SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20004

                                    FORM 10-K

  X       ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
-----     EXCHANGE ACT OF 1934


                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                                       OR

          TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
-----     EXCHANGE ACT OF 1934

                         Commission File Number 0-23972

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
             (Exact name of registrant as specified in its charter)

         MASSACHUSETTS                                           13-6972380
(State or other jurisdiction of                             (I.R.S. Employer
  incorporation or organization)                             Identification No.)

 625 MADISON AVENUE, NEW YORK, NEW YORK                            10022
(Address of principal executive offices)                         (Zip Code)

        Registrant's telephone number, including area code (212) 317-5700

           Securities registered pursuant to Section 12(b) of the Act:


                  SHARES OF BENEFICIAL INTEREST, PAR VALUE $.10

                   Name of each exchange on which registered:
                             AMERICAN STOCK EXCHANGE

           Securities registered pursuant to Section 12(g) of the Act:

                                      NONE

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.  Yes     No  X
                                               -----  -----

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act.  Yes  X  No
                                                        -----  -----

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  Yes  X  No
                                       -----  -----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer (as defined in Rule 12b-2 of the
Exchange Act). Large Accelerated filer     Accelerated filer  X  Non-accelerated
filer                                 -----                 -----
     -----

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes     No  X
                                     -----  -----

The  approximate  aggregate  market  value of the voting and  non-voting  common
equity  held by  non-affiliates  of the  Registrant  as of  June  30,  2005  was
approximately $123,432,000.

As of March 1,  2006  there  were  8,303,838  outstanding  common  shares of the
Registrant's shares of beneficial interest.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III:  Those  portions of the  Registrant's  Proxy  Statement for the Annual
Meeting of Shareholders  to be held in June 2006,  which are  incorporated  into
Items 10, 11, 12 and 13.





TABLE OF CONTENTS


                      AMERICAN MORTGAGE ACCEPTANCE COMPANY

                           ANNUAL REPORT ON FORM 10-K




                                                                                        PAGE
                                                                                 
PART I
                Item 1.       Business                                                     4
                Item 1A.      Risk Factors                                                 7
                Item 1B.      Unresolved Staff Comments                                   15
                Item 2.       Properties                                                  15
                Item 3.       Legal Proceedings                                           16
                Item 4.       Submission of Matters to a Vote of Shareholders             16
PART II
                Item 5.       Market for Registrant's Common Equity and Related
                               Shareholder Matters and Issuer Purchases of
                               Equity Securities                                          17
                Item 6.       Selected Financial Data                                     19
                Item 7.       Management's Discussion and Analysis of Financial
                               Condition and Results of Operations                        20
                Item 7A.      Quantitative and Qualitative Disclosures about
                               Market Risks                                               30
                Item 8.       Financial Statements and Supplementary Data                 34
                Item 9.       Changes in and Disagreements with Accountants on
                               Accounting and Financial Disclosure                        64
                Item 9A.      Disclosures Controls and Procedures                         64
                Item 9B.      Other Information                                           64
PART III
                Item 10.      Directors and Executive Officers of the Company             65
                Item 11.      Executive Compensation                                      65
                Item 12.      Security Ownership of Certain Beneficial Owners
                               and Management and Related Stockholder Matters             65
                Item 13.      Certain Relationships and Related Transactions              65
                Item 14.      Principal Accounting Fees and Services                      65
PART IV
                Item 15.      Exhibits and Financial Statement Schedules                  65
SIGNATURES                                                                                68




                                       2




                      CAUTIONARY STATEMENT FOR PURPOSES OF
                         THE "SAFE HARBOR" PROVISIONS OF
              THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995



Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange Act of 1934,  as amended.
Such forward-looking  statements include statements regarding the intent, belief
or current  expectations  of us and our management  (which includes our Advisor)
and involve known and unknown risks,  uncertainties  and other factors which may
cause the actual results, performance or achievements to be materially different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking statements.  These factors, which are outlined in detail in
Item 1A of this document, include the following:

     o    Risks of investing  in uninsured  and  non-investment  grade  mortgage
          assets and subordinated Commerical Mortgage Backed Securities;

     o    Competition in acquiring desirable investments;

     o    Interest rate fluctuations;

     o    Risks  associated  with  investments in real estate  generally and the
          properties that secure many of our investments;

     o    General economic conditions,  particularly as they affect the value of
          our assets and the credit status of our borrowers;

     o    Dependence on our external Advisor for all services  necessary for our
          operations;

     o    Conflicts which may arise among us and other entities  affiliated with
          our Advisor that have similar investment policies to ours; and

     o    Risks associated with the repurchase  agreements we utilize to finance
          our investments and the availability of financing generally

Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements, which speak only as of the date of this annual report.



                                       3




PART I


ITEM 1.  BUSINESS.

General
-------

American  Mortgage  Acceptance  Company  was  formed  on  June  11,  1991  as  a
Massachusetts  business  trust.  We  elected  to be  treated  as a  real  estate
investment  trust ("REIT")  under the Internal  Revenue Code of 1986, as amended
(the "Code").  We are an externally  managed REIT, and all of our operations are
conducted by CharterMac AMI Associates,  Inc.  (formerly Related AMI Associates,
Inc., the "Advisor") pursuant to an Advisory Services Agreement  Throughout this
report, the terms "we", "us", "the Company" and similar terms are meant to refer
to American Mortgage Acceptance Company and its consolidated subsidiaries.

Additional Information
----------------------

Additional  information  about us beyond  what is  included  in this Form  10-K,
including our code of conduct,  is available at  WWW.AMERICANMORTGAGECO.COM.  As
soon as reasonably practicable after such material is electronically filed with,
or  furnished  to,  the  Securities  and  Exchange  Commission  ("SEC")  we make
available, on or through our website, free of charge:

          o    our annual report on Form 10-K;
          o    our quarterly reports on Form 10-Q;
          o    our current reports on Form 8-K; and
          o    amendments  to those  reports  filed  or  furnished  pursuant  to
               Section 13(a) or 15(d) of the Exchange Act.

You may also read and copy these materials at the SEC's Public Reference Room at
450 Fifth Street, NW, Washington, DC 20549, or obtain them by calling the SEC at
1-800-SEC-0300.  The SEC  also  maintains  an  Internet  website  that  contains
reports,  proxy  and  information  statements  and other  information  regarding
issuers that file electronically with the SEC at WWW.SEC.GOV.  We will provide a
copy of any of the foregoing documents upon request.

None of the information on our website that is not otherwise expressly set forth
or incorporated by reference in the Form 10-K is a part of this Form 10-K.

Business Strategy
-----------------

Our business plan focuses on originating and acquiring mortgage loans secured by
multifamily   and   commercial   properties   throughout   the  United   States.
Historically, many of the mortgages were government insured or agency guaranteed
first mortgages,  insured mortgage pass-through certificates or insured mortgage
backed securities.  We are increasingly  investing in uninsured mezzanine loans,
construction  loans,  first  mortgage  loans,  subordinated  interests  in first
mortgage  loans and bridge  loans.  These  mortgages  may have fixed or variable
interest  rates.  Additionally,  we  have  indirectly  invested  in  subordinate
commercial  mortgage-backed  securities  and may  invest  in other  real  estate
assets.  In  association  with  our  investing  activities,  we may  also  issue
guarantees  of  construction  and  permanent  financing  and make  standby  loan
commitments.

During 2005, our board of trustees and shareholders approved an amendment to our
declaration  of trust that would  allow our board of  trustees  to,  among other
things,  broaden our  investment  strategy.  This will enable us to increase the
number  of  investments  we will  make in  first  mortgage  loans,  subordinated
interests  in  first  mortgage  loans  and  bridge  loans,  in  addition  to the
traditional  mezzanine  loans and  government  insured  mortgage  loans  that we
originated in the past. These changes will enable us to expand our business plan
and grow focus on additional real estate asset classes,  including  diversifying
outside of multifamily residential lending to include commercial opportunities.

In  order  to fund the  expected  growth  of our  investment  portfolio,  we are
currently   exploring   utilizing   Collateralized   Debt   Obligation   ("CDO")
securitizations.  We intend to  securitize  our expanding  investment  portfolio
through a CDO  beginning in the second  quarter of 2006;  however,  there are no
assurances that such a transaction will occur. We expect that securities  issued


                                       4




in any such  transaction will not be registered under the Securities Act of 1933
and will not be offered or sold in the United States absent  registration  or an
applicable exemption from registration requirements.

Investing
---------

We seek to  leverage  the  expertise  of our  Advisor,  and  its  affiliates  in
originating  the loans and other  assets in which we invest.  In  addition,  our
Advisor,  through its  affiliates,  provides  the  expertise to perform both the
initial  underwriting  of the  properties  which  serve as  direct  or  indirect
collateral  for our  loans,  as  well  as in the  ongoing  monitoring  of  those
properties through construction, lease-up and stabilization.

We invest, or have invested in, the following types of assets:

MEZZANINE LOANS

We originate or acquire  mezzanine loans that typically finance newly stabilized
or  transitional  multifamily and commercial  real estate  properties.  While we
mainly focus on the  multifamily  sector,  we may originate  mezzanine loans for
office, retail or industrial properties as well. The interest rates we offer are
either fixed or floating  rate.  We seek assets  secured by  properties  in real
estate markets with strong  fundamentals and transactions  with well capitalized
developers or guarantors. Our mezzanine transactions may involve us:

     1)   issuing  mezzanine  debt  subordinated  to an existing  first mortgage
          loan;
     2)   jointly bidding with a senior lender and closing  simultaneously  (the
          process can be seamless to the client);
     3)   acquiring a mezzanine loan from a senior lender; or
     4)   originating  the entire debt  structure and selling the first mortgage
          to a senior lender.

Mezzanine  loans  are  subordinate  to  senior   mortgages  and  may  include  a
participating  component,  such as a right to a  portion  of the  cash  flow and
proceeds  generated from the refinancing and sale of the underlying  properties.
Typically, they are secured by equity interests in the borrower and have limited
recourse to the borrower.

BRIDGE LOANS

We have two bridge loan programs.  In the first,  loans are typically  funded in
connection with the development of multifamily properties which benefit from the
Low-Income  Housing Tax Credit program under Section 42 of the Internal  Revenue
Code ("LIHTC  program").  Due to the typical equity payment schedule  associated
with the LIHTC  program,  there can be periods in a  construction  cycle where a
developer needs short-term  capital and we offer bridge loans to developers with
typical terms of 12 months,  which are collateralized by the equity interests in
the property owner.

In the second program, we provide loans for properties undergoing rehabilitation
when the  rehabilitation  process will add significant value to the property and
reduce the effective loan-to-value ratio and risk of loss.

These bridge loans may include a participation  component and in connection with
our broadened  investment  focus,  we may originate  additional  types of bridge
loans secured by either multifamily or commercial properties.

FIRST MORTGAGE LOANS

We currently  originate or invest in first mortgage loans secured by multifamily
properties.  The  loans  may be in the form of  long-term  fixed-rate  financing
obligations  or revenue bonds that are secured by first  mortgages on affordable
multifamily  housing  properties  throughout  the  country.  The  revenue  bonds
generally  rank on par with  tax-exempt  first  mortgage  revenue bonds that are
owned by CharterMac,  the parent of our Advisor. The proceeds from these revenue
bonds are generally used for the new construction or substantial  rehabilitation
of affordable multifamily properties.

First mortgage loans are an additional  area of expansion for us. We expect that
we will invest in first  mortgage  loans,  secured by  multifamily or commercial
properties, that will be originated by CharterMac Mortgage Capital, an affiliate
of our Advisor.


                                       5




GOVERNMENT INSURED AND GUARANTEED INVESTMENTS

We invest in government insured or guaranteed investments, primarily through the
acquisition of Government National Mortgage Association ("GNMA" or "Ginnie Mae")
and Federal National Mortgage Association (FNMA or "Fannie Mae") mortgage-backed
securities and  pass-through  certificates.  We believe that  government  agency
insured  lending  offers  safety,  liquidity  and  moderate  yields,  while also
providing a strong asset base for collateralized borrowing on favorable terms.

COMMERICAL MORTGAGE - BACKED SECURITIES ("CMBS")

We currently  invest  indirectly  in CMBS through an equity  investment in ARCap
Investors,  LLC ("ARCap").  ARCap  specializes in, and is a recognized  industry
leader in managing funds that invest in CMBS. The CMBS under ARCap's  management
are  collateralized  by a  diverse  range  of  underlying  properties  including
multifamily, retail, office and hotel. We own both common and preferred stock in
ARCap.

OTHER INVESTMENTS

From time to time,  we may invest in assets  outside  of our  normal  investment
strategy  if we believe  that  making  such an  investment  is  advantageous  in
maximizing our return on equity.

Financing
---------

We finance our  investing  activity  primarily  through  borrowing  from various
facilities at short-term rates. We have four repurchase facilities and a line of
credit with a related party that are used to finance our investments.

For further information about these facilities,  see MANAGEMENT'S DISCUSSION AND
ANALYSIS  -  LIQUIDITY  AND  CAPITAL  RESOURCES  and  Notes  7,  8 and 9 to  the
consolidated financial statements.

In addition, we may also issue common shares to fund investing activity. We have
the  capacity  to raise  approximately  $170.0  million of  additional  funds by
issuing  either  common or  preferred  shares  pursuant to a shelf  registration
statement filed with the SEC.

From  time to time,  we may  also  issue  other  types  of  securities  to raise
additional  capital.  For example,  during  2005,  our  subsidiary  issued $25.0
million of variable rate preferred  securities,  the proceeds of which were used
to purchase FNMA certificates.

In  2006,  we  expect  to  grow  our  investment   portfolio  by  utilizing  CDO
securitizations.  In order to finance these  investments  prior to  securitizing
them,  we expect to enter into a new warehouse  facility with a major  financial
institution, although there are no assurances that this facility will close.

Competition
-----------

We compete with various financial institutions in each of our lines of business.
We compete with investment banks, other REITs,  mezzanine funds and pension fund
advisors for investment opportunities.

Management and Governance
-------------------------

We have engaged our Advisor, to manage our day-to-day  affairs.  Our Advisor has
subcontracted  with  CharterMac  Capital LLC (formerly  known as Related Capital
Company LLC) ("CharterMac Capital"), a subsidiary of CharterMac,  to provide the
services necessary for our operations.  Through our Advisor,  CharterMac Capital
offers us a core group of experienced staff and executive  management  personnel
who provide us with services on both a full- and part-time basis. These services
include,  among  other  things,  acquisition,  underwriting,  asset  monitoring,
portfolio  management,   finance,  accounting,   capital  markets  and  investor
relations.

We have no employees.  Our Advisor  receives  compensation in connection for the
services  it  provides to us as set forth in Item 8,  FINANCIAL  STATEMENTS  AND
SUPPLEMENTARY  DATA;  Item 11,  EXECUTIVE  COMPENSATION;  and  Item 13,  CERTAIN
RELATIONSHIPS AND RELATED  TRANSACTIONS.  In addition,  we reimburse our Advisor
and certain of its


                                       6




affiliates  for expenses  they incur in  connection  with their  performance  of
services for us in accordance with our management agreement.

We are governed by a board of trustees  comprised of three independent  trustees
and two non-independent trustees who are affiliated with our Advisor.

ITEM 1A.  RISK FACTORS

An investment in our common shares involves a number of risks.  Before making an
investment decision, you should carefully consider all of the risks described in
this  document.  If any of the risks  discussed  actually  occur,  our business,
financial condition and results of operations, and the value of your investment,
could be materially adversely affected.

For convenience, we have grouped these risk factors as follows:

     1.   Risks related to our investments
     2.   Risks related to our Advisor
     3.   Risks related to our debt obligations
     4.   Risks related to our classification as a REIT and not as an investment
          company
     5.   Risks related to our common shares and our shareholders

1. RISKS RELATED TO OUR INVESTMENTS

MORTGAGE   INVESTMENTS  THAT  ARE  NOT  UNITED  STATES  GOVERNMENT  INSURED  AND
NON-INVESTMENT GRADE MORTGAGE ASSETS INVOLVE RISK OF LOSS

GENERAL.   We  intend  to  continue  to  originate  and  acquire  uninsured  and
non-investment  grade  mortgage  loans  and  mortgage  assets  as  part  of  our
investment  strategy.  Such loans and assets may include first  mortgage  loans,
mezzanine loans,  construction  loans, bridge loans,  subordinated  interests in
first mortgage loans and CMBS. While holding such interests,  we will be subject
to risks of borrower defaults, bankruptcies, fraud and losses and special hazard
losses that are not covered by standard  hazard  insurance.  In the event of any
default under mortgage loans we hold, we will bear the risk of loss of principal
and non-payment of interest and fees to the extent of any deficiency between the
value of the mortgage collateral and the principal amount of the mortgage loan.

LIMITED  RECOURSE  LOANS MAY LIMIT OUR  RECOVERY  TO THE VALUE OF THE  MORTGAGED
PROPERTY. Our loans are generally  non-recourse,  although some may have limited
recourse  provisions for a short period.  In addition,  limited recourse against
the borrower may be further limited by applicable  provisions of the laws of the
jurisdictions in which the mortgaged  properties are located or by the selection
of remedies and the impact of those laws on that selection.  With respect to our
non-recourse  mortgage loans, in the event of a borrower  default,  the value of
the specific  mortgaged property and other assets, if any, pledged to secure the
relevant  mortgage  loan,  may be less than the amount  owed under the  mortgage
loan. As to those mortgage loans that provide for recourse  against the borrower
and its assets  generally,  there can be no assurance  that such  recourse  will
provide a recovery  in respect of a defaulted  mortgage  loan  greater  than the
liquidation value of the mortgaged property securing that mortgage loan.

In addition,  investment  in  subordinated  interests  in mortgage  loans do not
provide us with foreclosure remedies upon default. Should an investment default,
we may lose our entire investment in such loans.

COMPETITION  IN ACQUIRING  DESIRABLE  INVESTMENTS  MAY LIMIT THEIR  AVAILABILITY
WHICH COULD, IN TURN, NEGATIVELY AFFECT OUR ABILITY TO GENERATE NET INCOME

We compete for loan  investments  with  numerous  public and private real estate
investment vehicles, such as mortgage banks, pension funds, REITs, institutional
investors and individuals. Mortgages, mezzanine loans, subordinated interests in
CMBS and other  investments  are often  obtained  through a competitive  bidding
process. In addition,  competitors may seek to establish  relationships with the
financial  institutions  and other firms from which we intend to  purchase  such
assets.  Many of our  competitors are larger than us, may have access to greater
capital resources and other resources, and may have other advantages over us and
our Advisor in  conducting  certain  business and  providing  certain  services.
Competition may result in higher prices for mortgage assets,  lower yields and a


                                       7




narrower  spread of yields over our borrowing  costs.  There can be no assurance
that we will achieve  investment  results that will allow any specified level of
cash distribution.

INTEREST RATE  FLUCTUATIONS  WILL AFFECT THE VALUE OF OUR ASSETS AND OUR ABILITY
TO GENERATE NET INCOME

Interest  rates are highly  sensitive to many  factors,  including  governmental
monetary and tax  policies,  domestic and  international  economic and political
considerations and other factors beyond our control.  Interest rate fluctuations
can adversely affect our net income in many ways and present a variety of risks,
including the risk of a mismatch between asset yields and borrowing rates.

Interest  rate mismatch  could occur  between  asset yields and borrowing  rates
resulting in decreased yield. Our operating results will depend in large part on
differences  between the income  from our assets (net of credit  losses) and our
borrowing  costs.  We fund the  origination  and  acquisition  of a  significant
portion of our assets  with  borrowings  which  have  interest  rates that reset
relatively  rapidly,  such as monthly or quarterly.  We anticipate that, in most
cases,  the income  from our  fixed-rate  assets  will  respond  more  slowly to
interest rate fluctuations than the cost of our borrowings,  creating a mismatch
between asset yields and borrowing  rates. In addition,  in periods of declining
market  rates,   income  from  our  variable  rate  investments  would  decline.
Consequently, changes in interest rates, particularly short-term interest rates,
may influence our net income and could result in operating losses.

Our operating results depend to a significant degree on differences  between the
income  from our  assets  and our  borrowing  costs.  Due to the  fixed  returns
generated by most of our assets,  interest rate  fluctuations  may influence our
net income.  See also Item 7A,  QUANTITATIVE  AND QUALITATIVE  DISCLOSURE  ABOUT
MARKET RISK.

PREPAYMENT RATES MAY NEGATIVELY AFFECT THE VALUE OF OUR INVESTMENTS.

The value of our  investments  may be affected by prepayment  rates.  Prepayment
rates are  influenced  by  changes in  current  interest  rates and a variety of
economic,  geographic  and other factors beyond our control,  and  consequently,
such  prepayment  rates cannot be  predicted  with  certainty.  To the extent we
originate mortgage loans, we expect that such mortgage loans will have a measure
of protection  from  prepayment in the form of  prepayment  lock-out  periods or
prepayment penalties. However, such protection may not be available with respect
to investments which we acquire,  but do not originate.  In periods of declining
mortgage interest rates, prepayments on mortgages generally increase. If general
interest rates decline as well, the proceeds of such prepayments received during
such periods are likely to be reinvested by us in assets  yielding less than the
yields on the investments  that were prepaid.  In addition,  the market value of
mortgage  investments may, because of the risk of prepayment,  benefit less from
declining interest rates than from other fixed-income securities. Conversely, in
periods of rising interest rates,  prepayments on mortgages  generally decrease,
in which case we would not have the prepayment  proceeds  available to invest in
assets with higher yields.  Under certain interest rate and prepayment scenarios
we may fail to recoup fully our cost of acquisition of certain investments.

WE MAY NOT ACCURATELY ASSESS INVESTMENT YIELDS,  WHICH MAY NEGATIVELY AFFECT OUR
EARNINGS

Before making any  investment,  our Advisor will consider the expected  yield of
the investment and the factors that may influence the yield actually obtained on
such investment.  These considerations will affect our or our Advisor's decision
whether  to  purchase  such an  investment  and the  price  offered  for such an
investment.  No  assurances  can be given  that we or our  Advisor  will make an
accurate  assessment of the yield to be produced by an investment.  Many factors
beyond our and our  Advisor's  control are likely to influence  the yield on the
investments,  including, but not limited to, competitive conditions in the local
real estate  market,  local and general  economic  conditions and the quality of
management of the  underlying  property.  Our Advisor's  inability to accurately
assess investment yields may result in our purchasing assets that do not perform
as well as expected, which may negatively affect our earnings.

THERE ARE RISKS  ASSOCIATED WITH INVESTMENTS  SECURED BY REAL ESTATE,  WHICH MAY
NEGATIVELY AFFECT OUR EARNINGS

We derive most of our income by  investing,  directly  and  indirectly,  in debt
secured by residential or commercial properties.  Such investments subject us to
various types and degrees of risk that could  adversely  affect the value of our
investments and our ability to generate revenue and net income.


                                       8




Multifamily and commercial property values and net operating income derived from
such  properties  are subject to volatility  and may be affected  adversely by a
number of factors, including, but not limited to:

     o    national,  regional  and  local  economic  conditions  (which  may  be
          adversely affected by industry slowdowns and other factors);
     o    local  real  estate  conditions  (such as an  oversupply  of  housing,
          retail, industrial, office or other commercial space);
     o    stability of controlling  entity of our borrower and managing agent of
          the borrower's property;
     o    construction quality, age and design;
     o    demographic factors;
     o    retroactive changes to building or similar codes; and
     o    increases in operating expenses (such as energy costs).

Other risks include, but are not limited to, the following:

     o    If a mortgage loan is called due to  construction  not being completed
          as required in the mortgage  loan  documents,  we may choose to expend
          additional capital in order to preserve our investment;
     o    occupancy  and  rent  levels  may  be  affected  by   construction  of
          additional  housing units and national,  regional and local  politics,
          including  current or future rent  stabilization and rent control laws
          and agreements;
     o    the federal LIHTC Program and city,  state and federal housing subsidy
          or similar programs which apply to some of the properties  impose rent
          limitations  that could adversely affect the ability to increase rents
          to generate the funds  necessary to maintain the  properties  securing
          our investments in proper condition,  which is particularly  important
          during  periods of rapid  inflation or declining  market value of such
          properties;
     o    if a loan defaults, the value of the property securing the loan (plus,
          for properties that are financed through the LIHTC Program,  the value
          of the credits) may be less than the unamortized  principal  amount of
          the loan;
     o    an owner or operator of real  property may become liable for the costs
          of removal of certain  hazardous  substances  released on its property
          without  regard  to  whether  the  owner or  operator  knew of, or was
          responsible  for,  the  release  of  such  hazardous  substances.  The
          presence  of  hazardous  substances  may  adversely  affect an owner's
          ability to operate the property;
     o    certain  underlying  properties  may be  required  to comply  with the
          Americans with  Disabilities Act, and must comply with fire and safety
          regulations,   building  codes,   and  other  land  use   regulations.
          Compliance with such  requirements may require  property  operators to
          make substantial capital expenditures; and
     o    loans to finance condominium  conversions may be adversely impacted if
          interest rate increases or market forces diminish  investor demand for
          condominium units.

These  conditions  and  events  may  increase  the  possibility  that a property
operator may be unable to meet its  obligations to us or otherwise  expose us to
losses, thereby affecting our net income. We manage these risks through diligent
and comprehensive underwriting,  asset management and ongoing monitoring of loan
and property performance. We may also obtain construction completion guarantees,
personal  recourse  agreements  and/or operating  deficit  guarantees.  In other
cases,  we may  decide to  forego  certain  types of  available  security  if we
determine  that the security is not  necessary or is too  expensive to obtain in
relation to the risks covered.

From time to time,  through the foreclosure  process,  we may also take title to
properties as a result of loan defaults by borrowers.  Excluding properties that
we have  legally  sold and for which we have  recovered  a large  portion of the
investment  we made upon  foreclosure,  as of December 31, 2005,  the  aggregate
carrying value was approximately  $18.4 million.  While our Advisor is acting to
improve the operating  performance of these  properties  and actively  marketing
them for sale,  the assets are illiquid  and there is no assurance  that we will
realize the full carrying amounts when the properties are sold.

CHANGES IN MORTGAGE LOAN PROGRAMS COULD ADVERSELY AFFECT US

We could be  hindered  in  making  investments  by  adverse  changes  in the FHA
insurance,  Ginnie Mae or Fannie Mae guarantee  programs or rules or regulations
relating to them. Generally,  once a mortgage has been endorsed for insurance or
guaranteed,  subsequent  amendments to the rules or regulations  would not apply


                                       9




THERE ARE RISKS  ASSOCIATED  WITH OUR INVESTMENT IN ARCAP,  WHICH MAY NEGATIVELY
AFFECT OUR EARNINGS

We have  invested  indirectly  in  subordinated  CMBS through our ownership of a
membership  interest in ARCap.  ARCap manages funds that invest in  subordinated
CMBS that include "first loss" and non-investment grade subordinated  interests.
A  first  loss  security  is the  most  subordinate  class  in a  structure  and
accordingly  is the first to bear the loss upon a default, on  restructuring  or
liquidation  of the  underlying  collateral  and the last to receive  payment of
interest and principal.  Such classes are subject to special risks,  including a
greater risk of loss of principal and  non-payment of interest than more senior,
rated  classes.  The market values of  subordinated  interests in CMBS and other
subordinated  securities  tend to be  more  sensitive  to  changes  in  economic
conditions  than  more  senior,  rated  classes.  As a result of these and other
factors,  subordinated  interests  generally are not actively traded and may not
provide  holders with  liquidity  of  investment.  In  addition,  our ability to
transfer  our  membership  interest  in ARCap is limited by the terms of ARCap's
operating agreement.

PARTICIPATING INTERESTS IN MORTGAGES MAY NOT BE REALIZED

In  connection  with the  acquisition  and  origination  of  mortgages,  we have
obtained and may continue to obtain participating  interests that may entitle us
to payments  based upon a property's  cash flow,  profits or any increase in the
value of the property that would be realized  upon a refinancing  or sale of the
property.  As the  operation  of a  particular  property  is subject to numerous
variables and risks,  there can be no assurance  that a  participating  interest
will result in additional payments to us.

GEOGRAPHIC  CONCENTRATION  AND THE  CREDIT  QUALITY OF  BORROWERS  MAY RESULT IN
LOSSES

We  have  not  established  any  limit  upon  the  geographic  concentration  of
properties  securing  our  investments  or the credit  quality of  borrowers  of
uninsured investments.  As a result,  properties securing our investments may be
overly concentrated in certain geographic areas and the underlying  borrowers of
our uninsured  investments may have low credit quality. We may experience losses
due to geographic  concentration or low credit quality. As of December 31, 2005,
36.7% of our portfolio was comprised of  investments  in mortgage  loans,  notes
receivable,  revenue bonds and real estate owned. Of this group of assets, 62.4%
were secured by  properties in Texas.  We had no borrowers  exceeding 10% of our
portfolio of investments in mortgage loans,  notes  receivable and revenue bonds
other than John Loder and  Richard  Nathan  who are the  creditors  of 11.4% and
10.5%, respectively, in these categories.

THERE ARE RISKS ASSOCIATED WITH OUR CONTEMPLATED CDO TRANSACTIONS

We would  be  exposed  to  additional  risks  if we  finance  a  portion  of our
investment portfolio through a CDO transaction.  Risks associated with financing
investments through a CDO include the following:

          WE MAY NOT BE ABLE TO ACQUIRE ELIGIBLE INVESTMENTS FOR A CDO ISSUANCE,
          OR MAY NOT BE ABLE TO ISSUE CDO SECURITIES ON ATTRACTIVE TERMS,  WHICH
          MAY REQUIRE US TO UTILIZE MORE COSTLY  FINANCING FOR OUR  INVESTMENTS,
          OR TO LIQUIDATE THE INVESTMENTS.

          We intend to capitalize  on  opportunities  to finance  certain of our
          investments on a non-recourse,  long-term  basis,  such as through the
          issuance  of CDOs.  During  the  period  that we are  acquiring  these
          investments,  we intend to finance our  purchases  through a warehouse
          facility.  We will use this  facility  to finance our  acquisition  of
          investments  until we have accumulated a sufficient  quantity of them,
          at which time we may refinance  these lines through a  securitization,
          such as a CDO issuance,  or other types of long-term  financing.  As a
          result, we are subject to the risk that we will not be able to acquire
          a sufficient amount of eligible investments to maximize the efficiency
          of a CDO issuance. In addition,  conditions in the capital markets may
          make the  issuance  of CDOs  less  attractive  to us when we do have a
          sufficient  pool of  collateral.  If we are  unable  to issue a CDO to
          finance these  investments,  we may be required to utilize other forms
          of potentially  less attractive  financing,  or otherwise to liquidate
          the collateral.


                                       10




         WE MAY  NOT  BE  ABLE  TO  FIND  SUITABLE  REPLACEMENT  INVESTMENTS  IN
         COLLATERALIZED DEBT OBLIGATIONS WITH REINVESTMENT PERIODS.

         Some CDOs have periods where  principal  proceeds  received from assets
         securing the obligation can be reinvested for a defined period of time,
         commonly  referred  to as a  reinvestment  period.  Our ability to find
         suitable  investments  during  any  reinvestment  period  that meet the
         criteria set forth in the CDO  documentation and by rating agencies may
         determine the success of our CDO investments.  Our potential  inability
         to find suitable investments may, among other things:

               o    cause interest deficiencies;
               o    cause hyper-amortization of the senior CDO liabilities; and
               o    cause us to reduce the life of our CDOs and  accelerate  the
                    amortization of certain fees and expenses.

         THE USE OF CDO  FINANCINGS  WITH  OVER-COLLATERALIZATION  AND  INTEREST
         COVERAGE REQUIREMENTS MAY HAVE A NEGATIVE IMPACT ON OUR CASH FLOW.

         The terms of CDOs will generally  provide that the principal  amount of
         investments must exceed the principal balance of the related bonds by a
         certain amount and that interest  income exceed  interest  expense by a
         certain amount.  We anticipate that the CDO terms will provide that, if
         certain delinquencies and/or losses or other factors cause a decline in
         collateral or cash flow levels,  the cash flow otherwise payable on our
         investment  may be  redirected  to repay classes of CDOs senior to ours
         until the issuer or the  collateral is in compliance  with the terms of
         the governing  documents.  Other tests (based on delinquency  levels or
         other  criteria)  may  restrict  our ability to receive net income from
         assets   pledged  to  secure  CDOs.  We  cannot  assure  you  that  the
         performance tests will be satisfied.  Nor can we assure you, in advance
         of  completing  negotiations  with the  rating  agencies  or other  key
         transaction  parties as to the actual terms of the  delinquency  tests,
         over-collateralization  and interest  coverage terms, cash flow release
         mechanisms  or other  significant  factors  upon which net income to us
         will be calculated.  Failure to obtain  favorable  terms with regard to
         these matters may adversely  affect the  availability  of net income to
         us.  If  our   investments   fail  to  perform  as   anticipated,   our
         over-collateralization,  interest coverage or other credit  enhancement
         expense associated with our CDO financings will increase.

         WE MAY BE  REQUIRED  TO  REPURCHASE  LOANS  THAT  WE  HAVE  SOLD  OR TO
         INDEMNIFY HOLDERS OF OUR CDOS.

         If any of the loans we  originate  or  acquire  and sell or  securitize
         through CDOs do not comply with  representations and warranties that we
         make about certain  characteristics of the loans, the borrowers and the
         underlying properties,  we may be required to repurchase those loans or
         replace them with substitute  loans. In addition,  in the case of loans
         that we have sold instead of retained,  we may be required to indemnify
         persons  for losses or  expenses  incurred as a result of a breach of a
         representation  or  warranty.  Repurchased  loans  typically  require a
         significant  allocation of working  capital to carry on our books,  and
         our ability to borrow against such assets is limited.  Any  significant
         repurchases  or  indemnification  payments could  adversely  affect our
         financial condition and operating results.

2.  RISKS RELATED TO OUR ADVISOR

WE ARE  DEPENDENT  ON OUR  ADVISOR AND IF OUR ADVISOR  TERMINATES  THE  ADVISORY
AGREEMENT, WE MAY NOT BE ABLE TO FIND AN ADEQUATE REPLACEMENT ADVISOR

We  have no  employees,  although  we have  officers.  We have  entered  into an
advisory  agreement  with our Advisor under which it provides us with all of the
services  necessary for our operations.  We are dependent on our Advisor for the
management and  administration  of our business and investments.  The results of
our  operations  will be dependent upon the  availability  of, and our Advisor's
ability to identify and capitalize on, investment  opportunities.  The agreement
may be terminated

     (i)  without cause by our Advisor or


                                       11




     (ii) with or without cause by a majority of our independent trustees.

The Advisor can terminate the agreement without penalty, but we are subject to a
penalty,   except  in  certain   instances,   for  termination  or  non-renewal.
Termination  would  be  effective  upon  60 days  prior  written  notice  to the
non-terminating  party. If our Advisor  terminates our agreement,  we may not be
able to find an adequate replacement advisor.

CONFLICTS OF INTEREST  COULD ARISE AMONG US AND OR RELATED  PARTIES WITH RESPECT
TO INVESTMENT OPPORTUNITIES

Our Advisor has  subcontracted  its  obligation  to provide  services  under the
advisory agreement to CharterMac Capital, and there are risks involved with this
arrangement.  Under our advisory  agreement,  the Advisor and CharterMac Capital
are permitted to act as advisor to other  entities  having  investment  policies
similar to ours, including other REITs.  Generally,  in conflict situations with
non-affiliated  entities,  our Advisor must present an investment opportunity to
us if the  opportunity  is within our investment  objectives  and policies,  the
opportunity  is of a  character  that  could  be  taken  by us,  and we have the
financial resources to take advantage of the opportunity.

Additionally,  CharterMac, the parent of the Advisor and CharterMac Capital, has
in the past, and may in the future,  invest in first mortgage  loans,  including
taxable first mortgage  revenue bonds or other  investments  that are similar to
those in which we invest.

To the extent that these existing entities, as well as affiliated entities which
may be formed by affiliates of our Advisor in the future,  have funds  available
for investment at the same time as we do and a potentially  suitable  investment
is  offered  to us or the  affiliated  entities,  our  Advisor  will  review the
affiliated entities' and our investment portfolios and will determine whether or
not the  investment  should be made by one of the  affiliated  entities or by us
based upon factors such as the amount of funds available for  investment,  yield
and  portfolio  diversification.  If the  making  of a  mortgage  loan or  other
mortgage  investment  appears equally  appropriate  for us and these  affiliated
entities,  the mortgage loan or other mortgage investment will either be made by
a joint venture  between two or more of such entities (which may include us), or
will be  allocated  to one of such  entities  on a basis  of  rotation  with the
initial order of priority determined by the dates of formation of the entities.

In addition, Stephen M. Ross is the principal owner of The Related Companies, LP
("TRCLP"),  as well as the  Chairman and an indirect  owner of a 15.9%  economic
interest in CharterMac. Jeff Blau, our Chief Executive Officer, is also employed
by TRCLP and has an  ownership  interest  in  CharterMac.  TRCLP  may  engage in
businesses  which  compete with our Company.  In  connection  with  CharterMac's
acquisition of CharterMac Capital in November 2003, CharterMac and TRCLP entered
into an agreement which  prohibited TRCLP and its affiliates from competing with
any business  currently engaged in by CharterMac Capital other than in specified
areas,  including  originating mezzanine loans to multifamily housing properties
similar to those which secure our loans.  There can be no assurance  that we and
TRCLP and its  affiliates  would not directly  compete for similar  products and
opportunities in these areas in the future.

CONFLICTS  OF INTEREST  COULD ARISE IN  TRANSACTIONS  WHERE WE LEND TO OR BORROW
FROM AFFILIATES OF OUR ADVISOR

Every transaction entered into between us and an affiliate of our Advisor raises
a potential  conflict of interest.  In addition to the initial  determination to
invest in mortgage  investments  secured by properties  owned by an affiliate of
our  Advisor,  such  conflicts  of  interest  with  respect  to  these  mortgage
investments include, among others, decisions regarding:

     o    whether to waive defaults of such affiliate;
     o    whether to foreclose on a loan; and
     o    whether to permit additional  financing on the properties securing our
          investments other than financing provided by us.

We have  invested  in, and may in the future  invest  in,  mortgage  investments
secured by  properties  in which  either  direct or indirect  affiliates  of our
Advisor own equity interests in the borrower.  Our declaration of trust requires
that any  transaction  between  our Advisor or any of its  affiliates  and us be
approved by a majority of our trustees,  including a majority of the independent
trustees,  not  otherwise  interested  in the  transaction,  as  being  fair and
reasonable  and on terms not less  favorable  to us than  those  available  from
unaffiliated  third  parties.  As of  December  31,  2005,  we  had  four  notes


                                       12




receivable with a total carrying value of approximately $13.7 million, one first
mortgage  with a total  carrying  value of  approximately  $771,000,  and  seven
multifamily  housing  first  mortgage  bonds  with a  total  carrying  value  of
approximately  $6.6 million to  borrowers  that are  affiliates  of our Advisor,
which represents 1.7% of our total assets.

In June 2004, we entered into a revolving credit facility with CharterMac, which
provides up to $20.0 million in borrowings  and bears interest at LIBOR plus 300
basis  points.  This  facility was  extended  through June 30, 2006 and contains
customary  restrictions  and covenants  that are similar to our  warehouse  debt
facility  with an  unaffiliated  lender.  As of December 31, 2005,  there was no
outstanding balance on this facility.

3. RISKS RELATED TO OUR DEBT OBLIGATIONS

SHORT-TERM REPURCHASE AGREEMENTS INVOLVE RISK OF LOSS

We finance,  and expect to continue  to  finance,  a portion of our  investments
through  collateralized  borrowing in the form of repurchase  agreements,  which
involve us selling assets  concurrently with our agreement to repurchase them at
a later date and at a fixed price.  During the repurchase  agreement  period, we
continue to receive  principal and interest  payments on the assets.  The use of
borrowing,  or  "leverage,"  to finance  our assets  involves a number of risks,
including the following:

IF WE ARE UNABLE TO RENEW OUR BORROWINGS AT FAVORABLE RATES, WE MAY BE FORCED TO
SELL  ASSETS,  AND  OUR  PROFITABILITY  MAY BE  ADVERSELY  AFFECTED.  We rely on
short-term repurchase agreements to finance a portion of our assets. Our ability
to achieve our investment  objectives  depends on our ability to borrow money in
sufficient  amounts and on  favorable  terms and our ability to renew or replace
these short-term  borrowings on a continuous basis as they mature. If we are not
able to renew or replace maturing borrowings, we would be forced to sell some of
our assets under possibly adverse market conditions,  which may adversely affect
our  profitability.  As of December 31, 2005, we had borrowings of approximately
$209.1  million  outstanding  under  the  repurchase  facilities,  all of  which
typically have 30-day settlement terms.

