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 JUNE 30, 2005
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
Commission File Number 0-23972
AMERICAN MORTGAGE ACCEPTANCE COMPANY
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Massachusetts 13-6972380
--------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 317-5700
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
----- -----
As of July 31, 2005, 8,311,226 shares of the Registrant's shares of beneficial
interest, $0.10 par value, were outstanding.
TABLE OF CONTENTS
AMERICAN MORTGAGE ACCEPTANCE COMPANY
FORM 10-Q
PAGE
PART I
Item 1. Condensed Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 21
PART II
Item 1. Legal Proceedings 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 23
Item 6. Exhibits 23
SIGNATURES 25
See accompanying notes to condensed consolidated financial statements.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
ASSETS
June 30, December 31,
2005 2004
----------- -----------
(Unaudited)
Investments in debt securities $ 230,308 $ 194,587
Investments in mortgage loans, net 42,458 21,376
Notes receivable, net 15,424 23,111
Investments in revenue bonds 6,656 6,672
Investment in ARCap 20,240 20,240
Real estate owned - held and used, net 51,317 60,211
Real estate owned - held for sale 19,175 17,924
Cash and cash equivalents 8,849 2,674
Other assets 3,720 2,238
--------- ---------
Total assets $ 398,147 $ 349,033
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Repurchase facilities payable $ 201,140 $ 157,633
Warehouse facility payable 4,070 3,827
Line of credit - due to related party -- 4,600
Mortgages payable on real estate owned 40,748 56,993
Preferred shares of subsidiary (subject to mandatory repurchase) 25,000 --
Accounts payable and accrued expenses 1,158 1,344
Due to Advisor and affiliates 1,231 770
Distributions payable 3,335 3,334
--------- ---------
Total liabilities 276,682 228,501
--------- ---------
Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest; $.10 par value; 25,000 shares authorized;
8,717 issued and 8,311 outstanding in 2005 and 8,716 issued and 8,337
outstanding in 2004 872 871
Treasury shares of beneficial interest at par; 406 shares in 2005 and 379
shares in 2004 (41) (38)
Additional paid-in capital 126,433 126,800
Share - based compensation -- (16)
Distributions in excess of net income (17,977) (17,202)
Accumulated other comprehensive income 12,178 10,117
--------- ---------
Total shareholders' equity 121,465 120,532
--------- ---------
Total liabilities and shareholders' equity $ 398,147 $ 349,033
========= =========
See accompanying notes to condensed consolidated financial statements.
3
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Interest income:
Debt securities $ 3,339 $ 2,406 $ 6,371 $ 4,743
Mortgage loans 1,148 377 1,763 795
Notes receivable 378 599 857 1,266
Revenue bonds 146 168 293 336
Temporary investments 67 8 84 20
Rental income of real estate owned - held and used 1,699 1,804 3,505 3,710
Other revenues 499 34 657 48
------- ------- ------- -------
Total revenues 7,276 5,396 13,530 10,918
------- ------- ------- -------
Expenses:
Interest 1,735 836 2,917 1,728
Interest - distributions to preferred shareholders of
subsidiary (subject to mandatory repurchase) 432 -- 500 --
General and administrative 468 387 905 643
Fees to Advisor 680 682 1,374 1,164
Property operations of real estate
owned-held and used 837 617 1,625 1,396
Mortgage interest for real estate owned - held and used 603 -- 1,208 --
Depreciation 336 59 702 308
Amortization and other 91 64 224 203
------- ------- ------- -------
Total expenses 5,182 2,645 9,455 5,442
------- ------- ------- -------
Other income:
Equity in earnings of ARCap 600 600 1,200 1,200
Income from real estate owned - held
for sale 375 -- 621 --
------- ------- ------- -------
Total other income 975 600 1,821 1,200
------- ------- ------- -------
Net income $ 3,069 $ 3,351 $ 5,896 $ 6,676
======= ======= ======= =======
Net income per share (basic and diluted) $ 0.37 $ 0.40 $ 0.71 $ 0.80
======= ======= ======= =======
Dividends per share $ 0.40 $ 0.40 $ 0.80 $ 0.80
======= ======= ======= =======
Weighted average shares outstanding:
Basic 8,311 8,336 8,324 8,337
======= ======= ======= =======
Diluted 8,311 8,336 8,327 8,345
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
4
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
2005 2004
-------- --------
Cash flows from operating activities:
Net income $ 5,896 $ 6,676
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 702 308
Amortization and accretion 176 52
Other non-cash expense 20 20
Changes in operating assets and liabilities:
Accrued interest receivable (461) 774
Other assets (250) (548)
Due to Advisor and affiliates 462 347
Accounts payable and accrued expenses (122) (458)
Accrued interest payable 81 (587)
-------- --------
Net cash provided by operating activities 6,504 6,584
-------- --------
Cash flows from investing activities:
Investment in debt securities (40,443) (6,600)
Principal repayments of debt securities 6,384 15,018
Purchase of mortgage on real estate owned (17,150) --
Proceeds from sale of real estate owned 7,474 --
Funding of notes receivable (472) (3,722)
Repayment of notes receivable 8,177 2,852
Paydown on property classified as real estate owned - held and used 480 --
Additions to real estate owned (14) --
Principal repayments on revenue bonds 104 793
Funding of mortgage loans (21,178) (189)
Repayments of mortgage loans -- 531
-------- --------
Net cash (used in) provided by investing activities (56,638) 8,683
-------- --------
continued
5
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
2005 2004
-------- --------
Cash flows from financing activities:
Proceeds from repurchase facilities 63,548 9,653
Repayments of repurchase facilities (20,041) (16,814)
Proceeds from warehouse facility 243 484
Repayments of warehouse facility -- (4,561)
Proceeds from line of credit - due to related party 14,761 3,122
Repayment of line of credit - due to related party (19,361) --
Distribution paid to shareholders (6,671) (6,671)
Deferred financing costs (802) --
Treasury stock purchases (368) (52)
Issuance of preferred shares of subsidiary 25,000 --
-------- --------
Net cash provided by (used in) financing activities 56,309 (14,839)
-------- --------
Net increase in cash and cash equivalents 6,175 428
Cash and cash equivalents at the beginning of the year 2,674 2,028
-------- --------
Cash and cash equivalents at the end of the period $ 8,849 $ 2,456
======== ========
See accompanying notes to condensed consolidated financial statements.
