UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-15724
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
(Exact name of registrant as specified in its charter)
Delaware 13-3294835
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
(203) 862-7000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q - SEPTEMBER 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended September 30,
1996 and 1995 and the nine months ended September 30, 1996 and
1995
STATEMENT OF PARTNERS' EQUITY - For the nine months ended September 30,
1996
STATEMENTS OF CASH FLOWS - For the nine months ended September 30, 1996
and 1995
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of an allowance
for loan losses of $18,976,460) ............... $ 4,753,348 $ 4,753,348
Cash and cash equivalents ........................ 4,113,432 4,035,754
Real estate - net ................................ 3,671,594 3,737,816
Other assets..................................... 47,229 38,842
------------ ------------
$ 12,585,603 $ 12,565,760
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable ............................ $ 3,586,854 $ 3,633,032
Due to affiliates ................................ 2,060,527 2,167,220
Accounts payable and accrued expenses ............ 303,130 208,745
------------ ------------
Total liabilities ......................... 5,950,511 6,008,997
------------ ------------
Commitments and contingencies
Partners' equity
Limited partners' equity (330,004 units issued
and outstanding) .............................. 10,427,439 10,353,026
General partners' deficit ........................ (3,792,347) (3,796,263)
------------ ------------
Total partners' equity .................... 6,635,092 6,556,763
------------ ------------
$ 12,585,603 $ 12,565,760
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF OPERATIONS
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Operating income ........................... $ 494,836 $ 482,762 $ 1,359,418 $ 1,361,567
Other income ............................... 64,316 25,421 138,915 49,371
Short-term investment interest ............. 48,104 60,907 143,354 154,268
----------- ----------- ----------- -----------
607,256 569,090 1,641,687 1,565,206
----------- ----------- ----------- -----------
Costs and expenses
Operating expenses ......................... 295,988 275,960 821,607 805,760
Interest expense ........................... 85,348 86,769 257,139 261,303
General and administrative expenses ........ 74,656 91,701 225,250 286,102
Asset management fees ...................... 38,713 41,583 123,868 123,214
Mortgage servicing fees .................... 23,663 29,464 69,272 98,863
Depreciation expense ....................... 22,222 22,007 66,222 66,018
Provision for loan losses .................. -- 1,260,000 -- 6,672,014
----------- ----------- ----------- -----------
540,590 1,807,484 1,563,358 8,313,274
----------- ----------- ----------- -----------
Net income (loss) ............................... $ 66,666 $(1,238,394) $ 78,329 $(6,748,068)
=========== =========== =========== ===========
Net income (loss) attributable to
Limited partners ........................... $ 63,333 $(1,176,474) $ 74,413 $(6,410,665)
General partners ........................... 3,333 (61,920) 3,916 (337,403)
----------- ----------- ----------- -----------
$ 66,666 $(1,238,394) $ 78,329 $(6,748,068)
=========== =========== =========== ===========
Net income (loss) per unit of limited partnership
interest (330,004 units outstanding) ....... $ 0.19 $ (3.57) $ 0.22 $ (19.43)
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF PARTNERS' EQUITY
General Limited Total
Partners' Partners' Partners'
Deficit Equity Equity
----------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1, 1996 ............ $(3,796,263) $10,353,026 $ 6,556,763
Net income for the nine months ended
September 30, 1996 .............. 3,916 74,413 78,329
----------- ----------- -----------
Balance, September 30, 1996 ......... $(3,792,347) $10,427,439 $ 6,635,092
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
For the nine months ended
September 30,
--------------------------
1996 1995
----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ............................................ $ 78,329 $(6,748,068)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation .......................................... 66,222 66,018
Deferred asset management and
mortgage servicing fees, net of
payments made ..................................... (106,693) (265,520)
Provision for loan losses ............................. -- 6,672,014
Changes in assets and liabilities
Other assets .............................................. (8,387) (12,452)
Accounts payable and accrued expenses ..................... 94,385 55,124
----------- -----------
Net cash provided by (used in) operating activities 123,856 (232,884)
----------- -----------
Cash flows from investing activities
Additions to real estate ..................................... -- (11,878)
----------- -----------
Cash flows from financing activities
Principal payments on mortgage loan payable .................. (46,178) (46,490)
----------- -----------
Net increase (decrease) in cash and cash equivalents .............. 77,678 (291,252)
Cash and cash equivalents, beginning of period .................... 4,035,754 4,241,885
----------- -----------
Cash and cash equivalents, end of period .......................... $ 4,113,432 $ 3,950,633
=========== ===========
Supplemental disclosure of cash flow information
Interest paid ................................................ $ 257,139 $ 261,303
=========== ===========
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussion should be read in conjunction with
the financial statements, related footnotes and discussions contained
in the Resources Accrued Mortgage Investor L.P. - Series 86 (the
"Partnership") annual report on Form 10-K for the year ended December
31, 1995. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of the results to be expected
for the full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in mortgage loans
The Partnership principally invested in nonrecourse, zero coupon junior
mortgage loans on properties owned or acquired by limited partnerships
sponsored by affiliates of the General Partners. These loans generally
contain provisions whereby the Partnership may be entitled to
additional interest represented by participation in the appreciation of
the underlying property.
