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 March 31, 1998
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, Suite 270, Greenwich, CT 06830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(203) 862-7444
(Registrant's telephone number, including area code)
None
(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 - MARCH 31, 1998
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1998 and December 31, 1997
STATEMENTS OF OPERATIONS - For the three months ended March 31, 1998
and 1997
STATEMENT OF PARTNERS' EQUITY - For the three months ended
March 31, 1998
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 1998 and 1997
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>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of an allowance
for loan losses of $6,050,832) ................ $ 1,484,585 $ 1,464,415
Cash and cash equivalents ........................ 8,450,021 8,273,293
Real estate - net ................................ 3,898,455 3,899,513
Other assets ..................................... 122,649 116,528
----------- -----------
$13,955,710 $13,753,749
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable ............................ $ 3,475,002 $ 3,495,478
Due to affiliates ................................ 1,896,711 1,843,290
Accounts payable and accrued expenses ............ 254,023 138,494
----------- -----------
Total liabilities ......................... 5,625,736 5,477,262
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (330,004 units
issued and outstanding) ....................... 7,913,526 7,862,713
General partners' equity ......................... 416,448 413,774
----------- -----------
Total partners' equity .................... 8,329,974 8,276,487
----------- -----------
$13,955,710 $13,753,749
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF OPERATIONS
For the three months ended
March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues
Operating income - real estate ....................... $ 336,341 $ 276,667
Short-term investment interest ....................... 107,216 78,156
Mortgage loans interest income ....................... 20,170 74,910
Other income ......................................... 11,460 36,032
----------- -----------
475,187 465,765
----------- -----------
Costs and expenses
Operating expenses - real estate ..................... 210,302 112,017
Mortgage loan interest expense ....................... 74,113 84,585
General and administrative expenses .................. 59,636 42,000
Asset management fees ................................ 37,202 41,870
Depreciation expense ................................. 24,228 23,000
Mortgage servicing fees .............................. 16,219 23,023
Provision for loan losses ............................ -- 2,340,260
----------- -----------
421,700 2,666,755
Net income (loss) ......................................... $ 53,487 $(2,200,990)
=========== ===========
Net income (loss) attributable to
Limited partners ..................................... $ 50,813 $(2,090,940)
General partners ..................................... 2,674 (110,050)
----------- -----------
$ 53,487 $(2,200,990)
=========== ===========
Net income (loss) per unit of limited partnership interest
(330,004 units outstanding) .......................... $ .15 $ (6.34)
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF PARTNERS' EQUITY
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
---------- ---------- ----------
<S> <C> <C> <C>
Balance, January 1, 1998 ............ $ 413,774 $7,862,713 $8,276,487
Net income for the three months ended
March 31, 1998 .................. 2,674 50,813 53,487
---------- ---------- ----------
Balance, March 31, 1998 ............. $ 416,448 $7,913,526 $8,329,974
========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
Cash flows from operating activities
Net income (loss) ............................................ $ 53,487 $ (2,200,990)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Provision for loan losses ............................. -- 2,340,260
Mortgage loan interest accrued ........................ (20,170) (18,847)
Depreciation .......................................... 24,228 23,000
Deferred asset management and
mortgage servicing fees, net of payments........... 53,421 64,893
Changes in assets and liabilities
Other assets .............................................. (6,121) 4,385
Accounts payable and accrued expenses ..................... 115,529 (31,152)
------------ ------------
Net cash provided by operating activities ......... 220,374 181,549
------------ ------------
Cash flows from investing activities
Principal payments on mortgage loan payable .................. (20,476) (16,518)
Additions to real estate ..................................... (23,170) (12,048)
Proceeds from repayment of mortage loans ..................... -- 6,861,997
------------ ------------
Net cash (used in) provided by investing activities (43,646) 6,833,431
------------ ------------
Net increase in cash and cash equivalents ......................... 176,728 7,014,980
Cash and cash equivalents, beginning of period .................... 8,273,293 3,769,118
------------ ------------
Cash and cash equivalents, end of period .......................... $ 8,450,021 $ 10,784,098
============ ============
Supplemental disclosure of cash flow information
Interest paid ................................................ $ 74,113 $ 84,585
============ ============
</TABLE>
See notes to financial statements.
<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 discussions should be read in conjunction
with the financial statements, related footnotes and discussions
contained in the Resources Accrued Mortgage Investors, L.P. - Series 86
(the "Partnership") annual report on Form 10-K for the year ended
December 31, 1997. The results of operations for the three months ended
March 31, 1998 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
contained provisions whereby the Partnership may have been 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>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
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
March 31, 1998. Accordingly, the Partnership may provide additional
losses in subsequent periods and such provisions could be material.
A $2,340,260 allowance for loan losses was required for the three
months ended March 31, 1997 to fully reserve for the Stockfield loan.
No allowance was required for the three months ended March 31, 1998.