6
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of American
Mortgage Acceptance Company and its wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation. Unless
otherwise indicated, we herein refer to American Mortgage Acceptance Company and
its subsidiaries as "AMAC", "we", "us", "our", and "our Company". We are
externally managed by Related AMI Associates, Inc., which acts as our Advisor.
We operate in one business segment.
In March 2005, we formed AMAC Capital Financing I ("ACFI"), a wholly owned
trust, for the purpose of issuing trust preferred securities, which are subject
to mandatory repurchase in March 2035 and are callable in March 2010 (see Note
7).
The condensed consolidated financial statements have been prepared without
audit. In the opinion of management, the financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly our financial position as of June 30, 2005, and the results of
our operations and our cash flows. However, the operating results for interim
periods may not be indicative of the results for the full year.
Certain information and footnote disclosures normally included in annual
consolidated 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 consolidated financial statements and notes thereto
included in our Form 10-K for the year ended December 31, 2004.
Our annual report on Form 10-K for the year ended December 31, 2004, contains a
summary of our significant accounting policies. There have been no material
changes to these items since December 31, 2004; however, we have entered into a
transaction during 2005 which involves a new significant accounting policy (see
Note 7).
The preparation of the consolidated financial statements in conformity with GAAP
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities as of 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.
Certain prior year amounts have been reclassified to conform to the current year
presentation, in particular, the reclassification of results of operations of
our real estate owned - held and used portfolio.
NOTE 2 - INVESTMENTS IN DEBT SECURITIES - AVAILABLE FOR SALE
During the first quarter of 2005, we purchased six Fannie Mae ("FNMA")
certificates with principal amounts totaling approximately $34.3 million. The
certificates were purchased at premiums totaling approximately $96,000 with a
weighted average maturity date of January 2033 and bear interest at rates
ranging from 4.90% per year to 6.65% per year.
During the second quarter of 2005, we purchased an additional FNMA certificate
with a principal amount of $3.9 million. The certificate, which matures May
2023, was purchased at a premium of approximately $23,000 and bears interest at
a rate of 5.60% per year.
During January 2005, one Ginnie Mae ("GNMA") certificate was repaid at par. We
received approximately $2.4 million in proceeds.
During February 2005, one FNMA certificate was repaid. We received approximately
$3.2 million in proceeds, resulting in a write off of an unamortized discount of
approximately $47,000, which is included in other revenues in the condensed
consolidated statements of income.
7
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
Information regarding our investments in debt securities is as follows:
(In thousands)
June 30, December 31,
2005 2004
---------- ------------
Amortized cost $ 218,560 $ 184,576
Unrealized gains 12,125 11,370
Unrealized losses (377) (1,359)
--------- ---------
Net unrealized gain 11,748 10,011
--------- ---------
Fair value $ 230,308 $ 194,587
========= =========
The fair value and gross unrealized losses of our debt securities aggregated by
length of time that these individual debt securities have been in a continuous
unrealized loss position, at June 30, 2005, and December 31, 2004, is summarized
in the table below:
(Dollars in thousands)
June 30, 2005 December 31, 2004
-------------------------------- --------------------------------
Fewer than 12 Months Fewer than 12 Months
12 Months or More Total 12 Months or More Total
---------- --------- ------- ---------- --------- -------
Number of securities 1 5 6 11 7 18
Fair value $13,775 $12,333 $26,108 $46,055 $16,832 $62,887
Gross unrealized loss $ 141 $ 236 $ 377 $ 515 $ 844 $ 1,359
These unrealized losses are as a result of increases in interest rates
subsequent to the acquisition of the securities. All of the debt securities are
performing according to their terms. Furthermore, we have the intent and ability
to hold these securities to maturity, or at least until interest rates change
such that the fair value is no longer less than book value. Accordingly, we have
concluded that these impairments are temporary.
At June 30, 2005, debt securities with a fair value of approximately $229.0
million were partially or wholly pledged as collateral under our repurchase
facilities. At June 30, 2005, we had approximately $16.4 million, available to
borrow off of partially or unpledged debt securities.
NOTE 3 - INVESTMENTS IN MORTGAGE LOANS
During May 2005, we were called upon to fund a $7.5 million first mortgage in
connection with a loan stabilization guarantee (see Note 11). The loan, which we
expect to be repaid when permanent financing is arranged, bears interest at a
rate of 6.82% per year.
During May 2005, we funded approximately $3.1 million of a $7.3 million
mezzanine loan secured by a land parcel, which matures April 2007 and bears
interest at a rate of 20% per year. We also received a loan origination fee of
$146,000, which is deferred and will be recorded as income ratably over the life
of the loan.
During May 2005, we funded approximately $6.9 million of an approximate $8.4
million mezzanine loan secured by multifamily housing, which matures December
2007 and bears interest at a rate of LIBOR + 12.75% per year.
During June 2005, we funded approximately $3.3 million for a mezzanine loan
secured by a shopping center, which matures June 2015 and bears interest at a
rate of 10.25% per year.
8
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
NOTE 4 - NOTES RECEIVABLE
During the six months ended June 30, 2005, several notes receivable have
partially or fully repaid. We have received a total of approximately $8.2
million in proceeds relating to repayments of these notes.