The Partnership accounts for its investments in mortgage loans under
the following methods:
Investment method
Mortgage loans representing transactions in which the Partnership
is considered to have substantially the same risks and potential
rewards as the borrower are accounted for as investments in real
estate rather than as loans. Although the transactions are
structured as loans, due to the terms of the zero coupon
mortgage, it is not readily determinable at inception that the
borrower will continue to maintain a minimum investment in the
property. Under this method of accounting, the Partnership will
recognize as revenue the lesser of the amount of interest as
contractually provided for in the mortgage loan, or its pro rata
share of the actual cash flow from operations of the underlying
property inclusive of depreciation and interest expense on any
senior indebtedness.
Interest method
Under this method of accounting, the Partnership recognizes
revenue as interest income over the term of the mortgage loans so
as to produce a constant periodic rate of return. Interest income
will not be recognized as revenue during periods where there are
concerns about the ultimate realization of the interest or loan
principal.
<PAGE>
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each of the mortgage loans in the Partnership's portfolio. In
performing the review, management considers the estimated net
realizable value of the mortgage loan or collateral as well as other
factors, such as the current occupancy, the amount and status of any
senior debt, the prospects for the property and the economic situation
in the region where the property is located. Because this determination
of net realizable value is based upon projections of future economic
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of
September 30, 1996.
The allowance is inherently subjective and is based on management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide additional losses in
subsequent years and such provisions could be material.
An allowance for loan losses was not recorded for the three months
ended September 30, 1996. An allowance was recorded for the three
months ended September 30, 1995 (see Note 4).
Depreciation
Depreciation is computed using the straight-line method over the useful
life of the property, which is estimated to be 40 years. The original
cost of the property is equal to the carrying value of the first
mortgage loan at the time of the foreclosure. Repairs and maintenance
are charged to operations as incurred.
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets.
Under SFAS #121 the initial test to determine if an impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
<PAGE>
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of assets (continued)
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of September 30, 1996. The cash flows used to
determine fair value and net realizable value are based on good faith
estimates and assumptions developed by management. Inevitably,
unanticipated events and circumstances may occur and some assumptions
may not materialize; therefore actual results may vary from our
estimate and the variances may be material. The Partnership may provide
additional losses in subsequent years if the real estate market or
local economic conditions change and such write-downs could be
material.
A write-down for impairment was not recorded for the three months ended
September 30, 1996 or 1995.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Investment General Partner of the Partnership, RAM Funding, Inc.,
and the Administrative General Partner, Resources Capital Corp. are
wholly-owned subsidiaries of Presidio Capital Corp. ("Presidio"). The
Associate General Partner of the Partnership is Presidio AGP Corp., a
Delaware Corporation, also a wholly owned subsidiary of Presidio. The
General Partners and certain of their affiliates are general partners
in several other limited partnerships which are also affiliated with
Presidio, and which are engaged in businesses that are, or may in the
future, be in direct competition with the Partnership. Wexford
Management LLC ("Wexford"), a company controlled by certain officers
and directors of Presidio, performs management and administrative
services for Presidio and its direct and indirect subsidiaries as well
as the Partnership. During the three and nine months ended September
30, 1996, reimbursable expenses to Wexford by the Partnership amounted
to $16,123 and $46,445, respectively. Wexford is engaged to perform
similar services for other similar entities that may be in competition
with the Partnership.
The Administrative General Partner is entitled to receive an asset
management fee for services rendered in the administration and
management of the Partnership's operations equal to 1/4 of 1% per annum
of the Net Asset Value of the Partnership, as defined in the Amended
and Restated Agreement of Limited Partnership (the "Limited Partnership
Agreement"). Payment of the asset management fee is deferred until
commencement of the disposition of the Partnership's mortgage loans,
with interest on the amount deferred at 10% per annum, compounded
annually. The Administrative General Partner earned $38,713 and
$41,583, including accrued interest of $38,544 and $37,852 for the
three months ended September 30, 1996 and 1995, respectively.
<PAGE>
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
The Administrative General Partner is also entitled to receive a
mortgage servicing fee at an annual rate of 1/4 of 1% per annum of the
principal balance of the Partnership's mortgage loans outstanding from
time to time. Payment of the mortgage servicing fee is deferred until
disposition of the applicable mortgage loan, with interest on the
amount deferred at 10% per annum, compounded annually. The
Administrative General Partner earned $23,663 and $29,464, including
accrued interest of $13,468 and $17,541 for the three months ended
September 30, 1996 and 1995, respectively.
In March 1995, the Administrative General Partner was paid $75,919,
$69,118, $29,219 and $137,918, which represented the mortgage servicing
fees previously accrued and associated with the Berkeley Western,
Southern Inns, Brentwood Place and Boram Loans, respectively. In
September 1995, the Administrative General Partner was paid $175,423,
which represented the mortgage servicing fee previously accrued with
the LAX loan. In February 1996, the Administrative General Partner was
paid $86,827 which represented the mortgage servicing fee previously
accrued for the Research Triangle Loan. In August 1996, the
Administrative General Partner was paid $134,953 and $78,054, which
represented the asset management fee previously accrued and associated
with the Lenox and Tri-State loans, respectively.
