SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 1, 2003
(Date of Report (Date of Earliest Event Reported))
Municipal Mortgage & Equity, LLC
(Exact Name of Registrant as Specified in Its Charter)
Delaware 011-11981 52-1449733
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
218 North Charles Street, Suite 500 21201
Baltimore, Maryland (Zip Code)
(Address of Principal Executive Offices)
(443) 263-2900
(Registrant;s Telephone Number, Including Area Code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
------------------------------------
On July 1, 2003, Municipal Mortgage & Equity, LLC (NYSE: MMA), known as
MuniMae, completed its acquisition of the Housing and Community Investing (HCI)
unit of Lend Lease Real Estate Investments, a subsidiary of Australia-based Lend
Lease Corporation Limited (ASX: LLC), for a purchase price of $102 million in
cash. MuniMae contributed the assets of HCI to MMA Financial, LLC, MuniMae's
wholly owned operating subsidiary. MMA Financial manages investments in real
estate totaling $7.4 billion, representing approximately 220,000 apartment
units. According to the National Multifamily Housing Council, MMA Financial is
currently the fourth largest owner of apartments in the United States. Through
the integration of HCI's affordable housing tax credit syndication operation
into MuniMae's existing operations, MMA Financial becomes one of the nation's
largest players in the affordable housing industry.
HCI provides equity financing for a wide range of affordable housing
developments across the country. Developments include new construction,
substantial rehabilitations, and revitalizations of public housing. HCI
structures and manages low income housing tax credit investments for corporate
investors. As a syndicator of tax credits, HCI sources and acquires deals from
developers, structures the investments and manages the assets in the investment
for the 15-year holding period. MMA Financial has 147,350 tax credit units under
management.
To finance the transaction, MuniMae drew from an 18-month, LIBOR-based
acquisition facility in the amount of $120 million from RBC Capital Markets. The
amount of consideration paid was determined pursuant to arms-length negotiations
between the parties.
The foregoing description of the acquisition is qualified in its entirety
by reference to the full text of the Purchase and Sale Agreement, a copy of
which was filed as Exhibit 2.1 to the Company's Report on Form 8-K filed on July
10, 2003 and which is incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(a) Financial Statements of business acquired.
------------------------------------------
No financial statements of the business acquired are
required to be filed with this report.
(b) Pro forma financial information.
--------------------------------
Pro forma information is not required to be filed; however,
such information is being included for the benefit of
shareholders and other business partners. The following
documents appear as Exhibits to this current report on Form
8-K/A:
(i) Unaudited Pro Forma Combined Balance Sheet as of
June 30, 2003
(ii) Unaudited Pro Forma Combined Statements of operations
for the year ended December 31, 2002 and the six
months ended June 30, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MUNICIPAL MORTGAGE & EQUITY, LLC
Date: September 15, 2003 By:
-------------------------------------
William S. Harrison
Senior Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit No. Description of Document
P-1 Unaudited Pro Forma Combined Balance Sheet as of June 30, 2003
P-2 Unaudited Pro Forma Combined Statements of Operations for the year
ended December 31, 2002
P-3 Unaudited Pro Forma Combined Statements of Operations for the six
months ended June 30, 2003
P-4 Notes to Pro Forma Combined Financial Statements
Exhibit P-1
MUNICIPAL MORTGAGE & EQUITY, LLC
PRO FORMA COMBINED BALANCE SHEET
June 30, 2003
(In thousands, except share data)
(unaudited)
Pro forma Pro forma
MuniMae HCI adjustments combined
--------------- ----------- ----------- ----------
ASSETS
Investment in tax-exempt bonds, net $ 775,793 $ 775,793
Loans receivable, net 451,397 451,397
Loans receivable held for sale 11,023 11,023
Notes receivable - $ 62,683 $ (62,683) (b) -
Investments in partnerships 98,239 177,024 (57,130) (b) 218,133
Residual interests in bond securitizations 13,099 13,099
Investment in derivative financial instruments 3,170 3,170
Cash and cash equivalents 81,335 24,636 118,307 (a) 118,929
