33
Edgewood (1) 386458 9/15/03 5.370% 2,351
9/1/33
---------------
Total $147,967
===============
Interest Income
Earned Applicable
Unrealized to the Three Months
Gain (Loss) at Balance at Ended
Name March 31, 2004 March 31, 2004 March 31, 2004
- ------------------- -------------- -------------- -------------------
30 West (1) (64) 1,291 15
Jackson Park (1) 20 2,788 35
Courtwood (1) (95) 1,664 20
Sultana (1) (267) 3,823 47
Buena (1) (149) 2,892 36
Allegro (1) (27) 2,540 34
Village West (1) (26) 758 9
Westwood/Monterey (1) 172 2,884 37
Euclid (1) 146 2,513 33
Edgewood (1) 133 2,484 33
---------------------------------------------------------
Total $ 9,295 $ 157,262 $ 2,337
=========================================================
(1)These GNMA and FNMA DUS certificates are partially or wholly-pledged as
collateral for borrowings under the repurchase facilities (see Note 7).
(2)In January 2004, the Company received proceeds in the approximate amount
of $14.5 million from HUD in relation to the paydown of the Reserve at
Autumn Creek GNMA certificate. This paydown approximated 90% of the total
outstanding balance of the underlying mortgage loan, which was the initial
payment pursuant to the FHA insurance claim made by the Company when the
borrower missed debt service payments. The remaining balance of
approximately $1.5 million is expected to be received in the second
quarter 2004, from the remaining amounts of the insurance and potentially
the guarantee from GNMA.
10
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
The amortized cost, unrealized gain and fair value for the investment in debt
securities at March 31, 2004 and December 31, 2003 were as follows:
(Dollars in thousands)
March 31, December 31,
2004 2003
------------ ------------
Amortized cost $147,967 $158,533
Net unrealized gain 9,295 8,727
-------- --------
Fair Value $157,262 $167,260
======== ========
As of March 31, 2004, there were gross unrealized gains and losses of
approximately $9,988,000 and approximately $693,000, respectively. As of
December 31, 2003, there were gross unrealized gains and losses of approximately
$10,040,000 and approximately $1,313,000, respectively.
Due to the complexity of the GNMA and FNMA DUS structure and the uncertainty of
future economic events and other factors that affect interest rates and mortgage
prepayments, it is not possible to predict the effect of future events upon the
yield to maturity or the market value of the debt securities upon any sale or
other disposition or whether the Company, if it chose to, would be able to
reinvest proceeds from prepayments at favorable rates relative to the coupon
rate.
The fair value and gross unrealized losses of the Company's debt securities
aggregated by length of time that individual debt securities have been in a
continuous unrealized loss position, at March 31, 2004, is summarized in the
table below:
(Dollars in thousands)
12
Less than Months
12 Months or More Total
------------------------------------------------------------------
Fair value $17,955 -- $17,955
Gross unrealized loss $ 693 -- $ 693
Of the Company's portfolio of debt securities, eight are in an unrealized loss
position at March 31, 2004. All of these securities have been in an unrealized
position for less than one year. These unrealized losses are as a result of
increases in interest rates subsequent to the acquisition of these securities.
All of the debt securities are performing according to their terms. Accordingly,
the Company has concluded that these impairments are only temporary.
11
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 3 - Notes Receivable
The Company's notes receivable are collateralized by equity interests in the
owner of the underlying property and consist of the following as of March 31,
2004:
(Dollars in thousands)
Remaining
Outstanding Committed
Principal Unamortized Carrying Balance to Interest
Property Location Balance Fees Amount Fund (1) Rate Maturity
- ------------------------------------------------------------------------------------------------------------------------------------
Noble Towers (2)(3) Oakland, CA $ 3,581 $ 25 $ 3,556 $3,719 9.75% July 2005
Clark's Crossing (2) Laredo, TX 1,074 -- 1,074 -- 12.00% October 2004
Valley View (2) North Little Rock, AR 400 -- 400 -- 12.00% July 2004
Georgia King (2) Newark, NJ 1,495 7 1,488 5 11.50% May 2004
Reserve at Thornton (2) Thornton, CO 260 8 252 690 11.00% August 2006
Concord at Gessner Land Houston, TX 188 -- 188 -- 8.00% December 2008
Del Mar Villas (4) Dallas, TX 5,554 -- 5,554 -- LIBOR + 4.625%(6) October 2004
Mountain Valley (5) Dallas, TX 6,306 22 6,284 -- LIBOR + 4.750%(6) November 2004
Baywoods (5) Antioch, CA 10,990 32 10,958 -- LIBOR + 4.000%(6) March 2005
Oaks of Baytown (5) Baytown, TX 2,432 13 2,419 1,393 LIBOR + 4.500%(6) August 2005
Quay Point (5) Houston, TX 1,223 4 1,219 -- LIBOR + 3.600%(6) August 2005
-----------------------------------------------
Total $ 33,503 $111 $33,392 $5,807
===============================================
(1) Funded on an as needed basis.
(2) These loans are to limited partnerships that are affiliated with the
Advisor (see Note 9).
(3) Affiliate of the Advisor has provided a full guarantee on the payment of
principal and interest due on this note.
(4) Effective April 2004, this note is no longer pledged as collateral in
connection with the warehouse facility with Fleet National Bank (see Note
8).
(5) Pledged as collateral in connection with the warehouse facility with Fleet
National Bank (see Note 8).
(6) 30-day LIBOR at March 31, 2004 was 1.09%.