A DECLINE IN THE MARKET  VALUE OF OUR ASSETS MAY RESULT IN MARGIN CALLS THAT MAY
FORCE US TO SELL ASSETS UNDER ADVERSE MARKET CONDITIONS.  Repurchase  agreements
involve the risk that the market value of the securities  sold by us may decline
and that we will be required to post  additional  collateral,  reduce the amount
borrowed or suffer forced sales of the collateral.  If forced sales were made at
prices  lower than the carrying  value of the  collateral,  we would  experience
additional losses. If we are forced to liquidate our assets to repay borrowings,
there can be no assurance that we will be able to maintain  compliance  with the
REIT asset and source of income requirements.

OUR USE OF REPURCHASE  AGREEMENTS  TO BORROW MONEY MAY GIVE OUR LENDERS  GREATER
RIGHTS IN THE EVENT OF  BANKRUPTCY.  Our  repurchase  agreements  require  us to
pledge certain of our assets to the lender to secure our obligations thereunder.
Borrowings made under  repurchase  agreements may qualify for special  treatment
under the U.S.  Bankruptcy  Code,  which may make it difficult for us to recover
our pledged assets if a lender files for bankruptcy.  In addition, if we were to
file for  bankruptcy,  lenders under our  repurchase  agreements  may be able to
avoid  the  automatic  stay  provisions  of the  U.S.  Bankruptcy  Code and take
possession  of, and  liquidate,  the assets we pledged  under  these  agreements
without delay.

HEDGING TRANSACTIONS CAN LIMIT GAINS AND INCREASE EXPOSURE TO LOSSES

Hedging involves risk and hedging activities may not have the desired beneficial
impact on our results of operations or financial condition. Moreover, no hedging
activity can completely  insulate us from the risks  associated  with changes in
interest rates and prepayment rates.

We intend  generally to hedge as much of the  interest  rate risk as our Advisor
determines is in our best interests given the cost of such hedging transactions.
REIT  provisions  of the Code may limit our  ability  to hedge  our  assets  and
related  borrowings.  Any limitation on our use of hedging techniques may result
in greater interest rate risk.


                                       13




4.  RISKS  RELATED  TO OUR  CLASSIFICATION  AS A REIT  AND NOT AS AN  INVESTMENT
COMPANY

POTENTIAL LOSS OF OUR REIT STATUS SUBJECTS US AND OUR SHAREHOLDERS TO RISKS

Potential loss of our REIT status  subjects us and our  shareholders to a number
of risks including the following:

FAILURE TO QUALIFY AS A REIT WOULD  HAVE  ADVERSE  TAX  CONSEQUENCES  FOR US. In
order to maintain our REIT status we must meet a number of  requirements.  These
requirements  are highly  technical and complex and often require an analysis of
various  factual  matters and  circumstances  that may not be totally within our
control.  Even a technical or  inadvertent  mistake  could  jeopardize  our REIT
status.  Furthermore,  Congress and the IRS may make changes to the tax laws and
regulations,  and the courts may issue new rulings,  that make it more difficult
or impossible  for us to remain  qualified as a REIT. If we fail to qualify as a
REIT, we would be subject to federal and state income taxes at regular corporate
rates.  Therefore,  we would have less money  available for  investments and for
distributions to our  shareholders.  This may also have an adverse effect on the
market  value of our common  shares.  In general,  we would not be able to elect
REIT status for four years after a year in which we lose our REIT status.

AS A REIT, OUR INCOME CAN ONLY COME FROM LIMITED TYPES OF SOURCES. To qualify as
a REIT,  at least 75% of our gross income must come from  qualified  real estate
sources  and at least 95% of our gross  income  must  come from  qualified  real
estate sources and certain other sources that are itemized in the REIT tax laws.
Therefore,  we may  have  to  forego  opportunities  to  invest  in  potentially
profitable  businesses or assets  because they would  produce  income that could
jeopardize our status as a REIT.

WE HAVE CERTAIN  DISTRIBUTION  REQUIREMENTS.  As a REIT,  we must  distribute to
shareholders at least 90% of our REIT taxable income (excluding  capital gains).
The required distribution limits the amount we have available for other business
purposes,  including  amounts to fund our  growth.  Also,  it is  possible  that
because of the differences  between the time we actually  receive revenue or pay
expenses and the period we report those items for distribution  purposes, we may
have  to  borrow  funds  on a  short-term  basis  to meet  the 90%  distribution
requirement.

WE ARE ALSO SUBJECT TO OTHER TAX  LIABILITIES.  As a REIT,  we may be subject to
certain federal,  state and local taxes on our income and property. Any of these
taxes would reduce our operating cash flow.

LIQUIDATION OF COLLATERAL MAY JEOPARDIZE OUR REIT STATUS. To continue to qualify
as a REIT, we must comply with requirements regarding our assets and our sources
of income. If we are compelled to liquidate our mortgage  investments to satisfy
our  obligations  to  our  lenders,  we may  be  unable  to  comply  with  these
requirements, ultimately jeopardizing our status as a REIT.

LOSS OF INVESTMENT COMPANY ACT EXEMPTION WOULD ADVERSELY AFFECT US

We intend to conduct our business so as not to become regulated as an investment
company under the  Investment  Company Act of 1940, as amended (the  "Investment
Company Act"). If we fail to qualify for this  exemption,  we would be regulated
as an  investment  company  and  our  business  would  be  materially  adversely
affected.  Investment  company  regulations would prevent us from conducting our
business as described in this  document by, among other  restrictions,  reducing
our ability to borrow.  The  Investment  Company Act exempts  entities  that are
primarily engaged in the business of purchasing or otherwise acquiring mortgages
and  other  liens  on  and   interests  in  real   estate.   Under  the  current
interpretation  of SEC staff,  in order to qualify for this  exemption,  we must
maintain  at least 55% of our assets  directly in these  qualifying  real estate
interests. Mortgage-backed securities that do not represent all the certificates
issued  with  respect  to an  underlying  pool of  mortgages  may be  treated as
securities  separate  from the  underlying  mortgage  loans and,  thus,  may not
qualify for purposes of the 55% requirement.  Therefore,  our ownership of these
mortgage-backed  securities  is  limited  by the  provisions  of the  Investment
Company Act. In meeting the 55% requirement,  we treat as qualifying  interests,
mortgage-backed securities issued with respect to an underlying pool as to which
we hold all  issued  certificates.  If the SEC or its  staff  adopts a  contrary
interpretation,  we  could  be  required  to sell a  substantial  amount  of our
mortgage-backed securities under potentially adverse market conditions. Further,
in order to  insure  that we at all times  qualify  for the  exemption  from the
Investment  Company  Act, we may be  precluded  from  acquiring  mortgage-backed
securities  whose yield is somewhat higher than the yield on those that could be
purchased in a manner  consistent  with the  exemption.  The net effect of these
factors may be to lower our net income.


                                       14




5. RISKS RELATED TO OUR COMMON SHARES AND OUR SHAREHOLDERS

RESTRICTIONS ON SHARE ACCUMULATION IN REITS COULD DISCOURAGE A CHANGE OF CONTROL
OF OUR COMPANY

In order for us to qualify  as a REIT,  not more than 50% of the number or value
of our outstanding shares may be owned, directly or indirectly, by five or fewer
individuals  during  the last half of a taxable  year or during a  proportionate
part of a shorter taxable year.

In order to prevent five or fewer  individuals  from  acquiring more than 50% of
our  outstanding  shares and a  resulting  failure  to  qualify  as a REIT,  our
declaration  of trust  provides  that, no person may own, or be deemed to own by
virtue  of the  attribution  provisions  of the  Code,  more  than  9.8%  of the
outstanding  shares.  The shares most recently  acquired by a person that are in
excess of the 9.8% limit  will not have any voting  rights and will be deemed to
have been offered for sale to us for a period subsequent to the acquisition. Any
person who acquires shares in excess of the 9.8% limit is obliged to immediately
give written notice to us and provide us with any  information we may request in
order to determine the effect of the acquisition on our status as a REIT.

While these  restrictions  are  designed to prevent  any five  individuals  from
owning more than 50% of our shares,  preserving our status as a REIT,  they also
discourage a change in control of our company. These restrictions may also deter
tender offers that may be attractive to  shareholders  or limit the  opportunity
for  shareholders  to receive a premium for their  shares if an  investor  makes
purchases of shares to acquire a block of shares.

SUPERMAJORITY  VOTING REQUIREMENTS FOR ACQUISITIONS AND MERGERS COULD DISCOURAGE
A CHANGE OF CONTROL OF OUR COMPANY

Our  declaration of trust requires that 80% of our  shareholders  and all of our
independent trustees approve exchange offers, mergers, consolidations or similar
transactions  involving us in which our  shareholders  receive  securities  in a
surviving entity having materially different investment objectives and policies,
or  that  is  anticipated  to  provide  significantly  greater  compensation  to
management,  except for  transactions  affected because of changes in applicable
law,  or  to  preserve  tax  advantages  for  a  majority  in  interest  of  our
shareholders.  These  restrictions  may also  deter  tender  offers  that may be
attractive to shareholders or limit the opportunity for  shareholders to receive
a premium for their shares if an investor makes purchases of shares to acquire a
block of shares.

ISSUANCES OF LARGE  AMOUNTS OF OUR COMMON  SHARES COULD CAUSE OUR SHARE PRICE TO
DECLINE

Our  declaration  of trust permits our trustees to issue an unlimited  number of
shares (subject to SEC registration requirements and the consent of shareholders
if required pursuant to the rules of the American Stock Exchange).  The issuance
of common  shares  could cause  dilution  of our  existing  common  shares and a
decrease in the market price of our common shares.

OUR SHAREHOLDERS MAY HAVE PERSONAL LIABILITY FOR OUR ACTS AND OBLIGATIONS

It is possible that certain  states may not  recognize the limited  liability of
shareholders,  although our declaration of trust provides that our  shareholders
shall not be subject to any personal  liability for our acts or obligations.  In
certain states,  our  shareholders  may be held  personally  liable for contract
claims where the underlying  agreement does not specifically exclude shareholder
liability.  Our shareholders may also be held personally liable for other claims
against  us,  such as tort  claims,  claims  for  taxes  and  certain  statutory
liability. Upon payment of any such liability, however, the shareholder will, in
the absence of willful  misconduct  on the  shareholder's  part,  be entitled to
reimbursement  from our general assets, to the extent such assets are sufficient
to satisfy the claim.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES.

         As a result of  foreclosure,  we own four properties held and used. See
         Note 6 to the consolidated  financial statements for further discussion
         of these properties.


                                       15




ITEM 3.  LEGAL PROCEEDINGS.

         On October  27,  2003,  prior to taking  possession  of the real estate
         collateral  supporting a loan  investment,  we were named in a lawsuit,
         Concord  Gulfgate,  Ltd. vs. Robert Parker,  Sunrise  Housing Ltd., and
         American Mortgage Acceptance Company, Cause No. 2003-59290 in the 133rd
         Judicial District Court of Harris County,  Texas. The suit alleges that
         the loan transaction was not properly authorized by the partnership and
         was not for a legitimate  partnership  purpose.  The suit claims, among
         other  causes of action  against the  respective  defendants,  wrongful
         foreclosure of the real estate collateral,  tortious  interference with
         contract  and civil  conspiracy.  The suit seeks,  among other  relief,
         actual,  consequential,  and exemplary damages,  and a declaration that
         the loan documents are  unenforceable  and constitute a cloud on title.
         The discovery phase of this suit has been completed. A summary judgment
         was filed by us, but was denied on July 25, 2005.  It is not known when
         the case will be called to trial.

         We filed a countersuit on November 25, 2003,  against Concord Gulfgate,
         Ltd., as guarantor,  seeking a deficiency on the loan,  and recovery of
         unpaid taxes and certain property receipts.  We are currently unable to
         determine the possible outcome of the litigation.

         We  are  also  subject  to  routine   litigation   and   administrative
         proceedings  arising  in the  ordinary  course of  business.  We do not
         believe that such matters  will have a material  adverse  impact on our
         financial portion, results of operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.

         None.


                                       16




                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  SHAREHOLDER
         MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

As of February 27, 2006, there were 235 registered shareholders owning 8,303,838
shares.  Our common shares have been listed on the American Stock Exchange since
July 1,  1999,  under the  symbol  "AMC".  Prior to July 1,  1999,  there was no
established public trading market for our shares.

The high and low common share prices for each  quarterly  period in the past two
fiscal years in which the shares were traded is as follows:




                                       2005                       2004
                             -----------------------     -----------------------

Quarter Ended                   Low           High          Low           High
-------------                ---------     ---------     ---------     ---------
                                                           
March 31                     $   13.70     $   17.15     $   16.15     $   18.31
June 30                      $   13.44     $   16.44     $   12.86     $   17.86
September 30                 $   13.93     $   16.45     $   13.65     $   17.02
December 31                  $   13.14     $   14.99     $   15.70     $   18.05



The last reported sale price of our common shares on the American Stock Exchange
on February 27, 2006 was $15.25.

The following table provides  information  related to our Incentive Share Option
Plan as of December 31, 2005:




                      Equity Compensation Plan Information

                                             (a)                      (b)                        (c)

                                                                                         Number of securities
                                          Number of                                    remaining available for
                                      securities to be                                  future issuance under
                                    issued upon exercise        Weighted-average         equity compensation
                                       of outstanding          exercise price of           plans (excluding
                                      options, warrants       outstanding options,       securities reflected
                                         and rights           warrants and rights           in column (a))
                                    ----------------------    ---------------------    -----------------------
                                                                                      
Equity compensation plans
   approved by security holders            187,052                 $   15.78                   643,332
Equity compensation plans not
   approved by security holders                 --                        --                        --
                                           -------                 ---------                   -------

Totals                                     187,052                 $   15.78                   643,332
                                           =======                 =========                   =======



                                       17




Distributions
-------------

Cash  distributions per share for the years ended December 31, 2004 and 2005 are
as set forth in the following table:




                                                                   Total Amount
Cash Distribution                                                  Distributed
for Quarter Ended                  Date Paid         Per Share    (in thousands)
-----------------                  ---------         ---------    --------------
                                                            
March 31, 2004                      5/13/04          $   0.40        $ 3,335
June 30, 2004                       8/12/04              0.40          3,334
September 30, 2004                  11/11/04             0.40          3,334
December 31, 2004                   2/14/05              0.40          3,334
                                                     --------        -------

Total for 2004                                       $   1.60        $13,337
                                                     =====           =======

March 31, 2005                      5/13/05          $   0.40        $ 3,335
June 30, 2005                       8/12/05              0.40          3,324
September 30, 2005                  11/14/05             0.40          3,325
December 31, 2005                   2/14/06              0.40          3,322
Special distribution                11/30/05             0.30          2,493
                                                     --------        -------

Total for 2005                                       $   1.90        $15,799
                                                     ========        =======



There are no material legal  restrictions  upon our present or future ability to
make  distributions  in accordance  with the  provisions of our  declaration  of
trust. Future distributions paid by us will be at the discretion of our trustees
and will  depend on our  actual  cash flow,  our  financial  condition,  capital
requirements,  REIT  requirements  and such other  factors as the trustees  deem
relevant.

The following table sets forth  information with respect to purchases made by us
of our common shares during the fourth quarter of 2005:




                                                               Total number            Maximum
                                                                 of shares            number of
                                                               purchased as        shares that may
                           Total number                      part of publicly     yet be purchased
                             of shares     Average price        announced            under the
      Period                 purchased     paid per share        programs             programs
-------------------        ------------    --------------    ----------------     ----------------
                                                                           
November 1-30, 2005            9,100        $   13.75              9,100               960,000



Other  information  required  by this item,  as well as  additional  information
regarding  our  share  repurchase  program  and share  compensation  paid to our
independent  trustees,  is  included  in  Note  11 and  12 to  our  consolidated
financial statements.


                                       18




ITEM 6.  SELECTED FINANCIAL DATA.

The information set forth below presents our selected financial data. See Item 7
for factors  affecting  the  comparability  of this data.  Additional  financial
information  is set forth in the  audited  financial  statements  and  footnotes
thereto contained in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

(In thousands except per share amounts)




                                                                 Year ended December 31,
                                               ------------------------------------------------------------
OPERATIONS                                       2005         2004         2003         2002         2001
----------                                     --------     --------     --------     --------     --------
                                                                                    
Total revenues                                 $ 36,143     $ 22,011     $ 16,966     $ 10,458     $  5,698
                                               ========     ========     ========     ========     ========

Net income                                     $ 15,235     $ 11,273     $ 11,884     $  9,660     $  5,187
                                               ========     ========     ========     ========     ========

Net income per share,
  basic and diluted                            $   1.83     $   1.35     $   1.52     $   1.61     $   1.35
                                               ========     ========     ========     ========     ========

Distributions per share                        $   1.90     $   1.60     $   1.60     $   1.51     $   1.45
                                               ========     ========     ========     ========     ========





                                                                       December 31,
                                               ------------------------------------------------------------
FINANCIAL POSITION                               2005         2004         2003         2002         2001
------------------                             --------     --------     --------     --------     --------
                                                                                    
Total assets                                   $400,723     $349,033     $327,107     $195,063     $101,982
                                               ========     ========     ========     ========     ========

Repurchase facilities payable                  $209,101     $157,633     $149,529     $ 87,880     $ 43,610
                                               ========     ========     ========     ========     ========

Warehouse facility payable                     $  4,070     $  3,827     $ 34,935     $  8,788     $     --
                                               ========     ========     ========     ========     ========

Line of credit - related party                 $     --     $  4,600     $     --     $     --     $     --
                                               ========     ========     ========     ========     ========

Mortgages payable on real estate owned         $ 40,487     $ 56,993     $ 15,993     $     --     $     --
                                               ========     ========     ========     ========     ========

Preferred shares of subsidiary (subject to
   mandatory repurchase)                       $ 25,000     $     --     $     --     $     --     $     --
                                               ========     ========     ========     ========     ========

Total liabilities                              $286,540     $228,501     $206,212     $100,725     $ 46,703
                                               ========     ========     ========     ========     ========

Total shareholders' equity                     $114,183     $120,532     $120,895     $ 94,338     $ 55,279
                                               ========     ========     ========     ========     ========




                                       19




ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Factors Affecting Comparability
-------------------------------

During  2005  and  2004,  we  owned  several  properties  through   foreclosure,
classified  as Real Estate Owned - Held and Used,  - Subject to Sales  Contracts
and - Held for Sale.  As a result  of  certain  circumstances  during  2004,  we
reclassified some of these assets from Held for Sale to Held and Used.  Although
prior period results have been  reclassified  as Held and Used, we have recorded
greater  depreciation expense and recognized property level mortgage interest in
the current year (see "Real Estate Owned" below).

During March 2005, we issued $25.0 million of Floating Rate Preferred Securities
through  a  subsidiary.  Due  to  the  mandatory  redemption  feature  of  these
securities,  the payments or accruals of dividends  and other amounts to be paid
to the holders of these  securities are reported as interest costs. As a result,
these  interest costs are  classified as Interest -  Distributions  to Preferred
Shareholders of Subsidiary (Subject to Mandatory Repurchase). There were no such
interest costs in prior periods.

During  September  2005, the GNMA  certificate  and mezzanine  loan  investments
relating to one property were paid off prior to the maturity date.  This pay off
resulted in significantly higher levels of fees earned and gain on redemption.

Investment Activity
-------------------

During the years ended December 31, we made the following investments:

(In thousands)




                                 2005                    2004                    2003
                         --------------------    --------------------    --------------------
                                     Weighted                Weighted                Weighted
                                     Average                 Average                 Average
                                     Interest                Interest                Interest
                          Amount       Rate       Amount       Rate       Amount       Rate
                         --------    --------    --------    --------    --------    --------
                                                                     
Debt securities          $ 61,691      6.04%     $ 34,823      5.60%     $ 39,960      5.49%
Mezzanine loans            40,000     15.78%        8,500     11.64%        3,293     16.50%
Bridge loans                   --        --         4,517     12.96%       31,046      7.91%
First mortgage loans        7,500     10.82            --        --         8,683      8.96%
                         --------     -----      --------     -----      --------     -----
Total                    $109,191      9.94%     $ 47,840      7.37%     $ 82,982      7.20%
                         ========     =====      ========     =====      ========     =====



During 2005 and 2004, the  composition of our  investment  portfolio  shifted to
include a larger proportion of debt securities and, especially in 2005, a larger
number  of  variable-rate   mezzanine  loans  (particularly   related  to  condo
conversion properties).  The increase in our debt security investments allows us
to increase  our ability to obtain  leverage  on those  assets to allow  further
investment  and the timing of cash flows  related  to the  liquidation  of other
assets in our portfolio.  The change in our  investment  strategy to expand into
asset  classes  beyond  traditional   multifamily   housing  has  increased  our
variable-rate  asset  base  and  increased  the  weighted  average  yield on our
portfolio.


                                       20




Results of Operations

The following is a summary of our operations:

(In thousands)




                                                  % Change              % Change
                                                   2005 vs               2004 vs
                             2005        2004       2004       2003       2003
                           --------    --------   --------   --------   --------
                                                           
Total revenues              $36,143     $22,011     64.2%     $16,966     29.7%

Total expenses               23,889      13,138     81.8        7,109     84.8

Total other income            2,981       2,400     24.2        2,027     18.4
                            -------     -------     ----      -------     ----

Net income                  $15,235     $11,273     35.1%     $11,884     (5.1%)
                            =======     =======     ====      =======     ====



The substantial  growth in our annual revenues and other income in both 2005 and
2004 resulted primarily from increases in investment  activity,  as well as fees
received as a result of an early paydown of one GNMA  certificate  and mezzanine
loan.  Expenses also increased for these periods due to the increase in property
operations,  interest  expenses and  depreciation  costs for Real Estate  Owned,
financing costs  (particularly due to higher interest rates),  and Advisory fees
due to higher profits and an increased asset base.

REVENUES

Changes in components of our revenues were as follows:




                                                   % Change        % of Total       % of Total       % of Total
                                  % Change         2004 vs.           2005             2004             2003
                                2005 vs 2004         2003           Revenues         Revenues         Revenues
                                ------------      ----------       ----------       ----------       ----------
                                                                                        
Interest income:

  Debt securities                    31.7%           11.1%            35.5%            44.2%            51.7%

  Mortgage loans                    200.1           (30.4)            15.0              8.2             15.3

  Notes receivable                  (38.6)          (19.6)             4.3             11.6             18.6

  Revenue bonds                      (8.2)          319.2              1.6              2.9              0.9

  Temporary investments             454.8           (23.6)             0.7              0.2              0.3

  Fees related to the
    prepayment  of assets         2,983.4           100.0             15.4              0.8               --

Other revenues                      523.5            (7.3)             2.6              0.7              1.0
                                  -------           -----             ----            -----            -----
  Subtotal                           79.9             1.3             75.1             68.6             87.8
                                  -------           -----             ----            -----            -----

  Rental income                      29.9           234.5             24.9             31.4             12.2
                                  -------           -----             ----            -----            -----

Total revenues                       64.2%           29.7%           100.0%           100.0%           100.0%
                                  =======           =====            =====            =====            =====




                                       21




At  December  31, we had the  following  investments  (exclusive  of Real Estate
Owned):




                                  2005                                 2004                                2003
                    --------------------------------     --------------------------------    --------------------------------
                                            Weighted                             Weighted                            Weighted
                                            Average                              Average                             Average
                    Carrying                Interest     Carrying                Interest    Carrying                Interest
                     Amount    % of Total     Rate        Amount    % of Total     Rate       Amount    % of Total     Rate
                    --------   ----------   --------     --------   ----------   --------    --------   ----------   --------
                                                                                           
Debt securities     $222,723      75.5%       6.23%      $194,587      79.2%       6.48%     $167,260      74.4%       6.80%
Mortgage loans        51,981      17.6       14.74         21,376       8.7       11.68        13,864       6.2       11.30
Notes receivable      13,725       4.7       10.00         23,111       9.4        9.43        35,946      16.0        7.96
Revenue bonds          6,626       2.2        8.68          6,672       2.7        8.69         7,586       3.4        8.69
                    --------     -----       -----       --------     -----       -----      --------     -----       -----
Total               $295,055     100.0%       7.96%      $245,746     100.0%       7.36%     $224,656     100.0%       7.32%
                    ========     =====       =====       ========     =====       =====      ========     =====       =====



Interest  income  from  debt  securities  increased  during  both 2005 and 2004,
primarily due to the continued  advances on an existing GNMA certificate and the
purchase of eight new FNMA  certificates  during the fourth  quarter of 2004 and
eleven new FNMA certificates  during 2005,  partially offset by the repayment of
one GNMA  certificate  in 2004 and two in 2005.  The  decrease  in the  weighted
average interest rate on debt securities  during these periods was primarily due
to the rising interest rates on mortgage loans; as mortgage interest rates rise,
interest rates on debt securities tend to decrease.

Interest  income from  mortgage  loans  decreased in 2004,  primarily due to the
reduction of interest  received from certain  foreclosed  properties  due to the
reclassification  of these assets to Real Estate  Owned.  The balance  increased
significantly  in 2005 primarily due to funding of three  mezzanine loans during
the second half of 2004 and the funding of seven  mezzanine  loans  during 2005,
many of which related to condominium  conversions.  The increase in the weighted
average  interest rates on mortgage loans during these periods was primarily due
to the increase in market interest rates.

Interest  income  from notes  receivable  decreased  during  both 2005 and 2004,
primarily  due to the payoff of several  notes during these  periods,  partially
offset by the funding of one new note  receivable.  The balance  also  decreased
during 2004 due to the default of required debt service payments from foreclosed
properties.

Fees related to prepayment of assets  increased during 2005 primarily due to the
recognition  of fees  relating to an early  payoff of a GNMA  certificate  and a
mezzanine loan during the third quarter of 2005.

Other  revenues  increased  for  2005,  primarily  due to the  recognition  of a
commitment fee and a non-refundable  due diligence fee during 2005. No such fees
were recorded in 2004.

Rental income  increased  during 2005 primarily due to the purchase of the first
mortgage on one  property in the Real Estate Owned  portfolio in February  2005.
Subsequent to the purchase,  we recorded income from property operations.  There
was no income from operations  during 2004.  Rental income increased during 2004
primarily due to the foreclosure of the Concord properties during the later half
of 2003. During 2004, there was a full year of income recorded for operations of
these properties.


                                       22




EXPENSES

Changes in components of our expenses in 2005, 2004 and 2003 were as follows:




                                                   % of Total                         % of Total       % of Total
                              % Change 2005           2005         % Change 2004         2004             2003
                                 vs 2004            Revenues          vs 2003          Revenues         Revenues
                              --------------       ----------      -------------      ----------       ----------
                                                                                           
Interest                            75.7%             19.5%             57.7%            18.2%            15.0%
Distributions to
  preferred shareholders           100.0               4.0                --               --               --
General and administrative          12.4               5.4              89.7              7.9              5.4
Fees to Advisor                    122.2              12.0               7.9              8.9             10.7
Amortization and other             (28.5)              0.8               9.3              1.9              2.2
                              -----------------------------------------------------------------------------------
Subtotal                            85.9              41.7              43.7             36.9             33.3
                              -----------------------------------------------------------------------------------

Property operations                 38.9              11.0              97.2             13.0              8.6
Depreciation                        11.5               6.6             100.0              9.7               --
Mortgage interest for
  real estate owned,
  held and used                    100.0               6.7                --               --               --
                              -----------------------------------------------------------------------------------

Total expenses                      81.8%             66.1%             84.8%            59.7%            41.9%
                              ===================================================================================



At December 31, 2005,  excluding  mortgages on real estate  owned,  we had total
debt of  approximately  $238.2 million with a weighted  average interest rate of
4.63% per year,  including  the effect of our swap  agreement.  At December  31,
2004,  we had a  comparable  balance  of  approximately  $166.1  million  with a
weighted  average  interest rate of 2.76% per year. The increase in the weighted
average interest rate is due to steady increases in market interest rates during
2004 and 2005.

Interest  expense  increased  for  both  2005  and  2004,  primarily  due to the
increased  borrowings on the  repurchase  facilities  stemming from an increased
investment base and the increase in interest rates during 2004 and 2005.

Distributions to preferred  shareholders were recorded following the issuance of
the securities in March 2005. There were no such securities  outstanding  during
2004 or 2003.

General and administrative  expenses increased for both 2005 and 2004, primarily
due to an increase in legal fees related to foreclosed  properties,  an increase
in  accounting  fees related to  Sarbanes-Oxley  compliance,  and an increase in
excise taxes due to undistributed taxable income.

Fees to Advisor  increased for both 2005 and 2004, due to higher  overhead costs
and asset  management fees because of expansion of our business and an increased
asset base during 2004 and 2005. In addition, during 2005, we incurred incentive
management fees based on the increase in 2005 earnings, which resulted primarily
from fees related to the early payoff of a GNMA certificate and mezzanine loan.

Property  operations  represent all non-interest  costs at the property level on
all of our Real Estate Owned - Held and Used properties.  Mortgage  interest for
Real Estate Owned - Held and Used  increased  during  2005,  due to debt service
costs  associated  with a $40.5 million  mortgage on the Concord  Portfolio (see
"Real Estate Owned" below).

Depreciation  expense  increased during both 2005 and 2004, due to a higher base
of  depreciable  real  estate  owned in both  2005 and 2004.  In 2004,  we began
depreciating  the Concord  Portfolio and in 2005, we began  depreciating  Autumn
Creek. In both years,  the initial amount of depreciation  included  retroactive
amounts to capture depreciation from the respective foreclosure dates.


                                       23




REAL ESTATE OWNED

During 2005, we reclassified some of our investments in foreclosed properties as
Real  Estate  Owned - Held  for  Sale on our  consolidated  balance  sheets  and
recognized income from the operations of these properties.  As a result of these
circumstances,  we have reclassified  certain prior year amounts relating to the
income recognition of our real estate owned portfolio to conform to current year
presentation.

During 2004, we had three  properties  classified as Real Estate Owned - Subject
to Sales Contracts, as the sale of these properties did not constitute a sale in
accordance with GAAP. After the properties were refinanced during December 2004,
we  reclassified  these  properties on our  consolidated  balance sheets as Real
Estate Owned - Held and Used;  we recorded  depreciation  on the  properties  in
2004, as well as retroactively  for the period since  foreclosure.  We recognize
income  associated with a $12.8 million  mezzanine loan (our remaining  economic
interest in the properties) as rental income,  property  operations and mortgage
interest on Real Estate Owned - Held and Used on our consolidated  statements of
income.

During  2005,  we had one  property  classified  as Real Estate Owned - Held for
Sale.  As a sale for this property  could not be  accomplished  before  December
2005,  we  also  reclassified  the  property  as  Held  and  Used;  we  recorded
depreciation  on the property in 2005, as well as  retroactively  for the period
since  foreclosure.  We recognize  income from the property as rental income and
property  operations  on Real Estate  Owned - Held and Used on our  consolidated
statements of income.

During 2005, we sold the Plaza at San Jacinto property to an unaffiliated  third
party for approximately its carrying value.

IMPACT OF HURRICANES DURING THE YEAR ENDED DECEMBER 31, 2005

During 2005,  three major hurricanes  struck the Southern United States.  Six of
our  investments,  secured by  properties  in Texas,  were affected by Hurricane
Rita. The damage to these properties was minor and therefore it is expected that
we have no financial exposure in this matter.  There were no properties affected
by Hurricane Katrina or by Hurricane Wilma.

Funds from Operations
---------------------

Funds  from  operations  ("FFO"),  represents  net income or loss  (computed  in
accordance  with  GAAP),  excluding  gains or  losses  from  sales of  property,
excluding  depreciation and amortization  related to real property and including
funds from operations for unconsolidated  joint ventures  calculated on the same
basis.  FFO is calculated in accordance  with the National  Association  of Real
Estate  Investment  Trusts  ("NAREIT")  definition.  FFO does not represent cash
generated  from  operating  activities  in  accordance  with  GAAP  and  is  not
necessarily  indicative of cash available to fund cash needs.  FFO should not be
considered  as an  alternative  to net income as an indicator  of the  Company's
operating  performance  or as an  alternative  to cash  flows  as a  measure  of
liquidity.  Our  management  considers FFO a  supplemental  measure of operating
performance,  and,  along with cash flows from operating  activities,  financing
activities,  and investing activities,  it provides investors with an indication
of our ability to incur and service debt, make capital expenditures, and to fund
other cash needs.


                                       24




The following  table  reconciles  net income to FFO for the years ended December
31, 2005, 2004 and 2003:




(In thousands)
                                               2005           2004           2003
                                            ---------      ---------      ---------
                                                                 
Net income                                  $  15,235      $  11,273      $  11,884

Add back: depreciation of real property         2,389          2,143             --(1)
                                            ---------      ---------      ---------

FFO                                         $  17,624      $  13,416      $  11,884
                                            =========      =========      =========

Cash flows from:
Operating activities                        $  18,036      $  14,032      $  11,977
                                            =========      =========      =========
Investing activities                        $ (64,512)     $ (22,592)     $(123,843)
                                            =========      =========      =========
Financing activities                        $  55,016      $   9,206      $ 103,490
                                            =========      =========      =========

Weighted average shares outstanding:
Basic                                           8,316          8,336          7,803
                                            =========      =========      =========
Diluted                                         8,317          8,343          7,815
                                            =========      =========      =========



   (1) There was no depreciation recorded on Real Estate Owned in 2003.

Since not all companies  calculate  FFO in a similar  fashion,  our  calculation
presented above may not be comparable to similarly  titled measures  reported by
other companies.

Liquidity and Capital Resources
-------------------------------

SOURCES OF FUNDS

We expect that cash  generated  from our  investments,  as well as our borrowing
capacity, will meet our needs for short-term liquidity and will be sufficient to
pay all expenses and distributions to our shareholders in amounts  sufficient to
retain our REIT status in the foreseeable  future. In order to qualify as a REIT
under the  Internal  Revenue  Code,  as amended,  we must,  among other  things,
distribute  at  least  90% of our  taxable  income.  We  believe  that we are in
compliance with the REIT-related provisions of the Code.

We finance our  investing  activity  primarily  through  borrowing  from various
facilities at short-term rates. At December 31, 2005, we had approximately $20.0
million available to borrow,  contractually,  under our debt facilities  without
exceeding limits imposed by debt covenants and our declaration of trust.

From time to time,  we may also  issue  common  shares  or other  equity to fund
investing activity. During 2005, our subsidiary issued $25.0 million of variable
rate  Preferred  Securities.  The proceeds  received  were used to purchase FNMA
certificates.

We have capacity to raise  approximately  $170.0 million of additional  funds by
issuing  either  common or  preferred  shares  pursuant  to an  effective  shelf
registration  statement filed with the SEC. If market conditions warrant, we may
seek to  raise  additional  funds  for  investment  through  further  offerings,
although the timing and amount of such  offerings  cannot be  determined at this
time.

We are  currently  exploring  funding the further  expansion  of our  investment
platform through the use of  Collateralized  Debt Obligations  ("CDOs").  A real
estate CDO is a capital markets transaction in which the holder of various forms
of real estate debt instruments finances those assets by selling bonds backed by
the assets.  The assets can be floating  or fixed  rate,  and may include  first
mortgages,   subordinate  participations  in  first  mortgages,   bridge  loans,
mezzanine loans, CMBS, and trust preferred stock. The assets would be aggregated
on our  consolidated  balance  sheets and would  later be  securitized.  The CDO
execution would enable us to lower our cost of capital  significantly,  which in
turn  would  make  us  more  competitive  in  the  lending  marketplace.  It  is
anticipated  that our  origination  activity would begin to increase  during the
first  quarter  of 2006 and we would  access  the  securitization  market in the


                                       25




second quarter of 2006,  although  there are no assurances  that we will proceed
with such a program or that such a program will be successful.

In order to finance this increased volume in investments  before  securitization
occurs,  we expect to enter into a  warehouse  facility  with a major  financial
institution.  The proposed terms of this facility  contemplate a credit limit of
up to $250 million,  priced at a spread to LIBOR. This facility will mature when
the CDO is entered  into,  after which,  new  facilities  will be  negotiated to
finance any  investments  to be placed in additional  CDOs. As with our proposed
investment strategy changes, there is no assurance that this facility will close
in 2006.

SUMMARY OF CASH FLOWS

During the year ended  December 31, 2005, as compared to the year ended December
31, 2004, the net change in cash and cash  equivalents  increased  approximately
$7.9  million.  Operating  cash flows  improved by  approximately  $4.0  million
primarily  due to higher  earnings.  An increase  in net cash used in  investing
activities (approximately $41.9 million) and an increase in net cash provided by
financing  activities  (approximately  $45.8 million) were due to an increase in
proceeds received from repurchase and warehouse facilities used for purchases of
mortgage loans and debt securities.

During the year ended  December 31, 2004, as compared to the year ended December
31, 2003, the net change in cash and cash equivalents increased by approximately
$9.0 million.  Operating  cash flows  improved by $2.1 million  primarily due to
higher cash earnings and favorable variances in timing of receivables collected.
A  decrease  in net cash  used in  investing  activities  (approximately  $101.3
million)  and a  corresponding  decrease  in  net  cash  provided  by  financing
activities (approximately $94.3 million) were due to a higher level of investing
activity in debt  securities,  mortgage  loans,  and  mezzanine and bridge loans
during the 2003 period. The lower level of investing in 2004 corresponded to the
decrease in net borrowings.

LIQUIDITY REQUIREMENTS AFTER DECEMBER 31, 2005

During February 2006, dividends of approximately $3.3 million ($0.40 per share),
which were declared in December 2005, have been paid to common shareholders.

We are not aware of any trends or events,  commitments or  uncertainties,  which
have not otherwise been disclosed that will or are likely to impact liquidity in
a material way.

Dividends
---------

The following table outlines our total dividends and return of capital  amounts,
determined in accordance with GAAP, for the year ended December 31,:




(in thousands)
                                          2005            2004            2003
                                        --------        --------        --------

                                                                
Total dividends                          15,799          13,337          12,551
Return of capital:
  Amount                                    564           2,065             667
  Per share                                $.07            $.25            $.08
  Percent of total dividends               3.57%          15.48%           5.31%



Application of Critical Accounting Policies
-------------------------------------------

Our consolidated financial statements are based on the selection and application
of GAAP,  which  requires us to make estimates and  assumptions  that affect the
reported amounts of assets, liabilities,  revenues and expenses. These estimates
and assumptions  sometimes involve future events which cannot be determined with
absolute certainty.  Therefore,  our determination of estimates requires that we
exercise our judgment.  While we have used our best estimates based on the facts
and  circumstances  available to us at the time,  different results may actually
occur and any such differences could be material to our financial statements.


                                       26




We believe the  following  policies may involve a higher  degree of judgment and
complexity  and  represent  the  critical   accounting   policies  used  in  the
preparation of our financial statement:

     o    valuation of investments in debt securities;
     o    assessment of impairment of mortgage loans and notes;
     o    classification of mezzanine loan investments; and
     o    classification and valuation of real estate owned.

VALUATION OF INVESTMENTS IN DEBT SECURITIES

SFAS No. 115,  ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES,
provides guidance on determining the valuation of investments owned. The initial
classification  of our  investments in the "available for sale" category  rather
than as "held to maturity" is due to our intent to sell these  securities if the
terms of a  particular  offer are  deemed  favorable  to us. We have sold  these
securities  in the  past  and  from  time to  time,  we may  look to sell  these
securities in the future if it is opportunistic for us to do so. Because of this
classification,  we must carry our investments at estimated fair value. GNMA and
FNMA DUS  Certificates  are relatively  liquid  investments.  We use third-party
quoted market prices as our primary source of valuation information.

ASSESSMENT OF IMPAIRMENT OF MORTGAGE LOANS AND NOTES

SFAS No. 114,  ACCOUNTING  BY CREDITORS FOR  IMPAIRMENT  OF A LOAN,  establishes
standards  regarding  impairment  issues related to our mortgage loans and notes
receivable.  Our portfolio of mortgage loans and notes is periodically evaluated
for impairment to establish  appropriate loan loss reserves,  if necessary.  Our
Advisor has a credit review committee which meets monthly and reviews the status
of each loan and note and maintains a "watch list" of loans (including loans for
which we have  issued  guarantees)  for which  the  underlying  property  may be
experiencing  construction  cost overruns,  delays in  construction  completion,
occupancy shortfalls, lower than expected debt service coverage ratios, or other
matters which might cause the borrower to be unable to make  scheduled  interest
and principal payments. If a loan is experiencing difficulties,  members of this
credit  committee  work with the  borrower to try to resolve  the issues,  which
could include extending the loan term, making additional  advances,  or reducing
required payments. If, in the judgment of our management,  it is determined that
it is probable that we will not receive all contractually required payments when
they are due, the loan or note would be deemed impaired, and a loan loss reserve
established. As of December 31, 2005, our management had determined that no loan
required a loss reserve.

