UNITED STATES
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, 2007
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 Identification No.)
incorporation or organization)
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 a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). Large Accelerated filer [ ] Accelerated filer [X] Non-accelerated
filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of July 31, 2007, there were 8,406,028 outstanding common shares of the
registrant's shares of beneficial interest, $0.10 par value.
TABLE OF CONTENTS
AMERICAN MORTGAGE ACCEPTANCE COMPANY
FORM 10-Q
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 27
Item 4. Controls and Procedures 27
PART II OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 1A. Risk Factors 28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5. Other Information 28
Item 6. Exhibits 28
SIGNATURES 29
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,
2007 2006
----------- -----------
(Unaudited)
Cash and cash equivalents $ 6,833 $ 7,553
Restricted cash 2,223 14,951
Investments
Mortgage loans receivable, net 727,675 545,898
Available for sale investments, at fair value:
Debt securities 78,347 82,582
CMBS 103,559 --
CDO securities 9,822 --
Revenue bonds 4,888 4,967
Real estate owned - discontinued -- 48,692
Accounts receivable 9,733 7,670
Deferred charges and other assets, net 13,433 8,671
----------- -----------
Total assets $ 956,513 $ 720,984
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
CDO notes payable $ 362,000 $ 362,000
Repurchase facilities 403,124 163,576
Line of credit - related party 57,600 15,000
Preferred shares of subsidiary (subject to mandatory
repurchase) 25,000 25,000
Mortgages payable on real estate owned - discontinued -- 39,944
Accounts payable and accrued expenses 8,590 13,666
Due to Advisor and affiliates 1,441 1,670
Dividends payable 1,891 15,120
----------- -----------
Total liabilities 859,646 635,976
----------- -----------
Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest; $0.10 par value; 25,000 shares
authorized; 8,817 issued and 8,402 outstanding in 2007 and
8,815 issued and 8,400 outstanding in 2006 882 881
Treasury shares of beneficial interest at par; 415 shares in
2007 and 2006 (42) (42)
Additional paid-in capital 128,048 127,971
Accumulated deficit (35,316) (40,174)
Accumulated other comprehensive income (loss) 3,295 (3,628)
----------- -----------
Total shareholders' equity 96,867 85,008
----------- -----------
Total liabilities and shareholders' equity $ 956,513 $ 720,984
=========== ===========
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,
------------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Revenues:
Interest income:
Mortgage loans $ 12,712 $ 3,903 $ 22,928 $ 6,124
Debt securities 1,208 2,996 2,435 6,215
CMBS 862 -- 862 --
Revenue bonds 105 141 211 284
Temporary investments 89 52 259 135
CDO securities 183 -- 190 --
Participation income -- -- 699 --
Other revenues 153 157 229 162
----------- ----------- ----------- -----------
Total revenues 15,312 7,249 27,813 12,920
----------- ----------- ----------- -----------
Expenses:
Interest 10,638 4,227 19,133 6,586
Interest - distributions to preferred
shareholders of subsidiary (subject to
mandatory repurchase) 554 556 1,123 1,074
General and administrative 687 490 1,421 978
Fees to Advisor 773 977 1,612 1,803
Amortization and other 201 15 401 30
----------- ----------- ----------- -----------
Total expenses 12,853 6,265 23,690 10,471
----------- ----------- ----------- -----------
Other income (loss)
Gain on sale of ARCap 337 -- 337 --
Change in fair value of derivative
instruments 681 1,879 650 2,023
Loss on repayment of debt securities -- (153) -- (153)
Equity in earnings of ARCap -- 2,397 -- 3,076
----------- ----------- ----------- -----------
Total other income 1,018 4,123 987 4,946
----------- ----------- ----------- -----------
Income from continuing operations 3,477 5,107 5,110 7,395
Income (loss) from discontinued
operations, including gain of sale -- 108 3,531 (11)
----------- ----------- ----------- -----------
Net income $ 3,477 $ 5,215 $ 8,641 $ 7,384
=========== =========== =========== ===========
Per share amounts (basic and diluted):
Net income from continuing operations $ 0.41 $ 0.62 $ 0.61 $ 0.89
Net income from discontinued operations -- 0.01 0.42 --
----------- ----------- ----------- -----------
Net income $ 0.41 $ 0.63 $ 1.03 $ 0.89
=========== =========== =========== ===========
Dividends per share $ 0.225 $ 0.400 $ 0.450 $ 0.800
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic 8,403 8,304 8,402 8,304
=========== =========== =========== ===========
Diluted 8,403 8,304 8,402 8,305
=========== =========== =========== ===========
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,
--------------------------
2007 2006
----------- -----------
Cash flows from operating activities:
Net income $ 8,641 $ 7,384
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense 336 900
Equity in earnings of ARCap -- (3,076)
Distributions received from ARCap -- 1,716
Gain on sale of real state owned (3,611) --
Net loss on sale or repayment of assets -- 153
Change in fair value of derivative instruments (681) (2,023)
Amortization and accretion 197 (144)
Other non-cash (income) expense (512) 89
Changes in operating assets and liabilities:
Accounts receivable (2,063) 159
Other assets (3) 223
Due to Advisor and affiliates (229) (1,070)
Accounts payable and accrued expenses 3,200 921
----------- -----------
Net cash provided by operating activities 5,275 5,232
----------- -----------
Cash flows from investing activities:
Funding and purchase of mortgage loans (238,873) (153,759)
Principal repayments of mortgage loans 57,565 5,450
Investment in CMBS (106,830) --
Investment in CDO securities (10,062) --
Principal repayments or sale of debt securities 2,408 17,945
Decrease in restricted cash 12,728 --
Proceeds from sale of real estate owned 11,987 --
Principal repayment on real estate owned 35 --
Principal repayment of revenue bonds 95 90
----------- -----------
Net cash used in investing activities (270,947) (130,274)
----------- -----------
continued
5
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
--------------------------
2007 2006
----------- -----------
Cash flows from financing activities:
Proceeds from repurchase facilities $ 387,649 $ 135,012
Repayments of repurchase facilities (148,101) (32,216)
Proceeds from line of credit - related party 171,815 67,542
Repayments of line of credit - related party (129,215) (40,500)
Repayments of warehouse facility -- (4,070)
Deferred financing costs (186) (1,604)
Dividends paid to shareholders (17,010) (6,644)
----------- -----------
Net cash provided by financing activities 264,952 117,520
----------- -----------
Net decrease in cash and cash equivalents (720) (7,522)
Cash and cash equivalents at the beginning of the year 7,553 11,214
----------- -----------
Cash and cash equivalents at the end of the period $ 6,833 $ 3,692
=========== ===========
See accompanying notes to condensed consolidated financial statements.
6
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(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 Centerline/AMAC Manager Inc. (the "Advisor"), formerly
known as CharterMac AMI Associates, Inc., which acts as our Advisor and is an
indirect subsidiary of Centerline Holding Company ("Centerline"), formerly known
as CharterMac, which owns approximately 2.4% of our common shares of beneficial
interest at June 30, 2007 (see Notes 13 and 15). We operate in one business
segment.
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, 2007, and the results of
our operations and our cash flows for the period then ended. 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 Annual Report on Form 10-K for the year ended December 31, 2006.
Our Annual Report on Form 10-K for the year ended December 31, 2006, contains a
summary of our significant accounting policies. There have been no material
changes to these items since December 31, 2006.
The preparation of the condensed 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.