Amounts due to affiliates for asset management and mortgage servicing
fees, consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---------- ----------
<S> <C> <C>
Asset management fee ..................... $1,508,340 $1,597,478
Mortgage servicing fee ................... 552,187 569,742
---------- ----------
$2,060,527 $2,167,220
========== ==========
</TABLE>
The General Partners collectively are allocated 5% of the net income or
loss of the Partnership and are entitled to receive 5% of
distributions. Such amounts are allocated or distributed 4.8% to the
Administrative General Partner, 0.1% to the Investment General Partner,
and 0.1% to the Associate General Partner. For the three months ended
September 30, 1996 and 1995 the Administrative General Partner,
Investment General Partner and Associate General Partner were allocated
net income (loss) of $3,199, $67 and $67 and $(59,444), $(1,238) and
$(1,238), respectively.
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES
The Partnership invested in nonrecourse, zero-coupon junior mortgage
loans. Collection of amounts due on the Partnership's junior mortgage
loans is solely dependent upon the sale or refinancing of the
underlying properties at amounts sufficient to satisfy the
Partnership's mortgage loans, after payment of the senior mortgage
notes owned by unaffiliated third parties.
The properties which collateralize the Partnership's mortgage loans
have experienced varying degrees of operating problems. The San Diego
Century Park, Clovine, Park Place, Lenox Towers and LAX loans were
ultimately lost when the senior lenders foreclosed on the properties
securing the Partnership's mortgage loans. The Brentwood Place,
Berkeley Western and Boram loans have been restructured to allow the
Partnership a possible equity participation in the future sales or
refinancing of the properties. The 595 Madison and Bellekirk loans were
repaid. The Research Triangle loan was exchanged for a participating
interest in the cash flows from the senior loan on the property.
The Partnership has provided for these contingencies, in some
circumstances, by establishing an allowance for loan losses on its
entire investment.
Research Triangle loan
The Complex securing the Research Triangle loan ("RT Loan"), is
operating with positive cash flow and is presently meeting all its debt
service requirements. The RT Loan and the Senior Wrap Mortgages were
due to mature January 1, 1996. The Senior Wrap Mortgages are currently
being negotiated to extend the maturity dates. While negotiations are
in progress, Research Triangle Associates ("RT"), the owner of the
property secured by the loan, continues to make debt service payments.
Currently, leases with IBM account for over 70% of the leased space at
the property and are due to expire in 1997. Since refinancing would be
difficult without a longer lease commitment from IBM, the Partnership
ceased accruing interest during 1993. Due to the uncertainty associated
with the ultimate recoverability of the RT Loan, an additional reserve
for loan losses in the amount of $2,360,000 was established for the
quarter ended March 31, 1995.
On August 1, 1995 (the "Closing Date"), the Partnership entered into a
Loan Acquisition and Participation Agreement (the "Agreement") with the
owner of the Senior Wrap Mortgages, TEER Associates ("Teer"), whereas
the Partnership conveyed its interest in the RT Loan to Teer in
consideration of the grant of a RAM Participation Interest. The RAM
Participation Interest is a twenty (20%) percent undivided interest in
(i) the Wrap Cash Flow, which is all amounts received by Teer on
account of the Senior Wrap Mortgages reduced by the sum of the senior
loan payments and the amount of all reimbursable expenses attributable
to the Senior Wrap Mortgages and (ii) the RAM Cash Flow, which is all
amounts received by Teer under the RT Loan reduced by the amount of
reimbursable expenses attributable to the RT Loan. Reimbursable
expenses are costs and expenses of Teer in connection with the
performance of all obligations under the Agreement, including the
collection and enforcement of the Senior Wrap Mortgages and the RT
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Research Triangle loan (continued)
Loans, the preservation of the collateral, the filing and prosecution
of a complaint with respect to any of the above matters, etc. The
Partnership granted Teer an option to purchase the RAM Participation
Interest. Teer may exercise the purchase option at any time from the
Closing Date through the third anniversary of the Closing Date. The
option prices are as follows: (i) on or prior to the first anniversary,
an amount equal to $1,750,000 (including cash payments received by the
Partnership on the account of the RAM Participation Interest during the
period following the Closing Date), (ii) on or prior to the second
anniversary, an amount equal to $2,200,000 (including cash payments
made on account of the RAM Participation Interest after the first
anniversary date), (iii) on or prior to the third anniversary, an
amount equal to $2,600,000 (including cash payments made on account of
the RAM Participation Interest after the second anniversary date).
As a result of this transaction and an analysis of the value of the
investment, an allowance for loan losses was recorded on the RT Loan in
the amount of $1,260,000. The property securing the RT Loan was
appraised in August 1995, and valued at $45,000,000. The Partnership's
20% interest in the excess of market value over the Senior Wrap
Mortgage amounted to approximately $1,360,000. The carrying value prior
to the additional allowance was approximately $2,620,000, resulting in
a $1,260,000 allowance in August 1995.
Pike Creek loan
The property securing the Pike Creek loan is currently operating with
positive cash flow and is meeting all debt service requirements.
However, a second mortgage, which requires no debt service payments
until maturity, matured at the end of 1995. A first mortgage loan,
which has a principal balance of approximately $12,850,000, matured on
February 15, 1996. Big Valley Associates ("BV"), the owner of the
property securing the Pike Creek Loan, is currently trying to obtain
replacement debt. Negotiations are currently under way to refinance or
otherwise restructure the mortgages. The Partnership had determined
during 1993 that interest on this loan should not be accrued.