12
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 4 - Investments in Mortgage Loans
Information relating to the Company's investments in mortgage loans as of March
31, 2004 is as follows:
(Dollars in thousands)
Final
Maturity Lifetime
Property Description Date Call Date (A) Interest Rate Interest Cap (C)
- -------- ----------- -------- ------------- -------------- ----------------
FIRST MORTGAGE LOANS:
Sunset Gardens
Eagle Pass, TX 60 Units 6/04 N/A 11.50% N/A
Alexandrine (G)
Detroit, MI 30 Units 12/03 N/A 11.00% N/A
Desert View (H)
Coolidge, AZ 45 Units 5/04 N/A 11.00% N/A
Subtotal First Mortgage Loans
MEZZANINE LOANS (I):
Properties in Lease-Up
The Hollows (J)
Greenville, NC 184 Units 1/42 1/12 10.00% (B) 16%
Elmhurst Village (K) (L)
Oveido, FL 313 Units 1/42 3/19 10.00% (B) 16%
Club at Brazos (J) (M)
Rosenberg, TX 200 Units 5/43 4/13 10.00% (B) 14%
Northbrooke (K) (L)
Harris County, TX 240 Units 8/43 7/13 11.50% (B) 14%
Subtotal Properties in Lease-Up
Properties in Construction/Rehabilitation
- -----------------------------------------
Del Mar Villas
Dallas, TX 260 Units 10/04 N/A LIBOR + 4.625% (N)
Mountain Valley
Dallas, TX 312 Units 11/04 N/A LIBOR + 4.750% (N)
Villas at Highpoint
Lewisville, TX 304 Units 4/33 TBD 14.57% N/A
Villas at Highpoint
Lewisville, TX 304 units 4/33 TBD 23.76% N/A
Share of
Share of Excess Sale or
Excess Operating Refinancing Periodic
Property Cash Flows Proceeds Payment Terms Prior Liens
- -------- ---------------- -------------- ------------- -----------
FIRST MORTGAGE LOANS:
Sunset Gardens
Eagle Pass, TX N/A N/A (F) --
Alexandrine (G)
Detroit, MI N/A N/A (F) --
Desert View (H)
Coolidge, AZ N/A N/A (F) --
Subtotal First Mortgage Loans
MEZZANINE LOANS (I):
Properties in Lease-Up
The Hollows (J)
Greenville, NC 50% 25% (F) $ 8,871
Elmhurst Village (K) (L)
Oveido, FL 50% 25% (F) 21,572
Club at Brazos (J) (M)
Rosenberg, TX 50% 25% (F) 14,326
Northbrooke (K) (L)
Harris County, TX 50% 50% (F) 13,857
Subtotal Properties in Lease-Up
Properties in Construction/Rehabilitation
- -----------------------------------------
Del Mar Villas
Dallas, TX N/A N/A (F) 5,554
Mountain Valley
Dallas, TX N/A N/A (F) 6,306
Villas at Highpoint
Lewisville, TX N/A N/A (F) 18,800
Villas at Highpoint
Lewisville, TX N/A N/A (F) --
Interest
Earned Applicable
Outstanding Carrying to the Three Months
Face Amount of Unamortized Amount of Ended
Property Mortgages (D) Costs and Fees Mortgages (E) March 31, 2004
- -------- -------------- -------------- ------------- -------------------
FIRST MORTGAGE LOANS:
Sunset Gardens
Eagle Pass, TX $ 1,479 $ -- $ 1,479 $ 43
Alexandrine (G)
Detroit, MI 342 -- 342 12
Desert View (H)
Coolidge, AZ 881 -- 881 26
------------------------------------------------------------------
Subtotal First Mortgage Loans 2,702 -- 2,702 81
------------------------------------------------------------------
MEZZANINE LOANS (I):
Properties in Lease-Up
The Hollows (J)
Greenville, NC 1,549 (129) 1,420 43
Elmhurst Village (K) (L)
Oveido, FL 2,875 (382) 2,492 80
Club at Brazos (J) (M)
Rosenberg, TX 1,962 (75) 1,887 49
Northbrooke (K) (L)
Harris County, TX 1,500 (132) 1,368 45
------------------------------------------------------------------
Subtotal Properties in Lease-Up 7,885 (718) 7,167 217
------------------------------------------------------------------
Properties in Construction/Rehabilitation
- -----------------------------------------
Del Mar Villas
Dallas, TX 765 -- 765 11
Mountain Valley
Dallas, TX 776 -- 776 11
Villas at Highpoint
Lewisville, TX 2,599 (144) 2,455 98
Villas at Highpoint
Lewisville, TX 68 (39) 29 --
------------------------------------------------------------------
Subtotal Properties in Construction/Rehabilitation 4,208 (183) 4,025 120
------------------------------------------------------------------
Subtotal Mezzanine Loans 12,093 (901) 11,192 337
------------------------------------------------------------------
Total Mortgage Loans $14,795 $ (901) $13,894 $ 418
==================================================================
13
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
(A) Loans are subject to mandatory prepayment at the option of the Company ten
years after construction completion, with one year's notice. Loans with a
call date of "TBD" are still under construction.
(B) Interest on the mezzanine loans is based on a fixed percentage of the
unpaid principal balance of the related first mortgage loans. The amount
shown is the approximate effective rate earned on the balance of the
mezzanine loan. The mezzanine loans also provide for payments of additional
interest based on a percentage of cash flow remaining after debt service
and participation in sale or refinancing proceeds and certain provisions
that cap the Company's total yield, including additional interest and
participations, over the term of the loan.
(C) Lifetime interest cap represents the maximum annual return, including
interest, fees and participations, that can be earned by the Company over
the life of the mezzanine loan, computed as a percentage of the balance of
the first mortgage loan plus the mezzanine loan.
(D) As of March 31, 2004, all interest payments on the mortgage loans are
current, except as noted.
(E) Carrying amounts of the loans are net of unamortized origination costs and
fees and loan discounts.
(F) Interest only payments are due monthly, with loan balance due at maturity.
(G) The first mortgage loan, which matured in December 2003, was paid off in
April 2004.
(H) Loan purchased in April 2003 in connection with the performance under a
guarantee made by the Company.
(I) The principal balance of the mezzanine loans is secured by the partnership
interests of the entity that owns the underlying property and a third
mortgage deed of trust. Interest payments on the mezzanine loans are
secured by a second mortgage deed of trust and are guaranteed for the first
36 months after construction completion by an entity related to the general
partner of the entity that owns the underlying property.
(J) The Company does not have an interest in the first lien position relating
to this mezzanine loan.
(K) The Company has an interest in the first lien position relating to this
mezzanine loan.
(L) The first mortgage loans related to these properties were converted from
participations in FHA loans to ownership of the GNMA certificates and are
held by the Company - see Note 2.
(M) The funding of this mezzanine loan is based on property level operational
achievements.
(N) Interest cap on these loans is the maximum rate permitted by law.
14
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 5 - Real Estate Owned
The Company foreclosed on certain mortgage loans and notes receivable during
2003. The Company's real estate owned at March 31, 2004 consisted of the
following:
(Dollars in thousands)
Number of Carrying
Units Location Value
----------- ------------- -----------
Real estate owned - held and used
- ---------------------------------
Plaza at San Jacinto (1)
(net of accumulated depreciation) 132 La Porte, TX $ 7,602
=== ========
Real estate owned - subject to sales contracts
- ----------------------------------------------
Concord at Little York (2) 276 Houston, TX $16,423
Concord at Gessner (2) 288 Houston, TX 17,447
Concord at Gulfgate (2) 288 Houston, TX 18,242
--- --------
Total real estate owned -
subject to sales contracts 852 $ 52,112
=== ========
Real estate owned -- held for sale
- ----------------------------------
Reserve at Autumn Creek (3) 212 Friendswood, TX $ 17,924
=== ========
(1) On March 7, 2003, the Company exercised its rights under the subordinated
promissory note and other documents to take possession of the real estate
collateral of the Plaza at San Jacinto. On May 6, 2003, the Company acquired the
real estate at a foreclosure auction. The Company classified its investment in
this property as real estate owned - held for sale. However, the Company has
been focused on increasing the occupancy and the operating income generated from
the property. The Company has reclassified the property as real estate owned -
held and used on March 7, 2004 and has begun to depreciate the property. The
Company has also recaptured depreciation for the period the property had been
classified as held for sale. Depreciation on the property at March 31, 2004
totaled approximately $249,000 and is recorded on the consolidated statement of
income. As operations begin to improve, the property will be marketed for sale.