We have reclassified certain prior year amounts to conform to the current year
presentation, in particular the reclassification of operating results for our
real estate owned portfolio to discontinued operations (see Notes 4 and 12).
NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement No. 157, FAIR VALUE MEASUREMENTS, which established a framework for
calculating the fair value of assets and liabilities as required by numerous
other accounting pronouncements and expands disclosure requirements of the fair
values of certain assets and liabilities. The statement is effective as of the
beginning of our 2008 fiscal year. We are currently evaluating the impact, if
any, that the adoption of this statement will have on our consolidated financial
statements.
In February 2007, the FASB issued Statement No. 159, THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES. This statement was issued with the
intent to provide an alternative measurement treatment for certain financial
assets and liabilities. The alternative measurement would permit fair value to
be used for both initial and subsequent measurement, with changes in fair value
recognized in earnings as those changes occur. This "Fair Value Option" would be
available on a contract by contract basis. The effective date for this statement
is the beginning of our 2008 fiscal year. We are currently assessing the impact,
if any, that the adoption would have on our consolidated financial statements
should we elect to adopt it. If we were to do so, we would not apply its
provisions until Statement No. 157 (described above) is adopted.
In June 2007, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") 07-1, CLARIFICATION OF THE SCOPE OF THE
7
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
AUDIT AND ACCOUNTING GUIDE INVESTMENT COMPANIES AND ACCOUNTING FOR PARENT
COMPANIES AND EQUITY METHOD INVESTORS FOR INVESTMENTS IN INVESTMENT COMPANIES.
This SOP provides guidance for determining whether an entity is within the scope
of the AICPA AUDIT AND ACCOUNTING GUIDE INVESTMENT COMPANIES (the "Guide").
Entities that are within the scope of the Guide are required, among other
things, to carry their investments at fair value, with changes in fair value
included in earnings. The provisions of this SOP are effective on January 1,
2008. We are currently evaluating this new guidance and have not determined
whether we will be required to apply the provisions of the Guide in presenting
our financial statements.
NOTE 2 - MORTGAGE LOANS
We partially or fully funded 19 first mortgage, bridge and mezzanine loans and
subordinated notes, totaling approximately $244.9 million through June 30, 2007,
including two to a related party (see Note 13). The loans bear interest at a
weighted average interest rate of 7.98%.
During February 2007, one of our mortgage loans was repaid, resulting in a
one-time payment received, pursuant to a participating arrangement, of
approximately $699,000. These fees are recorded as participation income in our
condensed consolidated statements of income.
During April 2007, we purchased an $84.0 million participation interest in a
mezzanine loan. Approximately $55.3 million was repaid during the second quarter
of 2007.
At June 30, 2007, approximately $673.5 million of our first mortgage, bridge and
mezzanine loans and subordinated notes were partially or fully pledged as
collateral under our repurchase facilities.
NOTE 3 -AVAILABLE FOR SALE INVESTMENTS
We carry all of our Available for Sale investments at their estimated fair
values. We record the change in their fair values as a component of
comprehensive income within shareholders' equity. If the fair value of an
investment is lower than our cost, and we determine that the decline in fair
value is other-than-temporary, we record an impairment charge in our condensed
consolidated statement of income.
At June 30, 2007, we had the following investments classified as available for
sale:
o Debt Securities
o Commercial Mortgage-Backed Securities ("CMBS")
o Collateralized Debt Obligation ("CDO") Securities
o Revenue Bonds
During March 2007, we purchased a $10.1 million investment in CDO securities
(class J, K, L, M, N, O and preferred shares), issued by Nomura CRE CDO 2007-2,
LTD ("Nomura"). These securities bear interest at a weighted average interest
rate of 9.00% and mature in May 2042.
During the second quarter of 2007, we purchased $115.3 million of CMBS, at
discounts aggregating $8.5 million, for a net cost of approximately $106.8
million. These securities, which bear interest at a weighted average interest
rate of 5.93%, mature on dates ranging from June 2022 through April 2049.
CMBS investments we hold were comprised of the following as of June 30, 2007:
8
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
Unrealized Percentage of
(Dollars in thousands) Face Amount Accreted Cost Fair Value losses Fair Value
- ------------------------- --------------- --------------- --------------- --------------- ---------------
Security rating:
BBB+ $ 4,750 $ 4,776 $ 4,740 $ (36) 4.6%
BBB 69,556 64,615 62,360 (2,255) 60.2
BBB- 40,995 37,470 36,459 (1,011) 35.2
--------------- --------------- --------------- --------------- ---------------
$ 115,301 $ 106,861 $ 103,559 $ (3,302) 100.0%
=============== =============== =============== =============== ===============
Information regarding our available for sale investments is as follows:
(In thousands)
Debt CDO Revenue
June 30, 2007 Securities CMBS Securities Bonds Total
- ------------------------- --------------- --------------- --------------- --------------- ---------------
Amortized cost $ 81,027 $ 106,861 $ 10,062 $ 4,753 $ 202,703
Unrealized gains 273 -- -- 135 408
Unrealized losses (2,953) (3,302) (240) -- (6,495)
--------------- --------------- --------------- --------------- ---------------
Net unrealized (loss) gain (2,680) (3,302) (240) 135 (6,087)
--------------- --------------- --------------- --------------- ---------------
Fair value $ 78,347 $ 103,559 $ 9,822 $ 4,888 $ 196,616
=============== =============== =============== =============== ===============
December 31, 2006
- -------------------------
Amortized cost $ 83,496 $ -- $ -- $ 4,846 $ 88,342
Unrealized gains 359 -- -- 121 480
Unrealized losses (1,273) -- -- -- (1,273)
--------------- --------------- --------------- --------------- ---------------
Net unrealized (loss) gain (914) -- -- 121 (793)
--------------- --------------- --------------- --------------- ---------------
Fair value $ 82,582 $ -- $ -- $ 4,967 $ 87,549
=============== =============== =============== =============== ===============
The fair value and gross unrealized losses of our available for sale investments
aggregated by length of time that these individual debt securities have been in
a continuous unrealized loss position at June 30, 2007, and December 31, 2006,
is summarized in the table below:
June 30, 2007 December 31, 2006
--------------------------------------------- ---------------------------------------------
Less than 12 Months Less than 12 Months
(dollars in thousands) 12 Months or More Total 12 Months or More Total
------------- ------------- ------------- ------------- ------------- -------------
Number of securities:
Debt securities 2 12 14 3 9 12
CMBS 6 -- 6 -- -- --
CDO securities 1 -- 1 -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Total 9 12 21 3 9 12
Fair value $ 128,497 $ 44,959 $ 173,456 $ 35,799 $ 37,579 $ 73,378
Gross unrealized
losses $ 3,888 $ 2,607 $ 6,495 $ 246 $ 1,027 $ 1,273
9
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
The unrealized losses shown above are as a result of increases in interest rates
and interest rate spreads subsequent to the acquisition of the investments. All
of the available for sale investments are performing according to their terms.
Furthermore, we have the intent and ability to hold these investments 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 declines
in value are temporary.
At June 30, 2007, approximately $187.5 million of our debt securities, CMBS and
CDO securities were pledged as collateral under our repurchase facilities.
NOTE 4 - REAL ESTATE OWNED
During March 2007, we sold our economic interest in the Concord portfolio to an
affiliated party (see Note 13), resulting in proceeds of approximately $12.0
million and a gain of approximately $3.6 million. As a result of the sale, we
have reclassified property operations for the current period and all comparable
prior periods as discontinued operations (see Note 12).
