<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1995
-----------------
Commission file number 1-11059
-----------------
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
-----------------------------------------------------------------
(Exact name of registrant as specified in charter)
California 13-3257662
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
----------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(301) 816-2300
----------------------------------------------------------------
(Registrant's telephone number, including area code)
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
As of August 11, 1995, 12,079,389 depositary units of limited partnership
interest were outstanding.
<PAGE>2
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1995 (unaudited)
and December 31, 1994 . . . . . . . . . . . 3
Statements of Operations - for the three and
six months ended June 30, 1995 and
1994 (unaudited) . . . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the six months ended June 30,
1995 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the six
months ended June 30, 1995 and
1994 (unaudited) . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 14
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 19
Signature . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured
Certificates and GNMA Mortgage-
Backed Securities, at fair value:
Acquired insured mortgages $166,608,274 $159,581,791
Originated insured mortgages 22,958,391 21,672,516
------------ ------------
189,566,665 181,254,307
Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
discount and premium:
Acquired insured mortgages 14,744,073 14,800,502
Originated insured mortgages 13,167,966 13,210,344
------------ ------------
27,912,039 28,010,846
Cash and cash equivalents 4,897,897 3,462,825
Receivables and other assets 1,970,128 1,775,797
Investment in affiliate 319,075 319,075
------------ ------------
Total assets $224,665,804 $214,822,850
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 4,148,013 $ 4,525,104
Accounts payable and accrued expenses 147,804 300,932
Note payable and due to affiliate 333,651 439,433
------------ ------------
Total liabilities 4,629,468 5,265,469
============ ============
Partners' equity:
Limited partners' equity 213,512,986 214,162,478
General partner's deficit (1,166,412) (1,140,053)
Net unrealized gains (losses)
on investment in FHA-Insured
Certificates and GNMA Mortgage-
Backed Securities 7,689,762 (3,465,044)
------------ ------------
Total partners' equity 220,036,336 209,557,381
------------ ------------
Total liabilities and partners'
equity $224,665,804 $214,822,850
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
----------------------------- -----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 4,676,253 $ 4,659,739 $ 9,298,777 $ 9,317,232
Interest and other income 40,888 146,312 58,811 313,378
------------ ------------ ------------ ------------
4,717,141 4,806,051 9,357,588 9,630,610
------------ ------------ ------------ ------------
Expenses:
Asset management fee to related parties 513,453 518,255 1,026,906 1,037,807
General and administrative 71,216 127,083 193,248 244,340
Mortgage servicing fees 73,094 75,198 144,700 201,939
Interest expense to affiliate 5,783 -- 11,566 --
------------ ------------ ------------ ------------
663,546 720,536 1,376,420 1,484,086
------------ ------------ ------------ ------------
Net earnings before gain (loss)
on mortgage dispositions 4,053,595 4,085,515 7,981,168 8,146,524
Gain on mortgage disposition -- -- 52,730 --
Loss on mortgage disposition (36,632) -- (36,632) --
------------ ------------ ------------ ------------
Net earnings $ 4,016,963 $ 4,085,515 $ 7,997,266 $ 8,146,524
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 96.1% $ 3,860,302 $ 3,926,180 $ 7,685,373 $ 7,828,810
General partner - 3.9% 156,661 159,335 311,893 317,714
------------ ------------ ------------ ------------
$ 4,016,963 $ 4,085,515 $ 7,997,266 $ 8,146,524
============ ============ ============ ============
Net earnings per Limited
Partnership Unit $ 0.32 $ 0.33 $ 0.64 $ 0.65
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Gains (Losses)
on Investment
in FHA-Insured
Certificates
and GNMA Total
General Limited Mortgage-Backed Partners'
Partner Partners Securities Equity
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ (1,140,053) $ 214,162,478 $ (3,465,044) $ 209,557,381
Net earnings 311,893 7,685,373 -- 7,997,266
Distributions paid or accrued,
including return of capital, of
$0.69 per Unit (338,252) (8,334,865) -- (8,673,117)
Adjustments to net unrealized gains
(losses) on investment in FHA-
Insured Certificates and GNMA
Mortgage-Backed Securities -- -- 11,154,806 11,154,806
------------- ------------- --------------- -------------
Balance, June 30, 1995 $ (1,166,412) $ 213,512,986 $ 7,689,762 $ 220,036,336
============= ============= =============== =============
Limited Partnership Units outstanding -
June 30, 1995 12,079,514
=============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30,
1995 1994
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,997,266 $ 8,146,524