NOTE 5 - REAL ESTATE OWNED
Our real estate owned at June 30, 2005, and December 31, 2004, consisted of the
following:
(dollars in thousands)
Carrying Value
Carrying Value as of
Number of as of December 31,
Units Location June 30, 2005 2004
--------- --------------- ------------- ------------
Real Estate Owned - Held and Used
---------------------------------
Plaza at San Jacinto (1) -- La Porte, TX $ -- $ 7,929
Less: accumulated depreciation -- -- (425)
--------- --------- --------
Total Plaza at San Jacinto, net -- -- 7,504
--------- --------
Concord Portfolio 852 Houston, TX 53,707 54,425
Less: accumulated depreciation -- (2,390) (1,718)
--------- --------- --------
Total Concord Portfolio, net 852 51,317 52,707
--------- --------
Total Real Estate Owned - Held and Used, net 852 $ 51,317 $ 60,211
========= ========= ========
Real Estate Owned - Held for Sale
---------------------------------
Reserve at Autumn Creek (2) 212 Friendswood, TX $ 19,175 $ 17,924
========= ========= ========
Mortgages Payable on Real Estate Owned
--------------------------------------
Concord Portfolio $ 40,748 $ 41,000
Reserve at Autumn Creek (2) -- 15,993
--------- --------
Total Mortgages Payable on Real Estate
Owned $ 40,748 $ 56,993
========= ========
(1) During February 2005, the Plaza at San Jacinto property was sold to an
unaffiliated third party. We received approximately $7.4 million in
proceeds from the sale, which approximated the property's carrying value.
Accordingly, no gain or loss was recorded.
(2) During February 2005, we purchased the first mortgage on the Reserve at
Autumn Creek property at a foreclosure auction for approximately $17.2
million.
9
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
NOTE 6 - REPURCHASE FACILITIES
During June 2005, we executed a new repurchase agreement with UBS Financial
Services, which offers us an advance rate of 97% and a borrowing rate set at
30-day LIBOR. The borrowings are subject to 30-day settlement terms. We
transferred ten FNMA and GNMA certificates previously held as collateral on our
RBC repurchase facility to this facility, and the amount outstanding under this
facility at June 30, 2005, was approximately $51.1 million with a weighted
average interest rate of 3.26%.
NOTE 7 - SUBSIDIARY EQUITY
During March 2005, ACFI issued 25,000 Floating Rate Preferred Securities, having
a stated liquidation amount of $1,000 per security. We received approximately
$24.2 million in proceeds, net of closing costs, which are deferred and will be
amortized ratably over a 30-year period to the redemption date. The securities
are callable in March 2010 and bear interest, re-set quarterly, equal to 30-day
LIBOR plus 3.75%. At June 30, 2005, the rate was 7.09%.
SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS
OF BOTH LIABILITIES AND EQUITY, requires that mandatorily redeemable financial
instruments be classified as liabilities in the consolidated financial
statements and the payments or accruals of dividends and other amounts to be
paid to the holders of these securities be reported as interest costs. Due to
the mandatory redemption feature, we have classified these securities as
liabilities and recorded and carry them at fair value.
NOTE 8 - RELATED PARTY TRANSACTIONS
The costs paid or payable to our Advisor for the three and six months ended June
30, 2005 and 2004, were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2005 2004 2005 2004
------ ------ ------ ------
Shared services expenses $ 210 $ 187 $ 456 $ 356
Asset management fees 382 305 710 618
Incentive management fee* 88 190 208 190
------ ------ ------ ------
$ 680 $ 682 $1,374 $1,164
====== ====== ====== ======
* Accrual based on our estimates of 2005 full-year results.
In June 2004, we entered into a revolving credit facility (the "Revolving
Facility") with CharterMac, an affiliated company and parent of our Advisor. The
Revolving Facility, which is unsecured, provides up to $20.0 million in
borrowings to purchase new investments. As of June 30, 2005, we had no
outstanding borrowings on this facility. At December 31, 2004, we had $4.6
million in borrowings outstanding on this facility at an interest rate of 5.42%.
This facility expires in June 2006, pursuant to a one year extension.
10
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
NOTE 9 - COMPREHENSIVE INCOME
Comprehensive income for the six months ended June 30, 2005 and 2004, was as
follows:
(In thousands) Six Months Ended
June 30,
--------------------
2005 2004
-------- --------
Net income $ 5,896 $ 6,676
Net unrealized gain (loss) on interest rate derivatives
arising during the period 237 (54)
Unrealized holding gain (loss) on investments arising during
the period 1,824 (2,679)
------- -------
Total comprehensive income $ 7,957 $ 3,943
======= =======
NOTE 10 - EARNINGS PER SHARE
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.
(In thousands, except per share amounts)
Three Months Ended June 30, 2005: Income Shares Per Share
------ ------ ---------
Basic EPS $3,069 8,311 $0.37
Effect of dilutive securities -- -- --
------ ------ -----
Diluted EPS $3,069 8,311 $0.37
====== ====== =====
Three Months Ended June 30, 2004:
Basic EPS $3,351 8,336 $0.40
Effect of dilutive securities -- -- --
------ ------ -----
Diluted EPS $3,351 8,336 $0.40
====== ====== =====
Six Months Ended June 30, 2005:
Basic EPS $5,896 8,324 $0.71
Effect of dilutive securities -- 3 --
------ ------ -----
Diluted EPS $5,896 8,327 $0.71
====== ====== =====
Six Months Ended June 30, 2004:
Basic EPS $6,676 8,337 $0.80
Effect of dilutive securities -- 8 --
------ ------ -----
Diluted EPS $6,676 8,345 $0.80
====== ====== =====
11
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
NOTE 11 - COMMITMENTS AND CONTINGENCIES
a) Legal
On October 27, 2003, prior to taking possession of the real estate collateral
supporting a loan investment, we were named in a lawsuit, Concord Gulfgate, Ltd.
vs. Robert Parker, Sunrise Housing Ltd., and American Mortgage Acceptance
Company, Cause No. 2003-59290 in the 133rd Judicial District Court of Harris
County, Texas. The suit alleges that the loan transaction was not properly
authorized by the partnership and was not for a legitimate partnership purpose.
