Item 1. Business.
General - - -------
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware business trust which is engaged in the acquisition and ownership (either directly or indirectly) of tax-exempt participating and non-participating First Mortgage Bonds ("FMBs") issued by various state or local governments or other agencies or authorities and secured by participating and non-participating mortgage loans on the underlying properties ("Underlying Properties"). As of December 31, 1998, the Company owned a portfolio of 49 FMBs. The Company is organized and managed as a single business segment.
The Underlying Properties securing the bonds are garden apartments located in nineteen metropolitan markets in fourteen states. The properties range in size from 70 units to 550 units with an average size of 231 units. All of the properties have an amenity package, competitive for their respective markets, with many including swimming pools, clubhouses, exercise rooms and tennis courts. There are 18 FMBs, which were acquired in 1997 and 1998, with Underlying Properties either under construction or undergoing major rehabilitation. The remaining 31 properties in the portfolio average 9-11 years in age. The portfolio reports an average occupancy of 94.3% as of February 28, 1999. Net operating income, in the aggregate, at the Underlying Properties has increased an average of approximately 3% per annum since 1992.
The Company does not operate as a mortgage REIT, which generally utilize high levels of leverage and acquire subordinated interests in commercial and/or residential mortgage- backed securities. Rather, the Company utilizes low levels of leverage and generally originates and acquires long-term, fixed-rate, tax-exempt FMBs. As a result, the Company did not expect to experience the ill-effects associated with the volatile interest rate environment during 1998.
Pursuant to its Trust Agreement, the Company is only able to incur leverage or other financing up to 50% of the Company's Total Market Value (as defined in the Trust Agreement) as of the date incurred (the "50% Limit"). The Company expects to seek shareholder approval at the 1999 annual meeting to amend the Trust Agreement to permit the Company to exceed the 50% Limit with respect to short term borrowings of no more than approximately 5% of Total Market Value. Mortgage REITs typically incur leverage at ratios ranging from between 3:1 to 10:1. In general, the FMBs that the Company either originates or acquires call for ten-year restrictions from prepayments, eliminating the Company's susceptibility to significant levels of repayment risk as a result of interest rate reductions. Consistent with the foregoing, the Company focuses on providing investors with a stable level of distributions, even through unstable markets.
Due to the Company's low level of leverage, the Company has not been affected by the recent lack of liquidity that is currently impairing mortgage REITs and its portfolio does not contain assets that are especially vulnerable to volatility during periods of interest rate fluctuations.
Organization - - ------------
The Company was formed on October 1, 1997 as the result of the consolidation (the "Consolidation") of three publicly registered limited partnerships, Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III") (the "Partnerships", and each individually a "Partnership"). One of the general partners of the Partnerships was an affiliate of Related Capital Company ("Related"). Unless otherwise indicated, the "Company", as hereinafter used, refers to Charter Municipal Mortgage Acceptance Company and its subsidiary and, for references prior to October 1, 1997, refers to Tax Exempt II. Pursuant to the Consolidation, the Company issued shares of beneficial interest (the "Shares") to all partners in each of the Partnerships in exchange for their interests in the Partnerships based upon each partner's proportionate interest in the Shares issued to their Partnership in the Consolidation. The Shares commenced trading on the American Stock Exchange on October 1, 1997 under the symbol "CHC". As of December 31, 1998, there were 20,579,448 Shares outstanding.
For financial accounting and reporting purposes, the Consolidation was accounted for using the purchase method of accounting. Under this method, the Partnership with the investor group receiving the largest ownership in the Company, in this case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for accounting purposes, Tax Exempt II's assets and liabilities were recorded by the Company at their historical cost, with the assets and liabilities of the other Partnerships recorded at their estimated fair values for each Partnership (an aggregate of approximately $158,129,000) as set forth in the Solicitation Statement of the Company dated June 18, 1997 (the "Solicitation Statement"). Results of operations and other operating financial data for the Company for the years ended December 31, 1998, 1997 and 1996 include information for the entire periods presented with respect to Tax Exempt II, but only include information for the period October 1, 1997 to December 31, 1998 with respect to the other Partnerships. Prior to the Consolidation, Tax Exempt II was a limited partnership which was formed under the laws of the State of Delaware on April 11, 1986. The general partners of Tax Exempt II were Related Tax Exempt Associates II, Inc., a Delaware corporation (the "Related General Partner"), and Prudential Bache Properties, Inc. ("PBP"). The general partners managed and controlled the affairs of Tax Exempt II prior to the Consolidation.
The Company is governed by a board of trustees comprised of two independent managing trustees and three managing trustees who are affiliated with Related. The Company has engaged Related Charter LP (the "Manager"), an affiliate of Related, to manage its day-to-day affairs. Each independent trustee is entitled to receive annual compensation for serving as a trustee in the aggregate amount of $15,000, payable in cash (maximum of $5,000 per year) and/or Shares valued based on the fair market value at the date of issuance. On June 4, 1998, 186 shares, having an aggregate value of $2,500 as of that date, were issued to each independent trustee as compensation for their services for the quarter ended December 31, 1997. Through the Manager, Related offers the Company
a core group of experienced staff and executive management, who provide the Company with services on both a full and part-time basis. These services include, among other things, acquisition, financial, accounting, capital markets, asset monitoring, portfolio management, investor relations and public relations services. The Company believes that it benefits significantly from its relationship with Related, since Related provides the Company with resources that are not generally available to small-capitalized, self-managed companies.
As part of the settlement of class action litigation relating to the Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had the right to petition the United States District Court for the Southern District of New York (the "Court") for additional attorneys' fees ("Counsel's Fee Shares") in an amount to be determined in the Court's sole discretion. The Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed to be 25%) of the increase in value of the Company, ("the Added Value") if any, as of October 1, 1998 based upon the difference between (i) the trading prices of the Company's shares of beneficial interest during the six month period ended October 1, 1998 and (ii) the trading prices of the limited partnership units and the asset values of the Partnerships prior to October 1, 1997. As of October 1, 1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an Order and Stipulation of Settlement by the Court on February 18, 1999, Class Counsel is entitled to receive 608,955 shares of beneficial interest in the Company. The shares will be distributed to Class Counsel quarterly in eight equal distributions commencing within ten business days after Class Counsel advises the Company in writing of the persons in whose name the shares are to be issued. One-half of such shares will be in the form of Restricted Securities (restricted only with respect to the sale, assignment, pledge or other transfer of such securities) and the remaining one-half of such shares will be unrestricted. Restrictions on the Restricted Securities expire one year from the date of issuance. Management is currently negotiating a discounted cash settlement with Class Counsel in lieu of the issuance of shares; however, any such settlement would require the approval of the Board of Trustees and there can be no assurance that such negotiations will be successful.
Business Plan - - -------------
The Company has initiated a focused business/strategic plan designed to increase cash available for distribution ("CAD"), generate increased tax-exempt income and as a result enhance the value of its stock. The plan concentrates principally on the origination and acquisition of additional tax-exempt FMBs secured by multfamily properties. The Company believes that it can earn above market rates of interest on its bond acquisitions by focusing its efforts primarily on affordable housing. The Manager estimates that nearly 50% of all new multifamily development contains an affordable component which produces tax credits pursuant to Section 42 of the Internal Revenue Code. The Manager also believes that each year a growing number of these properties are financed with tax-exempt bonds. The Company has designed a Direct Purchase Program specifically designed to appeal to developers of such properties. In general, these properties are smaller than traditional multifamily housing properties, averaging 150 units. The traditional method of financing tax-exempt properties requires the involvement of credit enhancement, rating agencies and investment bankers. Therefore, the up-front cost of such financing is generally much higher than traditional multifamily financing. Through its Direct Purchase Program, the Company will originate and acquire tax-exempt bonds without the cost associated with credit enhancement, rating agencies and investment bankers. The Company believes that the up-front cost savings to the developer will translate into a higher than market interest rate on the bonds acquired by the Company.
The Company is positioned to market its Direct Purchase Program as a result of the Manager's affiliation with Related. Related and its predecessor companies have specialized in offering debt and equity products to mid-market multifamily owners and developers for over 25 years. Related has provided debt and equity financing to properties valued at over $7.8 billion. In addition, since 1987 Related has been one of the nation's leading provider of equity to developers of multifamily housing which benefits from tax credits. During 1998, the Manager's affiliation with Related allowed it to become one of the dominant lenders to developers and owners of affordable housing financed with tax-exempt bonds.
During 1998, the Company's growth was financed by the Private Label Tender Option Program ("TOP") or similar programs, borrowings under the Interim Credit Facility (see below), funds generated from operations in excess of distributions and placements of equity. The Company is currently negotiating an increase in its TOP from $150 million to $200 million and, before the end of 1999, the Company expects to raise funds through an equity offering; however, there can be no assurance that either of these initiatives will be successful. During the period January 1, 1998 through December 31, 1998, the Company acquired 17 FMBs (see Note 3 to the financial statements in "Item 8. Financial Statements and Supplementary Data").
Structure of Existing First Mortgage Bonds - - ------------------------------------------
The principal and interest payments on each FMB are payable only from the cash flows of the Underlying Properties, including proceeds from a sale of an Underlying Property or the refinancing of the mortgage loan securing such FMBs (the "Mortgage Loans"). None of the FMBs constitute a general obligation of any state or local government, agency or authority. The structure of each Mortgage Loan mirrors the structure of the corresponding FMB which it secures.
The seasoned original 31 FMBs call for interest only debt service payments during their respective terms (which generally are 24 to 30 years from issuance or re-issuance) with repayment of principal due in a lump sum "balloon" payment at the expiration of their respective terms or upon sale or refinancing. The newly acquired bonds (bonds acquired in 1997 and 1998) call for amortization or "sinking fund" payments, generally at the completion of rehabilitation or construction, of principal based on thirty to forty year level debt service amortization schedules. On all the FMBs the Company generally has the right to require redemption approximately 12 to 15 years from issuance or re-issuance and obligors generally are locked out of prepayment for seven to ten years from issuance or re-issuance.
In addition to the stated base rates of interest of the FMBs which range from 4.87% to 8.5% per annum, certain of the FMBs provide for "contingent interest" which is equal to: (i) an amount equal to 50% to 100% of net property cash flow and 50% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annual compound interest at a rate
ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (ii) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of the remaining net sale or refinancing proceeds, until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent interest on the FMBs are exempt from federal income taxation. During the years ended December 31, 1998, 1997 and 1996, six, five and two FMBs, paid contingent interest amounting to approximately $960,000, $353,000 and $220,000, respectively.
Structure of Modified First Mortgage Bonds - - ------------------------------------------
Certain of the FMB's have been modified reflecting current market conditions. These modifications have generally encompassed an extension of the maturity (10-20 years) together with a prepayment lock-out feature and/or prepayment penalties together with an extension of the mandatory redemption feature (5-10 years from modification). Stated interest rates have also been adjusted together with a change in the participation and contingent interest features. Base interest rates, contingent interest, prepayment lock-outs, mandatory redemption and maturity features vary dependent on the facts of a particular FMB, the developer, the Underlying Property's performance and requirements of bond counsel and local issuers. During 1998, the Highland Ridge, Willow Creek, Bristol Village, Thomas Lake and Mansion FMBs were modified (see Note 3 to the financial statements in "Item 8. Financial Statements and Supplementary Data"). The Company currently anticipates that it will modify certain other FMBs to reflect generally similar terms as those modified previously and in 1998, where and as appropriate.
Structure of New First Mortgage Bonds - - -------------------------------------
Newly acquired FMBs will generally bear a fixed base interest rate and, to the extent permitted by existing regulations, they may or may not also provide for contingent interest. Terms are expected to be 5 to 35 years, although the Company may have the right to cause repayment prior to maturity through a mandatory redemption feature (5 to 7 years with up to 6 month's notice). In some cases, the principal of an FMB may amortize.
New FMBs are generally not expected to be subject to optional prepayment during the first 5-10 years of the Company's ownership of the bonds and may carry prepayment penalties thereafter beginning at 5% of the outstanding principal balance, declining by 1% per annum. Certain new FMBs may be purchased at a discount from their face value. Up to 15% of the Total Market Value of the Company may be invested in FMBs secured by Underlying Properties in which affiliates of the Manager have a controlling interest, equity interest or security interest. The 15% limit is not applicable to properties to which the Manager or its affiliates have taken title for the benefit of the Company and only applies to new FMBs acquired after the consolidation. In selected circumstances and only in connection with the acquisition of tax-exempt FMBs the Company may acquire a small amount of taxable bonds to fund certain costs associated with the issuance of FMBs, that under current law cannot be funded by FMBs.
First Mortgage Bonds - General - - ------------------------------
In order to protect the tax exempt status of the FMBs, the owners of the Underlying Properties are required to enter into certain agreements to own, manage and operate such Underlying Properties in accordance with requirements of the Internal Revenue Code of 1986, as amended.
No single FMB provided interest income which exceeded 10% of the Company's total revenue for the years ended December 31, 1998, 1997 and 1996, except for the Bristol Village and Pelican Cove FMBs which provided 14% and 11%, respectively, of total revenue in 1996.