(105,349) (b)
Interest receivable 17,252 17,252
Restricted assets 69,529 69,529
Other assets 32,846 35,057 1,693 (a) 53,863
(15,733) (b)
Property, plant and equipment, net 2,554 1,586 114 (b) 4,254
Mortgage servicing rights, net 10,869 10,869
Identifiable intangibles and goodwill 33,607 77,335 21,717 (b) 132,659
--------------- ----------- ----------- -----------
Total assets $ 1,600,713 $ 378,321 $ (99,064) $ 1,879,970
=============== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 436,949 $ 59,848 $ 120,000 (a) $ 556,949
(59,848) (b)
Short-term debt 211,670 211,670
Long-term debt 142,006 142,006
Residual interests in bond securitizations 1,343 1,343
Investment in derivative financial instruments 21,792 21,792
Accounts payable and accrued expenses 6,436 28,223 (24,336) (b) 10,323
Interest payable 5,383 5,383
Unearned revenue and other liabilities 33,336 155,370 188,706
Distributions payable 2,995 2,995
--------------- ----------- ----------- -----------
Total liabilities 861,910 243,441 35,816 1,141,167
--------------- ----------- ----------- -----------
Preferred shareholders' and minority interests'
equity in subsidiary companies 160,142 160,142
Shareholders' equity:
Common shares 568,576 568,576
Paid in capital 110,517 (110,517) (b) -
Retained earnings 24,363 (24,363) (b) -
Less: growth shares held in treasury at cost (2,615) (2,615)
Less unearned compensation - restricted shares (2,939) (2,939)
Accumulated other comprehensive income 15,639 15,639
--------------- ----------- ----------- -----------
Total shareholders' equity 578,661 134,880 (134,880) 578,661
--------------- ----------- ----------- -----------
Total liabilities and shareholders' equity $ 1,600,713 $ 378,321 $ (99,064) $ 1,879,970
=============== =========== =========== ===========
Exhibit P-2
MUNICIPAL MORTGAGE & EQUITY, LLC
PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
(In thousands, except share and per share data)
(unaudited) (unaudited)
(unaudited) Pro forma Pro forma
MuniMae HCI adjustment(1) combined
-------------- ------------- --------------- ------------
INCOME:
Interest income
Interest on bonds and residual interests in bond securitizations $ 59,923 $ 59,923
Interest on loans 34,895 $ 1,192 $ (1,192)(2) 34,895
Interest on short-term investments 1,255 38 23 1,316
-------------- ------------- --------------- ------------
Total interest income 96,073 1,230 (1,169) 96,134
-------------- ------------- --------------- ------------
Fee income
Syndication fees 7,221 22,208 3,838 33,267
Origination fees 6,631 - - 6,631
Loan servicing fees 6,823 - - 6,823
Asset management and advisory fees 3,887 13,834 2,584 20,305
Other income 4,435 4,778 2,091 11,304
-------------- ------------- --------------- ------------
Total fee income 28,997 40,820 8,513 78,330
-------------- ------------- --------------- ------------
Net gain on sales 8,558 666 4,643 13,867
-------------- ------------- --------------- ------------
Total income 133,628 42,716 11,987 188,331
-------------- ------------- --------------- ------------
EXPENSES:
Interest expense 36,596 299 (38) 43,674
6,817 (3)
Salaries and benefits 22,678 20,214 10,915 53,807
General and administrative 7,020 5,003 481 12,504
Professional fees 4,960 540 144 5,644
Amortization of intangibles and mortgage servicing rights 1,314 6,401 1,018 (4) 8,733
-------------- ------------- --------------- ------------
Total expenses 72,568 32,457 19,337 124,362
-------------- ------------- --------------- ------------
Net holding losses on derivatives (14,863) - - (14,863)
Impairments and valuation allowances related to investments (730) - - (730)
Net losses from equity investments in partnerships (3,057) (2,139) (2,162) (7,358)
-------------- ------------- --------------- ------------
Net income before income taxes and income allocated to
preferred shareholders in a subsidiary company 42,410 8,120 (9,512) 41,018
Income tax expense (benefit) 1,484 4,158 (4,715)(5) 927
-------------- ------------- --------------- ------------
Net income before income allocated to preferred shareholders
in a subsidiary company 40,926 3,962 (4,797) 40,091
Income allocable to preferred shareholders in a subsidiary company 11,977 - - 11,977
-------------- ------------- --------------- ------------
Net income $ 28,949 $ 3,962 $ (4,797) $ 28,114
============== ============= =============== ============
Net income allocated to:
Term growth shares $ 153 $ 153
============== ============