The suit claims, among other causes of action against the respective defendants,
wrongful foreclosure of the real estate collateral, tortious interference with
contract and civil conspiracy. The suit seeks, among other relief, actual,
consequential, and exemplary damages, and a declaration that the loan documents
are unenforceable and constitute a cloud on title. The discovery phase of this
suit has been completed. A summary judgment was filed by us, but was denied on
July 25, 2005. It is not known when the case will be called to trial.
We filed a countersuit on November 25, 2003, against Concord Gulfgate, Ltd., as
guarantor, seeking a deficiency on the loan, and recovery of unpaid taxes and
certain property receipts. We are currently unable to determine the possible
outcome of the litigation.
b) Guarantees
In June and October of 2000, we originated two loans totaling $3.3 million under
an agreement with Fannie Mae that provided for our guaranteeing a first-loss
position on the loans. In September 2003, we transferred and assigned all of our
obligations with respect to the two loans we originated under this program to
CharterMac Mortgage Capital Corp. ("CMC"), a subsidiary of CharterMac, both of
which are affiliates of our Advisor. Pursuant to the agreement with CMC,
CharterMac guaranteed CMC's obligations under the loans, and we agreed to
indemnify both CMC and CharterMac for any losses incurred in exchange for
retaining all fees which we were otherwise entitled to receive under the
program. While provisions of this agreement could potentially result in exposure
of up to $7.5 million, the maximum exposure at June 30, 2005 was $3.2 million,
and we expect that we will not be called upon to fund these guarantees.
In the first quarter of 2003, we discontinued our loan program with Fannie Mae
and will issue no further guarantees pursuant to such program.
For these guarantees, we monitor the status of the underlying properties and
evaluate our exposure under the guarantees. To date, we have concluded that no
accrual for probable losses is required under SFAS No. 5, ACCOUNTING FOR
CONTINGENCIES.
12
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
Standby and Forward Loan Commitments
------------------------------------
We issued the following standby and forward bridge and permanent loan
commitments for the purpose of funding construction/rehabilitation of certain
multifamily apartment complexes in various locations.
STANDBY AND FORWARD BRIDGE LOAN COMMITMENTS
-------------------------------------------
(In thousands)
MAXIMUM AMOUNT OF COMMITMENT
----------------------------
NO. OF APT. LESS THAN
ISSUE DATE PROJECT LOCATION UNITS 1 YEAR 1-3 YEARS
---------------------------------------------------------------------------------------------------------
May-04 Oak Village Oakland, CA 117 $ 967 $ --
Jun-04 Woods of Mandarin Jacksonville, FL 401 428 --
Dec-03 Reserve at Thornton Thornton, CO 216 183 --
------------------------------------------
TOTAL STANDBY AND FORWARD BRIDGE LOAN COMMITMENTS 734 $1,578 $ --
==========================================
STANDBY AND FORWARD MEZZANINE LOAN COMMITMENTS
----------------------------------------------
MAXIMUM AMOUNT OF COMMITMENT
----------------------------
NO. OF APT. LESS THAN
ISSUE DATE PROJECT LOCATION UNITS 1 YEAR 1-3 YEARS
---------------------------------------------------------------------------------------------------------
May-05 Pasadena Pasadena, FL -- $2,290 $1,154
Apr-05 Atlantic Hearthstone Hillsborough, NJ 198 1,500 --
------------------------------------------
TOTAL STANDBY AND FORWARD MEZZANINE LOAN COMMITMENTS 198 $3,790 $1,154
==========================================
TOTAL STANDBY AND FORWARD LOAN COMMITMENTS $5,368 $1,154
============================
Mezzanine Loan/Preferred Stock Commitment
-----------------------------------------
In November 2004, we provided a commitment to fund up to $74.5 million in
connection with the borrower's financing of an acquisition. The commitment
expired unused in April 2005, and we recognized a commitment fee of
approximately $412,000, net of related legal expenses, upon the expiration.
Loan Stabilization Guarantees
-----------------------------
In accordance with an agreement entered into in 2002 with Wachovia Bank
("Wachovia") to provide stabilization guarantees for new construction of
multifamily properties, we were called upon to fund the last guarantee made
under the program. In May 2005, we funded a $7.5 million loan secured by
multifamily housing (see Note 3).
NOTE 12 - SUBSEQUENT EVENTS
In July 2005, we funded approximately $6.2 million of an approximate $7.5
million mezzanine loan secured by multifamily housing. The loan, which matures
January 2008, bears interest at a rate of 30-day LIBOR + 11.50% per year.
In July 2005, we received an executed letter of intent to purchase a defaulted
GNMA certificate and mezzanine loan at par plus any accrued unpaid interest. As
such, we have recognized approximately $201,000 in previously unrecorded, unpaid
interest relating to the mezzanine loan for the period April 2004 through June
2005.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 us and our management (which includes our Advisor) and
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. These factors, which are outlined in detail in our
annual report on Form 10-K for the year ended December 31, 2004, include the
following:
o Risks of investing in uninsured and non-investment grade mortgage assets
and subordinated CMBS;
o Competition in acquiring desirable investments;
o Interest rate fluctuations and changes in prepayment rates which may affect
the value of our assets;
o Risks associated with investments in real estate generally and the
properties which secure many of our investments;
o General economic conditions, particularly as they affect the value of our
assets and the credit status of our borrowers;
o Dependence on our external Advisor for all services vital to our
operations;
o Conflicts which may arise among us and other entities affiliated with our
Advisor which have similar investment policies to ours; and
o Risks associated with the repurchase agreements we utilize to finance our
investments and the availability of financing generally.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this quarterly report.