Operations of the property at March 31, 2004, have also been recorded on the
consolidated statement of income.
(2) The three properties underlying these notes receivable stopped making
interest payments in May 2003. The Company subsequently exercised its rights
under the subordinated promissory notes and other documents and took possession
of all three properties. The Company purchased the first mortgages and acquired
the real estate at foreclosure auctions. The Company subsequently sold all three
properties to a qualified 501 (c)(3) entity during 2003. Due to the fact that
the Company provided 100% financing, these properties continue to be carried as
real estate owned - subject to sales contracts. Income from operations of all
three properties at March 31, 2004, totaled approximately $1.1 million and is
recorded as other income on the consolidated statement of income.
(3) Certain required debt service payments have been missed, causing the Reserve
at Autumn Creek mezzanine loan to be in default. During October 2003, the
Company exercised its rights under the subordinated promissory note and other
documents to take possession of the real estate collateral of the Reserve at
Autumn Creek property, subject to the first mortgage loan. The first mortgage
loan, in the approximate amount of $15,993,000, bears interest at a fixed rate
of 8% per annum and matures January 2042. The Company has reclassified its
investment in the Reserve at Autumn Creek to real estate owned - held for sale
on the consolidated balance sheet. The Company is currently focused on
15
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
increasing the occupancy and the operating income generated from the property.
As operations begin to improve, the property will be marketed for sale.
NOTE 6 - Taxable Revenue Bonds
During October 2003, the Company purchased nine taxable revenue bonds at a
discount (99% of par) from CharterMac in the amount of $7.6 million. The nine
taxable revenue bonds, each of which is secured by a first mortgage position
held by CharterMac on a multifamily property, carry a weighted average interest
rate of 8.69%. The price paid was determined by an independent third party
valuation of the taxable revenue bonds. This transaction was approved by the
Company's Board of Trustees. The Company's estimate of each revenue bond's fair
value was equal to its amortized cost at March 31, 2004.
NOTE 7 - Repurchase Facilities
The Company had a repurchase facility with Nomura Securities International Inc.
("Nomura"). In January 2004, Nomura notified the Company that it intended to
terminate the repurchase facility. In February 2004, the Company executed
repurchase agreements with Greenwich Capital, Bear Stearns and RBC Capital
Markets ("the Counterparties"), and in the first week of March 2004, the Company
executed multiple transactions whereby the repurchase transactions outstanding
with Nomura were paid off from the funds of three new transactions with the
Counterparties.
The terms of the Nomura facility allowed the Company to borrow up to 97% of the
fair market value of GNMA and FNMA DUS certificates owned by the Company.
Interest on borrowings were at a 30-day LIBOR plus 0.02%. As of December 31,
2003, the amounts outstanding under this facility were $149.5 million, and
weighted average interest rates were 1.56%. Deferred costs relating to this
facility have been fully amortized.
The terms of the Greenwich Capital, Bear Stearns and RBC Capital Markets
repurchase agreements offer advance rates between 94% and 97% of the fair market
value of GNMA and FNMA DUS certificates, determined by the Counterparties and
borrowing rates between 30-day LIBOR minus 3 basis points and 30-day LIBOR plus
10 basis points, which may change at the discretion of the Counterparties. The
borrowings are subject to 30-day settlement terms. As of March 31, 2004, amounts
outstanding under these repurchase facilities were $18.8, $19.1 and $107.9
million, respectively, at interest rates of 1.07%, 1.10% and 1.20%,
respectively.
A significant risk associated with these facilities is that the market value of
the securities sold by the Company may decline and that the Company will be
required to post additional collateral. See Note 2 for securities posted as
collateral in connection with these facilities.
NOTE 8- Warehouse Facility
In October 2002, the Company entered into a mortgage warehouse line of credit
with Fleet National Bank (the "Fleet Warehouse Facility") in the amount of up to
$40 million. Under the terms of the Fleet Warehouse Facility, Fleet will advance
up to 83% of the total loan package, to be used to fund notes receivable, which
the Company will make to its customers for the acquisition/refinancing and minor
renovation of existing, lender-approved multifamily properties. This facility,
which matures April 2006, bears interest at a rate of 30-, 60-, 90- or 180-day
LIBOR + 200 basis points, or prime, at the discretion of the Company, payable
monthly on the total amounts advanced. Principal is due upon the earlier of
refinance or sale of the underlying project or upon maturity. The Company pays a
fee of 12.5 basis points, paid quarterly, on any unused portion of the facility.
From time to time, the Company will use this facility to finance real estate
owned. As of March 31, 2004 and December 31, 2003, the Company had approximately
$35.0 and $34.9 million, respectively, in borrowings outstanding under this
program. As of April 2004, the Company's borrowing period under this facility
has expired.
16
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
During April 2004, the Company repaid the outstanding balance of the Del Mar
Villas loan from Fleet in the approximate amount of $4.6 million. The Del Mar
Villas note receivable is no longer pledged as collateral in connection with
this warehouse facility.
NOTE 9 - Related Party Transactions
The costs incurred to related parties for the three months ended March 31, 2004
and 2003 were as follows:
Three Months Ended
March 31,
---------------------
2004 2003
---------------------
Expense reimbursement $169 $147
Asset management fees 313 249
Incentive fee -- 47*
---- ----
$482 $443
==== ====
* During September 2003, the Company and its Advisor agreed to amend its
management agreement regarding the payment of an incentive management fee to
the Advisor. Under the terms of the amended agreement, there is no change to
the calculation of the incentive management fee. However, the incentive
management fee is only earned by the Advisor if the Company attains $1.60 in
GAAP earnings per share for the calendar year. Based on the amendment to the
agreement and the Company's 2003 earnings per share of $1.52, the Company did
not incur an incentive management fee in 2003. The $47,000 accrual made in
the first quarter of 2003 was reversed out in the third quarter of 2003.
Some of the Company's notes receivable (see Note 3), the stabilization loan
guarantees and the standby loan commitments described in Note 11 are to limited
partnerships in which the general partner is an unaffiliated third party and the
limited partner is itself a limited partnership in which an affiliate of the
Advisor is the general partner.
The Noble Towers note receivable is guaranteed by an affiliate of the Advisor
(see Note 3).
The Company has indemnified an affiliate of the Advisor (see Note 11).
NOTE 10 - Earnings Per Share
Basic net income per share in the amount $.40 and $.50 for the three months
ended March 31, 2004 and 2003, respectively, equals net income for the periods
($3,324,469 and $3,192,151, respectively), divided by the weighted average
number of shares outstanding, which were 8,338,180 and 6,363,630, respectively.