CLASSIFICATION OF MEZZANINE LOAN INVESTMENTS

Our mezzanine loan  investments  bear interest at fixed or variable  rates,  and
some also include provisions that allow us to participate in a percentage of the
underlying  property's  cash flows from  operations  and proceeds from a sale or
refinancing.  At the  inception of each such  investment,  our  management  must
determine  whether  such  investment  should be accounted  for as a loan,  joint
venture or as real estate,  using the guidance  contained in the Third Notice to
Practitioners issued by the AICPA. Although the accounting  methodology does not
affect our cash flows from these  investments,  this  determination  affects the
balance sheet  classification of the investments as well as the  classification,
timing and amounts of reported earnings.

Accounting  for the  investment as real estate is required if we expect that the
amount of profit, regardless of its nature, is over 50 percent of the property's
total expected residual profit. If a mezzanine  investment were accounted for as
an investment in real estate,  our  consolidated  balance  sheets would show the
underlying property and its related senior debt (if such debt were not also held
by us), and our  consolidated  statements of income would include the property's
rental revenues, operating expenses and depreciation.

If we expect to receive less than 50 percent of the property's  residual profit,
then  loan  or  joint  venture   accounting  is  applied.   Loan  accounting  is
appropriate:

     o    if the borrower has a substantial equity investment in the property;
     o    if we have recourse to substantial assets of the borrower;
     o    if the property is generating  sufficient  cash flow to service normal
          loan amortization; or
     o    if certain other conditions are met.


                                       27




Under loan  accounting,  we recognize  interest  income as earned and additional
interest from participations as received. Joint venture accounting would require
that we only record our share of the net income from the underlying property.

Our  management  must  exercise  judgment  in  making  the  required  accounting
determinations. For each mezzanine arrangement, we project total cash flows over
the loan's term and our share in those cash flows,  and consider the  borrower's
equity,  the contractual  cap, if any, on total yield to us over the term of the
loan, market yields on comparable loans, borrower guarantees,  and other factors
in making an assessment of the proper  accounting.  To date, we have  determined
that all mezzanine investments should be accounted for as loans.

CLASSIFICATION AND VALUATION OF REAL ESTATE OWNED

The accounting for the foreclosure, ownership and subsequent sale of real estate
is governed by:

     o    SFAS No. 15,  ACCOUNTING  BY DEBTORS AND  CREDITORS  FOR TROUBLED DEBT
          RESTRUCTURINGS;
     o    SFAS No.  144,  ACCOUNTING  FOR THE  SALE OR  DISPOSAL  OF  LONG-LIVED
          ASSETS; and
     o    SFAS No. 66, ACCOUNTING FOR SALES OF REAL ESTATE.

During 2003, we exercised  our rights under  subordinated  promissory  notes and
other  documents to take possession of certain real estate  collateral.  We have
also purchased the first  mortgage  loans on all of the  respective  properties,
except for Autumn Creek,  and acquired the real estate at foreclosure  auctions.
Three of the properties were subsequently sold, although the transaction did not
meet the sale criteria of SFAS No. 66, despite the fact that the purchaser later
secured permanent first-mortgage financing.

When a loan is in the  process of  foreclosure,  it is our  policy to  initially
reclassify  the balance of the loan into Real Estate  Owned-Held for Sale at the
lower of fair value of the real estate,  less  estimated  disposal  costs or the
carrying  amount  of the  loan,  and to cease  accrual  of  interest.  We obtain
independent  appraisals of all  foreclosed  real estate to assist  management in
evaluating  property  values.  To  date,  no  losses  have  been  recorded  upon
foreclosure.

It is our intent to sell foreclosed  properties within a short time period.  Due
to the  Held  for  Sale  classification,  we do  not  initially  depreciate  the
properties. If we do not sell a property or do not meet sale criteria within the
permissible  timeframe  for Held  for Sale  classification,  we  reclassify  the
property  into Real  Estate  Owned-Held  and Used or Subject  to Sales  Contract
categories and account for it as an operating  asset.  Depreciation  is recorded
for the asset  including a retroactive  adjustment  for the full period that the
property was classified as Real Estate Owned-Held for Sale. Income from property
operations is recorded  provided  realization and  collectibility of the amounts
are  considered  likely.  Likewise,  interest  income  on notes  receivable  for
properties  sold that do not meet the criteria for sale  recognition is recorded
to the extent that collectibility is considered likely.

This  accounting for real estate owned requires  substantial  judgment as to the
fair value of the assets, the likelihood of collecting income and our ability to
sell the  properties.  As of  December  31,  2005,  we believe  that the amounts
reported are fairly stated and realizable.

Commitments, Contingencies and Off Balance Sheet Arrangements
-------------------------------------------------------------

We  have no  unconsolidated  subsidiaries,  special  purpose  off-balance  sheet
financing entities, or other off-balance sheet arrangements.


                                       28




The  following  table  reflects our maximum  exposure and carrying  amount as of
December 31, 2005, for guarantees we have entered into:




                                    Maximum
                                    Exposure         Carrying
                                 (In thousands)       Amount
                                 --------------      --------
                                                
FNMA loan program (1)                $3,187           $   --
                                     ------           ------

                                     $3,187           $   --
                                     ======           ======



(1)  These indemnification  agreements relate to a program we initiated and have
     since  discontinued.  We believe the risk of any cost  associated  with the
     indemnity agreement is minimal.

The maximum  exposure  amount is not indicative of any expected losses under the
guarantees.  For  full  description  of  these  guarantees,  see  Note 16 to the
consolidated financial statements.

Contractual Obligations
-----------------------

In conducting business, we enter into various contractual  obligations.  Details
of these  obligations,  including  expected  settlement  periods,  are contained
below.




                                                                Payments Due by Period
                                                                    (In thousands)
                                           ---------------------------------------------------------------
                                                        Less than                                More than
                                             Total       1 Year     1 - 3 Years   3 - 5 Years     5 Years
                                           --------     ---------   -----------   -----------    ---------
                                                                                  
Debt:
Lines of credit:
  Repurchase facilities                    $209,101     $209,101     $     --      $     --      $     --
  Warehouse facility                          4,070        4,070           --            --            --
Mortgage loan on real estate owned (1)       40,487          497        1,182         1,330        37,478
Preferred shares of subsidiary
  (subject to mandatory repurchase)          25,000           --           --            --        25,000
Mortgage loan commitment with related
   party (see Note 14)                       26,000       26,000           --            --            --
Standby and forward loan commitments          6,061        5,445          616            --            --
                                           --------     --------     --------      --------      --------

Total                                      $310,719     $245,113     $  1,798      $  1,330      $ 62,478
                                           ========     ========     ========      ========      ========



(1) Represents a first  mortgage on  properties we report as Real Estate Owned -
    Held and Used (Concord  Portfolio) as a sale of the  properties did not meet
    the  criteria  for sale  recognition  in  accordance  with  GAAP.  The first
    mortgage loan is  non-recourse  with respect to us, the debt service is paid
    from the cash flows of the properties and we will not be required to satisfy
    the obligation. (See Note 6 to the consolidated financial statements).

Recently Issued Accounting Standards
------------------------------------

In December  2004,  the  Financial  Accounting  Standards  Board issued SFAS No.
123(R),  SHARE-BASED PAYMENT. As we already follow the fair value provisions set
forth in SFAS No. 123, this  statement is expected to have an immaterial  impact
on our financial statements.

There are no other new pending accounting  pronouncements  which we are required
to adopt that  would have a  significant  impact on our  consolidated  financial
statements.

Inflation
---------

Inflation  did not  have a  material  effect  on our  results  for  the  periods
presented.


                                       29




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates and
equity prices.  The primary market risk to which we are exposed is interest rate
risk, which is highly sensitive to many factors, including governmental monetary
and  tax   policies,   domestic  and   international   economic  and   political
considerations and other factors beyond the control of our company.

INTEREST RATE RISK

Interest  rate  fluctuations  can  adversely  affect our income in many ways and
present a variety of risks,  including the risk of mismatch between asset yields
and borrowing rates.

Our operating  results  depend in large part on  differences  between the income
from our assets (net of credit losses) and our borrowing costs.  Although we are
increasing our  origination of variable rate loans,  most of our assets generate
fixed  returns and have terms in excess of five years.  We fund the  origination
and acquisition of a significant  portion of these assets with borrowings  which
have variable  interest  rates that reset  relatively  rapidly,  such as weekly,
monthly or  quarterly.  In most cases,  the income from assets will respond more
slowly to interest rate  fluctuations  than the cost of  borrowings,  creating a
mismatch  between asset yields and  borrowing  rates.  Consequently,  changes in
interest rates,  particularly  short-term  interest rates, may influence our net
income.  Our borrowings under repurchase and warehouse  agreements bear interest
at rates that fluctuate with LIBOR.

Various  financial  vehicles  exist which would allow our management to mitigate
the impact of interest rate fluctuations on our cash flows and earnings.  During
March 2003, upon our analysis of the interest rate environment and the costs and
risks of such  strategies,  we entered  into an  interest  rate swap in order to
hedge  against  increases  in the  floating  interest  rate  on  our  repurchase
facilities.  The swap is a  five-year  agreement  with Bank of  America  ("BOA")
whereby  we pay BOA a fixed  3.48% on a  notional  amount of $30.0  million.  In
return,  BOA pays us a floating rate  equivalent to the 30-day LIBOR rate on the
same notional  amount.  A possible risk of such swap  agreements is the possible
inability of BOA to meet the terms of the contracts with us;  however,  there is
no current indication of such an inability.

Based on the $208.2  million  unhedged  portion of $238.2  million of borrowings
outstanding  at December  31, 2005, a 1% change in LIBOR would impact our annual
net income and cash flows by approximately $2.1 million. However, as some of the
interest income from our loans outstanding at December 31, 2005 is also based on
LIBOR,  a 1%  increase in LIBOR  would  increase  our annual net income and cash
flows from such loans by approximately $379,000. The net effect of a 1% increase
in LIBOR  would  therefore  result in a  reduction  of our  annual net income by
approximately $1.7 million. In addition,  an increase in LIBOR could also impede
the  collections  of interest on our variable rate loans,  as there might not be
sufficient  cash  flow at the  properties  to pay the  increased  debt  service.
Because the value of our debt  securities  fluctuates  with  changes in interest
rates, rate fluctuations will also affect the market value of our net assets.


                                       30




                   MANAGEMENT'S REPORT ON THE EFFECTIVENESS OF
                    INTERNAL CONTROL OVER FINANCIAL REPORTING


The management of American Mortgage Acceptance Company and its subsidiaries (the
"Company") is responsible for  establishing  and maintaining  adequate  internal
control over financial  reporting.  Our internal  control system was designed to
provide  reasonable  assurance to our management and Board of Trustees regarding
the preparation and fair presentation of published financial statements.

All  internal  control  systems,  no matter  how well  designed,  have  inherent
limitations.  Therefore,  even those  systems  determined  to be  effective  can
provide  only   reasonable   assurance  with  respect  to  financial   statement
preparation and presentation.

American Mortgage  Acceptance Company  management  assessed the effectiveness of
the Company's internal control over financial reporting as of December 31, 2005.
In  making  this  assessment,  management  used the  criteria  set  forth by the
Committee of Sponsoring  Organizations  of the Treadway  Commission  ("COSO") in
INTERNAL  CONTROL - INTEGRATED  FRAMEWORK.  Based upon our assessment we believe
that, as of December 31, 2005, our internal control over financial  reporting is
effective in accordance with those criteria.

Deloitte & Touche, LLP, our independent auditors, have issued an audit report on
our assessment of the Company's internal control over financial reporting, which
appears on page 32.


/s/ Jeff T. Blau                                         /s/ Alan P. Hirmes
----------------                                         ------------------
Jeff T. Blau                                             Alan P. Hirmes
Chief Executive Officer                                  Chief Financial Officer
March 9, 2006                                            March 9, 2006


                                       31




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Trustees
And Shareholders of
American Mortgage Acceptance Company
New York, New York


We  have  audited   management's   assessment,   included  in  the  accompanying
"Management's  Report on the  Effectiveness  Internal  Controls  over  Financial
Reporting",  that American  Mortgage  Acceptance  Company and subsidiaries  (the
"Company")  maintained effective internal control over financial reporting as of
December   31,   2005,   based  on  the   criteria   established   in  "INTERNAL
CONTROL--INTEGRATED   FRAMEWORK"   issued  by  the   Committee   of   Sponsoring
Organizations  of  the  Treadway   Commission.   The  Company's   management  is
responsible for maintaining  effective internal control over financial reporting
and for its assessment of the  effectiveness  of internal control over financial
reporting.   Our  responsibility  is  to  express  an  opinion  on  management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinions.

A company's internal control over financial  reporting is a process designed by,
or under the  supervision  of, the company's  principal  executive and principal
financial officers, or persons performing similar functions, and effected by the
company's  board  of  trustees,  management,  and  other  personnel  to  provide
reasonable  assurance  regarding the reliability of financial  reporting and the
preparation  of financial  statements for external  purposes in accordance  with
generally  accepted  accounting  principles.  A company's  internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because  of  the  inherent   limitations  of  internal  control  over  financial
reporting,  including  the  possibility  of  collusion  or  improper  management
override of controls,  material  misstatements  due to error or fraud may not be
prevented or detected on a timely basis. Also,  projections of any evaluation of
the  effectiveness  of the internal  control over financial  reporting to future
periods are subject to the risk that the controls may become inadequate  because
of changes in conditions,  or that the degree of compliance with the policies or
procedures may deteriorate.

In our opinion,  management's  assessment that the Company maintained  effective
internal  control over  financial  reporting as of December 31, 2005,  is fairly
stated, in all material respects, based on the criteria established in "INTERNAL
CONTROL--INTEGRATED   FRAMEWORK"   issued  by  the   Committee   of   Sponsoring
Organizations  of the  Treadway  Commission.  Also in our  opinion,  the Company
maintained, in all material respects,  effective internal control over financial
reporting  as of  December  31,  2005,  based  on the  criteria  established  in
"INTERNAL  CONTROL--INTEGRATED  FRAMEWORK" issued by the Committee of Sponsoring
Organizations of the Treadway Commission.


                                       32




We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the consolidated balance sheets as
of December 31, 2005 and 2004 and the related consolidated statements of income,
shareholders'  equity and cash flows for the years ended  December  31, 2005 and
2004 of the Company and our report dated March 9, 2006  expressed an unqualified
opinion on those financial statements.


/s/ DELOITTE & TOUCHE LLP
New York, New York
March 9, 2006


                                       33




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.




                                                                                       Page
(a) 1.   Financial Statements                                                        --------
         --------------------
                                                                                  
         Report of Independent Registered Public Accounting Firm                        35

         Consolidated Balance Sheets as of December 31, 2005 and 2004                   36

         Consolidated Statements of Income for the years ended December 31,
           2005, 2004 and 2003                                                          37

         Consolidated Statements of Shareholders' Equity for the years ended
           December 31, 2005, 2004 and 2003                                             38

         Consolidated Statements of Cash Flows for the years ended December 31,
           2005, 2004 and 2003                                                          39

         Notes to Consolidated Financial Statements                                     41



(a) 2.   Financial Statement Schedules
         -----------------------------

         All  schedules  have been  omitted  because  they are not  required  or
         because  the  required   information  is  contained  in  the  financial
         statements or notes thereto.


                                       34




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Trustees
And Shareholders of
American Mortgage Acceptance Company
New York, New York


We have  audited  the  accompanying  consolidated  balance  sheets  of  American
Mortgage  Acceptance Company and subsidiaries (the "Company") as of December 31,
2005 and 2004, and the related consolidated statements of income,  shareholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2005.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to  express  an  opinion  on the  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). 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 American  Mortgage  Acceptance
Company and  subsidiaries  as of December 31, 2005 and 2004,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2005, in conformity  with  accounting  principles  generally
accepted in the United States of America.

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the effectiveness of the Company's
internal control over financial  reporting as of December 31, 2005, based on the
criteria  established in INTERNAL  CONTROL--INTEGRATED  FRAMEWORK  issued by the
Committee of Sponsoring  Organizations of the Treadway Commission and our report
dated March 9, 2006 expressed an unqualified opinion on management's  assessment
of the effectiveness of the Company's internal control over financial  reporting
and an  unqualified  opinion  on the  effectiveness  of the  Company's  internal
control over financial reporting.


DELOITTE & TOUCHE LLP
New York, New York
March 9, 2006


                                       35




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (In thousands, except per share amounts)



                                     ASSETS




                                                                                December 31,
                                                                         -------------------------
                                                                            2005           2004
                                                                         ----------     ----------
                                                                                  
Cash and cash equivalents                                                $  11,214      $   2,674
 Investments
   Debt securities                                                         222,723        194,587
   Mortgage loans, net                                                      51,981         21,376
   Notes receivable, net                                                    13,725         23,111
   Revenue bonds                                                             6,626          6,672
   ARCap                                                                    20,678         20,240
   Real estate owned - held and used, net                                   68,793         78,135
Accounts receivable                                                          3,079          1,925
Other assets                                                                 1,904            313
                                                                         ---------      ---------

Total assets                                                             $ 400,723      $ 349,033
                                                                         =========      =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Repurchase facilities payable                                          $ 209,101      $ 157,633
  Warehouse facility payable                                                 4,070          3,827
  Mortgages payable on real estate owned                                    40,487         56,993
  Preferred  shares  of  subsidiary (subject  to  mandatory
   repurchase)                                                              25,000             --
  Line of credit - related party                                                --          4,600
  Accounts payable and accrued expenses                                      1,599          1,344
  Due to Advisor and affiliates                                              2,961            770
  Distributions payable                                                      3,322          3,334
                                                                         ---------      ---------

Total liabilities                                                          286,540        228,501
                                                                         ---------      ---------

Commitments and contingencies

Shareholders' equity:
  Shares  of  beneficial  interest;  $.10 par  value;  25,000
   shares  authorized;  8,719 issued and 8,304 outstanding in
   2005 and 8,716 issued and 8,337 outstanding in 2004                         871            871
  Treasury  shares of beneficial  interest at par; 415 shares
   in 2005 and 379 shares in 2004                                              (42)           (38)
  Additional paid-in capital                                               126,357        126,800
  Share - based compensation                                                   (20)           (16)
  Distributions in excess of net income                                    (17,766)       (17,202)
  Accumulated other comprehensive income                                     4,783         10,117
                                                                         ---------      ---------

Total shareholders' equity                                                 114,183        120,532
                                                                         ---------      ---------

Total liabilities and shareholders' equity                               $ 400,723      $ 349,033
                                                                         =========      =========



          See accompanying notes to consolidated financial statements.


                                       36




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                     (In thousands except per share amounts)




                                                                                      Years Ended December 31,
                                                                                -----------------------------------
                                                                                  2005          2004         2003
                                                                                --------      --------     --------
                                                                                                  
Revenues:
  Interest income:
   Debt securities                                                              $ 12,823      $  9,734     $  8,765
   Mortgage loans                                                                  5,425         1,808        2,597
   Notes receivable                                                                1,563         2,546        3,166
   Revenue bonds                                                                     581           633          151
   Temporary investments                                                             233            42           55
  Rental income of real estate owned - held and used                               8,983         6,914        2,067
  Fees related to prepayment of investments                                        5,581           181         --
  Other revenues                                                                     954           153          165
                                                                                --------      --------     --------
   Total revenues                                                                 36,143        22,011       16,966
                                                                                --------      --------     --------

Expenses:
  Interest                                                                         7,057         4,017        2,548
  Interest - distributions to preferred shareholders of subsidiary (subject
   to mandatory repurchase)                                                        1,452          --           --
  Mortgage interest for real estate owed - held and used                           2,407          --           --
  Property operations of real estate owned - held and used                         3,987         2,871        1,456
  General and administrative                                                       1,956         1,740          917
  Fees to Advisor                                                                  4,347         1,956        1,812
  Depreciation                                                                     2,389         2,143         --
  Amortization and other                                                             294           411          376
                                                                                --------      --------     --------
   Total expenses                                                                 23,889        13,138        7,109
                                                                                --------      --------     --------

Other income:
  Equity in earnings of ARCap                                                      2,837         2,400        2,400
  Net gain (loss) on sale or repayment of assets                                     183          --           (373)
  Other non-operating income (expense)                                               (39)         --           --
                                                                                --------      --------     --------
  Total other income                                                               2,981         2,400        2,027
                                                                                --------      --------     --------

  Net income                                                                    $ 15,235      $ 11,273     $ 11,884
                                                                                ========      ========     ========

  Net income per share (basic and diluted)                                      $   1.83      $   1.35     $   1.52
                                                                                ========      ========     ========

  Dividends per share                                                           $   1.90      $   1.60     $   1.60
                                                                                ========      ========     ========

  Weighted average shares outstanding
   Basic                                                                           8,316         8,336        7,803
                                                                                ========      ========     ========
   Diluted                                                                         8,317         8,343        7,815
                                                                                ========      ========     ========



          See accompanying notes to consolidated financial statements.


                                       37




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003




                                                                                            Treasury Shares of
                                                       Shares of Beneficial Interest        Beneficial Interest
                                                       -----------------------------     ------------------------
                                                         Shares             Amount         Shares        Amount
                                                       ----------         ----------     ----------    ----------

                                                                                             
Balance at January 1, 2003                                6,739             $  674           (375)       $  (38)

Net income
Other comprehensive income:
  Net unrealized loss on interest rate derivatives
  Unrealized holding loss on investments
   Plus: reclassification adjustment

Total other comprehensive loss

Comprehensive income


Issuance of share based compensation
Amortization of share option costs
Common shares issued                                      1,974                197

Distributions
                                                       ----------------------------------------------------------

Balance at December 31, 2003                              8,713                871           (375)          (38)

Net income
Other comprehensive income:
  Net unrealized gain on interest rate derivatives
  Unrealized holding gain on investments
Plus: reclassification adjustment

Total other comprehensive income

Comprehensive income


Issuance of share based compensation                          3
Amortization of share option costs
Purchase of treasury shares                                                                    (4)

Distributions
                                                       ----------------------------------------------------------

Balance at December 31, 2004                              8,716                871           (379)          (38)

Net income
Other comprehensive income:
  Net unrealized gain on interest rate derivatives
  Unrealized holding loss on investments
  Less: reclassification adjustment

Total other comprehensive income

Comprehensive income

Issuance of share based compensation                          3
Amortization of share option costs
Purchase of treasury shares                                                                   (36)           (4)

Distributions
                                                       ----------------------------------------------------------

Balance at December 31, 2005                              8,719             $  871           (415)       $  (42)
                                                       ==========================================================





                                                       Additional                      Distributions
                                                         Paid-in       Share Based       in Excess
                                                         Capital      Compensation     of Net Income
                                                       -----------    ------------     -------------

                                                                               
Balance at January 1, 2003                              $ 99,470        $     --        $  (14,471)

Net income                                                                                  11,884
Other comprehensive income:
  Net unrealized loss on interest rate derivatives
  Unrealized holding loss on investments
   Plus: reclassification adjustment

Total other comprehensive loss

Comprehensive income


Issuance of share based compensation                          51             (51)
Amortization of share option costs                                            22
Common shares issued                                      27,258

Distributions                                                                              (12,551)
                                                       ---------------------------------------------

Balance at December 31, 2003                             126,779             (29)          (15,138)

Net income                                                                                  11,273
Other comprehensive income:
  Net unrealized gain on interest rate derivatives
  Unrealized holding gain on investments
Plus: reclassification adjustment

Total other comprehensive income

Comprehensive income


Issuance of share based compensation                          74             (34)
Amortization of share option costs                                            47
Purchase of treasury shares                                  (53)

Distributions                                                                              (13,337)
                                                       ---------------------------------------------

Balance at December 31, 2004                             126,800             (16)          (17,202)

Net income                                                                                  15,235
Other comprehensive income:
  Net unrealized gain on interest rate derivatives
  Unrealized holding loss on investments
  Less: reclassification adjustment

Total other comprehensive income

Comprehensive income

Issuance of share based compensation                          47              (2)
Amortization of share option costs                                            (2)
Purchase of treasury shares                                 (490)

Distributions                                                                              (15,799)
                                                       ---------------------------------------------

Balance at December 31, 2005                            $126,357        $    (20)       $  (17,766)
                                                       =============================================





                                                                         Accumulated Other
                                                       Comprehensive       Comprehensive
                                                           Income              Income            Total
                                                       -------------     -----------------     ---------

                                                                                      
Balance at January 1, 2003                                                    $  8,703         $  94,338

Net income                                               $  11,884                                11,884
Other comprehensive income:
  Net unrealized loss on interest rate derivatives            (278)
  Unrealized holding loss on investments                      (348)
   Plus: reclassification adjustment                           373
                                                         ---------
Total other comprehensive loss                                (253)               (253)             (253)
                                                         ---------
Comprehensive income                                     $  11,631
                                                         =========

Issuance of share based compensation
Amortization of share option costs                                                                    22
Common shares issued                                                                              27,455

Distributions                                                                                    (12,551)
                                                       -------------------------------------------------

Balance at December 31, 2003                                                     8,450           120,895

Net income                                               $  11,273                                11,273
Other comprehensive income:
  Net unrealized gain on interest rate derivatives             407
  Unrealized holding gain on investments                     1,219
Plus: reclassification adjustment                               41
                                                         ---------
Total other comprehensive income                             1,667               1,667             1,667
                                                         ---------
Comprehensive income                                     $  12,940
                                                         =========

Issuance of share based compensation                                                                  40
Amortization of share option costs                                                                    47
Purchase of treasury shares                                                                          (53)

Distributions                                                                                    (13,337)
                                                       -------------------------------------------------

Balance at December 31, 2004                                                    10,117           120,532

Net income                                               $  15,235                                15,235
Other comprehensive income:
  Net unrealized gain on interest rate derivatives             679
  Unrealized holding loss on investments                    (2,916)
  Less: reclassification adjustment                         (3,097)
                                                         ---------
Total other comprehensive income                            (5,334)             (5,334)           (5,334)
                                                         ---------
Comprehensive income                                     $   9,901
                                                         =========
Issuance of share based compensation                                                                  45
Amortization of share option costs                                                                    (2)
Purchase of treasury shares                                                                         (494)

Distributions                                                                                    (15,799)
                                                                         -------------------------------

Balance at December 31, 2005                                                  $  4,783         $ 114,183
                                                                         ===============================




          See accompanying notes to consolidated financial statements.


                                       38




             AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)




                                                               Years Ended December 31,
                                                       ---------------------------------------
                                                          2005           2004           2003
                                                       ---------      ---------      ---------
                                                                            
Cash flows from operating activities:
   Net income                                          $  15,235      $  11,273      $  11,884

   Adjustments to reconcile net income to net cash
     provided by operating activities:
   Depreciation expense                                    2,389          2,143             --
   Equity in income of unconsolidated entities            (2,837)        (2,400)        (2,400)
   Net (gain) loss on sale or repayment of assets           (183)            --            373
   Amortization and accretion                                135            220           (169)
   Other non-cash expense                                     45             40             --
   Distributions received from equity investees            2,400          2,400          2,400
   Changes in operating assets and liabilities:
     Accounts receivable                                  (1,154)           273           (936)
     Other assets                                           (705)            64              8
     Due to Advisor and affiliates                         2,191            179           (100)
     Accounts payable and accrued expenses                   403            271            278
     Accrued interest payable                                117           (431)           639
                                                       ---------      ---------      ---------
Net cash provided by operating activities                 18,036         14,032         11,977
                                                       ---------      ---------      ---------

Cash flows from investing activities:
   Investment in debt securities                         (64,173)       (43,943)       (62,290)
   Principal repayments of debt securities                29,627         17,787          8,539
   Funding and purchase of mortgage loans                (42,246)        (8,802)        (4,053)
   Repayment of mortgage loans                            11,853          1,306          9,463
   Purchase of mortgage loans on real estate owned       (17,150)            --        (46,627)
   Proceeds from sale of real estate owned                 7,474             --             --
   Principal repayment on real estate owned                  480             --             --
   Funding of notes receivable                              (472)        (8,308)       (23,906)
   Repayment of notes receivable                           9,883         21,286          5,746
   Principal repayment of revenue bonds                      212            891             --
   Purchase of revenue bonds                                  --             --         (7,586)
   Additions to real estate owned                             --         (2,809)        (3,166)
   Net proceeds from sale of land                             --             --             37
                                                       ---------      ---------      ---------
Net cash used in investing activities                    (64,512)       (22,592)      (123,843)
                                                       ---------      ---------      ---------
                                                                                    (continued)




                                       39




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (continued)




                                                                                Years Ended December 31,
                                                                        ---------------------------------------
                                                                           2005           2004           2003
                                                                        ---------      ---------      ---------
                                                                                             
Cash flows from financing activities:
   Proceeds from repurchase facilities                                    104,418         27,613        115,818
   Repayments of repurchase facilities                                    (52,950)       (19,509)       (54,169)
   Proceeds from warehouse facility                                           243          1,245         26,147
   Repayments of warehouse facility                                            --        (32,353)            --
   Proceeds from line of credit - related party                            32,561         15,361             --
   Repayments of line of credit - related party                           (37,161)       (10,761)            --
   Proceeds from refinancing of real estate owned                              --         41,000             --
   Deferred financing costs                                                  (802)            --             --
   Distributions paid to shareholders                                     (15,799)       (13,337)       (11,761)
   Treasury stock purchases                                                  (494)           (53)            --
   Issuance of common shares                                                   --             --         27,455
   Issuance of preferred shares of subsidiary                              25,000             --             --
                                                                        ---------      ---------      ---------

Net cash provided by financing activities                                  55,016          9,206        103,490
                                                                        ---------      ---------      ---------

Net increase (decrease) in cash and cash equivalents                        8,540            646         (8,376)

Cash and cash equivalents at the beginning of the year                      2,674          2,028         10,404
                                                                        ---------      ---------      ---------

Cash and cash equivalents at the end of the year                        $  11,214      $   2,674      $   2,028
                                                                        =========      =========      =========

Supplemental information:

   Interest paid (including distributions to preferred shareholders
     of subsidiary (subject to mandatory repurchase))                   $   8,383      $   3,822      $   2,546
                                                                        =========      =========      =========

Non-cash investing and financing activities:

   Conversion of mortgage loans, notes receivable, and assumption
     of debt on real estate owned                                       $      --      $      --      $  72,748
                                                                        =========      =========      =========



          See accompanying notes to consolidated financial statements.


                                       40




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)   Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of American
Mortgage Acceptance Company and its wholly owned subsidiaries.  All intercompany
accounts  and  transactions  have  been  eliminated  in  consolidation.   Unless
otherwise indicated, we herein refer to American Mortgage Acceptance Company and
its  subsidiaries  as "AMAC,"  "we",  "us",  "our",  and "our  Company".  We are
externally  managed by Related AMI Associates,  Inc., which acts as our Advisor.
We operate in one business segment.

Effective  October 2003, we dissolved one  subsidiary  due to the  assignment of
certain  obligations  under the Fannie Mae loan program to  CharterMac  Mortgage
Capital Corp. ("CMC") (see Note 16). We had formed the subsidiary to manage this
program.

Our  consolidated  financial  statements  are  prepared on the accrual  basis of
accounting in accordance with accounting  principles  generally  accepted in the
United States of America  ("GAAP").  The preparation of financial  statements in
conformity with GAAP requires us to make estimates and  assumptions  that affect
the reported  amounts of assets and liabilities and the disclosure of contingent
assets and  liabilities  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.

Certain  amounts from prior years have been  reclassified to conform to the 2005
presentation,  in particular,  the  reclassification of results of operations of
our Real Estate Owned - Held and Used portfolio.

b)   Revenue Recognition

We derive our revenues from a variety of sources as follows:

     o    INTEREST INCOME ON DEBT SECURITIES - We recognize interest on GNMA and
          FNMA  certificates  on the accrual  basis as it becomes due.  Interest
          income also  includes  the  amortization  or accretion of premiums and
          discounts  arising at the purchase  date,  using the  effective  yield
          method.

     o    INTEREST  INCOME  FROM  MORTGAGE  LOANS  AND  NOTES  RECEIVABLE  -  We
          recognize  interest  on  mortgage  loans and notes  receivable  on the
          accrual basis as it becomes due. We amortize deferred loan origination
          costs  and fees on a  straight  line  basis,  which  approximates  the
          interest method, over the life of the applicable loan as an adjustment
          to interest  income.  Certain  mortgage loans contain  provisions that
          allow us to participate  in a percentage of the underlying  property's
          excess cash flows from  operations and excess  proceeds from a sale or
          refinancing.  This income is  recognized  on the  accrual  basis as it
          becomes due.

     o    INTEREST  INCOME ON REVENUE BONDS - Interest income from revenue bonds
          is recognized on the accrual basis as it becomes due.

     o    INTEREST  INCOME ON  TEMPORARY  INVESTMENTS  -  Interest  income  from
          temporary   investments,   such  as  cash  in  banks  and   short-term
          instruments, is recognized on the accrual basis as it becomes due.

     o    INCOME  FROM  REAL  ESTATE  OWNED  - We  recognize  rental  income  on
          properties classified as Held and Used as earned.

     o    OTHER REVENUES

          o    STANDBY  LOAN  COMMITMENT  FEES - We  receive  fees  for  issuing
               standby  loan  commitments.  If we do  not  expect  to  fund  the
               commitment,  we  recognize  the fee ratably  over the  commitment
               period.  If we  determine  that it is probable  that a commitment
               will be  exercised,  we defer the fee and, if the  commitment  is


                                       41




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



               exercised, amortize it over the life of the loan as an adjustment
               to interest income;  if the commitment  expires  unexercised,  we
               recognize it upon expiration.

          o    STABILIZATION GUARANTEE AND LOAN ADMINISTRATION FEES - We receive
               fees from borrowers for guaranteeing  construction  loans made by
               third-party   lenders   for  the  period   between   construction
               completion  and funding of the  permanent  loan. We receive these
               fees in advance and amortize them over the guarantee periods.  We
               also receive loan  administration fees on these guaranteed loans,
               on a monthly  basis  during the  guarantee  period.  We recognize
               these fees when due.

          o    FNMA   LOAN   GUARANTEE   FEES   -  We   receive   monthly   loss
               sharing/guarantee fees related to the FNMA loan program (see Note
               16) and recognize them when due.

          o    PREPAYMENT  FEES - We may receive fees from  borrowers that repay
               loans earlier than their maturity  dates. We recognize these fees
               as earned.

c)   Investments in Debt and Debt Securities

We account  for our  investments  in debt  securities  pursuant to SFAS No. 115,
ACCOUNTING  FOR CERTAIN  INVESTMENTS  IN DEBT AND EQUITY  SECURITIES  ("SFAS No.
115").  For  investments  classified as available for sale, we record changes in
fair  value in other  comprehensive  income  unless we  consider  an  investment
impaired,  or a decline in fair value to be other than temporary (see IMPAIRMENT
below).

          1.   Debt Securities

               We classify  our  investments  in GNMA and FNMA  certificates  as
               available for sale debt  securities  and use  third-party  quoted
               market prices as our primary source of valuation.

          2.   Mortgage Loans and Notes Receivable

               We  classify   these   investments   as  held  to  maturity  and,
               accordingly,  carry  them at  cost,  including  unamortized  loan
               origination costs and fees.

          3.   Revenue Bonds

               We classify our  investments  in revenue  bonds as available  for
               sale  debt  securities.  Because  revenue  bonds  have a  limited
               market, we estimate fair value for each bond as the present value
               of its expected cash flows using a discount  rate for  comparable
               investments.

          4.   Impairment

               For investments in mortgage loans and notes receivable, we follow
               the provisions of Statement of Financial Accounting Standards No.
               114,  ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN ("SFAS No.
               114").  Under SFAS No.  114, a loan is  impaired  when,  based on
               current  information  and events,  it is probable that a creditor
               will be  unable to  collect  all  amounts  due  according  to the
               contractual  terms of the loan  agreement.  SFAS No. 114 requires
               lenders to measure impaired loans based on:

               (i)  the present value of expected  future cash flows  discounted
                    at the loans' effective interest rate;
               (ii) the loan's observable market price; or
               (iii)the   fair   value  of  the   collateral   if  the  loan  is
                    collateral-dependent.

               We  periodically  evaluate our  portfolio  of mortgage  loans and
               notes receivable for possible impairment to establish appropriate
               loan loss  reserves,  if  necessary.  If, in the  judgment of our
               Advisor,  we  determine  that it is  probable  that  we will  not
               receive all contractually required payments when they are due, we
               deem the loan or note impaired and establish a loan loss reserve.


                                       42




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



               For any  investments  classified as available for sale, a decline
               in market  value below cost that we deem other than  temporary is
               charged to earnings.  If, in the  judgment of our Advisor,  it is
               determined  probable  that we will not  receive  all  contractual
               payments  required  when due, the bond is deemed  impaired and is
               written down to its then estimated fair value, with the amount of
               the write-down accounted for as a realized loss.

          5.   Gain or Loss on Sale

               Realized  gains and losses on securities are included in earnings
               and  are  recorded  on  the  trade  date  and  calculated  as the
               difference  between the amount of cash  received and the carrying
               cost  of  the  specific  investment,  including  any  unamortized
               discounts, premiums, origination costs and fees.


          6.   Concentration

               As of December 31, 2005,  36.7% of our portfolio was comprised of
               investments in mortgage loans,  notes  receivable,  revenue bonds
               and real  estate  owned.  Of this  group of  assets,  62.4%  were
               secured by properties in Texas. We had no borrowers exceeding 10%
               of  our  portfolio  of  investments  in  mortgage  loans,   notes
               receivable  and  revenue  bonds other than John Loder and Richard
               Nathan who are the creditors of 11.4% and 10.5%, respectively, in
               these categories.

d)   Investment in ARCap

We account for our investment in ARCap Investors, LLC ("ARCap") using the equity
method pursuant to Accounting Principles Board Opinion No. 18, THE EQUITY METHOD
OF ACCOUNTING  FOR  INVESTMENTS IN COMMON STOCK ("APB No. 18") as interpreted by
AICPA  Statement of Position  78-9,  ACCOUNTING  FOR  INVESTMENTS IN REAL ESTATE
VENTURES,  EITF Issue D-46,  ACCOUNTING FOR LIMITED PARTNERSHIP  INVESTMENTS and
EITF 03-16, ACCOUNTING FOR INVESTMENTS IN LIMITED LIABILITY COMPANIES.

With  respect to our  preferred  shares,  our equity in the earnings of ARCap is
accrued at the dividend rate earned for the applicable period,  which equals the
income allocated to us under ARCap's operating agreement,  unless ARCap does not
have earnings and cash flows adequate to meet this dividend requirement.

e)   Real Estate Owned

Real  estate  owned  consists  of  properties  of  which we took  possession  by
exercising our rights under  subordinated  promissory notes and other documents.
In some cases,  we also  purchased the first  mortgage  loans on the  properties
before foreclosing on the real estate  collateral.  We recorded these properties
at the lower of fair value of the real estate, less estimated disposal costs, or
the carrying amount of the foreclosed  loan. The  determination of fair value of
the real estate is based on independent  appraisals.  These properties fall into
three classifications:

     o    Held for Sale - properties for which we are actively seeking a buyer
     o    Held and Used - properties for which we are actively  seeking a buyer,
          but have held for longer than one year.
     o    Subject to Sales  Contracts -  properties  for which the buyer has not
          contributed  sufficient equity to qualify for sale treatment  pursuant
          to Statement of Financial  Accounting Standards No. 66, ACCOUNTING FOR
          SALES OF REAL ESTATE ("SFAS No. 66").

When  the  foreclosure  process  is  complete  and we own  the  property,  it is
classified as Held for Sale. As it is our intent to sell those properties in the
near  term,  we do not  initially  depreciate  the  assets.  We  apply  the same
accounting  for  properties  classified  as  Subject  to  Sales  Contracts.  For
properties later  reclassified as Held and Used, if full sale recognition is not
achieved  within one year,  we record  depreciation  on the asset,  including an
initial retroactive adjustment for the entire period we owned the property.


                                       43




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Our  portfolio  of real estate  owned is  periodically  evaluated  for  possible
impairment. If, in the judgment of our Advisor, we determine that the property's
fair value is below its carrying value,  we will deem the property  impaired and
it will be written down to its then estimated fair value, with the amount of the
write-down accounted for as a realized loss.