Based on the face amount of FMBs at December 31, 1998, approximately 23% of the Underlying Properties are located in California, 15% are located in Florida, 14% are located in Missouri, 10% are located in Georgia and 10% are located in Minnesota. No other states comprise more than 10% of the total face amount.
From time to time the Company has advanced funds to owners of certain Underlying Properties in order to preserve the underlying asset including completion of construction and/or when Underlying Properties have experienced operating difficulties including past due real estate taxes and/or deferred maintenance items. Such advances typically are secured by promissory notes and/or second mortgages. As of December 31, 1998, the face amount of such advances was $12,845,308, and their carrying value was $7,628,920, which is net of purchase accounting adjustments, and a reserve for collectibility of $138,000.
The original obligors and owners of the Underlying Properties of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced with affiliates of the Manager who have not made equity investments. These entities have assumed the day-to-day responsibilities and obligations of the Underlying Properties. Buyers are being sought who would make equity investments in the Underlying Properties and assume the nonrecourse obligations for the FMB. These properties are generally paying as interest an amount equal to the net cash flow generated by operations, which in some cases is less than the stated rate of the FMB. The Company has no present intention of declaring a default on these FMBs. The aggregate carrying value of these ten FMBs at December 31, 1998 was approximately $105,402,000 and the income earned from them for the year ended December 31, 1998 was approximately $7,497,000.
From time to time, the Company enters into forbearance agreements and/or permanent modifications with certain borrowers. The determination as to whether it is in the best interest of the Company to enter into permanent modifications or forbearance agreements on the FMBs, advance second mortgages, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, Underlying Property performance, owner cooperation and projected costs of foreclosure and litigation. Payments under each of the existing forbearance agreements are current as of December 31, 1998.
With respect to the FMBs which are subject to forbearance agreements with the respective obligors, the difference between the stated interest rates and the rates paid (whether deferred and payable out of available future cash flow or, ultimately, from sale or refinancing proceeds) on FMBs is not accrued for financial statement purposes. The accrual of interest at the stated interest rate
will resume once an Underlying Property's ability to pay the stated rate has been adequately demonstrated. Unrecorded contractual interest income was approximately $3,047,000, $2,415,000 and $1,407,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
The following table lists the FMBs that the Company owns together with the occupancy and rental rates of the Underlying Properties:
*The average interest rate paid represents the interest recorded by the Company while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate payable pursuant to the applicable forbearance agreement, if any.
(A) The interest rates for Jubilee Courtyards are 7% through September 30, 2000 and 7.125% thereafter.
(B) The minimum pay rate is the current cash flow of the property.
(C) Includes contingent interest paid during 1998.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated interest rate over the remaining term of the FMB.
(G) The FMBs are carried at their estimated fair values at December 31, 1998.
(H) The property is still in the construction phase.
(I) Includes receipt of primary contingent interest.
(J) Pursuant to a bond modification as of October 1, 1997 which lowered the base interest rate to 7.50% effective October 1, 1997, subject to a minimum pay rate of 5% through June 30, 2000.
(K) Pursuant to a forbearance agreement as of October 1, 1997 which lowered the base interest rate to 7% through June 30, 2000 and 7.50% thereafter.
(L) The property is still in the rehabilitation phase.
(M) Pursuant to a bond modification as of October 1, 1997, the base interest rate was lowered to 6% through July 31, 2000 and 7% thereafter.
(N) The interest rates for College Park are 7% during the construction period and 7.25% thereafter.
(O) The interest rates for Bedford Square are 7% during the construction period and 6.375% thereafter.
(P) The interest rates for Northpointe Village are 7.965% through September 23, 1998, 8.125% during the remainder of the construction period and 7.5% thereafter.
(Q) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25% thereafter.
Private Label Tender Option Program - - -----------------------------------
On May 21, 1998, the Company closed on its Private Label Tender Option Program ("TOP") in order to raise additional capital of $150 million to acquire additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the aggregate principal amount of approximately $385,907,000 to a Delaware business trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which then contributed 27 of those FMBs with an aggregate principal amount of approximately $233,105,000, to another Delaware business trust (the "Owner Trust"). The Owner Trust issued two equity certificates: ( i) a Senior Certificate, with an outstanding face amount of $150,000,000 at December 31, 1998, which has been deposited into another Delaware business trust (the "Certificate Trust") which issued and sold Floater Certificates representing proportional interests in the Senior Certificate to new investors; and (ii) a Residual Certificate representing the remaining beneficial ownership interest in the Owner Trust, which has been issued to the Origination Trust, whose sole owner is the Company. In addition, the Owner Trust obtained a municipal bond insurance policy from MBIA to credit enhance Certificate distributions for the benefit of the holders of the Floater Certificates and has also arranged for a liquidity facility, issued by a consortium of highly rated European banks, with respect to the Floater Certificates.
The end result of these transactions is that a portion of the interest received by the Owner Trust on the FMBs it holds is distributed through the Senior Certificate to the holders of the Floater Certificates in an amount determined each week by the remarketing agent, Goldman Sachs & Co., at the distribution amount that is required to enable the remarketing agent to sell the Floater Certificates at par on any weekly determination date.
Currently, the maximum amount of Floater Certificates that can be issued to raise capital under the TOP is $150 million and as of December 31, 1998 such maximum has been issued. The Company is currently negotiating an increase in its TOP to $200 million; however, there can be no assurance that such negotiations will be successful.
The Company's cost of funds relating to the TOP (calculated as income allocated to the minority interest plus current fees as a percentage of the weighted average amount of the outstanding Senior Certificate) was approximately 4.9% for the period May 21, 1998 (inception) through December 31, 1998.
Note Payable - - ------------
During 1998, an interim credit facility with Goldman Sachs & Company (the "Interim Credit Facility") was available to the Company at prevailing rates of interest for such accounts (5.98% at December 14, 1998). At December 31, 1998 there were no borrowings outstanding. The Company is currently negotiating with Goldman Sachs & Company and various other lenders the renewal or replacement of this facility.
The outstanding face amount of the Senior Certificate and indebtedness under the Interim Credit Facility, together with any other leveraging of the Company, will not exceed 50% of the Company's total Market Value (as defined in the Trust Agreement) as of the date incurred.
Competition - - -----------
The Manager and/or its affiliates have formed, and may continue to form, various entities to engage in businesses which may be competitive with the Company.
The Company's business is affected by competition to the extent that the Underlying Properties from which it derives interest and, ultimately, principal payments may be subject to competition relating to rental rates and relative levels of amenities from offered by comparable neighboring properties.
Employees - - ---------
The Company has no employees. Management and administrative services for the Company are performed by the Manager and its affiliates pursuant to the Management Agreement between the Company and the Manager dated October 1, 1997 (the "Management Agreement"). The Manager receives compensation for such services and the Company reimburses the Manager and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Company in accordance with the Management Agreement (see Note 7 to the Company's Financial Statements included in "Item 8. Financial Statements and Supplementary Data").
Recent Legislation - - ------------------
The State of California recently adopted an administrative amendment to the allocation plan pursuant to which they award bond value capital to developers of multifamily housing. The amendment will require, in many cases, up to 15% of debt financing for such properties to be a form of taxable financing. Therefore, in certain cases, the Company may be required to offer taxable financing to California developers in order to be competitive.
Item 2.
Item 2. Properties
The Company does not own or lease any property.
Item 3.
Item 3. Legal Proceedings
The Company is not a party to any material pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Shareholders
None.
PART II
Item 5.
Item 5. Market for the Company's Shares and Related Shareholder Matters.
As of March 24, 1999, there were 4,044 holders of record owning 20,580,975 Shares. The Company's Shares have been listed on the American Stock Exchange since October 1, 1997 under the symbol "CHC". Prior to October 1, 1997, there was no established public trading market for the Company's Shares.
The high and low prices for each quarterly period of the last two years for which the Shares were traded is as follows:
The last reported sale price of Shares on the American Stock Exchange on March 26, 1999 was $12 3/8.
Incentive Share Option Plan - - ---------------------------
The Company has adopted an incentive Share option plan (the "Incentive Share Option Plan"), the purpose of which is to (i) attract and retain qualified persons as trustees and officers and (ii) to incentivize and more closely align the financial interests of the Manager and its employees and officers with the interests of the shareholders by providing the Manager with substantial financial interest in the Company's success. The Compensation Committee administers the Incentive Share Option Plan. Pursuant to the Incentive Share Option Plan, if the Company's distributions per Share in the immediately preceding calendar year exceed $0.9517 per Share, the Compensation Committee has the authority to issue options to purchase, in the aggregate, that number of Shares which is equal to three percent of the Shares outstanding as of December 31 of the immediately preceding calendar year (or in the initial year, as of October 1, 1997), provided that the Compensation Committee may only issue, in the aggregate, options to purchase a maximum number of Shares over the life of the Incentive Shares Option Plan equal to 10% of the Shares outstanding on October 1, 1997.
Subject to the limitations described in the preceding paragraph, if the Compensation Committee does not grant the maximum number of options in any year, then the excess of the number of authorized options over the number of options granted in such year will be added to the number of authorized options in the next succeeding year and will be available for grant by the Compensation Committee in such succeeding year.
All options granted by the Compensation Committee will have an exercise price equal to or greater than the fair market value of the Shares on the date of the grant. The maximum option term is ten years from the date of grant. All Share options granted pursuant to the Incentive Share Option Plan may vest immediately upon issuance or in accordance with the determination of the Compensation Committee. No options were granted for the year ended December 31, 1997. In 1998, the Company distributed $.93 per Share, thus prohibiting the Compensation Committee from issuing options. Three percent of the Shares outstanding as of the effective date of the Consolidation are equal to 617,624 Shares.
Share Repurchase Plan - - ---------------------
On October 9, 1998, the Board of Trustees authorized the implementation of a share repurchase plan, enabling the Company to repurchase, from time to time, up to 1,500,000 of its Shares. The repurchases will be made in the open market and the timing will be dependant on the availability of Shares and other market conditions. During the period October 9, 1998 through December 31, 1998, the Company acquired 8,400 of its Shares for an aggregate purchase price of $103,359 (including commissions and service charges). Repurchased Shares are accounted for as treasury shares of beneficial interest.
Distribution Information - - ------------------------
Charter Municipal Mortgage Acceptance Company (After the Consolidation) - - -----------------------------------------------------------------------
Distributions Per Share - - -----------------------
Quarterly cash distributions per share for the year ended December 31, 1998 and the quarter ended December 31, 1997 were as follows:
In addition to the distributions set forth in the table above, the Company paid the Manager a special distribution (equal to .375% of the total invested assets of the Company) which amounted to $1,477,797 and $330,580 for the year ended December 31, 1998 and the three months ended December 31, 1997, respectively.
There are no material legal restrictions upon the Company's present or future ability to make distributions in accordance with the provisions of the Company's Amended and Restated Trust Agreement. Future distributions paid by the Company will be at the discretion of the Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements and such other factors as the Trustees deem relevant.
Tax Exempt II (Prior to the Consolidation) - - ------------------------------------------
Distributions per BUC - - ---------------------
Cash distributions per BUC of Tax Exempt II for the nine months ended September 30, 1997 were as follows:
Approximately $2,400,000 of the $9,518,000 paid to the BUC$holders of Tax Exempt II in 1997, represented a return of capital on a generally accepted accounting principles ("GAAP") basis. The return of capital on a GAAP basis is calculated as BUC$holder distributions less net income allocated to BUC$holders.
Item 6.
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the Company. Additional financial information is set forth in the audited financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data".
OTHER DATA - - ----------
*Information prior to October 1, 1997 (the date of the Consolidation) is only with respect to Tax Exempt II. Information subsequent to September 30, 1997 is with respect to the Company which includes Tax Exempt II and the other Partnerships pursuant to the Consolidation.
**Net income and distribution per unit information for periods prior to October 1, 1997 is not presented because it is not indicative of the Company's continuing capital structure.
***Represents amount for the three months ended December 31, 1997.
(1) Net income per Share equals net income, less the special allocations to the Manager, divided by the weighted average Shares (basic and diluted) outstanding for the period.
(2) See "Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources - - -------------------------------
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware business trust which is engaged in the acquisition and ownership (either directly or indirectly) of tax-exempt participating and non-participating First Mortgage Bonds ("FMBs") issued by various state or local governments or other agencies or authorities and secured by participating and non-participating mortgage loans on the Underlying Properties. As of December 31, 1998, the Company owned 49 FMBs and had net assets of approximately $332,102,000.
The Company was formed by the consolidation (the "Consolidation"), on October 1, 1997, of Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III"), three publicly registered limited partnerships (the "Partnerships") one of the general partners of the Partnerships was an affiliate of Related Capital Company ("Related").
For a discussion of the Company's Incentive Share Option Plan and Share Repurchase Plan, see "Item 5. Market for the Company's Common stock and Related Shareholder Matters".
