<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, 1998
------------------
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 June 30, 1998, 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, 1998
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited)
and December 31, 1997 . . . . . . . . . . . 3
Statements of Operations - for the three and
six months ended June 30, 1998 and 1997
(unaudited) . . . . . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the six months ended June 30,
1998 (unaudited). . . . . . . . . . . . . . 5
Statements of Cash Flows - for the six
months ended June 30, 1998 and
1997 (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 . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . 16
<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,
1998 1997
------------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured
Certificates and GNMA Mortgage-
Backed Securities, at fair value:
Acquired insured mortgages $128,362,339 $142,822,793
Originated insured mortgages 16,808,780 16,887,282
------------ ------------
145,171,119 159,710,075
------------ ------------
Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
discount and premium:
Acquired insured mortgages 13,405,511 14,416,917
Originated insured mortgages 12,874,651 12,928,572
------------ ------------
26,280,162 27,345,489
Cash and cash equivalents 6,645,963 14,718,103
Receivables and other assets 3,812,431 1,676,021
------------ ------------
Total assets $181,909,675 $203,449,688
============ ============<PAGE>
<PAGE>4
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 7,290,445 $ 15,460,772
Accounts payable and accrued expenses 186,478 306,715
Due to affiliate 1,266,454 --
------------ ------------
Total liabilities 8,743,377 15,767,487
------------ ------------
Partners' equity:
Limited partners' equity 167,277,939 180,044,243
General partner's deficit (3,042,756) (2,524,665)
Unrealized gain on investment
in FHA-Insured Certificates
and GNMA Mortgage-Backed
Securities 9,265,167 10,482,727
Unrealized loss on investment
in FHA-Insured Certificates
and GNMA Mortgage-Backed
Securities (334,052) (320,104)
------------ ------------
Total partners' equity 173,166,298 187,682,201
------------ ------------
Total liabilities and partners'
equity $181,909,675 $203,449,688
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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,
------------------------------ -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 3,533,125 $ 4,266,946 $ 7,239,023 $ 8,484,014
Interest and other income 218,085 51,496 371,291 108,750
------------ ------------ ------------ ------------
3,751,210 4,318,442 7,610,314 8,592,764
------------ ------------ ------------ ------------
Expenses:
Asset management fee to related parties 405,959 476,952 824,061 954,845
General and administrative 147,924 166,969 292,377 320,742
------------ ------------ ----------- ------------
553,883 643,921 1,116,438 1,275,587
------------ ------------ ----------- ------------
Net earnings before net gains
on mortgage dispositions 3,197,327 3,674,521 6,493,876 7,317,177
Net gains on mortgage
dispositions 857,977 -- 961,789 205,217
------------ ------------ ----------- ------------
Net earnings $ 4,055,304 $ 3,674,521 $ 7,455,665 $ 7,522,394
============ ============ =========== ============
Net earnings allocated to:
Limited partners - 96.1% $ 3,897,147 $ 3,531,215 $ 7,164,894 $ 7,229,021
General partner - 3.9% 158,157 143,306 290,771 293,373
------------ ------------ ----------- ------------
$ 4,055,304 $ 3,674,521 $ 7,455,665 $ 7,522,394
============ ============ =========== ============
Net earnings per Limited
Partnership Unit - basic $ 0.32 $ 0.29 $ 0.59 $ 0.60
============ ============ =========== ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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, 1998
(Unaudited)
<TABLE>
<CAPTION>
Adjustment Adjustment
to to
Unrealized Unrealized
Gains on Losses on
Investment Investment
General Limited in Insured in Insured
Partner Partners Mortgages Mortgages Total
------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ (2,524,665) $ 180,044,243 $ 10,482,727 $ (320,104) $ 187,682,201
Net earnings 290,771 7,164,894 -- -- 7,455,665
Distributions paid or
accrued of $1.65 per
Unit, including return
of capital of $1.06 (808,862) (19,931,198) -- -- (20,740,060)
Adjustments to unrealized
gains (losses) on investments
in FHA-Insured Certificates
and GNMA Mortgage-Backed
Securities -- -- (1,217,560) (13,948) (1,231,508)
------------- ------------- -------------- ------------ -------------
Balance, June 30, 1998 $ (3,042,756) $ 167,277,939 $ 9,265,167 $ (334,052) $ 173,166,298
============= ============= ============== ============ =============
Limited Partnership Units
outstanding - basic, as of
June 30, 1998 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 six months ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,455,665 $ 7,522,394
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Net gain on mortgage dispositions (961,789) (205,217)
Changes in assets and liabilities:
(Decrease) increase in accounts payable and
accrued expenses (120,237) 10,291
Decrease in receivables and other assets 280,061 50,727
Decrease in investment in affiliate -- 314,072
------------ ------------
Net cash provided by operating activities 6,653,700 7,692,267
------------ ------------
Cash flows from investing activities:
Receipt of mortgage principal from
scheduled payments 680,474 774,127
Proceeds from mortgage dispositions 13,504,073 904,891
------------ ------------
Net cash provided by investing activities 14,184,547 1,679,018
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (28,910,387) (15,586,469)
Decrease in note payable and due to affiliate -- (375,094)
------------ ------------
Net cash used in financing activities (28,910,387) (15,961,563)
------------ ------------
Net decrease in cash and cash equivalents (8,072,140) (6,590,278)
Cash and cash equivalents, beginning of period 14,718,103 9,716,786
------------ ------------
Cash and cash equivalents, end of period $ 6,645,963 $ 3,126,508
============ ============
Non cash investing activity:
9.5% debenture received from HUD in exchange
for the mortgage on Portervillage I Apartments $ 2,296,098 --
Portion of debenture due to affiliate, AIM 84 (1,148,049) --
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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).