See Note 6 for information regarding our real estate owned.

f)   Cash and Cash Equivalents

Cash and cash  equivalents  include cash in banks and temporary  investments  in
short-term  instruments with original maturity dates equal to or less than three
months.

g)   Loan Origination Costs and Fees

Acquisition fees and other direct expenses incurred for activities  performed to
originate  mortgage  loans are  capitalized  and are included in  Investment  in
Mortgage Loans,  net of any fees received from borrowers for loan  originations.
They are amortized on a straight-line basis over the period of the loans.

h)   Repurchase Facilities

We finance our investments in debt securities using repurchase facilities, under
which  we sell  the  certificates  to four  counterparties  under  an  agreement
requiring us to repurchase them for a fixed price on a fixed date,  generally 30
days from the sale date.  We account for these  transactions  as  collateralized
borrowings;  accordingly,  the  securities  remain on our  consolidated  balance
sheets with the proceeds from the sales recorded as debt. The difference between
the sale proceeds and the fixed repurchase price is recorded as interest expense
ratably over the period between the sale and repurchase dates.

i)   Subsidiary Equity

We account  for our  preferred  securities  under SFAS No. 150,  ACCOUNTING  FOR
CERTAIN  FINANCIAL  INSTRUMENTS  WITH  CHARACTERISTICS  OF BOTH  LIABILITIES AND
EQUITY,  which requires that  mandatorily  redeemable  financial  instruments be
classified as  liabilities  in the  consolidated  financial  statements  and the
payments or accruals of dividends and other amounts to be paid to the holders of
these securities be reported as interest costs. The fair value of the securities
approximates  the  liquidation  amount due to the variable  rate nature of their
dividends.

j)   Stock Options

We account for stock options we issue under the fair value based method pursuant
to  Statement  of  Financial   Accounting  Standards  No.  123,  ACCOUNTING  FOR
STOCK-BASED  COMPENSATION  ("SFAS No. 123").  We estimate the fair value of each
option grant using the Black-Scholes option-pricing model.

k)   Interest Rate Derivative

We account for our interest rate swap agreements under SFAS No. 133,  ACCOUNTING
FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES ("SFAS No. 133"). We entered
into one interest rate swap in 2003. At inception,  we designated this swap as a
cash  flow  hedge  on  the  variable  interest  payments  of our  floating  rate
financing.  Accordingly,  we record the swap at fair  market  value,  and record
changes in market value in other comprehensive income to the extent the hedge is
effective.  This hedge has been effective  through  December 31, 2005. We record
the net amounts receivable or payable under the swap agreement as a component of
interest expense.

In November 2005, we entered into a second swap intended to hedge the fair value
of a mortgage loan to hedge our risk that interest  rates do not affect the fair
value of one of our investments as we hold it before  securitization.  We do not
apply hedge accounting to this swap.  Accordingly,  we record any changes in the
fair value of this swap on our consolidated statements of income.


                                       44




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



l)   Fair Value of Financial Instruments

As described  above,  our debt  securities,  revenue  bonds,  and interest  rate
derivatives  are carried at estimated fair values.  We have  determined that the
fair value of our remaining financial instruments,  including mortgage loans and
cash and cash equivalents,  notes receivable, and secured borrowings approximate
their  carrying  values  at  December  31,  2005 and  2004.  The  fair  value of
investments  in  mortgage  loans,  revenue  bonds,  notes  receivable,  and debt
securities are based on actual market price quotes or by determining the present
value of the  projected  future cash flows  using  appropriate  discount  rates,
credit losses and prepayment  assumptions.  Other  financial  instruments  carry
interest rates which are deemed to approximate market rates.

m)   Income Taxes

We have qualified as a REIT under the Internal Revenue Code (the "Code"). A REIT
is  generally  not  subject  to federal  income tax on that  portion of its REIT
taxable income  ("Taxable  Income")  which is  distributed  to its  shareholders
provided that at least 90% of Taxable  Income is  distributed  and provided that
such income meets  certain  other  conditions.  Accordingly,  no  provision  for
federal  income taxes is  required.  We may be subject to state taxes in certain
jurisdictions.

n)   New Accounting Pronouncements

In December 2004, the FASB issued  Statement of Financial  Accounting  Standards
No. 123(R),  SHARE-BASED  PAYMENT,  which replaces SFAS No. 123 and which we are
required to adopt by the first quarter of 2006. As we have been  accounting  for
share-based  payments  following  the fair value  provisions of SFAS No. 123, we
expect our adoption of this standard will not be significant.

In March 2005, the FASB issued Financial  Interpretation  No. 47, ACCOUNTING FOR
CONDITIONAL  ASSET RETIREMENT  OBLIGATIONS--AN  INTERPRETATION OF FASB STATEMENT
NO. 143, which  specifies the accounting  treatment for  obligations  associated
with  the sale or  disposal  of an  asset  when  there  are  legal  requirements
attendant to such a disposition.

We adopted this  pronouncement in 2005, as required,  but there was no impact as
there  are  no  legal  obligations  associated  with  the  planned  sale  of any
properties in our Real Estate Owned portfolio.


                                       45




NOTE 2 - INVESTMENTS IN DEBT SECURITIES - AVAILABLE FOR SALE

Information  relating to our debt securities owned as of December 31, 2005 is as
follows:
(In thousands)




                                    Dates Purchased/                       Amortized
                      Certificate        Final            Stated            Cost at
Name                    Number        Payment Date     Interest Rate    December 31, 2005
-------------------   -----------   ----------------   -------------    -----------------
                                                               
GNMA CERTIFICATES

SunCoast Capital
  Group, Ltd.           G002412         6/23/97            7.000%          $     75
                                        4/20/27

Elmhurst Village         549391         6/28/01            7.745%                --
                                        1/15/42

Village at Marshfield    519281         3/11/02            7.475%            21,106
                                        1/15/42

Cantera Crossing         532663         3/28/02            6.500%             6,276
                                         6/1/29

Filmore Park             536740         3/28/02            6.700%             1,416
                                       10/15/42

Northbrooke              548972         5/24/02            7.080%            13,882
                                         8/1/43

Ellington Plaza          585494         7/26/02            6.835%            37,517
                                         6/1/44

Burlington               595515         11/1/02            5.900%             6,606
                                        4/15/31
FNMA DUS CERTIFICATES

Cambridge                385971         4/11/03            5.560%             3,564
                                         3/1/33

Bayforest                381974         4/21/03            7.430%             4,171
                                        10/1/28

Coventry Place           384920          5/9/03            6.480%               771
                                         3/1/32

Rancho de Cieto          385229         5/13/03            6.330%             2,522
                                         9/1/17

Elmwood Gardens          386113         5/15/03            5.350%             5,399
                                         5/1/33

30 West                  380751         5/27/03            6.080%             1,303
                                        10/1/16

Jackson Park             386139         5/30/03            5.150%             2,702
                                         6/1/18




                         Unrealized
                        Gain (Loss) at          Balance at       Interest income
Name                  December 31, 2005     December 31, 2005        in 2005
-------------------   -----------------     -----------------    ---------------
                                                           
GNMA CERTIFICATES

SunCoast Capital
  Group, Ltd.              $      2             $     77            $     6


Elmhurst Village                 --                   --               1,247


Village at Marshfield           392               21,498               1,426


Cantera Crossing                471                6,747                 418


Filmore Park                     77                1,493                  94


Northbrooke                   1,110               14,992                 971


Ellington Plaza               3,186               40,703               2,532


Burlington                      (18)               6,588                 385

FNMA DUS CERTIFICATES

Cambridge                       (50)               3,514                 191


Bayforest                       (81)               4,090                 251


Coventry Place                  (17)                 754                  43


Rancho de Cieto                 (55)               2,467                 123


Elmwood Gardens                (111)               5,288                 283


30 West                         (70)               1,233                  61


Jackson Park                    (36)               2,666                 137


                                                                  (continued)


                                       46




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - Continued



                                    Dates Purchased/                       Amortized
                      Certificate        Final            Stated            Cost at
Name                    Number        Payment Date     Interest Rate    December 31, 2005
-------------------   -----------   ----------------   -------------    -----------------
                                                               
Courtwood                386274         6/26/03            4.690%             1,713
                                         6/1/33

Sultana                  386259         6/30/03            4.650%             3,984
                                         6/1/23

Buena                    386273         6/30/03            4.825%             2,959
                                         6/1/33

Allegro                  386324         6/30/03            5.380%             2,509
                                         7/1/33

Westwood/Monterey        386421         9/15/03            5.090%             2,652
                                         8/1/33

Euclid                   386446         9/15/03            5.310%             2,316
                                         8/1/33

Edgewood                 386458         9/15/03            5.370%             2,299
                                         9/1/33

Bayou Pointe             387066         9/21/04            5.650%             1,686
                                         8/1/22

Pomono                   386995         9/21/04            6.220%             5,816
                                         7/1/34

Maple Street             387093         10/4/04            5.750%             1,475
                                        10/1/22

Seabreeze Co-op          387139        11/12/04            5.360%             1,932
                                        11/1/34

Orchard Street)          387158        11/22/04            5.480%                --
                                        11/1/22

Indiana Seniors          387171        12/15/04            5.380%             7,716
                                        12/1/29

Beach Grove              387114        12/21/04            5.620%             1,266
                                         9/1/34

York                     386631        12/29/04            5.490%            12,574
                                         8/1/33

Mountain Shadow          386756         1/12/05            5.480%             3,725
                                        12/1/28

Inn at Summit Ridge      385258         1/10/05            6.650%             1,541
                                         5/1/27

Sunset Pointe            386379         1/10/05            4.900%             4,883
                                         7/1/33

Tamarack                 387193         1/18/05            5.450%               600
                                         1/1/30




                         Unrealized
                        Gain (Loss) at          Balance at       Interest income
Name                  December 31, 2005     December 31, 2005        in 2005
-------------------   -----------------     -----------------    ---------------
                                                              
Courtwood                   (156)                1,557                  79


Sultana                     (240)                3,744                 186


Buena                       (250)                2,709                 138


Allegro                     (132)                2,377                 134


Westwood/Monterey             72                 2,724                 151


Euclid                        65                 2,381                 132


Edgewood                      63                 2,362                 132


Bayou Pointe                  (9)                1,677                  91


Pomono                       (99)                5,717                 333


Maple Street                  (4)                1,471                  79


Seabreeze Co-op              (29)                1,903                 106


Orchard Street)               --                    --                  30


Indiana Seniors             (168)                7,548                 406


Beach Grove                  (22)                1,244                  68


York                        (258)               12,316                 665


Mountain Shadow               13                 3,738                 200


Inn at Summit Ridge           47                 1,588                  92


Sunset Pointe                 (8)                4,875                 259


Tamarack                      (3)                  597                  31



                                                                (continued)


                                       47




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - Continued



                                    Dates Purchased/                       Amortized
                      Certificate        Final            Stated            Cost at
Name                    Number        Payment Date     Interest Rate    December 31, 2005
-------------------   -----------   ----------------   -------------    -----------------
                                                               
Wyndhurst                386641         2/28/05            5.800%             3,055
                                        12/1/33

Seward Park              386572         3/21/05            5.630%            20,168
                                        11/1/33

Plum Court               387374         4/25/05            5.600%             3,896
                                         5/1/23

FNMA 830083              830083         11/9/05            7.218%             2,054
                                         7/1/35

FNMA 254568              254568        11/10/05            6.799%             9,911
                                        11/1/32

FNMA 255366              255366        11/10/05            6.470%             2,801
                                         7/1/34

FNMA 254611              254611        11/10/05            6.823%             8,050
                                        12/1/32
                                                                        -----------------

2005 Total                                                                 $218,891
                                                                        =================

2004 Total                                                                 $184,576
                                                                        =================




                         Unrealized
                        Gain (Loss) at          Balance at       Interest income
Name                  December 31, 2005     December 31, 2005        in 2005
-------------------   -----------------     -----------------    ---------------
                                                           
Wyndhurst                       (54)               3,001                 140


Seward Park                      89               20,257                 864


Plum Court                      106                4,002                 148


FNMA 830083                      (2)               2,052                  19


FNMA 254568                       8                9,919                  82


FNMA 255366                      (3)               2,798                  23


FNMA 254611                       6                8,056                  67

                      ----------------------------------------------------------

2005 Total                 $  3,832             $222,723            $12,823
                      ==========================================================

2004 Total                 $ 10,011             $194,587            $  9,734
                      ==========================================================



All of our GNMA and FNMA DUS  certificates  are  partially or wholly  pledged as
collateral for borrowings under the repurchase facilities (see Note 7).


                                       48




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Information regarding our investments in debt securities is as follows:
(In thousands)




                                                           December 31,
                                                 ------------------------------
                                                    2005                 2004
                                                 ---------            ---------
                                                                
Amortized cost                                   $ 218,891            $ 184,576
Unrealized gains                                     5,707               11,370
Unrealized losses                                   (1,875)              (1,359)
                                                 ---------            ---------
Net unrealized gain                                  3,832               10,011
                                                 ---------            ---------
Fair value                                       $ 222,723            $ 194,587
                                                 =========            =========



The fair value and gross unrealized losses of our debt securities  aggregated by
length of time that these  individual  debt securities have been in a continuous
unrealized  loss  position,  at December 31, 2005 and 2004, is summarized in the
table below:

(Dollars in thousands)




                                     December 31, 2005                               December 31, 2004
                          ---------------------------------------        -----------------------------------------
                          Less than       12 Months                      Less than       12 Months
                          12 Months        or More         Total         12 Months        or More           Total
                          ---------       ---------       -------        ---------       ---------         -------
                                                                                         
Number of securities             8              16             24              11               7               18
Fair value                 $25,905         $56,281        $82,186         $46,055         $16,832          $62,887
Gross unrealized
loss                       $   197         $ 1,678        $ 1,875         $   515         $   844          $ 1,359



These  unrealized  losses  are  as a  result  of  increases  in  interest  rates
subsequent to the acquisition of the securities.  All of the debt securities are
performing according to their terms. Furthermore, we have the intent and ability
to hold these  securities to maturity,  or at least until  interest rates change
such that the fair value is no longer less than book value. Accordingly, we have
concluded that these impairments are temporary.

At December  31,  2005,  all of our debt  securities,  were  partially or wholly
pledged as collateral under our repurchase  facilities (see Note 7). At December
31, 2005, we had no availability  to borrow against  partially or unpledged debt
securities.


                                       49




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - INVESTMENTS IN MORTGAGE LOANS

Information  relating to our  investments in mortgage loans as December 31, 2005
is as follows:
(Dollars in thousands)





                                                    Final
                                                  Maturity                                        Lifetime
         Property                 Description       Date      Call Date (B)   Interest Rate   Interest Cap (D)
---------------------------     ---------------   ---------   -------------   -------------   ----------------
                                                                                  
FIRST MORTGAGE LOANS:

 Sunset Gardens (A)

   Eagle Pass, TX               Multifamily         10/04          N/A                11.50%        N/A

 Colorado Creekside (H)

   Colorado Springs, CO         Multifamily           N/A          N/A                10.82%        N/A

 Desert View

   Coolidge, AZ                 Multifamily          5/06          N/A                10.00%        N/A


Subtotal First Mortgage

Loans


MEZZANINE LOANS:

 The Hollows (I)(J)

   Greenville, NC               Multifamily          1/42         1/12            10.00% (C)     16% (D)

 Northbrooke (I)(K)(M)(N)

   Harris County, TX            Multifamily          8/43         7/13            11.50% (C)     14% (D)

 Elmhurst Village (I)(K)(L)

   Oveido, FL                   Multifamily          1/42         3/19            10.00% (C)     16% (D)

 Club at Brazos (I)(J)(O)

   Rosenberg, TX                Multifamily          5/43         4/13            10.00% (C)     14% (D)

 Del Mar Villas (K)

   Dallas, TX                   Multifamily          5/06          N/A        LIBOR + 4.625%         (P)

 Villas at Highpoint (J)

   Lewisville, TX               Multifamily          4/33          TBD                14.57%        N/A

 Villas at Highpoint (J)

   Lewisville, TX               Multifamily          4/33          TBD                23.76%        N/A

 The Pines (J)

   Las Vegas, NV                Multifamily          9/07          N/A         LIBOR + 8.75%        N/A

 Sawmill Plaza (J)

   Columbus, OH                 Shopping Center     10/14          N/A                13.50%        N/A

 Champaign Offices (J)

   Champaign, IL                Office Center       10/11          N/A                10.67%        N/A

 Atlantic - Hearthstone (J)

  Hillsborough, NJ              Multifamily          4/07          N/A                   20%        N/A

 South Burnswick (J)

   South Brunswick, NJ          Shopping Center      6/15          N/A                10.25%        N/A

 Pasadena (J)

   Pasadena, FL                 Multifamily         12/07          N/A        LIBOR + 12.75%        N/A






                                                      Share of
                                    Share of       Excess Sale or
                                Excess Operating     Refinancing       Periodic
         Property                  Cash Flows         Proceeds      Payment Terms   Prior Liens
---------------------------     ----------------   --------------   -------------   -----------
                                                                          
FIRST MORTGAGE LOANS:

 Sunset Gardens (A)

   Eagle Pass, TX                     N/A               N/A              (G)               --

 Colorado Creekside (H)

   Colorado Springs, CO               N/A               N/A              (G)               --

 Desert View

   Coolidge, AZ                       N/A               N/A              (G)                --


Subtotal First Mortgage

Loans


MEZZANINE LOANS:

 The Hollows (I)(J)

   Greenville, NC                      50%               25%             (G)          $ 8,797

 Northbrooke (I)(K)(M)(N)

   Harris County, TX                   50%               50%             (G)           13,775

 Elmhurst Village (I)(K)(L)

   Oveido, FL                          50%               25%             (G)               --

 Club at Brazos (I)(J)(O)

   Rosenberg, TX                       50%               25%             (G)           14,210

 Del Mar Villas (K)

   Dallas, TX                         N/A               N/A              (G)            5,554

 Villas at Highpoint (J)

   Lewisville, TX                     N/A               N/A              (G)           18,800

 Villas at Highpoint (J)

   Lewisville, TX                     N/A               N/A              (G)           18,800

 The Pines (J)

   Las Vegas, NV                      N/A               N/A              (G)            9,605

 Sawmill Plaza (J)

   Columbus, OH                       N/A               N/A              (G)           16,000

 Champaign Offices (J)

   Champaign, IL                      N/A               N/A              (G)           26,000

 Atlantic - Hearthstone (J)

  Hillsborough, NJ                    N/A               N/A              (G)           10,681

 South Burnswick (J)

   South Brunswick, NJ                N/A               N/A              (G)           36,750

 Pasadena (J)

   Pasadena, FL                       N/A               N/A              (G)           23,997






                                 Outstanding                        Carrying
                                Face Amount of    Unamortized       Amount of     Interest Income
         Property                Mortgages (E)   Costs and Fees   Mortgages (F)       in 2005
---------------------------     --------------   --------------   -------------   ---------------
                                                                          
FIRST MORTGAGE LOANS:

 Sunset Gardens (A)

   Eagle Pass, TX                  $     --          $  --          $     --          $  129

 Colorado Creekside (H)

   Colorado Springs, CO                  --             --                --             294

 Desert View

   Coolidge, AZ                         771             --               771              79
                                -----------------------------------------------------------------

Subtotal First Mortgage

Loans                                   771             --               771             502
                                -----------------------------------------------------------------

MEZZANINE LOANS:

 The Hollows (I)(J)

   Greenville, NC                     1,549            (98)            1,451             172

 Northbrooke (I)(K)(M)(N)

   Harris County, TX                  1,500           (131)            1,369             201

 Elmhurst Village (I)(K)(L)

   Oveido, FL                            --             --                --             238

 Club at Brazos (I)(J)(O)

   Rosenberg, TX                      1,962            (72)            1,890             199

 Del Mar Villas (K)

   Dallas, TX                           765             --               765              64

 Villas at Highpoint (J)

   Lewisville, TX                       693            (37)              656             131

 Villas at Highpoint (J)

   Lewisville, TX                     2,599           (135)            2,464             388

 The Pines (J)

   Las Vegas, NV                      4,600            (26)            4,574             579

 Sawmill Plaza (J)

   Columbus, OH                       2,000             --             2,000             275

 Champaign Offices (J)

   Champaign, IL                      1,900            (32)            1,868             212

 Atlantic - Hearthstone (J)

  Hillsborough, NJ                    4,220            (97)            4,123             531

 South Burnswick (J)

   South Brunswick, NJ                3,250             --             3,250             193

 Pasadena (J)

   Pasadena, FL                       7,574             --             7,574             724

                                                                                  (continued)



                                       50




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                                    Final
                                                  Maturity                                        Lifetime
         Property                 Description       Date      Call Date (B)   Interest Rate   Interest Cap (D)
---------------------------     ---------------   ---------   -------------   -------------   ----------------
                                                                                  
 222 Pearson (J)

   Chicago, IL                  Multifamily          8/07          N/A        LIBOR + 11.50%        N/A

 Bayfront Villas (J)

   Gulfport, FL                 Multifamily          8/07          N/A        LIBOR + 12.75%        N/A

 Marbella (J)

   Clearwater, FL               Multifamily          9/06          N/A        LIBOR + 12.50%        N/A

 The Victor (I) (J)

   Camden, NJ                   Mixed Use           12/14          N/A                 9.91%        N/A

Subtotal Mezzanine Loans

2005 Total Mortgage Loans

2004 Total Mortgage Loans





                                                      Share of
                                    Share of       Excess Sale or
                                Excess Operating     Refinancing       Periodic
         Property                  Cash Flows         Proceeds      Payment Terms   Prior Liens
---------------------------     ----------------   --------------   -------------   -----------
                                                                          
 222 Pearson (J)

   Chicago, IL                        N/A               N/A              (G)           35,862

 Bayfront Villas (J)

   Gulfport, FL                       N/A               N/A              (G)           10,553

 Marbella (J)

   Clearwater, FL                     N/A               N/A              (G)           17,946

 The Victor (I) (J)

   Camden, NJ                         N/A               N/A              (Q)           26,000

Subtotal Mezzanine Loans

2005 Total Mortgage Loans

2004 Total Mortgage Loans






                                 Outstanding                        Carrying
                                Face Amount of    Unamortized       Amount of     Interest Income
         Property                Mortgages (E)   Costs and Fees   Mortgages (F)       in 2005
---------------------------     --------------   --------------   -------------   ---------------
                                                                          
 222 Pearson (J)

   Chicago, IL                        6,714            (56)            6,658             521

 Bayfront Villas (J)

   Gulfport, FL                       2,436             --             2,436             171

 Marbella (J)

   Clearwater, FL                     5,174            (42)            5,132             263

 The Victor (I) (J)

   Camden, NJ                         5,000             --             5,000              61
                                -----------------------------------------------------------------
Subtotal Mezzanine Loans             51,936           (726)           51,210           4,923
                                -----------------------------------------------------------------
2005 Total Mortgage Loans          $ 52,707          $(726)         $ 51,981          $5,425
                                =================================================================
2004 Total Mortgage Loans          $ 22,313          $(937)         $ 21,376          $1,808
                                =================================================================




                                       51




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(A)  The matured loan was sold at par to an affiliate of our Advisor.

(B)  Loans are  subject to  mandatory  prepayment  at our option ten years after
     construction   completion,   with  one  year's  notice,   unless  otherwise
     indicated. Loans with a call date of "TBD" are still under construction.

(C)  Interest on the mezzanine loan is based on a fixed percentage of the unpaid
     principal  balance of the related first  mortgage loan. The amount shown is
     the approximate effective rate earned on the balance of the mezzanine loan.
     The mezzanine loan also provides for payments of additional  interest based
     on a percentage of cash flow remaining after debt service and participation
     in sale or refinancing  proceeds and certain  provisions that cap our total
     yield,  including additional interest and participations,  over the term of
     the loan.

(D)  Lifetime  interest cap  represents  the maximum  annual  return,  including
     interest,  fees and  participations,  that we can earn over the life of the
     mezzanine  loan,  computed  as a  percentage  of the  balance  of the first
     mortgage loan plus the mezzanine loan.

(E)  As of December 31, 2005,  all interest  payments on the mortgage  loans are
     current, except as noted.

(F)  Carrying amounts of the loans are net of unamortized  origination costs and
     fees and loan discounts.

(G)  Interest only payments are due monthly, with loan balance due at maturity.

(H)  Loan was purchased in connection with the performance  under a guarantee we
     made.

(I)  The principal  balance of the mezzanine loan is secured by the  partnership
     interests  of the  entity  that owns the  underlying  property  and a third
     mortgage deed of trust. Interest payments on the mezzanine loan are secured
     by a second  mortgage  deed of trust  and are  guaranteed  for the first 36
     months after  construction  completion by an entity  related to the general
     partner of the entity that owns the underlying property.

(J)  We do not have an  interest  in the first lien  position  relating  to this
     mezzanine loan.

(K)  We have an interest in the first lien position  relating to this  mezzanine
     loan.

(L)  The loan and the related 1st  mortgage  position  paid in full in September
     2005.

(M)  The first  mortgage loans related to these  properties  were converted from
     participations  in FHA loans to ownership of the GNMA  certificates and are
     held by us - see Note 2.

(N)  This mezzanine loan stopped  making  interest  payments in May 2004. We are
     currently in the process of determining the necessary steps we need to take
     to  protect  our  investment.  We have done an  internal  analysis  for the
     property  underlying the mortgage and the analysis indicates that the value
     of the property exceeds the carrying amount of our investment. Accordingly,
     we have not recorded an allowance for probable losses on this investment.

(O)  The funding of this mezzanine  loan is based on property level  operational
     achievements.

(P)  Interest cap on this loan is the maximum rate permitted by law.

(Q)  Interest only payments are due monthly until 1/1/08,  followed by principal
     and interest payments until maturity.


                                       52




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Further information relating to investments in mortgage loans is as follows:
(In thousands)




                                                           2005          2004
                                                         --------      --------
                                                                 
Balance at beginning of year                             $ 21,376      $ 13,864
Advances made                                              42,247         8,802
Loan origination fees (net of acquisition expenses)          (279)          (46)
Repayments                                                (11,853)       (1,306)
Amortization and accretion -- net                             236            62
Gain on sale or repayment of assets                           254          --
                                                         --------      --------

Balance at end of year                                   $ 51,981      $ 21,376
                                                         ========      ========



NOTE 4 - INVESTMENT IN ARCAP

We own 485,000  units Series A  Convertible  Preferred  Membership  Interests in
ARCap as well as 315,000  common  units,  which we acquired  upon  converting an
equal number of preferred  units in December  2005.  The initial cost of all the
units was $25 each.  The  remaining  preferred  units  are  convertible,  at our
option,  into common units.  The preferred units carry a preferred return of 12%
and the common units receive a specified annual  distribution,  currently set at
$4.00 per unit for 2006. In December 2005, we received a common  distribution of
$2.14 per share following this conversion.

ARCap  has met its  distribution  requirements  to us to  date.  Yields  on CMBS
depend,  among other things, on the rate and timing of principal  payments,  the
pass-through  rate,  interest rate  fluctuations  and defaults on the underlying
mortgages.  Our  interest in ARCap is  illiquid  and we would need to obtain the
consent of the board of managers of ARCap before we could  transfer our interest
in ARCap to any party other than a current  member.  The carrying  amount of the
investment  in ARCap is not  necessarily  representative  of the amount we would
receive upon a sale of the interest.

ARCap  is  focused  on  commercial  mortgage  backed  securities  ("CMBS")  fund
management,  whereby it manages CMBS  investment  funds raised from  third-party
investors.  ARCap is  generally  a minority  investor in these funds and thereby
diversifies  its revenue base by increasing  its  proportion of revenue  derived
from  fees as  opposed  to  interest  income.

Summarized information for ARCap as of December 31, 2005 and 2004, and the years
then ended is as follows:




(in millions)                                           2005          2004
                                                      --------      --------
                                                               
Investment securities - available for sale             $  979        $  771
Investment securities - trading                            92           108
Other assets                                              166            89
                                                       ------        ------
Total assets                                           $1,237        $  968
                                                       ======        ======

Repurchase agreements and long-term debt               $  538        $  426
Other liabilities                                         497           339
Members' equity                                           202           203
                                                       ------        ------
Total liabilities and equity                           $1,237        $  968
                                                       ======        ======

Total revenues                                         $  156        $  205
Total expenses                                             97           140
                                                       ------        ------
Net income                                             $   59        $   65
                                                       ======        ======




                                       53




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 5 - NOTES RECEIVABLE

Our notes receivable are  collateralized by equity interests in the owner of the
underlying property and consist of the following as of December 31, 2005:




                                 (In thousands)


                                             Outstanding
                                              Principal    Unamortized
Property                  Location             Balance         Fees
----------------------------------------------------------------------
                                                     
Del Mar Villas            Dallas, TX           $  5,554       $   --
Oaks of Baytown (1)       Baytown, TX             3,826           --
Quay Point (1)            Houston, TX             1,223           --
Woods of Mandarin         Jacksonville, FL        3,122           --
                                               =======================
    2005 Total                                  $13,725           --
                                               =======================
    2004 Total                                  $23,135       $ (24)
                                               =======================




                                 (In thousands)

                                       Remaining
                                       Committed
                           Carrying    Balance to          Interest
Property                    Amount        Fund               Rate                 Maturity
-------------------------------------------------------------------------------------------
                                                                   
Del Mar Villas            $  5,554     $     --       LIBOR + 4.625% (2)            May 2006
Oaks of Baytown (1)          3,826           --       LIBOR + 4.500% (2)       February 2006
Quay Point (1)               1,223           --       LIBOR + 3.600% (2)       February 2006
Woods of Mandarin            3,122           --               13.50%               July 2007
                         ======================
    2005 Total           $  13,725           --
                         ======================
    2004 Total           $  23,111    $  1,137
                         ======================



(1)  At December 31, 2005,  these notes were pledged as collateral in connection
     with  warehouse  facility  (see Note 8).  During 2006,  these notes stopped
     making required interest payments,  causing them to be in default (see Note
     17).
(2)  30-day LIBOR at December 31, 2005 was 4.39%.


                                       54




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - REAL ESTATE OWNED

Our real estate owned at December 31, 2005 and 2004 consisted of the following:




(dollars in thousands)
                                                                                           Carrying Value         Carrying Value
                                                                                               as of                  as of
                                                                                            December 31,           December 31,
                                                   Number of Units       Location               2005                   2004
                                                   -----------------------------------------------------------------------------

Real Estate Owned - Held and Used
---------------------------------
                                                                                                      
     Concord Portfolio (1)                               852             Houston, TX           $53,407               $54,425
       Less: accumulated depreciation                                                           (3,062)               (1,718)
                                                                                               -------               -------
     Subtotal                                                                                   50,345                52,707

     Reserve at Autumn Creek (2)                         212         Friendswood, TX            19,462                17,924
       Less: accumulated depreciation                                                           (1,014)                   --
                                                                                               -------               -------
     Subtotal                                                                                   18,448                17,924

     Plaza at San Jacinto (3)                            132            La Porte, TX                --                 7,929
                                                      ------
       Less: accumulated depreciation                                                               --                  (425)
                                                                                               -------               -------
     Subtotal                                                                                                          7,504

     Total Real Estate Owned - Held and Used, net      1,196                                   $68,793               $78,135
                                                      ======                                   =======               =======

Mortgages Payable on Real Estate Owned
--------------------------------------

     Concord Portfolio                                                                         $40,487               $41,000
     Reserve at Autumn Creek                                                                        --                15,993
                                                                                               -------               -------

     Total Mortgages Payable on Real Estate Owned                                              $40,487               $56,993
                                                                                               =======               =======



(1) The three  properties  underlying  these  notes  receivable  stopped  paying
interest  in  May  2003.  We   subsequently   exercised  our  rights  under  the
subordinated  promissory  notes and other  documents and took  possession of all
three properties.  We purchased the first mortgages and acquired the real estate
at foreclosure  auctions and sold all three properties to a qualified  501(c)(3)
entity during 2003.  Because we provided 100%  financing to the  purchaser,  the
transaction did not meet the criteria for sale recognition  pursuant to SFAS No.
66, and we  classified  the  properties  as Real Estate Owned - Subject to Sales
Contracts.  Following  the  provisions  of  SFAS  No.  66,  we  account  for the
properties under the deposit method.

During 2004, the properties  were  refinanced  with UBS Real Estate  Investments
Inc., who provided first mortgages of $41.0 million for these properties, and we
reclassified  the  properties  as Real Estate Owned - Held and Used. We recorded
the  $41.0  million  amortizing  mortgage  as a  liability  and  began to record
depreciation on the properties in 2004, as well as retroactively  for the period
since  foreclosure.  We recognize income associated with a 10-year $12.8 million
mezzanine  loan,  with a stated  interest rate of 8.00% (our remaining  economic
interest in the properties),  as rental income, property operations and mortgage
interest on Real Estate Owned - Held and Used on our consolidated  statements of
income.

(2) Certain required debt service payments were not paid,  causing the mezzanine
loan to be in  default.  In October  2003,  we  exercised  our rights  under the
subordinated promissory note and other documents and took possession of the real
estate collateral of the property,  and purchased the first mortgage loan on the
property in February 2005 for approximately $17.2 million.

The property has been marketed for sale since the date of foreclosure,  however,
due to unsuccessful efforts, we reclassified the property as Real Estate Owned -
Held and Used in December  2005.  We recorded  depreciation  on the  property in
2005, as well as retroactively  for the period since  foreclosure.  We recognize


                                       55




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



income from the property as rental income and property operations on Real Estate
Owned - Held and Used on our consolidated statements of income.

(3) In March 2003,  we exercised  our rights under the  subordinated  promissory
note and other documents to take possession of the real estate collateral of the
Plaza at San Jacinto and, in May 2003, acquired the real estate at a foreclosure
auction.  We classified  our  investment in this property as Real Estate Owned -
Held for Sale.  We have focused on  increasing  the  occupancy and the operating
income generated from the property.  We reclassified the property as Real Estate
Owned - Held and  Used in March  2004 and  began  to  depreciate  the  property,
including  depreciation  for the period the property had been classified as Held
for Sale. During February 2005, this property was sold to an unaffiliated  third
party for approximately its carrying value.

NOTE 7 - REPURCHASE FACILITIES

During   2004  and  2005,   we   executed   repurchase   agreements   with  four
counterparties,  Greenwich  Capital,  Bear Stearns,  RBC Capital Markets and UBS
Financial Services, which provided us the capacity to repay a previous facility.
Terms of the four newly executed  agreements offer advance rates between 94% and
97% and borrowing rates between the LIBOR minus 3 basis points and LIBOR plus 10
basis points.  The  borrowings  are subject to 30-day  settlement  terms.  As of
December 31, 2005 and 2004, the amounts outstanding under repurchase  facilities
were $209.1 and $157.6  million and weighted  average  interest rates were 4.30%
and 2.64%, respectively.

Certain of our debt  securities  are pledged as collateral  in  connection  with
these repurchase facilities (see Note 2).

NOTE 8 - WAREHOUSE FACILITY

In August 2005, our mortgage  warehouse line of credit with Bank of America (the
"Warehouse  Facility") matured.  Although we could no longer originate new loans
on this facility,  the two existing  loans that served as collateral  under this
program (see Notes 5 and 17) were extended and subsequently paid off in February
2006.  As of December  31,  2005 and 2004,  we had  approximately  $4.1 and $3.8
million,  respectively,  in  borrowings  outstanding  under  this  program  at a
weighted average interest rate of 6.06% and 4.42%, respectively.

NOTE 9 - LINE OF CREDIT - RELATED PARTY

In June 2004,  we entered  into a  revolving  credit  facility  (the  "Revolving
Facility") with CharterMac.  The Revolving  Facility,  which is unsecured,  will
provide  up  to  $20.0  million  in  borrowings  to  be  used  to  purchase  new
investments,  and bears  interest  at 30-day  LIBOR plus 300 basis  points.  The
Revolving  Facility expires in June 2006 with a one-year optional  extension and
contains  customary  restrictions/covenants  that are  similar to our  Warehouse
Facility.  In the  opinion of our  management,  the terms of this  facility  are
consistent  with those of transactions  with  independent  third parties.  As of
December 31, 2004, we had approximately $4.6 million, in borrowings  outstanding
on the  Revolving  Facility at a weighted  average  interest  rate of 5.42%.  At
December 31, 2005, there were no outstanding borrowings under this facility.

NOTE 10 - SUBSIDIARY EQUITY

During March 2005, ACFI issued 25,000 Floating Rate Preferred Securities, having
a stated  liquidation amount of $1,000 per security.  We received  approximately
$24.2 million in proceeds,  net of closing costs, which are deferred and will be
amortized  ratably over a 30-year period to the redemption  date. The securities
are callable in March 2010 and bear interest, re-set quarterly,  equal to 30-day
LIBOR plus 3.75%. At December 31, 2005, the rate was 7.77%.


                                       56




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - SHAREHOLDERS' EQUITY

Common Shares
-------------

On April 23, 2003, we completed a public offering of  approximately  2.0 million
common  shares at a price of $15.00 per share,  resulting  in  proceeds,  net of
underwriters'  discount and expenses, of approximately $27.5 million. The common
shares were offered  through JMP  Securities  and RBC Capital  Markets.  The net
proceeds from this offering were used to fund investments.

During 2005 and 2004,  we issued  approximately  3,035 and 2,600 common  shares,
respectively,  to our  trustees as  compensation.  No such shares were issued in
2003.

Share Repurchase Program
------------------------

In August 2003, our Board of Trustees approved a share repurchase plan. The plan
enables us to repurchase,  from time to time, up to 1,000,000 common shares. The
repurchases will be made in the open market, and the timing will be dependent on
the  availability  of shares and other  market  conditions.  This program has no
expiration date.  During 2005 and 2004, we repurchased  36,000 and 4,000 shares,
respectively, at a cost of approximately $494,000 and $53,000, respectively.

Accumulated Other Comprehensive Income
--------------------------------------

Changes in accumulated other comprehensive income




(in thousands)                                        Net unrealized
                                      Net unrealized  (loss) gain on
                                         gain on      interest rate
                                        investments    derivatives      Total
                                      --------------  --------------  ----------
                                                              
Balance at January 1, 2003               $  8,703       $     --       $  8,703
Period change                                  25           (278)          (253)
                                         --------       --------       --------
Balance at December 31, 2003                8,728           (278)         8,450
Period change                               1,260            407          1,667
                                         --------       --------       --------
Balance at December 31, 2004                9,988            129         10,117
Period change                              (6,013)           679         (5,334)
                                         --------       --------       --------
Balance at December 31, 2005             $  3,975       $    808       $  4,783
                                         ========       ========       ========



NOTE 12 - INCENTIVE SHARE OPTION PLAN

In  accordance  with our Amended and Restated  Incentive  Share Option Plan (the
"Plan"), our board of trustees can award share options to trustees, officers and
employees  of AMAC and our  Advisor  and its  affiliates.  A maximum  of 830,384
options can be granted,  with annual limits based upon formulas specified in the
Plan. Option terms and vesting requirements are determined at the time of grant,
provided that the term is no longer than ten years.

In April 2003, our Compensation  Committee  granted 190,000 options to employees
of an affiliate of our Advisor at an exercise price of $15.03,  the market price
of our common shares on the grant date.  These options vest equally,  in thirds,
in April 2004, 2005 and 2006 and expire in April 2013.

In January  2005,  our  Compensation  Committee  granted  65,052  options to one
employee of an  affiliate  of our Advisor at an  exercise  price of $17.20,  the
market price of our common shares on the grant date. These options vest equally,
in thirds, in January 2006, 2007, and 2008 and expire in January 2015.


                                       57




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In  accordance  with SFAS No.  123,  we accrue  compensation  cost  based on the
estimated  fair value of the options  issued and  amortize  those costs over the
vesting period.  Because the grant  recipients are not our employees and vesting
of the options is contingent upon the recipient  continuing to provide  services
to us, we estimate  the fair value of the options at each  period-end  up to the
vesting date, and adjust recorded amounts accordingly.

The assumptions used for valuing these options and the results of the valuations
were as follows:




Weighted Average Assumptions:                             2005             2004             2003
                                                        --------         --------         --------
                                                                                   
   Dividend Yield                                        10.95%            9.30%            9.63%

   Estimated Volatility                                  26.00%           16.00%           16.00%

   Risk Free Interest Rate                                4.36%            3.93%            4.27%

   Expected Lives (years)                                 8.0               8.3              9.4



There were 643,332 shares available for issuance as of December 31, 2005.