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Gain on mortgage disposition (52,730) --
Loss on mortgage disposition 36,632 --
Changes in assets and liabilities:
Decrease in accounts payable
and accrued expenses (153,128) (123,558)
Decrease in receivables and other assets 14,200 1,125,738
Decrease in notes receivable and due from
affiliates -- 3,522,411
Decrease in investment in affiliate -- 777,118
(Decrease) increase in note payable
and due to affiliate (105,782) 434,104
Increase in other liabilities -- 2,209,661
------------ ------------
Net cash provided by operating
activities 7,736,458 16,091,998
------------ ------------
Cash flows from investing activities:
Investment in Insured Mortgages
and advances on construction loans -- (9,619,877)
Receipt of mortgage principal from
scheduled payments 643,002 626,987
Proceeds from mortgage dispositions 2,105,820 --
------------ ------------
Net cash provided by (used in)
investing activities 2,748,822 (8,992,890)
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (9,050,208) (11,061,365)
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,435,072 (3,962,257)
Cash and cash equivalents, beginning of period 3,462,825 15,872,448
------------ ------------
Cash and cash equivalents, end of period $ 4,897,897 $ 11,910,191
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>7
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
American Insured Mortgage Investors - Series 85, L.P. (the Partnership) was
formed under the Uniform Limited Partnership Act of the state of California on
June 26, 1984. From inception through September 6, 1991, affiliates of
Integrated Resources, Inc. served as managing general partner (with a
partnership interest of 3.8%), corporate general partner (with a partnership
interest of 0.1%) and associate general partner (with a partnership interest of
0.1%). All of the foregoing general partners are sometimes collectively
referred to as the former general partners. The Partnership will terminate on
December 31, 2009, unless previously terminated under the provisions of the
Partnership Agreement.
Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded
the former general partners to become the sole general partner of the
Partnership. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc. From inception
through June 30, 1995, CRIIMI MAE was managed by an adviser whose general
partner is C.R.I., Inc. (CRI). However, effective June 30, 1995, CRIIMI MAE
became a self-managed and self-administered real estate investment trust (REIT)
and, as a result, the adviser no longer advises CRIIMI MAE.
AIM Acquisition Partners L.P. (the Advisor) serves as the advisor of the
Partnership. The general partner of the Advisor is AIM Acquisition Corporation
and the limited partners include an affiliate of CRIIMI MAE (and through June
30, 1995, an affiliate of CRI). Effective September 6, 1991 and through June
30, 1995, a sub-advisory agreement (the Sub-advisory Agreement) existed whereby
CRI/AIM Management, Inc. (the Sub-advisor), an affiliate of CRI, managed the
Partnership's portfolio. In connection with the transaction in which CRIIMI MAE
became a self-managed and self-administered REIT, an affiliate of CRIIMI MAE
acquired the Sub-advisory Agreement. As a consequence of this transaction,
effective June 30, 1995, CRIIMI MAE Services Limited Partnership, an affiliate
of CRIIMI MAE, manages the Partnership's portfolio. These transactions had no
effect on the Partnership's financial statements.
Prior to the expiration of the Partnership's reinvestment period on
December 31, 1993, the Partnership was in the business of originating mortgage
loans (Originated Insured Mortgages) and acquiring mortgage loans (Acquired
Insured Mortgages, and together with Originated Insured Mortgages, referred to
herein as Insured Mortgages). As of June 30, 1995, the Partnership had invested
in either Originated Insured Mortgages which are insured or guaranteed, in whole
or in part, by the Federal Housing
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION - Continued
Administration (FHA) or Acquired Insured Mortgages which are fully insured.
2. BASIS OF PRESENTATION
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position of the Partnership as of June 30, 1995 and
December 31, 1994 and the results of its operations for the three and six months
ended June 30, 1995 and 1994 and its cash flows for the six months ended June
30, 1995 and 1994.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. While the General Partner believes that the disclosures
presented are adequate to make the information not misleading, it is suggested
that these financial statements be read in conjunction with the financial
statements and the notes to the financial statements included in the
Partnership's Annual Report filed on Form 10-K for the year ended December 31,
1994.
3. SIGNIFICANT ACCOUNTING POLICIES
Reclassification
----------------
Certain amounts in the financial statements for the three and six
months ended June 30, 1994 have been reclassified to conform with the 1995
presentation.
