<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
--------------
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)
(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 check 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
NOTES TO FINANCIAL STATEMENTS
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1999 and December 31, 1998 ............. 1
STATEMENTS OF INCOME - For the three months ended March 31, 1999
and 1998 .................................................... 2
STATEMENT OF PARTNERS' EQUITY - For the three months ended
March 31, 1999 .............................................. 3
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 1999 and 1998 ..................................... 4
NOTES TO FINANCIAL STATEMENTS ..................................... 5-11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .........................12-13
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.............................................. 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K .............................. 14
SIGNATURES................................................................. 15
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
March 31, December 31,
1999 1998
----------- -------------
ASSETS
Investments in mortgage loans, net $ - $ -
Cash and cash equivalents 4,761,480 4,639,050
Real estate - net 4,046,865 3,965,378
Other assets - net 124,865 181,702
----------- -----------
$ 8,933,210 $ 8,786,130
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable $ 3,388,701 $ 3,410,955
Due to affiliates 1,357,500 1,352,500
Accounts payable and accrued expenses 312,951 232,169
----------- -----------
Total liabilities 5,059,152 4,995,624
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (330,004 units
issued and outstanding) 3,680,405 3,601,031
General partners' equity 193,653 189,475
----------- -----------
Total partners' equity 3,874,058 3,790,506
----------- -----------
$ 8,933,210 $ 8,786,130
=========== ===========
See notes to financial statements.
1
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF INCOME
For the three months ended
March 31,
--------------------------
1999 1998
--------- ---------
Revenues
Operating income - real estate $ 321,417 $ 336,341
Other income 106,760 11,460
Short-term investment interest 49,410 107,216
Mortgage loans interest income - 20,170
--------- ---------
477,587 475,187
--------- ---------
Costs and expenses
Operating expenses - real estate 240,524 210,302
Mortgage loan interest expense 72,326 74,113
General and administrative expenses 43,291 59,636
Depreciation expense 37,894 24,228
Asset management fees - 37,202
Mortgage servicing fees - 16,219
--------- ---------
394,035 421,700
--------- ---------
Net income $ 83,552 $ 53,487
--------- ---------
Net income attributable to
Limited partners $ 79,374 $ 50,813
General partners 4,178 2,674
--------- ---------
$ 83,552 $ 53,487
========= =========
Net income per unit of limited
partnership interest (330,004
units outstanding) $ .24 $ .15
========= =========
See notes to financial statements. 2
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
---------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1, 1999 $ 189,475 $ 3,601,031 $ 3,790,506
Net income - for the three months ended
March 31, 1999 4,178 79,374 83,552
---------- ----------- -----------
Balance, March 31, 1999 $ 193,653 $ 3,680,405 $ 3,874,058
========== =========== ===========
</TABLE>
See notes to financial statements. 3
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended
March 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
Cash flows from operating activities
Net income $ 83,552 $ 53,487
Adjustments to reconcile net income to net cash
provided by operating activities
Mortgage loan interest accrued - (20,170)
Depreciation 37,894 24,228
Deferred asset management and mortgage
servicing fees, net of payments - 53,421
Changes in assets and liabilities
Other assets 56,837 (6,121)
Accounts payable and accrued expenses 80,782 115,529
Due to affiliates 5,000 -
----------- -----------
Net cash provided by operating activities 264,065 220,374
----------- -----------
Cash flows from investing activities
Principal payments on mortgage loan payable (22,254) (20,476)
Additions to real estate (119,381) (23,170)
----------- -----------
Net cash used in investing activities (141,635) (43,646)
----------- -----------
Net increase in cash and cash equivalents 122,430 176,728
Cash and cash equivalents, beginning of period 4,639,050 8,273,293
----------- -----------
Cash and cash equivalents, end of period $ 4,761,480 $ 8,450,021
=========== ===========
Supplemental disclosure of cash flow information
Interest paid $ 72,326 $ 74,113
=========== ===========
</TABLE>
See notes to financial statements. 4
<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, 1998. The results of operations for the three months ended
March 31, 1999 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.