NOTE 5 - DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and other assets consisted of the following:
June 30, December 31,
(In thousands) 2007 2006
------------ ------------
Deferred financing charges, net of accumulated
amortization of $552 in 2007 and $151 in 2006 $ 7,255 $ 7,467
Interest rate derivatives (see Note 9) 6,114 1,143
Other Assets 64 61
------------ ------------
Total $ 13,433 $ 8,671
============ ============
NOTE 6 - REPURCHASE FACILITIES
Our repurchase facilities consisted of financing collateralized by:
June 30, December 31,
(In thousands) 2007 2006
------------ ------------
Debt securities $ 75,604 $ 79,427
Other investment classes (1) 327,520 84,149
------------ ------------
Total $ 403,124 $ 163,576
============ ============
(1) This facility includes mortgage loans, CMBS, bridge notes, mezzanine loans,
subordinated notes and CDO securities pledged as collateral.
As of June 30, 2007, the debt securities repurchase facilities (with RBC Capital
Markets Corporation and UBS Financial Services Inc.) had a weighted average
interest rate of 5.37% as compared to 5.41% at December 31, 2006. These
borrowings are subject to 30-day settlement terms. Our other repurchase
facilities with Citigroup Global Markets, Inc. ("Citigroup"), Bear Stearns
International Limited ("Bear Stearns") and Liquid Funding, LTD ("Liquid
Funding") had weighted average interest rates of 6.01% at June 30, 2007, as
compared to 6.13% at December 31, 2006. Our repurchase facility with Citigroup
expires upon the completion of a second planned CDO securitization, or December
2007, whichever comes first.
10
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
NOTE 7 - LINE OF CREDIT - RELATED PARTY
During April 2007, we amended our revolving credit facility with Centerline to
increase our borrowing capacity from $50.0 million to $80.0 million. The
maturity date of the facility was also extended to June 2008 with a one-year
optional extension. In the opinion of our Advisor, the terms of this facility
are consistent with those of transactions with independent third parties. At
June 30, 2007, and December 31, 2006, we had approximately $57.6 million and
$15.0 million, respectively, in borrowings outstanding, bearing interest at a
weighted average interest rate of 8.32% and 8.35%, respectively.
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
June 30, December 31,
(In thousands) 2007 2006
------------ ------------
Accrued interest payable $ 6,414 $ 3,078
Interest rate derivatives (see Note 9) 496 8,673
Refundable deposits (1) 265 1,161
Other 1,415 754
------------ ------------
$ 8,590 $ 13,666
============ ============
(1) Includes refundable deposits collected during the due diligence period of a
loan transaction which are payable to other parties.
NOTE 9 - DERIVATIVE INSTRUMENTS
Our derivative instruments comprise cash flow hedges of debt and free-standing
derivatives related to investments. While we carry derivative instruments in
both categories at their estimated fair values on our condensed consolidated
balance sheet, the changes in those fair values are recorded differently. To the
extent that the cash flow hedges are effectively hedging the associated debt, we
record changes in their fair values as a component of other comprehensive income
within shareholders' equity. If a cash flow swap is ineffective, we include a
portion of the change in its fair value in our condensed consolidated statement
of income. With respect to the free-standing derivatives, we always include the
change in their fair value in our condensed consolidated statement of income.
CASH FLOW HEDGES OF DEBT
Our borrowings under repurchase facilities, CDO notes payable, related party
line of credit and our preferred shares of a subsidiary (subject to mandatory
repurchase) incur interest at variable rates, exposing us to interest rate risk.
We have established a policy for risk management outlining our objectives and
strategies for use of derivative instruments to potentially mitigate such risks.
Effective March 30, 2007, we entered into a three-year interest rate swap to
reduce our exposure to possible increases in the variable interest rate on our
subsidiary's preferred shares (subject to mandatory repurchase). Under the swap
agreement, we are required to pay Bear Stearns a fixed rate of 4.97% on a
notional amount of $25.0 million and will receive a floating rate equivalent to
3-month LIBOR.
As of June 30, 2007, including the above mentioned swap, we had 45 interest rate
swaps with an aggregate notional amount of $618.3 million, which will expire on
dates ranging from March 2008 through February 2022 and are designated as cash
flow hedges, with the hedged item being the interest payments on our
variable-rate repurchase facilities, CDO notes payable, and our subsidiary's
preferred shares (subject to mandatory repurchase). These swaps are recorded at
fair value, with changes in fair value recorded in comprehensive income to the
11
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
extent the hedges are effective in achieving offsetting cash flows. Amounts in
accumulated other comprehensive income will be reclassified into earnings in the
same period during which the hedged forecasted transaction affects earnings.
Since we are hedging the interest payments on our variable-rate debt, the
forecasted transactions are the interest payments.
At inception and on an ongoing basis, we assess whether the swaps are effective
in offsetting changes in the variable cash flows of the hedged item. We measure
ineffectiveness of our cash flow hedges on a quarterly basis and record any
ineffectiveness in interest expense on the condensed consolidated statements of
income. With the exception of one, all of our swaps have been effective, and we
expect they will continue to be effective in the future. We have recorded
ineffectiveness of approximately $124,000 related to the one ineffective swap.
This swap includes an embedded financing component, which has caused and will
continue to cause some ineffectiveness, within the limits allowed by SFAS No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, to maintain
hedge accounting.
We estimate that approximately $682,000 of the net unrealized gains included in
accumulated other comprehensive loss will be reclassified as an offset to
interest expense within the next 12 months.
FREE-STANDING DERIVATIVES RELATED TO INVESTMENTS
We have three interest rate swaps with an aggregate notional amount of
approximately $20.1 million, which expire on dates ranging from February 2017
through July 2017, that are hedging changes in the fair value of certain
investments. We did not elect to apply hedge accounting to these swaps.
We are required to maintain a minimum balance of collateral with Bank of America
in connection with these interest rate swaps. From time to time, as market rates
fluctuate, we may be called upon to post additional cash collateral with Bank of
America. These payments are held as deposits with Bank of America and will be
used to settle the swap at termination date if market rates fall below the fixed
rates on the swaps. At June 30, 2007, we had approximately $150,000 of deposits
held by Bank of America.