The following table  summarizes  share option activity in our share option plans
for the years ended December 31:




                                                2005                   2004                    2003
                                       ---------------------   --------------------    ---------------------
                                                    Weighted               Weighted                 Weighted
                                                     Average                Average                  Average
                                                    Exercise               Exercise                 Exercise
                                        Options      Price      Options     Price       Options      Price
                                       ---------    --------   ---------   --------    ---------    --------
                                                                                  
Outstanding Shares
   at Beginning of Period               130,000      $15.03     190,000     $15.03           --     $   --

Granted                                  65,052       17.20          --         --      190,000      15.03
Forfeited                                (8,000)      15.03     (60,000)     15.03           --         --
Exercised                                    --          --          --         --           --         --
                                       --------      ------    --------     ------     --------     ------

Outstanding Shares
   at End of Period                     187,052      $15.78     130,000     $15.03      190,000     $15.03
                                       ========      ======    ========     ======     ========     ======

Exercisable at end of year               81,333      $15.78      43,334     $15.03           --     $   --
                                       ========      ======    ========     ======     ========     ======

Fair Value of options granted
   during the year (at grant date)     $ 64,000      $17.20    $     --     $   --     $131,100     $15.03
                                       ========      ======    ========     ======     ========     ======

Compensation costs                     $     --      $   --    $ 45,500     $   --     $ 22,700     $   --
                                       ========      ======    ========     ======     ========     ======




                                       58




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 13 - EARNINGS PER SHARE

Diluted net income per share is calculated  using the weighted average number of
shares  outstanding  during the period plus the  additional  dilutive  effect of
common share  equivalents.  The dilutive effect of outstanding  share options is
calculated using the treasury stock method.

(In thousands, except per share amounts)




Year Ended December 31, 2005                Income         Shares      Per Share
                                            -------       -------      ---------
                                                               
   Basic EPS                                $15,235         8,316       $ 1.83
   Effect of dilutive securities                 --             1           --
                                            -------       -------       ------
   Diluted EPS                              $15,235         8,317       $ 1.83
                                            =======       =======       ======


Year Ended December 31, 2004

   Basic EPS                                $11,273         8,336       $ 1.35
   Effect of dilutive securities                 --             7           --
                                            -------       -------       ------
   Diluted EPS                              $11,273         8,343       $ 1.35
                                            =======       =======       ======

Year Ended December 31, 2003

   Basic EPS                                $11,884         7,803       $ 1.52
   Effect of dilutive securities                 --            12           --
                                            -------       -------       ------
   Diluted EPS                              $11,884         7,815       $ 1.52
                                            =======       =======       ======




                                       59




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 14 - RELATED PARTY TRANSACTIONS

Pursuant to the amended Advisory  Agreement with our Advisor dated April 6, 1999
(the  "Amended  Advisory  Agreement"),  we pay  certain  fees,  in  addition  to
reimbursements of certain  administrative  and other costs our Advisor incurs on
our behalf, for its ongoing management and operations of our Company:

     Fees/Compensation      Annual Amount
     -----------------      -------------

     I.   Asset management  0.355% for investments in mortgage loans
          management        0.355% for certain investment grade investments
          fees              0.750% for certain non-investment grade investments
                            1.000% for unrated investments
                            0.625% for investments held prior to the adoption
                                   of the Amended Advisory Agreement.

     II.  Loan              With respect to new mortgage loans we acquire,  any
          origination fees  origination  points paid by borrowers will first be
                            paid to the Advisor for amounts up to 1.0%  of  the
                            principal  amount  of each  mortgage  loan  and  we
                            will receive any  excess  origination  points  paid
                            by borrowers, if any, above the 1.0%.

     III. Annual            Subject to (1) a minimum annual  distributions being
          incentive         made  to  shareholders   from  management  fees cash
          management        available  for  distribution  ("CAD") of  $1.45  per
          fees              share and (2) the Company  achieving at least annual
                            Adjusted Funds from Operations (defined  below) per
                            share of $1.60 (net of  this  incentive  fee),  the
                            Advisor  shall  be  entitled  to  receive  incentive
                            compensation for each fiscal year in an amount equal
                            to the product of:

                            (A) 25% of the dollar amount by which

                                (1)   Adjusted Funds From Operations before this
                                      incentive management fee per share

                                exceed

                                (2)   the greater of:

                                      (a) (i) the weighted average of (x) $20
                                              and (y) the prices per share of
                                              any secondary offerings  by  the
                                              Company multiplied by

                                          (ii) the Ten Year U.S.  Treasury Rate
                                               plus 2% per annum; and;

                                      (b)  $1.45

                                multiplied by

                            (B) the  weighted   average   number  of  shares
                                outstanding during such year.

"Adjusted Funds From  Operations"  means net income (computed in accordance with
GAAP) including  realized gains (or losses) from debt restructuring and sales of
assets,  plus  depreciation  and  amortization  on  real  property,   and  after
adjustments for unconsolidated partnerships and joint ventures.


                                       60




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



"CAD" means cash  available  for  distributions,  which shall consist of our net
income (as determined  pursuant to GAAP) adjusted for certain  non-cash  charges
(as determined pursuant to GAAP).

Prior to 2004,  the  incentive  management  fee was  calculated  pursuant to the
Company achieving at least annual GAAP net income of $1.60 per share, net of the
incentive management fee without the additional  requirement that net income had
to exceed CAD of $1.45 per share.

The costs paid or payable to our Advisor were as follows:




(in thousands)                                      Years Ended December 31,
                                              ----------------------------------
                                               2005          2004          2003
                                              ------        ------        ------
                                                                 
Shared service expenses                       $  947        $  682        $  725
Asset management fees                          1,545         1,274         1,087
Incentive management  fee                      1,855          --            --
                                              ------        ------        ------

                                              $4,347        $1,956        $1,812
                                              ======        ======        ======



During 2003, our Advisor waived  approximately  $67,000 in asset management fees
relating to additional  services it performed  with regard to real estate we now
own (see Note 6), as we paid a fee at the time the loans were originated.

During  December  2005, in connection  with our new investment  initiative,  our
Board of  Trustees  approved  various  amendments  to our  bylaws  and  Advisory
agreement.  The changes,  which will be  effective  upon renewal of the existing
agreement at its expiration in March 2006, include,  but are not limited to, the
following:

     o    ASSET  MANAGEMENT  FEE - The current asset by asset based fees will be
          replaced  with an  asset  management  fee  which  is equal to 1.75% of
          shareholders equity.
     o    LOAN  ORIGINATION  FEES - The revised  agreement will provide that the
          Advisor receive all origination fees.
     o    SHARE ISSUANCE - The current agreement  provides that the Advisor will
          receive 1% of all common shares issued by us. This  provision has been
          eliminated.
     o    TERMINATION  -  The  Advisory  agreement  will  be  subject  to  early
          termination  for  "cause",  without  payment  of  a  termination  fee.
          However,  if the  termination  occurs  without cause or is not renewed
          after its one year term,  the  Advisor  will be  entitled to receive a
          termination fee.

In September 2003, we transferred  certain of our  obligations  under the Fannie
Mae loan  program  to CMC,  a  subsidiary  of  CharterMac.  See Note 16 for more
details on the transaction.

In October 2003, we purchased nine taxable  revenue bonds from  CharterMac.  The
carrying value of these bonds at December 31, 2005 and 2004 are $6.6 million and
$6.7 million, respectively.

In December  2003, we borrowed  approximately  $11.3 million from  CharterMac in
order to aid in the  purchase of the Concord at Gulfgate  first  mortgage in the
total amount of $14.1 million (see Note 6). CharterMac charged us interest at an
annual  rate of 3.17% on the  borrowings,  which was based on LIBOR plus 2%, the
same rate we paid on our Warehouse Facility.  Shortly thereafter,  we received a
$14.0  million loan  through the  Warehouse  Facility,  and used the proceeds to
repay the loan to CharterMac.

See Note 9 for information regarding our Revolving Facility with CharterMac.

In September 2005, we sold a mortgage loan, at par, to CharterMac (see Note 3).

During   November   2005,  we  and   CharterMac   entered  into  a  Subordinated
Participation   Agreement,   under  which  we  have   acquired  a   subordinated
participation  equal to $5.0 million in a loan receivable that CharterMac holds.
Upon the inception of our new warehouse  facility  (which we anticipate to occur
in the first half of 2006),  we will  purchase  the  remaining  loan  receivable
balance from CharterMac at its $26.0 million par value.


                                       61




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 15 - SELECTED QUARTERLY FINANCIAL DATA




                                                           (unaudited)
                                                        2005 Quarter Ended
                                            ---------------------------------------------

                                            March 31   June 30  September 30  December 31
                                            --------   -------  ------------  -----------
                                                                    
Total revenues                               $6,703     $7,860     $13,343      $8,237
                                             ======     ======     =======      ======

Net income                                   $2,827     $3,069     $ 7,312      $2,027
                                             ======     ======     =======      ======

Net income per share (basic and diluted)     $ 0.34     $ 0.37     $  0.88      $ 0.24
                                             ======     ======     =======      ======

                                                        2004 Quarter Ended
                                            ---------------------------------------------
(In thousands except per share amounts)
                                            March 31   June 30  September 30  December 31
                                            --------   -------  ------------  -----------

Total revenues                               $5,522     $5,396     $ 5,765      $5,328
                                             ======     ======     =======      ======

Net income                                   $3,325     $3,351     $ 3,249      $1,348
                                             ======     ======     =======      ======

Net income per share (basic and diluted)     $ 0.40     $ 0.40     $  0.39      $ 0.16
                                             ======     ======     =======      ======



NOTE 16 - COMMITMENTS AND CONTINGENCIES

a) Legal

On October 27, 2003,  prior to taking  possession of the real estate  collateral
supporting a loan investment, we were named in a lawsuit, Concord Gulfgate, Ltd.
vs. Robert  Parker,  Sunrise  Housing  Ltd.,  and American  Mortgage  Acceptance
Company,  Cause No.  2003-59290 in the 133rd  Judicial  District Court of Harris
County,  Texas.  The suit  alleges  that the loan  transaction  was not properly
authorized by the partnership and was not for a legitimate  partnership purpose.
The suit claims, among other causes of action against the respective defendants,
wrongful foreclosure of the real estate collateral,  tortious  interference with
contract  and civil  conspiracy.  The suit seeks,  among other  relief,  actual,
consequential,  and exemplary damages, and a declaration that the loan documents
are  unenforceable  and constitute a cloud on title. The discovery phase of this
suit has been completed.  A summary  judgment was filed by us, but was denied on
July 25, 2005. It is not known when the case will be called to trial.

We filed a countersuit on November 25, 2003, against Concord Gulfgate,  Ltd., as
guarantor,  seeking a deficiency  on the loan,  and recovery of unpaid taxes and
certain  property  receipts.  We are currently  unable to determine the possible
outcome of the litigation.

b) Guarantees

In June and October of 2000, we originated two loans totaling $3.3 million under
an agreement  with Fannie Mae. That  agreement  provided for our  guaranteeing a
first-loss  position on the loans, which could potentially result in exposure of
$7.5  million.  In  September  2003,  we  transferred  and  assigned  all of our
obligations  to the two loans we  originated  under this  program to  CharterMac
Mortgage  Capital  ("CMC"),  a  subsidiary  of  CharterMac,  both of  which  are
affiliates  of the  Advisor.  Pursuant  to the  agreement  with CMC,  CharterMac
guaranteed CMC's obligations, and we agreed to indemnify both CMC and CharterMac
for any  losses  incurred  in  exchange  for  retaining  all fees  which we were
otherwise  entitled  to receive  under the  program.  The  maximum  exposure  at
December  31,  2005,  was $3.2  million,  although we expect that we will not be
called upon to fund these guarantees.

In the first quarter of 2003, we  discontinued  our loan program with Fannie Mae
and will issue no further guarantees pursuant to such program.


                                       62




              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Standby and Forward Loan Commitments

We  issued  the  following   standby  and  forward  bridge  and  permanent  loan
commitments   for  the   purpose  of   construction/rehabilitation   of  certain
multifamily apartment complexes in various locations.




                                    STANDBY AND FORWARD LOAN COMMITMENTS
                                    -------------------------------------------------------
                                                                                                       (In thousands)
                                                                                                MAXIMUM AMOUNT OF COMMITMENT
                                                                                         -----------------------------------------
       ISSUE DATE        PROJECT                LOCATION               NO.OF APT.UNITS    TOTAL    LESS THAN 1 YEAR    1-3 YEARS
       ---------------------------------------------------------------------------------------------------------------------------
                                                                                                  
          Jun-04         Woods of Mandarin      Jacksonville, FL              401        $   428      $   428          $   --
          Apr-05         Atlantic Hearthstone   Hillsborough, NJ              198          3,080        2,464             616
          May-05         Pasadena               Pasadena, FL                  198            777          777              --
         July-05         222 Pearson            Chicago, IL                   219            786          786              --
         July-05         Bayfront Villas        Gulfport, FL                  120            364          364              --
         Sept-05         Marbella               Clearwater, FL                 --            626          626              --
                                                                       -----------------------------------------------------------

       TOTAL STANDBY AND FORWARD LOAN COMMITMENTS                           1,136        $ 6,061     $  5,445          $  616
                                                                       ===========================================================



Mezzanine Loan/Preferred Stock Commitment
-----------------------------------------

During  November  2004,  we provided a commitment to fund up to $74.5 million in
connection  with the  borrower's  financing of an  acquisition.  The  commitment
expired   unused  in  April  2005,   and  we  recognized  a  commitment  fee  of
approximately $412,000, net of related legal expenses, upon the expiration.

NOTE 17 - SUBSEQUENT EVENTS

We did not receive the January 2006 payments for two notes  receivable  (both of
which have the same borrower),  causing the notes to be in default. While we are
exploring possible solutions  involving  repayment of these notes or recovery of
the  assets,  we are  unable to  determine  at this time if a loss  exists  with
respect to the investments.

These  notes were  pledged as part of our  warehouse  facility  (see Note 8). On
February  28,  2006,   we  paid  off  the  remaining   outstanding   balance  of
approximately  $4.1 million on the facility,  but we believe we have  sufficient
liquidity to do so if required.


                                       63




ITEM 9.   CHANGES IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.

None.

ITEM 9A.  DISCLOSURE CONTROLS AND PROCEDURES

(a)       EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.  Our Chief Executive
          Officer and Chief Financial  Officer have evaluated the  effectiveness
          of  our  disclosure  controls  and  procedures  (as  defined  in  Rule
          13a-15(e) or Rule 15a-15(e) under the Securities Exchange Act of 1934,
          as amended (the  "Exchange  Act")) as of the end of the period covered
          by this annual report.  Based on such  evaluation,  such officers have
          concluded that our disclosure controls and procedures as of the end of
          the period covered by this annual report were effective to ensure that
          information  required  to be  disclosed  by the Company in the reports
          that the Company  files or submits under the Exchange Act is recorded,
          processed,  summarized and reported, within the time periods specified
          in the SEC rules and forms,  and to ensure  that such  information  is
          accumulated and  communicated to the Company's  management,  including
          the  Chief  Executive   Officer  and  Chief  Financial   Officer,   as
          appropriate, to allow timely decisions regarding required disclosure.

(b)       INTERNAL  CONTROL OVER  FINANCIAL  REPORTING.  There have not been any
          significant  changes in our internal control over financial  reporting
          during  the  fiscal  year to  which  this  report  relates  that  have
          materially  affected,  or are reasonably likely to materially  affect,
          our internal control over financial reporting.

ITEM 9B.  OTHER ITEMS

None.


                                       64




                                    PART III


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.  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.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

          Incorporated by reference to the Company's  definitive proxy statement
          to be filed pursuant to Regulation 14A under the Exchange Act.

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.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

          Incorporated by reference to the Company's  definitive proxy statement
          to be filed pursuant to Regulation 14A under the Exchange Act.

                                    PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES




                                                                                    Sequential
                                                                                       Page
(a) 1.    Financial Statements                                                      ----------
          --------------------
                                                                                  
          American Mortgage Acceptance Company
          ------------------------------------

          Report of Independent Registered Public Accounting Firm                       35

          Consolidated Balance Sheets as of December 31, 2005 and 2004                  36

          Consolidated  Statements  of Income for the years ended  December  31,
          2005, 2004 and 2003                                                           37

          Consolidated  Statements of  Shareholders'  Equity for the years ended
          December 31, 2005, 2004 and 2003                                              38

          Consolidated Statements of Cash Flows for the years ended December 31,
          2005, 2004 and 2003                                                           39

          Notes to Consolidated Financial Statements                                    41




                                       65




ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (continued)




                                                                                    Sequential
                                                                                       Page
                                                                                    ----------
 
(a) 2.    Financial Statement Schedules

          All  schedules  have been  omitted  because  they are not required or
          because  the  required  information  is  contained  in the  financial
          statements or notes thereto.

(a) 3.    Exhibits
          --------

3.1       Third Amended and Restated  Declaration of Trust, dated as of June 8,
          2005  (incorporated  by  reference  to Appendix A to Proxy  Statement
          filed with the Commission on April 28, 2005).

3.2       Amended and Restated By-laws (incorporated by reference to Appendix B
          to Proxy Statement filed with the Commission on April 28, 2005).

3.3       Amendment to Amended and Restated  By-laws*.

10(a)     Second Amended and Restated  Advisory  Services  Agreement between the
          Company and CharterMac AMI Associates, Inc*.

10(b)     First  Amendment to the Amended and Restated  Incentive  Share Option
          Plan of the  Company  dated  June 9,  2004  (incorporated  herein  by
          reference  to Exhibit  10(e) to the  Company's  June 30, 2004 Amended
          Quarterly Report on Form 10-Q/A).

10(c)     Form of  Non-Qualified  Share Option Award Agreement  (incorporated by
          reference  to Exhibit  10(g) to the  Company's  Annual  Report on Form
          10-K).

10(d)     Loan agreement  between  CharterMac and American  Mortgage  Acceptance
          Company as of June 30, 2004*.

21        Subsidiaries of our Company*

23        Consent of Independent Registered Public Accounting Firm*

23(a)     Consent  of  Ernst  & Young  LLP  with  respect  to  incorporation  by
          reference of its report relating to the financial  statements of ARCap
          Investors, LLC in the Company's Registration Statement on form S-3 and
          Form S-8  (incorporated by reference to Exhibit 23(a) to the Company's
          December 31, 2004, Annual Report on Form 10-K/A).

24.1      Power of Attorney (Included on signature page hereto)

31.1      Chief Executive Officer  certification  pursuant to Section 302 of the
          Sarbanes-Oxley Act of 2002*

31.2      Chief Financial Officer  certification  pursuant to Section 302 of the
          Sarbanes-Oxley Act of 2002*

32.1      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*




                                       66




ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (continued)




                                                                                    Sequential
                                                                                       Page
                                                                                    ----------

       
99.       Additional Exhibits
          -------------------

99(a)     The 2004 Financial  Statements of ARCap  Investors,  LLC which invests
          primarily in subordinated commercial  mortgage-backed  securities,  as
          required by Regulation  S-X, Rule 3-09  (incorporated  by reference to
          Exhibit  99(a) to the  Company's  December 31, 2004,  Annual Report on
          Form 10-K/A).

99(b)     The 2003 Financial  Statements of ARCap  Investors,  LLC which invests
          primarily in subordinated commercial  mortgage-backed  securities,  as
          required by Regulation  S-X, Rule 3-09  (incorporated  by reference to
          Exhibit  99(b) to the  Company's  December 31, 2004,  Annual Report on
          Form 10-K/A).

          *  Filed herewith




                                       67




                                   SIGNATURES
                                   ----------



Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
                                  (Registrant)



Date:  March 9, 2006           By:  /s/ Jeff T. Blau
                                    ----------------
                                    Jeff T. Blau
                                    Chairman of the Board of Trustees,
                                    President and Chief Executive Officer

Date:  March 9, 2006           By:  /s/ Alan P. Hirmes
                                    ------------------
                                    Alan P. Hirmes
                                    Managing Trustee and Chief Financial Officer


                                       68




                               POWER OF ATTORNEY

Each person whose signature  appears below hereby  constitutes and appoints Jeff
T. Blau and Alan P.  Hirmes,  and each or either  of them,  his true and  lawful
attorney-in-fact with full power of substitution and resubstitution, for him and
in his name,  place and stead,  in any and all  capacities,  to sign any and all
amendments to this Annual  Report,  and to cause the same to be filed,  with all
exhibits  thereto  and  other  documents  in  connection  therewith,   with  the
Securities Exchange Commission,  hereby granting to said  attorneys-in-fact  and
agents,  and each of them,  full power and  authority to do and perform each and
every act and thing  whatsoever  requisite  or desirable to be done in and about
the premises,  as fully to all intents and purposes as the undersigned  might or
could do in person,  hereby  ratifying and  confirming  all acts and things that
said  attorneys-in-fact  and agents,  or either of them, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.

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 registrant
and in the capacities and on the dates indicated:



    Signature                            Title                          Date
------------------       -------------------------------------     -------------



/s/ Jeff T. Blau
----------------
Jeff T. Blau             Chairman of the Board of Trustees
                         and Chief Executive Officer               March 1, 2006


/s/ Alan P. Hirmes
------------------
Alan P. Hirmes           Managing Trustee
                         and Chief Financial Officer               March 1, 2006


/s/ Stanley R. Perla
--------------------
Stanley R. Perla         Trustee                                   March 1, 2006


/s/ Richard M. Rosan
--------------------
Richard M. Rosan         Trustee                                   March 1, 2006


/s/ Scott M. Mannes
-------------------
Scott M. Mannes          Trustee                                   March 1, 2006


                                       69




                                                                     Exhibit 3.3


                                AMENDMENT TO THE
                         AMENDED AND RESTATED BYLAWS OF
                      AMERICAN MORTGAGE ACCEPTANCE COMPANY


     This Amendment (the  "Amendment")  to the Amended and Restated  Bylaws (the
"Bylaws") of American  Mortgage  Acceptance  Company,  a real estate  investment
trust (the "Company"), was approved by the Company's Board of Trustees effective
as of December 14, 2005. Capitalized terms used and not otherwise defined herein
shall  for all  purposes  of this  Amendment  have the  respective  meanings  as
specified in the Bylaws.

RECITALS

     WHEREAS, pursuant to the resolutions adopted on December _, 2005, the Board
of  Trustees of the Company  resolved  to amend the Bylaws to (i)  increase  the
maximum  permissible  leverage;  (ii) eliminate the requirement  that Additional
Mortgage Investments comprise no more than 60% of the Company's invested assets;
and (iii) eliminate the  prohibition on the Company  investing in mortgages that
are subordinate to that of an Affiliate.

NOW THEREFORE, the Bylaws shall be amended as follows:

1.   Amendments.
     ----------

     A.   SECTION  1.1(s).  Section 1.1(s) is hereby amended and restated in its
          entirety as follows:

        (s) Debt  Limitation.  "Debt  Limitation"  shall mean 90% of
        Total Market Value (calculated at the time debt is incurred)
        with respect to Trust Indebtedness.

     B.   SECTION 1.1(rr). Section 1.1(rr) is hereby deleted in its entirety and
          the  balance  of the  numbering  in Section  1.1 is hereby  renumbered
          accordingly.

     C.   SECTION 1.1(ggg). Section 1.1(ggg) is hereby (x) renumbered as Section
          (fff) and (y) amended and restated in its entirety as follows:

        (ggg) Total Market  Value.  "Total  Market Value" shall mean
        the greater of (i) the sum of (x) the aggregate market value
        of  the  Trust's   outstanding  Shares  and  (y)  the  Trust
        Indebtedness excluding unconsolidated  subsidiaries and (ii)
        the aggregate  value of the Trust's  assets as determined by
        the Advisor based upon third-party or management  appraisals
        and other criteria as the Board of Trustees shall  determine
        in its sole discretion.

     D.   SECTION  1.1(iii).  Section 1.1(iii) is hereby amended and restated in
          its entirety as follows:

        (iii) Trust  Indebtedness.  "Trust  Indebtedness" shall mean
        all GAAP  liabilities of the Trust other than trade payables
        and  subordinated  advisor fees and  preferred  equity share
        interests subject to mandatory redemption.

     E.   SECTION  1.1  (lll).  Section  1.1  (lll)  is  hereby  deleted  in its
          entirety.

     F.   SECTION 5.1. The first  paragraph of Section 5.1 is hereby amended and
          restated in its entirety as follows:


                                       70




        GENERAL STATEMENT OF POLICY.  The Trust intends to invest in
        Mortgage  Investments   including:   (i)  Original  Mortgage
        Investments and (ii) Additional  Mortgage  Investments.  The
        Trust shall have the right to acquire or originate Mortgages
        without first obtaining a real property appraisal,  unless a
        majority of the Independent  Trustees determine that such an
        appraisal  is  necessary;  if  obtained,  any real  property
        appraisals  will be  maintained  in the  Trust's  books  and
        records for at least five years.  The foregoing  investments
        are intended to be structured to comply with the Real Estate
        Investment  Trust Provisions of the Code. In addition to the
        investments  referred  to  above,  the  Trust  may,  in  the
        discretion of the Board of Trustees or the Advisor, make the
        investments  described  in  Section  5.2 below or such other
        investments  that the Board of Trustees or the Advisor  deem
        in  good  faith  to  be  consistent   with  the   investment
        objectives  and  policies  of the  Trust as set forth in the
        Consent Statement.

     G.   SECTION 5.7(l). Section 5.7(l) is hereby deleted in its entirety.

     H.   SECTION  7.4. The last  sentence of Section 7.4 is hereby  amended and
          restated in its entirety as follows:

        The Trustees, including the Independent Trustees, shall take
        reasonable  steps to insure  that the  requirements  of this
        Section 7.4 are satisfied on a timely basis.

2.   No Further Amendments.
     ---------------------

          Except to the extent expressly amended by the terms of this Amendment,
     all terms and condition of the Bylaws shall remain in full force and effect
     in accordance with their terms.


                                       71




                                                                   Exhibit 10(a)



                           SECOND AMENDED AND RESTATED
                           ADVISORY SERVICES AGREEMENT

                                     BETWEEN

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY

                                       AND

                         CHARTERMAC AMI ASSOCIATES, INC.



     SECOND AMENDED AND RESTATED  ADVISORY  SERVICES  AGREEMENT  dated March 28,
2006 between American Mortgage  Acceptance  Company, a Massachusetts real estate
investment  trust (the  "Company"),  and  CharterMac  AMI  Associates,  Inc.,  a
Delaware corporation (the "Advisor"). All capitalized terms used herein, and not
otherwise  defined,  shall  have the  meanings  ascribed  to them in  Section 10
hereof.

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS,  the Company is a business trust  organized  under the laws of the
Commonwealth of  Massachusetts,  which has qualified as a real estate investment
trust as  defined  in the  Internal  Revenue  Code of  1986,  as the same may be
amended or modified from time to time (which,  together with any regulations and
rulings thereunder, is hereafter called the "Code");

     WHEREAS,  the Company and the Advisor  originally  entered into an Advisory
Services  Agreement dated as of March 29, 1993,  which agreement was amended and
restated  pursuant  to an  Amended  and  Restated  Advisory  Services  Agreement
effective  as of April 6, 1999,  as amended on November  29,  2001,  February 8,
2002,  November 12, 2003 and June 9, 2004 (as amended,  the  "Advisory  Services
Agreement"),  pursuant to which the Advisor has been  providing  services to the
Company since such date;

     WHEREAS,  the  Independent  Trustees of the Company have  approved  certain
changes to the existing Advisory Services Agreement which will be effective upon
the expiration of the current term of the Advisory  Services  Agreement on March
28, 2006;

     WHEREAS, the Company desires to continue to avail itself of the experience,
sources of information,  advice,  assistance and certain facilities available to
the Advisor and to have the Advisor  undertake  the duties and  responsibilities
hereinafter  set  forth,  on behalf of and  subject  to the  supervision  of the
Trustees of the Company, all as provided herein;

     WHEREAS,  the  Advisor is willing to render such  services,  subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth;

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
IT IS AGREED that the  Advisory  Services  Agreement  is amended and restated as
follows:

     1. DUTIES OF ADVISOR. The Company hereby continues to retain the Advisor as
the advisor of the Company to perform the services  hereinafter  set forth,  and
the Advisor hereby accepts such appointment, subject to the terms and conditions
hereinafter  set  forth.  In  performance  of this  undertaking,  subject to the
supervision of the Trustees and consistent  with the provisions of the Company's
Declaration of Trust, the Advisor shall:


                                       72




          (i) obtain for the  Company,  furnish  and/or  supervise  the services
necessary to perform any ministerial functions in connection with the management
of the day-to-day  operations of the Company  subject to the  supervision of the
Trustees;

          (ii) seek out and  present to the  Company,  whether  through  its own
efforts or those of third  parties  retained by it,  suitable  and a  sufficient
number of investment  opportunities  which are  consistent  with the  investment
objectives and policies of the Company ("Company  Investment  Policy")as adopted
by the Trustees from time to time; the currently  effective  Company  Investment
Policy is set forth on Exhibit A;

          (iii) exercise absolute  discretion,  subject to the Trustees' review,
in decisions to originate, acquire, retain, sell or negotiate for the prepayment
or restructuring of mortgages and other investments of the Company;

          (iv) recommend  investment  opportunities  consistent with the Company
Investment  Policy  and  negotiate  on behalf of the  Company  with  respect  to
potential investments or the disposition thereof;

          (v)  establish  and manage the  Company's  securitization  and capital
markets programs;

          (vi) upon request,  cause an Affiliate to serve as the owner of record
for the  Company's  investments  if such  Affiliate is qualified to do so and in
that  capacity  to hold  escrows,  if  applicable,  on behalf of  mortgagors  in
connection  with the servicing of  mortgages,  which it may deposit with various
banks including banks with which it may be affiliated;

          (vii) obtain for the Company such other services as may be required in
acquiring or disposing of  investments,  disbursing  and collecting the funds of
the Company, paying the debts and fulfilling the obligations of the Company, and
handling,  prosecuting  and  settling  any  claims  of  the  Company,  including
foreclosing  and  otherwise   enforcing   mortgages  and  other  liens  securing
investments;

          (viii)  obtain for the Company  such  services as may be required  for
property  management,  mortgage  brokerage and servicing,  and other  activities
relating to the investment portfolio of the Company;

          (ix) evaluate,  structure and negotiate potential prepayments or sales
of  mortgages  and  other  investments  and,  if  applicable,   coordinate  with
government agencies and government sponsored entities in connection therewith;

          (x) from time to time, or as requested by the  Trustees,  make reports
to the Company as to its performance of the foregoing services; and

          (xi) do all  things  necessary  to assure  its  ability  to render the
services contemplated herein.

     2. FIDUCIARY  RELATIONSHIP.  The Advisor,  as a result of its  relationship
with the Company pursuant to this Agreement,  stands in a fiduciary relationship
with the Shareholders of the Company.

     3. NO  PARTNERSHIP  OR JOINT  VENTURE.  The Company and the Advisor are not
partners  or joint  venturers  with  each  other  and  nothing  herein  shall be
construed to make them  partners or joint  venturers or impose any  liability as
such on either of them.

     4.  RECORDS.  At all times,  the  Advisor  shall keep books of account  and
records  relating to services  performed  hereunder,  which books of account and
records shall be accessible for inspection by the Company at any time during the
ordinary business hours of the Advisor.


                                       73




     5. REIT  QUALIFICATION.  Anything  else in this  Agreement  to the contrary
notwithstanding,  the Advisor shall refrain from any action (including,  without
limitation,  furnishing or rendering services to tenants of property or managing
or operating real property)  which, in its sole judgment made in good faith, or,
in the judgment of the  Trustees,  provided  that the Trustees  give the Advisor
written  notice to such  effect,  would (a)  adversely  affect the status of the
Company as a real estate  investment  trust pursuant to Section 856 of the Code;
(b) violate any law, rule, regulation or statement of policy of any governmental
body or agency having  jurisdiction over the Company or over its securities,  or
(c) be prohibited by the Company's Declaration of Trust.

     6. BANK  ACCOUNTS.  The Advisor may establish and maintain one or more bank
accounts  in the name of the Company or in its own name as agent for the Company
and may collect and deposit in and disburse from any such account,  any money on
behalf of the  Company,  under such terms and  conditions  as the  Trustees  may
approve,  provided that no funds in such account shall be commingled  with funds
of the  Advisor.  From time to time and upon  appropriate  request,  the Advisor
shall render  appropriate  accounting  of such  collections  and payments to the
Trustee and the auditors of the Company.

     7. BOND. If required by the Trustees,  the Advisor will maintain a fidelity
bond with a responsible surety company in such amounts as may be required by the
Trustees,  covering all partners  thereof  together with employees and agents of
the Advisor  handling funds of the Company and  investment  documents or records
pertaining to investments of the Company.  Such bonds shall inure to the benefit
of the Company in respect of losses from acts of such  partners,  employees  and
agents  through theft,  embezzlement,  fraud,  negligence,  error or omission or
otherwise. The premiums on such bonds shall be paid by the Company.

     8.  INFORMATION  FURNISHED  ADVISOR.  (a) The Trustees shall, at all times,
keep  the  Advisor  fully  informed  with  regard  to the then  current  Company
Investment  Policy  including any specific  types of  investments  desired,  the
desired  geographical  areas of  investments,  and any  criteria  or  conditions
established  by the  Trustees as to whether the Company  will make a  particular
investment,  the capitalization policy of the Company (including the policy with
regard to the incurrence of indebtedness by the Company) and their intentions as
to the future  operations  of the Company.  In  particular,  the Trustees  shall
notify the Advisor  promptly  of their  intention  to either  sell or  otherwise
dispose of any of the  Company's  investments,  to make any new  investment,  to
incur any indebtedness or to issue any additional Shares in the Company.

          (b) The Company shall furnish the Advisor with a certified copy of all
financial  statements of the Company,  a signed copy of each report  prepared by
the independent  certified  public  accountants and such other  information with
regard to the Company's  affairs as the Advisor may from time to time reasonably
request.

     9.  CONSULTATION AND ADVICE.  In addition to the services  described above,
the Advisor  shall  consult with the  Trustees and shall,  at the request of the
Trustees of the  Company,  furnish  advice and  recommendations  with respect to
other aspects of the business and affairs of the Company.

     10.  DEFINITIONS.  As used  herein,  the  following  terms  shall  have the
meanings set forth below:

          (a) "ADJUSTED  FUNDS FROM  OPERATIONS"  means net income  (computed in
accordance   with  GAAP)   including   realized  gains  (or  losses)  from  debt
restructuring  and sales of assets,  plus  depreciation and amortization on real
property,  and  after  adjustments  for  unconsolidated  partnerships  and joint
ventures.

          (b) "ADVISOR" shall mean CharterMac AMI Associates, Inc.

          (c)  "AFFILIATE"  shall mean (i) any  Person  directly  or  indirectly
controlling, controlled by or under common control with another Person, (ii) any
Person owning or controlling 10% or more of the outstanding voting securities or
beneficial interests in such other Person, (iii) any officer, director, trustee,
or general partner of such Person,  and (iv) if such other Person is an officer,
director,  trustee or partner of another entity,  then the entity for which that
Person acts in any such capacity.


                                       74




          (d)  "AFFILIATED  PROGRAMS"  shall mean  public or private  investment
partnerships or, any similar programs  organized by the Sponsor,  any successors
to such programs or a combination of such programs.

          (e) "AGREEMENT" shall mean this Amended and Restated Advisory Services
Agreement.

          (f) "ANNUAL INCENTIVE FEE" shall have the meaning set forth in Section
12(b) of this Agreement.

          (g) "ASSET  MANAGEMENT FEE" shall mean the fees payable to the Advisor
pursuant to Section 11 of this Agreement.

          (h) "CAD"  shall mean cash  available  for  distribution,  which shall
consist of the Company's net income (as  determined  pursuant to GAAP)  adjusted
for certain non-cash charges (as determined pursuant to GAAP).

          (i) "CODE" shall mean the Internal  Revenue Code of 1986,  as amended,
or  corresponding  provisions  of  subsequent  revenue laws  (together  with any
regulations and rulings thereunder).

          (j)  "COMPANY"  shall mean American  Mortgage  Acceptance  Company,  a
Massachusetts business trust.

          (k) "COMPANY  EQUITY"  means,  for purposes of  calculating  the Asset
Management  Fee, for any month the sum of the net proceeds  from any issuance of
the Company's  Common Shares,  after  deducting any  underwriting  discounts and
commissions  and other  expenses and costs  relating to the  issuance,  plus (or
minus) the  Company's  retained  earnings  (or deficit) at the end of such month
(without taking into account any non-cash equity  compensation  expense incurred
in current or prior  periods),  which amount shall be reduced by any amount that
the Company pays for repurchases of Common Shares;  provided, that the foregoing
calculation of Equity shall be adjusted to exclude  one-time  events pursuant to
changes in GAAP, as well as non-cash  charges after  discussion  between Advisor
and the  Independent  Directors  and  approval by a majority of the  Independent
Directors in the case of non-cash charges.

          (l)  "DECLARATION  OF TRUST" shall mean the Third Amended and Restated
Declaration  of Trust of the Company,  as amended  and/or  restated from time to
time.

          (m)  "DISTRIBUTIONS  " shall mean any cash distributed to Shareholders
arising from their interest in the Company.

          (n) "GAAP" shall mean generally accepted accounting principles applied
on a consistent basis.

          (o)  "INDEPENDENT  TRUSTEE"  shall mean the  Trustees  who (i) are not
affiliated,  directly or indirectly,  with the Advisor, whether by ownership of,
ownership  interest in,  employment  by, any material  business or  professional
relationship  with, or service as an officer or director of the Advisor,  or its
Affiliates,  (ii) do not serve as a director  or Trustee for more than two other
REITs  organized by the  Sponsor,  and (iii)  perform no other  services for the
Company,  except as Trustees.  For this purpose, an indirect  relationship shall
include circumstances in which a member of the immediate family of a Trustee has
one of the foregoing relationships with the Advisor or the Company.

          (p) "PERSON" shall mean and include individuals, corporations, limited
partnerships,  general  partnerships,  limited liability companies,  joint stock
companies or  associations,  joint ventures,  companies,  trusts,  banks,  trust
companies,  land trusts,  business  trusts or other entities and governments and
agencies and political subdivisions thereof.


                                       75




          (q)  "PROSPECTUS"  shall mean the final  prospectus in connection with
the registration of the Shares filed with the Securities and Exchange Commission
on Form S-11, as amended.

          (r) "REIT" shall mean a corporation or trust which qualifies as a real
estate  investment  trust described in Sections 856 through 860 of the Code (the
"REIT provisions").

          (s) "SHAREHOLDER" shall mean a holder of the Shares.

          (t) "SHARES" shall mean the shares of beneficial  interest,  par value
$.10 per share, of the Company.

          (u)   "SPONSOR"   shall  mean  any  Person   directly  or   indirectly
instrumental  in  organizing,  wholly or in part,  the Company or any Person who
will manage or participate in the management of the Company and any Affiliate of
such Person,  but does not include (i) any Person whose only  relationship  with
the Company is that of an independent  asset manager and whose only compensation
from the Company is as such, and (ii) wholly  independent  third parties such as
attorneys,   accountants  and  underwriters   whose  only  compensation  is  for
professional services.

          (v) "TRUSTEES"  shall mean,  collectively,  the Persons who constitute
the Board of Trustees of the Company.

     11. ASSET  MANAGEMENT  FEE.  Advisor shall receive an asset  management fee
equal to 1.75% per annum of Company  Equity.  The asset  management fee shall be
calculated and paid in cash monthly in arrears. Advisor shall make available the
monthly  calculation  of the asset  management fee to the Company within fifteen
(15) days following the last day of each calendar  month,  and the Company shall
pay the  Advisor  the  asset  management  fee  within  five  (5)  business  days
thereafter.

     12. OTHER FEES/COMPENSATION TO THE ADVISOR.

          (a) ORIGINATION POINTS. The Advisor shall be entitled to receive, with
respect to each investment originated by the Company, the origination points, if
any, paid by borrowers.  In connection  with the  acquisition of investments for
the  Company,  the  Advisor  may also act as an advisor to third  parties  which
participate  with the Company in such  investments  and may receive  origination
points, if any, from such third parties or their borrowers.

          (b)  ANNUAL   INCENTIVE   FEE.   Subject  to  (1)  a  minimum   annual
Distributions being made to Shareholders from CAD of $1.45 per Share AND (2) the
Company  achieving at least annual  Adjusted Funds From  Operations per share of
$1.60 (net of the Annual  Incentive  Fee),  the  Advisor  shall be  entitled  to
receive  incentive  compensation  for each fiscal year in an amount equal to the
product of:

          (A) 25% of the dollar amount by which


          (1) Adjusted Funds From  Operations of the Company  (before the Annual
          Incentive  Fee) per Share  (based on the  weighted  average  number of
          Shares outstanding)


          exceed

          (2) an amount equal to the greater of:


          (a) (i) the  weighted  average  of (x) $20 (the  price  per  Share the
          initial public offering) and (y) the prices per Share of any secondary
          offerings by the Company multiplied by


               (ii) the Ten-Year U.S. Treasury Rate plus 2% per annum; and


                                       76




          (b) $1.45

          multiplied by

          (B) the  weighted  average  number of Shares  outstanding  during such
          year.