Due to the uncertainty associated with the ultimate collectibility of
the Pike Creek loan, an allowance for loan losses in the amount of
$946,000 was recorded during March 1995, which reduced the carrying
value of the loan to $1,050,832.
Stockfield loan
The property securing the Stockfield loan is 96% occupied by Shell
California Productions, Inc. ("Shell"). The Shell lease expires in
August 1999, approximately three years after the first mortgage loan
which matured on April 1, 1996 and approximately one year after the
Partnership's loan matures on March 31, 1998. Negotiations are
currently under way to refinance or otherwise restructure the first
mortgage. Stockfield is currently making debt service payments while in
negotiations. Shell is presently paying rent that exceeds market rates
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
for the area. Shell is unlikely to exercise its renewal option without
renegotiating the rental downward to market rates and may make no
decision with respect to renewal before the Stockfield loan matures.
These factors are likely to hinder Stockfield Associates Limited
Partnership ("Stockfield"), the owner of the property which secures the
Stockfield loan, in its ability to obtain refinancing. As a result, the
Partnership decided in 1993 to cease accruing interest on the
Stockfield loan.
Due to the uncertainty associated with the ultimate collectibility of
the Stockfield loan, an additional allowance for loan losses in the
amount of $2,106,000 was established in March 1995, which reduced the
carrying value of the loan to $2,340,260.
West Palm loan
A second mortgage loan in the original principal amount of $9,200,000
was made to West Palm Associates Limited Partnership ("West Palm"), a
privately syndicated limited partnership sponsored by Integrated. The
loan is secured by a 582 unit apartment complex known as the West Palm
and is located in Los Angeles, California. The first mortgage is held
by John Hancock Life Insurance Company ("Hancock").
The first mortgage matured in December 31, 1995, since which time, West
Palm has been engaged in extensive negotiations with Hancock in an
effort to obtain a long term restructuring. Hancock was unwilling to
modify the first mortgage and on July 1, 1996, declared the mortgage to
be in default, and informed West Palm that it would immediately seek
the appointment of a receiver and begin foreclosure proceedings. As a
result, on July 2, 1996, West Palm filed for protection under Chapter
11 of the United States Bankruptcy Code. West Palm is currently
attempting to restructure the Hancock Mortgage and the Partnership's
second mortgage. Although the Bankruptcy protection enables West Palm
to avoid an imminent foreclosure, there can be no assurance that West
Palm will be able to successfully restructure its debt service
obligations on either mortgage. The Partnership had reserved the entire
carrying value of the West Palm loan in 1993. The Partnership is
currently preparing a proof of claim for all outstanding principal,
accrued interest, prepayment penalties, additional interest and all
other costs and obligations of West Palm to the Partnership.
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Information with respect to the Partnership's investments in mortgage
loans is as follows:
<TABLE>
<CAPTION>
Date
Interest Compound Loan Maturity Prepayment is
Description Rate Period Date Date Permissable
----------- ---- ------ ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Office Buildings
Berkeley Western (n) 14.50% Annual December 20, 1985 (n) (n)
Berkely, CA
Stockfield Associates (b) (c) 14.50% Annual April 1, 1986 March 31, 1998 April 1, 1996
Bakersfield, CA
San Diego Associates (e) 13.40% Monthly June 10, 1987 (e) (e)
San Diego, CA
Airport Center (g) (l) 13.46% Monthly January 1, 1988 (l) (l)
Los Angeles, CA
Clovine (h) 13.46% Monthly January 1, 1988 (h) (h)
Cincinnati, OH
Research Triangle (d) (o) 13.675% Monthly January 1, 1988 (f) (f)
Raleigh Durham, NC
Lenox Towers (m) 13.46% Monthly August 26, 1988 (m) (m)
Atlanta, GA
Shopping Centers
Big Valley Associates (d) 13.40% Monthly December 16, 1987 December 31, 1999 January 1, 1997
Wilmington, DE
B.P. Associates (g) 13.40% Monthly January 7, 1988 (g) (g)
Brentwood, TN
Boram (j) 14.50% Annual February 12, 1988 (j) (j)
Shreveport, LA
Park Place (k) 13.46% Monthly February 24, 1988 (k) (k)
Memphis, TN
<PAGE>
<CAPTION>
From Inception through
Mortgage Mortgage Sept. 30, 1996
Amount Purchased Placement Income Write
Description Advanced Interest Fee Recognized Off Reserves
----------- -------- -------- --- ---------- --- --------
<S> <C> <C> <C> <C> <C> <C>
Office Buildings
Berkeley Western (n) 2,250,000 $94,079 $ 137,483 $ - $ (2,481,562) $ -
Berkely, CA
Stockfield Associates (b) (c) 4,200,000 137,142 254,378 89,000 - (2,340,260)
Bakersfield, CA
San Diego Associates (e) 4,200,000 100,049 252,198 140,543 (4,692,790) -
San Diego, CA