FINANCIAL STATEMENT IMPACT
Interest rate swaps for which we were in a net liability position are recorded
in accounts payable and accrued expenses (see Note 8) and those for which we are
in a net asset position are recorded in deferred charges and other assets (see
Note 5). The amounts recorded were as follows:
June 30, December 31,
(In thousands) 2007 2006
------------ ------------
Net asset position $ 6,114 $ 1,143
Net liability position $ 496 $ 8,673
Net income included the following related to our free-standing derivatives and
interest rate hedges:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
(In thousands) 2007 2006 2007 2006
----------- ----------- ----------- -----------
Interest income $ (583) $ (127) $ (838) $ (202)
Interest expense 5 61 5 66
Other income (681) (1,879) (650) (2,023)
----------- ----------- ----------- -----------
Net $ (1,259) $ (1,945) $ (1,483) $ (2,159)
=========== =========== =========== ===========
12
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
NOTE 10 - COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for the six months ended June 30, 2007 and 2006, was
as follows:
Six Months Ended
June 30,
------------------------
(In thousands) 2007 2006
---------- ----------
Net income $ 8,641 $ 7,384
Net unrealized gain on derivative instruments 12,217 205
Net unrealized holding loss on investments (5,294) (10,293)
Comprehensive income of equity investments -- 240
---------- ----------
Comprehensive income (loss) 15,564 $ (2,464)
========== ==========
NOTE 11 - EARNINGS PER SHARE
Diluted net income from continuing operations 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, 2007: Income Shares Per Share
----------- ----------- -----------
Basic EPS (from continuing operations) $ 3,477 8,403 $ 0.41
Effect of dilutive securities -- -- --
----------- ----------- -----------
Diluted EPS (from continuing operations) $ 3,477 8,403 $ 0.41
=========== =========== ===========
Three Months Ended June 30, 2006:
Basic EPS (from continuing operations) $ 5,107 8,304 $ 0.62
Effect of dilutive securities -- -- --
----------- ----------- -----------
Diluted EPS (from continuing operations) $ 5,107 8,304 $ 0.62
=========== =========== ===========
Six Months Ended June 30, 2007:
Basic EPS (from continuing operations) $ 5,110 8,402 $ 0.61
Effect of dilutive securities -- -- --
----------- ----------- -----------
Diluted EPS (from continuing operations) $ 5,110 8,402 $ 0.61
=========== =========== ===========
Six Months Ended June 30, 2006:
Basic EPS (from continuing operations) $ 7,395 8,304 $ 0.89
Effect of dilutive securities -- 1 --
----------- ----------- -----------
Diluted EPS (from continuing operations) $ 7,395 8,305 $ 0.89
=========== =========== ===========
13
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
NOTE 12 - DISCONTINUED OPERATIONS
Income (loss) from discontinued operations included the following related to the
Concord portfolio (which we sold from our real estate owned portfolio in March
2007) and the Reserve at Autumn Creek (which we sold from our real estate owned
portfolio in October 2006):
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues $ -- $ 2,338 $ 1,815 $ 4,731
============ ============ ============ ============
Gain on sale of real estate owned $ -- $ -- $ 3,611 $ --
============ ============ ============ ============
Net income (loss) $ -- $ 108 $ 3,531 $ (11)
============ ============ ============ ============
NOTE 13 - RELATED PARTY TRANSACTIONS
Fees to Advisor
- ---------------
Under our amended Advisory Services Agreement with our Advisor (the "Advisory
Agreement"), which was amended in March 2007, we pay certain fees, in addition
to reimbursements of certain administrative and other costs that our Advisor
incurs on our behalf for its ongoing management and operations of our Company:
Fees/Compensation Annual Amount
I. Asset management fees Our Advisor receives an asset management fee
equal to 1.75% per year for the first $300.0
million of our equity balance (as defined in
the Advisory Agreement) and 1.50% per year of
our adjusted equity balance in excess of $300.0
million.
II. Loan origination fees Our Advisor is entitled to receive, with respect
to each investment originated by us, the
origination points, if any, paid by borrowers.
In connection with the acquisition of
investments for us, our Advisor may also act as
an advisor to third parties which participate
with us in such investments and may receive
origination points, if any, from such third
parties or their borrowers. In the event our
Advisor is not entitled to an origination
fee from a borrower for a loan the Advisor
originated for investment by us, we will pay
an origination fee or a referral fee consistent
with industry practice, amount and terms.
III.Annual incentive management Our Advisor is entitled to receive incentive
fees compensation for each fiscal year in an amount
equal to the product of:
(A) 25% of the dollar amount by which
(1) Adjusted Funds from Operations
("AFFO") before this incentive
management fee per share (based on
the weighted average number of
shares outstanding), excluding
non-cash gains or losses due to the
recording of fair value hedges
exceeds
(2) the weighted average per share value
of (x) $20 and (y) the prices per
share of any secondary offerings by
the Company multiplied by the
greater of:
14
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
(a) 9.00%; and
(b) the Ten-Year U.S. Treasury Rate
plus 2% per annum
multiplied by
(B) the weighted average number of shares
outstanding during such year.
AFFO means net income (computed in accordance
with GAAP) including realized gains (or losses)
from debt restructuring and sales of non-real
estate assets, plus depreciation and
amortization on real property, and after
adjustments for unconsolidated partnerships and
joint ventures.
A minimum of 10% and a maximum of 50% of the
annual incentive management fee is to be paid in
common shares, at the discretion of our Board of
Trustees.
IV. Shared services expenses Our Advisor is reimbursed by us for (i) the
actual costs to the Advisor of goods, materials
and services used for and by us obtained
from unaffiliated parties, (ii) the costs of
certain personnel employed by the Advisor and
directly involved in the organization and
business of our Company and for legal,
accounting, transfer agent, reinvestment and
redemption plan administration, data processing,
duplication and investor communications services
performed by employees or officers of the
Advisor.
Prior to the March 2007 amendment to the Advisory Agreement, the following fees
were paid to the Advisor differently than they are currently paid.
o ASSET MANAGEMENT FEES - We paid asset management fees equal to 1.75%
of our total equity balance, adjusted by certain costs and one-time
events.
o INCENTIVE MANAGEMENT FEES - We paid incentive management fees based on
a calculation that used an AFFO and specified yield - based threshold.
Payment of this fee was made in cash only.
Other fees as described above are consistent with the Advisory Agreement prior
to the March 2007 amendment.
Other Related Party Transactions
- --------------------------------
We pay Centerline Servicing Inc ("CSI"), an affiliate of Centerline, a fee for
servicing and special servicing our mortgage loans and other investments equal
to the Advisor's actual costs of performing such services but not less than
0.08% per year of the principal balance of the related mortgage loan or other
investment.
During 2006, we entered into a co-investment agreement with Centerline Real
Estate Special Situations Mortgage Fund LLC ("CRESS"), whereby we and CRESS will
participate in investment opportunities that are originated by affiliates and
which meet the investment criteria of both companies. A portion of our 2007
investments were made pursuant to this agreement and we will continue to pursue
investment opportunities with CRESS throughout 2007.
During April 2007, we amended our loan agreement with Centerline to increase our
borrowing capacity to $80.0 million and extend the maturity date of the facility
to June 2008 (see Note 7).
During 2007, we partially or fully funded 19 first mortgage, bridge and
mezzanine loans and subordinated notes, totaling approximately $244.9 million
(see Note 2), originated by Centerline Mortgage Capital Inc. ("CMC"), formerly
known as CharterMac Mortgage Capital Corporation, an affiliate of our Advisor.
CMC received approximately $924,000 in loan origination fees related to these
originations, all of which were paid by the borrowers.
15
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
During 2007, we funded two mezzanine loans aggregating $50.7 million to
properties developed by a company partly owned by the chairman of Centerline.
Those transactions were approved by the independent members of our Board of
Trustees and, in the opinion of management, the terms of these mezzanine
transactions were consistent with those transactions with independent third
parties.
During March 2007 Centerline entered into a 10b5-1 Plan whereby it may purchase
up to 9.8% of our common shares of beneficial interest in open market purchases
based on pre-determined parameters. Through June 30, 2007, it has purchased
approximately 199,000 common shares under this plan, amounting to approximately
2.4% of our outstanding common shares at June 30, 2007. Centerline has also
purchased 280,000 of our 7.25% Series A Cumulative Convertible Preferred Shares
("Preferred Shares") that we issued in July 2007 (see Note 15).
During March 2007, we sold our economic interest in the Concord properties to
CRESS (see Note 4).