Diluted net income per share is calculated using the weighted average number of
shares outstanding during the period plus the additional dilutive effect of
common share equivalents. The dilutive effect of outstanding share options is
calculated using the treasury stock method.
Diluted net income per share in the amount of $.40 for the three months ended
March 31, 2004 equals net income for the period ($3,324,469), divided by the
weighted average number of shares outstanding for the period (8,362,247).
Diluted net income per share equaled basic net income per share.
17
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 11 - Commitments and Contingencies
Upon taking possession of the real estate collateral supporting the Concord at
Gulfgate loan, the Company has been named in a lawsuit filed by the limited
partners of partnership that owned the property. Subsequently, the Company has
filed a countersuit against the limited partners seeking to recover unpaid taxes
and misappropriated property receipts. The Company is currently unable to
determine the possible outcome of the litigation, but does not believe it will
have a material impact on the consolidated financial statements.
In September 2003, the Company entered into a letter of agreement with PW
Funding Inc. ("PWF"), a subsidiary of CharterMac, each of which are affiliates
of the Advisor, under which the Company transferred and assigned all of its
rights and obligations to two loans it originated to PWF. There was no payment
made or received by the Company in connection with this transfer. CharterMac has
agreed to guarantee PWF's performance with regard to these two loans, which in
turn, allowed for the release of approximately $8.3 million in collateral
pledged by the Company to secure its obligations under the loan program. In
turn, the Company indemnified PWF against any losses to Fannie Mae on the loans
and indemnified CharterMac against any obligation under its guaranty. The
maximum aggregate exposure to the Company under the agreement is approximately
$7.5 million. However, the Company believes that it will not be called upon to
fund any of these guarantees and, accordingly, that the fair value of the
guarantees is insignificant.
18
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
Standby and Forward Loan and GNMA Commitments
- ---------------------------------------------
The Company has issued the following standby and forward bridge and permanent
loan commitments for the purpose of constructing/rehabilitating certain
multifamily apartment complexes in various locations.
(Dollars in thousands)
STANDBY AND
FORWARD BRIDGE LOAN COMMITMENTS
- ---------------------------------------
MAXIMUM AMOUNT OF COMMITMENTS
-------------------------------------------------
ISSUE DATE PROJECT LOCATION NO. OF APT. UNITS LESS THAN 1 YEAR 1-3 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Feb-03 Noble Towers Oakland, CA 195 $ -- $ 3,719 (1)
Aug-03 Oaks of Baytown Baytown, TX 248 1,393 (2) --
Nov-03 Georgia King Newark, NJ 422 5 --
Dec-03 Reserve at Thornton Thornton, CO 216 690 (2) --
----------------------------------------------------------------------
TOTAL STANDBY AND FORWARD BRIDGE LOAN COMMITMENTS 1,081 $2,088 $ 3,719
======================================================================
STANDBY AND FORWARD MEZZANINE LOAN
COMMITMENTS
----------------------------------------
MAXIMUM AMOUNT OF COMMITMENTS
-------------------------------------------------
ISSUE DATE PROJECT LOCATION NO. OF APT. UNITS LESS THAN 1 YEAR 1-3 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
April-03 Villas at Highpoint Lewisville, TX 304 $ -- $ 625
----------------------------------------------------------------------
TOTAL STANDBY AND FORWARD MEZZANINE LOAN COMMITMENTS 304 $ -- $ 625
======================================================================
19
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
FORWARD GNMA COMMITMENTS
- ------------------------
MAXIMUM AMOUNT OF COMMITMENTS
-----------------------------------------------
DATE PURCHASED PROJECT LOCATION LESS THAN 1 YEAR 1-3 YEARS
- ----------------------------------------------------------------------------------------------------------
May-02 Ellington Plaza Washington, DC $ 6,079 (2) $ --
-----------------------------------------------
TOTAL FORWARD GNMA COMMITMENTS $ 6,079 --
-----------------------------------------------
TOTAL STANDBY AND FORWARD LOAN AND GNMA COMMITMENTS $ 8,167 $ 4,344
===============================================
(1) Fundings will be on an as needed basis to complete rehabilitation of the
property.
(2) Funding has already begun. Amount represents remaining commitment expected
to be funded.
20
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
Stabilization Loan Guarantees
- -----------------------------
During 2002, the Company guaranteed the following loans in relation to the
construction of affordable multifamily apartment complexes in various locations.
The construction loan guarantees will provide credit support for the following
projects after construction completion, through the date on which the borrower
obtains permanent financing.
During October 2002, the Company entered into an agreement with Wachovia Bank,
National Association ("Wachovia") to provide stabilization guarantees for new
construction of multifamily properties under the Low Income Housing Tax Credit
("LIHTC") program. Wachovia already provides construction and stabilization
guarantees to Fannie Mae, for loans Wachovia originates under the Fannie Mae
LIHTC forward commitment loan program, but only for loans within regions of the
country Wachovia has designated to be within its territory. For loans outside
Wachovia's territory, the Company has agreed to issue a stabilization guarantee,
for the benefit of Wachovia. The Company is guarantying that properties which
have completed construction will stabilize and the associated construction loans
will convert to permanent Fannie Mae loans. The Company receives origination and
guarantee fees from the developers for providing the guarantees. If the
properties do not stabilize with enough Net Operating Income for Fannie Mae to
fully fund its commitment for a permanent loan, the Company may be required to
purchase the construction loan from Wachovia or to fund the difference between
the construction loan amount and the reduced Fannie Mae permanent loan amount.
(Dollars in thousands)
MAXIMUM AMOUNT OF
GUARANTEE
LOAN
ADMINISTRATION
FEE (1) STABILIZATION
LESS THAN (ANNUAL GUARANTEE FEE
DATE CLOSED PROJECT LOCATION NO. OF UNITS 1 YEAR 1-3 YEARS PERCENTAGE) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Jul-02 Clark's Crossing Laredo, TX 160 $ 4,790 $ -- 0.500% 0.625%
Sep-02 Creekside Apts. Colorado Springs, CO 144 7,500 -- 0.375% --
Oct-02 Village at Meadowbend (3) Temple, TX 138 -- 3,675 0.500% 0.750%
Nov-02 Mapleview Apartments (3) Saginaw, MI 104 -- 3,240 0.625% 0.247%
---------------------------------------------------------------------
Total Stabilization Loan Guarantees 546 $12,290 $ 6,915 -- --
=====================================================================
(1) Loan Administration Fee is paid on quarterly basis during the guarantee
period.
(2) Stabilization Guarantee Fee is an up-front fee - paid at closing and
amortized over the guarantee period.
(3) Guarantee was made under Wachovia Bank, National Association Guarantee
Agreement.
For each of these guarantees, and for the guarantees issued under the Fannie Mae
program discussed in the second paragraph of this Note 11, the Company monitors
the status of the underlying properties and evaluates its exposure under the
guarantees. To date, the Company has concluded that no accrual for probable
losses is required under SFAS 5.