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 and together with FHA-Insured Certificates and GNMA Mortgage-Backed
Securities referred to herein as Insured Mortgages). 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 June 30, 1998 and
December 31, 1997 and the results of its operations for the three and six months
ended June 30, 1998 and 1997 and its cash flows for the six months ended June
30, 1998 and 1997.
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, these financial
statements should 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, 1997.
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Basis of Presentation - Continued
New Accounting Standards
- ------------------------
During 1997, FASB issued SFAS No. 130 "Reporting Comprehensive Income" (FAS
130). FAS 130 states that all items that are required to be recognized under
accounting standards as components of comprehensive income are to be reported in
a separate statement of income. This would include net income as currently
reported by the Partnership adjusted for unrealized gains and losses related to
the Partnership's mortgages accounted for as "available for sale". FAS 130 was
adopted by the Partnership January 1, 1998. For the three and six months ended
June 30, 1998, comprehensive income was $2,197,121 and $6,224,157, respectively.
For the three and six months ended June 30, 1997, comprehensive income was
$5,775,220 and $6,899,794, respectively.
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES
Fully Insured Mortgage Investments
----------------------------------
Listed below is the Partnership's aggregate investment in Fully
Insured Mortgages:
<TABLE>
<CAPTION> June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Fully Insured Acquired:
Number of
GNMA Mortgage-Backed Securities(1) 8 9
FHA-Insured Certificates (2)(3)(4) 52 55
Amortized Cost $119,280,539 $132,530,176
Face Value 123,533,506 137,674,964
Fair Value 128,362,339 142,822,793
Fully Insured Originated:
Number of
GNMA Mortgage-Backed Securities 1 1
FHA-Insured Certificates 1 1
Amortized Cost $ 16,959,465 $ 17,017,276
Face Value 16,602,849 16,660,658
Fair Value 16,808,780 16,887,282
</TABLE>
(1) In February 1998, the mortgage on Spanish Trace Apartments was
prepaid. The Partnership received net proceeds of approximately $9.7
million and recognized a loss of approximately $96,000 for the six
months ended June 30, 1998. A distribution of approximately $0.77 per
unit related to this prepayment was declared in March 1998 and was
paid to Unitholders in May 1998.
(2) In April 1998, the mortgages on Emerald Green Apartments and Isle of
Pines Village Apartments were prepaid. The Partnership received net
proceeds, for the two mortgages, of approximately $2.3 million
resulting in an aggregate gain of approximately $520,000 for the six
months ended June 30, 1998. A distribution of approximately $0.19 per
Unit related to the prepayment of these mortgages was declared in May
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
1998 and was paid to Unitholders in August 1998.
(3) In May 1998, the mortgage on Stoney Brook Apartments was prepaid. The
Partnership received net proceeds of approximately $1.5 million
resulting in a gain of approximately $338,000 for the six months ended
June 30, 1998. A distribution of approximately $0.12 per Unit related
to the prepayment of this mortgage was declared in June 1998 and was
paid to Unitholders in August 1998.
