<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 September 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 November 13, 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 SEPTEMBER 30, 1995
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1995 (unaudited)
and December 31, 1994 . . . . . . . . . . . 3
Statements of Operations - for the three and
nine months ended September 30, 1995 and
1994 (unaudited) . . . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the nine months ended September 30,
1995 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the nine
months ended September 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 . . . . . . . . . . . . . . . 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 16
Signature . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 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 $167,074,613 $159,581,791
Originated insured mortgages 22,894,084 21,672,516
------------ ------------
189,968,697 181,254,307
Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
discount and premium:
Acquired insured mortgages 14,714,810 14,800,502
Originated insured mortgages 13,146,131 13,210,344
------------ ------------
27,860,941 28,010,846
Cash and cash equivalents 5,290,250 3,462,825
Receivables and other assets 1,757,713 1,775,797
Investment in affiliate 319,075 319,075
------------ ------------
Total assets $225,196,676 $214,822,850
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 6,159,171 $ 4,525,104
Accounts payable and accrued expenses 195,238 300,932
Note payable and due to affiliate 337,478 439,433
------------ ------------
Total liabilities 6,691,887 5,265,469
------------ ------------
Partners' equity:
Limited partners' equity 211,384,279 214,162,478
General partner's deficit (1,252,802) (1,140,053)
Net unrealized gains (losses)
on investment in FHA-Insured
Certificates and GNMA Mortgage-
Backed Securities 8,373,312 (3,465,044)
------------ ------------
Total partners' equity 218,504,789 209,557,381
------------ ------------
Total liabilities and partners'
equity $225,196,676 $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 nine months ended
September 30, September 30,
----------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 4,555,595 $ 4,657,867 $ 13,854,372 $ 13,975,099
Interest and other income 70,890 241,470 129,701 554,848
------------ ------------ ------------ ------------
4,626,485 4,899,337 13,984,073 14,529,947
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 507,990 513,453 1,534,896 1,551,260
General and administrative 96,676 107,562 289,924 351,902
Mortgage servicing fees 71,961 64,708 216,661 266,647
Interest expense to affiliate 5,784 11,600 17,350 11,600
------------ ------------ ------------ ------------
682,411 697,323 2,058,831 2,181,409
------------ ------------ ------------ ------------
Net earnings before gain (loss)
on mortgage dispositions 3,944,074 4,202,014 11,925,242 12,348,538
Gain on mortgage disposition -- -- 52,730 --
Loss on mortgage disposition -- -- (36,632) --
------------ ------------ ------------ ------------
Net earnings $ 3,944,074 $ 4,202,214 $ 11,941,340 $ 12,348,538
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 96.1% $ 3,790,255 $ 4,038,135 $ 11,475,628 $ 11,866,945
General partner - 3.9% 153,819 163,879 465,712 481,593
------------ ------------ ------------ ------------
$ 3,944,074 $ 4,202,014 $ 11,941,340 $ 12,348,538
============ ============ ============ ============
Net earnings per Limited
Partnership Unit $ 0.31 $ 0.33 $ 0.95 $ 0.98
============ ============ ============ ============
</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 nine months ended September 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 465,712 11,475,628 -- 11,941,340
Distributions paid or
accrued, including return
of capital, of $1.18 per
Unit (578,461) (14,253,827) -- (14,832,288)
Adjustments to net
unrealized losses
on investment in FHA-
Insured Certificates
and GNMA Mortgage-Backed
Securities -- -- 11,838,356 11,838,356
------------- ------------- ---------------- -------------
Balance, September 30, 1995 $ (1,252,802) $ 211,384,279 $ 8,373,312 $ 218,504,789
============= ============= ================ =============
Limited Partnership Units
outstanding -September
30, 1995 12,079,514
=============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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 nine months ended September 30,
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 11,941,340 $ 12,348,538
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 (105,694) (92,379)
Decrease in receivables and other assets 18,084 1,260,626
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 (101,955) 434,104
------------ ------------
Net cash provided by operating
activities 11,735,677 18,250,418
------------ ------------
Cash flows from investing activities:
Investment in insured mortgages
and advances on construction loans -- (9,739,490)
Receipt of mortgage principal from
scheduled payments 975,618 1,025,121
Proceeds from mortgage dispositions 2,314,351 --
------------ ------------
Net cash provided by (used in)
investing activities 3,289,969 (8,714,369)
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (13,198,221) (20,237,271)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 1,827,425 (10,701,222)
Cash and cash equivalents, beginning of period 3,462,825 15,872,448
------------ ------------
Cash and cash equivalents, end of period $ 5,290,250 $ 5,171,226
============ ============
</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. 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.