The following summarizes all costs paid or payable to our Advisor or its
affiliates:
Three months ended Six months ended
(In thousands) June 30, June 30,
--------------------------- ---------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Fees to Advisor:
Shared services expenses $ 338 $ 497 $ 793 $ 699
Asset management fees 435 480 819 916
Incentive management fee -- -- -- 188(1)
------------ ------------ ------------ ------------
Total fees to Advisor $ 773 $ 977 $ 1,612 $ 1,803
============ ============ ============ ============
Other Fees:
Servicing fees $ 145 $ -- $ 274 $ --
Interest paid on related party line of credit(2) 805 745 902 745
------------ ------------ ------------ ------------
Total other fees $ 950 $ 745 $ 1,176 $ 745
============ ============ ============ ============
(1) Accrual was based on the proportion of actual earnings as compared to our
estimates of full-year results at June 30, 2006. Later in 2006, when it was
determined that certain financial thresholds would not be achieved, the
accrual was reversed and no incentive fees were paid.
(2) Represents interest predominantly on the line of credit with Centerline
(see Note 7).
NOTE 14 - COMMITMENTS AND CONTINGENCIES
(a) Guarantees
Prior to 2000, we entered into a loan program with Fannie Mae, under which we
agreed to guarantee a first-loss position on certain loans, which could have
potentially resulted in an aggregate exposure of $7.5 million. In June and
October of 2000, we originated two loans totaling $3.3 million under the
program. In September 2003, we transferred and assigned all of our obligations
with respect to these two loans to CMC, a subsidiary of Centerline, both of
which are affiliates of the Advisor. Pursuant to the agreement with CMC,
Centerline guaranteed CMC's obligations, and we agreed to indemnify both CMC and
Centerline for any losses incurred in exchange for retaining all fees which we
were otherwise entitled to receive from Fannie Mae under the program. The
maximum exposure at June 30, 2007, was $3.1 million, although 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.
16
AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)
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.
(b) Future Funding Commitments
We are committed to additionally fund the following first mortgage and mezzanine
loans at June 30, 2007:
(In thousands)
MAXIMUM AMOUNT OF COMMITMENT
------------------------------------------
LESS THAN
ISSUE DATE PROJECT LOCATION TOTAL 1 YEAR 1-3 YEARS
- ---------- ------------------------ ---------------- ------------------------------------------
Apr-05 Atlantic Hearthstone Hillsborough, NJ $ 729 $ 729 $ --
Nov-06 12 Atlantic Station Hotel Atlanta, GA 1,000 1,000 --
Feb-07 Aberdeen Apartments Houston, TX 976 976 --
Jun-07 122 Greenwich Ave. New York, NY 6,454 6,454 --
------------ ------------ ------------
TOTAL FUTURE FUNDING COMMITMENTS $ 9,159 $ 9,159 $ --
============ ============ ============
NOTE 15 - SUBSEQUENT EVENTS
During July 2007, we issued 680,000 Preferred Shares at a price of $25.00 per
share. Of this total, Centerline purchased 280,000 shares, which amounts to
41.2% of the total issuance. These shares, which pay annual dividends of
$1.8125, can be converted into common shares at an initial rate of 2.2701 common
shares per preferred share. This offering generated $16.0 million in proceeds,
net of offering costs, and will be used for investment activity.
In addition to the common shares owned at June 30, 2007 and the purchase of the
Preferred Shares mentioned above, Centerline has made subsequent purchases of
our common shares, amounting to an ownership percentage of over 10%, assuming
all of the Preferred Shares were converted to common shares.
On July 12, 2007, Daryl J. Carter resigned as President.
17
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 and 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
under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for
the year ended December 31, 2006, include, but are not limited to, the
following:
o Risks of investing in non-investment grade commercial real estate
investments;
o Competition in acquiring desirable investments;
o Interest rate fluctuations;
o Risks associated with investments in real estate generally and the
properties which secure many of our investments;
o General economic conditions and economic conditions in the real estate
markets specifically, particularly as they affect the value of our
assets and the credit status of our borrowers;
o Dependence on our Advisor for all services necessary for our
operations;
o Conflicts which may arise among us and other entities affiliated with
our Advisor that have similar investment policies to ours;
o Risks associated with the repurchase agreements we utilize to finance
our investments and our ability to raise capital;
o Risks associated with the failure to qualify as a Real Estate
Investment Trust ("REIT"); and
o Risks associated with Collateral Debt Obligation ("CDO")
securitization transactions, which include, but are not limited to:
o The inability to acquire eligible investments for a CDO issuance;
o Interest rate fluctuations on variable-rate swaps entered into to
hedge fixed-rate loans;
o The inability to find suitable replacement investments within
reinvestment periods; and
o The negative impact on our cash flow that may result from the use
of CDO financings with over-collateralization and interest
coverage requirements.
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 2007, we sold our economic interest in the Concord portfolio, resulting
in a gain of approximately $3.6 million. This amount is recorded in discontinued
operations along with rental income, property operations, mortgage interest and
depreciation for the period up to the sale. Property operations from prior
comparable periods have been reclassified to conform to current period
presentation.
18
Investment Activity
- -------------------
During the three months ended June 30, 2007 and 2006, we partially or fully
funded the following investments, not reflecting any discounts or premiums:
Three months ended Three months ended
(In thousands) June 30, 2007 June 30, 2006
----------------------------- -----------------------------
Weighted Weighted
Average Average
Amount Interest Rate Amount Interest Rate
------------- ------------- ------------- -------------
Mortgage loans:
First mortgage loans $ 8,200 5.89% $ 151,200 6.28%
Bridge loans -- -- -- --
Mezzanine loans 110,131 8.25 5,500 9.05
Subordinated notes 23,380 8.47 -- --
CMBS 115,301 5.93 -- --
CDO securities -- -- -- --
------------- ------------- ------------- -------------
Total $ 257,012 7.15% $ 156,700 6.37%
============= ============= ============= =============
During the six months ended June 30, 2007 and 2006, we partially or fully funded
the following investments, not reflecting any discounts or premiums:
Six months ended Six months ended
(In thousands) June 30, 2007 June 30, 2006
----------------------------- -----------------------------
Weighted Weighted
Average Average
Amount Interest Rate Amount Interest Rate
------------- ------------- ------------- -------------
Mortgage loans:
First mortgage loans $ 42,900 5.75% $ 151,200 6.28%
Bridge loans 19,660 6.51 -- --
Mezzanine loans 155,824 8.73 5,500 9.05
Subordinated notes 26,490 8.30 -- --
CMBS 115,301 5.93 -- --
CDO securities 10,083 9.00 -- --
------------- ------------- ------------- -------------
Total $ 370,258 7.36% $ 156,700 6.37%
============= ============= ============= =============
During the three months ended March 31, 2006, we had no origination activity.
Results of Operations
- ---------------------
The following is a summary of our operations for the periods ended June 30, 2007
and 2006:
(In thousands)
Three months ended June 30, Six months ended June 30,
----------------------------------------- -------------------
2007 2006 Change 2007 2006 Change
-------- -------- -------- -------- -------- --------
Total revenues $ 15,312 $ 7,249 111.2% $ 27,813 $ 12,920 115.3%
Total expenses 12,853 6,265 105.2 23,690 10,471 126.2
Total other income 1,018 4,123 (75.3) 987 4,946 (80.0)
Income (loss) from
discontinued
operations,
including gain on
sale -- 108 (100.0) 3,531 (11) N/A
-------- -------- -------- -------- -------- --------
Net income $ 3,477 $ 5,215 (33.3)% $ 8,641 $ 7,384 17.0%
======== ======== ======== ======== ======== ========
19
The growth in our annual revenues during the three and six month periods ended
June 30, 2007, as compared to the same periods in 2006, resulted primarily from
increases in investment volume, as well as participation income received in
connection with a paydown of one of our mortgage loans.