21
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 12 - Financial Risk Management and Derivatives
In March 2003, the Company entered into a five-year interest rate swap in order
to reduce the Company's exposure to any possible increases in the floating
interest rate on its Repurchase Facilities (Note 7). Under the interest rate
swap agreement, the Company is required to pay Fleet National Bank (the
"Counterparty") a fixed rate of 3.48% on a notional amount of $30 million. In
return, the Counterparty will pay the Company a floating rate equivalent to
30-day LIBOR.
The average 30-day LIBOR rate for the three months ended March 31, 2004, was
1.09%. A possible risk of such swap agreements is the possible inability of the
Counterparty to meet the terms of the contracts with the Company; however, there
is no current indication of such an inability.
The Company accounts for this swap under Statement of Financial Accounting
Standards No. 133, as amended and interpreted. Accordingly, the Company has
documented its established policy for risk management and its objectives and
strategies for the use of derivative instruments to potentially mitigate such
risks. The Company evaluates its interest rate risk on an ongoing basis to
determine whether or not it would be advantageous to engage in any further
hedging transactions. At inception, the Company designated the interest rate
swap as cash flow hedges on the variable interest payments on its floating rate
financing. Accordingly, the interest rate swap will be recorded at the fair
market value at the end of each accounting period, with changes in the market
value being recorded in other comprehensive income to the extent that the hedge
is effective in achieving offsetting cash flows. Amounts accumulated in other
comprehensive income are reclassified into earnings in the same period or
periods during which the hedged forecasted transaction affects earnings. The
Company assesses, both at the inception of the hedge and on an ongoing basis
whether the swap agreement is highly effective in offsetting changes in the cash
flows of the hedged financing. Any ineffectiveness in the hedging relationship
is immediately recorded in earnings. The Company's assessment is that this swap
will be highly effective.
At March 31, 2004, this interest rate swap was recorded as a liability with a
fair market value of approximately $871,248, included in interest rate
derivatives on the consolidated balance sheet.
NOTE 13 - Subsequent Events
During April 2004, the Alexandrine first mortgage was paid down. The Company
received total proceeds of $342,000.
During April 2004, the Company repaid the outstanding balance of the Del Mar
Villas loan from Fleet in the approximate amount of $4.6 million.
In May 2004, a distribution of $3,335,272, ($0.40 per share), which was declared
in March 2004, will be paid to shareholders for the quarter ended March 31,
2004.
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
- --------
The Company is a real estate investment trust specializing in multifamily
housing finance. The Company originates and acquires mezzanine loans, bridge
loans, and government-insured first mortgages secured by multifamily housing
properties throughout the United States. The Company seeks to increase the
return on its asset base by investing in higher yielding assets while balancing
risk by maintaining a portion of its investments in government-insured or
agency-guaranteed loans.
The Company primarily generates revenue from the collection of interest income
from mezzanine loans, bridge loans, and debt securities. The Company also earns
fees on standby loan commitments and stabilization guarantees that it makes.
The Company is managed by an affiliate of CharterMac, which provides services
including, among other things, acquisition, financial, accounting, tax, capital
markets, asset monitoring, portfolio management, investor relations, and public
relation services. A significant amount of the expenditures made by the Company
are in the form of fees paid to the Advisor for these services rendered. The
Company also incurs costs relating to interest expense on debt.
Results of Operations
- ---------------------
2003 was a challenging year for the Company as several of its loans went into
default and the Company took aggressive steps to protect its investments. In
certain instances this required the Company to invest additional capital to
acquire senior mortgage positions and subsequently foreclose its position to
acquire the real estate securing the loans. The Company believes that to date it
has been successful in protecting its investments and over time it will recover
all its invested capital.
As a result of the foreclosures, the Company now has a significant amount of
real estate owned on its balance sheet. The Company has been focused on, and has
achieved, in some cases, increasing the occupancy level and operating income of
the properties to projected stabilization levels. During the first quarter of
2004, the Company has experienced increasing yields on several of its foreclosed
assets. As property level operations continue to improve, the Company will seek
to sell or refinance the properties with third parties such that the Company can
redeploy the capital invested in higher yielding investments.
Interest income from debt securities increased approximately $465,000 for the
three months ended March 31, 2004 as compared to 2003 primarily due to the
purchase of fifteen FNMA DUS certificates during 2003 at an average interest
rate yield of 5.49%.
Interest income from mortgage loans decreased approximately $989,000 for the
three months ended March 31, 2004 as compared to 2003 primarily due to the
receipt of additional interest and prepayment penalties from the repayment of
the Stonybrook II first mortgage and mezzanine loan in 2003.
Interest income from notes receivable decreased approximately $251,000 for the
three months ended March 31, 2004 as compared to 2003 primarily due to the
default of required debt service payments from Concord at Gessner, Concord at
Little York and Concord at Gulfgate notes.
Interest income from revenue bonds in the approximate amount of $168,000,
relating to the purchase of nine taxable revenue bonds in October 2003, was
recorded for three months ended March 31, 2004. The nine taxable revenue bonds
carry a weighted average interest rate of 8.69%.
Rental income of approximately $263,000 was recorded for the three months ended
March 31, 2004 due to the reclassification of Plaza San Jacinto as real estate
owned - held and used.
Other income increased approximately $1,101,000 for the three months ended March
31, 2004 as compared to 2003 due to the increase in net operating income picked
up from the operations of foreclosed properties.
Interest expense increased approximately $485,000 for the three months ended
March 31, 2004 as compared to 2003 due to the increased borrowings on the Fleet
Warehouse Facility (approximately $202,000), additional borrowings under the
repurchase facilities (approximately $112,000), as well as the addition of an
interest rate swap agreement (approximately $172,000), put into place in April
2003 to mitigate the impact of interest rate fluctuations on the Company's cash
flows and earnings.
23
Property operations of approximately $239,000 were recorded for the three months
ended March 31, 2004 due to the reclassification of Plaza San Jacinto as real
estate owned - held and used.
Depreciation expense of approximately $249,000 was recorded for the three months
ended March 31, 2004 relating to the reclassification of the Plaza at San
Jacinto property from real estate-held for sale to real estate owned - held and
used. Depreciation was captured for the first quarter of 2004, as well as for
the full year that the property was classified as held for sale.
A loss on the repayment of debt securities in the amount of approximately
$391,000 was recorded for the three months ended March 31, 2003, relating to the
write-off of a purchase premium due to the repayment of one GNMA certificate.