In order to generate increased tax exempt income and as a result enhance the value of the Company's Shares, the Company intends to originate and acquire additional tax-exempt bonds secured by multifamily properties. The Company believes that it can earn above market rates of interest on its bond acquisitions by focusing its efforts primarily on affordable housing. The Manager estimates that nearly 50% of all new multifamily development contains an affordable component which produces tax credits pursuant to Section 42 of the Internal Revenue Code. The Company has designed a Direct Purchase Program specifically designed to appeal to developers of such properties. In general, these properties are smaller than traditional multifamily housing properties, averaging 150 units. The traditional method of financing tax-exempt properties requires the involvement of credit enhancement, rating agencies and investment bankers. Therefore, the up-front cost of such financing is generally much higher than traditional multifamily financing. Through its Direct Purchase Program, the Company will originate and acquire tax-exempt bonds without the cost associated with credit enhancement, rating agencies and investment bankers. The Company believes that the up-front cost savings to the developer will translate into a higher than market interest rate on the bonds acquired by the Company.
The Company is positioned to market its Direct Purchase Program as a result of the Manager's affiliation with Related. Related and its predecessor companies have specialized in offering debt and equity products to mid-market multifamily owners and developers for over 25 years. Related has provided debt and equity financing to properties valued at over $7.8 billion. In addition, since 1987 Related has been one of the nation's leading provider of equity to developers of multifamily housing which benefits from tax credits. During 1998, the Manager's affiliation with Related allowed it to become one of the dominant lenders to developers and owners of affordable housing financed with tax-exempt bonds.
The Company does not operate as a mortgage REIT, which generally utilize high levels of leverage and acquire subordinated interests in commercial and/or residential mortgage- backed securities. Rather, the Company utilizes low levels of leverage and generally originates and acquires long-term, fixed-rate, tax-exempt FMBs. As a result, the Company did not experience the ill-effects associated with the volatile interest rate environment during 1998.
Pursuant to its Trust Agreement, the Company is only able to incur leverage or other financing up to 50% of the Company's Total Market Value (as defined in the Trust Agreement) as of the date incurred (the "50% Limit"). The Company expects to seek shareholder approval at the 1999 annual meeting to amend the Trust Agreement to permit the Company to exceed the 50% Limit with respect to short term borrowings of no more than approximately 5% of Total Market Value. Mortgage REITs typically incur leverage at ratios ranging from between 3:1 to 10:1. In general, the FMBs that the Company either originates or acquires call for ten-year restrictions from prepayments, eliminating the Company's susceptibility to significant levels of repayment risk as a result of interest rate reductions. Consistent with the foregoing, the Company focuses on providing investors with a stable level of distributions, even through unstable markets.
Due to the Company's low level of leverage, the Company has not been affected by the recent lack of liquidity that is currently impairing mortgage REITs and its portfolio does not contain assets that are especially vulnerable to volatility during periods of interest rate fluctuations.
On May 21, 1998, the Company closed on its Private Label Tender Option Program ("TOP") in order to raise additional capital of $150 million to acquire additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the aggregate principal amount of approximately $385,907,000 to a Delaware business trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which then contributed 27 of those FMBs, with an aggregate principal amount of approximately $233,105,000, to another Delaware business trust (the "Owner Trust"). The Owner Trust issued two equity certificates: (i) a Senior Certificate, with an outstanding face amount of $150,000,000 at December 31, 1998, which has been deposited into another Delaware business trust (the "Certificate Trust") which issued and sold Floater Certificates representing proportional interests in the Senior Certificate to new investors; and (ii) a Residual Certificate representing the remaining beneficial ownership interest in the Owner Trust, which has been issued to the Origination Trust, whose sole owner is the Company. In addition, the Owner Trust obtained a municipal bond insurance policy from MBIA to credit enhance Certificate distributions for the benefit of the holders of the Floater Certificates and has also arranged for a liquidity facility, issued by a consortium of highly rated European banks, with respect to the Floater Certificates.
The end result of these transactions is that a portion of the interest received by the Owner Trust on the FMBs it holds is distributed through the Senior Certificate to the holders of the Floater Certificates in an amount determined each week by the remarketing agent, Goldman Sachs & Co., at the distribution amount that is required to enable the remarketing agent to sell the Floater Certificates at par on any weekly determination date.
Currently, the maximum amount of Floater Certificates that can be issued to raise capital under the TOP is $150 million and as of December 31, 1998, such maximum has been issued. The Company is currently negotiating an increase in its TOP to $200 million and, before the end of 1999, the Company expects to raise funds through an equity offering; however, there can be no assurance that either of these initiatives will be successful. If the Company is unable to access additional capital through the foregoing initiatives, the Company's ability to grow will be restricted.
The Company's cost of funds relating to the TOP (calculated as income allocated to the minority interest plus current fees as a percentage of the weighted average amount of the outstanding Senior Certificate) was approximately 4.9% for the period May 21, 1998 (inception) through December 31, 1998.
During 1998, an interim credit facility with Goldman Sachs & Company (the "Interim Credit Facility") was available to the Company at prevailing rates of interest for such accounts (5.98% at December 14, 1998). At December 31, 1998 there were no borrowings outstanding. The Company is currently negotiating with Goldman Sachs & Company and various other lenders the renewal or replacement of this facility.
During the period January 1, 1998 through March 30, 1999 the Company acquired 18 FMBs for an aggregate purchase price of approximately $123,997,000, not including bond selection fees and expenses of approximately $2,669,000. The purchases were financed by the TOP and from borrowings under the Interim Credit Facility.
During the year ended December 31, 1998, cash and cash equivalents of the Company and its consolidated subsidiary increased approximately $10,796,000. This increase was primarily due to cash provided by operating activities ($22,651,000), the net sale of temporary investments ($3,500,000), principal payments received from loans made to properties ($507,000) and an increase in minority interest ($150,000,000) which exceeded the purchase of FMBs ($117,597,000), an increase in deferred bond selection costs ($2,598,000), loans made to properties ($1,056,000), net repayments of note payable ($21,445,000), an increase in deferred costs relating to the TOP ($2,513,000) and distributions paid ($20,331,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is amortization in the amount of $217,000.
The Company's growth will be financed by the TOP or similar programs, borrowings under the Interim Credit Facility, funds generated from operations in excess of distributions and by placements of equity. The Company has entered into forbearance agreements on several FMBs and may be required to extend these agreements or enter into new agreements in the future. Such agreements may adversely impact liquidity; however interest payments from FMBs are anticipated to provide sufficient liquidity to fund the Company's operating expenditures, debt service and distributions in future years.
Effective January 1, 1998, the Highland Ridge, Willow Creek, Bristol Village and Thomas Lake FMBs were modified to (i) reflect a change in their stated interest rates, (ii) allow for deferred base and other interest accrued and unpaid through December 1997 to be paid at maturity or upon an event of sale or refinancing and (iii) extend the mandatory call and prepayment lock-out dates. In addition, the maturities of the Highland Ridge and Willow Creek FMBs were extended to 2018 and 2022, respectively, and the maturities of the Bristol Village and Thomas Lake FMBs were extended to 2027 with mandatory call dates at January 2010. On December 23, 1998, the Mansion FMB was modified to (i) reflect a change in base interest rate, effective December 31, 1998 (from 5.23% to 7.25%), (ii) allow for certain equal quarterly payments of supplemental contingent interest ($150,000 per quarter) to be paid initially at closing and then quarterly over the second, third and fourth quarters of 1999 and (iii) extend the maturity date, the mandatory call date and the prepayment lock-out dates (to 2029, 2011 and 2006, respectively). Pursuant to the modified terms of the Mansion FMB, no additional contingent interest is to be paid from this FMB. The Company currently anticipates that it will modify certain other FMBs in generally similar terms as Mansion and those done previously and effective in 1998, where and as appropriate.
As part of the settlement of class action litigation relating to the Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had the right to petition the United States District Court for the Southern District of New York (the "Court") for additional attorneys' fees ("Counsel's Fee Shares") in an amount to be determined in the Court's sole discretion. The Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed to be 25%) of the increase in value of the Company, ("the Added Value") if any, as of October 1, 1998 based upon the difference between (i) the trading prices of the Company's Shares of beneficial interest during the six month period ended October 1, 1998 and (ii) the trading prices of the limited partnership units and the asset values of the Partnerships prior to October 1, 1997. As of October 1, 1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an Order and Stipulation of Settlement by the Court on February 18, 1999, Class Counsel is entitled to receive 608,955 Shares. The Shares will be distributed to Class Counsel quarterly in eight equal distributions commencing within ten business days after Class Counsel advises the Company in writing of the persons in whose name the Shares are to be issued. One-half of such Shares will be in the form of Restricted Securities (restricted only with respect to the sale, assignment, pledge or other transfer of such securities) and the remaining one-half of such Shares will be unrestricted. Restrictions on the Restricted Securities expire one year from the date of issuance. Management is currently attempting to negotiate a discounted cash settlement with Class Counsel in lieu of the issuance of Shares; however, there can be no assurance that such negotiations will be successful.
In February 1999, a distribution of $4,939,068 ($.24 per share), which was declared in December 1998, was paid to the shareholders from cash flow from operations for the quarter ended December 31, 1998.
Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way.
Results of Operations - - ---------------------
The following is a summary of the results of operations of the Company for the years ended December 31, 1998, 1997 and 1996. The net income for the years ended December 31, 1998, 1997 and 1996 was $22,025,872, $10,055,808 and $5,845,041, respectively.
1998 vs. 1997 - - -------------
For the year ended December 31, 1998 as compared to 1997, total revenues, total expenses and net income increased and the results of operations are not comparable due to (i) the Consolidation of Tax Exempt II with two other Partnerships on October 1, 1997, which resulted in the formation of the Company and (ii) the acquisition of 18 FMBs after the Consolidation. The Company's results of operations for the year ended December 31, 1998 consisted primarily of the results of the Company's investment in 49 FMBs. The Company's results of operations for the year December 31, 1997 consisted primarily of the results of Tax Exempt II's investment in 16 FMBs. In addition, the results of operations are not reflective of future operations due to the anticipated continued acquisition of FMBs.
Interest income from FMBs increased approximately $13,276,000 for the year ended December 31, 1998 as compared to 1997. An increase of $9,815,000 was due to the 16 FMBs (including Tax Exempt III's portion of the Players Club FMB) acquired from Tax Exempt I and Tax Exempt III in the Consolidation (the "Tax Exempt I and III Acquisitions") and an increase of $3,252,000 was due to the acquisition of 18 FMBs after the Consolidation (the "New Acquisitions"). Excluding these acquisitions, interest income from FMBs increased approximately 2% for the year ended December 31, 1998 as compared to 1997.
Interest income from temporary investments increased approximately $66,000 for the year ended December 31, 1998 as compared to 1997 primarily due to higher invested cash balances in 1998.
Interest income from promissory notes increased approximately $422,000 for the year ended December 31, 1998 as compared to 1997. An increase of $405,000 was due to the Tax Exempt I and III Acquisitions. Excluding these acquisitions, interest income from promissory notes increased approximately $17,000 for the year ended December 31, 1998 as compared to 1997 primarily due to loans to the owners of the Suntree and Bristol Village Underlying Properties in November 1997 and June 1998, respectively.
Interest expense increased approximately $1,075,000 for the year ended December 31, 1998 as compared to 1997 primarily due to higher outstanding balances of the Interim Credit Facility during 1998.
Management fees incurred to the general partners of Tax Exempt II in the amount of approximately $608,000 were recorded in 1997.
Loan servicing fees increased approximately $462,000 for the year ended December 31, 1998 as compared to 1997 due to increases of $349,000 and $113,000 relating to the Tax Exempt I and III Acquisitions and the New Acquisitions, respectively.
General and administrative expenses increased approximately $973,000 for the year ended December 31, 1998 as compared to 1997. This increase was primarily due to current fees relating to the TOP, an increase in printing and investor service expenses resulting from an increase in investors, an increase in insurance expense, an increase in audit/tax fees and expense reimbursements to the Manager and its affiliates due to the Tax Exempt I and III Acquisitions and the New Acquisitions and fees to the independent trustees relating to their services for 1998.
Amortization increased approximately $171,000 for the year ended December 31, 1998 as compared to 1997 primarily due to amortization of deferred bond selection costs relating to the New Acquisitions and amortization of deferred costs relating to the TOP.
A loss on impairment of assets in the amount of approximately $1,843,000 was recorded in 1997 to recognize other than temporary impairment of the Shannon Lake, Players Club and Lakepoint FMBs based upon operating difficulties at the properties securing the FMBs.
Minority interest in income of subsidiary in the amount of approximately $1,564,000 was recorded in 1998, relating to the TOP.
1997 vs. 1996 - - -------------
For the year ended December 31, 1997 as compared to 1996, total revenues, total expenses (excluding loss on impairment of assets) and net income increased and the results of operations are not comparable due to the Consolidation of Tax Exempt II with two other Partnerships on October 1, 1997, which resulted in the formation of the Company. The Company's results of operations for the year ended December 31, 1997 consisted primarily of the results of the Company's investment in sixteen FMBs for the nine months ended September 30, 1997 and the results of the Company's investment in thirty-two FMBs for the three months ended December 31, 1997. The Company's results of operations for the year December 31, 1996 consisted primarily of the results of Tax Exempt II's investment in sixteen FMBs. In addition, the results of operations are not reflective of future operations due to the anticipated continued acquisition of FMBs.
Interest income from FMBs increased approximately $2,440,000 for the year ended December 31, 1997 as compared to 1996. An increase of $2,996,000 was due to the sixteen FMBs (including Tax Exempt III's portion of the Players Club FMB) acquired from Tax Exempt I and Tax Exempt III in the Consolidation (the "Tax Exempt I and III Acquisitions"). Excluding these acquisitions, interest income from FMBs decreased approximately 5% for the year ended December 31, 1997 as compared to 1996.