Statements of Cash Flows
------------------------
No cash payments were made for interest expense during the six months
ended June 30, 1995 and 1994.
4. INVESTMENT IN FHA-INSURED MORTGAGES AND GNMA MORTGAGE-
BACKED SECURITIES
Fully Insured Mortgage Investments
----------------------------------
As of June 30, 1995 and December 31, 1994, the Partnership's
investment in fully insured Acquired Insured Mortgages, recorded at fair
value, consisted of 66 and 67 FHA-Insured Certificates, respectively, and
nine GNMA Mortgage-Backed Securities with an aggregate amortized cost of
$158,206,101 and $161,032,201, respectively, an aggregate face value of
$165,066,471 and $168,027,076, respectively, and an aggregate fair value of
$166,608,274 and $159,581,791, respectively.
As of June 30, 1995 and December 31, 1994, the Partnership's
investment in fully insured Originated Insured Mortgages, recorded at fair
value, consisted of one GNMA Mortgage-Backed Security with an amortized
cost of $10,688,012 and $10,708,771, respectively, a face value of
$10,782,861 and $10,804,299, respectively, and a fair value of $11,016,250
and $10,345,301, respectively.
In April 1995, the Partnership filed a Notice of Default and an
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED MORTGAGES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
Election to Assign with HUD related to the mortgage on El Lago Apartments.
On June 22, 1995, the Partnership received approximately $2.1 million,
representing approximately 90% of the assignment proceeds. The remaining
proceeds of approximately $200,000 are included in receivables and other
assets on the accompanying balance sheet as of June 30, 1995. As discussed
in Note 6, below, in July 1995, the Partnership declared a special
distribution of the proceeds from the assignment, which will be paid to
Unitholders on November 1, 1995.
As of August 11, 1995, the fully insured Originated Insured Mortgage,
recorded at fair value, was current with respect to payment of principal
and interest. As of August 11, 1995, all of the Acquired Insured
Mortgages, recorded at fair value, were current with respect to the payment
of principal and interest except for the mortgage on Country Club Terrace
Apartments. As of August 11, 1995, this Acquired Insured Mortgage was
delinquent with respect to the July 1995 payment of principal and interest.
The General Partner does not anticipate a material adverse impact on the
Partnership's financial statements as a result of this delinquency.
As of June 30, 1995, the Partnership had committed to make future
advances on construction loans of approximately $318,000.
Coinsured Mortgage Investments
------------------------------
As discussed in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1994, under the HUD coinsurance program, both HUD
and the coinsurance lender are responsible for paying a portion of the
insurance benefits if a mortgagor defaults and the sale of the development
collateralizing the mortgage produces insufficient net proceeds to repay
the mortgage obligation. In such case, the coinsurance lender will be
liable to the Partnership for the first part of such loss in an amount up
to 5% of the outstanding principal balance of the mortgage as of the date
foreclosure proceedings are instituted or the deed is acquired in lieu of
foreclosure. For any loss greater than 5% of the outstanding principal
balance, the responsibility for paying the insurance benefits will be borne
on a pro-rata basis, 85% by HUD and 15% by the coinsurance lender.
Coinsured by affiliate
----------------------
As of June 30, 1995 and December 31, 1994, the Partnership held
investments in two FHA-Insured Certificates secured by coinsured mortgages
where the coinsurance lender is Integrated Funding, Inc. (IFI). These
investments were made by the former managing general partner on behalf of
the Partnership. As structured by the former managing general partner,
with respect to these mortgages, the Partnership bears the risk of loss
upon default for IFI's portion of the coinsurance loss.
As of August 11, 1995, these two investments, as shown in the table
below, were current with respect to the payment of principal and interest.
The General Partner believes there is adequate collateral value underlying
these two mortgages. Accordingly, no loan losses were recognized on these
investments during the three and six months ended June 30, 1995 and 1994.
As of June 30, 1995 and December 31, 1994, these two mortgages had an
aggregate fair value of $11,942,141 and $11,327,215, respectively.