Expenses also increased for these periods due to:
o financing costs (particularly due to higher debt balances and slight
increases in interest rates);
o amortization costs due to a higher balance of deferred costs resulting
from our 2006 CDO securitization; and
o general and administrative costs (particularly legal costs due to a
higher amount of specially serviced assets in our portfolio, CDO
administrative costs as a result of our 2006 CDO securitization and
loan servicing costs which we no longer pay through quarterly expense
reimbursement to our Advisor).
Other income (loss) decreased during 2007 primarily as a result of the sale of
our investment in ARCap during 2006 and the resulting absence of equity income.
The balance in 2007 relates to the change in the fair value of free-standing
derivatives, as well as an additional gain recognized from the sale of our
investment in ARCap resulting from the release of escrow funds upon the
expiration of certain holdback requirements.
Income from discontinued operations includes operations from real estate owned
that was sold during 2007 and 2006. The increase for the six months ended June
30, 2007, as compared to 2006, is due to the recognition of a gain on sale of a
portfolio of properties.
REVENUES
Three Months Ended Change % of % of
---------------------------- from 2007 2006
June 30, June 30, Prior Total Total
(In thousands) 2007 2006 Period Revenues Revenues
------------ ------------ ------------ ------------ ------------
Interest income:
Mortgage loans $ 12,712 $ 3,903 225.7% 83.0% 53.9%
Debt securities 1,208 2,996 (59.7) 7.9 41.3
CMBS 862 -- 100.0 5.6 --
Revenue bonds 105 141 (25.5) 0.7 1.9
Temporary investments 89 52 71.2 0.6 0.7
CDO securities 183 -- 100.0 1.2 --
Other revenues 153 157 (2.5) 1.0 2.2
------------ ------------ ------------ ------------ ------------
Total revenues $ 15,312 $ 7,249 111.2% 100.0% 100.0%
============ ============ ============ ============ ============
Six Months Ended Change % of % of
---------------------------- from 2007 2006
June 30, June 30, Prior Total Total
(In thousands) 2007 2006 Period Revenues Revenues
------------ ------------ ------------ ------------ ------------
Interest income:
Mortgage loans $ 22,928 $ 6,124 274.4% 82.4% 47.4%
Debt securities 2,435 6,215 (60.8) 8.8 48.1
CMBS 862 -- 100.0 3.1 --
Revenue bonds 211 284 (25.7) 0.8 2.2
Temporary investments 259 135 91.9 0.9 1.0
CDO securities 190 -- 100.0 0.7 --
Participation income 699 -- 100.0 2.5 --
Other revenues 229 162 41.4 0.8 1.3
------------ ------------ ------------ ------------ ------------
Total revenues $ 27,813 $ 12,920 115.3% 100.0% 100.0%
============ ============ ============ ============ ============
20
At June 30, we had the following investments (exclusive of Real Estate Owned and
temporary investments):
(In thousands)
2007 2006
-------------------------------------------- --------------------------------------------
Weighted Weighted
Carrying % of Average Carrying % of Average
Amount Total Interest Rate Amount Total Interest Rate
------------ ------------ ------------ ------------ ------------ ------------
Mortgage loans $ 727,675 78.7% 6.28% $ 213,487 51.5% 8.79%
Debt securities 78,347 8.5 6.49 194,286 46.9 6.17
CMBS 103,559 11.2 5.93 -- -- --
CDO securities 9,822 1.1 9.00 -- -- --
Revenue bonds 4,888 0.5 8.70 6,489 1.6 8.68
------------ ------------ ------------ ------------ ------------ ------------
$ 924,291 100.0% 6.30% $ 414,262 100.0% 7.54%
============ ============ ============ ============ ============ ============
Interest income from mortgage loans increased significantly for the 2007 periods
as compared to 2006, primarily due to the funding of 77 first mortgage loans,
bridge notes, mezzanine loans, and subordinated notes throughout 2006 and 2007
and the partial funding of several existing mezzanine loans during 2006. The
decrease in the weighted average interest rates on mortgage loans as of June 30,
2007, as compared to June 30, 2006, was primarily due to the funding of a
greater amount of higher credit quality loans, as opposed to riskier, higher
coupon loans as we had funded in the past.
Interest income from debt securities decreased for the three and six months
ended June 30, 2007, primarily due to the sale of 20 FNMA certificates in
November 2006, as well as the payoff of three GNMA certificates during 2006. The
increase in the weighted average interest rate on debt securities during 2007 is
due to the lower yields of the FNMA certificates sold relative to the yields of
those retained.
Interest income from CMBS increased for the 2007 periods, as compared to 2006,
due to the purchase of nine CMBS investments during the second quarter of 2007.
There were no investments in CMBS in prior periods.
Interest income from revenue bonds for the three and six months ended June 30,
2007, was lower than the comparable prior year period, primarily due to the
payoff of two revenue bonds during 2006.
Interest income from temporary investments increased for the 2007 periods, as
compared to 2006, primarily due to the investment of excess cash on hand
resulting from the payoff of several mortgage loans and debt securities, as well
as interest earned on restricted cash balances held with custodians.
Interest income from CDO securities increased for the three and six months ended
June 30, 2007, as compared to 2006, due to an investment made during the first
quarter of 2007 purchasing various classes of Nomura CDO securities. There were
no investments in CDO securities made in prior periods.
Participation income for the six months ended June 30, 2007 represents a one
time payment received pursuant to a participating arrangement for a mortgage
loan that was repaid in the first quarter of 2007. There was no such income
received during 2006 or the second quarter of 2007.
21
EXPENSES
Three Months Ended Change % of % of
--------------------------- from 2007 2006
June 30, June 30, Prior Total Total
(In thousands) 2007 2006 Period Revenues Revenues
------------ ------------ ------------ ------------ ------------
Interest $ 10,638 $ 4,227 151.7% 69.5% 58.3%
Interest-subsidiary
preferred shares 554 556 (0.4) 3.6 7.7
General and administrative 687 490 40.2 4.5 6.8
Fees to Advisor 773 977 (20.9) 5.0 13.5
Amortization and other 201 15 1,240.0 1.3 0.2
------------ ------------ ------------ ------------ ------------
Total expenses $ 12,853 $ 6,265 105.2% 83.9% 86.4%
============ ============ ============ ============ ============
Six Months Ended Change % of % of
--------------------------- from 2007 2006
June 30, June 30, Prior Total Total
(In thousands) 2007 2006 Period Revenues Revenues
------------ ------------ ------------ ------------ ------------
Interest $ 19,133 $ 6,586 190.5% 68.8% 51.0%
Interest-subsidiary
preferred shares 1,123 1,074 4.6 4.0 8.3
General and administrative 1,421 978 45.3 5.1 7.6
Fees to Advisor 1,612 1,803 (10.6) 5.8 14.0
Amortization and other 401 30 1,236.7 1.4 0.2
------------ ------------ ------------ ------------ ------------
Total expenses $ 23,690 $ 10,471 126.2% 85.1% 81.0%
============ ============ ============ ============ ============
Interest expense increased for the three and six months ended June 30, 2007, as
compared to 2006, primarily due to the increased borrowings made through 2007
and 2006 to fund origination activity and the slight increase in market interest
rates during 2006 and 2007. Excluding mortgages on real estate owned (in the
2006 period), we had total debt as follows:
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
(dollars in thousands) 2007 2006 2007 2006
----------- ----------- ----------- -----------
Average outstanding $ 814,735 $ 339,032 $ 726,950 $ 286,462
Weighted average interest rate
(including effect of interest rate swaps) 5.49% 5.64% 5.57% 5.11%
Average notional amount of interest rate swaps $ 607,572 $ 148,607 $ 582,723 $ 91,803
Weighted average rate of interest rate swaps 5.18% 4.96% 5.18% 4.72%
General and administrative expenses increased for the three and six months ended
June 30, 2007, as compared to 2006, due to higher legal fees resulting from a
larger amount of watched assets as our portfolio has grown, recurring CDO
administrative costs incurred during the 2007 period as a result of our 2006 CDO
securitization and increased servicing costs. During 2006, our servicing costs
were paid through quarterly expense reimbursements made to our Advisor. These
increases were partially offset by decreased insurance costs, decreased stock
option costs (all of which were fully amortized in April 2006) and excise tax
accrual (as no excise taxes are anticipated for 2007).