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 C.R.I., Inc. (CRI)). Effective September 6, 1991 and
through June 30, 1995, a sub-advisory agreement (the Sub-advisory Agreement)
existed whereby CRI/AIM Management, Inc., 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 real estate investment trust (REIT)
on June 30, 1995, CRIIMI MAE Services Limited Partnership, an affiliate of
CRIIMI MAE, acquired the Sub-advisory Agreement. As a consequence of this
transaction, CRIIMI MAE Services Limited Partnership manages the Partnership's
portfolio. These transactions had no effect on the Partnership's financial
statements.
The Partnership's investment in mortgages consists of participation
certificates evidencing a 100% undivided beneficial interest in government
insured multifamily mortgages issued or sold pursuant to Federal Housing
Administration (FHA) programs (FHA-Insured Certificates), mortgage-backed
securities guaranteed by the Government National Mortgage Association (GNMA)
(GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans (FHA-Insured
Loans). The mortgages underlying the FHA-Insured Certificates, GNMA Mortgage-
Backed Securities and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments or retirement homes.
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 September 30,
1995 and December 31, 1994 and the results of its operations for the three and
nine months ended September 30, 1995 and 1994 and its cash flows for the nine
months ended September 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.
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES
Reclassification
----------------
Certain amounts in the financial statements for the three and nine
months ended September 30, 1994 have been reclassified to conform with the
1995 presentation.
4. INVESTMENT IN FHA-INSURED MORTGAGES AND GNMA MORTGAGE-
BACKED SECURITIES
Fully Insured Mortgage Investments
----------------------------------
As of September 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
$157,934,178 and $161,032,201, respectively, an aggregate face value of
$164,735,279 and $168,027,076, respectively, and an aggregate fair value of
$167,074,613 and $159,581,791, respectively.
As of September 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 $10,677,295 and $10,708,771, respectively, a face value of
$10,771,797 and $10,804,299, respectively, and a fair value of $10,937,144
and $10,345,301, respectively.
In April 1995, the Partnership filed a Notice of Default and an
Election to Assign with the United States Department of Housing and Urban
Development (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 $210,000 were received on September 27, 1995. As discussed
in Note 6, below, in July 1995, the Partnership declared a special
distribution of the proceeds from the assignment, which was paid to
Unitholders on November 1, 1995. Additionally, in October 1995, a special
distribution of the remaining assignment proceeds was declared. This
distribution will be paid to Unitholders on February 1, 1996.
As of November 10, 1995, the fully insured originated insured
mortgage, recorded at fair value, was current with respect to payment of
principal and interest. As of November 10, 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 Woodland
Village Apartments. As of November 10, 1995, this acquired insured
mortgage was delinquent with respect to the September 1995 payment of
principal and interest. On October 31, 1995, the General Partner
instructed the servicer of Woodland Village Apartments to file a Notice of
Default and an Election to Assign the mortgage with HUD. The General
Partner does not anticipate a material adverse impact on the Partnership's
financial statements as a result of these delinquencies.
As of September 30, 1995, the Partnership had committed to make future
advances on construction loans of approximately $318,000.
<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
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 September 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 November 10, 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 nine months ended September 30, 1995 and
1994. As of September 30, 1995 and December 31, 1994, these two mortgages
had an aggregate fair value of $11,956,940 and $11,327,215, respectively.