Interest income from temporary investments increased approximately $17,000 for the year ended December 31, 1997 as compared to 1996 primarily due to higher invested cash balances in 1997.
Interest income from promissory notes increased approximately $145,000 for the year ended December 31, 1997 as compared to 1996. An increase of $140,000 was due to the Tax Exempt I Acquisitions. Excluding these acquisitions, interest income from promissory notes increased approximately $5,000 for the year ended December 31, 1997 as compared to 1996.
Interest expense in the amount of approximately $429,000 was recorded in 1997 relating to the Interim Credit Facility.
Management fees incurred to the general partners of Tax Exempt II decreased approximately $203,000 for the year ended December 31, 1997 as compared to 1996 due to the Consolidation on October 1, 1997.
Loan servicing fees increased approximately $118,000 for the year ended December 31, 1997 as compared to 1996 due to the Tax Exempt I and III Acquisitions.
General and administrative expenses increased approximately $162,000 for the year ended December 31, 1997 as compared to 1996. This increase was primarily due to an increase in printing and investor service expenses resulting from an increase in investors, an increase in insurance expense and an increase in audit/tax fees and expense reimbursements to the Manager and its affiliates due to the Tax Exempt I and III Acquisitions.
Amortization increased approximately $42,000 for the year ended December 31, 1997 as compared to 1996 primarily due to amortization of deferred loan costs relating to debt assumed from Tax Exempt I in the Consolidation.
Losses on impairment of assets in the amounts of approximately $1,843,000 and $4,000,000 were recorded for the years ended December 31, 1997 and 1996, respectively, to recognize other than temporary impairment of the Shannon Lake, Players Club and Lakepoint FMBs and the Cedar Pointe, Sunset Downs and Loveridge FMBs, respectively, based upon operating difficulties at the properties securing the FMBs.
General - - -------
The determination as to whether it is in the best interest of the Company to enter into forbearance agreements on the FMBs or, alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors including, but not limited to, Underlying Property performance, owner cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid by FMBs is not accrued as interest income for financial reporting purposes. The accrual of interest at the stated interest rate will resume once an Underlying Property's ability to pay the stated rate has been adequately demonstrated. Interest income of approximately $3,047,000, $2,415,000 and $1,407,000 was not recognized for the years ended December 31, 1998, 1997 and 1996, respectively.
Cash Available for Distribution - - -------------------------------
The Company uses cash available for distribution ("CAD") as the primary measure of its dividend paying ability. The difference between CAD and net income results from variations between generally accepted accounting principles ("GAAP") and cash received. One difference between CAD and GAAP is the amortization of loan origination costs, the costs of the TOP and other intangible assets. These amounts have been excluded from CAD due to their noncash nature. Another difference is the noncash gain and loss associated with bond impairments and sales for GAAP purposes, which are not included in the calculation of CAD. During the year ended December 31, 1998 and the three months ended December 31, 1997, there were FMB impairments in the amounts of $0 and $1,843,135, respectively. CAD should not be considered an alternative to net income as a measure of the Company's financial performance or to cash flow from operating activities (computed in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs.
Cash available for distribution ("CAD") for the year ended December 31, 1998 and the three months ended December 31, 1997 is summarized in the following table:
Recently Issued Accounting Standards - - ------------------------------------
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2000. Because the Company does not currently utilize derivatives or engage in hedging activities, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements.
Forward-Looking Statements - - --------------------------
Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements.
Year 2000 Compliance - - --------------------
The Company utilizes the computer services of an affiliate of the Manager. The affiliate of the Manager has upgraded its computer information systems to be year 2000 compliant and beyond. The year 2000 compliance issue concerns the inability of a computerized system to accurately record dates after 1999. The affiliate of the Manager recently underwent a conversion of its financial systems applications and upgraded all of its non-compliant, in-house software and hardware inventory. The work stations that experienced problems from the testing process were corrected with an upgrade patch. The costs incurred by the Manager are not being charged to the Company. The most likely worst case scenario that the Company faces is that computer operations will be suspended for a few days to a week at January 1, 2000. The Company's contingency plan is to have a complete backup done on December 31, 1999 and to have both electronic and printed reports generated for all critical data up to and including December 31, 1999.
With regard to third parties, the Company's Manager is in the process of evaluating the potential adverse impact that could result from the failure of material service providers to be year 2000 compliant. A detailed survey and assessment was sent to material third parties in the fourth quarter of 1998. The Company has received assurances from a majority of its third parties with which it interacts that they have addressed the year 2000 issues and is evaluating these assurances for their adequacy and accuracy. In cases where the Company has not received assurances from third parties, it is initiating further mail and/or phone correspondence. The Company relies heavily on third parties and is vulnerable to the failures of third parties to address their year 2000 issues. There can be no assurance given that the third parties will adequately address their issues.
Inflation - - ---------
Inflation did not have a material effect on the Company's results for the periods presented.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The nature of the Company's investments and the instruments used to raise capital for their acquisition expose the Company to gains and losses due to fluctuations in market interest rates. Market interest rates are highly sensitive to many factors, including governmental policies, domestic and international political considerations and other factors beyond the control of the Company.
The FMBs generally bear interest at fixed rates, or pay interest according to the cash flows of the underlying property, which do not fluctuate with changes in market interest rates. In contrast, payments required under the TOP program vary based on market interest rates, primarily BMA, and are re-set weekly. Thus, an increase in market interest rates would result in increased payments under the TOP program, without a corresponding increase in cash flows from the investments in FMBs. For example, based on the $150,000,000 outstanding under the TOP program at December 31, 1998, the Company estimates that an increase of 0.5% in the BMA rate would decrease the Company's annual net income by approximately $750,000; a 1.0% increase in BMA would decrease annual net income by approximately $1,500,000. For the same reasons, a decrease in market interest rates would generally benefit the Company, as a result of decreased allocations to the minority interest without corresponding decreases in interest received on the FMBs. For example, based on the $150,000,000 outstanding under the TOP program at December 31, 1998, the Company estimates that a 0.5% decline in BMA rates would increase the Company's annual net income by approximately $750,000, and a 1.0% decline in BMA would increase net income by approximately $1,500,000. Various financial vehicles exist which would allow Company management to mitigate the impact of interest rate fluctuations on the Company's cash flows and earnings. Although management has not engaged in any of these hedging strategies in the past, it may do so in the future, depending on management's analysis of the interest rate environment and the costs and risks of such strategies.
Changes in market interest rates would also impact the estimated fair value of the company's portfolio of FMBs. The Company estimates the fair value for each bond as the present value of its expected cash flows, using a discount rate for comparable tax-exempt investments. Therefore, as market interest rates for tax-exempt investments increase, the estimated fair value of the company's FMBs will generally decline, and a decline in interest rates would be expected to result in an increase in the estimated fair values. For example, the Company projects that a 1% increase in market rates for tax-exempt investments would decrease the estimated fair value of its portfolio of FMBs from its December 31, 1998 value of $458,662,600 to approximately $417,353,000. A 1% decline in interest rates would increase the value of the December 31, 1998 portfolio to approximately $513,446,000. Changes in the estimated fair value of the FMBs do not impact the Company's reported net income, earnings per share, distributions or cash flows, but are reported as components of other comprehensive income and affect reported shareholders' equity.
Item 8.
Item 8. Financial Statements and Supplementary Data. Page ---- (a) 1. Financial Statements --------------------
Independent Auditors' Report 22
Consolidated Balance Sheets as of December 31, 1998 and 1997 23
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 24
Consolidated Statements of Changes in Shareholders' Equity/Partners' Capital (Deficit) for the years ended December 31, 1998, 1997 and 1996 25
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 27
Notes to Consolidated Financial Statements 29
INDEPENDENT AUTITORS' REPORT
To the Board of Trustees And Shareholders of Charter Municipal Mortgage Acceptance Company New York, New York
We have audited the accompanying consolidated balance sheets of Charter Municipal Mortgage Acceptance Company and subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in shareholders' equity/partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedule listed in Item 14(a)2. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Charter Municipal Mortgage Acceptance Company and subsidiary as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP New York, New York
March 19, 1999
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
See accompanying notes to consolidated financial statements
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
*Net income per unit information for periods before October 1, 1997 is not presented because it is not indicative to the Company's continuing capital structure. **Represents amount for the three months ended December 31, 1997.
See accompanying notes to consolidated financial statements
See accompanying notes to consolidated financial statements
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
See accompanying notes to consolidated financial statements
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to consolidated financial statements
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - General
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware business trust which is engaged in the acquisition and ownership (either directly or indirectly) of tax-exempt participating and non-participating First Mortgage Bonds ("FMBs") issued by various state or local governments or other agencies or authorities and secured by participating and non-participating mortgage loans on the underlying properties ("Underlying Properties"). As of December 31, 1998 the Company owned a portfolio of 49 FMBs. The Company is organized and managed as a single business segment.
The Company was formed on October 1, 1997 as the result of the Consolidation (the "Consolidation") of three publicly registered limited partnerships, Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III") (the "Partnerships", and each individually a "Partnership"). One of the general partners of the Partnerships was an affiliate of Related Capital Company ("Related"). Unless otherwise indicated, the "Company", as hereinafter used, refers to Charter Municipal Mortgage Acceptance Company and its subsidiary and, for references prior to October 1, 1997, refers to Tax Exempt II. Pursuant to the Consolidation, the Company issued shares of beneficial interest (the "Shares") to all partners in each of the Partnerships in exchange for their interests in the Partnerships based upon each partner's proportionate interest in the Shares issued to their Partnership in the Consolidation. The Shares commenced trading on the American Stock Exchange on October 1, 1997 under the symbol "CHC". As of December 31, 1998, there were 20,579,448 Shares outstanding.
The Company is governed by a board of trustees comprised of two independent managing trustees and three managing trustees who are affiliated with Related. The Company has engaged Related Charter LP (the "Manager"), an affiliate of Related, to manage its day-to-day affairs. Each independent trustee is entitled to receive annual compensation for serving as a trustee in the aggregate amount of $15,000, payable in cash (maximum of $5,000 per year) and/or Shares valued based on the fair market value at the date of issuance. On June 4, 1998, 186 Shares, having an aggregate value of $2,500 as of that date, were issued to each independent trustee as compensation for their services for the quarter ended December 31, 1997. On February 22, 1999, 769 Shares, having an aggregate value of $10.000 as of that date, were issued to each independent trustee as compensation for their services for the year ended December 31, 1998.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Company are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP"). For financial accounting and reporting purposes, the Consolidation was accounted for using the purchase method of accounting. Under this method, the Partnership with the investor group receiving the largest ownership in the Company, in this case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for accounting purposes, Tax Exempt II's assets and liabilities were recorded by the Company at their historical cost, with the assets and liabilities of the other Partnerships recorded at their estimated fair values for each Partnership (an aggregate of approximately $158,129,000) as set forth in the Solicitation Statement of the Company dated June 18, 1997 (the "Solicitation Statement"). Results of operations and other operating financial data for the Company for the years ended December 31, 1998, 1997 and 1996 include information for the entire periods presented with respect to Tax Exempt II, but only include information for the period October 1, 1997 to December 31, 1998 with respect to the other Partnerships. Prior to the Consolidation, Tax Exempt II was a limited partnership which was formed under the laws of the State of Delaware on April 11, 1986.
b) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its majority owned subsidiary business trust (see Note 5). All intercompany accounts and transactions have been eliminated in consolidation.
c) Participating FMBs and Promissory Notes Receivable
The Company accounts for its investments in the FMBs as debt securities available for sale under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
In most cases the Company has a right to require redemption of the FMBs prior to their maturity, although it can and may elect to hold them up to their maturity dates unless otherwise modified. As such, SFAS 115 requires the Company to classify these investments as "available for sale." Accordingly, investments in FMBs are carried at their estimated fair values, with unrealized gains and losses reported as items of other comprehensive income and in a separate component of shareholders' equity. Unrealized gains or losses do not affect the cash flow generated from property operations, distributions to shareholders, the characterization of the tax-exempt income stream or the financial obligations under the FMBs.
The Company periodically evaluates each FMB to determine whether a decline in fair value below the FMB's cost basis is other than temporary. Such a decline is considered to be other than temporary if, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms of the FMBs. If the decline is judged to be other than temporary, the cost basis of the FMB is written down to its then estimated fair value, with the amount of the write-down accounted for as a realized loss.
Because the FMBs are not readily marketable, the Company estimates fair value for each FMB using its expected cash flows and an interest rate for comparable tax exempt investments. This process is based upon projections of future economic events affecting the
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Underlying Properties, such as occupancy rates, rental rates, operating cost inflation and market capitalization rates, and upon determination of an appropriate market rate of interest, all of which are based on good faith estimates and assumptions developed by the Company's management. Changes in market conditions and circumstances may occur which would cause these estimates and assumptions to change, therefore, actual results may vary from the estimates and the variance may be material.
From time to time, the Company has advanced funds to the owners of certain Underlying Properties in the form of promissory notes, generally collateralized by second mortgages on such properties. These promissory notes are carried at cost less a valuation allowance where appropriate. The Company periodically evaluates the collectibility of both interest and principal of these investments to determine whether a reserve is necessary.