Fees to Advisor decreased for the 2007 periods, as compared to 2006, due to
lower shared services costs because servicing costs are now billed separately by
our Advisor's servicing affiliate, as well as by the absence of an accrual of
incentive management fees in the 2007 period, as we do not anticipate current
year earnings to reach incentive fee payment hurdles.
Amortization and other costs increased for the 2007 periods, as compared to the
same periods in 2006, due to higher deferred financing costs as a result of our
2006 CDO securitization.
22
OTHER INCOME
Other income decreased for the three and six months ended June 30, 2007, as
compared to 2006, primarily due to the sale of our investment in ARCap in 2006,
which had earned equity income in the 2006 period.
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 our 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 fund other cash needs.
The following table reconciles net income to FFO for the three months ended June
30, 2007 and 2006:
(In thousands)
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net income $ 3,477 $ 5,215 $ 8,641 $ 7,384
Add back: Depreciation of real property(1) -- 450 336 900
Less: Gain on sale of real property(1) -- -- (3,611) --
------------ ------------ ------------ ------------
FFO 3,477 $ 5,665 $ 5,366 $ 8,284
============ ============ ============ ============
Cash flows from:
Operating activities $ 3,646 $ 3,578 $ 5,275 $ 5,232
============ ============ ============ ============
Investing activities $ (186,619) $ (130,507) $ (270,947) $ (130,274)
============ ============ ============ ============
Financing activities $ 175,298 $ 129,943 $ 264,952 $ 117,520
============ ============ ============ ============
Weighted average shares outstanding:
Basic 8,403 8,304 8,402 8,304
============ ============ ============ ============
Diluted 8,403 8,304 8,402 8,305
============ ============ ============ ============
(1) Related to properties sold during 2007 and 2006 and included in discontinued
operations in our condensed consolidated statements of income.
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 REIT status in the foreseeable future. In order to qualify as a REIT
under the Internal Revenue Code, as amended ("the Code"), 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.
23
As of June 30, 2007, our credit facilities consisted of:
o repurchase facilities; and
o a related party line of credit.
Repurchase Facilities
- ---------------------
Under our repurchase agreements we pledge additional assets as collateral to our
repurchase agreement counterparties (i.e., lenders) when the estimated fair
value of the existing pledged collateral under such agreements declines and such
lenders demand additional collateral (i.e., a margin call). Margin calls result
from a decline in the value of our investments collateralizing our repurchase
agreements, generally due to changes in the estimated fair value of such
investments. This could result from principal reduction of such investments due
to scheduled amortization payments or unscheduled principal prepayments on the
mortgages underlying our investments, changes in market interest rates and other
market factors. To cover a margin call, we may pledge additional securities or
cash.
Through June 30, 2007, we paid approximately $450,000 due to margin calls on our
repurchase facility with Liquid Funding. We believe we have adequate financial
resources to meet our obligations, including margin calls, as they come due and
to fund dividends we declare as well as to actively pursue our investment
strategies. However, should market interest rates and/or prepayment speeds on
our investments suddenly increase, margin calls on our repurchase agreements
could result, causing an adverse change in our liquidity position.
At June 30, 2007, we had the following repurchase facilities in place:
DEBT SECURITIES
As a vehicle to leverage our investments in debt securities, we have repurchase
agreements with two counterparties, RBC Capital Markets and UBS Financial
Services. These facilities offer advance rates between 94% and 97% of collateral
value and borrowing rates between LIBOR minus 0.03% and LIBOR plus 0.10%. The
borrowings are subject to 30-day settlement terms. As of June 30, 2007, the
amount outstanding under these repurchase facilities was $75.6 million, with a
weighted average interest rate of 4.62% including the effects of interest rate
hedges in place on these facilities.
OTHER INVESTMENT CLASSES
During 2006, we began financing our investment growth by utilizing CDO
securitizations. Prior to a securitization, we finance investments through a
repurchase facility, which is repaid from the proceeds received when the CDO
securitization is complete.
During December 2006, we executed a repurchase agreement with Citigroup for the
purpose of funding investment activity. Advance rates on the borrowings from
this facility, ranging from 80% to 90% of collateral value, are determined on an
asset-by-asset basis. Interest on the borrowings, which ranges from LIBOR plus
0.40% to LIBOR plus 1.25%, is also determined on an asset-by-asset basis. The
repurchase facility expires upon completion of a second planned CDO
securitization, or December 2007, whichever comes first. At June 30, 2007, we
had approximately $266.6 million of borrowings outstanding under this facility
at a weighted average interest rate of 5.31%, including the effects of interest
rate hedges.
In the event we do not complete the anticipated CDO securitization, we believe
that we can extend the existing facility or refinance it with another lending
institution.
During the second quarter of 2007, we executed repurchase agreements with Bear
Stearns and Liquid Funding for the purpose of providing financing for our
investments in CMBS and CDO securities. Advance rates on the borrowings from the
Bear Stearns facility range from 58-80% of the collateral value and interest on
the borrowings ranged from 30-day LIBOR plus 0.55% to 30-day LIBOR plus 0.85%.
The borrowings are subject to 30-day settlement terms. Advance rates on the
borrowings from Liquid Funding facility are at 73% of the collateral value and
interest on these borrowings is at 30-day LIBOR plus 0.50%. The borrowings are
subject to 30-day settlement terms. At June 30, 2007, we had approximately $60.9
million of borrowings outstanding under these facilities at a weighted average
interest rate of 5.94%, including the effects of interest rate hedges.
24
Related Party Line of Credit
- ----------------------------
We finance our remaining investing activity primarily through borrowings from a
credit facility we maintain with Centerline, which was amended in April 2007 to
increase our borrowing capacity and extend the maturity date of the facility to
June 2008. This $80.0 million facility offers borrowing rates of LIBOR plus
3.00%. As of June 30, 2007, the amount outstanding was $57.6 million with a
weighted average interest rate of 8.32%. We had approximately $22.4 million
available to borrow on this line at June 30, 2007.
Other Financing
- ---------------
As noted above, in 2006, we began financing our investment growth by utilizing
CDO securitizations. At June 30, 2007, we had outstanding CDO securitization
certificates totaling $362.0 million at a weighted average rate of 5.42%,
including the effects of interest rate hedges.