(4) In July 1998, the mortgage on Amador Residential was prepaid. The
Partnership received net proceeds of approximately $1.4 million
resulting in a gain of approximately $64,000. The Partnership expects
to distribute $0.11 per Unit in November 1998, related to the
prepayment of this mortgage.
As of August 3, 1998, all of the fully insured FHA-Insured
Certificates and GNMA Mortgage-Backed Securities are current with respect
to the payment of principal and interest except for the mortgage on Wayland
Health Center, which is delinquent with respect to the May and June 1998
payments of principal and interest. In addition, the mortgages on Country
Club Terrace Apartments and Bentgrass Hills Apartments are delinquent with
respect to the June 1998 payment of principal and interest.
4. INVESTMENT IN FHA-INSURED LOANS
Fully Insured FHA-Insured Loans
-------------------------------
Listed below is the Partnership's aggregate investment in FHA-Insured
Loans:
<TABLE>
<CAPTION> June 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Fully Insured Acquired:
Number of Loans(1) 11 12
Amortized Cost $ 13,405,511 $ 14,416,917
Face Value 15,903,523 17,165,551
Fair Value 16,168,965 17,432,816
Fully Insured Originated:
Number of Loans 3 3
Amortized Cost $ 12,874,651 $ 12,928,572
Face Value 12,540,094 12,589,214
Fair Value 13,301,329 13,431,769
(1) In March 1998, HUD issued assignment proceeds in the form of a 9.5%
debenture for the mortgage on Portervillage I Apartments. This
mortgage was owned 50% by AIM 85 and 50% by an affiliate, American Insured
Mortgage Investors (AIM 84). The debenture face value is $2,296,098 with
interest payable semi-annually on January 1 and July 1. Upon disposition
of the debenture, 50% of the proceeds will be payable to AIM 84. The
Partnership expects to receive net proceeds of approximately $1.1 million
and has recognized a gain of approximately $200,000 for the six months
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
ended June 30, 1998. The debenture and accrued interest are included on
the balance sheet in Receivables and other assets and the portion due to
AIM 84 is included in Due to affiliate. A distribution will be declared in
the quarter in which cash is received for the debenture.
</TABLE>
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
As of August 3, 1998, all of the Partnership's FHA-Insured Loans,
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,
1998, the Partnership received additional interest of $34,553 as compared
to $89,222 for the corresponding periods in 1997 from the Participations.
These amounts, if any, are included in mortgage investment income on the
accompanying statements of operations.
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the three months ended March 31, 1998 and 1997 are as follows:
1998 1997
------ ------
Quarter ended March 31, $ 1.07(1) $ 0.39(3)
Quarter ended June 30, 0.58(2) 0.30
------ ------
$ 1.65 $ 0.69
====== ======
(1) This amount includes approximately $0.77 per Unit return of capital from
the disposition of the mortgage on Spanish Trace Apartments.
(2) This amount includes approximately $0.31 per Unit return of capital and
gain from the disposition of the following mortgages: Emerald Green
Apartments and Isle of Pines Village of $0.19 per Unit and Stoney Brook
Apartments of $0.12 per Unit.
(3) This amount includes approximately $0.07 per Unit return of capital and
gain from the disposition of the following mortgages: Meadow Park
Apartments I of $0.05 per Unit and Security Apartments of $0.02 per Unit.
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 payment receipts are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments resulting from 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.
6. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three and
six months ended June 30, 1998 and 1997, 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)
6. 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 1998 1997 1998 1997
- ----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution $ 284,327 $ 147,066 $ 808,862 $ 338,252
AIM Acquisition Advisor/Asset Management Fee 405,959 476,952 824,061 954,845
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/ 16,361 18,081 32,544 35,024
Management, Inc. Expense Reimbursement
(1) The Advisor, pursuant to the Partnership Agreement, effective June 26, 1984, is entitled to an Asset Management Fee equal to
0.95% of Total Invested Assets (as defined in the Partnership Agreement). CRIIMI MAE Services Limited Partnership, the sub-
advisor to the Partnership (the Sub-advisor) is entitled to a fee of 0.28% of Total Invested Assets, pursuant to the amended
partnership agreement as of October 1991. Of the amounts paid to the Advisor, the Sub-advisor earned a fee equal to $119,657
and $242,893 for the three and six months ended June 30, 1998, respectively, and $140,349 and $281,205 for the three and six
months ended June 30, 1997, respectively. The Sub-advisor is an affiliate of CRIIMI MAE.