Airport Center (g) (l) 6,500,000 - 381,232 - (6,881,232) -
Los Angeles, CA
Clovine (h) 5,000,000 - 293,255 1,471,041 (6,764,296) -
Cincinnati, OH
Research Triangle (d) (o) 3,000,000 - 175,953 2,068,560 - (3,882,257)
Raleigh Durham, NC
Lenox Towers (m) 6,045,832 - 354,594 - (6,400,426) -
Atlanta, GA
Shopping Centers
Big Valley Associates (d)
Wilmington, DE 975,000 - 57,185 1,069,479 - (1,050,832)
B.P. Associates (g)
Brentwood, TN 1,900,000 - 111,437 69,693 (2,081,130) -
Boram (j)
Shreveport, LA 6,900,000 - 404,692 863,769 (8,168,461) -
Park Place (k)
Memphis, TN 3,030,000 - 177,713 - (3,207,713) -
<PAGE>
<CAPTION>
Contractual
Carrying value Balance (a)
Sept. 30, Dec. 31, Sept. 30, Dec. 31,
Description 1996 1995 1996 1995
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Office Buildings
Berkeley Western (n) $ - $ - (n) (n)
Berkely, CA
Stockfield Associates (b) (c) 2,340,260 2,340,260 17,464,893 15,751,877
Bakersfield, CA
San Diego Associates (e)
San Diego, CA - - (e) (e)
Airport Center (g
Los Angeles, CA - - (l) (l)
Clovine (h)
Cincinnati, OH - - (h) (h)
Research Triangle (d) (o)
Raleigh Durham, NC
Lenox Towers (m) 1,362,256 1,362,256 (f) (f)
Atlanta, GA
- - (m) (m)
Shopping Centers
Big Valley Associates (d)
Wilmington, DE 1,050,832 1,050,832 3,128,908 2,831,314
B.P. Associates (g)
Brentwood, TN - - (g) (g)
Boram (j)
Shreveport, LA - - (j) (j)
Park Place (k)
Memphis, TN - - (k) (k)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date
Interest Compound Loan Maturity Prepayment is
Description Rate Period Date Date Permissable
----------- ---- ------ ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Residential
West Palm (c) 13.46% Monthly June 16, 1988 July 1, 2000 July 1, 1997
Los Angeles, CA
Belekirk Associates (f) 14.25% Annual September 3,1987 (f) (f)
Seattle, WA
Industrial/Commercial
Tri-State (b) (c) 13.46% Monthly June 22, 1988 June 30, 2000 July 1, 1997
Kentucky, Nebraska, Pennsylvania
Southern Inns, (i) 13.46% Monthly June 29, 1988 (i) (i)
North and South Carolina, Virginia
<PAGE>
<CAPTION>
From Inception through
Mortgage Mortgage Sept. 30, 1996
Amount Purchased Placement Income Write
Description Advanced Interest Fee Recognized Off Reserves
----------- -------- -------- --- ---------- --- --------
<S> <C> <C> <C> <C> <C> <C>
Residential
West Palm (c) $ 9,200,000 $ - $ 539,589 $ - $ - $ (9,739,589)
Los Angeles, CA
Belekirk Associates (f) 1,000,000 - 58,651 866,498 (1,925,149) -
Seattle, WA
Industrial/Commercial
Tri-State (b) (c) 1,800,000 - 105,572 57,950 - (1,963,522)
Kentucky, Nebraska, Pennsylvania
Southern Inns, (i) 4,000,000 - 234,604 - (4,234,604) -
North and South Carolina, Virginia
------------ -------- ---------- ---------- ------------ ------------
$ 60,000,832 $331,270 $3,538,536 $6,696,533 $(46,837,363) $(18,976,460)
<PAGE>
<CAPTION>
Contractual
Carrying value Balance (a)
Sept. 30, Dec. 31, Sept. 30, Dec. 31,
Description 1996 1995 1996 1995
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Residential
West Palm (c) $ - $ - $27,858,908 $25,198,003
Los Angeles, CA
Belekirk Associates (f) - - - -
Seattle, WA
Industrial/Commercial
Tri-State (b) (c) - - 5,446,280 4,926,086
Kentucky, Nebraska, Pennsylvania
Southern Inns, (i) - - (i) (i)
North and South Carolina, Virginia
4,753,348 4,753,348 53,898,989 48,707,280
Less Allowance for Loan Losses
Net carrying value
</TABLE>
<PAGE>
(a) Contractual balance represents the amount to be paid by the borrower if the
loan were liquidated as of December 31, of each year, including principal plus
interest earned to such date. These balances are given for informational
purposes only.
(b) The Partnership may be entitled to additional interest in the appreciation
of property, which additional interest is subordinated to a specified return to
the borrowers.
(c) These loans are accounted for under the investment method.
(d) These loans are accounted for under the interest method.
(e) The property securing this loan was foreclosed upon by the senior lender on
December 30, 1991 and the Partnership lost its entire investment in this loan.
(f) This loan was prepaid on July 2, 1992. The Partnership recognized income of
$866,498.
(g) In December 1992, a Plan of Reorganization was confirmed as previously
discussed and the Partnership received Equity Participation Certificates.
(h) The property securing this loan was foreclosed upon by the senior lender on
January 13, 1993. The Partnership lost its entire investment in this loan.
(i) In April 1993, the Partnership acquired a property, through foreclosure
replacing the original loan. The Partnership recognized income of $235,644 in
1993, as previously mentioned.
(j) In July 1993, the loan was restructured. The Partnership now has a
participating interest in a future sale of the Property, as previously
discussed.
(k) The property securing this loan was foreclosed upon by the senior lender on
January 13, 1994. The Partnership lost its entire investment in this loan.