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED MORTGAGES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
<TABLE>
<CAPTION>
Amortized Face Amortized Face
Cost Value Cost Value
June 30, June 30, December 31, December 31,
1995 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Westlake Village $ 6,489,050 $ 6,487,094 $ 6,504,367 $ 6,502,394
Waterford Green Apts. 6,493,740 6,508,749 6,474,012 6,489,123
</TABLE>
5. INVESTMENT IN FHA-INSURED LOANS
Fully Insured Mortgage Investments
----------------------------------
As of June 30, 1995 and December 31, 1994 the Partnership's investment
in fully insured Acquired Insured Mortgages, recorded at amortized cost,
consisted of 12 FHA-Insured Loans with an aggregate amortized cost of
$14,744,073 and $14,800,502, respectively, an aggregate face value of
$17,732,200 and $17,833,049, respectively, and an aggregate fair value of
$17,927,549 and $16,920,898, respectively.
As of June 30, 1995 and December 31, 1994, the Partnership's
investment in fully insured Originated Insured Mortgages, recorded at
amortized cost, consisted of three FHA-Insured Loans with an aggregate
amortized cost of $13,167,966 and $13,210,344, respectively, an aggregate
face value of $12,806,388 and $12,844,664, respectively, and an aggregate
fair value of $13,049,917 and $12,412,621, respectively.
As of August 11, 1995, all of the fully insured Originated Insured
Mortgages and Acquired Insured Mortgages, recorded at amortized cost, were
current with respect to the payment of principal and interest.
In addition to base interest payments under Originated Insured
Mortgages, the Partnership is entitled to additional interest based on a
percentage of the net cash flow from the underlying development (referred
to as Participations). During the three and six months ended June 30,
1995, the Partnership received additional interest of $64,676 from the
Participations. During the three and six months ended June 30, 1994, the
Partnership received additional interest of $35,314 from the
Participations. These amounts are included in mortgage investment income
on the accompanying statements of operations.
6. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the six months ended June 30, 1995 and 1994 are as follows:
1995 1994
------ ------
Quarter ended March 31, $ 0.36 $ 0.39(1)
Quarter ended June 30, 0.33 0.73(2)
------ ------
$ 0.69 $ 1.12
====== ======
<PAGE>11
AMERICAN INSURED MORTGAGEINVESTORS L.P - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS - Continued
(1) This amount includes approximately $0.05 per Unit representing previously
undistributed accrued interest and gain from the disposition of the
mortgage on Victoria Pointe Apartments-Phase I.
(2) This amount includes approximately $0.37 per Unit representing net
principal proceeds from the prepayment of the mortgage on Richardson Road
Apartments.
On June 22, 1995, the Partnership received net proceeds of approximately
$2.1 million from the assignment of the mortgage on El Lago Apartments and
declared a special distribution of $0.16 per unit, representing return of
capital, on July 20, 1995. The special distribution will be paid to Unitholders
on November 1, 1995 in conjunction with the payment of the third quarter
distribution.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although the
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.
7. INVESTMENT IN AFFILIATE AND NOTE PAYABLE AND DUE TO
AFFILIATE
In April 1994, American Insured Mortgage Investors L.P. - Series 88 (AIM
88), an affiliate of the Partnership, transferred a GNMA Mortgage-Backed
Security in the amount of approximately $2.0 million to IFI in order to
recapitalize IFI with sufficient net worth under HUD regulations. The
Partnership and its affiliate, American Insured Mortgage Investors L.P. -Series
86 (AIM 86), each issued a demand note payable to AIM 88 and recorded an
investment in IFI through an affiliate, AIM Mortgage, Inc., in proportion to
each entity's coinsured mortgages for which IFI was the mortgagee of record as
of April 1, 1994. Interest expense on the note payable is based on an annual
interest rate of 7.25%.
In connection with these transactions, the expense reimbursement agreement
was amended, as of April 1, 1994, to adjust the allocation of the expense
reimbursement agreement to the AIM Funds to an amount proportionate to each
entity's coinsured mortgage investments for which IFI was the mortgagee of
record as of April 1, 1994. The expense reimbursement, as amended, along with
the Partnership's equity interest in IFI's net income or loss, substantially
equals the Partnership's interest expense on the note payable.