          (c) SERVICING  FEES AND OTHER  COMPENSATION  FROM THIRD  PARTIES.  The
Advisor shall be entitled to receive all servicing fees  associated  with assets
under the Company's management. To the extent that the Company participates with
a third party in connection  with  investments,  the Advisor may receive special
servicer fees and other fees and compensation from such third party.

     13.  STATEMENTS.  Prior to the payment of any fees  hereunder,  the Advisor
shall furnish to the Company a statement showing the computation of the fees, if
any, payable under Sections 11, 12 and 14 hereof.

     14.  COMPENSATION FOR ADDITIONAL SERVICES.

          (a)  PROPERTY  MANAGEMENT.  In the event the Company  forecloses  on a
property on which it holds a mortgage,  the Company may be required to take over
the  management of the property.  In such cases,  the Advisor or an Affiliate of
the Advisor may be retained to provide property management services at rates and
on terms no less  favorable  to the  Company  than those  customary  for similar
services, if such entity has knowledge of and experience in the area. In no case
shall such fee (including all rent-up,  leasing, and re-leasing fees and bonuses
paid to any person) exceed 5% of the gross revenues from such properties.

          (b)  PROPERTY  DISPOSITIONS  FOLLOWING  FORECLOSURE.  If  the  Company
forecloses  on a  property  securing a mortgage  and sells  such  property,  the
Advisor or an  Affiliate of the Advisor may be entitled to a  subordinated  real
estate commission equal to the lesser of (i) 3% of the gross sales price of such
property  received by the Company or (ii) one-half of the normal and competitive
rate customarily charged by unaffiliated parties rendering similar services, and
such fees shall be paid only if the  Advisor  or  Affiliate  thereof  provides a
substantial amount of services in the sales effort.

     15. EXPENSES OF THE COMPANY. (a) The Company shall pay all of its expenses,
except those set forth in paragraph 16 hereof.  Without  limiting the foregoing,
it is  specifically  agreed that the following  expenses of the Company shall be
paid by the Company and shall not be borne by the Advisor:

          (i) the cost of money borrowed by the Company;

          (ii) taxes an income and taxes and  assessments  on real  property and
all other taxes applicable to the Company;

          (iii) fees and expenses paid to independent contractors,  unaffiliated
mortgage  servicers,  consultants,  managers and other agents  employed by or on
behalf of the Company;

          (iv) expenses directly  connected with the ownership,  and disposition
of  investments,  or other  property  and with the  origination  or  purchase of
investments  (including  the costs of  foreclosure,  insurance  premiums,  legal
services, brokerage and sales commissions,  maintenance,  repair and improvement
of property);

          (v) expenses of maintaining and managing real estate equity interests,
processing  and  servicing  mortgage and other loans and managing the  Company's
other investments;

          (vi) insurance coverage in connection with the business of the Company
(including officers' and trustees' liability insurance);

          (vii) the expenses of  revising,  amending,  converting,  modifying or
terminating  the Company or revising,  amending or modifying its  organizational
documents;


                                       77




          (viii) expenses  connected with payments of interest or  Distributions
in  cash or any  other  form  made or  caused  to be  made  by the  Trustees  to
Shareholders;

          (ix) all expenses  connected with  communications  to Shareholders and
other bookkeeping and clerical work necessary in maintaining  relations with the
Shareholders,  including  the cost of  printing  and  mailing  certificates  for
securities, proxy solicitation materials and reports to holders of the Company's
securities;

          (x) the cost of any accounting,  statistical or bookkeeping  equipment
necessary for the maintenance of the books and records of the Company;

          (xi) transfer agent's and registrar's fees and charges;

          (xii) other legal,  accounting  and auditing fees and expenses as well
as any costs  incurred  in  connection  with any other  litigation  in which the
Company is involved and in the examination,  investigation or other  proceedings
conducted by any regulatory agency with respect to the Company;

          (xiii)  all  expenses  relating  to any  office or  office  facilities
maintained by the Company or any Subsidiary  exclusive of the main office of the
Advisor,  including,  without limitation,  rent, telephones,  utilities,  office
furniture,  equipment,  machinery  and other  office  expenses  for any  persons
employed by the Company;; and

          (xiv) the  Company's pro rata portion of rent,  telephone,  utilities,
office furniture,  equipment,  machinery and other office, internal and overhead
expenses  of  the  Advisor  and  its  Affiliates   required  for  the  Company's
operations.

          (b) The Company shall reimburse the Advisor and its Affiliates for (i)
the  actual  costs to the  Advisor or its  Affiliates  of goods,  materials  and
services used for and by the Company obtained from  unaffiliated  parties;  (ii)
administrative  services necessary to the operation of the Company and (iii) the
costs of certain personnel  employed by the Company and directly involved in the
organization and business of the Company (including persons who may be employees
or  officers  of the  Advisor  and its  Affiliates)  and for legal,  accounting,
transfer  agent,   reinvestment   and  redemption  plan   administration,   data
processing,  duplicating  and  investor  communications  services  performed  by
employees or officers of the Advisor and its Affiliates which could be performed
directly  for the Company by  independent  parties.  The amounts  charged to the
Company for services performed pursuant to clause (ii) above will not exceed the
lesser of (a) the actual  cost of such  services,  or (b) the  amount  which the
Company would be required to pay to independent parties for comparable services.
No  reimbursement  will be allowed to the Advisor or its Affiliates for services
performed  pursuant  to clause (ii) above  unless the Advisor or its  Affiliates
have the appropriate experience and expertise to perform such services.

          (c) The Company  will  reimburse  the Advisor for any travel  expenses
incurred in connection with the services provided  hereunder and for advertising
expenses incurred by it in seeking any investments or seeking the disposition of
any investments held by the Company.

     16.  EXPENSES  OF THE  ADVISOR.  Except as  otherwise  provided  herein and
without regard to the amount of compensation  received hereunder by the Advisor,
the Advisor shall bear the following expenses:

          (i) employment expenses of the Advisor's or its Affiliates'  personnel
(including  partners and  directors  and officers  thereof and  employees of the
Company who are Trustees, officers and employees of the Advisor), including, but
not limited to, fees, salaries, wages, payroll taxes, travel expenses (except as
set forth  pursuant to Section  15(c)  above) and the cost of  employee  benefit
plans and temporary help expenses;

          (ii)  advertising  expenses  (except as set forth  pursuant to Section
15(c) above);

Notwithstanding  the  provisions of Section 16, the Company shall  reimburse the
Advisor for the expenses set forth in Section 15(b) and 15(c) above.


                                       78




     17.  INTENTIONALLY DELETED.

     18.  OTHER ACTIVITIES OF ADVISOR.  Nothing in this Agreement  shall prevent
the Advisor or any of its Affiliates from engaging in other business  activities
related  to real  estate,  mortgage  investments  or other  investments  whether
similar or  dissimilar to those made by the Company or from acting as advisor to
any  other  person or entity  having  investment  policies  whether  similar  or
dissimilar  to those of the Company  (including  another real estate  investment
trust). However, before the Advisor, its partners, their officers and directors,
and any person  controlled by the partners of the Advisor or their  officers and
directors may take advantage of an opportunity  for their own account or present
or recommend it to others (except for the  presentation  and  recommendation  of
equally suitable investment opportunities to Affiliated Programs, which shall be
governed by the procedures set forth in the Company Investment Policy), they are
obligated  to  present  an  investment  opportunity  to the  Company if (i) such
opportunity is within the Company's  investment  objectives  and policies,  (ii)
such  opportunity  is of a character  which could be taken by the  Company,  and
(iii)  the  Company  has  the  financial  resources  to take  advantage  of such
opportunity.

     19.  TERM; TERMINATION OF AGREEMENT .

          (a) TERM.  This Agreement shall remain in full force through March 28,
2007,  unless terminated by the Company or Advisor as set forth below, and shall
be renewed  automatically for successive one (1) year periods thereafter,  until
this Agreement is terminated in accordance with the terms hereof.

          (b) NON-RENEWAL. Either party may elect not to renew this Agreement at
the  expiration  of the initial term or any renewal term for any or no reason by
notice to the other party at least six (6) months prior to the end of the term.

          (c) VOLUNTARY  TERMINATION.  Either party may terminate this Agreement
or any reason or no reason upon prior  written  notice to the other party (1) in
the case of the  Company,  at least six (6) months prior to the end of the term,
and (2) in the case of the  Advisor,  at least three (3) months prior to the end
of the term.

          (d)  TERMINATION  BY THE  COMPANY.  The  Company  may  terminate  this
Agreement effective sixty (60) days after notice of termination from the Company
to  Advisor in the event that any act of fraud,  misappropriation  of funds,  or
embezzlement against the Company or other willful and material violation of this
Agreement by Advisor in its corporate  capacity (as distinguished  from the acts
of any employees of Advisor which are taken without the complicity of any of the
executive  officers  of  Advisor);  provided,  that such  willful  and  material
violation  continues  for a period of  thirty  (30) days  after  written  notice
thereof  specifying  such violation and requesting  that the same be remedied in
such thirty (30) day period.

          (e)  TERMINATION  BY ADVISOR.  Advisor may  terminate  this  Agreement
effective  upon sixty  (60) days  prior  written  notice of  termination  to the
Company in the event  that the  Company  shall  default  in the  performance  or
observance  of any material  term,  condition or covenant in this  Agreement and
such  default  shall  continue  for a period of thirty  (30) days after  written
notice thereof  specifying such default and requesting that the same be remedied
in such thirty (30) day period.

          (f) TERMINATION FEES. In the event the Agreement is not renewed by the
Company or is terminated  under  Section  19(b) or 19(e),  the Company shall pay
Advisor on the termination  date: (A) if the termination date occurs on or prior
to  March  28,  2010,  a  termination  fee  equal to (1) four  times  the  Asset
Management  Fee Advisor  would have been  entitled  to receive  from the Company
during the 4-calendar quarter period immediately preceding the effective date of
such  termination,  plus (2) four times the Annual  Incentive  Fee Advisor would
have been  entitled to receive from the Company  during the  4-calendar  quarter
period immediately  preceding the effective date of such termination;  or (B) if
the  termination  date occurs after March 28,  2010,  the greater of (1) (a) two
times the Asset  Management Fee Advisor would have been entitled to receive from
the Company  during the  4-calendar  quarter  period  immediately  preceding the
effective  date of such  termination,  plus (b) two times the  Annual  Incentive
Advisor  would  have been  entitled  to  receive  from the  Company  during  the
4-calendar  quarter  period  immediately  preceding the  effective  date of such
termination  or (2) a fee equal to the market  rate  termination  fee payable to
outside advisors of real estate investments trusts. The Company's  obligation to
pay a termination fee shall survive the termination of this Agreement.


                                       79




          (g) SURVIVAL. If this Agreement is terminated pursuant to this Section
19, such  termination  shall be without any further  liability or  obligation of
either party to the other, except as otherwise expressly provided herein.]

          (h) DISPUTE  RESOLUTION.  If the Company and the Advisor are unable to
reach an  agreement  regarding  the fees  payable to the Advisor upon renewal of
this  Agreement  pursuant  to  Section  19(a) or the  amount  of the  applicable
market-rate  termination fee pursuant to Section  19(e)(B)(2),  any such dispute
shall be settled and  determined by  arbitration in New York City before a panel
of three  arbitrators  (who shall be required to be members in good  standing of
the American Arbitration  Association)  pursuant to the Commercial Rules then in
effect of the  American  Arbitration  Association.  The  parties  agree that the
arbitrators  shall have the power to award  damages,  preliminary  or  permanent
injunctive  relief and reasonable  attorneys'  fees and expenses to any party in
such  arbitration.  The  arbitration  award shall be final and binding  upon the
parties  and  judgment  thereon  may be  entered in any court  having  competent
jurisdiction  thereof.  The arbitrators shall be governed by and shall apply the
substantive law of the State of New York in making their award.

     20. AMENDMENTS.  This Agreement shall not be changed, modified,  terminated
or discharged  in whole or in part except by an instrument in writing  signed by
both parties hereto,  or their respective  successors or permitted  assigns,  or
otherwise as provided herein.

     21.  ASSIGNMENT.  This Agreement may not be assigned by the Advisor without
the written  consent of the  Company,  except to a  corporation  or other person
which  controls,  is controlled by, or is under common control with the Advisor,
or a corporation,  association,  trust or other successor organization which may
take over the property and carry on the affairs of the Advisor.  Any assignee of
the Advisor  shall be bound  hereunder to the same extent as the  Advisor.  This
Agreement  shall not be assigned by the Company  without the written  consent of
the Advisor, except to a corporation,  association,  trust or other organization
which is a successor to the Company.  Such successor shall be bound hereunder to
the  same  extent  as the  Company.  Notwithstanding  anything  to the  contrary
contained herein,  the economic rights of the Advisor  hereunder,  including the
right  to  receive  all  compensation  hereunder,  may be sold,  transferred  or
assigned by the Advisor without the consent of the Company.

     22.  ACTION  UPON  TERMINATION.  From  and  after  the  effective  date  of
termination of this Agreement,  pursuant to Section 19 hereof, the Advisor shall
not be entitled to compensation for further service rendered hereunder but shall
be paid all  compensation  and reimbursed for all expenses  accrued  through the
date of termination. The Advisor shall forthwith upon such termination:

          (a) pay over to the  Company  all  moneys  collected  and held for the
account of the Company  pursuant to this Agreement,  after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;

          (b)  deliver to the Company a full  accounting,  including a statement
showing all  payments  collected by it and a statement of all moneys held by it,
covering the period  following the date of the last accounting  furnished to the
Company; and

          (c) deliver to the Company all property  and  documents of the Company
then in the custody of the Advisor.

     23.   INCORPORATION  OF  THE  DECLARATION  OF  TRUST.  To  the  extent  the
Declaration  of Trust  imposes  obligations  or  restrictions  on the Advisor or
grants the Advisor certain rights which are not set forth in this Agreement, the
Advisor shall abide by such  obligations or  restrictions  and such rights shall
inure to the  benefit of the  Advisor  with the same force and effect as if they
were set forth herein.

     24. MISCELLANEOUS. (a)( a) The Advisor assumes no responsibility under this
Agreement  other than to render the services called for hereunder in good faith,
and shall not be  responsible  for any  action of the  Company in  following  or
declining to follow any advice or  recommendations  of the Advisor.  Neither the
Advisor  nor its  directors,  officers  and  employees  shall be  liable  to the
Company, the Shareholders or to any successor or assignee of the Company, except


                                       80




by reason of acts constituting bad faith, gross negligence or reckless disregard
of their  duties.  This shall in no way affect the standard for  indemnification
but shall only constitute a standard of liability. The duties to be performed by
the Advisor  pursuant to this  Agreement  may be performed by it or by officers,
directors or by Affiliates  of the foregoing  under the direction of the Advisor
or delegated to unaffiliated third parties under its direction.

          (b) The  Advisor  shall look  solely to the assets of the  Company for
satisfaction  of all  claims  against  the  Company,  and in no event  shall any
Shareholder  of the Company have any personal  liability for the  obligations of
the Company under this Agreement.

          (c) All  calculations  made in accordance  with this Agreement  (other
than those  calculations  which by their  terms are not based on GAAP)  shall be
based on statements  (which may be unaudited,  except as  specifically  provided
herein) prepared on an accrual basis consistent with GAAP, regardless of whether
the Company may also prepare statements on a different basis.

     25.  NOTICES.  Any  notice,  report  or  other  communication  required  or
permitted  to be given  hereunder  shall be in  writing,  and  shall be given by
delivering such notice by hand or by certified mail,  return receipt  requested,
postage pre-paid, at the following addresses of the parties hereto:

     American Mortgage Acceptance Company
     625 Madison Avenue
     New York, New York 10022
     Attn.:  President

     CharterMac AMI Associates, Inc.
     625 Madison Avenue
     New York, New York  10022
     Attention:  President

Either  party may at any time change its address for the purpose of this Section
25 by like notice.

     26.   HEADINGS.   The  section  headings  hereof  have  been  inserted  for
convenience  of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.

     27.  GOVERNING LAW. The provisions of this Agreement shall be construed and
interpreted in accordance  with the laws of the State of New York as at the time
in effect.

IN WITNESS  WHEREOF,  the undersigned have caused this agreement to be signed as
of the day and year first above written.



AMERICAN MORTGAGE ACCEPTANCE COMPANY


                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:


CHARTERMAC AMI ASSOCIATES, INC.


                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:



                                       81




                                                                   Exhibit 10(d)



                                 LOAN AGREEMENT

                                     BETWEEN

                                   CHARTERMAC

                                       AND

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY

                               AS OF JUNE 30, 2004




                                       82







                                TABLE OF CONTENTS

                                                                                      PAGE

                                                                                 
SECTION 1.       DEFINITIONS AND ACCOUNTING TERMS.......................................1

      1.1     DEFINITIONS...............................................................1

      1.2     ACCOUNTING TERMS AND DETERMINATIONS.......................................8

SECTION 2.       THE CREDIT ACCOMMODATIONS..............................................8

      2.1     THE CREDIT ACCOMMODATIONS.................................................8

      2.2     TERM OF AGREEMENT.........................................................9

      2.3     PREPAYMENT OF THE OBLIGATIONS; BORROWER'S REDUCTION OF LOAN AMOUNT........9

      2.4     EVIDENCE OF INDEBTEDNESS, MATURITY.......................................10

      2.5     INTEREST, LOAN FEES AND PAYMENT OF EXPENSES..............................10

SECTION 3.       CONDITIONS TO CREDIT...................................................2

      3.1     DOCUMENTS................................................................12

      3.2     REPRESENTATIONS AND WARRANTIES...........................................12

      3.3     EVENTS OF DEFAULT........................................................13

      3.4     APPROVAL OF LENDER'S COUNSEL.............................................13

      3.5     PAYMENT OF FEES..........................................................13

SECTION 4.       REPRESENTATIONS AND WARRANTIES.........................................3

      4.1     EXISTENCE; PLACE OF BUSINESS; IDENTIFICATION NUMBERS.....................13

      4.2     AUTHORITY................................................................13

      4.3     FINANCIAL STATEMENTS.....................................................14

      4.4     FINANCIAL CONDITION......................................................14

      4.5     ASSETS...................................................................14

      4.6     LITIGATION...............................................................14

      4.7     BURDENSOME PROVISIONS....................................................14

      4.8     OTHER AGREEMENTS.........................................................15

      4.9     TAXES....................................................................15

      4.10    THE LOAN.................................................................15

      4.11    CAPITALIZATION...........................................................15

      4.12    SOLVENCY.................................................................15

      4.13    EVENTS OF DEFAULT........................................................15

      4.14    ERISA....................................................................16

      4.15    ENVIRONMENTAL AND REGULATORY COMPLIANCE..................................16

      4.16    CONTRACTS WITH AFFILIATES, ETC...........................................17

      4.17    FEDERAL REGULATIONS......................................................17

      4.18    QUALIFICATION AS A REIT..................................................17

      4.19    ADVISORY AGREEMENT; ADVISORY SUBCONTRACT.................................17




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                                TABLE OF CONTENTS
                                   (continued)

                                                                                      PAGE

                                                                                 
      4.20    HOLDING COMPANY AND INVESTMENT COMPANY ACTS..............................18

      4.21    INVESTMENT COMPANY ACT; OTHER REGULATIONS................................18

SECTION 5.       AFFIRMATIVE COVENANTS..................................................8

      5.1     FINANCIAL STATEMENTS.....................................................18

      5.2     MAINTENANCE OF EXISTENCE; CHARACTER OF EQUITY............................19

      5.3     MAINTENANCE OF PROPERTIES................................................19

      5.4     COMPLIANCE WITH LAWS.....................................................19

      5.5     TAXES AND CLAIMS.........................................................20

      5.6     NOTICE OF DEFAULTS.......................................................20

      5.7     CHANGES IN MANAGEMENT....................................................20

      5.8     NOTICE OF LITIGATION.....................................................20

      5.9     RECORDS..................................................................20

      5.10    EXECUTION OF OTHER INSTRUMENTS...........................................20

      5.11    MAINTENANCE OF REIT STATUS...............................................20

      5.12    CONTINUATION OF ADVISORY AGREEMENT AND ADVISORY SUBCONTRACT..............20

      5.13    INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS...................21

SECTION 6.       NEGATIVE COVENANTS.....................................................1

      6.1     ENCUMBRANCES AND LIENS...................................................21

      6.2     INDEBTEDNESS.............................................................22

      6.3     CONSOLIDATION AND MERGER.................................................23

      6.4     LOANS, GUARANTEES, INVESTMENTS...........................................23

      6.5     ACQUISITIONS.............................................................23

      6.6     DISPOSAL OF ASSETS.......................................................23

      6.7     PAYMENT OF DISTRIBUTIONS.................................................23

      6.8     LIMITATIONS ON LEASING...................................................23

      6.9     DEFAULT UNDER OTHER AGREEMENTS OR INDENTURES.............................23

      6.10    PURCHASE OF MARGIN STOCK.................................................24

      6.11    AMENDMENT TO CERTAIN DOCUMENTS...........................................24

      6.12    TRANSACTIONS WITH AFFILIATES.............................................24

      6.13    ERISA COMPLIANCE.........................................................24

      6.14    REAL ESTATE ACTIVITIES...................................................25

      6.15    DEFAULT UNDER ADVISORY AGREEMENT OR ADVISORY SUBCONTRACT.................25

SECTION 7.       FINANCIAL COVENANTS....................................................5

      7.1     INDEBTEDNESS.............................................................25

      7.2     MINIMUM TANGIBLE NET WORTH...............................................25




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                                TABLE OF CONTENTS
                                   (continued)

                                                                                      PAGE

                                                                                 
      7.3     LIQUIDITY................................................................25

      7.4     MATERIAL ADVERSE CHANGE..................................................25

SECTION 8.       EVENTS OF DEFAULT......................................................6

      8.1     EVENTS OF DEFAULT........................................................26

SECTION 9.           MISCELLANEOUS PROVISIONS..........................................28

      9.1     INCORPORATION OF PREAMBLE, RECITAL AND EXHIBITS..........................28

      9.2     NOTICES..................................................................28

      9.3     AMENDMENTS, WAIVERS, ETC.................................................28

      9.4     INDEMNIFICATION..........................................................29

      9.5     INCONSISTENCIES WITH OTHER LOAN DOCUMENTS................................29

      9.6     EXPENSES.................................................................29

      9.7     ASSIGNABILITY............................................................29

      9.8     TIME OF ESSENCE..........................................................30

      9.9     ENTIRE AGREEMENT.........................................................30

      9.10    SEVERABILITY.............................................................30

      9.11    GOVERNING LAW............................................................30

      9.12    NO PARTNERSHIP OR JOINT VENTURE..........................................30

      9.13    REPLACEMENT DOCUMENTS....................................................30

      9.14    HEADINGS.................................................................30

      9.15    USURY LIMITATION.........................................................30

      9.16    WAIVER OF JURY TRIAL.....................................................31




                                       85







                           EXHIBITS TO LOAN AGREEMENT
                           --------------------------
                        
EXHIBIT A                  Form of Note
EXHIBIT 2.1                Form of Borrowing Notice
EXHIBIT 3.1                Closing Checklist
EXHIBIT 4.6                Litigation
EXHIBIT 4.16               Contracts with Affiliates
EXHIBIT 5.1                Form of Covenant Compliance Certificate
EXHIBIT 6.2                Indebtedness




                                       86




                                 LOAN AGREEMENT

     THIS LOAN AGREEMENT (this  "Agreement") is entered into as of this 30th day
of JUNE,  2004 among  American  Mortgage  Acceptance  Company,  a  Massachusetts
business  trust  ("Borrower"),   and  CharterMac,  a  Delaware  statutory  trust
("Lender") .

                                    RECITALS

     By means of a loan  facility  to be  established  under and subject to this
Agreement (the "Line of Credit"),  Borrower desires to secure from the Lender up
to $20,000,000  for use by Borrower to originate  bridge loans,  mortgage loans,
mezzanine loans and other mortgage  investments and Lender has agreed to provide
such financing.

     NOW  THEREFORE,  in  consideration  of the mutual  covenants and conditions
contained therein and set forth below, and for other valuable consideration, the
receipt and  sufficiency  of which is hereby  acknowledged  by the parties,  the
parties agree as follows:

                                   Section 1.
                        DEFINITIONS AND ACCOUNTING TERMS

     1.1 DEFINITIONS. The following terms, as used in this Agreement, shall have
the following meanings, unless the context clearly indicates otherwise:

     "Accountants"  means independent  certified public  accountants  reasonably
     acceptable  to  the  Lender.  The  Lender  hereby   acknowledges  that  the
     Accountants  for  Borrower  may  include   Deloitte  &  Touche  LLP,  which
     accountants are acceptable to the Lender.

     "Advances"  means any and all advances  made or to be made by the Lender to
     Borrower pursuant to and as contemplated by the terms of this Agreement.

     "Advisor" means Related AMI Associates,  Inc., a Delaware  corporation,  or
     any Person  directly or indirectly  succeeding  to Related AMI  Associates,
     Inc. (or RCC under the Advisory  Subcontract)  as the Advisor in accordance
     with the terms of SECTION 5.12 hereof.

     "Advisory  Agreement" means (i) that certain Amended and Restated  Advisory
     Services  Agreement,  effective as of April 6, 1999, amended as of November
     29, 2001, between Borrower and the Advisor,  restating an Agreement,  dated
     March 29, 1993, or (ii) any replacement  thereof  executed and delivered by
     Borrower in accordance  with the terms of Section 5.12 hereof,  pursuant to
     which the Advisor performs  investment  advisory services to Borrower,  and
     manages Borrower's assets and day-to-day affairs.

     "Advisory Subcontract" means that certain advisory subcontract, dated as of
     March 29, 1993,  between the Advisor and RCC,  pursuant to which all of the
     Advisor's  obligations and duties under the Advisory Agreement are assigned
     to and assumed by RCC. In the event that the Advisor or RCC are replaced in
     accordance  with the  terms  of  SECTION  5.12  hereof,  the term  Advisory
     Subcontract  shall mean the Advisory  Agreement  or such other  document as
     Borrower and the Lender may agree.

     "Affiliates"  means, with reference to any Person (including an individual,
     a corporation,  a partnership,  a limited liability  company, a trust and a
     governmental agency or instrumentality) (i) any director,  officer, general
     partner,  manager,  or  employee  of that  Person,  (ii) any  other  Person
     controlling,  controlled by or under direct or indirect  common  control of
     that Person,  (iii) any other Person  directly or  indirectly  holding five
     percent  (5%) or more of any  class of the  capital  stock or other  equity
     interests  (including  partnership  interests,  member  interest,  options,
     warrants,  convertible  securities  and similar  rights) of that Person and
     (iv) any  other  Person  five  percent  (5%) or more of any  class of whose
     capital stock or other equity interests (including  partnership  interests,
     member  interest,  options,  warrants,  convertible  securities and similar
     rights) is held directly or indirectly by that Person.

     "Agreement" means this Loan Agreement.

     "AMAC Credit  Facility" means AMAC Credit Facility LLC, a Delaware  limited
     liability company.


                                       87




     "AMAC Credit  Facility Loan  Agreement"  means that certain loan  agreement
     among Fleet National Bank, AMAC Credit  Facility and Borrower,  dated as of
     October 22,  2002,  as the same may be amended or otherwise  modified  from
     time to time.

     "AMAC Funds" means the funds  advanced by Borrower to AMAC Credit  Facility
     LLC under the AMAC Credit Facility Loan Agreement.

     "Borrower"  means  that  term as  defined  in the first  paragraph  of this
     Agreement.

     "Borrowing Notice" means any borrowing request submitted by Borrower in the
     form of EXHIBIT 2.1 attached hereto.

     "Business  Day" means any day on which  commercial  banks in New York,  New
     York settle payments.

     "Cash and Cash  Equivalents"  means the  aggregate  amount of cash and cash
     equivalents, as determined in accordance with GAAP.

     "Closing  Date" means the date on which the conditions set forth in SECTION
     3.1 through SECTION 3.5 are first satisfied.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Control" means either (i) having an economic  interest in greater than 50%
     of the  equity  of an  entity  and the  power  and  authority  to  elect or
     otherwise  determine  a  majority  of the  board of  directors  or  similar
     governing  body of such entity,  or (ii) having the power and  authority to
     determine and control the policies and operations of such entity.

     "Covenant Compliance Certificate" means the Covenant Compliance Certificate
     substantially  in the  form  of  EXHIBIT  5.1  attached  hereto,  from  the
     principal  financial  officer of Borrower,  certifying that the information
     prepared  thereon has been  prepared in accordance  with GAAP,  and stating
     that such officer has no  knowledge  that a Default or Event of Default has
     occurred and is continuing  or, if a Default or an Event of Default or such
     event has occurred and is  continuing,  the  statement as to its nature and
     the action  which such  entity or any other  entity  proposes  to take with
     respect to such Default or Event of Default.

     "Default" means an event or condition  which,  with the giving of notice or
     the passage of time, or both, would constitute an Event of Default.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
     amended, and the rules and regulations thereunder.

     "ERISA  Affiliate"  means each entity that may have been at any time during
     the  sixty  month  period  ending on the date of this  Agreement  or may be
     treated as a single  employer with Borrower  under the rules of Subsections
     (b), (c), (m) or (o) of Section 414 of the Code.

     "Event of Default"  means any act or  occurrence  specified  as an Event of
     Default in SECTION 8.

     "Fair Market Value of Total Assets"  means the aggregate  fair market value
     of all of a Person's assets,  valuing those assets  customarily  bought and
     sold on a recognized  market  yielding  widely  distributed  standard price
     quotations  at their  readily  ascertainable  market  price,  and all other
     assets valued using such  methodology  and data as shall be fully disclosed
     to, and approved by, the Lender in its reasonable discretion.

     "Fannie Mae" means the Federal National Mortgage Association.

     "FHA" means the Federal Housing Administration.

     "Financial Statements" means that term as defined in SECTION 4.3.


                                       88




     "Freddie Mac" means the Federal Home Loan Mortgage Corporation.

     "GAAP" means  generally  accepted  accounting  principles  and practices as
     applicable  under  SECTION 1.2 below and as set forth in the  opinions  and
     pronouncements of the Accounting Principles Board of the American Institute
     of Certified Public  Accountants and statements and  pronouncements  of the
     Financial  Accounting  Standards Board or in such other  statements by such
     other entity as may be approved by a significant  segment of the accounting
     profession.  GAAP shall be consistently  applied from one accounting period
     to another.

     "GNMA Certificates" means securities  guaranteed by the Government National
     Mortgage   Association   including   GNMA   pass-through    mortgage-backed
     securities.

     "Indebtedness"  with  respect to any  Person  means and  includes,  without
     duplication  (i) all  items  which,  in  accordance  with  GAAP,  would  be
     liabilities on the balance sheet of such Person,  but excluding anything in
     the nature of capital stock or other equity,  surplus  capital and retained
     earnings,  (ii) the face  amount  of all  banker's  acceptances  and of all
     drafts  drawn under all banker's  acceptances  and of all letters of credit
     issued by any bank for the account of such Person and, without duplication,
     all drafts drawn  thereunder,  (iii) the total  amount of all  indebtedness
     secured by any encumbrance to which any property or asset of such Person is
     subject,  whether or not the  indebtedness  secured thereby shall have been
     assumed,  and (iv) the total amount of all  indebtedness and obligations of
     others which such Person has directly or  indirectly  guaranteed,  endorsed
     (otherwise  than for  collection  or  deposit  in the  ordinary  course  of
     business),  discounted with recourse or agreed  (contingently or otherwise)
     to  purchase  or  repurchase  or  otherwise  acquire,  including,   without
     limitation,  any  agreement  (a) to provide  or supply  funds to such other
     Person to maintain working capital,  equity capital, net worth or solvency,
     or (b) otherwise to assure or hold harmless such other Person  against loss
     in respect of its obligations.

     "Interest  Period"  means,  as to any LIBOR  Rate  Amount,  the  period the
     commencement  and duration of which shall be determined in accordance  with
     SECTION 2.5.1(A), provided that if any such Interest Period would otherwise
     end on a day which is not a Business Day, such Interest Period shall end on
     the Business Day next preceding or next  succeeding  such day as determined
     by the Lender in accordance with its usual  practices,  of which the Lender
     shall notify Borrower in writing at the beginning of such Interest Period.

     "IRS" means the United States Internal Revenue Service.

     "LIBOR Business Day" means any Business Day on which  commercial  banks are
     open for international  business (including dealings in dollar deposits) in
     London or such other eurodollar  interbank market as may be selected by the
     Lender in its sole discretion acting in good faith.

     "LIBOR  Rate" means for any  Interest  Period with  respect to a LIBOR Rate
     Amount,  the rate of interest equal to the rate per annum (rounded  upwards
     to the nearest  100,000th of one percent) as determined on the basis of the
     offered rates for deposits in U.S. dollars, for a period of time comparable
     to the Interest Period selected by Borrower with respect to such LIBOR Rate
     Amount which appears on the Telerate page 3750 as of 11:00 a.m. London time
     on the day that is two LIBOR  Business Days  preceding the first day of the
     applicable  Interest Period. If the rate described above does not appear on
     the Telerate  System on any  applicable  interest  determination  date, the
     LIBOR  Rate  shall be the rate  (rounded  upwards as  described  above,  if
     necessary)  determined  on the basis of the offered  rates for  deposits in
     U.S.  dollars for a period of time  comparable to the  applicable  Interest
     Period and in an amount comparable to the principal amount of the requested
     LIBOR Rate  Amount  which are  offered  by four  major  banks in the London
     interbank market at approximately 11:00 a.m. London time on the day that is
     two (2) LIBOR  Business  Days  preceding  the  first day of the  applicable
     Interest  Period.  The  principal  London  office of each of the four major
     London banks will be  requested  to provide a quotation of its U.S.  dollar
     deposit  offered rate. If at least two such  quotations  are provided,  the
     rate for that date will be the arithmetic mean of the quotations.  If fewer
     than two quotations are provided as requested,  the rate for that date will
     be determined on the basis of the rates quoted for loans in U.S. dollars to
     leading  European  banks for a period of time  comparable to the applicable
     Interest  Period  for such LIBOR  Rate  Amount and in an amount  comparable
     thereto offered by major banks in New York City at approximately 11:00 a.m.
     New York City time, on the day that is two LIBOR  Business  Days  preceding
     the first day of such  Interest  Period.  In the event  that the  Lender is
     unable to obtain any such  quotation as provided  above,  it will be deemed
     that the LIBOR Rate cannot be determined  and the interest rate  applicable


                                       89




     to such LIBOR Rate Amount shall be determined  in  accordance  with SECTION
     2.5.1(D).  In the event that the Board of Governors of the Federal  Reserve
     System shall impose a LIBOR Reserve Rate,  then for any period during which
     such LIBOR  Reserve Rate shall apply,  the LIBOR Rate shall be equal to the
     amount  determined  above  divided by an amount  equal to 1 minus the LIBOR
     Reserve Rate.

     "LIBOR Rate Amount" means, in relation to any Interest Period, any portions
     of the principal  amount of the Loan on which Borrower  elects  pursuant to
     SECTION  2.5.1 to pay  interest at a rate  determined  by  reference to the
     LIBOR Rate.

     "LIBOR Reserve  Charge" means,  for each day on which any LIBOR Rate Amount
     is outstanding, a reserve charge in an amount equal to the product of:

          (i)  the outstanding principal amount of the LIBOR Rate Amount,

                                  multiplied by


          (ii) (a) the LIBOR Rate (expressed as a decimal)  divided by one minus
               the LIBOR Reserve Rate,  minus (b) the LIBOR Rate (expressed as a
               decimal),

                                  multiplied by

          (iii) 1/360.

     "LIBOR  Reserve  Rate"  means,  for any day with  respect  to a LIBOR  Rate
     Amount,  the  maximum  rate  (expressed  as a decimal)  at which any lender
     subject  thereto  would be  required to maintain  reserves  (including  all
     basic, supplemental, marginal and other reserves) under Regulation D of the
     Board of  Governors  of the Federal  Reserve  System (or any  successor  or
     similar  regulations  relating  to  such  reserve   requirements)   against
     "Eurocurrency  Liabilities" (as that term is used in Regulation D), if such
     liabilities  were  outstanding.  The LIBOR  Reserve  Rate shall be adjusted
     automatically  on and as of the  effective  date of any change in the LIBOR
     Reserve Rate.

     "Line of Credit" means that term as defined in the recital set forth above.

     "Liquidity"  means Cash and Cash Equivalents plus  availability to Borrower
     under any working capital facilities or Repo Facilities.

     "Loan" means all Advances made or other credit  accommodations  provided by
     the Lender to Borrower in accordance  with the terms and conditions of this
     Agreement.

     "Loan  Amount"  means the  principal  amount of TWENTY  MILLION  AND NO/100
     DOLLARS ($20,000,000.00), or such lesser amount as may from time to time be
     in  effect  following  exercise  of the  reduction  procedure  set forth in
     SECTION 2.3.

     "Loan Documents" means this Agreement, the Note and the documents specified
     in Section 3.1 and any other documents,  instruments or agreements relating
     to the Line of Credit required or contemplated hereby and thereby.

     "Loan Fees" means the  Upfront  Fee.  The Loan Fees shall be in addition to
     all  out-of-pocket  expenses,  including,  without  limitation,  reasonable
     attorneys' fees and costs for the Lender and customary recording, filing or
     other  similar  document  fees and charges,  each of which shall be paid by
     Borrower.

     "Maturity  Date" means such date as determined in accordance with the terms
     of  SECTION  2.4,  upon  which  date all  Obligations,  including,  without
     limitation,   any  remaining  unpaid   principal,   interest,   Loan  Fees,
     out-of-pocket   expenses   including   attorneys'   fees  and  costs,   and
     documentation  charges and other charges  relating to the Loan shall be due
     and payable in full.


                                       90




     "Net Equity"  means equity  raised by  Borrower,  net of costs  incurred in
     raising such equity,  including,  without  limitation,  brokerage costs and
     reasonable fees for professional services.

     "Note" means the credit note in the aggregate  principal amount of the Loan
     Amount executed  substantially  in the form of EXHIBIT A attached hereto by
     Borrower, payable to the order of the Lender.

     "Obligations"  means any and all  obligations  of Borrower to the Lender of
     every kind and  description,  direct or indirect,  absolute or  contingent,
     primary or secondary, due or to become due, now existing in connection with
     or hereafter arising out of this Agreement and the other Loan Documents.

     "Organizational  Documents"  means,  with regard to (i) a corporation,  its
     charter and bylaws, (ii) a limited partnership,  its certificate of limited
     partnership and agreement of limited partnership, (iii) a limited liability
     company,  its certificate of organization  and operating  agreement or such
     similar  certificate  or agreement as is customary in the  jurisdiction  of
     formation for such limited liability company, (iv) a Massachusetts business
     trust,  its charter  and  declaration  of trust,  and (v) any other type of
     entity,  documents,  agreements and certificates serving  substantially the
     same purposes as the foregoing.

     "Person"  means and  includes  any  natural  person,  partnership,  limited
     liability company, trust, estate, association, corporation or other entity.

     "Plans" means that term as defined in SECTION 4.14.

     "RCC" means the Related Capital Company,  LLC, a New York limited liability
     company.

     "Registration Statement" means that certain Form S-2 Registration Statement
     under the Securities Act of 1933, for Borrower, as amended by Amendment No.
     1, filed with the Securities  and Exchange  Commission on January 11, 2002.
     The  Registration   Statement  shall  be  defined,  for  purposes  of  this
     Agreement,  as the Registration  Statement as filed with the Securities and
     Exchange   Commission  prior  to  the  date  hereof,   without   amendment,
     modification or restatement.

     "REIT"  means a "real estate  investment  trust" as such term is defined in
     Section 856 of the Code.

     "Repo Facilities" means the facilities  existing on the date hereof between
     Borrower,  on the one hand,  and each of RBC Capital  Markets  Corporation,
     Greenwich Capital Markets,  Inc. and Bear,  Stearns & Co. Inc. on the other
     hand.

     "Revolving Commitment Period" means that term as defined in SECTION 2.1.