(l) The property securing this loan was foreclosed upon by the senior lender on
July 26, 1995. The Partnership lost its entire investment in this loan.
(m) The property securing this loan was foreclosed upon by the senior lender on
April 5, 1994. The Partnership lost its entire investment in this loan.
(n) In November 1994, a Plan of Reorganization was confirmed which converted the
Partnership's original investment into a note for $550,000 and participating
interest in the future sale of the property.
(o) During 1995, the Partnership conveyed its interest in this loan in exchange
for a participation interest in the cash flow of the Senior Wrap Mortgage
holder.
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
A summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
--------------------------------------------- -----------------------------------------------
Investment Interest Investment Interest
Method Method Total Method Total Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Opening balance ................. $ 2,340,260 $ 2,413,088 $ 4,753,348 $ 4,446,494 $ 6,978,868 $ 11,425,362
Provision for loan losses ....... -- -- -- (2,106,234) (4,565,780) (6,672,014)
------------ ------------ ------------ ------------ ------------ ------------
Ending balance ................ $ 2,340,260 $ 2,413,088 $ 4,753,348 $ 2,340,260 $ 2,413,088 $ 4,753,348
============ ============ ============ ============ ============ ============
</TABLE>
5 REAL ESTATE
On April 1, 1993 the Partnership acquired title by foreclosure and
assumed ownership responsibilities of a hotel property, the Richmond
Comfort Inn Executive Center, located in Richmond, Virginia, which was
part of the Partnership's collateral for the Southern Inns loan.
The Partnership had originally loaned Southern Inns $4,000,000 secured
by seven properties, one of which was this hotel. The Partnership
acquired title by foreclosure to this property subject to a first
mortgage. The Partnership has recorded the land and buildings acquired
by the foreclosure at an initial cost equal to the existing first
mortgage. The operating income and expenses of the hotel are reflected
in the statements of operations.
A summary of the Partnership's real estate is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Land ..................................... $ 444,700 $ 444,700
Buildings and improvements ............... 3,531,652 3,531,652
----------- -----------
3,976,352 3,976,352
Less: accumulated depreciation ........... (304,758) (238,536)
----------- -----------
$ 3,671,594 $ 3,737,816
=========== ===========
</TABLE>
The land, building and improvements are pledged to collateralize the
mortgage loan payable.
<PAGE>
6 MORTGAGE LOAN PAYABLE
In connection with the foreclosure of the Richmond Comfort Inn, the
Partnership acquired the property subject to a $4,000,000 nonrecourse
promissory note secured by a first mortgage on the hotel property. The
mortgage note has a current balance of $3,586,854 at September 30,
1996. Interest rates on the loan are adjustable every five years with a
current interest rate of 9.49% effective through April 1, 1997. The
interest rate on the loan is based on a 2% premium over the Federal
Home Loan Bank of Atlanta Five Year Advance Rate. The loan requires
monthly payments of interest and principal. Interest expense for the
three months ended September 30, 1996 amounted to $85,348. The loan is
held by the Resolution Trust Company and the lender is permitted to
accelerate the note as of April 1, 1997, and thereafter with nine
months notice. The loan matures on February 1, 2016. A prepayment
penalty of 2%, reducing to 1%, exists for the first two years after an
interest rate change.
7 COMMITMENTS AND CONTINGENCIES
Legal proceedings
HEP Action
On or about May 11, 1993, three public real estate partnerships (the
"HEP Partnerships") including High Equity Partners, L.P. - Series 86
("HEP-86"), in which the Administrative General Partner is also a
General Partner, were advised of the existence of an action (the "B&S
Litigation") in which a complaint (the "HEP Complaint") was filed in
the Superior Court for the State of California for the County of Los
Angeles (the "Court") on behalf of a purported class consisting of all
of the purchasers of limited partnership interests in HEP-86.
On April 7, 1994 Plaintiffs were granted leave to file an amended
complaint (the "Amended Complaint"). The amended complaint asserted
claims against the Administrative General Partner, certain former
officers of the Administrative General Partner, and other former
subsidiaries of Integrated and a number of other defendants, including
certain former officers of Integrated.
On July 19, 1995, the Court approved the B&S Litigation and approved a
form of notice (the "Notice") concerning such proposed settlement. In
response to the Notice, approximately 1.1% of the limited partners of
the three HEP Partnerships requested exclusion and 15 limited partners
filed written objections to the settlement. The California Department
of Corporations also sent a letter to the Court opposing the
settlement. Five objecting limited partners, represented by two law
firms, also made motions to intervene so they could participate more
directly in the action. The motions to intervene were granted by the
Court on September 14, 1995.
In October and November 1995, the attorneys for the
plaintiffs-intervenors conducted extensive discovery. At the same time,
there were continuing negotiations concerning possible revisions to
the proposed settlement.
<PAGE>
7 COMMITMENTS AND CONTINGENCIES (continued)
Legal proceedings (continued)
HEP Action (continued)
On November 30, 1995, the original plaintiffs and the intervening
plaintiffs filed a Consolidated Class and Derivative Action Complaint
("Consolidated Complaint") against the General Partners alleging, among
other things, breach of fiduciary duties, breach of contract, and
negligence.