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. Of this amount, we issued $17.0 million of
preferred securities in July 2007 (see Note 15 to our condensed consolidated
financial statements). 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, 2007, as compared to the six months ended
June 30, 2006, the net change in cash and cash equivalents increased by
approximately $6.8 million. Operating cash flows were consistent with the prior
year period. While net income excluding the gain on sale of our real estate
owned was lower than in 2006, this decrease was offset by lower payments to our
Advisor.
An increase in net cash used in investing activities (approximately $140.7
million) was due to investments made in mortgage loans, CMBS and CDO securities
during 2007 as compared to lower origination activity in the 2006 period,
partially offset by proceeds received from the sale of real estate owned and a
higher amount of principal repayments made on our mortgage loans.
The increase in net cash provided by financing activities (approximately $147.4
million) can be attributed to the higher level of investing activity during the
2007 period, offset by partial repayments of the repurchase facilities and our
related party line of credit.
LIQUIDITY REQUIREMENTS AFTER JUNE 30, 2007
During July 2007, we partially or fully funded approximately $25.3 million of
first mortgage loans, mezzanine loans and CMBS. Financing for these acquisitions
was made through our related party line of credit or repurchase facilities.
During July and August 2007, we paid approximately $2.7 million due to margin
calls on our repurchase facility with Liquid Funding.
During August 2007, dividends of approximately $1.9 million ($0.225 per share),
which were declared in June 2007, will be paid to common shareholders.
OTHER MATTERS
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.
25
Dividends
- ---------
The following table outlines our total dividends and return of capital amounts,
determined in accordance with GAAP, for the six months ended June 30:
(In thousands) 2007 2006
------------ ------------
Total dividends $ 3,782 $ 6,644
============ ============
None of the dividends constituted a return of capital.
Commitments, Contingencies and Off-Balance Sheet Arrangements
- -------------------------------------------------------------
See Note 14 to our condensed consolidated financial statements for a 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.
CONTRACTUAL OBLIGATIONS
In conducting business, we enter into various contractual obligations. Details
of these obligations, including expected settlement periods as of June 30, 2007,
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:
CDO notes payable (1)(2) $ 362,000 $ -- $ -- $ -- $ 362,000
Repurchase facilities:
Debt securities (1)(2) 75,604 75,604 -- -- --
Other investment classes(1)(2)(3) 327,520 327,520 -- -- --
Preferred shares of subsidiary
(subject to mandatory repurchase)(1)(2) 25,000 -- -- -- 25,000
Line of credit - related party (1)(2) 57,600 57,600 -- -- --
Funding Commitments:
Future funding loan commitments 9,159 9,159 -- -- --
----------- ----------- ----------- ----------- -----------
Total $ 856,883 $ 469,883 $ -- $ -- $ 387,000
=========== =========== =========== =========== ===========
(1) The amounts included in each category reflect the current expiration, reset
or renewal date of each facility or security certificate. Management has the
ability and intent to renew, refinance or remarket the borrowings beyond
their current due dates.
(2) Includes principal amounts only. At June 30, 2007, the weighted average
interest rate on our debt was 6.06%.
(3) Approximately $266.6 million of this debt is related to a repurchase
facility that will be repaid upon the closing of our second CDO
securitization currently anticipated to take place during the second half of
2007.
Recently Issued Accounting Standards
- ------------------------------------
See NEW ACCOUNTING PRONOUNCEMENTS in Note 1 to the condensed consolidated
financial statements.
Inflation
- ---------
Inflation did not have a material effect on our results for the periods
presented.
26
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 we are 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 our control.
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. Although we have
originated variable-rate loans, 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 our assets with borrowings that have variable interest
rates that reset relatively rapidly, such as weekly, 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 our related party line of credit, repurchase facilities and our
subsidiary's preferred securities subject to mandatory redemption 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. We
enter into certain hedging transactions to protect our positions from interest
rate fluctuations and other changes in market conditions. These transactions
include interest rate swaps and fair value hedges. Interest rate swaps are
entered into in order to hedge against increases in floating rates on our
repurchase facilities. Fair value hedges are entered into for some of our
investments to hedge our risk that interest rates may affect the fair value of
these investments, prior to securitization.
Based on the $847.7 million of borrowings outstanding at June 30, 2007, of which
$176.5 million remains unhedged, a 1% change in LIBOR would impact our annual
net income and cash flows by approximately $1.8 million. However, as the
interest income from some of our loans is also based on LIBOR, a 1% change in
LIBOR would impact our annual net income and cash flows from such loans by
approximately $1.3 million. The net effect of a 1% change in LIBOR would
therefore result in a change of our annual net income by approximately $421,000.
In addition, a change in LIBOR could also impede the collections of interest on
our variable-rate loans, as there might not be sufficient cash flow at the
properties securing such loans to pay the increased debt service. 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.
If we complete a second CDO transaction, substantially all of our debt will be
fixed through interest rate swaps on the CDO debt.
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 us in the reports that we file or submit 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 our 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 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.
27
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not party to any pending material legal proceedings.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors as disclosed
in our Annual Report on Form 10-K for the year ended December 31,
2006.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None
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 12, 2007.
The shareholders elected Jeff T. Blau, James L. Duggins, George P.
Jahn, Harry Levine, Scott M. Mannes, Stanley R. Perla, and Marc D.
Schnitzer as trustees for one-year terms which will expire in 2008.
Common shares of beneficial interest were voted as follows:
Trustee nominee For Abstain/withheld
----------------- --------- -----------------
Jeff T. Blau 6,320,626 1,251,932
James L. Duggins 7,342,458 230,100
George P. Jahn 7,369,139 203,419
Harry Levine 7,369,755 202,803
Scott M. Mannes 7,362,941 209,617
Stanley R. Perla 7,372,912 199,646
Marc D. Schnitzer 7,332,612 239,946
There were no votes "against" any of the nominees.
The shareholders were also asked to ratify the appointment of Deloitte
& Touche LLP as the independent registered public accountants of
American Mortgage Acceptance Company. The ratification was identified
as proposal 2 in the proxy statement for the annual meeting and
approved by the shareholders. Common Shares of beneficial interests
were voted on as follows:
For 7,389,057
Against 139,971
Abstain 43,530
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS.
31.1 Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.*
31.2 Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification of the Chief Executive Officer and the Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
* Filed herewith.
28
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: August 8, 2007 By: /s/ James L. Duggins
--------------------
James L. Duggins
Chief Executive Officer
(Principal Executive Officer)
Date: August 8, 2007 By: /s/ Robert L. Levy
------------------
Robert L. Levy
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
29
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002.
I, James L. Duggins, hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended
June 30, 2007, of American Mortgage Acceptance Company;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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 have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that 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 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 and 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 trustees (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, 2007 By: /s/ James L. Duggins
--------------------
James L. Duggins
Chief Executive Officer
(Principal Executive Officer)
30
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002.
I, Robert L. Levy, hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended
June 30, 2007, of American Mortgage Acceptance Company;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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 have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that 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 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 and 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 trustees (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, 2007 By: /s/ Robert L. Levy
------------------
Robert L. Levy
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
31
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, 2007 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), James
L. Duggins, as Chief Executive Officer of the Company, and Robert L. Levy, 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/ James L. Duggins By: /s/ Robert L. Levy
-------------------- ------------------
James L. Duggins Robert L. Levy
Chief Executive Officer Chief Financial Officer
August 8, 2007 August 8, 2007
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.