8. TRANSACTIONS WITH RELATED PARTIES
In addition to the related party transactions described in Note 7, the
<PAGE>12
AMERICAN INSURED MORTGAGEINVESTORS L.P - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. TRANSACTIONS WITH RELATED PARTIES - Continued
General Partner and certain affiliated entities, during the three and six months
ended June 30, 1995 and 1994, earned or received compensation or payments for
services from the Partnership as follows:
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. TRANSACTIONS WITH RELATED PARTIES - Continued
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
For the For the
Three months ended Six months ended
Capacity in Which June 30, June 30,
Name of Recipient Served/Item 1995 1994 1995 1994
----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution $ 161,774 $ 357,860 $ 338,252 $ 549,046
AIM Acquisition Advisor/Asset Management Fee 513,453 518,255 1,026,906 1,037,807
Partners, L.P.(1)
CRI(2) Affiliate of General Partner/ 30,318 35,252 61,905 78,977
Expense Reimbursement
(1) Of the amounts paid to the Advisor, the Sub-advisor earned a fee equal to $151,341 and $152,758, or .28% of Total Invested
Assets, for the three months ended June 30, 1995 and 1994, respectively. The Sub-Advisor earned a fee equal to $302,682 and
$305,898, or .28% of Total Invested Assets, for the six months ended June 30, 1995 and 1994, respectively. As discussed in
Note 1, through June 30, 1995, CRI/AIM Management, Inc. served as the Sub-advisor to the Partnership. Effective June 30, 1995,
CRIIMI MAE Services Limited Partnership will serve as the Sub-advisor. No amounts were paid to CRIIMI MAE Services Limited
Partnership during the six months ended June 30, 1995.
(2) Prior to June 30, 1995, these amounts were paid to CRI as reimbursement for expenses incurred on behalf of the General Partner
and the Partnership. The transaction in which CRIIMI MAE became a self-managed and self-administered REIT, discussed in Note 1
above, has no impact on the payments required to be made by the Partnership, other than the expense reimbursement previously
paid by the Partnership to CRI in connection with the provision of services by the Sub-advisor will be paid to a wholly-owned
subsidiary of CRIIMI MAE, which is the General Partner of CRIIMI MAE Services Limited Partnership, effective June 30, 1995. No
amounts were paid to CRIIMI MAE or its affiliates during the six months ended June 30, 1995.
</TABLE>
<PAGE>14
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
-------
As of June 30, 1995, the Partnership had invested in 93 Insured Mortgages
with an aggregate amortized cost of approximately $210 million, an aggregate
face value of approximately $219 million and an aggregate fair value of
approximately $221 million, as discussed below. As of June 30, 1995, the
Partnership had committed approximately $318,000 for additional advances on
construction loans.
Investment in FHA-Insured Certificates and GNMA Mortgage-Backed
Securities
---------------------------------------------------------------
As of June 30, 1995 and December 31, 1994, the Partnership's investment in
fully insured Acquired Insured Mortgages, recorded at fair value, consisted of
66 and 67 FHA-Insured Certificates, respectively, and nine GNMA Mortgage-Backed
Securities with an aggregate amortized cost of $158,206,101 and $161,032,201,
respectively, an aggregate face value of $165,066,471 and $168,027,076,
respectively, and an aggregate fair value of $166,608,274 and $159,581,791,
respectively.
As of June 30, 1995 and December 31, 1994, the Partnership's investment in
fully insured Originated Insured Mortgages, recorded at fair value, consisted
of one GNMA Mortgage-Backed Security with an amortized cost of $10,688,012 and
$10,708,771, respectively, a face value of $10,782,861 and $10,804,299,
respectively, and a fair value of $11,016,250 and $10,345,301, respectively.
In April 1995, the Partnership filed a Notice of Default and an Election to
Assign with HUD related to the mortgage on El Lago Apartments. On June 22,
1995, the Partnership received approximately $2.1 million, representing
approximately 90% of the assignment proceeds. The remaining proceeds of
approximately $200,000 are included in receivables and other assets on the
accompanying balance sheet as of June 30, 1995. In July 1995, the Partnership
declared a special distribution of the proceeds from the assignment which will
be paid to Unitholders on November 1, 1995.
As of August 11, 1995, the fully insured Originated Insured Mortgage,
recorded at fair value, was current with respect to payment of principal and
interest. As of August 11, 1995, all of the Acquired Insured Mortgages,
recorded at fair value, were current with respect to the payment of principal
and interest except for the mortgage on Country Club Terrace Apartments. As of
August 11, 1995, this Acquired Insured Mortgage was delinquent with respect to
the July 1995 payment of principal and interest. The General Partner does not
anticipate a material adverse impact on the Partnership's financial statements
as a result of this delinquency.