Common shares $ 28,796 $ 27,961
============== ============
Basic earnings per common share:
Basic earnings per common share $ 1.16 $ 1.12
============== ============
Weighted average common shares outstanding 24,904,437 24,904,437
Diluted earnings per common share:
Diluted earnings per common share $ 1.13 $ 1.10
============== ============
Weighted average common shares outstanding 25,473,815 25,473,815
Exhibit P-3
MUNICIPAL MORTGAGE & EQUITY, LLC
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(In thousands, except share and per share data)
(unaudited)
Pro forma Pro forma
MuniMae HCI adjustments (1) combined
----------- ---------- ----------- -------------
INCOME:
Interest income
Interest on bonds and residual interests in bond securitizations $ 29,914 $ 29,914
Interest on loans 17,066 $ 798 $ (798) (2) 17,066
Interest on short-term investments 524 172 12 708
----------- ---------- ----------- -------------
Total interest income 47,504 970 (786) 47,688
----------- ---------- ----------- -------------
Fee income
Syndication fees 3,236 24,739 (15,247) 12,728
Origination fees 2,917 - - 2,917
Loan servicing fees 3,747 - - 3,747
Asset management and advisory fees 2,274 16,998 (9,500) 9,772
Other income 5,506 8,903 (7,108) 7,301
----------- ---------- ----------- -------------
Total fee income 17,680 50,640 (31,855) 36,465
----------- ---------- ----------- -------------
Net gain on sales 2,731 2,760 (544) 4,947
----------- ---------- ----------- -------------
Total income 67,915 54,370 (33,185) 89,100
----------- ---------- ----------- -------------
EXPENSES:
Interest expense 19,092 189 (103) 21,890
2,712 (3)
Salaries and benefits 14,637 32,110 (21,022) 25,725
General and administrative 3,938 5,883 (3,432) 6,389
Professional fees 1,866 828 (414) 2,280
Amortization of intangibles and mortgage servicing rights 803 6,774 (4,120) (4) 3,457
----------- ---------- ----------- -------------
Total expenses 40,336 45,784 (26,379) 59,741
----------- ---------- ----------- -------------
Net holding gains (losses) on derivatives 424 424
Impairments and valuation allowances related to investments (1,144) (1,144)
Net gains (losses) from equity investments in partnerships (2,353) (5,880) 4,905 (2) (3,328)
----------- ---------- ----------- -------------
Net income before income taxes, income allocated to preferred
shareholders and minority interests in subsidiary companies
and discontinued operations 24,506 2,706 (1,901) 25,311
Income tax expense (benefit) (472) 969 (647) (5) (150)
----------- ---------- ----------- -------------
Net income before income allocated to preferred shareholders
and minority interests in subsidiary companies and
discontinued operations 24,978 1,737 (1,254) 25,461
Income allocable to preferred shareholders and minority interests
in subsidiary companies 5,679 - - 5,679
----------- ---------- ----------- -------------
Net income from continuing operations 19,299 1,737 (1,254) 19,782
Discontinued operations 25,748 - - 25,748
----------- ---------- ----------- -------------
Net income $ 45,047 $ 1,737 $ (1,254) $ 45,530
=========== ========== =========== =============
Basic earnings per common share:
Net income from continuing operations $ 0.69 $ 0.71
Discontinued operations 0.91 0.91
----------- -------------
Basic earnings per common share $ 1.60 $ 1.62
=========== =============
Weighted average common shares outstanding 28,104,281 28,104,286
Diluted earnings per common share:
Net income from continuing operations $ 0.68 $ 0.70
Discontinued operations 0.90 0.90
----------- -------------
Diluted earnings per common share $ 1.58 $ 1.60
=========== =============
Weighted average common shares outstanding 28,451,480 28,451,485
Exhibit P-4
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1 - The pro forma combined balance sheet as of June 30, 2003 has been
prepared to reflect the acquisition of the Housing and Community Investing
("HCI") unit of Lend Lease Real Estate Investments for a purchase price of $102
million in cash. Pro forma adjustments assume a transaction date of June 30,
2003 and are made to reflect the following:
(a) Borrowings totaling $120 million under a bank line of credit to finance
(i) the $102 million cash purchase price, (ii) $3 million in capitalized
advisory fees and other acquisition related costs and (iii) $15 million to
pay debt issue costs, to finance various integration costs and to finance
HCI's capital needs until permanent financing is arranged.