Factors Affecting Comparability
-------------------------------
During 2004, we owned several properties through foreclosure, classified as Real
Estate Owned - Held and Used, -Subject to Sales Contracts and - Held for Sale.
As a result of certain circumstances during 2004, we reclassified some of these
assets from Held for Sale to Held and Used, resulting in greater depreciation
expenses in the current year (see "Real Estate Owned" below).
During March 2005, we issued $25.0 million of Floating Rate Preferred Securities
through a subsidiary. Due to the mandatory redemption feature of these
securities, the payments or accruals of dividends and other amounts to be paid
to the holders of these securities are reported as interest costs. As a result,
these interest costs are classified as Interest - Distributions to Preferred
Shareholders of Subsidiary (Subject to Mandatory Repurchase). There were no such
interest costs in prior, comparable periods.
14
Results of Operations
---------------------
The following is a summary of our operations for the three and six months ended
June 30, 2005 and 2004:
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2005 2004 Change 2005 2004 Change
------- ------- ------ ------- ------- ------
Total revenues $ 7,276 $ 5,396 34.8 % $13,530 $10,918 23.9 %
Total expenses 5,182 2,645 95.9 9,455 5,442 73.7
Total other income 975 600 62.5 1,821 1,200 51.8
------- ------- ---- ------- ------- ----
Net income $ 3,069 $ 3,351 (8.4)% $ 5,896 $ 6,676 (11.7)%
======= ======= ==== ======= ======= ====
In both the three and six month periods ended June 30, 2005, as compared to the
same periods in 2004, revenues increased mainly due to the purchases of new FNMA
certificates and the funding of several new mezzanine loans. Expenses have also
increased for these periods due to mortgage interest costs for Real Estate Owned
- Held and Used following the December 2004 refinancing of the Concord
Portfolio, as well as an increase in advisory, administrative, depreciation and
financing costs (particularly higher interest rates). Other income has increased
due to the recognition of income relating to the purchase of the Autumn Creek
property in Real Estate Owned - Held For Sale.
REVENUES
Three Months Six Months
Ended Ended
June 30, 2005 June 30, 2005
% Change from % Change from
Prior Year Prior Year
---------------------------- ------------- -------------
Interest income:
Debt securities 38.8 % 34.3 %
Mortgage loans 204.5 121.8
Notes receivable (36.9) (32.3)
Revenue bonds (13.1) (12.8)
Temporary investments 737.5 320.0
Other revenues 1,367.6 1,268.8
---------- ----------
Subtotal 55.3 % 39.1 %
Rental income (5.8) (5.5)
---------- ----------
Total revenues 34.8 % 23.9 %
========== ==========
At June 30, 2005, and December 31, 2004, we had the following investments:
As of As of
June 30, 2005 December 31, 2004
---------------------------- ------------------------------
Weighted Weighted
Carrying Average Carrying Average
Amount Interest Rate Amount Interest Rate
----------- ------------- ----------- -------------
Debt securities $ 230,308 6.32% $ 194,587 6.47%
Mortgage loans $ 42,458 12.90% $ 21,376 11.68%
Notes receivable $ 15,424 9.45% $ 23,111 9.43%
Revenue bonds $ 6,656 8.69% $ 6,672 8.69%
Interest income from debt securities increased, primarily due to the continued
advances on an existing GNMA certificate and the purchase of eight new FNMA
certificates during the fourth quarter of 2004 and seven new FNMA certificates
during 2005, partially offset by the repayment of two GNMA certificates. The
15
decrease in the weighted average interest rate on debt securities as of June 30,
2005 as compared to December 31, 2004 was primarily due to the rising interest
rates on mortgage loans, which fluctuate inversely with interest rates on our
debt securities.
Interest income from mortgage loans increased for the three and six months ended
June 30, 2005, as compared to 2004, primarily due to the funding of three
mezzanine loans during the second half of 2004 and the funding of three
mezzanine loans during the second quarter of 2005. We have also funded a loan
pursuant to a guarantee during the second quarter of 2005 (see Note 11). The
increase can also be attributed to the recognition of unpaid interest on a
previously defaulted loan (see Note 12). The increase in the weighted average
interest rates on mortgage loans as of June 30, 2005 as compared to December 31,
2004 primarily due to the increase in interest rates in the market.
Interest income from notes receivable decreased for the three and six months
ended June 30, 2005, as compared to 2004, primarily due to the payoff of several
notes in 2004, partially offset by the funding of a new note receivable.
Other revenues increased for the three and six months ended June 30, 2005, as
compared to 2004, primarily due to the recognition of a commitment fee in the
second quarter of 2005, the write off of an unamortized discount relating to the
paydown of a FNMA certificate, and the recognition of a non-refundable due
diligence fee in 2005. No such fees were recorded in 2004.
Rental income decreased for the three and six months ended June 30, 2005, as
compared to 2004, due to the Plaza at San Jacinto sale in February 2005.
EXPENSES
Three Months Six Months
Ended Ended
June 30, 2005 June 30, 2005
% Change from % Change from
Prior Year Prior Year
------------------------------------------------------- ------------- -------------
Interest 107.5% 68.8%
Distributions to preferred shareholders 100.0 100.0
General and administrative 20.9 40.7
Fees to Advisor (0.3) 18.0
Depreciation 469.5 127.9
Amortization and other 42.2 10.3
----- -----
Subtotal 84.5 % 63.7%
Property operations 35.7 16.4
Mortgage interest for real estate owned - held and used 100.0 100.0
----- -----
Total expenses 95.9% 73.7%
===== =====
At June 30, 2005, excluding mortgages on real estate owned, we had total debt of
approximately $230.2 million with a weighted average interest rate of 3.73% per
year, including the effect of our swap agreement. At June 30, 2004, we had a
comparable balance of approximately $176.3 million with a weighted average
interest rate of 2.00% per year. The increase in the weighted average interest
rate is due to steady increases in interest rates during 2004 and 2005.