Funds from Operations
- ---------------------
Funds from operations ("FFO"), represents net income or loss (computed in
accordance with GAAP), excluding gains (or losses) from sales of property, plus
depreciation and amortization and including funds from operations for
unconsolidated joint ventures calculated on the same basis. FFO is calculated in
accordance with the National Association of Real Estate Investment Trusts
("NAREIT") definition. FFO does not represent cash generated from operating
activities in accordance with GAAP, which is disclosed in the consolidated
statements of cash flows included in the consolidated financial statements for
the applicable periods, and is not necessarily indicative of cash available to
fund cash needs. There are no material legal or functional restrictions on the
use of FFO. FFO should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flows as a measure of liquidity. Management considers FFO a supplemental measure
of operating performance, and, along with cash flow from operating activities,
financing activities, and investing activities, it provides investors with an
indication of the ability of the Company to incur and service debt, make capital
expenditures, and to fund other cash needs.
FFO, as calculated in accordance with the NAREIT definition, for the three
months ended March 31, 2004 is summarized in the following table:
Three Months Ended
(Dollars in thousands) March 31, 2004
------------------
Net income $ 3,325
Add back: depreciation of real property 249
-----------
FFO $ 3,574
===========
Cash flows from:
Operating activities $ 3,123
===========
Investing activities $ 12,685
===========
Financing activities $ (6,975)
===========
Weighted average shares outstanding:
Basic 8,338,180
===========
Diluted 8,362,247
===========
During the three months ended March 31, 2003, the Company did not take
depreciation expense on any of its real estate owned. Therefore, FFO for the
three months ended March 31, 2003 would be equivalent to net income for the
period.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2004, the Company had total assets of approximately $323.1 million.
At March 31, 2004, the Company owned approximately $157.3 million in GNMA and
FNMA certificates, or representing approximately 48.7% of the Company's assets.
The Company generally seeks to maintain at least 40% of its investments in
government-insured or guaranteed investments.
At March 31, 2004, the Company owned approximately $11.2 million in mezzanine
loans, approximately $2.7 million in mortgage loans, and approximately $33.4
24
million in total bridge loans (approximately $26.4 million in floating-rate
bridge loans and approximately $7.0 million in fixed-rate bridge loans) funded
in connection with the development of multifamily properties. The Company also
owned approximately $77.6 million in real estate that was foreclosed upon, $7.6
million in taxable revenue bonds and an indirect investment in commercial
mortgage backed securities through the Company's $20.2 million preferred equity
interest in ARCap.
During the three months ended March 31, 2004, cash and cash equivalents
increased approximately $8,833,000 primarily due to principal repayments of debt
securities of $14,742,000, proceeds from repurchase facilities payable of
$6,060,000 and repayment of notes receivable of $2,703,000, offset by repayment
of repurchase facilities payable of $9,795,000 and investment in debt securities
of $4,199,000.
The Company finances the acquisition of its assets primarily through borrowing
at short-term rates using demand repurchase agreements and the mortgage
warehouse line of credit (see below). Under the Company's declaration of trust,
the Company may incur permanent indebtedness of up to 50% of total market value
calculated at the time the debt is incurred. Permanent indebtedness and working
capital indebtedness may not, in the aggregate, exceed 100% of the Company's
total market value.
On April 23, 2003, the Company completed a public offering of 1,955,000 common
shares at a price of $15.00 per share, resulting in proceeds, net of
underwriters discount and expenses, of approximately $27.5 million. The net
proceeds from the public offering were used to fund investments.
The Company has the capacity to raise an additional approximate amount of $170
million in either common or preferred shares remaining under a shelf
registration statement filed with the Securities and Exchange Commission during
2002. If market conditions warrant, the Company may seek to raise additional
funds up to this amount for investment through further common and/or preferred
offerings in the future, although the timing and amount of such offerings cannot
be determined at this time.
The Company had a repurchase facility with Nomura Securities International Inc.
("Nomura"). In January 2004, Nomura notified the Company that it intended to
terminate the repurchase facility. In February 2004, the Company executed
repurchase agreements with Greenwich Capital, Bear Stearns and RBC Capital
Markets ("the Counterparties"), and in the first week of March 2004, the Company
executed multiple transactions whereby the repurchase transactions outstanding
with Nomura were paid off from the funds of three new transactions with the
Counterparties.
The terms of the Nomura facility allowed the Company to borrow up to 97% of the
fair market value of GNMA and FNMA DUS certificates owned by the Company.
Interest on borrowings were at a 30-day LIBOR plus 0.02%. As of December 31,
2003, the amounts outstanding under this facility were $149.5 million, and
weighted average interest rates were 1.56%. Deferred costs relating to this
facility have been fully amortized.
The terms of the Greenwich Capital, Bear Stearns and RBC Capital Markets
repurchase agreements offer advance rates between 94% and 97% of the fair market
value of GNMA and FNMA DUS certificates, determined by the Counterparties and
borrowing rates between 30-day LIBOR minus 3 basis points and 30-day LIBOR plus
10 basis points, which may change at the discretion of the Counterparties. The
borrowings are subject to 30-day settlement terms. As of March 31, 2004, amounts
outstanding under these repurchase facilities were $18.8, $19.1 and $107.9
million, respectively, at interest rates of 1.07%, 1.10% and 1.20%,
respectively.
Of the Company's portfolio of debt securities, eight are in an unrealized loss
position, totaling approximately $693,000, at March 31, 2004. All of these
securities have been in an unrealized position for less than one year. These
unrealized losses are as a result of increases in interest rates subsequent to
the acquisition of these securities. All of the debt securities are performing
according to their terms. Accordingly, the Company has concluded that these
impairments are only temporary.
In October 2002, the Company entered into the Fleet Warehouse Facility with
Fleet National Bank in the amount of $40 million. Advances under the warehouse
facility, up to 83% of the total loan package, will be used to fund notes
receivable, which the Company will make to its customers for the
acquisition/refinancing and minor renovation of existing, lender-approved
multifamily properties located in stable sub-markets. The warehouse facility,
which matures April 2006, bears an interest rate of 30-, 60-, 90- or 180-day
LIBOR + 200 basis points, at the discretion of the Company, payable monthly on
advances. Principal is due upon the earlier of refinance or sale of the
underlying property or upon maturity. The Company pays a fee of 12.5 basis
points, paid quarterly, on any unused portion of the facility. From time to
time, the Company will use this facility to finance real estate owned. As of
March 31, 2004 and December 31, 2003, the Company had approximately $35.0
25
million and $34.9 million, respectively, in loans outstanding under this
program. As of April 2004, the Company's borrowing period under this facility
has expired.
In order to qualify as a REIT under the Code, as amended, the Company must,
among other things, distribute at least 90% of its taxable income. The Company
believes that it is in compliance with the REIT-related provisions of the Code.
The Company expects that cash generated from the Company's investments, as well
as cash generated from additional borrowings from the new repurchase facilities,
will meet its needs for short-term liquidity and will be sufficient to pay all
of the Company's expenses and to make distributions to its shareholders in
amounts sufficient to retain the Company's REIT status in the foreseeable
future.