For both FMBs and promissory notes, interest income is recognized at the stated rate when collectibility of future amounts is reasonably assured. Interest income from FMBs with modified terms or where the collectibility of future amounts is uncertain is recognized based upon expected cash receipts.
d) Temporary Investments
Temporary investments at December 31, 1997 represent tax-exempt municipal preferred stock which is carried at cost.
e) Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and investments in short-term instruments with an original maturity of three months or less.
f) Deferred Bond Selection Costs
Prior to the Consolidation the general partners of Tax Exempt II were paid, and after the Consolidation the Advisor is paid, bond selection fees for evaluating and selecting FMBs, negotiating the terms of mortgage loans and coordinating the development effort with property developers and government agencies. These fees have been capitalized and are being amortized over the terms of the FMBs.
g) Deferred Costs Relating to the Private Label Tender Option Program
Costs incurred in connection with the Company's Private Label Tender Option Program (see Note 5) have been capitalized and are being amortized over the life of the program using the effective yield method.
h) Goodwill/Excess of Acquired Net Assets Over Cost
The application of purchase accounting to the Consolidation resulted in the Company recording a deferred credit for the excess of the fair value of the net assets acquired from Tax Exempt I and Tax Exempt III over their cost. This deferred credit was being accreted to interest income from FMBs using the straight-line method over 10 years, which approximated the average remaining term to maturity of the FMBs. The accrual of the estimated value of the Counsel Fee Shares (see Note 9) at October 1, 1998 is considered to be a purchase price adjustment and, in accordance with the application of purchase accounting to the Consolidation, results in the reversal of the carrying value of the excess of acquired net assets over cost and the recognition of goodwill at October 1, 1998 in the amount of $4,805,828. Goodwill is being amortized to interest income from FMBs using the straight-line method over nine years, which approximates the average remaining term to maturity of the FMBs.
i) Fair Value of Financial Instruments
As described above, the Company's investments in FMBs are carried at estimated fair values. The Company has determined that the fair value of its remaining financial instruments, including its temporary investments, cash and cash equivalents, promissory notes receivable and notes payable approximate their carrying values at December 31, 1998 and 1997, due to their generally short-term nature.
j) Consolidation Costs
Costs incurred in the Consolidation including legal, accounting and registration fees, amounting to $2,716,260, were charged directly to shareholders' equity.
k) Income Taxes
The Company is not required to provide for, or pay, any federal income taxes. Income tax attributes that arise from its operations are passed directly to the Company's shareholders. The Company may be subject to state and local taxes in jurisdictions in which it operates. At December 31, 1998, the net tax basis of the Company's assets and liabilities exceeded the net book basis by approximately $55,699,000.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income," requires the Company to classify items of "other comprehensive income", such as unrealized gains and losses on its FMBs, by their nature in the financial statements and display the accumulated balance of other comprehensive income (loss) separately from beneficial owners' equity in the shareholders' equity section of the consolidated balance sheet. In accordance with SFAS No. 130, cumulative unrealized gains and losses on securities available for sale are classified as accumulated other comprehensive income in shareholders' equity and current period unrealized gains and losses are included as a component of comprehensive income.
m) Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
n) New Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2000. Because the Company does not currently utilize derivatives or engage in hedging activities, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements.
o) Reclassifications
Certain amounts in the 1997 and 1996 financial statements have been reclassified to conform to the 1998 presentation.
NOTE 3 - Participating First Mortgage Bonds
As of December 31, 1998, the Company owned 49 FMBs which are secured by mortgages on apartment complexes in fourteen states across the continental United States. The face amount of the FMBs ranges from $2,275,000 to $19,450,000 with carrying amounts from $2,275,000 to $20,189,000. The FMBs have maturity dates from December 2003 to January 2041, however, seven FMBs are callable as of December 31, 1998 and the remainder are callable from January 1999 to October 2025. The stated interest rates range from 4.87% to 8.5%. The weighted average interest rates recognized on the face amount of the portfolio of FMBs for the years ended December 31, 1998, 1997 and 1996 were 6.94%, 6.75% and 7.18%, respectively, based on weighted average face amounts of approximately $394,079,000, $208,744,000 and $162,125,000, respectively.
The principal and interest payments on each FMB are payable only from the cash flows of the the Underlying Properties, including proceeds from a sale of an Underlying Property or the refinancing of the mortgage loan securing such FMBs (the "Mortgage Loans"). None of the FMBs constitute a general obligation of any state or local government, agency or authority. The structure of each Mortgage Loan mirrors the structure of the corresponding FMB which it secures.
The seasoned original 31 FMBs call for interest only debt service payments during their respective terms (which generally are 24 to 30 years from issuance or re-issuance) with repayment of principal due in a lump sum "balloon" payment at the expiration of their respective terms or upon sale or refinancing. The newly acquired bonds (bonds acquired in 1997 and 1998) call for amortization or "sinking fund" payments, generally at the completion of rehabilitation or construction, of principal based on thirty to forty year level debt service amortization schedules. On all the FMBs the Company generally has the right to require redemption approximately 12 to 15 years from issuance or re-issuance and obligors generally are locked out of prepayment for seven to ten years from issuance or re-issuance.
The original obligors and owners of the Underlying Properties of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced with affiliates of the Manager who have not made equity investments. These entities have assumed the day-to-day responsibilities and obligations of the Underlying Properties. Buyers are being sought who would make equity investments in the Underlying Properties and assume the nonrecourse obligations for the FMB. These properties are generally paying as interest an amount equal to the net cash flow generated by operations, which in some cases is less than stated rate of the FMB. The Company has no present intention of declaring a default on these FMBs. . The aggregate carrying value of these ten FMBs at December 31, 1998 was approximately $105,402,000 and the income earned from them for the year ended December 31, 1998 was approximately $7,497,000.
From time to time, the Company enters into forbearance agreements and/or permanent modifications with certain borrowers. The determination as to whether it is in the best interest of the Company to enter into permanent modifications or forbearance agreements on the FMBs, advance second mortgages, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, Underlying Property performance, owner cooperation and projected costs of foreclosure and litigation. Payments under each of the existing forbearance agreements are current as of December 31, 1998.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective January 1, 1998, the Highland Ridge, Willow Creek, Bristol Village and Thomas Lake FMBs were modified to (i) reflect a change in their stated interest rates, (ii) allow for deferred base and other interest accrued and unpaid through December 1997 to be paid at maturity or upon an event of sale or refinancing and (iii) extend the mandatory call and prepayment lock-out dates. In addition, the maturities of the Highland Ridge and Willow Creek FMBs were extended to 2018 and 2022, respectively, and the maturities of the Bristol Village and Thomas Lake FMBs were extended to 2027 with mandatory call dates at January 2010. On December 23, 1998, the Mansion FMB was modified to (i) reflect a change in base interest rate, effective December 31, 1998 (from 5.23% to 7.25%), (ii) allow for certain equal quarterly payments of supplemental contingent interest ($150,000 per quarter) to be paid initially at closing and then quarterly over the second, third and fourth quarters of 1999 and (iii) extend the maturity date, the mandatory call date and the prepayment lock-out dates (to 2029, 2011 and 2006, respectively). Pursuant to the modified terms of the Mansion FMB, no additional contingent interest is to be paid from this FMB. The Company currently anticipates that it will modify certain other FMBs to reflect generally similar terms as those modified previously and effective in 1998, where and as appropriate.
Certain of the Company's other FMBs have been previously modified. These modifications have generally encompassed an extension of the maturity together with a prepayment lock out feature and/or prepayment penalties together with an extension of the mandatory redemption feature (5-10 years from modification). Stated interest rates have also been adjusted together with a change in the participation and contingent interest features. Base interest rates, contingent interest, prepayment lock-outs, mandatory redemption and maturity features vary dependent on the facts of a particular FMB, the developer, the Underlying Property's performance and requirements of bond counsel and local issuers.
In addition to the stated base rates of interest, certain of the FMBs provide for "contingent interest" which is equal to: (i) an amount equal to 50% to 100% of net property cash flow and 50% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annual compound interest at a rate ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (ii) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of the remaining net sale or refinancing proceeds, until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent interest on the FMBs are exempt from federal income taxation. During the years ended December 31, 1998, 1997 and 1996, six, five and two FMBs, paid contingent interest amounting to approximately $960,000, $353,000 and $220,000, respectively.
With respect to the FMBs which are subject to forbearance agreements with the respective obligors, the difference between the stated interest rates and the rates paid (whether deferred and payable out of available future cash flow or, ultimately, from sale or refinancing proceeds) on FMBs is not accrued for financial statement purposes. The accrual of interest at the stated interest rate will resume once an Underlying Property's ability to pay the stated rate has been adequately demonstrated. Unrecorded contractual interest income was approximately $3,047,000, $2,415,000 and $1,407,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Newly acquired FMBs will generally bear a fixed base interest rate and, to the extent permitted by existing regulations, and other features, they may or may not also provide for contingent interest. Terms are expected to be 5 to 35 years, although the Company may have the right to cause repayment prior to maturity through a mandatory redemption feature (5 to 7 years with up to 6 month's notice). In some cases, the principal of an FMB may amortize.
New FMBs are generally not expected to be subject to optional prepayment during the first 5-10 years of the Company's ownership of the bonds and may carry prepayment penalties thereafter beginning at 5% of the outstanding principal balance, declining by 1% per annum. Certain new FMBs may be purchased at a discount from their face value. Up to 15% of the Total Market Value of the Company may be invested in FMBs secured by Underlying Properties in which affiliates of the Manager have a controlling interest, equity interest or security interest. The 15% limit is not applicable to properties to which the Manager or its affiliates have taken title for the benefit of the Company and only applies to new FMBs acquired after the Consolidation. In selected circumstances and only in connection with the acquisition of tax-exempt FMBs the Company may acquire a small amount of taxable bonds to fund certain costs associated with the issuance of FMBs, that under current law cannot be funded by FMBs.
In order to protect the tax exempt status of the FMBs, the owners of the Underlying Properties are required to enter into certain agreements to own, manage and operate such Underlying Properties in accordance with requirements of the Internal Revenue Code of 1986, as amended.
From time to time the Company has advanced funds to owners of certain Underlying Properties in order to preserve the underlying asset including completion of construction and/or when Underlying Properties have experienced operating difficulties including past due real estate taxes and/or deferred maintenance items. Such advances typically are secured by promissory notes and/or second mortgages. As of December 31, 1998, the face amount of such advances was $12,845,308, and their carrying value was $7,628,920, which is net of purchase accounting adjustments, and a reserve for collectibility of $138,000.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the period January 1, 1998 through December 31, 1998 the Company acquired 17 FMBs for an aggregate purchase price of $117,596,600, not including bond selection fees and expenses of approximately $2,541,000. Further information regarding the 17 FMBs is as follows:
(a) The interest rates for College Park are 7% during the construction period and 7.25% thereafter.
(b) The interest rates for Bedford Square are 7% during the construction period and 6.375% thereafter.
(c) The interest rates for Northpointe Village are 7.965% through September 23, 1998, 8.125% during the remainder of the construction period and 7.5% thereafter.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25% thereafter.
(e) The interest rates for Jubilee Courtyards are 7% through September 30, 2000 and 7.125% thereafter.
No single FMB provided interest income which exceeded 10% of the Company's total revenue for the years ended December 31, 1998, 1997 and 1996, except for the Bristol Village and Pelican Cove FMBs which provided 14% and 11%, respectively, of total revenue in 1996.
Based on the face amount of FMBs at December 31, 1998, approximately 23% of the Underlying Properties are located in California, 15% are located in Florida, 14% are located in Missouri, 10% are located in Georgia and 10% are located in Minnesota. No other states comprise more than 10% of the total face amount.
The cost basis of the Company's portfolio of 49 and 32 FMBs at December 31, 1998 and 1997 was $443,602,409 and $325,979,354, respectively. The net unrealized gain on FMBs at December 31, 1998 consisted of gross unrealized gains and losses of $22,256,064 and $7,195,873, respectively. The net unrealized gain on FMBs at December 31, 1997 consisted of gross unrealized gains and losses of $28,984,175 and $8,663,529, respectively.
During December of 1997, an unrelated publicly-registered partnership sold a portfolio of nine bonds similar to the Company's FMBs. Based on the information available to Company management regarding the pricing of this sale, management determined that market conditions for the Company's FMBs were much more favorable than was previously believed. Accordingly, the estimated fair values of the FMBs calculated by management at December 31, 1997 increased by a total of approximately $22,700,000 over the estimated fair values at December 31, 1996.