Interest expense increased for the three and six months ended June 30, 2005, as
compared to 2004, primarily due to the increased borrowings on the repurchase
facilities stemming from an increased investment base and the increase in
interest rates during 2004 and 2005.
Distributions to preferred shareholders were recorded following the issuance of
the securities in March 2005. There were no such securities outstanding during
2004.
General and administrative expenses increased for the three and six months ended
June 30, 2005, as compared to 2004, primarily due to an increase in legal fees
related to foreclosed properties, an increase in accounting fees related to
16
Sarbanes-Oxley compliance, and an increase in tax expense due to an accrual for
excise taxes relating to the 2004 tax year.
Fees to Advisor remained in line for the three months ended June 30, 2005, as
compared to 2004, due to an increase in overhead allocations and an increase in
asset management fees paid to our Advisor because of an increased asset base,
partially offset by a decrease in incentive management fee accrual, which is
based on income projections. Fees to Advisor increased for the six months ended
June 30, 2005, as compared to 2004, primarily due to an increase in the overhead
allocations and the asset management fees paid to our Advisor.
Property operations represents all costs at the property level on all of our
Real Estate Owned - Held and Used properties.
Mortgage interest for Real Estate Owned - Held and Used increased for the three
and six months ended June 30, 2005, as compared to 2004, due to debt service
costs associated with a $41.0 million mortgage on the Concord Portfolio (see
"Real Estate Owned" below).
Depreciation expense increased for the three and six months ended June 30, 2005,
as compared to 2004, due to a higher base of depreciable real estate owned in
2005 as compared to the 2004 period. In 2004, only the Plaza at San Jacinto
property was depreciated. In 2005, the Concord Portfolio is depreciating,
partially offset by the removal of Plaza at San Jacinto upon its sale.
OTHER INCOME
Other income increased for the three and six months ended June 30, 2005, as
compared to 2004, due to purchase of the Autumn Creek mortgage, resulting in the
recording of property operations from Real Estate Owned - Held For Sale (see
"Real Estate Owned" below).
REAL ESTATE OWNED
During 2004, we reclassified some of our investments in foreclosed properties as
Real Estate Owned - Held for Sale on our balance sheet and recognized income
from the operations of these properties. As a result of these circumstances, we
have reclassified certain prior year amounts relating to the income recognition
of our real estate owned portfolio to conform to current year presentation.
During the time we have owned the real estate, certain circumstances have
occurred that warranted the reclassification of most of these assets. The
following is the June 30, 2005 classification of our real estate owned
portfolio:
o REAL ESTATE OWNED - HELD AND USED
During 2004, we had three properties classified as Real Estate Owned -
Subject to Sales Contracts, as the sale of these properties did not
constitute a sale in accordance with GAAP. After the properties were
refinanced during December 2004, we reclassified these properties on our
balance sheet as Real Estate Owned - Held and Used; we recorded
depreciation on the properties in 2004, as well as retroactively for the
period since foreclosure. We recognized income associated with the
properties as income from real estate owned on the income statement up to
the date of refinancing. Subsequently, we recognize income associated with
a $12.9 million mezzanine loan (our remaining economic interest in the
properties) as rental income, property operations and mortgage interest on
Real Estate Owned - Held and Used on the income statement.
During 2005, we sold the Plaza at San Jacinto property to an unaffiliated
third party for approximately its carrying value.
o REAL ESTATE OWNED - HELD FOR SALE
One remaining property in our real estate owned portfolio, Reserve at
Autumn Creek, will continue to remain as Real Estate Owned - Held for Sale
as we continue to market the real estate. We have changed the marketing
strategy of this asset in order to reflect marketplace behavior.
17
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,
excluding depreciation and amortization related to real property 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 and is not
necessarily indicative of cash available to fund cash needs. 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. Our management considers FFO a supplemental measure of operating
performance, and, along with cash flows from operating activities, financing
activities, and investing activities, it provides investors with an indication
of our ability to incur and service debt, make capital expenditures, and to fund
other cash needs.
The following table reconciles net income to FFO:
Three months ended Six months ended
(In thousands) June 30, June 30,
---------------------- ----------------------
2005 2004 2005 2004
-------- -------- -------- --------
Net income $ 3,069 $ 3,351 $ 5,896 $ 6,676
Add back: depreciation of real property $ 336 $ 59 $ 702 $ 308
-------- -------- -------- --------
FFO $ 3,405 $ 3,410 $ 6,598 $ 6,984
======== ======== ======== ========
Cash flows from:
Operating activities $ 2,843 $ 3,461 $ 6,504 $ 6,584
======== ======== ======== ========
Investing activities $(23,261) $ (4,002) $(56,638) $ 8,683
======== ======== ======== ========
Financing activities $ 19,139 $ (7,864) $ 56,309 $(14,839)
======== ======== ======== ========
Weighted average shares outstanding:
Basic 8,311 8,336 8,324 8,337
======== ======== ======== ========
Diluted 8,311 8,336 8,327 8,345
======== ======== ======== ========
Since not all companies calculate FFO in a similar fashion, our calculation
presented above may not be comparable to similarly titled measures reported by
other companies.
Liquidity and Capital Resources
-------------------------------
SOURCES OF FUNDS
We expect that cash generated from our investments, as well as our borrowing
capacity, will meet our needs for short-term liquidity and will be sufficient to
pay all expenses and distributions to our shareholders in amounts sufficient to
retain our Real Estate Investment Trust ("REIT") status in the foreseeable
future. In order to qualify as a REIT under the Internal Revenue Code (the
"Code"), as amended, we must, among other things, distribute at least 90% of our
taxable income. We believe that we are in compliance with the REIT-related
provisions of the Code.
We finance our investing activity primarily through borrowing from various
facilities at short-term rates. At June 30, 2005, we had approximately $36.4
million available to borrow, contractually, under our debt facilities without
exceeding limits imposed by debt covenants and our by-laws.