In May 2004, a distribution of $3,335,272 ($.40 per share), which was declared
in March 2004, will be paid to the shareholders for the quarter ended March 31,
2004.
For a summary of the Company's commitments and contingencies at March 31, 2004,
see Note 11 to the consolidated financial statements.
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.
Distributions
- -------------
Of the total distributions of $3,335,272 and $2,545,452 for the three months
ended March 31, 2004 and 2003, respectively, $10,803 (.32%) represented a return
of capital for the three months ended March 31, 2004 and there was no return of
capital for the three months ended March 31, 2003 determined in accordance with
GAAP. As of March 31, 2004, the aggregate amount of the distributions made since
the commencement of the initial public offering representing a return of
capital, in accordance with GAAP, totaling $15,148,583. The portion of the
distributions which constituted a return of capital was significant during the
initial acquisition stage in order to maintain level distributions to
shareholders.
Critical Accounting Policies
- ----------------------------
The Company's critical accounting policies are described in its Form 10-K for
the year ended December 31, 2003. These critical accounting policies have not
changed during 2004, but the Company has entered into certain transactions which
involve new critical accounting policies as described in the following
paragraphs.
The Company has reclassified one of its properties out of real estate owned -
held for sale to real estate owned - held and used due to the fact that the
Company is currently focused on increasing the occupancy and operating income
generated from the property prior to marketing the property for sale. As a
result, the Company has begun depreciating the property, as well as catching up
with depreciation for the period that it was classified as held for sale.
It is the Company's policy to reclassify any held for sale property after one
year of attempting to market the property for sale. Depreciation will be taken
for the full year that the property was classified as held for sale and any
current period going forward until the asset is sold. Buildings are depreciated
on a straightline basis over their estimated useful lives, generally 40 years.
Any furniture and fixtures are depreciated using a 7 year useful life.
Off-Balance Sheet Arrangements
- ------------------------------
The Company has no unconsolidated subsidiaries, special purpose off-balance
sheet financing entities, or other off-balance sheet arrangements.
26
Contractual Obligations
- -----------------------
In conducting business, the Company enters into various contractual obligations.
Detail of these obligations, including expected settlement periods, is contained
below.
Payments Due by Period
(Dollars in thousands)
Less than More than
Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years
-------- --------- ----------- ----------- ----------
Debt:
Lines of credit:
Repurchase facilities $145,794 $145,794 $ -- $ -- $ --
Fleet warehouse facility 35,030 23,853 11,177 -- --
Mortgage loan 15,993 -- -- -- 15,993
Contingent Liabilities:
Standby and forward bridge
loan commitments 5,807 2,088 3,719 -- --
Standby and forward mezza-
nine loan commitments 625 -- 625 -- --
Forward GNMA commit-
ments 6,079 6,079 -- -- --
Stabilization loan guarantees 19,205 12,290 6,915 -- --
-------- -------- -------- ------- --------
Total $228,533 $190,104 $ 22,436 $ -- $ 15,993
======== ======== ======== ======= ========
(1) Represents contractual maturity of mortgage loan on real estate owned.
However, it is the Company's intention to find a buyer who will assume this
obligation in the near term.
Forward-Looking Statements
- --------------------------
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements include statements regarding the intent, belief
or current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things, affect the availability and creditworthiness of prospective tenants,
lease rents and the terms and availability of financing; adverse changes in the
real estate markets including, among other things, competition with other
companies; risks of real estate development and acquisition; governmental
actions and initiatives; and environment/safety requirements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof.
Inflation
- ---------
Inflation did not have a material effect on the Company's results for the
periods presented.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. The primary
market risk to which the investments of the Company is exposed is interest rate
risk, which is highly sensitive to many factors, including governmental monetary
and tax policies, domestic and international economic and political
considerations and other factors beyond the control of the Company.
INTEREST RATE RISK
Interest rate fluctuations can adversely affect the Company's income and value
of its common shares in many ways and present a variety of risks, including the
risk of mismatch between asset yields and borrowing rates.
The Company's operating results will depend in large part on differences between
the income from its assets (net of credit losses) and its borrowing costs. Most
of the Company's assets generate fixed returns and have terms in excess of five
years. The Company funds the origination and acquisition of a significant
portion of these assets with borrowings which have interest rates that reset
relatively rapidly, such as monthly or quarterly. In most cases, the income from
assets will respond more slowly to interest rate fluctuations than the cost of
27
borrowings, creating a mismatch between asset yields and borrowing rates.
Consequently, changes in interest rates, particularly short-term interest rates,
may influence the Company's net income. The Company bears interest at rates that
fluctuate with LIBOR.
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. During March 2003, upon management's analysis of the interest rate
environment and the costs and risks of such strategies, the Company entered into
an interest rate swap in order to hedge against increases in the floating
interest rate on its Repurchase Facilities. On March 25, 2003, the Company
entered into a five-year interest rate swap agreement with Fleet National Bank
("Fleet") whereby the Company has agreed to pay Fleet a fixed 3.48% on a
notional amount of $30 million. In return, Fleet will pay the Company a floating
rate equivalent to the 30-day LIBOR rate on the same notional amount. This
effectively fixes $30 million of the Company's secured borrowings at 3.48%,
protecting the Company in the event the 30-day LIBOR rate rises. A possible risk
of such swap agreements is the possible inability of Fleet to meet the terms of
the contracts with the Company; however, there is no current indication of such
an inability.
Based on the $150.8 million unhedged portion of $180.8 million of borrowings
outstanding under these facilities at March 31, 2004, a 1% change in LIBOR would
impact the Company's annual net income and cash flows by approximately $1.5
million. However, due to the fact that the interest income from loans made by
the Company under the Fleet Warehouse Facility are also based on LIBOR, a 1%
increase in LIBOR would increase the Company's annual net income and cash flows
from such loans by approximately $210,000. Increases in these rates will
decrease the net income and market value of the Company's net assets. Interest
rate fluctuations that result in interest expense exceeding interest income
would result in operating losses.
The value of the Company's assets may be affected by prepayment rates on
investments. Prepayment rates are influenced by changes in current interest
rates and a variety of economic, geographic and other factors beyond the
Company's control, and consequently, such prepayment rates cannot be predicted
with certainty. When the Company originates mortgage loans, it expects that such
mortgage loans will have a measure of protection from prepayment in the form of
prepayment lock-out periods or prepayment penalties. However, such protection
may not be available with respect to investments which the Company acquires, but
does not originate. In periods of declining mortgage interest rates, prepayments
on mortgages generally increase. If general interest rates decline as well, the
proceeds of such prepayments received during such periods are likely to be
reinvested by the Company in assets yielding less than the yields on the
investments that were prepaid. In addition, the market value of mortgage
investments may, because of the risk of prepayment, benefit less from declining
interest rates than from other fixed-income securities. Conversely, in periods
of rising interest rates, prepayments on mortgages generally decrease, in which
case the Company would not have the prepayment proceeds available to invest in
assets with higher yields. Under certain interest rate and prepayment scenarios
the Company may fail to recoup fully its cost of acquisition of certain
investments.