<PAGE>10
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
<TABLE>
<CAPTION>
Amortized Face Amortized Face
Cost Value Cost Value
September 30, September 30, December 31, December 31,
1995 1995 1994 1994
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Westlake Village $ 6,481,146 $ 6,479,198 $ 6,504,367 $ 6,502,394
Waterford Green Apts. $ 6,502,766 $ 6,517,716 $ 6,474,012 $ 6,489,123
</TABLE>
5. INVESTMENT IN FHA-INSURED LOANS
Fully Insured Mortgage Investments
----------------------------------
As of September 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 $14,714,810 and $14,800,502, respectively, an aggregate
face value of $17,680,325 and $17,833,049, respectively, and an aggregate
fair value of 17,930,642 and $16,920,898, respectively.
As of September 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 $13,146,131 and $13,210,344, respectively, an aggregate
face value of $12,786,645 and $12,844,664, respectively, and an aggregate
fair value of $13,073,124 and $12,412,621, respectively.
As of November 10, 1995, all of the Partnership's mortgage
investments, 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 nine months ended September 30, 1995 and
1994, the Partnership received additional interest of $64,676 and $35,314,
respectively, from the Participations. During the three months ended
September 30, 1995 and 1994, the Partnership received no additional
interest from the Participations. These amounts, if any, 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 nine months ended September 30, 1995 and 1994 are as follows:
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS - Continued
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Quarter ended March 31, $ 0.36 $ 0.39(2)
Quarter ended June 30, 0.33 0.73(3)
Quarter ended September 30, 0.49(1) 0.48(4)
------ ------
$ 1.18 $ 1.60
====== ======
<FN>
(1) This amount includes approximately $0.16 per unit representing return of
capital from the assignment of the mortgage on El Lago Apartments.
(2) This amount includes approximately $0.05 per Unit representing previously
undistributed accrued interest and capital gain from the disposition of the
mortgage on Victoria Pointe Apartments-Phase I.
(3) This amount includes approximately $0.37 per Unit representing net
principal proceeds from the prepayment of the mortgage on Richardson Road
Apartments.
(4) This amount includes approximately $0.11 per Unit representing a one-time
distribution of funds that had previously been set aside pending resolution
of the Partnership's troubled loans. Also included is approximately $0.01
per Unit representing a return of capital from a partial prepayment of the
mortgage on Garden Court Apartments.
</FN>
</TABLE>
As discussed in Note 4, above, on September 27, 1995, the remaining
proceeds from the assignment of El Lago Apartments were received from HUD.
Accordingly, in October 1995, a special distribution of $0.02 per Unit was
declared. This distribution will be paid to Unitholders on February 1, 1996 in
conjunction with the fourth 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. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three and
nine months ended September 30, 1995 and 1994, earned or received compensation
or payments for services from the Partnership as follows:
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES - Continued
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
For the For the
three months ended nine months ended
Capacity in Which September 30, September 30,
Name of Recipient Served/Item 1995 1994 1995 1994
- - - - - - ----------------- ---------------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution $ 240,209 $ 235,306 $ 578,461 $ 784,352
AIM Acquisition Advisor/Asset Management Fee 507,990 513,453 1,534,896 1,551,260
Partners, L.P.(1)
CRI(2) Affiliate of General Partner/ 9,224 30,248 71,129 109,225
Expense Reimbursement
CRIIMI MAE Affiliate of General Partner/ 11,519 -- 11,519 --
Management, Inc.(2) Expense Reimbursement
<FN>
(1) Of the amounts paid to the Advisor, the sub-advisor to the Partnership (the Sub-advisor) is entitled to a fee of .28% of Total
Invested Assets. CRI/AIM Management, Inc., which through June 30, 1995 acted as the Sub-advisor, earned a fee equal to $0 and
$151,341 for the three months ended September 30, 1995 and 1994, respectively. CRI/AIM Management, Inc. earned a fee equal to
$302,682 and $457,239, for the nine months ended September 30, 1995 and 1994, respectively. As discussed in Note 1 above,
effective June 30, 1995, CRIIMI MAE Services Limited Partnership now serves as the Sub-advisor. Of the amounts paid to the
Advisor, CRIIMI MAE Services Limited Partnership earned a fee equal to $149,730 and $0, for the three months ended September
30, 1995 and 1994, respectively. CRIIMI MAE Services Limited Partnership earned a fee equal to $149,730 and $0, for the nine
months ended September 30, 1995 and 1994, respectively.