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 represented the carrying value of the first
mortgage loan at the time of the foreclosure. Repairs and maintenance
are charged to operations as incurred.
Write-down for impairment
The Partnership provides write-downs for impairment based upon a
quarterly review of the real estate in its portfolio, when management
believes that, based upon market analysis and appraisal reports, the
investment in such real estate may not be recoverable.
The initial test to determine if an impairment exists is to compute the
recoverability of the asset based upon anticipated cash flows compared
to the carrying value of the asset. If anticipated cash flows are
insufficient to recover the 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 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 periods and such provisions could be material.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
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. During the three
months ended March 31, 1998 reimbursable expenses due to NorthStar
Presidio from the Partnership amounted to $1,128.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
direct and indirect ownership of the General Partners. On August 28,
1997, an affiliate of NorthStar Capital Partners acquired all of the
Class B shares of Presidio. This acquisition, when aggregated with
previous acquisitions, caused NorthStar Capital Partners to acquire
indirect control of the General Partners.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES(continued)
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 $37,202 and
$41,870, including accrued interest of $36,287 and $38,676 for the
three months ended March 31, 1998 and 1997, respectively.
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 $16,219 and $23,023, including
accrued interest of $9,950 and $13,669 for the three months ended March
31, 1998 and 1997, respectively.
Amounts due to affiliates for asset management and mortgage servicing
fees consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ----------
<S> <C> <C>
Asset management fee ......... $1,488,668 $1,451,466
Mortgage servicing fee ....... 408,043 391,824
---------- ----------
$1,896,711 $1,843,290
========== ==========
</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
March 31, 1998 and 1997 the Administrative General Partner, Investment
General Partner and Associate General Partner were allocated net income
(loss) of $2,568, $53 and $53 and $(107,848), $(1,101) and $(1,101),
respectively.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
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
loans held by unaffiliated third parties.
The properties, which collateralize the Partnership's mortgage loans,
have experienced varying degrees of operating problems. Other loans
were ultimately lost when the senior lenders foreclosed on the
properties securing the Partnership's mortgage loans. Other loans have
been restructured to allow the Partnership a possible equity
participation in the future sales or refinancings of the properties.
The Partnership has provided for these contingencies, in certain
circumstances, by establishing an allowance for loan losses on its
entire investment in certain mortgages.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
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 Mortgage Mortgage
Interest Compound Loan Maturity Prepayment is Amount Purchased Placement
Description Rate Period Date Date Permissable Advanced Interest Fee
----------- ---- ------ ---- ---- ----------- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
Big Valley Associates (b)(d) 13.40% Monthly 16-Dec-87 31-Dec-99 1-Jan-97 1,305,000 - 57,185
Wilmington, DE
Residential
West Palm (c) (a) 13.46% Monthly 16-Jun-88 1-Jul-2000 1-Jul-97 9,200,000 - 539,589
Los Angeles, CA ----------- ---- --------
$10,505,000 $ - $596,774
----------- ---- --------
<CAPTION>
Interest recognized Contractual
------------------- Carrying value Balance (a)
----------------------- ----------------------
March 31, 1997 and Write-offs, March 31, December 31, March 31 December 31,
Description 1998 Prior Reserves net of recoveries 1998 1997 1998 1997
----------- ---- ----- -------- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
Big Valley Associates (b)(d) 20,170 1,153,062 (1,050,832) - 1,484,585 1,464,415 867,604 913,585
Wilmington, DE
Residential
West Palm (c) (a) - - (5,000,000) (4,739,589) - - 5,423,809 5,331,781
Los Angeles, CA ------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
$20,170 $1,153,062 $(6,050,832) $(4,739,589) $1,484,585 $1,464,415 $6,291,413 $6,245,366
------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
</TABLE>
(a) This loan is accounted for under the investment method.
(b) This loan is accounted for under the interest method.
(c) This loan was restructured to reduce the indebtedness to $5,000,000 with
interest accruing at 7% per annum and the maturity date was extended to
February 2017.
(d) During 1996, the Partnership amended and restated this loan. The new loan
of $830,000 consits of two components; $500,000 and $330,000 bearing
interest at 7% and 12% per annum, respectively, plus equity participation.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
A summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Three months ended Year ended
March 31, 1998 December 31, 1997
----------------------------------------- ------------------------------------------------
Investment Interest Investment Interest
Method Method Total Method Total Total
------ ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Opening balance ........... -- 1,464,415 1,464,415 $ 7,977,396 $ 3,976,124 $ 11,953,520
(Provision for) recovery of
loan losses ........... -- -- -- (2,340,260) 604,155 (1,736,105)
Additional funding ........ -- -- -- -- --
Interest recognized ....... -- 20,170 20,170 56,063 75,408 131,471
Loan repayments ........... -- -- -- (5,693,199) (3,191,272) (8,884,471)
----- ------------ ------------ ------------ ------------ ------------
Ending balance ............ $-- $ 1,484,585 $ 1,484,585 $ -- $ 1,464,415 $ 1,464,415
===== ============ ============ ============ ============ ============
</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 recorded the land and building 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>
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Land ................................... $ 444,700 $ 444,700
Building and improvements .............. 3,899,463 3,876,293
----------- -----------
4,344,163 4,320,993
Less: accumulated depreciation ......... (445,708) (421,480)
----------- -----------
$ 3,898,455 $ 3,899,513
=========== ===========
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE (continued)
The land, building and improvements are pledged to collateralize the
mortgage loan payable.