On or about January 31, 1996, the parties to the B&S Litigation agreed
upon a revised settlement, which would be significantly more favorable
to the HEP limited partners than the previously proposed settlement.
The revised settlement proposal, like the previous proposal, involves
the reorganization of the HEP Partnership (the "Revised Exchange").
Upon the effectuation of the Revised Exchange, the B&S Litigation would
be dismissed with prejudice.
On February 8, 1996, at a hearing on preliminary approval of the
revised settlement, the Court determined that in light of renewed
objections to the settlement by the California Department of
Corporations, the Court would appoint a securities litigation expert to
evaluate the settlement. On May 8, 1996, the expert submitted a report
stating that he was unable to conclude that the revised settlement as
proposed is fair, reasonable and adequate, and recommending that the
revised settlement be restructured in certain respects. On May 28,
1996, at a hearing in connection with the expert's report, the Court
ordered the parties to brief certain valuation issues, the requisite
consents required from limited partners to approve the Revised Exchange
and the applicability of exemptions from the California securities law.
A hearing on the issues the Court had ordered the parties to brief was
held on July 9, 1996. On July 18, 1996, the Court preliminary approved
the proposed, revised settlement of the B&S Litigation, and made a
preliminary finding that the proposed revised settlement is fair,
adequate and reasonable to the class, and that a settlement class
should also be conditionally certified. The Court also set a hearing
for August 19, 1996 to settle the form and method of notice to limited
partners regarding the proposed, revised settlement. If the final
approval of the settlement is granted by the Court, a solicitation
statement concerning the settlement and the reorganization would be
sent to all HEP limited partners.
At a hearing on October 23, 1996, the Court stated that it wished to
consider late-filed briefs from certain objectors which were filed up
to and including the date of the hearing. On November 4, 1996, the
Court issued an order seeking comment on the final version of the
settlement from the California Department of Corporations and
additional information from the plaintiffs. The Court requested a
response within 17 days of its order. Upon final approval of the
settlement by the Court the Consent Solicitation Statement concerning
the Revised Exchange would be sent to all HEP limited partners. There
would be at least a 60 day solicitation period and a reorganization of
the HEP Partnerships cannot be consummated unless a majority of the
limited partners in the HEP Partnerships affirmatively vote to approve
it.
It is impossible to predict what financial exposure the Administrative
General Partner will have, if any, as a result of this litigation, or
its indirect effect on the Partnership.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership invested 100% of the net proceeds of its public
offering in zero coupon junior Mortgage Loans secured by properties
owned principally by privately syndicated limited partnerships
originally sponsored by affiliates of the General Partners. The public
offering commenced on January 21, 1986, and the Partnership had its
initial admission of limited partners on March 28, 1986. The offering
terminated on May 1, 1987 at which time the Partnership had accepted
subscriptions for 330,004 Units (including ten Units owned by the
initial limited partner) for aggregate gross proceeds of $82,501,000.
This amount includes $2,475,030 of evaluation fees paid in accordance
with the Partnership Agreement and $4,125,000 of mortgage placement
fees. As of August 1988, the Partnership had invested 100% of the net
proceeds in sixteen mortgage loans, one of which was prepaid in
November 1989 and a second of which was prepaid in July 1992. On
December 31, 1991, January 13, 1993, January 13, 1994, April 5, 1994
and July 27, 1995 the senior mortgage lenders on properties securing
five of the Partnership's investments foreclosed on the properties
securing their loans and the Partnership lost its entire investment in
each of the respective loans. Also, in December 1992, the BP loan was
converted to equity participation certificates pursuant to the
borrower's bankruptcy plan of reorganization. On April 1, 1993 the
Partnership foreclosed and assumed ownership of the Richmond Comfort
Inn, located in Richmond, Virginia. The Richmond property foreclosure
and acquisition were part of a restructuring agreement associated with
the Southern Inns loan. In July 1993 the Boram loan, through a
settlement agreement, was converted to an equity participation in the
future sale of the property. In November 1994, the Berkeley loan was
restructured to convert the Partnership's original investment to a new
$550,000 loan and an equity participation in the future sale of the
property. In August 1995, the Research Triangle loan was exchanged for
a 20% participation interest in the net wrap cash flow of the Senior
Wrap loan. Because the Partnership's loans are zero-coupon loans, the
Partnership receives no current cash flow from such investments.
The Partnership uses working capital reserves provided from the
proceeds of its public offering and any undistributed cash from
temporary investments and from pre-payments as its primary source of
liquidity. As of September 30, 1996, the Partnership's working capital
reserves amounted to approximately $4,100,000. The Partnership may
utilize its working capital reserves in the event the Partnership
incurs additional expenses in taking legal action or lending additional
funds to protect its interest in certain of the mortgage loans on
properties which are currently experiencing difficulties. The
Partnership's cash flow from operation of its hotel property is
anticipated to be sufficient to meet such property's capital
expenditure needs in 1996. In February 1996, the Partnership paid
$86,827 to the Administrative General Partner, which represented
payment of the mortgage servicing fee related to the Research Triangle
loan. In March 1995, the Partnership paid $75,919, $69,118, $29,219 and
$137,918 which represented payment of the mortgage servicing fee on the
Berkeley Western, Southern Inns, BP Shopping Center and Boram loans,
<PAGE>
Liquidity and Capital Resources (continued)
respectively. In September 1995, the Partnership paid $175,423
representing the mortgage servicing fee associated with the Airport
Center loan. In August 1996, the Partnership paid $134,953 and $78,054
which represented the asset management fee associated with the Lenox
and Tri-State loans, respectively.