In August 2005, our warehouse facility will mature. We are currently in
negotiations with a financial institution to replace this facility with another
one with similar terms, which we expect to occur before 2005 year end.
From time to time, we may also issue common shares or other equity to fund
investing activity. During 2005, our subsidiary issued $25.0 million of Floating
Rate Preferred Securities. The proceeds received were used to purchase FNMA
certificates.
18
We have capacity to raise approximately $170.0 million of additional funds by
issuing either common or preferred shares pursuant to a shelf registration
statement filed with the SEC in 2002. If market conditions warrant, we may seek
to raise additional funds for investment through further offerings, although the
timing and amount of such offerings cannot be determined at this time.
SUMMARY OF CASH FLOWS
During the six months ended June 30, 2005, as compared to the six months ended
June 30, 2004, the net change in cash and cash equivalents increased
approximately $5.7 million. Operating cash flows decreased by approximately
$80,000 primarily due to lower earnings and the timing of collections of
receivables. An increase in net cash used in investing activities (approximately
$65.3 million) offset by an increase in net cash provided by financing
activities (approximately $71.1 million) was due to a higher level of investing
activity in debt securities and mortgage loans and the purchase of a mortgage
loan on real estate owned during the 2005 period. This investing activity was
funded through borrowings from our repurchase facilities and through the
issuance of preferred shares.
OTHER
We are currently evaluating the possibility of selling all or part of our
investment in ARCap Investors, LLC.
During August 2005, distributions of approximately $3.3 million ($0.40 per
share) will be paid to common shareholders, which were declared in June 2005,
and we expect to purchase approximately $18.8 million of revenue bonds from
CharterMac.
We are 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 made (approximately $6.7 million for both the six
months ended June 30, 2005 and 2004), approximately $773,000 (0.09 per share or
11.6%) represented a return of capital in the 2005 period, determined in
accordance with GAAP, while none in the 2004 period were determined to be
returns of capital. As of June 30, 2005, the aggregate amount of distributions
made since the initial public offering representing returns of capital in
accordance with GAAP was approximately $18.0 million. The portion of the
distributions which constituted a return of capital was more significant in our
initial years in order to permit us to maintain level distributions to
shareholders while we were in the process of investing the proceeds from our
initial public offering.
Commitments, Contingencies and Off-Balance Sheet Arrangements
-------------------------------------------------------------
See Note 11 of our condensed consolidated financial statements for a complete
summary of our guarantees and commitments and contingencies.
We have no unconsolidated subsidiaries, special purpose off-balance sheet
financing entities, or other off-balance sheet arrangements.
19
CONTRACTUAL OBLIGATIONS
In conducting business, we enter into various contractual obligations. Details
of these obligations, including expected settlement periods, are contained
below.
Payments Due by Period
(In thousands)
-----------------------------------------------------------------------
Less than More than
Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years
---------- ----------- ----------- ----------- -----------
Debt:
Lines of credit:
Repurchase facilities $ 201,140 $ 201,140 $ -- $ -- $ --
Warehouse facility 4,070 4,070 -- -- --
Mortgage loan on real estate owned (1) 40,748 483 1,148 1,291 37,826
Preferred shares of subsidiary
(subject to mandatory repurchase) 25,000 -- -- -- 25,000
Funding Commitments:
Standby and forward bridge loan
commitments 1,578 1,578 -- -- --
Standby and forward mezzanine loan
commitments 4,944 3,790 1,154 -- --
---------- ----------- ---------- ----------- -----------
Total $ 277,480 $ 211,061 $ 2,302 $ 1,291 $ 62,826
========== =========== ========== =========== ===========
(1) Represents a first mortgage on properties we report as Real Estate Owned -
Held and Used (Concord Portfolio) as a sale of the properties did not meet
the criteria for sale recognition in accordance with GAAP. The first
mortgage loan is non-recourse with respect to AMAC, the debt service is paid
from the cash flows of the properties and we will not be required to satisfy
the obligation. (See Note 5).
Inflation
---------
Inflation did not have a material effect on our 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 and
equity prices. The primary market risk to which 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 our income in many ways and
present a variety of risks, including the risk of mismatch between asset yields
and borrowing rates.
Our operating results depend in large part on differences between the income
from our assets (net of credit losses) and our borrowing costs. Most of our
assets generate fixed returns and have terms in excess of five years. We fund
the origination and acquisition of a significant portion of these assets with
borrowings which have variable 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 borrowings, creating
a mismatch between asset yields and borrowing rates. Consequently, changes in
interest rates, particularly short-term interest rates, may influence our net
income. Our borrowings under repurchase, warehouse and revolving facilities bear
interest at rates that fluctuate with LIBOR.
Various financial vehicles exist which would allow our management to mitigate
the impact of interest rate fluctuations on our cash flows and earnings. During
March 2003, upon our management's analysis of the interest rate environment and
the costs and risks of such strategies, we entered into an interest rate swap in
order to hedge against increases in the floating interest rate on our repurchase
facilities. The swap is a five-year agreement with Bank of America ("BOA")
whereby we pay BOA a fixed 3.48% on a notional amount of $30.0 million. In
return, BOA pays us a floating rate equivalent to the 30-day LIBOR rate on the
same notional amount. A possible risk of such swap agreements is the possible
inability of BOA to meet the terms of the contracts with us; however, there is
no current indication of such an inability.
20
Based on the $200.2 million unhedged portion of the $230.2 million of borrowings
outstanding at June 30, 2005, a 1% change in LIBOR would impact our annual net
income and cash flows by approximately $2.0 million. However, as the interest
income from some of our loans is also based on LIBOR, a 1% increase in LIBOR
would increase our annual net income and cash flows from such loans by
approximately $228,000. In addition, an increase in LIBOR could also impede the
collections of interest on our variable rate loans. Because the value of our
debt securities fluctuates with changes in interest rates, rate fluctuations
will also affect the market value of our net assets.