NOTE 4 - Deferred Costs
The components of deferred costs are as follows:
NOTE 5 - Minority Interest In Subsidiary
On May 21, 1998, the Company closed on its Private Label Tender Option Program ("TOP") in order to raise additional capital of $150 million to acquire additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the aggregate principal amount of approximately $385,907,000 to a Delaware business trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which then contributed 27 of those FMBs, with an aggregate principal amount of approximately $233,105,000, to another Delaware business trust (the "Owner Trust"). The Owner Trust issued two equity certificates: ( i) a Senior Certificate, with an outstanding face amount of $150,000,000 at December 31, 1998, which has been deposited into another Delaware business trust (the "Certificate Trust") which issued and sold Floater Certificates representing proportional interests in the Senior Certificate to new investors; and (ii) a Residual Certificate representing the remaining beneficial ownership interest in the Owner Trust, which has been issued to the Origination Trust, whose sole owner is the Company. In addition, the Owner Trust obtained a municipal bond insurance policy from MBIA to credit enhance Certificate distributions for the benefit of the holders of the Floater Certificates and has also arranged for a liquidity facility, issued by a consortium of highly rated European banks, with respect to the Floater Certificates.
The end result of these transactions is that a portion of the interest received by the Owner Trust on the FMBs it holds is distributed through the Senior Certificate to the holders of the Floater Certificates in an amount determined each week by the remarketing agent, Goldman Sachs & Co., at the distribution amount that is required to enable the remarketing agent to sell the Floater Certificates at par on any weekly determination date.
For financial accounting and reporting purposes, the equity in the Owner Trust represented by the Senior Certificate is classified as "minority interest in subsidiary (subject to mandatory redemption)" in the accompanying consolidated balance sheets. Income earned by the Owner Trust is allocated to the minority interest in an amount equal to the distributions through the Senior Certificate to the holders of the Floater Certificates. Such allocation of income is classified as "minority interest in income of subsidiary" in the accompanying consolidated statements of income. Deferred costs relating to the TOP are being amortized using the straight line method over 10 years, which approximates the average remaining term to maturity of the FMBs contributed or expected to be contributed to the Owner Trust.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Currently, the maximum amount of Floater Certificates that can be issued to raise capital under the TOP is $150 million and as of December 31, 1998 such maximum has been issued. The Company is currently negotiating an increase in its TOP to $200 million and, before the end of 1999, the Company expects to raise funds through an equity offering; however, there can be no assurance that either of these initiatives will be successful.
The Company's cost of funds relating to the TOP (calculated as income allocated to the minority interest plus current fees as a percentage of the weighted average amount of the outstanding Senior Certificate) was approximately 4.9% for the period May 21, 1998 (inception) through December 31, 1998.
NOTE 6 - Note Payable
During 1998, an interim credit facility with Goldman Sachs & Company (the "Interim Credit Facility") was available to the Company at prevailing rates of interest for such accounts (5.98% at December 14, 1998). At December 31, 1998 there were no borrowings outstanding. The Company is currently negotiating with Goldman Sachs & Company and various other lenders the renewal or replacement of this facility.
NOTE 7 - Related Parties
Charter Municipal Mortgage Acceptance Company (After the Consolidation) - - ----------------------------------------------------------------------- Pursuant to the Management Agreement, the Manager receives (i) bond selection fees equal to 2% of the principal amount of each FMB or other tax-exempt instrument acquired or originated by the Company; (ii) special distributions equal to .375% of the total invested assets of the Company; (iii) loan servicing fees equal to .25% of the outstanding principal amount of FMBs; (iv) a liquidation fee based on the gross sales price of assets sold by the Company in connection with a liquidation of the Company's assets; and (v) reimbursement of certain administrative costs incurred by the Manager and its affiliates on behalf of the Company. In addition, the Manager receives bond placement fees from the borrower in an amount equal to 1% of the principal amount of each FMB or other tax-exempt instrument acquired or originated by the Company and affiliates of the Manager are part of a joint venture which has a development services agreement with the obligors of three FMBs.
The original term of the Management Agreement will terminate on October 1, 2001. Thereafter, the Management Agreement will be renewed annually by the Company, subject to majority approval of the Company's Board of Trustees. The Management Agreement cannot be terminated by the Company prior to October 1, 2001, other than for gross negligence or willful misconduct of the Manager and by a majority vote of the Company's independent trustees. The Management Agreement may be terminated without cause by a majority vote of the Company's independent trustees following October 1, 2001 or by the Manager at any time.
The costs, expenses and the special distribution incurred to the Manager and its affiliates for the year ended December 31, 1998 and the three months ended December 31, 1997 (after the Consolidation) were as follows:
Year Three Months Ended Ended December 31, December 31, 1998 1997
Bond selection fees $2,351,932 $ 100,000 Expense reimbursement 374,315 36,747 Loan servicing fees 985,198 220,386 Special distribution 1,477,797 330,580 ---------- ----------
$5,189,242 $ 687,713 ========== ==========
Tax Exempt II (Prior to the Consolidation) - - ------------------------------------------ Prior to the Consolidation, the general partners of Tax Exempt II were Related Tax Exempt Associates II, Inc., a Delaware corporation (the "Related General Partner"), and Prudential Bache Properties, Inc. ("PBP"). The general partners managed and controlled the affairs of Tax Exempt II prior to the Consolidation.
The general partners and their affiliates performed services for Tax Exempt II which included, but were not limited to: accounting and financial management; registrar, transfer and assignment functions; asset management; investor communications; printing and other administrative services. The general partners and their affiliates received reimbursements for costs incurred in connection with these services, the amount of which was limited by the provisions of the partnership agreement of Tax Exempt II. The general partners were paid, in aggregate, an annual management fee equal to .5% of the total invested assets (which equaled the total original face amount of the FMBs). An affiliate of the Related General Partner received loan servicing fees in an amount of .25% per annum of the principal amount outstanding on mortgage loans serviced by the affiliate.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The expenses incurred by Tax Exempt II to related parties for the nine months ended September 30, 1997 and the year ended December 31, 1996 were as follows:
Nine Months Year Ended Ended September 30, December 31, 1997 1996
PBP and affiliates General and administrative $ 58,170 $ 67,483 Management fee 303,984 405,312 ---------- ---------- 362,154 472,795 ---------- ---------- Related General Partner and affiliates General and administrative 66,222 46,725 Management fee 303,984 405,313 Loan servicing fee 303,152 405,313 ---------- ---------- 673,358 857,351 ---------- ---------- $1,035,512 $1,330,146 ========== ==========
General - - ------- The obligors of the Suntree, Players Club, River Run, Ocean Air, Phoenix, Stone Creek, Cedarbrook, Marsh Landings, Gulfstream, Bedford Square, Northpointe Village, Falcon Creek, Jubilee Courtyards, Silvercrest, Carrington Pointe, Madalyn Landing, Forest Hills, Lake Jackson and Mountain Ranch FMBs are local partnerships in which investment partnerships, whose general partners are affiliates of the Manager, own a controlling partnership interest.
As of December 31, 1998, the original owners of the Underlying Properties and obligors of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs had been replaced with affiliates of the Manager who have not made equity investments. These entities have assumed the day-to-day responsibilities and obligations of the Underlying Properties. Buyers are being sought who would make equity investments in the Underlying Properties and assume the nonrecourse obligations for the FMBs.
NOTE 8 - Earnings Per Share, Profit and Loss Allocations and Distributions
Charter Municipal Mortgage Acceptance Company (After the Consolidation) - - ----------------------------------------------------------------------- Pursuant to the Management Agreement, the Manager receives a special distribution equal to a .375% per annum of the total invested assets of the Company (which equals the face amount of the FMBs), payable quarterly, for managing the affairs of the Company. After payment of the special distribution, distributions are made to the shareholders in accordance with their percentage interests.
Income is allocated first to the Manager in an amount equal to the special distribution. The net remaining profits or losses, after a special allocation of 1% to the Manager, are then allocated to shareholders in accordance with their percentage interests.
Basic net income per Share in the amount of $.99 and $.12 for the year ended December 31, 1998 and the three months ended December 31, 1997, respectively, equals net income for the periods ($22,025,872 and $2,792,740, respectively), less the special allocations to the Manager ($1,683,278 and $355,202, respectively), divided by the weighted average number of Shares outstanding for the periods (20,587,151 and 20,587,465, respectively).
Diluted net income per Share in the amount of $.98 and $.12 for the year ended December 31, 1998 and the three months ended December 31, 1997, respectively, equals net income for the periods, less the special allocations to the Manager, divided by the weighted average number of diluted Shares outstanding for the periods (20,740,641 and 20,587,465, respectively). The weighted average number of diluted Shares outstanding for the year ended December 31, 1998 reflects the weighted average impact of an additional 608,955 Shares presumed to be issued to counsel for the Partnerships pursuant to an Order and Stipulation of Settlement by the United States District Court for the Southern District of New York on February 18, 1999 (see Note 9).
Net income per unit information for periods before the Consolidation is not presented because it is not indicative of the Company's continuing capital structure.
Tax Exempt II (Prior to the Consolidation) - - ------------------------------------------ Net profits or losses and distributions were allocated 98% to the BUC$holders and 2% to the general partners of Tax Exempt II in accordance with the Agreement of Limited Partnership of Tax Exempt II.
NOTE 9 - Capital Stock and Share Option Plan
The Company has adopted an incentive Share option plan (the "Incentive Share Option Plan"), the purpose of which is to (i) attract and retain qualified persons as trustees and officers and (ii) to incentivize and more closely align the financial interests of the Manager and its employees and officers with the interests of the shareholders by providing the Manager with substantial financial interest in the Company's success. The Compensation Committee administers the Incentive Share Option Plan. Pursuant to the Incentive Share Option Plan, if the Company's distributions per Share in the immediately preceding calendar year exceed $0.9517 per
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Share, the Compensation Committee has the authority to issue options to purchase, in the aggregate, that number of Shares which is equal to three percent of the Shares outstanding as of December 31 of the immediately preceding calendar year (or in the initial year, as of October 1, 1997), provided that the Compensation Committee may only issue, in the aggregate, options to purchase a maximum number of Shares over the life of the Incentive Shares Option Plan equal to 10% of the Shares outstanding on October 1, 1997.
Subject to the limitations described in the preceding paragraph, if the Compensation Committee does not grant the maximum number of options in any year, then the excess of the number of authorized options over the number of options granted in such year will be added to the number of authorized options in the next succeeding year and will be available for grant by the Compensation Committee in such succeeding year.
All options granted by the Compensation Committee will have an exercise price equal to or greater than the fair market value of the Shares on the date of the grant. The maximum option term is ten years from the date of grant. All Share options granted pursuant to the Incentive Share Option Plan may vest immediately upon issuance or in accordance with the determination of the Compensation Committee. No options were granted for the year ended December 31, 1997. In 1998, the Company distributed $.93 per Share, thus prohibiting the Compensation Committee from issuing options. Three percent of the Shares outstanding as of the effective date of the Consolidation are equal to 617,624 Shares.
On October 9, 1998, the Board of Trustees authorized the implementation of a Share repurchase plan, enabling the Company to repurchase, from time to time, up to 1,500,000 of its Shares. The repurchases will be made in the open market and the timing will be dependant on the availability of Shares and other market conditions. During the period October 9, 1998 through December 31, 1998, the Company acquired 8,400 of its Shares for an aggregate purchase price of $103,359 (including commissions and service charges). Repurchased Shares are accounted for as treasury Shares of beneficial interest.
As part of the settlement of class action litigation relating to the Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had the right to petition the United States District Court for the Southern District of New York (the "Court") for additional attorneys' fees ("Counsel's Fee Shares") in an amount to be determined in the Court's sole discretion. The Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed to be 25%) of the increase in value of the Company, ("the Added Value") if any, as of October 1, 1998 based upon the difference between (i) the trading prices of the Company's shares of beneficial interest during the six month period ended October 1, 1998 and (ii) the trading prices of the limited partnership units and the asset values of the Partnerships prior to October 1, 1997. As of October 1, 1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an Order and Stipulation of Settlement by the Court on February 18, 1999, Class Counsel is entitled to receive 608,955 shares of beneficial interest in the Company. The shares will be distributed to Class Counsel quarterly in eight equal distributions commencing within ten business days after Class Counsel advises the Company in writing of the persons in whose name the shares are to be issued. One-half of such shares will be in the form of Restricted Securities (restricted only with respect to the sale, assignment, pledge or other transfer of such securities) and the remaining one-half of such shares will be unrestricted. Restrictions on the Restricted Securities expire one year from the date of issuance. Management is currently negotiating a discounted cash settlement with Class Counsel in lieu of the issuance of shares; however, any such settlement would require the approval of the Board of Trustees and there can be no assurance that such negotiations will be successful.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - Selected Quarterly Financial Data (unaudited)
NOTE 11 - Subsequent Event (unaudited)
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 26, 1999, the Company acquired one FMB for a purchase price of $6,400,000, not including bond selection fees and expenses of approximately $128,000. The obligor of the FMB is a local partnership in which an investment partnership, whose general partner is as affiliate of the Manager, owns a controlling partnership interest. Further information regarding the FMB is as follows:
Stated No. of Project Closing Call Date/ Face Interest Rental Name Date Maturity Date Amount of Bond Rate Units ---- ---- ------------- -------------- ---- -----
Hamilton Garden 4/1/15 Hamilton, NJ 3/26/99 3/1/35 $6,400,000 (a) 174
(a) The interest rates for Hamilton Garden are 7.625% during the construction period and 7.125% thereafter.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None. PART III
Item 10.
Item 10. Directors and Executive Officers of the Company.
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Item 11.
Item 11. Executive Compensation.
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act.