Allowance for loan losses
An allowance for loan losses is established based upon a periodic
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, 1999. The allowance is inherently subjective and based upon
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.
5
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation
Depreciation is computed using the straight-line method over the useful
life of the property, which is estimated to range from 7 to 40 years.
The original cost of the property which was acquired through
foreclosure, 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
periodic 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.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Investment General Partner of the Partnership, RAM Funding, Inc.,
the Administrative General Partner, Resources Capital Corp. and the
Associate General Partner, Presidio AGP Corp., are wholly-owned
subsidiaries of Presidio Capital Corp. ("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.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
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. Effective July 31, 1998, Presidio is
indirectly controlled by NorthStar Capital Investment Corp.
("NorthStar"), a Maryland corporation.
Presidio entered into a management agreement with NorthStar Presidio
Management Company, LLC ("NorthStar Presidio"), an affiliate of
NorthStar. Under the terms of the management agreement, NorthStar
Presidio provides the day-to-day management of Presidio and its direct
and indirect subsidiaries and affiliates. For the three month periods
ended March 31, 1999 and, 1998, reimbursable expenses due to NorthStar
Presidio from the Partnership amounted to $5,000 and $1,128
respectively.
6
<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 Limited
Partnership Agreement. Payment of the asset management fee was 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,
including accrued interest of $36,287 for the three months ended March
31, 1998. No asset management fee was earned for the three months ended
March 31, 1999.
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, including accrued
interest of $9,950 for the three months ended March 31, 1998. No
mortgage servicing fee was earned for the three months ended March 31,
1999.
Amounts due to affiliates for asset management fees consist of the
following:
March 31, December 31,
1999 1998
---- ----
Asset management fee
(principally deferred interest) $ 1,352,500 $ 1,352,500
=========== ===========
There are no amounts outstanding for mortgage servicing fees.
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, .1% to the Investment General Partner,
and .1% to the Associate General Partner. For the three months ended
March 31, 1999 and 1998 the Administrative General Partner, Investment
General Partner and Associate General Partner were allocated net income
of $4,250, $89 and $89 and $2,568, $53 and $53, respectively.
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.
7
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
The properties which collateralize the Partnership's mortgage loans
have experienced varying degrees of operating problems. The Stockfield,
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, Research Triangle, West Palm, Pike Creek and Boram
loans have been restructured to allow the Partnership a possible equity
participation in the future sales or refinancing of the properties. The
Partnership subsequently lost its equity participation in the Boram
loan, as the senior lender was paid off at a discount. The Brentwood
Place, Research Triangle and Pike Creek participation interests were
paid to the Partnership after the underlying properties securing the
respective loans were sold.
The Partnership has provided for these contingencies, in certain
circumstances, by establishing an allowance for loan losses on its
entire investment in certain mortgages.
West Palm loan
The West Palm loan, in the original principal amount of $9,200,000, was
made to West Palm Associates Limited Partnership ("West Palm"). The
loan is secured by a 582 unit apartment complex located in Los Angeles,
California.
On July 2, 1996, West Palm filed for protection under Chapter 11 of the
United States Bankruptcy Code. Although the bankruptcy protection
enabled West Palm to avoid an imminent foreclosure, there was no
assurance that West Palm will be able to successfully restructure its
debt service obligations on the first mortgage. The Partnership had
reserved the entire carrying value of the West Palm loan in 1993. The
Partnership filed 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.
In February 1997, a Plan of Reorganization was filed which called for a
restructuring of the Partnership's mortgage, and in September 1997, the
restructuring agreement was executed. The Partnership has reduced its
indebtedness to $5,000,000, with interest accruing at 7% per annum and
extended the maturity date to February 2017. The Partnership is also
entitled to a participation interest in the event of a sale of the
property. The Partnership has fully reserved for this investment and is
unable to determine at the present time whether any amounts will be
received upon the ultimate sale or disposition of the property.