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 $3,475,002 at March 31, 1998.
Interest rates on the loan are adjustable every five years, with a
current interest rate of 9.49%, through the next adjustment period.
Interest 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
March 31, 1998 amounted to $74,113 The lender is permitted to
accelerate the note as of April 1, 1997, and thereafter with six months
notice. The Partnership has not been notified of an acceleration of
this mortgage. 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.
<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
sponsored by affiliates of the General Partner.
The Partnership originally invested its net proceeds in sixteen
Mortgage Loans, which aggregated $70,332,103. Presently, there are two
mortgage loans outstanding, and one additional possible equity
participation. 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, any undistributed cash from temporary
investments plus any cash flow from the operation of its motel as its
primary measure of liquidity. As of March 31, 1998 the Partnership's
working capital reserves equaled approximately $8,196,000. 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 laons on properties which are currently experiencing
difficulties or to pay fees. The Partnership's cash flow from the
operations of its motel property is anticipated to be sufficient to
meet such property's capital expenditure needs in 1998.
The Partnership has placed the undistributed portion of the proceeds of
the Tri-State, Research Triangle and BP loan repayments approximately
$4,708,000 in working capital reserves in order to retain sufficient
funds to protect and maximize the value of its remaining investments,
whether further distributions are warranted.
Working capital reserves will be temporarily invested in short-term
money market instruments and are expected to be sufficient to pay
administrataive expenses during the term of the Partnership.
The Partnership may use its working capital reserves in the future to
pay deferred fees relating to laons, the collateral for which has been
foreclosed by senior lenders. The borrower under the West Palm Loan is
experiencing cash flow problems. If as a result of these cash flow
problems, eventual foreclosure should occur, the Partnership may not
have sufficient capital to bid as 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,
management is not aware of any other known trends, events, commitments
or uncertainties that will have significant impact of liquidity.
<PAGE>
Liquidity and Capital Resources (continued)
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 March
31, 1998.
There was no provision for loan losses recorded for the quarter ended
March 31, 1998.
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 periods and such provisions could be material.
Certain of the properties, with respect to which the Partnership has
made loans are experiencing varying degrees of operating problems (see
Note 4 to the Financial Statements).
Results of operations
There was net income for the three months ended March 31, 1998 as
opposed to net loss for the three months ended March 31, 1997,
primarily due to the provision for loan losses, net of recoveries,
which were recognized in 1997.
Revenues increased for the three months ended March 31, 1998 compared
with the prior year. The increase was primarily a result of an increase
in short-term investment interest partially offset by a decrease in
mortgage loan interest income. Mortgage loan interest income decreased
due to the interest that was recorded as a result of the payoff of the
Tri-State loan and the restructuring of the Big Valley loan in 1997,
versus interest recorded on only the Big Valley loan in 1998. Operating
revenues increased in porportion with the increase in operating
expenses at the Richmond Comfort Inn. Short-term investment interest
increased as a result of an increase in cash and cash equivalents on
which interest is earned. Cash and cash equivalents increased due to
the payoff of the Tri-State loan and the payment received in connection
with the equity participations in BP Shopping Center and Research
Triangle.
<PAGE>
Costs and expenses decreased for the three months ended March 31, 1998.
The decrease was primarily due to the provision for loan losses which
was recorded during the first quarter of 1997 on the Stockfield loan.
Inflation
Inflation has not had a material impact on the Partnership's recent
operations or financial position and is not expected to have a material
impact in the future.
Legal Proceedings
For a discussion of Legal Proceedings, please see Note 7 in the
Partnership's 10-K for the year end December 31, 1997.
<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 - 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
Partnership 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: May 14, 1998 By: /s/ Richard Sabella
-------------------
Richard Sabella
President
(Duly Authorized Officer)
Dated: May 14, 1998 By: /s/ Lawrence Schachter
----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the Financial
Statements of the March 31, 1998 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,450,021
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,450,021
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,955,710
<CURRENT-LIABILITIES> 254,023
<BONDS> 3,475,002
0
0
<COMMON> 0
<OTHER-SE> 8,329,974
<TOTAL-LIABILITY-AND-EQUITY> 13,455,710
<SALES> 0
<TOTAL-REVENUES> 475,187
<CGS> 0
<TOTAL-COSTS> 210,302
<OTHER-EXPENSES> 211,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,487
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,487
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