</TABLE>
<PAGE>13
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking. These statements contain a number of risks and uncertainties
as discussed herein and in the Partnership's other reports filed with the
Securities and Exchange Commission that could cause actual results to differ
materially. See Item 1, "Forward-Looking Statements" in the Partnership's
Annual Report for 1997 on Form 10-K for a more detailed discussion of such risks
and uncertainties.
General
- -------
As of June 30, 1998, the Partnership had invested in 76 Insured Mortgages
with an aggregate amortized cost of approximately $162.5 million, an aggregate
face value of approximately $168.6 million and an aggregate fair value of
approximately $174.6 million, as discussed below.
In July 1998, the mortgage on Amador Residential was prepaid. The
Partnership received net proceeds of approximately $1.4 million resulting in a
gain of approximately $64,000. The Partnership expects to distribute $0.11 per
Unit in November 1998, related to the prepayment of this mortgage.
As of August 3, 1998, all of the fully insured FHA-Insured Certificates and
GNMA Mortgage-Backed Securities are current with respect to the payment of
principal and interest except for the mortgage on Wayland Health Center, which
is delinquent with respect to the May and June 1998 payments of principal and
interest. In addition, the mortgages on Country Club Terrace Apartments and
Bentgrass Hills Apartments are delinquent with respect to the June 1998 payment
of principal and interest.
Results of Operations
- ---------------------
Net earnings for the three months ended June 30, 1998 increased as compared
to the corresponding period in 1997. Net earnings for the six months ended June
30, 1998 decreased as compared to the corresponding period in 1997. The
increase for the three months ended June 30, 1998, is primarily due to the
increase in net gains from mortgage dispositions, as discussed below. This
increase was partially offset by a decrease in mortgage investment income due to
the disposition of nine mortgages since June 1997. The decrease for the six
months ended June 30, 1998, is primarily due to a decrease in mortgage
investment income as a result of the disposition of nine mortgages since June
1997. This decrease was partially offset by an increase in net gains from
mortgage dispositions, as discussed below.
Interest and other income increased for the three and six months ended June
30, 1998, as compared to the corresponding periods in 1997, primarily due to the
investment of proceeds received from the
<PAGE>14
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
disposition of mortgages, prior to distribution, as discussed in Notes 3 and 5
of the financial statements.
Asset management fees decreased for the three and six months ended June 30,
1998, as compared to the corresponding periods in 1997, primarily from the
reduction in the mortgage asset base.
Net gains on mortgage dispositions increased for the three and six months
ended June 30, 1998, as compared to the corresponding periods in 1997. During
the first six months of 1998, the Partnership recognized gains of approximately
$200,000 from the assignment of the mortgage on Portervillage I Apartments in
March 1998 and approximately $858,000 from the prepayment of the mortgages on
Stoney Brook Apartments, Emerald Green Apartments and Isle of Pines Village
Apartments in April 1998. In addition, the Partnership recognized a loss of
approximately $96,000 from the prepayment of the mortgage on Spanish Trace
Apartments in February 1998. During the first six months of 1997, the
Partnership recognized gains of approximately $139,000 from the assignment of
the mortgage on Meadow Park Apartments I in January 1997 and approximately
$66,000 from the prepayment of the mortgage on Security Apartments in February
1997.
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 1998 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, 1998, as compared to the corresponding period in 1997, primarily
due to the decrease in earnings before mortgage dispositions as it relates to
the reduction in mortgage base.
Net cash provided by investing activities increased for the six months
ended June 30, 1998, as compared to the corresponding period in 1997. This
increase is primarily due to proceeds received from the disposition of
mortgages, as discussed in Notes 3 and 5 of the financial statements.
Net cash used in financing activities increased for the six months ended
June 30, 1998, as compared to the corresponding period in 1997. This increase
was due to the distribution of net proceeds received from the disposition of
mortgages, as discussed in Notes 3 and 5 of the financial statements.
<PAGE>15
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, 1998.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
----------- -----------------------
27 Financial Data Schedule
<PAGE>16
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
/s/ August 13, 1998 /s/ Cynthia O. Azzara
- ------------------- -------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,646
<SECURITIES> 145,171
<RECEIVABLES> 30,093
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<CURRENT-ASSETS> 0
<PP&E> 0
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<CURRENT-LIABILITIES> 8,744
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 173,166
<TOTAL-LIABILITY-AND-EQUITY> 181,910
<SALES> 0
<TOTAL-REVENUES> 8,572
<CGS> 0
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<EPS-PRIMARY> .59
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