Berkeley Western loan
The entire carrying value of this loan of $2,481,562 had been written
off during 1990. The Partnership is unable to determine at the present
time whether any amounts will be received upon the ultimate sale or
disposition of the property.
8
<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>
Residential
West Palm (b) (a) 13.46% Monthly 16-Jun-88 1-Jul-2000 1-Jul-97 $ 9,200,000 $ - $ 539,589
Los Angeles, CA
Office Buildings
Berkeley Western (c) 14.50% Annual 20-Dec-85 2,250,000 94,079 137,483
------------ -------- ----------
Berkely, CA
$ 11,450,000 $ 94,079 $ 677,072
============ ======== ==========
<CAPTION>
Contractual
Interest recognized Carrying value Balance (a)
---------------------- ------------------- -----------------------
March 31, 1998 and Write-offs, net Payments March 31, December March 31, December 31,
Description 1999 Prior Reserves of recoveries Received 1999 31, 1998 1999 1998
------------ ----- ------ --------- ------------- -------- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
West Palm (b) (a) $ - $ 2,494,763 $(5,000,000) $ (4,739,589) $ - $ - $ - $ 5,813,558 $ 5,714,917
Los Angeles, CA
Office Buildings
Berkeley Western (c) - - - (2,481,562) - - - - -
---- ----------- ----------- ------------- ---- ---- ---- ----------- -----------
Berkely, CA
$ - $ 2,494,763 $ (5,000,000) $ (7,221,151) $ - $ - $ - $ 5,813,558 $ 5,714,917
==== =========== ============= ============= ==== ==== ==== =========== ===========
</TABLE>
(a) This loan is accounted for under the investment method.
(b) This loan was restructured during 1997 to reduce the indebtedness to
$5,000,000 with interest accruing at 7% per annum and the maturity date was
extended to February 2017.
(c) In November 1994, a Plan of Reorganization was confirmed which converted
the Partnership's original investment into a non-interest bearing note for
$550,000 and participating interest in the future sale of the property.
9
<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, 1999 December 31, 1998
----------------------------------- --------------------------------------
Investment Interest Investment Interest
Method Method Total Method Method Total
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Opening balance $ - $ - $ - $ - $1,464,415 $ 1,464,415
Recovery of loan losses - - - - 1,129,857 1,129,857
Interest recognized - - - - 1,341,701 1,341,701
Payments received on - - - - - -
Mortgage loan - - - - (3,935,973) (3,935,973)
---------- ---------- ---------- --------- ---------- -----------
Ending balance $ - $ - $ - $ - $ - $ -
---------- ---------- ---------- --------- ---------- -----------
---------- ---------- ---------- --------- ---------- -----------
</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,
1999 1998
---- ----
<S> <C> <C>
Land $ 444,700 $ 444,700
Building and improvements 4,214,630 4,095,249
------------- --------------
4,659,330 4,539,949
Less: accumulated depreciation (612,465) (574,571)
------------- --------------
$ 4,046,865 $ 3,965,378
------------- --------------
</TABLE>
The land, building and improvements are pledged to collateralize the
mortgage loan payable.
10
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
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 $3,388,701 at March 31, 1999.
Interest rates on the loan are adjustable every five years, with a
current interest rate of 8.5%, through April 2002. Interest is based on
a 2% premium over the Federal Home Loan Bank of Atlanta Five Year
Advance Rate. The loan presently requires monthly payments of interest
and principal aggregating $31,526. Interest expense for the three
months ended March 31, 1999 and 1998 amounted to $72,326 and $74,113,
respectively. The loan is held by the Resolution Trust Company and the
lender was permitted to accelerate the note as of April 1, 1997, and
thereafter with six months notice. The Partnership has not received any
notice of an acceleration from the lender. 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.
11
<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 Partners.
The Partnership originally invested its net proceeds in sixteen
Mortgage Loans, which aggregated $70,332,103. As of March 31, 1999, the
Partnership's investments consists of two mortgage loans outstanding
and a hotel which it acquired through foreclosure. Because the
Partnership's loans are zero-coupon loans, the Partnership receives no
guaranteed cash flow from such investments.