Item 13.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Sequential (a) 1. Financial Statements Page -------------------- ----------
Independent Auditors' Report 22
Consolidated Balance Sheets as of December 31, 1998 and 1997 23
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 24
Consolidated Statements of Changes in Shareholders' Equity/Partners' Capital (Deficit) for the years ended December 31, 1998, 1997 and 1996 25
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 27
Notes to Consolidated Financial Statements 29
(a) 2. Financial Statement Schedules
Schedule IV - Mortgage Loans on Real Estate at December 31, 1998 56
All other schedules have been omitted because they are not applicable or the required information is included in the financial statements and the notes thereto.
(a) 3. Exhibits
3.1(a) Certificate of Business Trust dated as of August 12, 1996 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237)
3.1(b) Certificate of Amendment of Certificate of Business Trust dated as of April 30, 1997 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237)
3.1(c) Trust Agreement dated as of August 12, 1996 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237)
3.1(d) Amendment No. 1 to Trust Agreement dated as of April 30, 1997 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237)
3.1(e) Amended and Restated Trust Agreement dated as of September 30, 1997 (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998)
3.2 Bylaws (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
Sequential Page ----------
4.1 Specimen Copy of Share Certificate for shares of beneficial interest of the Company (incorporated by reference to the Company's Amendment No. 1 on Form 10/A to the Company's Registration Statement on Form 10, File No. 001-13237)
10(a) First Mortgage Bond, dated May 13, 1986, with respect to The Mansion project, in the principal amount of $19,450,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated May 13, 1986)
10(b) First Mortgage Bond, dated May 20, 1986, with respect to the Martin's Creek project, in the principal amount of $7,300,000 (incorporated by reference to Exhibit 10(c) in Tax Exempt I's Current Report on Form 8-K dated May 20, 1986)
10(c) First Mortgage Bond, dated May 20, 1986, with respect to the East Ridge project, in the principal amount of $8,700,000 (incorporated by reference to Exhibit 10(b) in Tax Exempt I's Current Report on Form 8-K dated May 20, 1986)
10(d) First Mortgage Bond, dated July 29, 1986, with respect to the High Pointe Club project (formerly named Greenhill), in the principal amount of $8,900,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated July 29, 1986)
10(e) First Mortgage Bond, dated August 14, 1986, with respect to the Cypress Run project at Tampa Palms, in the principal amount of $15,750,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated August 14, 1986)
10(f) First Mortgage Bond, dated September 2, 1986, with respect to the Thomas Lake Place Apartments project, in the principal amount of $12,975,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated September 2, 1986)
10(g) First Mortgage Bond, dated September 30, 1986, with respect to the North Glen Apartments project (formerly named Tempo Northridge), in the principal amount of $12,400,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current report on Form 8-K dated September 30, 1986)
10(h) First Mortgage Bond, dated October 9, 1986, with respect to Greenway Manor project, in the principal amount of $12,850,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated October 9, 1986)
10(i) First Mortgage Bond, dated December 8, 1986, with respect to the Clarendon Hills Apartments project, in the principal amount of $17,600,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated December 8, 1986)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(j) First Mortgage Bond, dated December 29, 1986, with respect to the Cedar Creek Village Apartments project, in the principal amount of $8,100,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated December 29, 1986)
10(k) First Mortgage Bond, dated February 12, 1987, with respect to the Sunset Terrace project, in the principal amount of $10,350,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated February 12, 1987)
10(l) Loan Agreement dated September 19, 1990 between River Bank America and the Tax Exempt I (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990)
10(m) Note dated September 19, 1990 from the Tax Exempt I to River Bank America (incorporated by reference to Exhibit 10(b) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990)
10(n) Pledge Agreement dated September 19, 1990 between River Bank America and the Tax Exempt I (incorporated by reference to Exhibit 10(c) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990)
10(o) Indemnity and Reimbursement Agreement dated September 19, 1990 between Stephen M. Ross and the Tax Exempt I (incorporated by reference to Exhibit 10(d) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990)
10(p) Settlement Agreement for the North Glen First Mortgage Bond dated December 3, 1990 (incorporated by reference to Exhibit 10(p) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1991)
10(q) Settlement Agreement for the Thomas Lake Mortgage Bond dated July 11, 1991 (incorporated by reference to Exhibit 10(q) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1991)
10(r) Settlement Agreement for the Sunset Terrace First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(r) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1992)
10(s) Assignment and Assumption Agreement for the Clarendon Hills First Mortgage Bond dated May 1, 1992 (incorporated by reference to Exhibit 10 (s) in Tax Exempt I's Annual report on Form 10-K dated December 31, 1992)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(t) First Supplemental Indenture between City of Hayward and Seattle-First National Bank relating to the Clarendon Hills First Mortgage Bond dated May 1, 1992 (incorporated by reference to Exhibit 10(t) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1992)
10(u) Loan Agreement dated as of January 14, 1993 between Tax Exempt I and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(u) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993)
10(v) Pledge and Security Agreement dated as of January 14, 1993 between Tax Exempt I and U.S. West Financial Service, Inc. (incorporated by reference to Exhibit 10(v) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993)
10(w) Secured Promissory Note dated January 14, 1993 between Tax Exempt I and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(w) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993)
10(x) Promissory Note dated January 15, 1993 between Tax Exempt I and RHA Inc. (incorporated be reference to Exhibit 10(x) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993)
10(y) Nonrecourse Promissory Note Secured by Deed of Trust dated January 28, 1993 between Stephen P. Diamond and Clarendon Hills Investors, Inc. assigned to Tax Exempt I (incorporated by reference to Exhibit 10(y) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993)
10(z) Assignment Agreement dated January 15, 1993 between Summit Tax Exempt Funding Corporation and Tax Exempt I (incorporated by reference to Exhibit 10(z) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993)
10(aa) Amended Settlement Agreement for the North Glen First Mortgage dated June 1, 1993 (incorporated by reference to Exhibit 10 (aa) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1993)
10(ab) Sale-Purchase Agreement between Mansion Apartment Project Investors, Inc., Seller and Independence Apartments Associates, L.P., Purchaser dated November 30,1993 (incorporated by reference to Exhibit 10 (ab) in Tax Exempt I's Quarterly Report on Form-Q dated March 31, 1994)
10(ac) Addendum to Sale-Purchase Agreement between Mansion Apartment Project Investors, Inc., Seller and Independence Apartments Associates, L.P., Purchase dated March 31, 1994 (incorporated by reference to Exhibit 10(ac) in Tax Exempt I's Quarterly Report on Form 10-Q dated March 31, 1994)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(ad) First Supplemental Indenture, dated as of October 18, 1994, between The Industrial Development Authority of the City of Independence, Missouri and Boatman's First National Bank of Kansas City relating to The Mansion project (incorporated by reference to Exhibit 10(ad) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1994)
10(ae) First Mortgage Bond, dated May 13, 1986 and revised as of October 18, 1994 with respect to The Mansion project, in the principal amount of $19,450,000 (incorporated by reference to Exhibit 10(ae) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1994)
10(af) Amended Settlement Agreement for the North Glen First Mortgage dated May 1, 1996 (incorporated by reference to Exhibit 10(af) in Tax Exempt I's Annual Report on Form 10-K/A-1 dated December 31, 1995)
10(ag) First Mortgage Bond, dated September 11, 1986, with respect to the Bay Club project, in the principal amount of $6,400,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated September 11, 1986)
10(ah) First Mortgage Bond, dated November 13, 1986, with respect to the Loveridge project, in the principal amount of $8,550,000 (incorporated by reference to exhibit 10(d) in Tax Exempt II's Form 8 Amendment No. 1 to Current Report on Form 8-K, dated February 10, 1987)
10(ai) First Mortgage Bond, dated December 30, 1986 with respect to The Lakes project, in the principal amount of $13,650,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated December 30, 1986)
10(aj) First Mortgage Bond, dated December 31, 1986, with respect to the Crowne Pointe project, in the principal amount of $5,075,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated December 31, 1986)
10(ak) First Mortgage Bond, dated December 31, 1986, with respect to the Orchard Hills project, in the principal amount of $5,650,000 (incorporated by reference to exhibit 10(c) in Tax Exempt II's Current Report on Form 8-K dated December 31, 1986)
10(al) First Mortgage Bond, dated February 2, 1987, with respect to the Highland Ridge project, in the principal amount of $15,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated February 2, 1987)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
Sequential Page ----------
10(am) First Mortgage Bond, dated February 11, 1987, with respect to the Newport Village project, in the principal amount of $13,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated February 11, 1987)
10(an) First Mortgage Bond, dated February 11, 1987, with respect to the Sunset Downs project, in the principal amount of $15,000,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated February 11, 1987)
10(ao) First Mortgage Bond, dated February 27, 1987, with respect to the Pelican Cove project, in the principal amount of $18,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated February 27, 1987)
10(ap) First Mortgage Bond, dated February 27, 1987, with respect to the Willow Creek project, in the principal amount of $6,100,000 (incorporated by reference to exhibit 10(c) in Tax Exempt II's Current Report on Form 8-K dated February 27, 1987)
10(aq) First Mortgage Bond, dated April 22, 1987, with respect to the Cedar Pointe project, in the principal amount of $9,500,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated April 22, 1987)
10(ar) First Mortgage Bond, dated June 26, 1987, with respect to the Shannon Lake project, in the principal amount of $12,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated June 26, 1987)
10(as) First Mortgage Bond, dated July 31, 1987, with respect to the Bristol Village project, in the principal amount of $17,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated July 31,1987)
10(at) First Mortgage Bond, dated July 31, 1987, with respect to the Suntree project, in the principal amount of $7,500,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated July 31, 1987)
10(au) First Mortgage Bond, dated August 7, 1987, with respect to the River Run project, in the principal amount of $6,700,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated August 7, 1987)
10(av) First Mortgage Bond, dated August 14, 1987, with respect to the Players Club project, in the principal amount of $2,500,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated August 14, 1987)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aw) Settlement Agreement for the Shannon Lake First Mortgage Bond dated December 3, 1990 (incorporated by reference to Exhibit 10(q) in Tax Exempt II's 1991 Annual Report on Form 10K)
10(ax) Settlement Agreement for the Newport Village First Mortgage Bond dated October 9, 1992 (incorporated by reference to Exhibit 10(r) in Tax Exempt II's 1992 Annual Report on Form 10K)
10(ay) Settlement Agreement for the Sunset Downs First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(s) in Tax Exempt II's 1992 Annual Report on Form 10K)
10(az) Settlement Agreement for the Suntree First Mortgage Bond dated February 1, 1992 (incorporated by reference to Exhibit 10(t) in Tax Exempt II's 1992 Annual Report on Form 10K)
10(aaa) Settlement Agreement for the Players Club First Mortgage Bond dated February 1, 1992 (incorporated by reference to Exhibit 10(w) in Tax Exempt II's 1992 Annual Report on Form 10K)
10(aab) Settlement Agreement for the Bristol Village First Mortgage Bond dated March 2, 1993 (incorporated by reference to Exhibit 10(x) in Tax Exempt II's 1992 Annual Report on Form 10K)
10(aac) Amended Settlement Agreement for the Shannon Lake First Mortgage Bond dated June 1, 1993 (incorporated by reference to Exhibit 10(y) in Tax Exempt II's 1993 Annual Report on Form 10K)
10(aad) Amended Settlement Agreement for the Player's Club First Mortgage Bond dated December 1, 1993 (incorporated by reference to Exhibit 10(z) in Tax Exempt II's 1993 Annual Report on Form 10K)
10(aae) Amended Settlement Agreement for the Suntree First Mortgage Bond dated December 1, 1993 (incorporated by reference to Exhibit 10(aa) in Tax Exempt II's 1993 Annual Report on Form 10K)
10(aaf) First Supplemental Indenture between The Industrial Development Authority of the City of Kansas City, Missouri and Boatmen's First National Bank of Kansas City dated January 24, 1994 (incorporated by reference to Exhibit 10(ab) in Tax Exempt II's Quarterly Report on Form 10Q dated March 31, 1994)
10(aag) Option Agreement between The Lakes Project Investors, Inc., Seller and ZIPCO, Inc., Purchaser, dated January 27, 1994 (incorporated by reference to Exhibit 10(ac) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1994)
10(aah) Assignment and Assumption Agreements between The Lakes Apartments, Inc., Seller, and ZIPCO, Inc., Purchaser, dated August 31, 1994 (incorporated by reference to Exhibit 10(ad) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1994)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aai) Sale-Purchase Agreement between The Lakes Project Investors, Inc., Seller, and ZIPCO, Inc., Purchaser, dated August 31, 1994 (incorporated by reference to Exhibit 10(ae) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1994)
10(aaj) Amended Settlement Agreement for the Player's Club First Mortgage Bond dated December 1, 1994 (incorporated by reference to Exhibit 10(af) in Tax Exempt II's 1994 Annual Report on Form 10K)
10(aak) Amended Settlement Agreement for the Suntree First Mortgage Bond dated December 1, 1994 (incorporated by reference to Exhibit 10(ag) in Tax Exempt II's 1994 Annual Report on Form 10K)
10(aal) Amended Settlement Agreement for the Loveridge First Mortgage Bond dated July 31, 1995 (incorporated by reference to Exhibit 10(ah) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1995)