As of June 30, 1995, the Partnership had committed to make future advances
on construction loans of approximately $318,000.
<PAGE>15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Coinsured Mortgage Investments
------------------------------
As discussed in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1994, under the HUD coinsurance program, both HUD and the
coinsurance lender are responsible for paying a portion of the insurance
benefits if a mortgagor defaults and the sale of the development collateralizing
the mortgage produces insufficient net proceeds to repay the mortgage
obligation. In such case, the coinsurance lender will be liable to the
Partnership for the first part of such loss in an amount up to 5% of the
outstanding principal balance of the mortgage as of the date foreclosure
proceedings are instituted or the deed is acquired in lieu of foreclosure. For
any loss greater than 5% of the outstanding principal balance, the
responsibility for paying the insurance benefits will be borne on a pro-rata
basis, 85% by HUD and 15% by the coinsurance lender.
Coinsured by affiliate
----------------------
As of June 30, 1995 and December 31, 1994, the Partnership held investments
in two FHA-Insured Certificates secured by coinsured mortgages where the
coinsurance lender is IFI. These investments were made by the former managing
general partner on behalf of the Partnership. As structured by the former
managing general partner, with respect to these mortgages, the Partnership bears
the risk of loss upon default for IFI's portion of the coinsurance loss.
As of August 11, 1995, these two investments, as shown in the table below,
were current with respect to the payment of principal and interest. The General
Partner believes there is adequate collateral value underlying these two
mortgages. Accordingly, no loan losses were recognized on these investments
during the three and six months ended June 30, 1995 and 1994. As of June 30,
1995 and December 31, 1994, these two mortgages had an aggregate fair value of
$11,942,141 and $11,327,215, respectively.
<PAGE>16
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
<TABLE>
<CAPTION>
Amortized Face Amortized Face
Cost Value Cost Value
June 30, June 30, December 31, December 31,
1995 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Westlake Village $ 6,489,050 $ 6,487,094 $ 6,504,367 $ 6,502,394
Waterford Green Apts. 6,493,740 6,508,749 6,474,012 6,489,123
</TABLE>
Investment in FHA-Insured Loans
-------------------------------
As of June 30, 1995 and December 31, 1994 the Partnership's investment in
fully insured Acquired Insured Mortgages, recorded at amortized cost, consisted
of 12 FHA-Insured Loans with an aggregate amortized cost of $14,744,073 and
$14,800,502, respectively, an aggregate face value of $17,732,200 and
$17,833,049, respectively, and an aggregate fair value of $17,927,549 and
$16,920,898, respectively.
As of June 30, 1995 and December 31, 1994, the Partnership's investment in
fully insured Originated Insured Mortgages, recorded at amortized cost,
consisted of three FHA-Insured Loans with an aggregate amortized cost of
$13,167,966 and $13,210,344, respectively, an aggregate face value of
$12,806,388 and $12,844,664, respectively, and an aggregate fair value of
$13,049,917 and $12,412,621, respectively.
As of August 11, 1995, all of the fully insured Originated Insured
Mortgages and Acquired Insured Mortgages were current with respect to the
payment of principal and interest.
In addition to base interest payments under Originated Insured Mortgages,
the Partnership is entitled to additional interest based on a percentage of the
net cash flow from the underlying development (referred to as Participations).
During the three and six months ended June 30, 1995, the Partnership received
additional interest of $64,676 from the Participations. During the three and
six months ended June 30, 1994, the Partnership received additional interest of
$35,314 from the Participations. These amounts are included in mortgage
investment income on the accompanying statements of operations.
Results of Operations
---------------------
Net earnings for the three and six months ended June 30, 1995 decreased as
compared to the corresponding periods in 1994 primarily due to a decrease in
interest and other income, as discussed below. Mortgage investment income did
not change significantly for the three and six months ended June 30, 1995, as
compared to the corresponding periods in 1994.
Interest and other income decreased for the three and six months ended June
30, 1995 as compared to the corresponding periods in 1994 primarily due to a
reduction in funds available for short term investment during 1995. During the
first quarter of 1994, the Partnership had a greater amount of short-term
investments, resulting from the temporary investment of disposition proceeds
received in late 1993, prior to the distribution of these funds to partners
during the first quarter of 1994. Additionally, during the second quarter of
1994, the notes receivable from affiliates were paid off as a result of the
prepayment of the mortgage on Richardson Road Apartments and the proceeds were
invested in the short term money market prior to the distribution of these
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
proceeds to partners during the third quarter of 1994.