(2) Prior to CRIIMI MAE becoming a self-administered REIT, amounts were paid to CRI as reimbursement for expenses incurred prior to
June 30, 1995 on behalf of the General Partner and the Partnership. As discussed in Note 1, the transaction in which CRIIMI
MAE became a self-managed and self-administered REIT has no impact on the payments required to be made by the Partnership,
other than that the expense reimbursements previously paid by the Partnership to CRI in connection with the provision of
services by the Sub-advisor are, effective June 30, 1995, paid to a wholly-owned subsidiary of CRIIMI MAE, CRIIMI MAE
Management, Inc. The amounts paid to CRI during the three months ended September 30, 1995 represent reimbursement of expenses
incurred prior to June 30, 1995.
</FN>
</TABLE>
<PAGE>13
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- - - - - - -------
As of September 30, 1995, the Partnership had invested in 93 insured
mortgages with an aggregate amortized cost of approximately $209 million, an
aggregate face value of approximately $219 million and an aggregate fair value
of approximately $221 million, as discussed below. As of September 30, 1995,
the Partnership had committed approximately $318,000 for additional advances on
construction loans.
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 $210,000 were received on September 27, 1995.
As of November 10, 1995, all of the Partnership's mortgage investments were
current with respect to the payment of principal and interest except for the
fully insured mortgage on Woodland Village Apartments, which was delinquent with
respect to the September 1995 payment of principal and interest. On October 31,
1995, the General Partner instructed the servicer of Woodland Village Apartments
to file a Notice of Default and an Election to Assign the mortgage with HUD.
The General Partner does not anticipate a material adverse impact on the
Partnership's financial statements as a result of these delinquencies.
Results of Operations
- - - - - - ---------------------
Net earnings for the three and nine months ended September 30, 1995
decreased as compared to the corresponding periods in 1994 primarily due to
decreases in mortgage investment income and interest and other income, as
discussed below.
Mortgage investment income decreased for the three and nine months ended
September 30, 1995, as compared to the corresponding periods in 1994 primarily
due to the assignment to HUD of El Lago Apartments in June 1995. Also
contributing to these decreases was the conversion of construction loans to
permanent loans at lower effective interest rates during 1994.
Interest and other income decreased for the three and nine months ended
September 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
proceeds to partners during the third quarter of 1994.
General and administrative expenses decreased for the three and nine months
ended September 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 nine months ended September 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
<PAGE>14
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
three months ended September 30, 1995 as compared to the corresponding period in
1994.
Gain on mortgage disposition increased for the nine months ended September
30, 1995 as compared to the corresponding period in 1994. Loss on mortgage
disposition increased for the nine months ended September 30, 1995 as compared
to the corresponding period in 1994. No gains or losses on mortgage
dispositions were recognized for the three months ended September 30, 1995 and
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 nine 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 nine months
ended September 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. The
decrease in net cash provided by operating activities was also due to a decrease
in receivables and other assets during the nine months ended September 30, 1994
resulting from the receipt in January 1994 of accrued, but previously
undistributed, interest related to Victoria Pointe Apartments - Phase I. Also
contributing to this decrease was a decrease in net earnings, as discussed
above.
Net cash provided by investing activities increased for the nine months
ended September 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 nine months ended
September 30, 1995 as compared to the corresponding period in 1994, as a result
of a decrease in distributions paid to partners. Distributions paid to
<PAGE>15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
partners during the nine months ended September 30, 1994 included special
distributions resulting from the prepayment of the mortgage on Richardson Road
Apartments and 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 nine months ended September 30, 1995 of regular cash flow
from the fourth quarter of 1994 and the first two quarters of 1995.
<PAGE>16
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 September 30, 1995.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
----------- -----------------------
27 Financial Data Schedule
<PAGE>17
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
November 13, 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 THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,290
<SECURITIES> 189,969
<RECEIVABLES> 29,619
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 225,197
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 218,505
<TOTAL-LIABILITY-AND-EQUITY> 225,197
<SALES> 0
<TOTAL-REVENUES> 14,037
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,059
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,941
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,941
<EPS-PRIMARY> .95
<EPS-DILUTED> 0
</TABLE>