ITEM 4. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule
15a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the end of the period covered by this quarterly report. Based
on such evaluation, such officers have concluded that our disclosure
controls and procedures as of the end of the period covered by this
quarterly report were effective to ensure that information required to be
disclosed by the Company in the reports that the Company files or submits
under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC rules and forms, and to ensure
that such information is accumulated and communicated to the Company's
management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
(b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any
significant changes in our 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, our internal
control over financial reporting.
21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 27, 2003, prior to taking possession of the real estate
collateral supporting a loan investment, we were named in a lawsuit,
Concord Gulfgate, Ltd. vs. Robert Parker, Sunrise Housing Ltd., and
American Mortgage Acceptance Company, Cause No. 2003-59290 in the 133rd
Judicial District Court of Harris County, Texas. The suit alleges that
the loan transaction was not properly authorized by the partnership and
was not for a legitimate partnership purpose. The suit claims, among
other causes of action against the respective defendants, wrongful
foreclosure of the real estate collateral, tortious interference with
contract and civil conspiracy. The suit seeks, among other relief,
actual, consequential, and exemplary damages, and a declaration that
the loan documents are unenforceable and constitute a cloud on title.
The discovery phase of this suit has been completed. A summary judgment
was filed by us, but was denied on July 25, 2005. It is not known when
the case will be called to trial.
We filed a countersuit on November 25, 2003, against Concord Gulfgate,
Ltd., as guarantor, seeking a deficiency on the loan, and recovery of
unpaid taxes and certain property receipts. We are currently unable to
determine the possible outcome of the litigation.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information with respect to purchases
made by the Company of its common shares during the three months ended
June 30, 2005:
Total number of Maximum number
shares purchased as of shares that may
Total number of Average price part of publicly yet be purchased
Period shares purchased paid per share announced programs (1) under the programs
------------------------------------------------------------------------------------------------------------
April 1-30, 2005 24,800 $13.61 24,800 969,100
(1) In August 2003, our Board of Trustees approved a share repurchase
plan. The plan enables us to repurchase, from time to time, up to
1,000,000 common shares. The repurchases will be made in the open
market, and the timing will be dependent on the availability of shares
and other market conditions. This program has no expiration date.
See also Note 7 of our condensed consolidated financial statements for
information relating to the issuance of Floating Rate Preferred
Securities by ACFI.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on June 8, 2005.
The shareholders elected Stuart J. Boesky, Alan P. Hirmes, Scott M.
Mannes, Stanley R. Perla and Richard M. Rosan as trustees for one-year
terms which will expire in 2006. Common shares of beneficial interest
were voted as follows:
Trustee Nominee For Abstain/Withheld
-------------------------- ------------- ----------------
Stuart J. Boesky 7,772,093 239,750
Alan P. Hirmes 7,768,868 242,975
Scott M. Mannes 7,777,124 234,719
Stanley Perla 7,768,159 243,684
Richard M. Rosan 7,768,859 242,984
No votes were withheld with respect to the vote on the election of the
trustee nominees.
22
The shareholders also were asked to authorize an amendment and
restatement of the Company's declaration of trust by voting for four
proposed amendments to the declaration of trust. The four amendments
were identified as Proposals 2a, 2b, 2c and 2d in the proxy statement
for the annual meeting and are summarized below:
o Proposal 2a: the transfer of provisions with respect to our
investment policy from our declaration of trust to our bylaws.
Proposal 2a was approved by the shareholders. The affirmative vote of
the holders of a majority of the issued and outstanding common shares
entitled to vote at the annual meeting was required to approve Proposal
2a. Common shares of beneficial interests were voted as follows:
For 4,510,431
Against 643,570
Abstain 222,708
o Proposal 2b: the transfer of provisions with respect to our debt
policy from our declaration of trust to our bylaws.
Proposal 2b was approved by the shareholders. The affirmative vote of
the holders of a majority of the issued and outstanding common shares
entitled to vote at the annual meeting was required to approve Proposal
2b. Common shares of beneficial interests were voted as follows:
For 4,459,416
Against 685,433
Abstain 231,860
o Proposal 2c: the transfer of provisions with respect to our
operating procedures from our declaration of trust to our bylaws.
Proposal 2c was approved by the shareholders. The affirmative vote of
the holders of a majority of the issued and outstanding common shares
entitled to vote at the annual meeting was required to approve Proposal
2c. Common shares of beneficial interests were voted as follows:
For 4,485,382
Against 668,026
Abstain 223,301
o Proposal 2d: the reduction in the vote required to approve a
conversion transaction or a rollup from 80% to a majority vote.
Proposal 2d was not approved by the shareholders. The affirmative vote
of the holders of 80% of the issued and outstanding common shares
entitled to vote at the annual meeting was required to approve Proposal
2d. Common shares of beneficial interests were voted as follows:
For 4,716,645
Against 420,275
Abstain 239,789
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS
Exhibits
3.1 Third Amended and Restated Declaration of Trust of American
Mortgage Acceptance Company Dated June 8, 2005.*
23
3.2 Amended and Restated Bylaws of American Mortgage Acceptance
Company.*
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 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.*
* Filed herewith.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: August 8, 2005 By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
President and Chief Executive Officer
Date: August 8, 2005 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
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 June 30, 2005, 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 officer 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)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under our
supervision, 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) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 8, 2005 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 June 30, 2005, 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 officer 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)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under our
supervision, 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) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 8, 2005 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 June 30, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), Stuart
J. Boesky, as Chief Executive Officer of the Company, and Alan P. Hirmes, as
Chief Financial Officer of the Company each hereby certifies, 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 By: /s/ Alan P. Hirmes
-------------------- ------------------
Stuart J. Boesky Alan P. Hirmes
Chief Executive Officer Chief Financial Officer
August 8, 2005 August 8, 2005
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.