     "Subsidiaries"   means,   with  reference  to  any  Person   (including  an
     individual,  a corporation,  a partnership,  a limited liability company, a
     trust  or a  governmental  agency  or  instrumentality),  any  corporation,
     partnership,  association,  joint stock  company,  business  trust or other
     similar  organization  of whose total capital stock,  voting stock or other
     equity such Person  directly or  indirectly  owns or controls more than 50%
     thereof or any partnership,  limited  liability  company or other entity in
     which such Person  directly or  indirectly  has more than a 50% interest or
     which is controlled directly or indirectly by such Person.

     "Tangible  Net Worth" means the net worth of the entity for which  Tangible
     Net Worth is being  calculated,  computed in accordance  with GAAP and with
     inventory  and cost of goods sold  determined  on a  "first-in,  first-out"
     basis,  and minus (i) the book value,  net of applicable  reserves,  of all
     intangible assets of such entity including,  without limitation,  goodwill,
     trademarks,  tradenames,  copyrights,  patents and any similar rights,  and
     unamortized  debt  discount and expense,  (ii)  intercompany  accounts with
     Affiliates (including  receivables due from Affiliates),  unless created at
     market  rates in the  ordinary  course of  business,  consistent  with past
     practices  and  approved by the Lender,  (iii) to the extent not  otherwise
     approved  in advance by the  Lender,  any write up in the book value of any
     asset of such entity  resulting  from a revaluation  thereof after June 30,
     2004, (iv) the value in excess of the cost thereof, if any, attributable to
     any equity interests of such entity held in treasury,  (v) the value of any
     minority equity  interests in any Person,  and (vi) notes or  subscriptions
     receivable  due  from  any  equityholders  of such  entity  or due from any
     equityholders in respect of such entity.


                                       91




     "Ten Year U.S.  Treasury Rate" means the  arithmetic  average of the weekly
     average yield to maturity for actively traded current coupon U.S.  Treasury
     fixed  interest  rate  securities  (adjusted to constant  maturities of ten
     years)  published by the Federal Reserve Board during a fiscal year, or, if
     such rate is not  published  by the  Federal  Reserve  Board,  any  Federal
     Reserve Bank or agency or department of the federal government  selected by
     the Lender.  If the Lender  determines in good faith that the Ten Year U.S.
     Treasury Rate cannot be calculated as provided above, then the rate will be
     the arithmetic average of the per annum average yields to maturities, based
     upon  closing ask prices on each  business  day during a quarter,  for each
     actively traded  marketable U.S. Treasury fixed interest rate security with
     a final  maturity date not less than 8 nor more than 12 years from the date
     of closing  ask prices as chosen and quoted for each  business  day in each
     such quarter in New York City by at least three recognized  dealers in U.S.
     Government Securities selected by the Lender.

     "Upfront Fee" means that term as defined in SECTION 2.5.2.

     For  purposes of this  Agreement,  except as otherwise  expressly  provided
     herein or unless the context otherwise requires:

          (1) references to any Person defined in this SECTION 1.1 refer to such
     Person and its  successor  in title and assigns or (as the case may be) his
     successors,  assigns,  heirs,  executors,  administrators  and other  legal
     representatives;

          (2) references to this Agreement  refer to such document as originally
     executed, or if subsequently varied,  supplemented or restated from time to
     time, as so varied, supplemented or restated and in effect at that relevant
     time of reference thereto;

          (3) words  importing  the singular  only shall  include the plural and
     vice versa,  and words  importing  the  masculine  gender shall include the
     feminine  gender and vice versa,  and all references to dollars shall be to
     United States Dollars; and

          (4) grammatical variations of terms defined in this Agreement shall be
     defined with  reference  to and in the context of such defined  terms (e.g.
     "Controlling,"  "Controlled,"  etc.  shall be defined in the context of the
     definition  of the word  "Control" to refer to situations in which a Person
     holds  greater than fifty  percent (50%) of the equity of an entity and the
     power and authority to elect or otherwise determine a majority of the Board
     of Directors or similar governing body of such entity).

     1.2 ACCOUNTING TERMS AND  DETERMINATIONS.  All accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP as in effect from time to time.

                                   Section 2.
                            THE CREDIT ACCOMMODATIONS

     2.1  THE CREDIT ACCOMMODATIONS.

     2.1.1  ADVANCES.  Subject  to the terms  and  conditions  hereof,  from and
including  the  Closing  Date and prior to the  Maturity  Date  (the  "REVOLVING
COMMITMENT  PERIOD"),  the Lender agrees to make revolving loans ("ADVANCES") to
Borrower  from  time to time in an  aggregate  principal  amount at any one time
outstanding  which  does  not  exceed  the Loan  Amount.  During  the  Revolving
Commitment Period, Borrower may use the Loan Amount by borrowing,  prepaying the
Advances in whole or in part, and reborrowing,  all in accordance with the terms
and  conditions  hereof.  Borrower  shall give the Lender written notice of each
requested Advance in the form of a Borrowing Notice,  signed by Borrower. On the
Maturity Date, Borrower shall repay in full the outstanding principal balance of
all Advances.

     2.1.2 MAKING OF REVOLVING  LOANS.  Promptly  after receipt of the Borrowing
Notice,  the Lender shall make the funds available to Borrower on the applicable
Borrowing Date,  utilizing  reasonable  efforts to initiate the transfer of such
funds so received by not later than 2:00 p.m. (New York time) and shall disburse
such  proceeds in  accordance  with  Borrower's  instructions  set forth in such
Borrowing Notice.


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     2.1.3  TERMINATION OF REVOLVING  COMMITMENT  PERIOD.  Without  limiting any
other  rights  or  remedies  available  to the  Lender  hereunder  or under  any
applicable law, and notwithstanding  any other provision of this Agreement,  the
Revolving  Commitment  Period shall end  immediately  in the event that Borrower
fails to perform or observe any covenant, term, provision,  condition, agreement
or obligation  under any of the Loan  Documents or any other note,  agreement or
instrument  in favor  of the  Lender,  or in the  event  that any of  Borrower's
Subsidiaries  fails  to  perform  or  observe  any  covenant,  term,  provision,
condition, agreement or obligation under any of the Loan Documents.

     2.1.4 APPLICATION OF PAYMENTS. All Obligations incurred with respect to any
Loan made to Borrower shall be paid within the applicable  repayment periods set
forth in this Section 2.1. All payments shall be applied first to the payment of
all Loan Fees, expenses and other amounts due to the Lender (excluding principal
and  interest),  then  to  accrued  interest,  and the  balance  on  account  of
outstanding principal of the Loan; provided, however, that after a Default or an
Event of Default has occurred and is continuing, payments will be applied to the
Obligations  as the Lender  determines in its  unrestricted  discretion.  If the
entire amount of any required  principal  and/or interest payment is not paid in
full within  fifteen (15) days after the same is due,  Borrower shall pay to the
Lender a late fee equal to five percent (5%) of the required payment.

     2.2 TERM OF  AGREEMENT.  This  Agreement  shall  continue in full force and
effect so long as any Obligation remains outstanding and the Lender continues to
have any commitment to make any Advance or other credit accommodation hereunder.

     2.3  PREPAYMENT OF THE  OBLIGATIONS;  BORROWER'S  REDUCTION OF LOAN AMOUNT.
Borrower may prepay any  Obligation in whole or part at any time or from time to
time,  with  accrued  interest  to the  date of such  prepayment  on the  amount
prepaid,  but without premium or penalty.  Any such partial  prepayment shall be
applied  against the Advances  under the Line of Credit as Borrower shall direct
so long as there is not then  outstanding  any Default or Event of Default  and,
after the  occurrence  of such Default or Event of Default,  as the Lender shall
determine in its unrestricted discretion (provided that the Lender agrees not to
prepay a LIBOR Rate Amount  prior to the end of an Interest  Period if there are
any outstanding  Advances  accruing interest with reference to the LIBOR Rate at
such time).  Any  prepayment  of a LIBOR Rate  Amount  shall be  accompanied  by
payment of any  additional  amounts  required  pursuant  to  SECTION  2.5.1 (F).
Borrower  may from time to time by  written  notice  delivered  to the Lender at
least  three (3)  Business  Days prior to the date of the  requested  reduction,
reduce the Loan Amount by integral  multiples of $1,000,000 as to any unborrowed
portion of the Loan Amount.  No reduction of the Loan Amount shall be subject to
reinstatement.

     2.4 EVIDENCE OF INDEBTEDNESS,  MATURITY. The Loan shall be evidenced by the
Note in the  aggregate  principal  amount of the Loan  Amount.  The  outstanding
principal balance of the Loan,  together with accrued interest thereon,  and all
other amounts payable by Borrower under the terms of the Loan  Documents,  shall
be due and payable on June 30, 2005 (the "MATURITY DATE").

     2.5  INTEREST, LOAN FEES AND PAYMENT OF EXPENSES.

     2.5.1 LIBOR Interest Rate.
           -------------------

     (A)  At the option of  Borrower,  so long as no Default or Event of Default
          has occurred and is then  continuing,  Borrower may elect from time to
          time prior to the Maturity Date to have all or a portion of the unpaid
          principal amount of the Loans bear interest at a per annum rate during
          any particular  Interest  Period with reference to the LIBOR Rate plus
          three percent (3%);  provided,  however,  that any such portion of any
          Loan  shall be in an amount  not less than  $100,000  or some  greater
          integral  multiple of  $100,000  with  respect to any single  Interest
          Period.  During the continuation of any Event of Default,  interest on
          the Loans will be  calculated  based on the one month  LIBOR Rate plus
          any  default  interest  and  other  penalties  provided  for  in  this
          Agreement.  Each Interest Period selected  hereunder shall commence on
          the first day of a calendar  month.  Any  election by Borrower to have
          interest  calculated  at the LIBOR Rate shall be made by notice (which
          shall be  irrevocable)  to the Lender at least three (3) Business Days
          prior to the first day of the proposed Interest Period, specifying the
          LIBOR Rate Amount and the  duration of the  proposed  Interest  Period
          (which must be for one, two,  three or six months).  Any such election
          of a LIBOR Rate shall lapse at the end of the expiring Interest Period
          unless  extended by a further  election  notice provided in accordance
          with this paragraph. Interest shall be payable in the last day of each


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          such  Interest  Period and if such  Interest  Period has a duration of
          more than three  months,  on each date  during  such  Interest  Period
          occurring  every  three  months  from the first  day of such  Interest
          Period. All computations of interest accruing on the unpaid balance of
          Loans from time to time shall be  calculated on the basis of a 360-day
          year  for the  actual  number  of days  elapsed.  From and  after  the
          occurrence of an Event of Default and, when applicable, the expiration
          of the 15-day  cure  period for such Event of Default as  provided  in
          SECTION 8.1, and during the continuation of such Event of Default, the
          unpaid  balance  of the  Loan  shall  bear  interest,  to  the  extent
          permitted by law, at the annual rate of interest equal to four percent
          (4%) above the  interest  rate  applicable  to such Loan  pursuant  to
          SECTION  2.5.1  in  effect  on the  first  Business  Day  prior to the
          occurrence  of  such  Event  of  Default,   which  interest  shall  be
          compounded  monthly  and  payable  on  demand.   Notwithstanding   the
          foregoing,  Borrower may not select an Interest  Period which  extends
          beyond the Maturity Date.

     (B)  Borrower shall pay to the Lender,  the LIBOR Reserve  Charge,  if any,
          with respect to LIBOR Rate Amounts of the Loans  outstanding from time
          to time on the dates interest is payable on such LIBOR Rate Amounts.

     (C)  The Lender shall  forthwith  upon  determining  any LIBOR Rate provide
          notice  thereof to Borrower.  Each such notice shall be conclusive and
          binding upon Borrower.

     (D)  If,  with  respect  to any  Interest  Period,  the Lender is unable to
          determine  the LIBOR  Rate  relating  thereto,  or  adverse or unusual
          conditions in or changes in applicable  law relating to the applicable
          Eurodollar  interbank  market  make it illegal  or, in the  reasonable
          judgment of the Lender, impracticable,  to fund therein the LIBOR Rate
          Amount or make the  projected  LIBOR Rate  unreflective  of the actual
          costs of funds therefor to the Lender,  or if it shall become unlawful
          for the Lender to charge  interest on the Loans on a LIBOR Rate basis,
          then  in any of the  foregoing  events  the  Lender  shall  so  notify
          Borrower and  interest  will be  calculated  and payable in respect of
          such  projected  Interest  Period (and  thereafter  for so long as the
          conditions  referred to in this sentence shall  continue) by reference
          to the "prime rate" published by Citibank, N.A. plus 1% per annum.

     (E)  If any  Interest  Period would  otherwise  end on a day which is not a
          Business Day for LIBOR Rate purposes,  that Interest  Period shall end
          on the Business  Day next  preceding  or next  succeeding  such day as
          determined by the Lender in  accordance  with its usual  practice,  of
          which the  Lender  shall  notify  Borrower  at the  beginning  of such
          Interest Period.

     (F)  Borrower  may prepay a LIBOR Rate  Amount only upon at least three (3)
          Business Days prior  written  notice to the Lender (which notice shall
          be irrevocable). Borrower shall pay to the Lender, upon request of the
          Lender,  such  amount  or  amounts  as  shall  be  sufficient  (in the
          reasonable  opinion of the  Lender) to  compensate  the Lender for any
          loss,  cost, or expense  incurred as a result of: (i) any payment of a
          LIBOR Rate  Amount on a date  other than the last day of the  Interest
          Period for such Loan;  (ii) any  failure by Borrower to borrow a LIBOR
          Rate Amount on the date  specified by Borrower's  written  notice;  or
          (iii) any  failure by  Borrower to pay a LIBOR Rate Amount on the date
          for payment specified in Borrower's written notice.

     2.5.2  UPFRONT FEE. On the Closing  Date,  the  Borrower  agrees to pay the
Lender a fee of $30,000 (the "Upfront Fee").

     2.5.3 PAYMENT OF FEES.  Borrower  hereby  authorizes the Lender to disburse
proceeds of the Loan to pay the Loan Fees and the  reasonable  fees and expenses
of the  Lender's  legal  counsel  notwithstanding  that  Borrower  may not  have
requested a disbursement of such amount.  Such disbursements  shall constitute a
portion of the outstanding  principal balance of the Loan and the Note and shall
be  deemed to be the  first  principal  amounts  repaid  by  Borrower  in making
principal payments, whether or not designated as such by Borrower.  Invoices for
all expenses charged to Borrower pursuant hereto will be provided to Borrower by
the Lender prior to any such disbursement,  and Borrower shall pay to the Lender
all amounts due  pursuant to any such  invoices as  repayment of such portion of
the outstanding  principal  balance of the Loan and the Note represented by such
invoices,  with all interest accrued  thereon,  within twenty (20) Business Days
following Borrower's receipt thereof.


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     2.5.4 CHANGE IN LAWS. Anything herein to the contrary  notwithstanding,  if
any future applicable law (which expression, as used in this Agreement, includes
statutes and rules and regulations thereunder and interpretations thereof by any
competent  court or by any  governmental  or other  regulatory  body or official
charged with the administration or the interpretation thereof) shall (1) subject
the Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding
of any nature with  respect to this  Agreement,  the Loans or the payment to the
Lender of any amounts due to it hereunder, or (2) materially change the basis of
taxation of payments to the Lender of the  principal  or the  interest on or any
other amounts payable to the Lender  hereunder,  or (3) impose on the Lender any
other conditions or requirements with respect to this Agreement, the Loan Amount
or any Loan,  and the result of any of the foregoing is (a) to increase the cost
to making, funding or maintaining all or any part of the Loans, or (b) to reduce
the  amount  of  principal,  interest  or other  amount  payable  to the  Lender
hereunder,  or (c) to require  the  Lender to make any  payment or to forego any
interest  or other  sum  payable  hereunder,  the  amount  of which  payment  or
foregoing  interest or other sum is  calculated by reference to the gross amount
of any sum receivable or deemed received by the Lender from Borrower  hereunder,
then, and in each such case not otherwise provided for hereunder, Borrower will,
upon demand made by the Lender accompanied by calculations thereof in reasonable
detail,  pay to the Lender  such  additional  amounts as will be  sufficient  to
compensate the Lender for such additional cost, reduction,  payment or foregoing
interest or other sum,  provided that the foregoing  provisions of this sentence
shall  not  apply in the case of any  additional  cost,  reduction,  payment  or
foregoing  interest or other sum  resulting  from any taxes  charged  upon or by
reference to the overall net income, profits or gains of the Lender.

                                   Section 3.
                              CONDITIONS TO CREDIT

     The Lender's  obligations to make any Advances hereunder are subject to the
fulfillment  of each of the following  conditions  to the Lender's  satisfaction
immediately prior to or contemporaneously with the making of any such Advances:

     3.1 DOCUMENTS.  Prior to or concurrently with the execution and delivery of
this Agreement, the Lender shall receive each of the following documents in form
and substance satisfactory to the Lender:

     3.1.1 All of the documents listed on the Closing Checklist  attached hereto
as EXHIBIT 3.1; and

     3.1.2 Such other  instruments  or  documents  as the  Lender's  counsel may
reasonably request.

     3.2  REPRESENTATIONS  AND  WARRANTIES.  Upon execution and delivery of this
Agreement and upon each request by Borrower for an Advance,  the representations
and warranties  contained in Section 4 of this  Agreement  shall be accurate and
complete (except to the extent such representations and warranties relate solely
to an earlier specific date, in which case such  representations  and warranties
shall have been accurate and complete as of such date).

     3.3 EVENTS OF DEFAULT.  Upon  execution and delivery of this  Agreement and
upon each  request by Borrower  for an  Advance,  no Default or Event of Default
hereunder shall have occurred and be continuing.

     3.4  APPROVAL OF LENDER'S  COUNSEL.  Upon  execution  and  delivery of this
Agreement  and upon each request by Borrower for an Advance,  all legal  matters
incident to or in connection with the transactions  hereby contemplated shall be
reasonably satisfactory to counsel for the Lender.

     3.5 PAYMENT OF FEES.  At the  Closing  Date and prior to making any Advance
hereunder, the Lender shall have received from Borrower an unconditional payment
of the Loan Fees then due and  payable,  together  with payment of all costs and
expenses,  including  without  limitation  reasonable  attorneys' fees and costs
incurred by the Lender in connection  with the preparation and execution of this
Agreement and the Loan Documents.  Notwithstanding the foregoing, and without in
any way reducing  Borrower's  obligation to pay such fees, the Lender agrees not
to refuse to make an Advance  solely  because  attorneys  fees  incurred  by the
Lender,  for which  Borrower has been  invoiced  within 30 days of such Advance,
remain outstanding.


                                       95




                                   Section 4.
                         REPRESENTATIONS AND WARRANTIES

     Borrower  represents and warrants that, as of the date hereof and as of any
date any Advances under the Line of Credit are to be made:

     4.1 EXISTENCE; PLACE OF BUSINESS;  IDENTIFICATION NUMBERS. Borrower and its
Subsidiaries are duly organized, validly existing and in good standing under the
laws of the  state of its  formation.  Borrower  and its  Subsidiaries  are duly
licensed or qualified in all jurisdictions wherein the character of the property
owned  or the  nature  of the  business  transacted  by it  makes  licensing  or
qualification  necessary or advisable,  except to the extent that the failure to
do so could not reasonably be expected to have a material  adverse effect on the
business,  results of  operations  or  condition  (financial  or  otherwise)  of
Borrower and its Subsidiaries,  taken as a whole.  Borrower and its Subsidiaries
are also duly  authorized,  qualified and licensed  under all  applicable  laws,
regulations, ordinances or orders of public authorities to carry on its business
in the places and in the manner presently  conducted,  except to the extent that
the failure to do so could not reasonably be expected to have a material adverse
effect on the  business,  results  of  operations  or  condition  (financial  or
otherwise) of Borrower and its Subsidiaries,  taken as a whole. Borrower has the
organizational  power to enter into any  transaction and to make and perform any
agreement or instrument  which this Agreement or the Loan  Documents  require or
contemplate.

     4.2 AUTHORITY.  The execution,  delivery and performance by Borrower of the
Loan Documents and the  transactions  contemplated by this  Agreement:  (a) have
been duly authorized and do not require any other filing with,  consent from, or
approval by any Person or governmental authority,  (b) do not violate Borrower's
Organizational Documents or any law, rule, regulation,  order, writ, judgment or
decree,  and will not result in or  constitute  a default  under any  indenture,
credit agreement,  or any other agreement or instrument,  to which it is a party
or to which any of its property is subject.

     4.3 FINANCIAL  STATEMENTS.  The balance sheet and  statements of income and
retained earnings of Borrower, on a consolidated basis, as of December 31, 2003,
audited  by the  Accountants,  and the  interim  management  prepared  financial
statements of Borrower, on a consolidated basis, as of March 31, 2004, each duly
certified by the principal  financial  officer of Borrower,  as furnished to the
Lender (collectively,  the "Financial Statements"), are complete and correct and
fairly present the financial  position of Borrower and the results of operations
for the period  indicated.  Each of the  Financial  Statements  was  prepared in
accordance with GAAP.

     4.4 FINANCIAL  CONDITION.  Since the date of the latest Financial Statement
(a) there has been no materially  adverse  change in the condition  financial or
otherwise of Borrower, and its Subsidiaries,  taken as a whole, and (b) Borrower
and its  Subsidiaries  have not entered  into,  incurred or assumed any material
long-term debts, mortgages, leases or oral or written commitments, nor commenced
any significant project, nor made any significant purchase or acquisition of any
property  except with the prior written consent of the Lender in accordance with
the terms  hereof.  Notwithstanding  the  foregoing  sentence,  Borrower and its
Subsidiaries may enter into, incur or assume debt, mortgages,  leases or oral or
written  commitments,  commence  significant  projects  and  purchase or acquire
property so long as such action is done in the  ordinary  course of business and
is consistent  with the  description  of Borrower's  Business.  Borrower and its
Subsidiaries do not have any contingent  liabilities of any  substantial  amount
which are not reflected in the Financial  Statements described above, except for
liabilities  incurred by  Borrower  and its  Subsidiaries  since the date of the
Financial Statements in the ordinary course of its business consistent with past
practices.

     4.5 ASSETS. Borrower and its Subsidiaries have good and marketable title to
all of its properties and assets,  including without  limitation as reflected in
the balance sheet  included in the  Financial  Statements,  except  property and
assets sold or otherwise  disposed of at market rates in the ordinary  course of
business and consistent with the description of Borrower's  Business  subsequent
to the date of such balance sheet. Borrower and its Subsidiaries do not have any
outstanding liens or encumbrances on any of its properties or assets, other than
as fully described in the Financial  Statements.  Borrower and its  Subsidiaries
are not a party  to any  security  agreements  or  title  retention  agreements,
whether in the form of leases or otherwise,  of any personal  property except as
reflected in the financial statements.

     4.6 LITIGATION.  There are no actions, suits, proceedings or investigations
pending or, to the knowledge of Borrower  upon  reasonable  inquiry,  threatened
against  or  affecting  Borrower,  at  law,  in  equity,  or  before  or by  any


                                       96




governmental department,  commission, board, bureau, agency, or instrumentality,
domestic or  foreign,  which if  adversely  determined  would have a  materially
adverse  effect on the business or  condition of Borrower and its  Subsidiaries,
taken as a whole, other than those actions, suits, proceedings or investigations
set forth on EXHIBIT 4.6.  Borrower and its  Subsidiaries  are not in default or
violation, in either case, beyond expiration of applicable grace, cure or notice
periods of any order, writ, injunction or decree.

     4.7  BURDENSOME  PROVISIONS.  Other  than  as  reflected  in the  Financial
Statements,  Borrower  and its  Subsidiaries  are not a party to any  indenture,
agreement,  instrument  or lease,  or subject to any charter,  bylaw,  operating
agreement or other  restriction,  or any law,  rule,  regulation,  order,  writ,
judgment or  injunction,  which will,  under current or  reasonably  anticipated
conditions,  materially and adversely affect its ability to fully perform all of
the Obligations.

     4.8 OTHER  AGREEMENTS.  Borrower  and its  Subsidiaries  are not in default
beyond  applicable  grace,  cure or notice periods to any material extent in the
performance,  observance or fulfillment of any of the obligations,  covenants or
conditions contained in any debenture, note or other evidence of indebtedness of
such entity or any  indenture  or  agreement to which it is a party or is bound,
which  would  have a  material  adverse  effect on the  financial  condition  of
Borrower and its Subsidiaries, taken as a whole.

     4.9 TAXES.  Borrower  and its  Subsidiaries  have  filed all United  States
federal and state tax returns  which are required to be filed by it (taking into
account  extensions  permitted by applicable law) and have paid or made adequate
provision  for the payment of all taxes which have or may become due pursuant to
those returns, to any matters raised by audits,  assessments received by it, and
for any other causes known to it, including foreign taxes.

     4.10  THE  LOAN.  This  Agreement,  any  Note  and any  other  of the  Loan
Documents, or any other documents delivered by Borrower to or for the benefit of
the Lender at any time in  connection  with the execution and delivery of any of
the Loan  Documents,  will,  when executed and delivered,  constitute  valid and
binding  obligations  of  such  entity,   enforceable  against  such  entity  in
accordance  with  their  respective  terms,  except  as  limited  by  applicable
bankruptcy,  insolvency,  reorganization,  moratorium  or other similar laws, or
general  principles  of equity,  affecting  the rights of  creditors  generally.
Borrower will duly and punctually pay any principal and interest when due on any
Obligation requiring the payment of money.

     4.11  CAPITALIZATION.  The  outstanding  equity of  Borrower  is  comprised
exclusively of trust interests or member interests,  all of which have been duly
issued and are  outstanding and fully paid and  nonassessable.  There are (i) no
outstanding  securities or agreements  exchangeable  for or convertible  into or
carrying any rights to acquire any equity  interests  in  Borrower,  and (ii) no
outstanding commitments,  options,  warrants, calls or other agreements (whether
written or oral) binding on Borrower  which require or could require such entity
to sell, grant, transfer,  assign, mortgage,  pledge or otherwise dispose of any
equity interests of Borrower, except as set forth on EXHIBIT 4.11. Except as set
forth in any  Organizational  Document  provided to the Lender for Borrower,  no
equity  interests of Borrower are subject to any restrictions on transfer or any
member agreements, voting agreements, trust agreements, trust deeds, irrevocable
proxies, or any other similar agreements or interests (whether written or oral).

     4.12 SOLVENCY.  Borrower has and, after giving effect to each Advance under
the Line of Credit will have,  tangible  assets  having a fair salable  value in
excess of the amount required to pay the probable liability on its then existing
debts  (whether  matured or  unmatured,  liquidated  or  unliquidated,  fixed or
contingent);  Borrower  has and will have  access to  adequate  capital  for the
conduct of its business and the  discharge of its debts  incurred in  connection
therewith as such debts mature.

     4.13 EVENTS OF DEFAULT.  No Event of Default or, to the best  knowledge  of
Borrower, Default exists.

     4.14 ERISA.  Borrower and the ERISA Affiliates,  and each "Employee Pension
Benefit  Plan" and each  "Employee  Welfare  Benefit Plan" (as defined in ERISA)
established,  maintained or  contributed to (including any such plan to which an
obligation   to   contribute   exists)  by  Borrower  or  any  ERISA   Affiliate
(collectively, the "Plans") is in compliance in all material respects with ERISA
and the  provisions  of the Code  applicable  to such  entity  or Plan;  neither
Borrower  nor any  ERISA  Affiliate  or any Plan has  engaged  in a  "prohibited
transaction"  (as defined in ERISA and the Code) which would subject such entity
or such Plan to a material tax or penalty imposed on a "prohibited transaction";


                                       97




neither  Borrower nor any ERISA  Affiliate or any Plan has incurred any material
"accumulated  funding  deficiency" (as defined in ERISA);  the aggregate current
value of all  assets  of the  funded  Plans of each of  Borrower  and any  ERISA
Affiliate  is at  least  equal to the  aggregate  current  value of all  accrued
benefits under such Plans  calculated in accordance  with actuarial  assumptions
current as of the date of this representation and warranty on a Plan termination
basis;  neither  Borrower  nor any ERISA  Affiliate  has  incurred  any material
liability to the Pension Benefit  Guaranty  Corporation  over and above premiums
required  by law and which have been paid or are not yet due;  neither  Borrower
nor any ERISA  Affiliate has  terminated any Plan in a manner which could result
in the  imposition  of a lien on the property of such entity;  none of the Plans
are  multi-employer  plans (as defined in ERISA). All contributions to all Plans
which  were  required  to be  made  or  provided  for as of  the  date  of  this
representation  and warranty have been made or provided for in  accordance  with
GAAP and,  in the case of Plans,  funded by means  other  than  direct  employer
contributions, all such funding required through the date of this representation
and  warranty  has been made or provided for in  accordance  with GAAP;  each of
Borrower and the ERISA Affiliates have performed in all material respects all of
their respective obligations under each Plan and each Plan has been administered
in  accordance  with its  terms;  there are no claims,  complaints  or causes of
action pending or, to Borrower's  knowledge,  threatened against any Plan (other
than claims filed in the ordinary  course for  benefits  under such Plans);  and
Borrower does not have any  liability,  contingent or otherwise,  under any Plan
that is not disclosed on its Financial Statements.

     4.15 ENVIRONMENTAL AND REGULATORY COMPLIANCE.

     4.15.1 As to each of the real properties either owned or leased by Borrower
or any of its Subsidiaries, each such property is presently in compliance in all
material  respects with, and has in full force and effect,  all material permits
or approvals required by, all applicable  anti-pollution,  hazardous  substance,
hazardous material, oil, environmental, health, safety or other laws, ordinances
or regulations, and Borrower and its Subsidiaries have not received notification
that any of the  foregoing  properties  is in violation of any of the  foregoing
provisions, except for any non-compliance with respect to, or lack of possession
of the  foregoing,  which  does not have or will not have a direct  or  indirect
material adverse effect, in the Lender's reasonable judgment,  on the ability of
Borrower to meet its Obligations  under any of the Loan  Documents.  No inquiry,
notice or threat to give notice by any governmental authority or third party has
been  received  by  Borrower  or any of its  Subsidiaries  with  respect  to the
generation,  storage or disposal  or release or threat of release  on,  under or
from  any real  property  either  owned  or  leased  by  Borrower  or any of its
Subsidiaries,  of any hazardous  substance,  hazardous  material or oil, or with
respect to any violation of any federal, state or local environmental, health or
safety  statute or  regulation  which  could have a direct or  material  adverse
effect, in the Lender's reasonable judgment,  on the ability of Borrower to meet
its Obligations under any of the Loan Documents.

     4.16 CONTRACTS WITH AFFILIATES, ETC. Except as disclosed in EXHIBIT 4.16 or
in the Financial  Statements and except for agreements or transactions  (in each
case) in the ordinary course of business and on an arm's-length basis upon terms
at least as favorable  as would be  available to Borrower as is a party  thereto
with an unaffiliated  third party,  neither Borrower nor any of its Subsidiaries
is a party  to or  otherwise  bound by any  agreement,  instrument  or  contract
(whether  written or oral) with any  Affiliate,  except for any such  agreement,
instrument  or  contract  as would  not  materially  and  adversely  affect  the
condition  (financial  or  otherwise),   properties,   business  or  results  of
operations  of Borrower and its  Subsidiaries,  taken as a whole,  or Borrower's
ability to meet its Obligations under any of the Loan Documents.

     4.17 FEDERAL  REGULATIONS.  No part of the proceeds of any Advance,  and no
other  extensions of credit  hereunder,  will be used for "buying" or "carrying"
any "margin  stock" within the  respective  meanings of each of the quoted terms
under  Regulation  U as now and  from  time  to time  hereafter  in  effect.  If
requested by the Lender,  Borrower will furnish to the Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U
1, as applicable, referred to in Regulation U.

     4.18  QUALIFICATION  AS A REIT.  Borrower  qualified  as a REIT  under  the
provisions of the Code, as  applicable  for its fiscal years ended  December 31,
1991  through  December 31,  2001,  and from  December 31, 2001 through the date
hereof. All appropriate  federal income tax returns for the fiscal years through
December  31,  2001 have been filed by Borrower  with the IRS and no  previously
filed  return has been  examined  and  reported on by the IRS.  Borrower has not
incurred any  liability  for excise taxes  pursuant to Section 4981 of the Code.
Borrower is organized in conformity with the requirements for qualification as a
REIT pursuant to Sections 856 through 860 of the Code, and  Borrower's  proposed
method  of  operation  consistent  with  Borrower's  business  and the  business


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activities   contemplated   by  this  Agreement  will  enable  it  to  meet  the
requirements for qualification and taxation as a REIT under the Code.

     4.19 ADVISORY AGREEMENT; ADVISORY SUBCONTRACT.

     4.19.1 In furtherance,  and without  limiting the provisions of SECTION 4.8
of this Agreement,  the Advisory Agreement is in full force and effect,  neither
party thereto is in breach or default of any of its terms or provisions,  and no
party has given notice to the other of the intent to terminate,  or cause not to
be  renewed or  extended,  the  Advisory  Agreement.  To the best of  Borrower's
knowledge,  none of the  parties  to the  Advisory  Agreement  has any  basis or
intention  to  terminate  or cause not to be renewed or  extended  the terms and
provisions of the Advisory Agreement.

     4.19.2 In furtherance,  and without  limiting the provisions of SECTION 4.8
of this Agreement, the Advisory Subcontract is in full force and effect, neither
party thereto is in breach or default of any of its terms or provisions,  and no
party has given notice to the other of the intent to terminate,  or cause not to
be renewed or extended,  the  Advisory  Subcontract.  To the best of  Borrower's
knowledge,  none of the  parties to the  Advisory  Subcontract  has any basis or
intention  to  terminate  or cause not to be renewed or  extended  the terms and
provisions of the Advisory Subcontract.

     4.20  HOLDING  COMPANY  AND  INVESTMENT  COMPANY  ACTS.  Borrower  is not a
"holding  company,"  or a  subsidiary  company  of a  `holding  company"  or  an
"affiliate"  of a "holding  company,"  as such  terms are  defined in the Public
Utility  Holding  Company Act of 1935; nor is it an "investment  company," or an
"affiliated company" or a "principal underwriter" of an "investment company," as
such terms are defined in the Investment Company Act of 1940.

     4.21  INVESTMENT  COMPANY  ACT;  OTHER  REGULATIONS.  Borrower  is  not  an
"investment  company",  or a company  "controlled"  by an "investment  company",
within the meaning of the Investment  Company Act of 1940, as amended.  Borrower
is not  subject  to  regulation  under any  Requirement  of Law that  limits its
ability to incur Indebtedness.

                                   Section 5.
                              AFFIRMATIVE COVENANTS

     Unless the Lender  waives  compliance in writing,  Borrower  agrees to, and
shall cause its  Subsidiaries to, do the following until the Lender is no longer
obligated to make any further  Advances and all Obligations  hereunder have been
repaid in full  (including all principal,  interest,  costs,  fees and expenses,
including,  without  limitation,  Loan Fees and reasonable  attorneys'  fees and
costs):

     5.1 FINANCIAL STATEMENTS.

     5.1.1  Within one  hundred  twenty  (120) days after the end of  Borrower's
fiscal  year,  deliver  to the  Lender a  complete  copy of  Borrower's  audited
financial  statements certified as being true and correct by the chief financial
officer of  Borrower.  The above  financial  statements  are to be  prepared  in
accordance  with  GAAP  and  shall  include  at  least,  on a  consolidated  and
consolidating  basis,  a balance  sheet as of the close of each such fiscal year
and a statement of income and retained  earnings (or  comparable  statement) for
each such  fiscal  year,  as at the end of the fiscal  year,  together  with the
report by  Borrower's  Accountants,  which  financial  statements  shall  fairly
reflect the financial  condition and operations of such entity,  together with a
certificate of said chief financial officer,  in the form of Exhibit 5.1 hereof,
to the effect that,  in making the  examination  necessary for his report of the
financial  affairs of such  entity for such  fiscal  year,  he has  obtained  no
knowledge  of the  occurrence  of  any  condition,  event  or  act  which  would
constitute  a Default or an Event of  Default,  or, if said  officer  shall have
obtained knowledge of any such violation,  condition,  event or act, a statement
as to the nature and status thereof.

     5.1.2 Deliver to the Lender as soon as such  statements are available,  but
not  later  than  sixty  (60)  days  after  the end of each  quarter,  a copy of
Borrower's unaudited financial  statements,  on a consolidated and consolidating
basis,  certified by the  principal  financial  officer of each entity as having
been prepared in accordance with GAAP (subject to year end adjustments,  none of
which shall be  material  individually  or in the  aggregate),  together  with a
certificate of said officer, in the form of the Covenant Compliance  Certificate
attached hereto as EXHIBIT 5.1, stating he has no knowledge that a Default or an


                                       99




Event of Default, has occurred and is continuing or, if a Default or an Event of
Default or such event has  occurred  and is  continuing,  a statement  as to its
nature and the action which  Borrower or any other entity  proposes to take with
respect to such event.

     5.1.3 Deliver to the Lender as soon as such  statements are available,  but
not later than sixty (60) days prior to December 31 of each year,  a copy of the
consolidated and consolidating budgeted operating statements (including, without
limitation  balance  sheet,  statement  of  income  and  retained  earnings  and
statement of cash flows) for Borrower for the fiscal year commencing immediately
following such December 31.

     5.1.4 Deliver,  promptly upon receipt, to the Lender copies of all material
notices received from any governmental authority.

     5.1.5  Deliver,  upon the Lender's  request from time to time,  delinquency
reports with respect to any of Borrower's investments.

     5.1.6  Deliver to the Lender within thirty days of the end of each calendar
month  a  valuation  of  each  so-called  GNMA  Certificate  owned  directly  or
indirectly by Borrower or any of its  Subsidiaries.  In addition,  Borrower will
notify the Lender  within five Business Days of any change in value greater than
5% of any GNMA Certificate.

     5.1.7 Deliver to the Lender,  simultaneously  with each Borrowing Notice, a
Covenant  Compliance  Certificate in which the officer  executing and delivering
such  Certificate  states that he has no knowledge that a Default or an Event of
Default has occurred and is continuing.

     5.1.8 Deliver such  additional  information as the Lender from time to time
may  reasonably  request  with  respect to the  business  affairs and  financial
condition of Borrower.

     5.2   MAINTENANCE OF EXISTENCE; CHARACTER OF EQUITY.

     5.2.1  Remain in and  continue to operate,  and cause its  Subsidiaries  to
remain in and  continue  to  operate,  substantially  the same line of  business
presently  engaged  in or  contemplated  to be  engaged  in by the terms of this
Agreement as described in the Registration  Statement  (except that Borrower and
its  Subsidiaries  may,  upon notice to the Lender,  withdraw  from any business
activity  which its trustee(s) or manager(s)  reasonably  deem  unprofitable  or
unsound  in the  due  exercise  of  their  authority,  provided,  however,  such
withdrawal  shall not impair in any way such  entity's  ability to fully pay and
perform all of its  Obligations),  maintain and preserve,  and cause Borrower to
maintain and preserve,  its existence and all rights,  privileges and franchises
necessary or desirable  in the conduct of its business as  contemplated  by this
Agreement;  and conduct its business (and no other  business) as contemplated by
the terms of this  Agreement  in an orderly,  efficient  and  customary  manner.
Borrower shall not modify or amend its  Organizational  Documents  without first
giving 20 days prior written notice of a proposed change to the Lender.

     5.3  MAINTENANCE  OF PROPERTIES.  Restore,  maintain and operate all of its
respective properties, if any, in accordance with sound commercial practices and
maintain,  preserve  and  keep  all  of its  respective  properties  and  assets
necessary  or  useful  in its  respective  business  in good  working  order and
condition.

     5.4 COMPLIANCE WITH LAWS.  Comply with and duly observe the requirements of
all applicable  laws,  rules,  regulations and orders of all federal,  state and
local governmental authorities, including without limitation obligations imposed
by ERISA and hazardous  substance and environmental  laws,  non-compliance  with
which could materially adversely affect the Borrower's business or credit.

     5.5 TAXES AND CLAIMS.  Pay and discharge  promptly all taxes,  assessments,
governmental  charges  and  levies  imposed,  respectively,  upon it or upon its
income or profits or upon any  properties  belonging to it, prior to the date on
which penalties would be imposed, and pay all lawful claims for labor, materials
and supplies that, if unpaid,  might become a lien or charge upon its respective
property,  provided that Borrower and its Subsidiaries  shall not be required to
pay any such tax, assessment, charge, levy or claim if the amount, applicability
or validity  thereof is  currently  being  contested in good faith and by proper
proceedings  and if such  entity,  respectively,  has set aside on its books and
shall maintain  adequate reserves for the payment of the same in conformity with
GAAP.