In August 1998, the property underlying the Big Valley loan was sold.
The partnership received approximately $3,790,000 of which $1,437,000
was applied towards principal, $1,051,000 towards recovery of loan
losses and the balance of $1,302,000 towards interest.
The Partnership uses working capital reserves provided from any
undistributed cash from temporary investments plus any cash flow from
the operation of its hotel as its primary measure of liquidity. As of
March 31, 1999 the Partnership's working capital reserves equaled
approximately $2,500,000. The Partnership may utilize its working
capital reserves in the event the Partnership incurs additional
expenses with respect to its hotel property, in taking legal action or
lending additional funds to protect its interest in its remaining
mortgage loans on properties which are currently experiencing
difficulties or to pay fees. The Partnership's cash flow from the
operations of its hotel property is anticipated to be sufficient to
meet such property's capital expenditures in the near term.
In July 1998, the Partnership paid a cash distribution of $7,000,000
($20.15 per limited partnership unit.) A substantial portion of the
distribution represents the undistributed portion of the proceeds of
the Tri-State, Research Triangle and BP loan repayments (approximately
$4,708,000.) The remainder represents excess working capital reserves.
The Partnership will determine on a quarterly basis 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
administrative expenses during the term of the Partnership.
The Partnership may use its working capital reserves in the future to
pay deferred fees relating to loans, the collateral for which has been
foreclosed by senior lenders. Except as discussed above, management is
not aware of any other known trends, events, commitments or
uncertainties that will have a significant impact on liquidity.
Results of operations
Net income increased for the three month period ended March 31, 1999
compared with the same period in the prior year. The increase is
primarily due to the increase in other income and a reduction in costs
and expenses.
Revenues increased for the three month period ended March 31, 1999
compared with the corresponding period in the prior year. The increase
is primarily due to a increase in other income offset by a decrease in
short-term investment interest. Other income increased due to an
increase in transfer fee income. Operating income decreased due to a
decrease in occupancy at the Richmond Comfort Inn. Short-term
investment interest decreased as a result of lower balances available
for investment on which interest is earned.
12
<PAGE>
Costs and expenses decreased for the three month period ended March 31,
1999 compared to the same period in the prior year. The decrease was
primarily due to no asset management and mortgage servicing fees being
incurred as a result of the disposition of mortgage loans offset by
higher depreciation expense on the hotel property and an increase in
costs of operating the hotel property.
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.
Year 2000 compliance
The Year 2000 compliance issue concerns the inability of computerized
information systems and equipment to accurately calculate, store or use
a date after December 31, 1999, as a result of the year being stored as
a two digit number. This could result in a system failure or
miscalculations causing disruptions of operations. The Partnership and
NorthStar Presidio recognize the importance of ensuring that its
business operations are not disrupted as a result of Year 2000 related
computer system and software issues.
NorthStar Presidio is in the process of assessing its internal computer
information systems and is taking the steps necessary to remediate
these systems so that they will be Year 2000 compliant. In connection
therewith, NorthStar Presidio has installed a new fully compliant
accounting and reporting system. NorthStar Presidio is also reviewing
its other internal systems and programs, along with those of its
unaffiliated third party service providers, in order to ensure
compliance.
Because this assessment is ongoing, the total cost of bringing all
systems and equipment into Year 2000 compliance has not been fully
quantified. Based upon available information, NorthStar Presidio does
not believe that these costs will have a material adverse effect on the
Partnership's business, financial condition or results. However, it is
possible that there could be adverse consequences to the Partnership as
a result of Year 2000 issues that are outside the Partnership's
control.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(a) None.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
14
<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
By: /s/ Allan B. Rothschild
-----------------------
Allan B. Rothschild
President
(Duly Authorized Officer)
By: /s/ Lawrence R. Schachter
---------------------------
Lawrence R. Schachter
Senior Vice President and
Chief Financial Officer
Date: May 13, 1999
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Statements of the March 31, 1999 Form 10-Q of Resources Accrued Mortgage - 86
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
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0
0
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</TABLE>