The Partnership may use its working capital reserves in the future for
similar payments relating to loans, the collateral for which has been
foreclosed by senior lenders. The Partnership does not anticipate
making any distributions until such time as the existing mortgage loans
mature or are prepaid. Working capital reserves are temporarily
invested in short-term money market instruments and are expected to be
sufficient to pay administrative expenses during the term of the
Partnership. The borrower under the West Palm loan is experiencing cash
flow problems and has filed for protection under Chapter 11 of the
United States Bankruptcy Code. If as a result of these events an
eventual foreclosure should occur, the Partnership does not have
sufficient capital to bid at a foreclosure. This would result in a
total loss of the Partnership's investment in that particular mortgage
if the amount bid at the foreclosure by the successful bidder is the
amount of the first mortgage holder's lien. Except as discussed above,
and in Note 4 to the financial statements, management is not aware of
any other known trends, events, commitments or uncertainties that will
have a significant impact on liquidity.
Real estate market
The real estate market continues to suffer from the effects of the
recent recession which included a substantial decline in the market
values of existing properties. Market values have begun to recover, and
while the pace of new construction has slowed, high vacancy rates
continue to exist in many areas. These factors may continue to reduce
rental rates. As a result of such decline, investors will most likely
not recover a significant portion of their original investment in the
Partnership.
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each mortgage in the Partnership's portfolio. In performing
the review, management considers the estimated net realizable value of
the properties or collateral as well as other factors, such as the
current occupancy, the amount and status of senior debt, if any, the
prospects for the property and the economic situation in the region
where the property is located. Because this determination of net
realizable value is based upon projections of future economic events
which are inherently subjective, the amounts ultimately realized at
disposition may differ materially from the carrying value as of
September 30, 1996. No allowance was recorded for the three months
ended September 30, 1996. A $5,412,000 allowance was recorded for the
Stockfield, Research Triangle and Big Valley loans for the quarter
ended March 31, 1995. A $1,260,000 allowance was recorded on the
Research Triangle loan for the quarter ended September 30, 1995. See
Note 4 to the Financial Statements.
<PAGE>
Liquidity and Capital Resources (continued)
The allowance is inherently subjective and is based on management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide additional losses in
subsequent years and such provisions could be material.
Certain of the properties, as described in the Notes to Financial
Statements - with respect to which the Partnership has made loans are
experiencing varying degrees of operating problems.
Results of operations
The Partnership experienced net income for the three and nine months
ended September 30, 1996 compared with a net loss for the same periods
in the prior year primarily due to the allowance for loan losses
recorded during 1995 as discussed above.
For both the nine months and three months ended September 30, 1996
compared with 1995, revenues increased primarily due to an increase in
other income. Other income increased due to the interest income
received during 1996 on the Research Triangle participation interest,
which began in August 1995 and the receipt of approximately $55,000 in
August 1996, in settlement of a claim against Integrated relating to
the Boram Loan.
For the nine and three months ended September 30, 1996 compared with
the same period in the prior year, costs and expenses decreased
primarily as a result of the allowance for loan losses recorded during
1995. In addition, there was a decrease in mortgage servicing fees and
general and administrative expenses partially offset by an increase in
operating expenses. Mortgage servicing fees decreased as a result of
the payment of fees in March 1995 and in February 1996 related to
several mortgages, thus eliminating interest accumulating on the
deferred fees. General and administrative expenses decreased as a
result of a decrease in payroll costs. Operating expenses increased due
to an increase in marketing and general and administrative expenses
related to the Richmond Comfort Inn.
Legal Proceedings
For a discussion of Legal Proceedings, please see Note 7 ("Commitments
and Contingencies") to the Financial Statements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(a) See Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes to Financial Statements - Note 7 which
is herein incorporated by reference.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RESOURCES ACCRUED MORTGAGE
INVESTORS L.P. - SERIES 86
By: Resources Capital Corp.
Administrative General Partner
Dated: November 14, 1996 By: /s/ Joseph Jacobs
-----------------
Joseph Jacobs
President
(Duly Authorized Officer)
Dated: November 14, 1996 By: /s/ Jay L. Maymudes
-------------------
Jay L. Maymudes
Vice President, Secretary and
Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the September 30, 1996 Form 10-Q of Resources Accrued Mortgage
Investors, L.P. - Series 86 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,113,432
<SECURITIES> 0
<RECEIVABLES> 18,497
<ALLOWANCES> 0
<INVENTORY> 17,705
<CURRENT-ASSETS> 4,149,634
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,585,603
<CURRENT-LIABILITIES> 303,130
<BONDS> 3,586,854
0
0
<COMMON> 0
<OTHER-SE> 6,635,092
<TOTAL-LIABILITY-AND-EQUITY> 12,585,603
<SALES> 0
<TOTAL-REVENUES> 1,641,687
<CGS> 0
<TOTAL-COSTS> 1,239,997
<OTHER-EXPENSES> 66,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 257,139
<INCOME-PRETAX> 78,329
<INCOME-TAX> 0
<INCOME-CONTINUING> 78,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,329
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