     5.6 NOTICE OF  DEFAULTS.  Give prompt  written  notice to the Lender of any
Default or Event of Default or of any default  arising under any other agreement
or  indenture  entered  into by Borrower or any of its  Subsidiaries,  or of any


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other matter which has resulted in or is reasonably  anticipated  to result in a
materially  adverse  change in  Borrower's  financial  condition,  operations or
prospects.

     5.7 CHANGES IN MANAGEMENT.  Give prompt written notice to the Lender of any
changes in the senior management positions of Borrower or the Advisor.

     5.8 NOTICE OF  LITIGATION.  Give  prompt  written  notice of any pending or
threatened  claim,  action  or  proceeding  which  would,  in  the  event  of an
unfavorable  outcome,   have  a  materially  adverse  effect  on  the  condition
(financial  or   otherwise),   operations  or  prospects  of  Borrower  and  its
Subsidiaries, taken as a whole.

     5.9 RECORDS.  Keep and maintain  full and accurate  accounts and records of
its  operations  according  to GAAP and permit the  Lender  (and its  designated
officers,  employees,  agents  and  representatives)  to  have  access  to  such
accounts,   records  and  operations  and  to  make  examinations  thereof  upon
reasonable prior notice during normal business hours.

     5.10 EXECUTION OF OTHER INSTRUMENTS.  Do, execute, acknowledge and deliver,
or cause to be done, executed, acknowledged and delivered by others, all further
acts, covenants, assurances or further instruments and documents, promptly after
the Lender reasonably requests,  in order to carry out the intent and purpose of
this  Agreement and the other Loan  Documents.  Borrower  shall pay all fees and
expenses (including without limitation  reasonable attorneys' fees and costs) in
connection with the foregoing.

     5.11 MAINTENANCE OF REIT STATUS.  Engage in such business  activities,  and
shall refrain from engaging in such activities,  so as to have Borrower continue
to meet the  requirements  for  qualification  and  taxation as a REIT under the
Code.

     5.12 CONTINUATION OF ADVISORY AGREEMENT AND ADVISORY SUBCONTRACT.  Borrower
shall notify the Lender at least 90 days prior to any of the terms or conditions
of the Advisory  Agreement or the Advisory  Subcontract  no longer being in full
force and effect or otherwise being  terminated or amended for any reason or for
no reason. Borrower shall notify the Lender at least 90 days prior to either the
Advisor or RCC no longer being bound by the  Advisory  Agreement or the Advisory
Subcontract,  including, without limitation,  because of either the Advisor's or
RCC's  assignment  or  delegation  of their  respective  obligations  or  duties
thereunder;  provided, however, that the transfer of all of the equity interests
in RCC  to an  Affiliate  of  RCC or to a  Person  whose  chief  executive  with
senior-most  responsibility for the business and operations of such Person is an
Affiliate of RCC,  shall not  constitute  an  assignment  or delegation of RCC's
obligations  or duties  thereunder.  In the event that either the Advisor or RCC
provides  notice of its  intention  to terminate  the Advisory  Agreement or the
Advisory  Subcontract,  regardless of whether such  termination is in accordance
with the terms of the Advisory Agreement or the Advisory  Subcontract,  or fails
to renew or extend the Advisory  Agreement or the Advisory  Subcontract  for any
reason or for no reason,  Borrower shall provide to the Lender written notice at
least 90 days prior to the effectiveness of such notice from the Advisor or from
RCC or such failure to renew or extend.  During the 90 day period  following any
such  notice  from,  or failure by,  Borrower  pursuant  to this  SECTION  5.12,
Borrower  shall  execute  and  deliver  with  one  or  more  Persons  reasonably
acceptable  to the Lender an agreement to provide those  services  following the
end of such 90 day  period  provided  by the  Advisor  and RCC  pursuant  to the
Advisory Agreement and the Advisory Subcontract.

     5.13 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.

     5.13.1 Borrower and its Subsidiaries shall keep proper books of records and
account in which full,  true and correct entries in conformity with GAAP and all
requirements  of law shall be made of all dealings and  transactions in relation
to its business and activities.

     5.13.2  Borrower shall permit the Lender to examine and make abstracts from
any of its  books  and  records,  at any  reasonable  time  and as  often as may
reasonably be desired and to discuss the business,  operations,  properties  and
financial and other condition of Borrower and its Subsidiaries, taken as a whole
with its representatives and with its independent certified public accountants.

     5.13.3  Borrower shall permit the Lender to conduct audits of Borrower (but
not more than once during each  semi-annual  period unless a Default or an Event
of Default has occurred and is  continuing).  Borrower shall bear, and reimburse
the Lender for, the commercially reasonable expenses of each such audit.


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                                   Section 6.
                               NEGATIVE COVENANTS

     Borrower  covenants and agrees that until the Lender is no longer obligated
to  make  any  further  Advances  on  account  of the  Line  of  Credit  and the
Obligations  have been repaid and performed in full,  Borrower will not and will
cause its Subsidiaries to not:

     6.1 ENCUMBRANCES AND LIENS. Create,  execute, assume or allow any mortgage,
deed of trust, security agreement,  pledge or encumbrance,  or any other lien of
any kind, or execute or allow to be filed any financing statement affecting, any
or all of its property,  real, personal or mixed, whether now owned or hereafter
acquired, except:

     6.1.1 Liens or charges for current taxes, assessments or other governmental
charges which are not delinquent or which remain payable without penalty, or the
validity of which is contested  in good faith by  appropriate  proceedings  upon
stay of execution of the  enforcement  thereof,  provided such entity shall have
set aside on its books and shall maintain adequate reserves for their payment in
conformity with GAAP;

     6.1.2  Liens or  encumbrances  granted  with  respect  to its real  estate,
partnership  interests or other assets, now owned or hereafter acquired,  solely
to the extent that such lien or encumbrance secures Indebtedness permitted under
the terms of this Agreement;

     6.1.3  Liens  or  encumbrances  related  to  carriers',   warehouse  men's,
mechanics',  materialmen's,  repairman's,  or other  like  liens  arising in the
ordinary  course of  business  which are not  overdue  for a period of more than
thirty  days or which  are being  contested  in good  faith  and by  appropriate
proceedings  diligently  conducted,  provided that such entities  shall have set
aside on their books and shall maintain  adequate  reserves for their payment in
conformity with GAAP;

     6.1.4 Liens or  encumbrances  arising  solely by virtue of any statutory or
common law provision  relating to banker's  liens,  rights of set-off or similar
rights and  remedies as to deposit  accounts or other  funds  maintained  with a
creditor depository institution; and

     6.1.5 Liens or encumbrances that are easements, rights-of-way, restrictions
and  other  similar  encumbrances  affecting  the real  property  which,  in the
aggregate,  are  not  substantial  in  amount,  and  which  do not  in any  case
materially and adversely  detract from the value of the property subject thereto
or  materially  interfere  with the  ordinary  conduct  of the  business  of the
applicable Person

     6.1.6 Liens or  encumbrances  created  under the AMAC Credit  Facility Loan
Agreement.

     6.2   INDEBTEDNESS.

     6.2.1 Create, incur, assume or suffer to exist, nor in any manner become or
be  liable  directly  or  indirectly  with  respect  to any  Indebtedness  (on a
consolidated  basis) except:  (A) the  Obligations;  (B)  Indebtedness for other
borrowed money existing on the date of this Agreement, listed and described, but
only to the extent so listed and described,  on EXHIBIT 6.2 attached hereto, and
any refinancings,  refundings,  renewals,  restatement,  or extensions  thereof,
provided that the principal amount of such  Indebtedness is not increased at the
time of such refinancing,  refunding,  renewal,  restatement or extension except
for an amount  equal to a  reasonable  premium for  accrued and unpaid  interest
thereon and the fees and expenses  incurred in connection with such refinancing,
refunding,  renewal,  restatement  or  extension,  and by an amount equal to any
existing commitments  unutilized  thereunder;  (C) Indebtedness for the purchase
price of capital assets  incurred in the ordinary course of business (other than
real estate),  subject,  however,  to the limitation that such Indebtedness does
not  exceed  the lesser of the cost of such  capital  assets or its fair  market
value at the time of acquisition;  (D) Indebtedness  permitted under SECTION 6.4
hereof; (E) Indebtedness for taxes,  assessments or governmental  charges to the
extent  that  payment  thereof  shall at the time not be  required to be made in
accordance  with  SECTION  5.5 hereof;  (F)  Indebtedness  represented  by trust
preferred  securities issued by the Borrower or any of its Subsidiaries;  or (G)
Indebtedness  on open account for the cost of services,  materials  and supplies
incurred  by  Borrower in the  ordinary  course of business  (not as a result of
borrowing),  so long as all of such open account  Indebtedness shall be promptly
paid and discharged  when due or in conformity  with  customary  trade terms and
practices,  except  for any  such  open  account  Indebtedness  which  is  being


                                      102




contested  in good  faith by such  debtor,  respectively,  as to which  adequate
reserves  required by GAAP have been established and are being maintained and as
to which no lien or encumbrance  has been placed on any property of such debtor,
respectively.

     6.3  CONSOLIDATION  AND  MERGER.  Liquidate  or  dissolve or enter into any
consolidation,   merger,   partnership,   joint  venture,   syndicate  or  other
combination.

     6.4 LOANS, GUARANTEES,  INVESTMENTS.  Except as expressly permitted by this
Agreement,  make any  advance,  loan or  extension  of  credit  to nor  become a
guarantor  or  surety  for any  Person,  firm or  corporation;  except  that (a)
Borrower may make subordinated loans of AMAC Funds to AMAC Credit Facility;  (b)
Subsidiaries  of the  Borrower  may make  loans  to the  Borrower  or any  other
Subsidiary  of the  Borrower;  (c) the  Borrower and its  Subsidiaries  may make
investments (i) in direct  obligations of the United States of America or of any
state,  U.S.  federal  agency  obligations  and commercial  paper  designated as
"prime"  by the  National  Credit  Office of Dun &  Bradstreet,  and (ii) in the
ordinary  course  of  Borrower's  Business  substantially  consistent  with past
practices.

     6.5  ACQUISITIONS.  Except in the ordinary  course of  Borrower's  Business
substantially  consistent  with past practices,  purchase,  acquire or incur any
liability  for  the  purchase  or  acquisition  of any or all of the  assets  or
business (including stock, partnership, membership or other equity interests) of
any Person.

     6.6 DISPOSAL OF ASSETS. Sell, lease, assign,  transfer or otherwise dispose
of more than five percent (5%) of its property or assets, now owned or hereafter
acquired,  except for (a) obsolete or worn-out property and real estate not used
or useful in its business,  and  inventory  sold at market rates in the ordinary
course  of  business,   (b)  in  the  ordinary  course  of  Borrower's  Business
substantially consistent with past practices.

     6.7  PAYMENT  OF  DISTRIBUTIONS.  Declare  or pay  directly  or  indirectly
(through any Affiliate or otherwise), any distributions in respect to its equity
interests  or make  any  distribution  of  assets  with  respect  to its  equity
interests or in payment of fees or other  compensation or  reimbursement  of any
expenses to a party related to any other Affiliates,  whether in cash,  property
or  securities,  except  that so long as there  does not then exist a Default or
Event of Default  (with and without  taking into  account the making of any such
distribution),  Borrower may make  distributions to its equity holders as it may
elect from time to time.

     6.8 LIMITATIONS ON LEASING. Lease or become liable as lessee upon any lease
of real or personal property, other than leases of office space and equipment at
market rates  entered into in the ordinary  course of business  consistent  with
past practices.

     6.9 DEFAULT UNDER OTHER AGREEMENTS OR INDENTURES.  Commit or do, or fail to
commit or do, any act or thing which action or failure to act would constitute a
material  event of  default  under any of the terms or  provisions  of any other
agreement,  indenture,  contract,  document  or  instrument  executed  or  to be
executed  by such  entity  where  such  event of  default  would have a material
adverse  effect  on the  business  or  condition  (financial  or  otherwise)  of
Borrower.

     6.10 PURCHASE OF MARGIN STOCK.  In furtherance,  and not in limitation,  of
SECTION 5.2 hereof,  utilize any part of the proceeds of the Loan to purchase or
carry any margin  stock  (within  the  meaning of  Regulation  U of the Board of
Governors of the Federal  Reserve  System) or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

     6.11 AMENDMENT TO CERTAIN DOCUMENTS.  Except with the prior written consent
of the Lender:

     6.11.1   amend  or  agree   with  any  party  to  vary  the  terms  of  any
Organizational  Documents of any of Borrower in a manner which may be materially
adverse to the Lender; or

     6.11.2 Subject to the terms of SECTION 5.12 hereof, amend or vary the terms
of either the Advisory  Agreement or Advisory  Subcontract in a manner which may
be materially  adverse to the Lender.  Borrower hereby  acknowledges  and agrees
that, unless a Person reasonably  acceptable to the Lender is engaged to perform
such  services in  accordance  with the terms of SECTION 5.12  hereof,  RCC's no
longer  serving as its advisor in  substantially  the same capacity in which RCC


                                      103




serves  as its  advisor  as of the  date  of  this  Agreement  shall  constitute
circumstances  which are, for purposes of this Agreement,  materially adverse to
the Lender.

     6.12 TRANSACTIONS  WITH AFFILIATES.  Directly or indirectly enter into, any
purchase,  sale,  lease or other  transaction with any Affiliate except (i) AMAC
Credit  Facility's  borrowings  of AMAC  Funds  from  Borrower,  and (ii) in the
ordinary  course  of  business  on  terms  that  are no less  favorable  to such
transacting  entity  than  those  which  might  be  obtained  at the  time  in a
comparable  arm's-length  transaction with any Person  (including an individual,
corporation,  partnership,  trust,  limited  liability  company and governmental
agency or instrumentality) who is not an Affiliate.

     6.13 ERISA COMPLIANCE. Permit, suffer or cause any Plan or any fiduciary or
any  party-in-interest  (as such  terms are  defined in ERISA)  thereof,  to (A)
engage in any "prohibited  transaction"  (as defined in ERISA and the Code), (B)
incur any  material  "accumulated  funding  deficiency"  (as  defined in Section
412(a) of the Code and Section 302 of ERISA) whether or not waived,  (C) fail to
satisfy any additional funding requirements set forth in Section 412 of the Code
and Section 302 of ERISA,  (D) terminate any Plan in a manner which could result
in the  imposition of a lien on any property of an such entity,  and (E) fail to
administer the Plan in accordance with its terms,  ERISA and the Code. Each Plan
shall  comply  in all  material  respects  with  ERISA.  In  furtherance  of the
foregoing,  with  respect  to any  Plan,  Borrower  shall,  or shall  cause  its
Affiliates to, furnish to the Lender  promptly (T) Written notice of the failure
to make any  contribution,  premium  payment or other  payment  relating  to the
funding of any Plan when due,  (U)  written  notice of the actual or  threatened
insertion  of any claim,  complaint  or cause of action  against any Plan (other
than a claim for benefits  under such Plan filed in the ordinary  course of such
Plan's  administration)  or any  fiduciary  thereof,  (V) written  notice of the
occurrence of a Reportable  Event (as defined in ERISA and the Code), (W) a copy
of any request  for a waiver of the funding  standards  or an  extension  of the
amortization  periods  required under Section 412 of the Code and Section 302 of
ERISA, (X) a copy of any notice of intent to terminate any funded Plan that is a
defined  benefit plan, (Y) notice that Borrower or any of its Affiliates will or
may incur any  liability to or on account of a Plan under  Section  4062,  4064,
4201 or 4204 of ERISA, and (Z) upon the Lender's  request,  a copy of the annual
report of each Plan (Form 5500 or comparable form) required to be filed with the
IRS and/or the U.S. Department of Labor. Any notice to be provided to the Lender
under this Section shall include a certificate of the chief financial officer of
Borrower  setting forth details as to such  occurrence  and the action,  if any,
which such entity and/or the Affiliate is required or proposes to take, together
with any notices  required or proposed to be filed with or by such entity and/or
any Affiliate, the Pension Benefit Guaranty Corporation, the IRS, the trustee or
the Plan administrator with respect thereto.  Promptly after the adoption of any
Plan subject to ERISA,  the entity adopting such Plan shall notify the Lender of
such  adoption  and of the  vesting and funding  schedules  and other  principal
provisions thereof.

     6.14 REAL ESTATE ACTIVITIES.

     6.14.1 Engage in the  development  or  acquisition  of real estate  (except
solely  to  the  extent  permitted  under  Subchapter  M of  the  Code  and  all
regulations thereunder); or

     6.14.2 Undertake or participate in, directly or indirectly, any real estate
development  project  or asset of any kind  whatsoever  except  as  specifically
contemplated by this Agreement or in the ordinary course of Borrower's  Business
consistent with past practices.

     6.15 DEFAULT UNDER ADVISORY  AGREEMENT OR ADVISORY  SUBCONTRACT.  Commit or
do, or fail to commit or do,  any act or thing  which  action or  failure to act
would  constitute a breach or default  under any of the terms or  provisions  of
either the Advisory Agreement or Advisory Subcontract.

                                   Section 7.
                               FINANCIAL COVENANTS

     7.1 INDEBTEDNESS.  Borrower shall not at any time create,  incur, assume or
suffer to exist or in any  manner  become or be liable  with  respect to any (i)
unsecured  Indebtedness,  or  (ii)  secured  Indebtedness  in  excess  of 70% of
Borrower's Fair Market Value of Total Assets.

     7.2 MINIMUM TANGIBLE NET WORTH.  Borrower shall at all times maintain,  and
shall have maintained, on a consolidated basis, a Tangible Net Worth of not less
than FIFTY MILLION AND NO/100 DOLLARS  ($50,000,000.00) as determined at the end
of each calendar  quarter  beginning with the calendar  quarter ending September


                                      104




30, 2004,  and  increasing  at the end of each  calendar  quarter  thereafter by
seventy-five  percent  (75%) of any Net Equity  raised during each such calendar
quarter.

     7.3  LIQUIDITY.  Borrower,  on a  consolidated  basis,  shall at all  times
maintain   Liquidity  of  not  less  than  FIVE   MILLION  AND  00/100   DOLLARS
($5,000,000.00) as determined at the end of each calendar quarter.

     7.4 MATERIAL ADVERSE CHANGE.  Borrower shall not cause, permit or suffer to
exist any material adverse change in its financial  condition as compared to its
financial condition as of June 30, 2004.

                                   Section 8.
                                EVENTS OF DEFAULT

     8.1 EVENTS OF DEFAULT.  If one or more of the following described Events of
Default occurs:

     8.1.1  Borrower  defaults  in the  punctual  payment  of any  principal  or
interest on any Obligation  when due and such default  continues for a period of
five (5) days after the due date of such principal or interest payment; or

     8.1.2 Any of the  representations  or  warranties  made by Borrower in this
Agreement, any Note, any other Loan Document, agreement,  guaranty,  certificate
or financial or other statements delivered or later furnished by or on behalf of
Borrower in  connection  with this Loan is false or  misleading  in any material
respect at the time made; or

     8.1.3  Borrower  fails to pay,  perform  or  otherwise  observe  any  other
covenant, term, provision,  condition,  agreement or obligation of, or otherwise
defaults under, this Agreement, or any other Loan Document; or

     8.1.4 Borrower or any of its Subsidiaries  becomes insolvent,  or admits in
writing its inability to pay its debts as they mature, or fails generally to pay
its  debts as they  become  due,  or  makes an  assignment  for the  benefit  of
creditors or commences a case for its dissolution; or applies for or consents to
the  appointment  of or taking  possession by a trustee,  liquidator,  assignee,
custodian,  sequestrator  or  receiver  (or  similar  official)  for it or for a
substantial part of its property or business; or takes any action in furtherance
of any of the foregoing; or

     8.1.5 A trustee, liquidator, assignee, custodian,  sequestrator or receiver
(or similar  official) is appointed for Borrower or any of its  Subsidiaries  or
for a  substantial  part of any of its property or business  without its consent
and is not discharged within thirty (30) days after such appointment; or

     8.1.6 Any governmental agency or any court of competent jurisdiction at the
insistence of any governmental agency assumes custody or control of the whole or
any  substantial  portion of the  properties or assets of Borrower or any of its
Subsidiaries and such is not dismissed within thirty (30) days thereafter; or

     8.1.7 Any  money  judgment,  writ or  warrant  of  attachment,  or  similar
process,  in excess of $1,000,000.00 is entered or filed against Borrower or any
of its  Subsidiaries,  any of its properties or other assets and is not vacated,
bonded,  or stayed within the earlier of (a) a period of thirty (30) days or (b)
five (5) days  prior to the date of any  proposed  sale  thereunder,  unless (i)
currently  contested by such party in good faith and by proper  proceedings  and
(ii) such party  shall have set aside on its books and shall  maintain  adequate
reserves for the payment of the same in conformity with GAAP; or

     8.1.8 A bankruptcy,  reorganization,  insolvency,  or  liquidation  case or
other  case for  relief  under any  bankruptcy  law or any law for the relief of
debtors is commenced by or against Borrower or any of its  Subsidiaries  and, if
instituted against Borrower or any of its Subsidiaries,  is not dismissed within
thirty (30) days after such  institution  or such entity by any action or answer
approves of,  consents to, or acquiesces in any such case or admits the material
allegations of, or defaults in answering a petition filed in any such case; or

     8.1.9 This Agreement or any other guaranty or other agreement  entered into
in connection  herewith or therewith,  or any other Loan  Document,  at any time
while any Obligations  remain unpaid or unperformed,  ceases to be in full force
and effect or is  declared  null and void,  or the  validity  or  enforceability
thereof is  contested  or any party  thereto  denies  that it has any or further
liability  or  obligation  under  this  Agreement,  such other  agreement,  such
guarantee or any other Loan Document; or


                                      105




     8.1.10 A default or a breach shall have occurred and be  continuing  beyond
any  applicable  cure  period in the  payment  or  performance  of any direct or
contingent  liability  of  Borrower  or any of its  Subsidiaries  in  excess  of
$1,500,000.00; or

     8.1.11 Any security issued by Borrower and listed on a national  securities
exchange or quoted on an  automated  quotation  system of a national  securities
association is delisted from such national  securities  exchange or ceases to be
quoted on such automated quotation system, as applicable; or

     8.1.12 The  assignment  by the  Advisor or RCC, by act or  omission,  or by
operation of law, of all or any portion of their respective rights, benefits and
entitlements,   including,   without   limitation,   their  respective  economic
interests,  under the Advisory Agreement or the Advisory  Subcontract (except if
and to the extent (i) arising out of the transfer of all of the equity interests
in RCC  to an  Affiliate  of  RCC or to a  Person  whose  chief  executive  with
senior-most  responsibility for the business and operations of such Person is an
Affiliate of RCC, or (ii) in accordance  with the terms of Section 5.12 hereof);
or either the Advisor or RCC gives  notice of its  intention  to  terminate  the
Advisory  Agreement  or the Advisory  Subcontract,  or either the Advisor or RCC
fails to renew the Advisory  Agreement or the  Advisory  Subcontract  (except in
accordance with the terms of Section 5.12 hereof

     And any such Event of Default (except for an Event of Default  described in
SECTIONS 8.1.1,  8.1.2,  8.1.4 THROUGH 8.1.10  (INCLUSIVE) AND 8.1.12, for which
there shall be no grace period  except as  specifically  provided  therein,  and
except for any other  Event of Default  that is not  capable of being cured (for
example,  without  limitation,  an Event of Default arising out of a breach of a
financial  covenant set forth in SECTION 7 hereof)) shall continue for more than
fifteen  (15) days after the Lender shall have first  notified  Borrower of such
Event of Default  (or for more than sixty (60) days after the Lender  shall have
first notified Borrower of such Event of Default,  if such Event of Default is a
non-monetary  failure or breach and is not  capable of being  cured  within such
fifteen (15) day period but is, nevertheless, capable of cure and Borrower shall
have  commenced and is  diligently  pursuing (in the sole  determination  of the
Lender) a cure of such  failure  or  breach)  THEN,  or at any time  thereafter,
(unless such Event of Default shall have been waived in writing by the Lender in
accordance  with the terms of SECTION 9.3 hereof) at the option of the  Lender's
unrestricted  discretion  the Lender may  terminate  the Line of Credit and each
commitment  to make any  Advances to Borrower  and each  Obligation  outstanding
shall, without presentment, demand, protest, or notice of any kind, all of which
are hereby expressly waived, be forthwith due and payable, if not otherwise then
due and payable,  anything herein  contained or in any Note or other document to
the contrary  notwithstanding,  and the Lender may immediately,  and without any
expiration of any period of grace, enforce any and all of the Lender's rights or
remedies  provided by this  Agreement,  any Note, any Loan Document or any other
rights or remedies afforded by law.

                                   Section 9.
                            MISCELLANEOUS PROVISIONS

     9.1  INCORPORATION  OF  PREAMBLE,   RECITAL  AND  EXHIBITS.  The  preamble,
Recitals,  and exhibits hereto are incorporated into this Agreement by reference
and made a part hereof.

     9.2  NOTICES.  All notices,  requests and demands  given under the terms of
this  Agreement  shall be in writing and may be  effected by personal  delivery,
including by any commercial courier or overnight delivery service,  or by United
States certified mail, return receipt requested, with all postage and fees fully
prepaid.  Notices  shall be  effective  upon  receipt by the party  being  given
notice, as indicated by the return receipt if mailed; EXCEPT that if a party has
relocated  without providing the other party with its new address for service of
notices,  or if a party refuses delivery of a notice upon its tender, the notice
shall be  effective  upon the  attempt to serve the  notice at the last  address
given for  service of notices  upon that party.  In  addition to the  foregoing,
notice may be served by facsimile  transmission,  in which case service shall be
deemed effective only upon receipt by the party serving the notice of telephonic
or return facsimile transmission  confirmation that the party to whom the notice
is directed  has  received a complete  and legible  copy of the notice.  Notices
shall be addressed as follows:


                                      106




Borrower:    American Mortgage Acceptance Company
             625 Madison Avenue
             New York, NY 10022
             Attention:  Stuart J. Boesky, President and Chief Executive Officer
             Telephone:  (212) 588-1765
             Facsimile:   (212) 751-3550

Lender:      CharterMac
             625 Madison Avenue
             New York, NY 10022
             Attention:  Alan P. Hirmes, Chief Financial Officer
             Telephone:   (212) 317-5700
             Facsimile:   (212) 751-3550

         The addresses for service of notice on any party may be changed by that
party by  serving a notice  upon the  others of the new  address  or  addresses,
except  that any change of address to a post  office box shall not be  effective
unless a street  address  is also  specified  for use in  effectuating  personal
service.

     9.3 AMENDMENTS, WAIVERS, ETC.

     The Lender may exercise its rights and remedies under this  Agreement,  the
Note and the Loan Documents  without  resorting or regard to other  interests or
sources of  reimbursement.  The Lender shall not be deemed to have waived any of
such  rights or  remedies  unless  such  waiver be in writing  and signed by the
Lender. No delay or omission on the part of the Lender in exercising any of such
rights or remedies shall operate as a waiver of such right or any other right. A
waiver on any one  occasion  shall not be construed as a bar to or waiver of any
right on any future  occasion.  All such rights and remedies shall be cumulative
and may be exercised separately or concurrently.

     9.4  INDEMNIFICATION.  To the fullest  extent  permitted  by law,  Borrower
agrees to protect, indemnify, defend and hold harmless the Lender, its trustees,
officers,  agents,  employees and  representatives  from and against any and all
liability,  expense,  loss or damage of any kind or nature  and from any  suits,
claims or demands,  including without limitation  reasonable attorneys' fees and
costs,  on  account  of any  matter or thing or action or  failure to act by the
Lender, or its trustees, officers, agents, employees or representatives, whether
in suit or not, arising out of this Agreement or in connection  herewith or with
the  transactions  contemplated  hereby,  unless  such suit,  claim or demand is
caused  principally  by  any  grossly  negligent  act  or  omission  or  willful
malfeasance  of, the Lender,  its trustees,  officers,  agents and employees and
representatives.  Upon receiving knowledge of any suit, claim or demand asserted
by a third  party that the Lender  believes is covered by this  indemnity,  such
indemnified party shall give Borrower notice of the matter and an opportunity to
defend it, at Borrower's sole cost and expense,  with legal counsel satisfactory
to such indemnified  party. If such indemnified  party is not satisfied with the
defense  being  provided,  such  indemnified  party may  employ an  attorney  or
attorneys selected by it to protect its rights hereunder, and Borrower shall pay
to such indemnified  party the reasonable  attorneys' fees and costs incurred by
such  indemnified  party.  This obligation on the part of Borrower shall survive
the  closing of the Loan the  repayment  of all  obligations  hereunder  and the
termination or expiration of this Agreement.

     9.5  INCONSISTENCIES  WITH  OTHER LOAN  DOCUMENTS.  In the event that it is
impossible  to  simultaneously  comply with the terms of this  Agreement and any
term of any of the  other  Loan  Documents,  the terms of this  Agreement  shall
govern and prevail over the conflicting portion of the other Loan Document(s).

     9.6  EXPENSES.  Borrower  shall  pay on  demand  all  reasonable  costs and
expenses,  including, without limitation,  reasonable attorneys' fees and costs,
incurred (A) by the Lender in connection with the preparation of this Agreement,
(B) by the Lender in connection with the  administration of this Agreement,  and
(C) by the Lender in  connection  with the  enforcement  and  protection  of its
rights  under this  Agreement,  including  the  protection  of the rights of the
Lender in any bankruptcy, reorganization,  liquidation or insolvency proceeding,
whether or not litigation is commenced.

     9.7 ASSIGNABILITY.


                                      107




     9.7.1 This  Agreement  shall bind and its benefits shall inure to Borrower,
the Lender, and their respective  successors and permitted assigns,  as the case
may be.

     9.7.2 Borrower may not assign  (voluntarily  or by force of law) all or any
portion of its interests,  rights and obligations under this Agreement, the Note
or any of the Loan  Documents,  without the prior written consent of the Lender,
which consent may be withheld in the Lender's sole and unrestricted discretion.

     9.7.3 The Lender may assign all or any portion of its interests, rights and
obligations under this Agreement,  the Note and the Loan Documents (for purposes
of this SECTION 9.7 only,  collectively,  the "Assigned Commitment");  provided,
however,  that if there does not then exist a Default or Event of  Default,  the
prior  written  consent  of  Borrower  shall be  required  to any such  proposed
assignment;   provided  further,   however,  that  such  consent  shall  not  be
unreasonably withheld, conditioned or delayed.

     9.8 TIME OF ESSENCE. Time is of the essence of this Agreement.

     9.9 ENTIRE  AGREEMENT.  This  Agreement  and the Loan  Documents  and other
materials  furnished to the Lender by and on behalf of Borrower  constitute  the
entire  agreement and  understanding  of the Lender and Borrower with respect to
the matters set forth herein and therein. No representation, warranty, covenant,
promise,  understanding  or  condition  shall be  enforceable  against any party
unless it is contained in this Agreement or the Loan Documents.

     9.10 SEVERABILITY.  The invalidity or  unenforceability  of any one or more
provisions of this Agreement or any Loan Document under particular circumstances
or in its  entirety  shall not affect the  validity  or  enforceability  of such
provisions under different  circumstances or the validity or  enforceability  of
any other provision.

     9.11  GOVERNING  LAW.  This  Agreement,  any Note and all  other  documents
executed  pursuant to this  Agreement or any Note shall be deemed  entered into,
and shall be governed  and  construed  according to the laws of the State of New
York, notwithstanding choice of law rules to the contrary.

     9.12 NO PARTNERSHIP  OR JOINT  VENTURE.  The Lender and Borrower agree that
the  Lender is not a partner  or joint  venturer  with  Borrower,  in any manner
whatsoever.

     9.13  REPLACEMENT  DOCUMENTS.  Upon receipt of an affidavit from the Lender
(containing  standard  indemnification  provisions or representations) as to the
loss,  theft,  destruction or mutilation of any Loan Document or Note,  Borrower
shall issue or execute and deliver to the Lender in lieu  thereof,  an identical
replacement therefor.

     9.14 HEADINGS. The headings of this Agreement are solely for the purpose of
identification and shall not be construed as a part of the paragraphs they head.

     9.15 USURY LIMITATION. If, at any time, the rate of interest, together with
all amounts which constitute  interest and which are reserved,  charged or taken
by the Lender as compensation for fees,  services or expenses  incidental to the
making,  negotiating or collection of the Loan, shall be deemed by any competent
court of law,  governmental  agency or tribunal  to exceed the  maximum  rate of
interest permitted to be charged by the Lender to Borrower under then applicable
law, then,  during such time as such rate of interest would be deemed excessive,
that portion of each sum paid attributable to that portion of such interest rate
that  exceeds  the  maximum  rate of  interest  so  permitted  shall be deemed a
voluntary prepayment of principal of the Obligations; provided, however, that in
the event  there is a change in the law which  results  in a higher  permissible
rate of interest,  then this  Agreement  shall be governed by such new law as of
its effective date.

     9.16  WAIVER OF JURY  TRIAL.  BORROWER  SHALL NOT SEEK A JURY  TRIAL IN ANY
LAWSUIT,  PROCEEDING,  COUNTERCLAIM OR ANY OTHER LITIGATION ACTION INVOLVING THE
LENDER  (OR ANY  OFFICER,  TRUSTEE,  EMPLOYEE  OR AGENT  THEREOF)  BASED UPON OR
ARISING  OUT OF  THIS  AGREEMENT  OR ANY OF THE  OTHER  LOAN  DOCUMENTS,  OR THE
DEALINGS OR THE RELATIONSHIP  BETWEEN OR AMONG SUCH PERSONS OR ENTITIES,  OR ANY
OF THEM.  BORROWER WILL NOT SEEK TO CONSOLIDATE ANY ACTION IN WHICH A JURY TRIAL
HAS BEEN  WAIVED WITH ANY OTHER  ACTION IN WHICH A JURY TRIAL  CANNOT OR HAS NOT


                                      108




BEEN WAIVED.  ANY COURT  PROCEEDINGS  RELATING TO THIS AGREEMENT OR ANY OTHER OF
THE LOAN  DOCUMENTS  SHALL BE BROUGHT  EXCLUSIVELY IN THE COURTS OF THE STATE OF
NEW YORK  SITTING  IN NEW YORK CITY (OR THE  FEDERAL  COURTS  LOCATED  THEREIN).
NOTWITHSTANDING THE FOREGOING FORUM DESIGNATION, BORROWER AGREES THAT THE LENDER
SHALL HAVE THE RIGHT TO PROCEED AGAINST BORROWER OR ITS RESPECTIVE PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE THE LENDER TO (1) OBTAIN  PERSONAL  JURISDICTION
OVER ANY OF THEM OR (2) IN ORDER TO  ENFORCE A  JUDGMENT  OR OTHER  COURT  ORDER
ENTERED IN FAVOR OF THE LENDER.  BORROWER FURTHER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE  COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE LENDER TO REALIZE
ON ANY  SECURITY  FOR THE  OBLIGATIONS  OR TO ENFORCE A JUDGMENT  OR OTHER COURT
ORDER IN FAVOR OF THE LENDER.  BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED ANY PROCEEDING.  THE
PROVISIONS  OF THIS SECTION  9.16 HAVE BEEN FULLY  DISCUSSED BY BORROWER AND THE
LENDER,  AND THE PROVISIONS  HEREOF SHALL BE SUBJECT TO NO EXCEPTIONS.  NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS SECTION 9.16 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

                        (SIGNATURES APPEAR ON NEXT PAGE)


                                      109




WITNESS  the  execution  hereof  under seal as of the day and year  first  above
written.

                                       BORROWER:
                                       AMERICAN MORTGAGE ACCEPTANCE COMPANY


                                       By: ____________________________________
                                       Name:
                                       Title:

                                       LENDER:
                                       CHARTERMAC


                                       By: ____________________________________
                                       Name:
                                       Title:


                                      110




                                                                      Exhibit 21



               Subsidiaries of the Company as of December 31, 2005
               ---------------------------------------------------

AMAC Credit Facility, LLC, a Delaware limited liability company

AMAC Capital Financing I, a Delaware statutory trust

AMC Repo Seller, LLC, a Delaware limited liability company


                                      111




                                                                      Exhibit 23



            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We consent to the  incorporation  by reference  in  Registration  Statement  No.
33-87440 of American Mortgage Acceptance Company on Form S-3 and in Registration
Statement No. 33-118572 of American Mortgage  Acceptance  Company on Form S-8 of
our  reports  dated  March  9,  2006  relating  to  the  consolidated  financial
statements of American Mortgage  Acceptance  Company and management's  report on
the effectiveness of internal control over financial reporting appearing in this
Annual Report on Form 10-K of American Mortgage  Acceptance Company for the year
ended December 31, 2005.


/s/ DELOITTE & TOUCHE LLP

New York, New York
March 9, 2006


                                      112




                                                                    Exhibit 31.1

                                  CERTIFICATION

I, Jeff T. Blau, hereby certify that:

     1.  I have reviewed  this annual  report on Form 10-K of American  Mortgage
         Acceptance Company;

     2.  Based on my  knowledge,  this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         in order to make the  statements  made,  in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this annual report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included  in this  annual  report,  fairly  present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the  registrant as of, and for, the periods  presented in
         this annual report;

     4.  The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules  13a-15(e)  and  15d-15(e))  and internal
         control  over  financial  reporting  (as defined in Exchange  Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and we have:

         a) designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  to  ensure  the  material  information  relating  to  the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this annual report is being prepared;

         b) designed such internal control over financial  reporting,  or caused
         such internal control over financial reporting to be designed under our
         supervision,  to provide reasonable assurance regarding the reliability
         of financial reporting and the preparation of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principals;

         c) evaluated the effectiveness of the registrant's  disclosure controls
         and procedures  presented in this annual report our  conclusions  about
         the effectiveness of the disclosure controls and procedures,  as of the
         end of the period covered by this report based on such evaluation; and

         d)  disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has  materially  affected,  or  is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying officers and I have disclosed,  based
         on our most  recent  evaluation  of  internal  control  over  financial
         reporting,  to the  registrant's  auditors  and the audit  committee of
         registrant's  board of directors (or persons  performing the equivalent
         functions):

         a) all significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal control over financial reporting.


         Date:  March 9, 2006                        By: /s/ Jeff T. Blau
                -------------                            ----------------
                                                         Jeff T. Blau
                                                         Chief Executive Officer


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                                                                    Exhibit 31.2

                                  CERTIFICATION

I, Alan P. Hirmes, hereby certify that:

     1.  I have reviewed  this annual  report on Form 10-K of American  Mortgage
         Acceptance Company;

     2.  Based on my  knowledge,  this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         in order to make the  statements  made,  in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this annual report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included  in this  annual  report,  fairly  present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the  registrant as of, and for, the periods  presented in
         this annual report;

     4.  The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules  13a-15(e)  and  15d-15(e))  and internal
         control  over  financial  reporting  (as defined in Exchange  Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and we have:

         a) designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  to  ensure  the  material  information  relating  to  the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this annual report is being prepared;

         b) designed such internal control over financial  reporting,  or caused
         such internal control over financial reporting to be designed under our
         supervision,  to provide reasonable assurance regarding the reliability
         of financial reporting and the preparation of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principals;

         c) evaluated the effectiveness of the registrant's  disclosure controls
         and procedures  presented in this annual report our  conclusions  about
         the effectiveness of the disclosure controls and procedures,  as of the
         end of the period covered by this report based on such evaluation; and

         d)  disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has  materially  affected,  or  is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying officers and I have disclosed,  based
         on our most  recent  evaluation  of  internal  control  over  financial
         reporting,  to the  registrant's  auditors  and the audit  committee of
         registrant's  board of directors (or persons  performing the equivalent
         functions):

         a) all significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal control over financial reporting.


         Date:  March 9, 2006                        By: /s/ Alan P. Hirmes
                -------------                            ------------------
                                                         Alan P. Hirmes
                                                         Chief Financial Officer


                                      114




                                                                    Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                             18.U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection  with the Annual Report of American  Mortgage  Acceptance  Company
(the  "Company")  on Form 10-K for the year ending  December 31, 2005,  as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, Jeff T. Blau,  Chief Executive  Officer of the Company and I, Alan P. Hirmes,
Chief Financial Officer of the Company,  certify,  pursuant to 18 U.S.C. Section
1350,  as adopted  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002,
that:


       (1) The Report fully complies with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and


       (2) The  information  contained  in the Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.


By:  /s/ Jeff T. Blau                                By: /s/ Alan P. Hirmes
     ----------------                                    ------------------
     Jeff T. Blau                                        Alan P. Hirmes
     Chief Executive Officer                             Chief Financial Officer
     March 9, 2006                                       March 9, 2006


A signed  original of this  written  statement  required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.


                                      115