REAL ESTATE RISK
Multifamily and commercial property values and net operating income derived from
such properties are subject to volatility and may be affected adversely by a
number of factors, including, but not limited to, national, regional and local
economic conditions (which may be adversely affected by industry slowdowns and
other factors); local real estate conditions (such as an oversupply of housing,
retail, industrial, office or other commercial space); changes or continued
weakness in specific industry segments; construction quality, age and design;
demographic factors; retroactive changes to building or similar codes; and
increases in operating expenses (such as energy costs). In the event net
operating income decreases, a borrower may have difficulty paying the Company's
mortgage loan, which could result in losses to the Company. In addition,
decreases in property values reduce the value of the collateral and the
potential proceeds available to a borrower to repay the Company's mortgage
loans, which could also cause the Company to suffer losses.
RISK IN OWNING SUBORDINATED INTERESTS
The Company has invested indirectly in subordinated CMBS through its ownership
of a $20.2 million preferred membership interest in ARCap. Subordinated CMBS of
the type in which ARCap invests include "first loss" and non-investment grade
subordinated interests. A first loss security is the most subordinate class in a
structure and accordingly is the first to bear the loss upon a default on
restructuring or liquidation of the underlying collateral and the last to
receive payment of interest and principal. Such classes are subject to special
risks, including a greater risk of loss of principal and non-payment of interest
than more senior, rated classes. The market values of subordinated interests in
CMBS and other subordinated securities tend to be more sensitive to changes in
28
economic conditions than more senior, rated classes. As a result of these and
other factors, subordinated interests generally are not actively traded and may
not provide holders with liquidity of investment. With respect to the Company's
investment in ARCap, the ability to transfer the membership interest in ARCap is
further limited by the terms of ARCap's operating agreement.
PARTICIPATING INTEREST
In connection with the acquisition and origination of mortgages, the Company
has, on occasion, obtained and may continue to obtain participating interests
that may entitle it to payments based upon a development's cash flow, profits or
any increase in the value of the development that would be realized upon a
refinancing or sale of the development. Competition for participating interests
is dependent to a large degree upon market conditions. Participating interests
are more difficult to obtain when mortgage financing is available at relatively
low interest rates. In the current interest rate environment, the Company may
have greater difficulty obtaining participating interest. Participating
interests are not government insured or guaranteed and are therefore subject to
the general risks inherent in real estate investments. Therefore, even if the
Company is successful in investing in mortgage investments which provide for
participating interests, there can be no assurance that such interests will
result in additional payments.
REPURCHASE FACILITIES COLLATERAL RISK
Repurchase agreements involve the risk that the market value of the securities
sold by the Company may decline and that the Company will be required to post
additional collateral, reduce the amount borrowed or suffer forced sales of the
collateral. If forced sales were made at prices lower than the carrying value of
the collateral, the Company would experience additional losses. If the Company
is forced to liquidate these assets to repay borrowings, there can be no
assurance that the Company will be able to maintain compliance with the REIT
asset and source of income requirements.
BRIDGE AND MEZZANINE LOAN RISK
The Company has originated and expects to continue to originate bridge and
mezzanine loans. These types of mortgage loans are considered to involve a
higher degree of risk than long-term senior mortgage lending secured by
income-producing real property due to a variety of factors, including the loan
becoming unsecured as a result of foreclosure by the senior lender. The Company
may not recover some or all of its investment in such loans. In addition, bridge
loans and mezzanine loans may have higher loan to value ratios than conventional
mortgage loans resulting in less equity in the property and increasing the risk
of loss of principal.
ITEM 4. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chief
Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of
the period covered by this report. Based on such evaluation, such officers
have concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective.
(b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any
significant changes in the Company's internal control over financial
reporting during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
29
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 27, 2003, prior to taking possession of the real estate
collateral supporting the Gulfgate loan, the Company was named in a
lawsuit, Concord Gulfgate, Ltd. vs. Robert Parker, Sunrise Housing
Ltd., and American Mortgage Acceptance Company, Cause No. 2003-59290 in
the State District Court of Harris County, Texas. The suit claims,
among other causes of action against the respective defendants, that
the Company conducted wrongful foreclosure in that the Guarantor did
not derive any benefit from the Company's loan and that the limited
partners of the Guarantor did not authorize the loan transaction. The
suit seeks, among other relief, actual, consequential, exemplary, and
punitive damages, a declaration that the loan made by the Company is
unenforceable, and that the Company was involved in a conspiracy to
defraud the Guarantor. The suit is currently in the discovery phase.
Subsequently, the Company has filed a countersuit against the limited
partners seeking to recover unpaid taxes and misappropriated property
receipts. The Company is currently unable to determine the possible
outcome of the litigation.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY
SECURITIES - None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION
Stuart A. Rothstein resigned his position as Chief Financial Officer
("CFO") of the Company effective March 31, 2004, in order to pursue
other endeavors. Alan P. Hirmes, the Executive Vice President of the
Company, replaced Mr. Rothstein as the new CFO.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
10(c) Third Amendment to Amended and Restated Advisory Services
Agreement between Related AMI Associates, Inc. and the Company
dated November 12, 2003.
31.1 Chief Executive Officer certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Chief Financial Officer certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Reports on Form 8-K
The following 8-K reports were filed or furnished, as noted in the
applicable Form 8-K, for the quarter ended March 31, 2004.
Current report on form 8-K, filed on March 3, 2004, relating to the
press release regarding the Company's fourth quarter and year end
results for 2003.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN MORTGAGE ACCEPTANCE COMPANY
(Registrant)
Date: May 10, 2004 By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
Trustee, Chairman of the Board,
President and Chief Executive Officer
Date: May 10, 2004 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Trustee, Chief Operating Officer and
Chief Financial Officer
Exhibit 31.1
CERTIFICATION
I, Stuart J. Boesky, hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ending March 31, 2004 of American Mortgage Acceptance Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure the
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of March 31, 2004 (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors or persons
performing the equivalent functions:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 10, 2004 By: /s/ Stuart J. Boesky
------------ --------------------
Stuart J. Boesky
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Alan P. Hirmes, hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ending March 31, 2004 of American Mortgage Acceptance Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure the
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of March 31, 2004 (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors or persons
performing the equivalent functions:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 10, 2004 By: /s/ Alan P. Hirmes
------------ ------------------
Alan P. Hirmes
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18.U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Mortgage Acceptance Company
(the "Company") on Form 10-Q for the period ending March 31, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Stuart J. Boesky, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
Chief Executive Officer
May 10, 2004
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18.U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Mortgage Acceptance Company
(the "Company") on Form 10-Q for the period ending March 31, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Alan P. Hirmes, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Financial Officer
May 10, 2004
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.