General and administrative expenses decreased for the three and six months
ended June 30, 1995, as compared to the corresponding periods in 1994. These
decreases were due primarily to a reduction in investor services expenses and
annual and quarterly reporting expenses resulting from a reduction in the number
of Unitholders.
Mortgage servicing fees decreased for the six months ended June 30, 1995 as
compared to the corresponding period in 1994 primarily due to a reduction in the
annual servicing fee rates upon completion of the construction periods for
several of the Partnership's mortgage investments during the first quarter of
1994. Mortgage servicing fees did not change significantly for the three months
ended June 30, 1995 as compared to the corresponding period in 1994.
Gain on mortgage disposition increased for the six months ended June 30,
1995 as compared to the corresponding period in 1994. No gains on mortgage
dispositions were recognized for the three months ended June 30, 1995 and 1994.
Loss on mortgage disposition increased for the three and six months ended June
30, 1995 as compared to the corresponding periods in 1994. Gains or losses on
mortgage dispositions are based on the number, carrying amounts and proceeds of
mortgage investments disposed of during the period. During the first quarter of
1995, the Partnership recognized a gain of $52,730 as a result of the final
settlement of the disposition of the mortgage on Dearborne Place Apartments.
During the second quarter of 1995, the Partnership recognized a loss of $36,632
as a result of the assignment to HUD of the mortgage on El Lago Apartments.
Liquidity and Capital Resources
-------------------------------
The Partnership's operating cash receipts, derived from payments of
principal and interest on Insured Mortgages, plus cash receipts from interest on
short-term investments, were sufficient during the first six months of 1995 to
meet operating requirements.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although the
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.
Net cash provided by operating activities decreased for the six months
ended June 30, 1995, as compared to the corresponding period in 1994. This
decrease was primarily due to decreases in investment in affiliate and notes
receivable and due from affiliates resulting from the prepayment of the mortgage
on Richardson Road Apartments underlying the GNMA Mortgage-Backed Security which
had been transferred to IFI to meet IFI's minimum net worth requirement. Also
contributing to the decrease was an increase in other liabilities during the six
months ended June 30, 1994, as a result of the receipt of insurance claim
proceeds related to Forest Ridge, a defaulted mortgage investment, which were
payable to a third party pursuant to the sale of the Partnership's interest in
this mortgage investment during 1992. The decrease in net cash provided by
operating activities was also due to a decrease in receivables and other assets
<PAGE>18
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
during the six months ended June 30, 1994 resulting from the receipt in January
1994 of accrued, but previously undistributed, interest related to Victoria
Pointe Apartments - Phase I.
Net cash provided by investing activities increased for the six months
ended June 30, 1995 as compared to the corresponding period in 1994, principally
due to a decrease in mortgage acquisitions and advances on construction loans as
a result of the expiration of the Partnership's reinvestment period. Also
contributing to the increase was the receipt in 1995 of proceeds from the
assignment of the mortgage on El Lago Apartments.
Net cash used in financing activities decreased for the six months ended
June 30, 1995 as compared to the corresponding period in 1994, as a result of a
decrease in distributions paid to partners. Distributions paid to partners
during the six months ended June 30, 1994 included special distributions
resulting from the receipt of previously undistributed accrued interest and gain
received in late 1993 from the disposition of the defaulted mortgages on
Chapelgate Apartments, Sugar Creek Trace, Cumberland Village, Diamond Ridge, and
Victoria Pointe Apartments-Phase I. This compares to the distribution paid to
partners during the six months ended June 30, 1995 of regular cash flow from the
fourth quarter of 1994 and the first quarter of 1995.
<PAGE>19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended June 30, 1995.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
---------- -----------
27 Financial Data Schedule
<PAGE>20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS L.P. - SERIES 85
(Registrant)
By: CRIIMI, Inc.
General Partner
August 11, 1995 /s/ Cynthia O. Azzara
--------------------------- -------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SECOND QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,898
<SECURITIES> 189,567
<RECEIVABLES> 29,882
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,666
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 220,036
<TOTAL-LIABILITY-AND-EQUITY> 224,666
<SALES> 0
<TOTAL-REVENUES> 9,410
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,376
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,997
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,997
<EPS-PRIMARY> .64
<EPS-DILUTED> 0
</TABLE>