(b) (i) Exclusion of balance sheet items representing HCI assets and
liabilities not acquired by the Company; (ii) recording the net assets
acquired at estimated fair value at the acquisition date; (iii) recording
identifiable intangible assets and (iv) recording the excess of acquisition
cost over the fair value of the net assets acquired and identified
intangibles as goodwill. The allocation of the purchase price is as
follows:
(in thousands) Historical Purchase
Cost Adjustment Allocation
----------------- ---------------- ------------------
Notes receivable $ 62,683 (i) $ (62,683) $ -
Investment in partnerships 177,024 (i) (57,130) 119,894
Cash and cash equivalents 24,636 (i) - 24,636
Other assets 35,057 (i) (15,733) 19,324
Property, plant and equipment 1,586 114 1,700
Identifiable intangibles 77,335 (45,332) 32,003 (ii)
Goodwill - 67,049 67,049 (iv)
Notes payable (59,848) (i) 59,848 -
Accounts payable and accrued expenses (28,223) (i) 24,336 (3,887)
Unearned revenue and other liabilities (155,370) (i) - (155,370)
Equity (134,880) 134,880 -
Cash purchase price and acquisition costs $ - $ 105,349 $ 105,349 (iii)
(i) Historical cost amount includes assets not included or liabilities not
assumed in purchase.
(ii) The identified intangible asset represents asset management contracts.
(iii) The cash purchase price of $105 million includes the purchase price of
$102 million and the capitalization of acquisition costs of $3 million.
(iv) The excess of acquisition cost over the fair value of the net assets
acquired and identified intangibles.
The above allocation of purchase price is preliminary pending the
finalization of the treatment of certain balance sheet items as outlined in
the purchase agreement; therefore, the final amounts may differ from the
estimates provided herein. The Company expects that any adjustments will
not be significant.
NOTE 2 - The pro forma statements of income for the year ended December 31, 2002
and the six months ended June 30, 2003 give effect to the following pro forma
adjustments necessary to reflect the acquisition as of January 1, 2002. Pro
forma adjustments are made to reflect the following:
(1) The Company has a calendar year end and reports quarterly and HCI had a
fiscal year end of June 30 and reports annually. As a result, the Company
made adjustments necessary to conform reporting periods, either (i) by
specific identification of significant and non-recurring transactions,
wherever possible, to calendar periods within the Company's periods
presented, or (ii) by averaging amounts recorded in HCI's two fiscal years
ended June 30, 2002 and June 30, 2003, respectively, to generate estimates
for the periods presented. For the six months ended June 30, 2003, the pro
forma adjustments also reflect dividing by two and/or backing out the
effects of the first six months of HCI's fiscal year ended June 30, 2003.
(2) Exclusion of income and expenses related to assets and liabilities not
purchased by the Company (see Note 1(b) above).
(3) Interest expense on the line of credit utilized to finance the acquisition
and the related amortization of debt issue costs. An increase (decrease) in
the assumed interest rate by 0.125% would increase (decrease) net income by
$150,000 for the year ended December 31, 2002. An increase (decrease) in
the assumed interest rate by 0.125% would increase (decrease) net income by
$75,000 for the six months ended June 30, 2003.
(4) Amortization of identifiable intangibles with finite lives. Such assets are
amortized on a straight-line basis over their useful lives, which range
from one year to 15 years.
(5) Income tax expense using a statutory tax rate of 40% for the year ended
December 31, 2002 and for the six months ended June 30, 2003 for HCI as
adjusted by pro forma adjustments.