10(aam) Amended Settlement and Forbearance Agreement for the Sunset Downs First Mortgage Bond dated July 31, 1995 (incorporated by reference to Exhibit 10(ai) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1995)
10(aan) Amended Settlement Agreement for the Suntree First Mortgage Bond dated January 26, 1996 (incorporated by reference to Exhibit 10(aj) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1)
10(aao) Amended Settlement Agreement for the Shannon Lake First Mortgage Bond dated May 1, 1996 (incorporated by reference to Exhibit 10(ak) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1)
10(aap) Amended Settlement Agreement for the Player's Club First Mortgage Bond date January 26, 1996 (incorporated by reference to Exhibit 10(al) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1)
10(aaq) Forbearance Agreement for the Highland Ridge First Mortgage Bond dated May 14, 1996 (incorporated by reference to Exhibit 10(am) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1)
10(aar) Forbearance Agreement for the Cedar Pointe First Mortgage Bond dated February 1, 1997 (incorporated by reference to Exhibit 10(an) in Tax Exempt II's 1996 Annual Report on Form 10-K)
10(aas) First Mortgage Bond, dated as of August 14, 1987, with respect to the Players Club project at Fort Myers in the principal amount of $7,200,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt III's Current Report on Form 8-K dated August 14, 1987)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aat) First Mortgage Bond, dated as of November 18, 1987, with respect to the Lakepoint project, in the principal amount of $15,100,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt III's Current Report on Form 8-K dated November 18, 1987)
10(aau) First Mortgage Bonds, dated March 25, 1988, with respect to the Sunset Village and Sunset Creek projects in the principal amounts of $11,375,000 and $8,275,000, respectively (incorporated by reference to Exhibits 10(a) and 10(b) in Tax Exempt III's Current Report on Form 8-K dated March 25, 1988)
10(aav) First Mortgage Bond, dated as of May 1, 1989, with respect to the Ashley Knoll project (now named Orchard Mill) in the principal amount of $10,500,000 (incorporated by reference to Exhibits 10(a), 10(b) and 10(c) in Tax Exempt III's Current Report on Form 8-K dated May 1, 1989)
10(aaw) Settlement Agreement for the Lakepoint First Mortgage Bond dated June 28, 1991 (incorporated by reference to Exhibit 10(e) in Tax Exempt III's 1991 Annual Report on Form 10-K)
10(aax) Settlement Agreement for the Players Club First Mortgage Bond dated February 1, 1992 (incorporated by reference to exhibit 10(f) in Tax Exempt III's 1992 Annual Report on Form 10-K)
10(aay) Settlement Agreement for the Sunset Village First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(g) in Tax Exempt III's 1992 Annual Report in Form 10-K)
10(aaz) Settlement Agreement for the Sunset Creek First Mortgage Bond dated July 10,1992 (incorporated by reference to exhibit 10(h) in Tax Exempt III's 1992 Annual Report on Form 10-K)
10(aaaa) Amended Settlement Agreement for the Lakepoint First Mortgage Bond dated June 1, 1993 (incorporated by reference to Exhibit 10(i) in Tax Exempt III's 1993 Annual Report on Form 10-K)
10(aaab) Amended Settlement Agreement for the Players Club First Mortgage Bond dated December 1, 1993 (incorporated by reference to Exhibit 10(j) in Tax Exempt III's 1993 Annual Report on Form 10-K)
10(aaac) Amended Settlement Agreement for the Players Club First Mortgage Bond dated December 1, 1994 (incorporated by reference to Exhibit 10(k) in Tax Exempt III's 1994 Annual Report on Form 10-K)
10(aaad) Amended Settlement Agreement for the Lakepoint First Mortgage Bond dated May 1, 1996 (incorporated by reference to Exhibit 10(l) in Tax Exempt III's 1995 Annual Report on Form 10-K/A-1)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aaae) Settlement Agreement for Orchard Mill First Mortgage Bond dated May 1, 1995 (incorporated by reference to Exhibit 10(m) in Tax Exempt III's September 30, 1996 Quarterly Report on Form 10-Q)
10(aaaf) Management Agreement dated as of October 1, 1997, between the Company and Related Charter L.P. (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998)
10(aaag) Agreement and Plan of Merger dated as of October 1, 1997, by and among the Company, Summit Tax Exempt Bond Fund, L.P., Summit Tax Exempt L.P. II and Summit Tax Exempt L.P. III (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998)
10(aaah) Incentive Share Option Plan (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998)
10(aaai) Restated First Mortgage Bond, dated as of September 30, 1986, with respect to the Tempo Northridge Apartments Project in the principal amount of $12,400,000 (incorporated by reference to Exhibit 10 (aaai) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997)
10(aaaj) Restated First Mortgage Bond, dated as of June 26, 1987, with respect to the Shannon Lake Project in the principal amount of $12,000,000 (incorporated by reference to Exhibit 10 (aaaj) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997)
10(aaak) Restated First Mortgage Bond, dated as of November 18, 1987, with respect to the Lakepointe Project in the principal amount of $15,100,000 (incorporated by reference to Exhibit 10 (aaak) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997)
10(aaal) Restated First Mortgage Bond, dated as of May 1, 1989, with respect to the Ashley Knoll Project in the principal amount of $10,500,000 (incorporated by reference to Exhibit 10 (aaal) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997)
10(aaam) First Mortgage Bond, dated as of December 11, 1997, with respect to the Countryside Apartments Project in the principal amount of $5,000,000 (incorporated by reference to Exhibit 10 (aaam) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997)
10(aaan) Restated First Mortgage Bond, dated as of February 2, 1987, with respect to the Highland Ridge Project in the principal amount of $15,000,000 (incorporated by reference to Exhibit 10 (aaan) in the Company's March 31, 1998 Quarterly Report on Form 10-Q)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aaao) Restated First Mortgage Bond, dated as of March 2, 1987, with respect to the Mortenson I Project in the principal amount of $6,100,000 (incorporated by reference to Exhibit 10 (aaao) in the Company's March 31, 1998 Quarterly Report on Form 10-Q)
10(aaap) Restated First Mortgage Bond, dated as of September 2, 1986, with respect to the Thomas Lake Place Apartments Project in the principal amount of $12,975,000 (incorporated by reference to Exhibit 10 (aaap) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaq) Restated First Mortgage Bond, dated as of July 31, 1987, with respect to the Bristol Village Apartments Project in the principal amount of $17,000,000 (incorporated by reference to Exhibit 10 (aaaq) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaar) First Mortgage Bond, dated as of April 20, 1998, with respect to the Ocean Air Apartments Project in the principal amount of $10,000,000 (incorporated by reference to Exhibit 10 (aaar) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaas) First Mortgage Bond, dated as of April 28, 1998, with respect to the Cedarbrook Apartments Project in the principal amount of $2,840,000 (incorporated by reference to Exhibit 10 (aaas) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaat) First Mortgage Bond, dated as of April 28, 1998, with respect to the Phoenix Apartments Project in the principal amount of $3,250,000 (incorporated by reference to Exhibit 10 (aaat) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaau) First Mortgage Bond, dated as of April 28, 1998, with respect to the Stone Creek Project in the principal amount of $8,820,000 (incorporated by reference to Exhibit 10 (aaau) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaav) First Mortgage Bond, dated as of May 20, 1998, with respect to the Lee Hall Project (Marsh Landings) in the principal amount of $6,050,000 (incorporated by reference to Exhibit 10 (aaav) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaw) Contribution Agreement between CharterMac and CharterMac Origination Trust ("Origination Trust") dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaw) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaax) Contribution Agreement between Origination Trust and CharterMac Owner Trust ("Owner Trust") dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaax) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aaay) Insurance Agreement among MBIA, CharterMac, Origination Trust, Owner Trust, CharterMac Floater Certificate Trust ("Floater Certificate Trust"), First Tennessee Bank National Association ("First Tennessee"), Related Charter LP, and Bayerische Landesbank Girozentrale, New York Branch ("Bayerische") dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaay) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaz) Liquidity Agreement among Owner Trust, Floater Certificate Trust, First Tennessee, MBIA and Bayerische dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaz) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaaa) Liquidity Pledge and Security Agreement among Origination Trust, Owner Trust, Floater Certificate Trust, MBIA, First Tennessee and Bayerische dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaaa) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaab) Fee Agreement among Wilmington Trust Company, Floater Certificate Trust and CharterMac dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaab) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaac) Certificate Placement Agreement (incorporated by reference to Exhibit 10 (aaaac) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaad) Remarketing Agreement (incorporated by reference to Exhibit 10 (aaaad) in the Company's June 30, 1998 Quarterly Report on Form 10-Q)
10(aaaae) First Mortgage Bond, dated as of July 15, 1998, with respect to the College Park Apartments Project in the principal amount of $10,100,000 (incorporated by reference to Exhibit 10 (aaaae) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaaf) First Mortgage Bond, dated as of July 22, 1998, with respect to Gulfstream Apartments in the principal amount of $3,500,000 (incorporated by reference to Exhibit 10 (aaaaf) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaag) First Mortgage Bond, dated as of August 25, 1998, with respect to the Lexington Square Project (Bedford Square) in the principal amount of $3,850,000 (incorporated by reference to Exhibit 10 (aaaag) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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10(aaaah) First Mortgage Bond, dated as of August 25, 1998, with respect to the Northpointe Village Project in the principal amount of $13,250,000 (incorporated by reference to Exhibit 10 (aaaah) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaai) First Mortgage Bond, dated as of September 14, 1998, with respect to the Falcon Creek Place Apartments Project in the principal amount of $6,144,600 (incorporated by reference to Exhibit 10 (aaaai) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaaj) First Mortgage Bond, dated as of September 15, 1998, with respect to the Jubilee Courtyards Apartments Project in the principal amount of $4,150,000 (incorporated by reference to Exhibit 10 (aaaaj) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaak) First Mortgage Bond, dated as of September 24, 1998, with respect to the Silvercrest at Clovis Project in the principal amount of $2,275,000 (incorporated by reference to Exhibit 10 (aaaak) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaal) First Mortgage Bond, dated as of September 24, 1998, with respect to the Carrington Pointe Project in the principal amount of $3,375,000 (incorporated by reference to Exhibit 10 (aaaal) in the Company's September 30, 1998 Quarterly Report on Form 10-Q)
10(aaaam) First Mortgage Bond, dated as of November 13, 1998, with respect to Madalyn Landing Apartments in the principal amount of $14,000,000 (filed herewith) 59
10(aaaan) First Mortgage Bond, dated as of December 15, 1998, with respect to the Forest Hills Apartments Project in the principal amount of $5,930,000 (filed herewith) 71
10(aaaao) First Mortgage Bond, dated as of December 1, 1998, with respect to the Gateway at Lake Jackson Apartments Project in the principal amount of $10,934,000 (filed herewith) 77
10(aaaap) First Mortgage Bond, dated as of December 1, 1998, with respect to the Mountain Ranch Apartments Project in the principal amount of $9,128,000 (filed herewith) 83
10(aaaaq) Restated First Mortgage Bond, dated as of May 13, 1986, with respect to the Mansion Project in the principal amount of $19,450,000 (filed herewith) 89
21 Subsidiary of the Company (filed herewith) 96
27 Financial Data Schedule (filed herewith) 97
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
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(b) Reports on Form 8-K -------------------
No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY (COMPANY)
Date: March 30, 1999 By: /s/ J. Michael Fried -------------------- J. Michael Fried Managing Trustee, Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated:
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY ITEM 14, SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998
Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Company at December 31, 1998 are as follows:
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY ITEM 14, SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998
Participating First Mortgage Bonds
*The average interest rate paid represents the interest recorded by the Company while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate payable pursuant to the applicable forbearance agreement, if any.
(A) Aggregate cost for federal income tax purposes is $174,925,192. (B) The minimum pay rate is the current cash flow of the property. (C) Includes contingent interest paid during 1998. (D) Includes receipt of deferred base interest relating to prior periods. (E) Includes receipt of primary and supplemental contingent interest. (F) The minimum pay rate on the FMB is scheduled to increase to the stated interest rate over the remaining term of the FMB. (G) The FMBs are carried at their estimated fair values at December 31, 1998. (H) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25% thereafter. (I) Includes receipt of primary contingent interest. (J) Pursuant to a bond modification as of October 1, 1997 which lowered the base interest rate to 7.50% effective October 1, 1997, subject to a minimum pay rate of 5% through June 30, 2000. (K) Pursuant to a forbearance agreement as of October 1, 1997 which lowered the base interest rate to 7% through June 30, 2000 and 7.50% thereafter. (L) The interest rates for Jubilee Courtyards are 7% through September 30, 2000 and 7.125% thereafter. (M) Pursuant to a bond modification as of October 1, 1997, the base interest rate was lowered to 6% through July 31, 2000 and 7% thereafter. (N) The interest rates for College Park are 7% during the construction period and 7.25% thereafter. (O) The interest rates for Bedford Square are 7% during the construction period and 6.375% thereafter. (P) The interest rates for Northpointe Village are 7.965% through September 23, 1998, 8.125% during the remainder of the construction period and 7.5% thereafter.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY ITEM 14, SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998
Participating First Mortgage Bonds
Reconciliation of FMBs: