UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-15724
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - Series 86
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(Exact name of registrant as specified in its charter)
Delaware 13-3294835
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Suite 270, Greenwich, CT 06830
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(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-862-7444
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest, $250 per Unit
(Title of Class)
Indicate by check mark whether 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 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>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Exhibit Index set forth on page IV-1.
<PAGE>
PART I
Item 1. Business.
General
Registrant is a Delaware limited partnership formed on September 25, 1985. RAM
Funding, Inc., a Delaware corporation, is Registrant's investment general
partner ("Investment General Partner") and is a wholly-owned subsidiary of
Presidio Capital Corp. ("Presidio"). Resources Capital Corp., a Delaware
corporation, is Registrant's administrative general partner ("Administrative
General Partner") and is also a wholly-owned subsidiary of Presidio. RAM Funding
Inc., and Resources Capital Corp., were until November 3, 1994 wholly-owned
subsidiaries of Integrated Resources Inc. ("Integrated"). On November 3, 1994,
as a result of the reorganization plan relating to Integrated's bankruptcy,
indirect ownership of the Administrative General Partner, the Investment General
Partner, and the Associate General Partner was purchased by Presidio.
Beginning January 21, 1986, Registrant offered 500,000 units of limited
partnership interest (the "Units") pursuant to the Prospectus (the "Prospectus")
of Registrant dated January 21, 1986, as supplemented by Supplements dated March
14, 1986, April 9, 1986, July 25, 1986, August 1, 1986, September 8, 1986,
October 29, 1986 and December 30, 1987 (collectively, the "Supplements"), which
were filed pursuant to Rules 424(b) and 424(c) under the Securities Act of 1933,
as amended. The Prospectus was filed as part of Registrant's Registration
Statement on Form S-11, Commission File No. 33-00836, as amended (the
"Registration Statement"). The offering terminated on May 1, 1987 with 329,994
Units having been sold (excluding the 10 Units sold to the initial limited
partner) representing net proceeds of $78,582,310 (gross proceeds of $82,501,000
less organization and offering costs of $3,918,690). All underwriting and sales
commissions were paid by Integrated or its affiliates and not by Registrant.
Registrant invested in "zero-coupon" junior mortgage loans ("Mortgage Loans") on
properties owned or acquired principally by privately syndicated limited
partnerships originally sponsored by Integrated. The Mortgage Loans generally
had original terms of approximately twelve years (with a right to prepay with
payment of a prepayment penalty between the eighth and ninth years and without
penalty beginning in the tenth year) with all interest and principal due and
payable at the maturity or prepayment of the Mortgage Loan.
In December 1994, Z Square G Partners II, the Associate General Partner of
Registrant whose partners were previously associated with Integrated, notified
Registrant of its withdrawal as the associate general partner of Registrant. The
withdrawal became effective, after 60 days prior written notice to Limited
Partners, on February 28, 1995. Upon the effective date of such withdrawal,
Presidio AGP Corp. ("Presidio AGP"), a wholly-owned subsidiary of Presidio,
became the Associate General Partner. (The Investment General Partner,
Administrative General Partner and Associate General Partner are hereinafter
collectively referred to as the "General Partners").
On August 28, 1997, an affiliate of the NorthStar Capital Partners acquired all
of the Class B shares of Presidio, the corporate parent of the General Partners.
This acquisition, when aggregated with previous acquisitions, caused NorthStar
Capital Partners to acquire indirect control of the General Partners. Presidio
was also party to an Administrative Services Agreement with Wexford Management
LLC ("Wexford") pursuant to which Wexford was responsible for the day-to-day
<PAGE>
management of Presidio and, among other things, had authority to designate
directors of the General Partners. On November 2, 1997, the Administrative
Services Agreement between Presidio and Wexford expired. Effective November 3,
1997, Wexford and Presidio entered into a new Administrative Services Agreement
(the "ASA"), which expired on May 3, 1998. Under the terms of the ASA, Wexford
provided consulting and administrative services to Presidio and its affiliates,
including the General Partners and Registrant. On August 28, 1997, Presidio also
entered into a management agreement with NorthStar Presidio Management Company,
LLC ("NorthStar Presidio"). Under the terms of the management agreement,
NorthStar Presidio provides the day-to-day management of Presidio and its direct
or indirect subsidiaries and affiliates.
Subject to the rights of the Limited Partners under the Limited Partnership
Agreement, Presidio controls Registrant through its indirect ownership of the
General Partners. Effective July 31, 1998, Presidio is indirectly controlled by
NorthStar Capital Investment Corp., ("NorthStar"), a Maryland corporation.
Investments of Registrant
Registrant originally invested 100% of its net proceeds in sixteen Mortgage
Loans which aggregated $70,332,103, three of which, the 595 Madison Loan, the
Bellekirk Loan and the Pace Loan, were prepaid in their entirety on November 30,
1989, July 2, 1992 and January 23, 1997, respectively. In addition, Registrant
has foreclosed on the Southern Inns Loan and acquired title to a hotel located
in Richmond, Virginia, which secured the loan; three Mortgage Loans had been
converted to potential equity participations with BP Shopping Center's
participation being paid on February 20, 1997, Research Triangle's participation
interest being paid on September 17, 1997, and Pike Creek's participation
interest being paid on August 4, 1998. Registrant lost its entire investment in
seven Mortgage Loans as a result of foreclosures or discounted payoffs of senior
lenders.
Current Investments
As of March 1, 1999, Registrant's investments consisted of one zero-coupon
Mortgage Loan (West Palm) in the original amount of $9,200,000 (restructured
during 1997 to a $5,000,000 loan with all interest accruing at 7% per annum and
principal due and payable at maturity in February 2017). There is no current
payment due on this Mortgage Loan. Registrant also has an equity participation
interest in one property (Berkeley) which originally secured another mortgage
loan. In addition, Registrant owns a hotel located in Richmond, Virginia as a
result of the Southern Inns foreclosure. Set forth below is a description of the
status of Registrant's current investments.
Berkeley Loan
Originally a $2,250,000 (plus accrued interest) second mortgage loan (the
"Berkeley Loan") was made to Berkeley Western Associates Limited Partnership
("BW Associates"), a private limited partnership sponsored by Integrated which
was secured by an office building commonly known as the Great Western Savings
Building located in Berkeley, California (the "BW Property"). The BW Property
consists of a thirteen-story office building, an adjacent six-level parking
garage and the 1.31 acres of land underlying the building and garage located in
<PAGE>
downtown Berkeley. The land consists of two separate contiguous parcels, the
larger one of which (approximately 46,100 square feet) is owned by BW Associates
in fee simple and the smaller parcel (approximately 10,700 square feet) lies
under a portion of the garage and is leased by BW Associates pursuant to a
ground lease. The building contains approximately 120,300 square feet of office
space, 13,000 square feet of retail space and 3,770 square feet of basement
space. The garage contains parking space for 586 automobiles and approximately
9,400 square feet of retail space.
The Berkeley Loan originally bore interest at the rate of 14.5% compounded
annually and was due December 31, 1997 at which time a balloon payment of
$11,474,491, together with additional interest (as described below), if any,
would be due and payable. The Berkeley Loan was allowed to be prepaid without
penalty beginning January 1, 1996 and provided for the payment by BW Associates
of additional interest reflecting a participation in the appreciation, if any,
of the BW Property. The maximum annual compounded rate of interest, including
additional interest with respect to the Berkeley Loan, was not to exceed 16.41%.
The total amount, including fees, allocated to the loan from the gross proceeds
of Registrant's offering was $2,749,653.
The BW Property was also encumbered by a first mortgage loan in the amount of
$14,750,000 originally held by Guaranty Federal Savings and Loan Association
("Guaranty Federal"). The first mortgage was to mature on January 1, 1996, bore
interest at the rate of 12.25% per annum and was payable at the following pay
rates: (i) for years 1 and 2, payments of interest only at the rate of 10.5% per
annum; (ii) years 3 through 5, payments of interest only at the rate of 11.0%,
11.5% and 12.0% per annum, respectively; and (iii) years 6 through 10, payments
of interest at 12.25% and principal payments based on a 30-year amortization
schedule. At maturity, a balloon payment equal to approximately $15,000,275
would be due and payable.
BW Associates had been unable to make payments on its first mortgage since May
1989. Notices of default with respect to the first mortgage held by Guaranty
Federal and the loan held by Registrant were issued shortly thereafter. Guaranty
Federal was placed under receivership by the Federal Savings and Loan Insurance
Corporation, which entity was subsequently absorbed by the Resolution Trust
Company. Shortly thereafter, BW Associates, Guaranty Federal and Registrant
entered into a cash flow arrangement whereby all cash flow from the property was
placed into an escrow account to be drawn down for payment of capital
improvements and asbestos abatement work only with the approval of Guaranty
Federal. In May 1992, Guaranty Federal elected to pursue its default remedies
under its first mortgage.
In January 1993, BW Associates filed for protection under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code"). The Bankruptcy Court
entered a cash collateral order which permitted use of the cash flow from the BW
Property to pay operating and other expenses pursuant to a court approved
budget. On May 18, 1993, Registrant filed a Proof of Claim for all outstanding
principal, accrued interest, prepayment penalties and other costs and
obligations of BW Associates to Registrant. In September 1993, BW Associates and
Guaranty Federal signed a Memorandum of Understanding to restructure the first
mortgage loan. BW Associates has incorporated the Memorandum of Understanding
into a plan of reorganization. The plan of reorganization (the "Plan") was
confirmed by the Court on November 14, 1994. A copy of the Plan is on file with
the bankruptcy court for the District of Connecticut. The Plan entitles
Registrant to certain economic benefits after Guaranty Federal is repaid upon a
sale or refinancing.
<PAGE>
Some of the more relevant terms of the Plan are summarized as follows:
- Guaranty Federal, a first priority mortgage holder which was owed in
excess of $22 million, consented to a claim of $10 million, the
approximate value (at that time) of the BW Property which constitutes
BW Associates major asset. A new promissory note (the "New Note"), in
the principal sum of $10 million and secured by a first mortgage on
the BW Property, superseded the existing note.
- The New Note had a term of four years and required payments of
interest only at 5% per annum for the first two years, and 11% per
annum for the latter two years.
- Upon repayment of all outstanding principal and interest of the New
Note, all economic benefits (net sale proceeds, refinancing proceeds
and distributable net cash flow) shall be apportioned as follows:
a) Registrant will receive a total and maximum priority distribution of
$550,000 (inclusive of any previous priority distributions paid from
net refinancing proceeds and from distributable net cash flow, if
any). A non-interest bearing note for $550,000 replaced the original
loan of $2,250,000 made by Registrant to BW Associates.
b) The next $6 million of proceeds will be allocated pari passu, 25% to
Guaranty Federal, 44% to Registrant, and 31% to BW Associates.
c) Any additional amounts will be allocated pari passu, 12.5% to
Guaranty Federal, 43.75% each to BW Associates and Registrant.
The entire carrying value of $2,481,562 was written off by Registrant during
1990. Registrant is unable to determine at the present time whether any amount
will be recovered upon the ultimate sale or disposition of the BW Property.
West Palm Loan
Originally a $9,200,000 second mortgage loan (the "West Palm Loan") to West Palm
Associates Limited Partnership ("West Palm Associates"), a private limited
partnership originally sponsored by Integrated which is secured by a 582 unit
apartment complex known as The West Palm located in Los Angeles, California (the
"West Palm Property").
The West Palm Loan originally bore simple interest at varying rates that were
the equivalent of 13.46% per annum compounded monthly and is due July 1, 2000,
at which time a balloon payment of approximately $46,021,411, together with
additional interest (as described below), if any, was payable.
The total amount, including fees, allocated to the West Palm Loan from the gross
proceeds from Registrant's offering was $10,791,789.
The first mortgage matured in December 31, 1995, since which time West Palm had
been engaged in extensive negotiations with the first mortgage holder (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 Associates that it would immediately seek the
appointment of a receiver and begin foreclosure proceedings. As a result, on
July 2, 1996, West Palm Associates filed for protection under Chapter 11 of the
<PAGE>
United States Bankruptcy Code. Although the bankruptcy protection enabled West
Palm Associates to avoid an imminent foreclosure, there was no assurance that
West Palm Associates would be able to successfully restructure its debt service
obligations on the Hancock Mortgage. Registrant had reserved the entire carrying
value of the West Palm Loan in 1993. Registrant filed a Proof of Claim for all
outstanding principal, accrued interest, prepayment penalties, additional
interest and all other costs and obligations of West Palm Associates to
Registrant.
In February 1997, a Plan of Reorganization was filed which called for a
restructuring of Registrant's mortgage, and in September 1997 the restructuring
agreement was executed. Registrant has reduced its indebtedness to $5,000,000,
with interest accruing at 7% per annum and extended the maturity date to
February 2017. Registrant is also entitled to a participation interest in the
event of a sale of the property. However, it is unlikely that the Registrant
will realize any proceeds from this investment.
Investments Recently Terminated
Pike Creek Loan
Originally a $975,000 third mortgage loan (the "Pike Creek Loan") to Big Valley
Associates Limited Partnership ("Big Valley Associates"), a private limited
partnership originally sponsored by Integrated which was secured by the Pike
Creek Shopping Center located in Pike Creek Valley, Delaware, bore interest at
13.4% per annum compounded monthly, and was originally scheduled to mature on
December 31, 1999 at which time a balloon payment equal to the entire principal
balance plus accrued interest thereon (approximately $4,824,806), together with
additional interest, if any, would have been due and payable.
The property securing the Pike Creek Loan was operating with positive cash flow
and was meeting all debt service requirements. However, a second mortgage, which
required no debt service payments until maturity, matured at the end of 1995. A
first mortgage loan, which had a principal balance of approximately $12,850,000,
matured on February 15, 1996.
Negotiations were being conducted during early 1996 to refinance or otherwise
restructure the first and second mortgages. Based on an internal valuation, at
that time, the likelihood of Big Valley Associates obtaining continued financing
would have been difficult. Therefore, Registrant had determined 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
established during March 1995, which reduced the carrying value of the Pike
Creek Loan to $1,050,832.
In November 1996 this loan was amended and restated (the "Amended Note"). The
Amended Note had a principal balance of $830,000 which was comprised of $500,000
of the original loan made by Registrant and $330,000 of new funds advanced by
Registrant. The $500,000 portion of the Amended Note bore interest at 7% per
annum and the $330,000 portion bore interest at 12% per annum, both compounded
annually. The amendment was necessary in order to facilitate the refinancing of
the first mortgage loan of Big Valley Associates which was in default.
Additionally, it allowed for the satisfaction of the second mortgage loan. The
$330,000 advanced to Big Valley Associates was used, in addition to funds
provided by Big Valley Associates, to satisfy its second mortgage loan payable.
<PAGE>
Both portions of the Amended Note were serviced by a percentage of net cash flow
from the property. Net cash flow was defined as the amount by which, in any
calendar year, rent received by Big Valley Associates exceeded all costs and
expenses incurred in connection with the property, including debt service. In
addition, various provisions were made for Registrant to receive additional
interest from Big Valley Associates upon the ultimate sale or refinancing of the
property.
On August 4, 1998, the property underlying the Pike Creek Loan was sold. As a
result, Registrant 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.
FOR ADDITIONAL INFORMATION REGARDING REGISTRANT'S MORTGAGE INVESTMENTS, SEE ITEM
8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA", NOTE 4.
Additional Information Regarding Investments
See table appearing on page I-6 for additional information with respect to the
Mortgage Loans.
All interest and principal on the Mortgage Loans accrues and is payable upon the
maturity or earlier prepayment of the loans. Interest on short-term investments
accounted for 11%, 19% and 3.5% of Registrant's revenues for the years ended
December 31, 1998, 1997 and 1996, respectively. (see Item 8, "Financial
Statements and Supplementary Data").
<PAGE>
The following table sets forth, as of March 1, 1999, the Mortgage Loans and
current investments acquired or made by Registrant:
<TABLE>
<CAPTION>
Date of Date Loan Balance
Property Type of Loan Original Acquired/ Maturity Interest Due at
Name/Location Sq. Ft./Use Investment Principal Loan Restructured Date Rate Maturity 1)
- ------------- ----------- ---------- --------- ---- ------------ ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Great Western 146,470 Equity N/A N/A N/A N/A N/A N/A
Savings Building (Office Participation
Berkeley, CA Retail)
West Palm 582 units Second $5,000,000 (2) 6/88 9/97 2/17 7% (2) (2)
Los Angeles, CA Apartments Mortgage
(Residential)
</TABLE>
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(1) Includes principal and accrued interest, but not any additional interest
which may be payable.
(2) Loan restructured in September 1997, reducing principal balance to
$5,000,000 with interest accruing at 7% per annum.
THIS TABLE SETS FORTH INFORMATION WITH RESPECT TO THE MORTGAGE LOANS AND CURRENT
INVESTMENTS ACQUIRED OR MADE BY REGISTRANT. HOWEVER, PLEASE SEE PAGES I-2
THROUGH I-12 FOR A DISCUSSION OF ADVERSE CONDITIONS AFFECTING THE VALUE OF
REGISTRANT'S INVESTMENT IN ITS MORTGAGE LOANS.
<PAGE>
Competition
The properties which secure Registrant's mortgage loans may face competition
from similar properties in the vicinity. To the extent such competition reduces
the gross revenue from the operation of such property, and/or decreases any
appreciation in the value of such properties, such competition may reduce any
contingent interest, principal or base interest otherwise paid to Registrant. In
addition, Registrant would encounter competition should it sell its Mortgage
Loans.
Because Presidio is the parent of other corporations in addition to the
Investment and Administrative General Partners, such General Partners are or may
become affiliated with other entities which are engaged in businesses that are,
or may in the future be, in direct competition with Registrant.
Employees
Registrant does not have any employees. Certain services are currently performed
by the General Partners and/or their affiliates for Registrant in connection
with the servicing of the Mortgage Loans pursuant to a mortgage servicing
agreement. NorthStar Presidio currently performs accounting, secretarial,
transfer and administrative services for Registrant and Registrant pays its pro
rata portion of such services. NorthStar Presidio also performs similar services
for other affiliates of the General Partners. See Item 10, "Directors and
Executive Officers of Registrant," Item 11, "Executive Compensation" and Item
13, "Certain Relationships and Related Transactions."
Item 2. Properties
On April 1, 1993, Registrant acquired title by foreclosure and assumed ownership
responsibilities of a motel property, the Richmond Comfort Inn Executive Center,
located in Richmond, Virginia which had been part of Registrant's collateral for
the Southern Inns Loan. Registrant had originally loaned Southern Inns
Associates $4,000,000 secured by seven properties, one of which was this motel.
Registrant acquired title by foreclosure to this property subject to a first
mortgage. The Comfort Inn is a limited service motel situated on approximately
2.5 acres of land and it contains 123 guest rooms.
Item 3. Legal Proceedings
For discussion of Legal Proceedings, please see Item 8, "Financial Statements
and Supplementary Data."
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Securities and Related
Security Holder Matters
There is no established public trading market for the Units of Registrant.
There are certain restrictions set forth in the Partnership Agreement which may
limit the ability of a limited partner to transfer units. Such restrictions
could impair the ability of a limited partner to liquidate its investment in the
event of an emergency or for any other reason.
As of March 1, 1999, there were approximately 11,500 holders of Units of
Registrant (including the initial limited partner), owning an aggregate of
330,004 Units.
There are no material legal restrictions set forth in the Partnership Agreement
upon Registrant's present or future ability to make distributions. Registrant
will determine on a quarterly basis, based on an analysis of its remaining
investments and reserves, 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 Registrant.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year ended December 31,
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1998 1997 1996 1995 1994
----------- ---------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues ............ $ 3,162,173 $ 2,242,929 $ 5,764,309(2) $ 1,997,835 $ 1,858,087
Net Income (Loss) ... $ 2,514,019(5) $(1,225,720) (4) $ 7,113,916(1) $(6,713,010) (3) $ (239,929)
Net Income (Loss)
Per Unit ............ $ 7.24(5) $ (3.53) (4) $ 20.48(1) $ (19.33) (3) $ (.69)
Distribution Per Unit $ 20.15 $ 12.00 $ -- $ -- $ --
Total Assets
Net of Reserves ..... $ 8,786,130 $13,753,749 $19,540,249 $12,565,760 $ 19,536,535
</TABLE>
- -----------
(1) Net of recovery of provision for loan losses of $3,188,383 or $91.79 per
Unit.
(2) 1996 revenues include mortgage interest income of $3,681,789, and is not
directly comparable with revenues in prior periods. which consisted
primarily of motel revenue and short-term interest income in 1994 and 1995.
(3) Net of a provision for loan losses of $6,672,014 or $19.21 per Unit for
1995.
(4) Net of provision for loan losses of $1,736,105 or $5.00 per Unit. (5) Net
of recovery of provision for loan losses of $1,129,857 or $3.25 per Unit.
(5) Net of recovery of provision for loan losses of $1,129,857 or $3.25
or $ 3.25 per Unit.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The General Partners hold a 5% equity interest in Registrant. However, at the
inception of Registrant, the General Partners' equity account was credited with
only the actual capital contributed in cash, $1,000. Registrant's management
determined that this accounting did not appropriately reflect the Limited
Partners' and the General Partners' relative participations in Registrant's net
assets, since it did not reflect the General Partners' 5% equity interest in
Registrant. Thus, Registrant had reallocated $4,124,051 (5% of the gross
proceeds raised at Registrant's formation) of the partners' equity to the
General Partners' equity account. This reallocation was made as of the inception
of Registrant. The reallocation had no impact on Registrant's financial
position, results of operations, cash flows, distributions to partners, or the
partners' tax basis capital accounts.
Registrant 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 Integrated.
The public offering commenced on January 21, 1986, and Registrant had its
initial admission of limited partners on March 28, 1986. The offering terminated
on May 1, 1987 at which time Registrant had accepted subscriptions for 329,994
Units (exclusive of the 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.
Registrant originally invested 100% of its net proceeds in sixteen Mortgage
Loans which aggregated $70,332,103, three of which, the 595 Madison Loan, the
Bellekirk Loan and the Pace Loan, were prepaid in their entirety on November 30,
1989, July 2, 1992 and January 23, 1997, respectively. In addition, Registrant
has foreclosed on the Southern Inns Loan and acquired title to a hotel located
in Richmond, Virginia, which secured the loan; three Mortgage Loans have been
converted to possible equity participations with BP Shopping Center's
participation having been paid on February 20, 1997, Research Triangle's
participation interest having been paid on September 17, 1997, and Pike Creek's
participation interest having been paid on August 4, 1998. Registrant lost its
entire investment in seven Mortgage Loans as a result of foreclosures or
discounted payoffs of senior lenders.
On December 31, 1991, the senior mortgage lender on one of Registrant's Mortgage
Loans, the Century Park Loan, foreclosed on the property securing its loan, and
Registrant lost its entire investment. In December 1992, the BP Loan was
converted to an equity participation pursuant to the borrower's bankruptcy plan
of reorganization and on February 20, 1997 Registrant was paid for this equity
participation. On January 13, 1993, the senior mortgage lender on another of
Registrant's investments, the Clovine Loan, foreclosed on the property securing
its loan and Registrant lost its entire investment. On April 1, 1993, Registrant
foreclosed on the Southern Inns Loan and assumed ownership of the Richmond
Comfort Inn, located in Richmond, Virginia. In July 1993, the Boram Loan was
converted to an equity participation in the future sale of the property pursuant
to a settlement agreement. The first mortgage lender of the Boram Property was
subsequently paid off at a discount and Registrant lost any potential recovery
<PAGE>
from its equity participation interest. On January 13, 1994 and April 5, 1994,
the respective senior lenders associated with the Park Place and Lenox Loans,
foreclosed on the respective properties securing such loans and Registrant lost
its entire investment. In November 1994, the Berkeley Loan was restructured to
convert Registrant's original investment to a new $550,000 loan and an equity
participation in the future sale of the property. In 1995, the Airport Center
Loan was foreclosed upon by the senior lender and Registrant lost its entire
investment and the RT Loan was exchanged for a 20% interest in the net wrap cash
flow of the senior Wrap Mortgages which was paid in September 1997. During 1996,
the Pike Creek Loan was amended and reduced to $500,000 with interest to accrue
at 7% per annum. In addition, an additional $330,000 was advanced to the Pike
Creek borrower which bore interest at 12% per annum. On August 4, 1998,
Registrant was repaid its entire $830,000 amended loan balance together with its
equity participation interest. In January 1997 the Pace Loan was prepaid in its
entirety. In April 1997, the senior mortgage lender foreclosed on the property
securing the Stockfield loan and Registrant lost its entire investment. In
September 1997, the West Palm Loan was restructured and reduced to $5,000,000
with interest accruing at 7% per annum and the maturity date was extended to
February 2017. Because Registrant's loans are zero-coupon loans, Registrant
receives no current cash flow from such investments.
Registrant 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
December 31, 1998, Registrant's working capital reserves equaled approximately
$4,600,000. Registrant may utilize its working capital reserves in the event
Registrant incurs additional expenses with respect to its hotel property or 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. Registrant's cash flow from the operations of its
motel property is anticipated to be sufficient to meet such property's capital
expenditure needs in 1999.
In December 1993, Registrant paid the Clovine related deferred mortgage
servicing fee to the Administrative General Partner in the amount of $75,028. On
March 8, 1994, Registrant paid $57,077 to the Administrative General Partner
representing the deferred mortgage servicing fee on its Park Place Loan. On May
17, 1994 Registrant paid $107,394 representing the deferred mortgage servicing
fee on its Lenox Loan. In March 1995, Registrant paid $75,919, $69,118, $29,219
and $137,918 which represented the mortgage servicing fees associated with the
Berkeley Western, Southern Inns, BP Shopping Center and Boram loans,
respectively. In September 1995, Registrant paid $175,423 representing the
mortgage servicing fee associated with the Airport Center loan. On May 5, 1997
and June 26, 1997 Registrant paid $58,898 and $197,000 which represented the
mortgage servicing fees associated with the Tri-State and Stockfield loans,
respectively. In July 1998, the Administrative General Partner was paid
$381,648, which represented the mortgage servicing fee accrued for the West Palm
Loan. In August 1998, the Administrative General Partner was paid $43,528 which
represented the mortgage servicing fee for the Pike Creek Loan. (See Note 3 to
Financial Statements).
During 1997, Registrant paid $93,568, $71,561, $28,297 and $54,134 to the
Administrative General Partner representing the asset management fees for the
Airport Center, Southern Inns, BP and Berkeley loans, respectively. In August
1998, the Administrative General Partner was paid $174,298 which represented the
asset management fee previously accrued for the Pike Creek Loan.
<PAGE>
In July 1998, Registrant paid a cash distribution of $7,000,000 ($20.15 per
Unit). A substantial portion of the distribution represented the undistributed
portion of the proceeds of the Tri-State, Research Triangle and BP loan
repayments (approximately $4,708,000). The remainder represented excess working
capital reserves.
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 Registrant.
Registrant 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.
Real Estate Market
The real estate market has begun to recover from the effects of the recession
which included a substantial decline in the market values of existing
properties. While the real estate market has improved, this has not had a
material impact on the carrying value of assets. However, high vacancy rates
continue to exist in some areas. As a result, investors will not recover a
significant portion of their original investment in Registrant.
Allowance for Loan Losses
Registrant invested principally in zero-coupon, nonrecourse junior Mortgage
Loans. Collection of amounts due on Registrant's Loans is solely dependent upon
the sale or refinancing of collateral at amounts sufficient to satisfy
Registrant's mortgage loans after payment of the senior mortgage notes owned by
unaffiliated third parties.
An allowance for loan losses is established based upon a periodic review of each
mortgage in Registrant's portfolio. In performing this 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
estimated 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 December 31,
1998.
The allowance is inherently subjective and is based on management's best
estimate of current conditions and assumptions about expected future conditions.
Registrant may provide for additional losses in subsequent years and such
provisions could be material.
During 1996, the property securing the Pike Creek Loan was operating with
positive cash flow and was meeting all debt service requirements. However, the
first mortgage matured on February 15, 1996 and the second mortgage matured on
December 15, 1995. During 1996, Big Valley Associates was negotiating with the
first mortgage lender to obtain permanent replacement debt. Based on internal
valuations, the likelihood of Big Valley Associates obtaining continued
<PAGE>
financing at that time would be difficult. Based on this factor, the
Registrant's management determined as of March 31, 1995, that an additional
reserve in the amount of $946,000 was required. This reserve reduced the
carrying value of the Pike Creek Loan to $1,050,832. In November 1996, the Pike
Creek Loan was amended and restructured. On August 4, 1998, the property
underlying the Pike Creek Loan was sold and Registrant was repaid its entire
$830,000 amended loan balance together with its equity participation interest.
The carrying value of the Pike Creek Loan at the time of the sale was $1,464,415
resulting in the recovery of loan losses of $1,050,832. (See Note 4 to the
Financial Statements).
While the property securing the RT Loan was operating with positive cash flow
and meeting debt service requirements, the senior wrap mortgages and the RT Loan
matured on January 1, 1996. In March 1995, the IBM lease, which by itself
accounted for over 70% of the leased space at the property, was due to expire
one year after the current debt matured. The Senior Wrap Mortgages were
negotiated to extend the maturity dates. While negotiations were in progress, RT
Associates continued to make debt service payments. Since refinancing would be
difficult without a longer lease commitment from IBM, Registrant's management
determined that as of March 31, 1995, an additional reserve in the amount of
$2,360,000 was required which reduced the carrying value of the RT Loan to
$2,622,257. In August 1995, the RT Loan was acquired by the senior wrap mortgage
holders, with Registrant obtaining a 20% participating interest (See Note 4 to
the Financial Statements). As a result of this transaction and an analysis of
the value of the investment, it was determined that a provision for loan losses
was required for the quarter ended September 30, 1995 for the RT Loan in the
amount of $1,260,000, reducing the carrying value to $1,362,256. During 1996,
the IBM leases were extended for periods expiring between 2 and 5 years. In
September 1997, the properties underlying the RAM Participation Interest were
sold. Accordingly, Registrant received its 20% undivided interest, as stipulated
in the agreement, which amounted to $1,966,411. The carrying value of the RT
Loan at the time of the sale was $1,362,256, resulting in a recovery of loan
losses of $604,155 for the quarter ended September 30, 1997.
In addition, the property securing the Stockfield Loan was 96% occupied by Shell
California Productions, Inc., whose lease was scheduled to expire in 1999. It
was unlikely that Shell would exercise its renewal option with renegotiating the
rental downward toward market rates. The first mortgage matured on April 1,
1996, and without a long-term commitment from Shell, refinancing would be
difficult. Stockfield Associates was attempting to negotiate an extension of the
first mortgage, but was unable to reach an agreement and the first mortgage
lender commenced foreclosure proceedings and ultimately foreclosed on the
property in April of 1997. Registrant's management decided at March 31, 1995, to
reserve an additional $2,106,000 on the Stockfield Loan, which reduced the
carrying value to $2,340,260. Due to the foreclosure, Registrant lost its entire
investment in this loan and recorded a provision for the entire carrying value
of $2,340,260.
During 1996, Registrant recorded recoveries of prior provisions for loan losses
of $1,963,522 and $1,224,861 for the Tri-State and BP Loans, respectively.
Additionally, Registrant recorded $3,673,614 of interest income during 1996 with
respect to the Tri-State Loan. All such amounts were received by Registrant
during the first quarter of 1997. During 1997, Registrant recorded a recovery of
loan losses in the amount of $604,155 on the RT Loan and a provision for loan
losses in the amount of $2,340,260 on the Stockfield loan, as more fully
discussed above.
<PAGE>
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. Registrant 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 Registrant's business, financial condition or
results. However, it is possible that there could be adverse consequences to
Registrant as a result of Year 2000 issues that are outside Registrant's
control. NorthStar Presidio is in the preliminary stages of evaluating these
issues and will be developing contingency plans.
Results of Operations
1998 as compared to 1997
Registrant recognized net income for the year ended December 31, 1998 as
compared to a net loss for the year ended December 31, 1997. The net income for
1998 was primarily due to the payoff of the Pike Creek Loan and its resulting
recovery of loan losses.
Revenues increased for the year ended December 31, 1998 as compared to the prior
year due to the increase in mortgage loan interest income offset by the
decreases in operating income, short-term investment interest and other income.
Mortgage loan interest income increased as a result of the payoff of the Pike
Creek Loan. Operating income decreased due to the lower occupancy at the
Richmond Comfort Inn. Short-term investment interest decreased as a result lower
cash balances available for investment. Other income decreased primarily as a
result of the payoff of the Research Triangle Loan in 1997.
Costs and expenses decreased for the year ended December 31, 1998 as compared to
the year ended December 31, 1997. The decrease was primarily due to the recovery
of loan losses associated with the payoff of the Pike Creek Loan as compared to
a provision for loan losses recorded in the prior year. Asset management and
mortgage servicing fees decreased in 1998 as compared to 1997 due to disposition
of mortgage loans.
<PAGE>
1997 as compared to 1996
There was a net loss for the year ended December 31, 1997 as opposed to net
income for the year ended December 31, 1996 primarily due to the provision for
loan losses, net of recoveries recorded in 1997 as opposed
to a recovery of loan losses recorded in 1996.
Revenues decreased for the year ended December 31, 1997 compared to the prior
year primarily due to a decrease in mortgage interest income only partially
offset by an increase in short-term investment interest. Mortgage interest
income decreased due to the payoff of the Tri-State Loan and thus the recording
of $3,673,614 in mortgage interest income in 1996. Short-term investment income
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 payments received in connection with the equity
participations in BP Shopping Center and Research Triangle Loans.
Costs and expenses increased in 1997 compared to the prior year primarily due to
a provision for loan losses recorded on the Stockfield loan in 1997 compared to
a recovery of loan losses recorded in 1996 as discussed below. This increase was
primarily offset by decreases in operating expenses and general and
administrative expenses. Operating expenses decreased in proportion to the
decrease in operating income. General and administrative expenses decreased
primarily due to a decrease in payroll costs.
Legal Proceedings
HEP Action
On or about May 11, 1993, three public real estate partnerships (the "HEP
Registrants") including High Equity Partners, L.P. - Series 86, in which the
Administrative General Partner is also a General Partner, were advised of the
existence of an action (the "HEP Action") filed in the Superior Court for the
State of California for the County of Los Angeles, by Mark Erwin, Trustee, Mark
Erwin Sales, Inc. Defined Benefit Plan; Nancy Cooper, Trustee of Nancy Cooper
Individual Retirement Account; and Leonard Drescher, Trustee of Drescher Family
Trust Account individually and purportedly on behalf of a class consisting of
all of the purchasers of limited partnership interests in the HEP Registrants
(the "Plaintiffs"). The HEP Action names as defendants the Administrative
General Partner and several individuals who are general partners of the former
Associate General Partner, among others.
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 HEP Action agreed upon a
revised settlement, which would be significantly more favorable to the
Plaintiffs than the previously proposed settlement. The revised settlement
proposal, like the previous proposal, involves the reorganization of the HEP
Registrant. Upon the effectuation of the revised settlement, the HEP Action
would be dismissed with prejudice.
<PAGE>
On July 18, 1996, the Court preliminarily approved the revised settlement. In
August 1996, the Court approved the form and method of notice regarding the
revised settlement which was sent to the HEP limited partners.
Only approximately 2.5% of the limited partners of the HEP Registrants elected
to "opt out" of the revised settlement. Despite this, following the submission
of additional briefs, the Court entered an order on January 14, 1997 rejecting
the revised settlement and concluding that there had not been an adequate
showing that the settlement was fair and reasonable. Thereafter, the Plaintiffs
filed a motion seeking to have the Court reconsider its order. However, the
defendants withdrew the revised settlement and at a hearing on February 24,
1997, the Court denied the Plaintiffs' motion. Also at the February 24, 1997
hearing, the Court granted the request of one of the Plaintiffs' law firms to
withdraw as class counsel.
Thereafter, in June 1997, the Plaintiffs again amended their complaint ("Amended
Complaint"). The Amended Complaint asserts substantially the same claims as the
Consolidated Complaint, except that it no longer contains causes of action for
fraud, except on behalf of the two original plaintiffs, or for negligence. In
February 1998, the Court certified three Plaintiff classes consisting of current
unit holders in each of the three HEP Registrants. On March 11, 1998, the Court
stayed the action through June 30, 1998 to permit the parties to engage in
renewed settlement discussions.
In September 1998, the parties in the lawsuit entered into a Memorandum of
Understanding with respect to settlement of the lawsuit. The Memorandum of
Understanding provided, among other things, for the preparation of definitive
documentation in the form of a Stipulation of Settlement and related documents
("Stipulation"). The Stipulation was executed by the parties in December 1998,
and submitted to the Court for preliminary approval early in January 1999. After
hearing and receipt of a report from the Court's designated independent expert,
the Court entered an order on February 1, 1999, wherein it gave its preliminary
approval to the settlement and directed that notice of the proposed settlement
be sent to the previously certified class. A hearing is scheduled for April 14,
1999. The settlement is subject to a number of conditions. There can be no
assurance that such conditions will be fulfilled.
The Administrative General Partner believes that each of the claims asserted in
the Amended Complaint is meritless and intends to vigorously defend the HEP
Action if the settlement is not finally approved and/or consummated. It is
impossible at this time to predict what the defense of this lawsuit will cost
the Administrative General Partner and whether such costs could adversely effect
the Administrative General Partners' ability to perform its obligations to
Registrant.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
Not applicable
<PAGE>
Item 8. Financial Statements and Supplementary Data
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
I N D E X
Page
Number
------
Independent Auditor's Report F-1
Financial Statements - years ended
December 31, 1998, 1997 and 1996
Balance sheets F-2
Statements of operations F-3
Statement of partners' equity F-4
Statements of cash flows F-5
Notes to financial statements F-6 through F-29
Financial statement schedules
Schedule III
Real Estate and Accumulated Depreciation F-30 through F-31
All other financial statement schedules are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.
<PAGE>
To the Partners of
Resources Accrued Mortgage Investors L.P. - Series 86
Greenwich, Connecticut
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Resources Accrued Mortgage
Investors L.P. - Series 86 (a limited partnership) as of December 31, 1998 and
1997, and the related statements of operations, partners' equity and cash flows
for each of the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the Index at Item
14(a)2. These financial statements and financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Resources Accrued Mortgage
Investors L.P. - Series 86 as of December 31, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Hays & Company
------------------
Hays & Company
February 16, 1999
New York, New York
F-1
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
December 31,
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of an allowance
for loan losses of $5,000,000 and $6,050,832) . $ -- $ 1,464,415
Cash and cash equivalents ........................ 4,639,050 8,273,293
Real estate - net ................................ 3,965,378 3,899,513
Other assets - net ............................... 181,702 116,528
----------- -----------
$ 8,786,130 $13,753,749
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable ............................ $ 3,410,955 $ 3,495,478
Due to affiliates ................................ 1,352,500 1,843,290
Accounts payable and accrued expenses ............ 232,169 138,494
----------- -----------
Total liabilities ............................. 4,995,624 5,477,262
----------- -----------
Commitments and contingencies (Notes 3, 4, 6 and 8 )
Partners' equity
Limited partners' equity (330,004 units issued
and outstanding) .............................. 3,601,031 7,862,713
General partners' equity ......................... 189,475 413,774
----------- -----------
Total partners' equity ........................ 3,790,506 8,276,487
----------- -----------
$ 8,786,130 $13,753,749
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF OPERATIONS
Year ended December 31,
---------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Operating income - real estate .............. $ 1,452,505 $ 1,570,960 $ 1,712,325
Mortgage loan interest income ............... 1,341,701 131,471 3,681,789
Short-term investment interest .............. 337,856 424,271 202,876
Other income ................................ 30,111 116,227 167,319
----------- ----------- -----------
3,162,173 2,242,929 5,764,309
----------- ----------- -----------
Costs and expenses
Operating expenses - real estate ............ 1,012,937 929,557 958,418
Mortgage loan interest expense .............. 293,870 309,566 342,110
General and administrative expenses ......... 208,836 175,926 192,836
Depreciation expense ........................ 153,091 93,626 89,318
Asset management fees ....................... 75,334 151,989 162,567
Mortgage servicing fees ..................... 33,943 71,880 93,527
(Recovery of) provision for loan losses ..... (1,129,857) 1,736,105 (3,188,383)
----------- ----------- -----------
648,154 3,468,649 (1,349,607)
----------- ----------- -----------
Net income (loss) ................................ $ 2,514,019 $(1,225,720) $ 7,113,916
=========== =========== ===========
Net income (loss) attributable to
Limited partners ............................ $ 2,388,318 $(1,164,434) $ 6,758,220
General partners ............................ 125,701 (61,286) 355,696
----------- ----------- -----------
$ 2,514,019 $(1,225,720) $ 7,113,916
=========== =========== ===========
Net income (loss) per unit of limited partnership
interest (330,004 units outstanding) ........ $ 7.24 $ (3.53) $ 20.48
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 .................... $ 327,788 $ 6,228,975 $ 6,556,763
Net income - 1996 ........................... 355,696 6,758,220 7,113,916
------------ ------------ ------------
Balance, December 31, 1996 .................. 683,484 12,987,195 13,670,679
Net loss - 1997 ............................. (61,286) (1,164,434) (1,225,720)
Distributions to partners ($12.00 per limited
partnership unit) ...................... (208,424) (3,960,048) (4,168,472)
------------ ------------ ------------
Balance, December 31, 1997 .................. 413,774 7,862,713 8,276,487
Net income - 1998 ........................... 125,701 2,388,318 2,514,019
Distributions to partners ($20.15 per limited
partnership unit) ...................... (350,000) (6,650,000) (7,000,000)
------------ ------------ ------------
Balance, December 31, 1998 .................. $ 189,475 $ 3,601,031 $ 3,790,506
============ ============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
Year ended December 31,
---------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income (loss) ................................. $ 2,514,019 $(1,225,720) $ 7,113,916
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Mortgage loan interest accrued ............. -- (131,471) (3,681,789)
(Recovery of) provision for loan losses .... (1,129,857) 1,736,105 (3,188,383)
Bad debts .................................. 36,248 -- --
Deferred asset management and
mortgage servicing fees, net of
payments made ........................... (490,790) (280,191) (43,739)
Depreciation expense ....................... 153,091 93,626 89,318
Changes in assets and liabilities
Other assets .................................. (22,397) (29,201) (48,485)
Accounts payable and accrued expenses ......... 93,675 (36,872) (33,379)
----------- ----------- -----------
Net cash provided by operating activities 1,153,989 126,276 207,459
----------- ----------- -----------
Cash flows from investing activities
Principal payments on mortgage loan payable ....... (84,523) (75,245) (62,309)
Additions to real estate .......................... (218,956) (262,855) (81,786)
Investment in mortgage loans ...................... -- -- (330,000)
Payments received on mortgage loans ............... 2,515,247 8,884,471 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities ................. 2,211,768 8,546,371 (474,095)
----------- ----------- -----------
Cash flows from financing activities
Distributions to partners ......................... (7,000,000) (4,168,472) --
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents .. (3,634,243) 4,504,175 (266,636)
Cash and cash equivalents, beginning of year .......... 8,273,293 3,769,118 4,035,754
----------- ----------- -----------
Cash and cash equivalents, end of year ................ $ 4,639,050 $ 8,273,293 $ 3,769,118
=========== =========== ===========
Supplemental disclosure of cash flow information
Interest paid ..................................... $ 293,870 $ 309,566 $ 342,110
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1 ORGANIZATION
Resources Accrued Mortgage Investors L.P. - Series 86, a Delaware limited
partnership (the "Partnership"), was formed in September 1985 under the
Delaware Revised Uniform Limited Partnership Act for the purpose of
investing primarily in nonrecourse, zero-coupon junior accrued interest
mortgage loans on properties owned or acquired principally by privately
and publicly syndicated limited partnerships sponsored by affiliates of
Integrated Resources Inc. ("Integrated"), the former parent of the General
Partners.
Beginning on January 21, 1986, the Partnership offered 500,000 units of
limited partnership interest (the "Units") pursuant to the Prospectus
dated January 21, 1986 (the "Prospectus"). The Prospectus was filed as
part of the Partnership's Registration Statement on Form S-11, Commission
File No. 33-00836, as amended (the "Registration Statement"). The offering
terminated on May 1, 1987 with 329,994 Units having been sold (excluding
the 10 Units sold to the initial limited partner) representing net
proceeds of $78,582,310 (gross proceeds of $82,501,000 less organization
and offering costs of $3,918,690). All underwriting and sales commissions
were paid by Integrated or its affiliates and not by the Partnership.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment 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.
F-6
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 this 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 at each year end.
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.
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.
F-7
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 for losses in subsequent years and
such provisions could be material.
Financial statements
The financial statements include only those assets, liabilities and
results of operations which relate to the business of the Partnership.
Cash and cash equivalents
For the purpose of the statements of cash flows, the Partnership considers
all short-term investments which have original maturities of three months
or less to be cash equivalents.
Principally all of the Partnership's cash and cash equivalents are held at
one financial institution.
Fair value of financial instruments
The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The
Partnership's financial instruments include cash and cash equivalents,
investments in mortgage loans and a mortgage loan payable. Unless
otherwise disclosed, the fair value of financial instruments approximates
their recorded values.
Net income (loss) per unit of limited partnership interest
Net income (loss) per unit of limited partnership interest is computed
based upon the number of units outstanding (330,004) for the year.
Income taxes
No provisions have been made for federal, state and local income taxes,
since they are the personal responsibility of the partners.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could
result in adjustments to Partnership income or losses, which changes could
affect the income tax liability of the individual partners.
Reclassifications
Certain reclassifications have been made to the financial statements shown
for the prior years in order to conform to the current year's
classifications.
F-8
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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"). RAM
Funding, Inc. (the "Investment General Partner") and Resources Capital
Corp. (the "Administrative General Partner") were, until November 3, 1994,
wholly-owned subsidiaries of Integrated. On November 3, 1994, as a result
of the reorganization plan relating to Integrated's bankruptcy indirect
ownership of the Administrative General Partner, the Investment General
Partner and the Associate General Partner was purchased by Presidio. As of
February 28, 1995, the Associate General Partner of the Partnership is
Presidio AGP Corp. ("Presidio AGP"), a Delaware Corporation, which
replaced Z Square G Partners II, a New York general partnership comprised
of a general partnership and individuals who were all former officers,
directors and significant shareholders of Integrated. 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 was also party to an Administrative Services Agreement with
Wexford Management LLC ("Wexford") pursuant to which Wexford was
responsible for the day-to-day management of Presidio and, among other
things, had authority to designate directors of the General Partners.
F-9
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
On November 2, 1997, the Administrative Services Agreement between
Presidio and Wexford expired. Effective November 3, 1997, Wexford and
Presidio entered into a new Administrative Services Agreement (the "ASA")
which expired on May 3, 1998. Under the terms of the ASA, Wexford provided
consulting and administrative services to Presidio and its affiliates,
including the General Partners and the Partnership. Presidio also entered
into a management agreement with NorthStar Presidio Management Company,
LLC ("NorthStar Presidio"). 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. During 1998 and 1997,
amounts paid to NorthStar Presidio and Wexford for management and
administrative services aggregated $3,000 and $23,230, respectively.
Effective November 3, 1997, the officers and employees of Wexford that had
served as officers and/or directors of the General Partners tendered their
resignations. On the same date, the Board of Directors of Presidio
appointed new individuals to serve as officers and/or directors of the
General Partners.
The Partnership has invested principally in mortgage loans on properties
owned or acquired by privately syndicated limited partnerships originally
sponsored by Integrated. Transactions entered into between the Partnership
and affiliates of Integrated were subject to inherent conflicts of
interest.
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 asset management fees of $75,334,
$151,989 and $162,567, including accrued interest of $73,527, $144,758 and
$158,607 for the years ended December 31, 1998, 1997 and 1996,
respectively.
In August 1998, the Administrative General Partner was paid $174,298 which
represented the asset management fee previously accrued for the Pike Creek
Loan. In May 1997, the Administrative General Partner was paid $193,426
which represented the asset management fees previously accrued by the
Partnership for the Airport Center, Southern Inns and BP Shopping Center
loans. In July 1997, the Administrative General Partner was paid $54,134,
which represented partial payment of the previously accrued asset
management fee for the Berkeley Western loan.
F-10
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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 was 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
mortgage servicing fees of $33,943, $71,880 and $93,527, including accrued
interest of $20,378, $42,817 and $28,120, for the years ended December 31,
1998, 1997, and 1996, respectively.
In July 1998, the Administrative General Partner was paid $381,648 which
represented the mortgage servicing fee accrued for the West Palm loan. In
August 1998, the Administrative General Partner was paid $43,528 which
represented the mortgage servicing fee for the Pike Creek loan. In May
1997, the Administrative General Partner was paid $58,900 which
represented the mortgage servicing fee accrued by the Partnership for the
Tri-State loan. In June 1997, the Administrative General Partner was paid
$197,600 which represented the mortgage servicing fee for the Stockfield
loan. In June 1996, the Administrative General Partner was paid $86,827
which represented the mortgage servicing fee accrued by the Partnership
for the RT Loan.
F-11
<PAGE>
RESOURCE S ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amounts due to the Administrative General Partner for asset management and
mortgage servicing fees (including accrued interest), consist of the
following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
Asset management fee $ 1,352,500 $ 1,451,466
Mortgage servicing fee - 391,824
--------------- ----------------
$ 1,352,500 $ 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.
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 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 some
circumstances, by establishing an allowance for loan losses on its
investments.
F-12
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Berkeley Western loan
The Berkeley Western loan, in an original principal amount of $2,250,000,
was secured by an office building in downtown Berkeley, California. The
Borrower, Berkeley Western Associates ("BW Associates") had been unable to
make payments on its first mortgage loan since May, 1989. Notices of
Default with respect to the first mortgage held by Guaranty Federal
Savings and Loan Association ("Guaranty Federal") and the loan held by the
Partnership were issued shortly thereafter. Guaranty Federal was placed
under Receivership by the Federal Savings and Loan Insurance Corporation,
which entity was subsequently absorbed by the Resolution Trust
Corporation.
Shortly thereafter, BW Associates and Guaranty Federal entered into a Cash
Flow Arrangement whereby all cash flow from the property was placed into
an escrow account to be drawn down for payment of capital improvements and
asbestos abatement work only with the approval of Guaranty Federal. In May
1992, Guaranty Federal elected to pursue its default remedies under its
first mortgage and issued a Notice of Default and Election to Sell Under
Deed of Trust, and commenced a foreclosure action.
In January 1993, BW Associates filed for protection under Chapter 11 of
the United States Bankruptcy Code. Upon BW Associates' request, the
bankruptcy court entered a cash collateral order which permitted use of
the property's cash flow to pay operating and other expenses pursuant to a
court approved budget. On May 18, 1993, the Partnership filed a Proof of
Claim for all outstanding principal, accrued interest, prepayment
penalties and other costs and obligations of BW Associates to the
Partnership. In September 1993, BW Associates and Guaranty Federal signed
a Memorandum of Understanding to restructure the first mortgage loan. The
restructuring entitled the Partnership to certain economic benefits, after
Guaranty Federal is repaid, upon a sale or refinancing of the property. BW
Associates had incorporated the Memorandum of Understanding into a plan of
reorganization. The plan of reorganization (the "Plan") was confirmed by
the bankruptcy court on November 14, 1994. A copy of the Plan is on file
with the bankruptcy court for the District of Connecticut. Some of the
more relevant terms of the Plan, which was consummated in December 1994,
are summarized as follows:
Guaranty Federal, a first priority mortgage holder, which was owed in
excess of $22 million, consented to a claim of $10 million, the
approximate value of the property which constitutes BW Associates major
asset. A new promissory note (the "New Note"), in the principal sum of $10
million, and secured by a mortgage on the Property, supersedes the
existing note.
The New Note had a term of four years and required payments of interest
only at 5% per annum for the first two years, and 11% per annum for the
latter two years.
F-13
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Berkeley Western loan (continued)
Upon repayment of all outstanding principal and interest of the New Note,
all economic benefits (net sale proceeds, refinancing proceeds and
distributable net cash flow) shall be apportioned as follows:
a) The Partnership will receive a total and maximum priority
distribution of $550,000 (inclusive of any previous priority
distributions paid from net refinancing proceeds and from
distributable net cash flow, if any). A non-interest bearing note for
$550,000 replaced the original loan of $2,250,000 made by the
Partnership to BW Associates.
b) The next $6,000,000 of proceeds will be allocated pari passu, 25% to
Guaranty Federal, 44% to the Partnership, and 31% to BW Associates.
c) Any additional amounts will be allocated pari passu, 12.5% to
Guaranty Federal, 43.75% each to BW Associates and the Partnership.
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.
Brentwood Place loan
The Brentwood Place loan was made to BP Shopping Center Associates ("BP
Associates") in an original principal amount of $1,900,000 and was secured
by a shopping center in Brentwood, Tennessee. Decreasing rental rates,
combined with several merchant failures, reduced cash flow which in turn,
caused BP Associates to default on their first mortgage debt service
obligations to Northwestern Mutual Life Insurance Company ("Northwestern")
in February 1991. BP Associates had continued cash flow deficiencies and
its inability to restructure its existing indebtedness led to BP
Associates filing for protection under Chapter 11 of the United States
Bankruptcy Code on May 16, 1991. In December 1992, a Plan of
Reorganization was approved by all creditor classes, including the
Partnership, and confirmed by the bankruptcy court.
Under the plan, title and control of the property was transferred to
Northwestern which had the right to hold the property or sell it. The
Partnership, and certain other unsecured creditors, received equity
participation certificates of which the Partnership had a majority
interest. The entire carrying value of this loan of $2,081,130 had been
written off during 1990.
In February 1997 the Partnership received $1,224,861 for its equity
participation certificate due to the sale of the BP Shopping Center by
Northwestern. For the year ended December 31, 1996, the Partnership
recorded a recovery of prior loan losses to reflect this receipt. In
addition, the Partnership recorded $79,025 of recovery of loan losses
during 1998 with respect to additional amounts received in early 1999.
F-14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
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.
Beginning in 1990, West Palm became entitled to draw on a cash flow
guarantee from the Seller in the amount of $1.5 million. Since that time,
West Palm has continuously drawn down on and almost depleted that amount
to meet operating and debt-service requirements.
Through a loan modification, debt service payments to the first mortgage
holder were modified to require interest only payments for a five month
period from August 1993 through December 1993. In addition, one debt
service payment due in July 1993, was deferred entirely and added to the
outstanding principal of the first mortgage. In January 1994, payments of
principal and interest resumed. However, beginning in February 1994, a new
modification with essentially the same terms as the first modification was
implemented. This modification required interest only payments at the rate
of 10.5% per annum through January 1995 except for the payment due June
1994, which has been deferred entirely and added to the outstanding
principal balance of the first mortgage. The payments of principal and
interest resumed with the payment due February 1, 1995.
The first mortgage matured in December 31, 1995, since which time West
Palm had been engaged in extensive negotiations with the first mortgage
holder (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. 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.
F-15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Tri-State loan
The Tri-State loan, in the original principal amount of $1,800,000, was
made to Tri-State Retail Associates, L.P. ("Tri-State"). The Partnership's
security for this loan was subordinate to the first mortgage held by Trans
Ohio Savings Bank, in the original principal amount of $10,650,000, which
was scheduled to mature on July 1, 1998. The mortgage secured three retail
warehouses formerly operated as PACE membership clubs.
There was substantial risk that the Partnership would lose its entire
investment at the time the first mortgage matured. Therefore, the entire
carrying value of the loan, in the amount of $1,963,522, was reserved
during 1993.
In June 1995 the Partnership entered into an agreement to restructure its
loan to Tri-State. The agreement, among other things, set certain release
prices for the three properties securing the loan, allowing Tri-State to
sell one property alone.
The agreement also provided that Tri-State would not incur a prepayment
penalty in the event of a prepayment. In addition, the Partnership waived
its right to receive additional interest (interest that represented a
percentage of the increase in the value of the Tri-State Properties). The
restructuring enabled the Partnership to recoup all of its investment. In
January 1997, the Partnership received the full contractual balance of the
Tri-State loan of approximately $5,700,000. In the 4th quarter of 1996,
the Partnership recorded a recovery of prior loan losses of $1,963,522 and
recorded $3,673,614 of interest income not previously accrued to reflect
the repayment of this loan.
F-16
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Research Triangle loan
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 Research Triangle loan ("RT
Loan") to Teer in consideration of the grant of a RAM Participation
Interest. The RAM Participation Interest was a twenty (20%) percent
undivided interest in (i) the Wrap Cash Flow, which was 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 was all amounts received by Teer under the RT Loan reduced by
the amount of reimbursable expenses attributable to the RT Loan.
Reimbursable expenses were 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 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 was able to exercise the purchase option at any time from
the Closing Date through the third anniversary of the Closing Date. The
option prices were 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). Teer did not
excercise its option to acquire the RAM Participation Interest.
As a result of this transaction and an analysis of the value of the
investment, it was determined that an additional allowance for loan losses
was required for the value of the RT Loan in the amount of $1,260,000. The
Complex 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. The
Partnership received $65,750 and $80,459, during 1997 and 1996,
respectively, from the RAM Participation Interest, which amounts are
included in other income in the accompanying statements of operations.
F-17
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Research Triangle loan (continued)
In September 1997, the Complex underlying the RAM Participation Interest
were sold. Accordingly, the Partnership received its 20% undivided
interest, as stipulated in the agreement, which amounted to $1,966,411.
The carrying value of the RT Loan at that time of the sale was $1,362,256,
resulting in a recovery of loan losses of $604,155.
Pike Creek loan
Originally the Partnership held a $975,000 third mortgage loan to Big
Valley Associates, L.P. which bore interest at 13.4% per annum compounded
monthly, and was scheduled to mature on December 31, 1999.
The property securing the Pike Creek loan was operating with positive cash
flow and was meeting all debt service requirements. However, a second
mortgage, which required no debt service payments until maturity, matured
at the end of 1995. A first mortgage loan, which had a principal balance
of approximately $12,850,000, matured on February 15, 1996.
Negotiations were being conducted during early 1996 to refinance or
otherwise restructure the first and second mortgages. Based on an internal
valuation, at that time, the likelihood of obtaining continued financing
would be difficult. Therefore, the Partnership had determined 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 was established during March
1995, which reduced the carrying value of the loan to $1,050,832.
In November 1996 this loan was amended and restated (the "Amended Note").
The Amended Note had a principal balance of $830,000 which was comprised
of $500,000 of the original loan made by the Partnership and $330,000 of
new funds advanced by the Partnership. The $500,000 portion of the Amended
Note bore interest at 7% per annum and the $330,000 portion bore interest
at 12% per annum, both compounded annually. The amendment was necessary in
order to facilitate the refinancing of the first mortgage loan which was
F-18
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Pike Creek loan (continued)
in default. Additionally, it allowed for the satisfaction of the second
mortgage loan. The $330,000 advanced to the Pike Creek borrower was used,
in addition to funds provided by the Pike Creek borrower to satisfy its
second mortgage loan payable. Both portions of the Amended Note were
serviced by a percentage of net cash flow from the property. Net cash flow
was defined as the amount by which, in any calendar year, rent received by
the Pike Creek borrower exceeded all costs and expenses incurred in
connection with the property, including debt service. In addition, various
provisions were made for the Partnership to receive additional interest
from the Pike Creek borrower upon the ultimate sale or refinancing of the
property.
On August 4, 1998, the property underlying the Pike Creek loan was sold
and the Partnership was repaid its entire $830,000 amended loan balance
together with its equity participation interest. 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.
Stockfield loan
The property securing the Stockfield loan was 96% occupied by Shell
California Productions, Inc. ("Shell") whose lease was to expire in August
1999, approximately three years after the first mortgage loan matured on
April 1, 1996 and approximately one year after the Partnership's loan was
scheduled to mature on March 31, 1998. Shell was paying rent that exceeded
market rates for the area. Shell was unlikely to exercise its renewal
option without renegotiating the rental downward to market rates and may
have not made a decision with respect to renewal before the first mortgage
or the Stockfield loan matured. These factors were likely to hinder
Stockfield Associates Limited Partnership ("Stockfield"), the owner of the
property which secured 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. In August 1995, the Partnership entered into an
agreement with Stockfield to restructure the Stockfield loan (the
"Restructuring"). The Restructuring was premised upon Stockfield
satisfying the following conditions: (i) the existing lease with Shell was
to be replaced by a bond type net lease which extended the expiration date
of the property lease, (ii) the first mortgage was to be refinanced or
restructured and (iii) the net present value of the cash flow available to
Stockfield from the restructured lease, after payment of debt service on
the refinanced/restructured first mortgage indebtedness (the "Net Cash
Flow"), was to be equal to or greater than $8 million, using an annual
discount factor of 8% without regard to the final residual value of the
property owned by Stockfield.
F-19
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Stockfield was unable to reach an agreement with the first mortgage lender
and the first mortgage lender commenced foreclosure proceedings. As a
result, during the first quarter of 1997, the Partnership recorded an
additional provision for loan losses for the remaining carrying value of
the Stockfield loan, which was $2,340,260. In April 1997 the senior
mortgage lender foreclosed on the Property securing the loan and the
Partnership lost its entire investment.
F-20
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Unaudited financial information for mortgage loans accounted for under the
investment method, which exceed 10% of the Partnership's original capital
contributions, is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1998 1997 1996
West Palm (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Real estate assets $ * $ * $ 48,330,750
Total liabilities $ * $ * $ 81,139,155
Rental income $ * $ * $ 5,927,455
Net operating loss $ * $ * $ 3,909,067
</TABLE>
* 1998 and 1997 unaudited financial information for West Palm is not
available to the Partnership.
F-21
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Information with respect to the Partnership's investments in mortgage
loans is summarized as follows:
<TABLE>
<CAPTION>
Original Mortgage Mortgage
Interest Compound Loan Maturity Amount Purchased Placement
Description Rate Period Date Date Advanced Interest Fee
----------- ---- ------ ---- ---- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Office Buildings
Berkeley Western (i) 14.50% Annual 20-Dec-85 (i) $ 2,250,000 $ 94,079 $ 137,483
Berkely, CA
Stockfield Associates (h) 14.50% Annual 1-Apr-86 (h) 4,200,000 137,142 254,378
Bakersfield, CA
Research Triangle (j) 13.675% Monthly 1-Jan-88 (j) 3,000,000 - 175,953
Raleigh Durham, NC
Shopping Centers
Big Valley Associates (d)(b) 13.40% Monthly 16-Dec-87 31-Dec-99 1,305,000 - 57,185
Wilmington, DE
B.P. Associates (e) 13.40% Monthly 7-Jan-88 (e) 1,900,000 - 111,437
Brentwood, TN
Residential
West Palm (c) (f) 7.00% Annual 16-Jun-88 1-Jul-2000 9,200,000 - 539,589
Los Angeles, CA
Industrial/Commercial
Tri-State (c) (g) 13.46% Monthly 22-Jun-88 30-Jun-2000 1,800,000 - 105,572
------------ --------- -----------
Kentucky, Nebraska,
Pennsylvania
$ 23,655,000 $ 231,221 $ 1,381,597
============ ========= ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Interest recognized
-------------------------
Year ended
December 31, 1997 and Write-offs, Payments
Description 1998 Prior Reserves net of recoveries Received
----------- ---- ----- -------- ----------------- --------
<S> <C> <C> <C> <C> <C>
Office Buildings
Berkeley Western (i) $ - $ - $ - $ (2,481,562) $ -
Berkely, CA
Stockfield Associates (h) - 89,000 - (4,680,520) -
Bakersfield, CA
Research Triangle (j) - 2,068,560 - (3,278,102) (1,966,411)
Raleigh Durham, NC
Shopping Centers
Big Valley Associates (d)(b) 1,341,701 1,153,062 - - (3,856,948)
Wilmington, DE
B.P. Associates (e) - 69,693 - (777,244) (1,303,886)
Brentwood, TN
Residential
West Palm (c) (f) - - (5,000,000) (4,739,589) -
Los Angeles, CA
Industrial/Commercial
Tri-State (c) (g) - 3,787,627 - - (5,693,199)
----------- ------------ ----------- ------------- ------------
Kentucky, Nebraska,
Pennsylvania
$ 1,341,701 $ 7,167,942 $(5,000,000) $ (15,957,017) $(12,820,444)
=========== ============= ============ ============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Contractual
Carrying value Balance (a)
December 31, December 31,
----------------------- ----------------------------
Description 1998 1997 1998 1997
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Office Buildings
Berkeley Western (i) $ - $ - $ - $ -
Berkely, CA
Stockfield Associates (h) - - - -
Bakersfield, CA
Research Triangle (j) - - - -
Raleigh Durham, NC
Shopping Centers
Big Valley Associates (d)(b) - 1,464,415 - 913,585
Wilmington, DE
B.P. Associates (e) - - - -
Brentwood, TN
Residential
West Palm (c) (f) - - 5,714,917 5,331,781
Los Angeles, CA
Industrial/Commercial
Tri-State (c) (g) - - - -
------ ---------- ----------- -----------
Kentucky, Nebraska,
Pennsylvania
$ - $1,464,415 $ 5,714,917 $ 6,245,366
====== ========== =========== ===========
</TABLE>
(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 but not including any appreciation
interest.
(b) During 1996, the Partnership amended and restated this loan. The new loan
of $830,000 consisted of two components; $500,000 and $330,000 bore
interest at 7% and 12% per annum, respectively, plus equity participation.
In August 1998 the Partnership received approximately $3,790,000 in
satisfaction of such participation interest.
(c) This loan is accounted for under the investment method.
(d) This loan is accounted for under the interest method.
(e) In December 1992, a Plan of Reorganization was confirmed and the
Partnership received Equity Participation Certificates. In February 1997,
the property was sold and the partnership received $1,224,861 for its share
of the Equity Participation Certificates. During 1998, the Partnership
recorded an additional $79,025 of recoveries of loan losses for amounts
received in early 1999.
<PAGE>
(f) 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.
(g) This loan was repaid in January 1997.
(h) The property securing this loan was foreclosed upon by the senior lender in
April 1997. The Partnership lost its entire investment in this loan.
(i) 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.
(j) 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 and in September 1997 the Partnership received $1,966,411 in
satisfaction of such participation interest.
F-22
<PAGE>
A summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Investment Interest
Method Method Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 .............. $ 2,340,260 $ 2,413,088 $ 4,753,348
Additional funding .................... -- 330,000 330,000
Recovery of loan loss provision ....... 1,963,522 -- 1,963,522
Recovery of loan previously written off -- 1,224,861 1,224,861
Interest recognized ................... 3,673,614 8,175 3,681,789
------------ ------------ ------------
Balance, December 31, 1996 ............ 7,977,396 3,976,124 11,953,520
Recovery of (provision for) loan loss . (2,340,260) 604,155 (1,736,105)
Payments received on mortgage loans ... (5,693,199) (3,191,272) (8,884,471)
Interest recognized ................... 56,063 75,408 131,471
------------ ------------ ------------
Balance, December 31, 1997 ............ -- 1,464,415 1,464,415
Recovery of loan loss ................. -- 1,129,857 1,129,857
Payments received on mortgage loans ... -- (3,935,973) (3,935,973)
Interest recognized ................... -- 1,341,701 1,341,701
------------ ------------ ------------
Balance, December 31, 1998 ............ $ -- $ -- $ --
============ ============ ============
</TABLE>
F-23
<PAGE>
5 REAL ESTATE - NET
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>
December 31,
-----------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
Land $ 444,700 $ 444,700
Buildings and improvements 4,095,249 3,876,293
4,539,949 4,320,993
Less: accumulated depreciation (574,571) (421,480)
--------------- ----------------
$ 3,965,378 $ 3,899,513
=============== ================
</TABLE>
The land, building and improvements are pledged to collateralize the
mortgage loan payable (Note 6).
F-24
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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.
Interest rates on the loan are adjustable every five years with a current
interest rate of 8.5% effective 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 $33,701. Interest expense for the years ended
December 31, 1998, 1997 and 1996 amounted to $293,870, $309,566 and
$342,110, 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 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.
Minimum principal payments on the mortgage loan payable during the next
five years and thereafter, based upon the current interest rate, are as
follows:
Year ending December 31,
1999 $ 91,300
2000 99,300
2001 108,100
2002 117,700
2003 128,069
Thereafter 2,866,486
-----------
$ 3,410,955
===========
7 PARTNERS' EQUITY
The General Partners hold a 5% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners' equity
account was credited with only the actual capital contributed in cash,
$1,000. The Partnership's management determined that this accounting did
not appropriately reflect the Limited Partners' and the General Partners'
relative participations in the Partnership's net assets, since it did not
reflect the General Partners' 5% equity interest in the Partnership.
During 1997 the Partnership reallocated $4,124,051 (5% of the gross
proceeds raised at the Partnership's formation) of the partners' equity to
the General Partners' equity account. This reallocation was made
retroactively as of the inception of the Partnership. The reallocation had
no impact on the Partnership's financial position, results of operations,
cash flows, distributions to partners, or the partners' tax basis capital
accounts.
F-25
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
8 COMMITMENTS AND CONTINGENCIES
HEP Action
On or about May 11, 1993, three public real estate partnerships (the "HEP
Partnerships") including High Equity Partners, L.P. - Series 86, in which
the Administrative General Partner is also a General Partner, were advised
of the existence of an action (the "HEP Action") filed in the Superior
Court for the State of California for the County of Los Angeles, by Mark
Erwin, Trustee, Mark Erwin Sales, Inc. Defined Benefit Plan; Nancy Cooper,
Trustee of Nancy Cooper Individual Retirement Account; and Leonard
Drescher, Trustee of Drescher Family Trust Account individually and
purportedly on behalf of a class consisting of all of the purchasers of
limited partnership interests in the HEP Partnerships (the "Plaintiffs").
The HEP Action names as defendants the Administrative General Partner and
several individuals who are general partners of the former Associate
General Partner, among others.
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 HEP Action agreed upon a
revised settlement, which would be significantly more favorable to the
Plaintiffs than the previously proposed settlement. The revised settlement
proposal, like the previous proposal, involves the reorganization of the
HEP Partnership. Upon the effectuation of the revised settlement, the HEP
Action would be dismissed with prejudice.
On July 18, 1996, the Court preliminarily approved the revised settlement.
In August 1996, the Court approved the form and method of notice regarding
the revised settlement which was sent to the HEP limited partners.
Only approximately 2.5% of the limited partners of the HEP Partnerships
elected to "opt out" of the revised settlement. Despite this, following
the submission of additional briefs, the Court entered an order on January
14, 1997 rejecting the revised settlement and concluding that there had
not been an adequate showing that the settlement was fair and reasonable.
Thereafter, the Plaintiffs filed a motion seeking to have the Court
reconsider its order. However, the defendants withdrew the revised
settlement and at a hearing on February 24, 1997, the Court denied the
Plaintiffs' motion. Also at the February 24, 1997 hearing, the Court
granted the request of one of the Plaintiffs' law firms to withdraw as
class counsel.
Thereafter, in June 1997, the Plaintiffs again amended their complaint
("Amended Complaint"). The Amended Complaint asserts substantially the
same claims as the Consolidated Complaint, except that it no longer
contains causes of action for fraud, except on behalf of the two original
F-26
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
8 COMMITMENTS AND CONTINGENCIES (continued)
HEP Action (continued)
plaintiffs, or for negligence. In February 1998, the Court certified three
Plaintiff classes consisting of current unit holders in each of the three
HEP Partnerships. On March 11, 1998, the Court stayed the action through
June 30, 1998 to permit the parties to engage in renewed settlement
discussions.
In September 1998, the parties in the lawsuit entered into a Memorandum of
Understanding with respect to a settlement of the lawsuit. The Memorandum
of Understanding provided, among other things, for the preparation of
definitive documentation in the form of a Stipulation of Settlement and
related documents ("Stipulation"). The Stipulation was executed by the
parties in December 1998, and submitted to the Court for preliminary
approval early in January 1999. After hearing and receipt of a report from
the Court's designated independent expert, the Court entered an order on
February 1, 1999, wherein it gave its preliminary approval to the
settlement and directed that notice of the proposed settlement be sent to
the previously certified class. A hearing is scheduled for April 14, 1999.
The settlement is subject to a number of conditions. There can be no
assurance that such conditions will be fulfilled.
The Administrative General Partner believes that each of the claims
asserted in the Amended Complaint is meritless and intends to vigorously
defend the HEP Action if the settlement is not finally approved and/or
consummated. It is impossible at this time to predict what the defense of
this lawsuit will cost the Administrative General Partner and whether such
costs could adversely effect the Administrative General Partners' ability
to perform its obligations to Registrant.
9 RECONCILIATION OF NET INCOME (LOSS) AND NET ASSETS PER FINANCIAL
STATEMENTS TO TAX BASIS
The Partnership recognizes interest income on all of its investments in
mortgage loans for tax purposes using the interest method. For financial
statement purposes mortgage loans accounted under the investment method
recognize income as described in Note 2.
F-27
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
A reconciliation of net income (loss) per financial statements to the tax
basis of accounting is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1998 1997 1996
----------- ------------- -----------
<S> <C> <C> <C>
Net income (loss) per financial
statements ................................ $ 2,514,019 $ (1,225,720) $ 7,113,916
Interest income recognized for
tax purposes in excess of
(less than) financial statements ......... 371,144 271,203 (749,971)
Fees to affiliates recognized
for tax purposes (in excess of)
less than financial statements ........... (81,442) 141,213 256,094
Tax depreciation in excess of
financial statement depreciation ......... (42,780) (57,622) (23,410)
Provision for (recovery of) loan losses
for financial statement purposes in excess
of amounts reported for tax purposes ..... -- 1,736,105 (1,963,522)
Provision for uncollected accounts not
recognized for tax purposes .............. 36,248 -- --
Tax (write-off) write-up of loans previously
reserved for financial statements ........ -- (32,474,044) (1,837,010)
----------- ------------ -----------
Net income (loss) income per tax basis ......... $ 2,797,189 $(31,608,865) $ 2,796,097
=========== =========== ===========
</TABLE>
F-28
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
9 RECONCILIATION OF NET INCOME (LOSS) AND NET ASSETS PER FINANCIAL
STATEMENTS TO TAX BASIS (continued)
The differences between the Partnership's net assets per financial
statements to the tax basis of accounting are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
Net assets per financial statements $ 3,790,506 $ 8,276,487
Interest income recognized for financial
statement purposes less than (in excess)
amounts recognized for tax purposes 672,828 (749,147)
Allowance for loan losses 5,000,000 6,050,832
Syndication costs 3,918,690 3,918,690
Other asset - net 36,248 -
Due to affiliates 315,865 397,307
Cumulative tax depreciation in excess of
financial statement depreciation (183,681) (140,901)
--------------- ----------------
Net assets per tax basis $ 13,550,456 $ 17,753,268
=============== ================
</TABLE>
F-29
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
COSTS CAPITALIZED GROSS AMOUNT AT
INITIAL COST TO SUBSEQUENT TO CLOSE OF
PARTNERSHIP ACQUISITION PERIOD
------------------------- ------------------------- -------------------------------------
ENCUMB- BUILDING AND CARRYING BUILDING AND
DESCRIPTION RANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS LAND IMPROVEMENTS TOTAL
----------- ------ ---- ------------ ------------ ----- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comfort Inn
Hotel
Richmond, VA $ 3,410,955 $ 444,700 $ 3,303,821 $ 791,428 $ - $ 444,700 $ 4,095,249 $ 4,539,949
=========== ========== =========== ========= ======= ========= =========== ===========
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST STATEMENT
ACCUMULATED DATE OF DATE OF OPERATIONS IS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
----------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Comfort Inn
Hotel
Richmond, VA $ 574,571 N/A 4/1/93 7 - 40 YEARS
=========
Straight - line
method
</TABLE>
F-30
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
(A) RECONCILIATION OF REAL ESTATE OWNED 1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 3,976,352 $ 4,058,138 $ 4,320,993
Additions during year
Improvements 81,786 262,855 218,956
----------- ----------- -----------
Balance at end of year $ 4,058,138 $ 4,320,993 $ 4,539,949
============ ============ ===========
<CAPTION>
Year ended December 31,
-------------------------------------
(B) RECONCILIATION OF ACCUMULATED DEPRECIATION 1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year $ 238,536 $ 327,854 $ 421,480
Additions during year
Depreciation 89,318 93,626 153,091
--------- --------- ---------
Balance at end of year $ 327,854 $ 421,480 $ 574,571
========= ========== =========
</TABLE>
Aggregate cost for federal income tax purposes is $4,539,949 at December 31,
1998.
F-31
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant
There are no officers or directors of Registrant. The Administrative General
Partner has overall administrative responsibility for Registrant and for
operations and for resolving conflicts of interest after the net proceeds of the
offering are invested in Mortgage Loans. The Investment General Partner has
responsibility for the selection, evaluation, negotiation and disposition of
Mortgage Loans. The Associate General Partner will not devote any material
amount of its business time and attention to the affairs of Registrant. The
Administrative General Partner and the Investment General Partner are
wholly-owned subsidiaries of Presidio and were incorporated in Delaware in
September 1985. The Administrative General Partner also serves as the
administrative general partner of High Equity Partners L.P. -- Series 86 and
Resources Pension Shares 5, L.P. The Investment General Partner also serves as
the managing general partner of Resources Accrued Mortgage Investor 2 L.P. ("RAM
2").
Based on a review of Forms 3 and 4 and amendments thereto furnished to
Registrant pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") during its most recent fiscal year and Forms 5
and amendments thereto furnished to Registrant with respect to its most recent
fiscal year and written representations received pursuant to Item 405(b)(2)(i)
of Regulation S-K, none of the General Partners, directors or officers of the
General Partners or beneficial owners of more than 10% of the Units failed to
file on a timely basis reports required by Section 16(a) of the Exchange Act
during the most recent fiscal or prior fiscal years. However, no written
representations were received from the partners of the former Associate General
Partner.
As of March 1, 1999, the executive officers and directors of the Administrative,
Investment and Associate General Partners were as follows:
<TABLE>
<CAPTION>
Name Age Position Held Has served as a
Director and/or
Officer since
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
W. Edward Scheetz 34 Director November 1997
David Hamamoto 39 Director November 1997
Dallas E. Lucas 36 Director August 1998
David King 36 Executive Vice President and Assistant November 1997
Treasurer, Director
Lawrence R. Schachter 42 Senior Vice President and Chief January 1998
Financial Officer
J. Peter Paganelli 40 Senior Vice President, Secretary and March 1998
Treasurer
Allan B. Rothschild 37 President and Director December 1997
Marc Gordon 34 Vice President November 1997
Charles Humber 25 Vice President November 1997
Adam Anhang 25 Vice President November 1997
Gregory Peck 24 Assistant Secretary November 1997
</TABLE>
- ------------
<PAGE>
There are no family relationships between or among any of the directors and/or
executive officers of the Administrative, Investment and Associate General
Partner.
W. Edward Scheetz co-founded NorthStar Capital Partners LLC with David Hamamoto
in July 1997, From 1993 through 1997, Mr. Scheetz was a partner at Apollo Real
Estate Advisors L.P. From 1989 to 1993, Mr. Scheetz was a principal with
Trammell Crow Ventures.
David Hamamoto co-founded NorthStar Capital Partners LLC with W. Edward Scheetz
in July 1997. From 1988 to 1997, Mr Hamamoto was a partner and a co-head of the
real estate principal investment area at Goldman, Sachs & Co.
Dallas E. Lucas joined Northstar Capital Partners LLC in August 1998. From 1994
until then he was the Chief Financial Officer of Crescent Real Estate Equities
Company. Prior to that he was a financial consulting and audit manager in the
real estate services group of Arthur Anderson LLP.
David King joined NorthStar Capital Partners LLC in November 1997. From 1990 to
1997, Mr. King was associated with Olympia & York Companies (USA) where he held
the position of Senior Vice President of Finance. Prior to that Mr. King was
employed with Bankers Trust in its real estate finance group.
Lawrence R. Schachter joined NorthStar Presidio in January 1998 From 1996 to
1998, Mr. Schachter was Controller at CB Commercial/Hampshire LLC. From 1995 to
1996, Mr. Schachter was Controller at Goodrich Associates. From 1992 to 1995,
Mr. Schachter was Controller at Greenthal/Harlan Realty Services Co.
J. Peter Paganelli joined NorthStar Presido in March 1998. From 1997 to 1998,
Mr. Paganelli was Director of Asset Management at Argent Ventures LLC, a private
real estate company. From 1994 to 1997, Mr. Paganelli was a Vice President at
Starwood Capital Group, LLC in its Asset Management Group. From 1986 to 1994,
Mr. Paganelli was an Associate Director at Cushman & Wakefield, Inc. in its
Financial Services and Asset Services Groups.
Allan B. Rothschild joined NorthStar Presidio in December 1997.From 1995 to
1997, Mr. Rothschild was Senior Vice President and General Counsel of Newkirk
Limited Partnership. From 1987 to 1995, Mr. Rothschild was associated with the
law firm of Proskauer, Rose LLP in its real estate group.
Marc Gordon joined NorthStar Capital Partners LLC in October 1997 From 1993 to
1997, Mr. Gordon was Vice President in the real estate investment banking group
at Merrill Lynch. Prior to that, Mr. Gordon was associated with the law firm of
Irell & Manella in its real estate and banking group.
Charles Humber joined NorthStar Capital Partners LLC in September 1997. From
1996 to 1997, Mr Humber was employed with Merrill Lynch in its real estate
investment banking group. Prior to that, Mr. Humber was a student at Brown
University.
Adam Anhang joined NorthStar Capital Partners LLC in August 1997. From 1996 to
1997, Mr. Anhang was employed by The Athena Group as part of its Russia and
former Soviet Union development team. Prior to that, Mr. Anhang was a student at
the Wharton School of the University of Pennsylvania.
<PAGE>
Gregory Peck joined NorthStar Capital Partners LLC in July 1997. From 1996 to
1997, Mr. Peck was employed by Morgan Stanley as part of Morgan Stanley Realty
Real Estate Funds (MSREF) and Morgan Stanley's Real Estate Investment Banking
Group. From 1994 to 1996, Mr. Peck worked for Lazard Freres & Co. LLC in the
Real Estate Investment Banking Group.
Many of the above officers and directors of the Administrative, Investment and
Associate General Partners are also officers and/or directors of the general
partners of other public partnerships affiliated with Presidio or of various
subsidiaries of Presidio.
Item 11. Executive Compensation
Registrant is not required to and did not pay remuneration to the officers and
directors of the Investment General Partner, the Administrative General Partner
or the general partners of the former or current Associate General Partner.
Certain executive officers and directors of the General Partners receive
compensation from affiliates of the General Partners (but not from Registrant)
for services performed for various affiliated entities, which may include
services performed for Registrant; however, the Administrative General Partner
believes that any compensation attributable to services performed for Registrant
is not material. See Item 13, "Certain Relationships and Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1999, no person owned of record or was known by Registrant to own
beneficially more than 5% of the Units of Registrant.
As of March 1, 1999, neither the General Partners nor their officers and
directors was known by Registrant to be beneficially own Units or shares of
Presidio, the parent of the General Partners.
To the knowledge of the Registrant, the following sets forth certain information
regarding ownership of the Class A shares of Presidio as of March 11, 1998
(except as otherwise noted) by: (i) each person or entity who owns of record or
beneficially five percent or more of the Class A shares, (ii) each director and
executive officer of Presidio, and (iii) all directors and executive officers of
Presidio as a group. To the knowledge of Presidio, each of such shareholders has
sole voting and investment power as to the shares shown unless otherwise noted.
All outstanding shares of Presidio are owned by Presidio Capital Investment
Company, LLC ("PCIC"), a Delaware limited liability company. The interests in
PCIC (and beneficial ownership in Presidio) are held as follows:
<PAGE>
<TABLE>
<CAPTION>
Percentage Ownership in PCIC
and Percentage Beneficial
Ownership
Name of Beneficial Owner in Presidio
------------------------ -----------
<S> <C>
Five Percent Holders:
NorthStar Presidio Capital Holding Corp.(1) 71.93%
AG Presidio Investors, LLC (2) 14.12%
DK Presidio Investors, LLC (3) 8.45%
Stonehill Partners, L.P. (4) 5.50%
</TABLE>
The holdings of the directors and executive officers of Presidio are as
follows:
<TABLE>
<CAPTION>
Directors and Officers:
-----------------------
<S> <C>
Adam Anhang (5) 0%
Marc Gordon (5) 0%
David Hamamoto (5) 71.93%
Charles Humber (5) 0%
David King (5) 0%
Gregory Peck (5) 0%
Dallas Lucas (5) 0%
Allan Rothschild (5) 0%
J. Peter Paganelli(5) 0%
Lawrence Schachter (5) 0%
W. Edward Scheetz (5) 71.93%
Directors and Officers as a group: 71.93%
----------------------------------
</TABLE>
(1) NorthStar Presidio Capital Holding Corp. ("NS Presidio") is a Delaware
corporation whose address is c/o NorthStar Capital Investment Corp.,
527 Madison Avenue, 16th Floor, New York, New York 10022. NS Presidio
has three shareholders: (i) NorthStar Partnership, L.P., a Delaware
limited partnership whose address is c/o NorthStar Capital Investment
Corp., 527 Madison Avenue, 16th Floor, New York, New York 10022, holds
99% of the common stock (non-voting); (ii) David T. Hamamoto holds 0.5%
of the common stock (voting); and (iii) W. Edward Scheetz holds 0.5% of
the common stock (voting).
<PAGE>
(2) Each of Angelo, Gordon & Co., L.P., as sole manager of AG Presidio
Investors, LLC and John M. Angelo and Michael L. Gordon, as general
partners of the general partner of Angelo, Gordon & Co., L.P., may be
deemed to beneficially own for purposes of Rule 13d-3 of the Exchange
Act the securities beneficially owned by AG Presidio Investors, LLC.
Each of John M. Angelo and Michael L. Gordon disclaims such beneficial
ownership. The business address for such persons is c/o Angelo, Gordon
& Co., L.P., 245 Park Avenue, 26th Floor, New York, New York 10167.
(3) M.H. Davidson & Company, as sole manager of DK Presidio Investors, LLC,
may be deemed to beneficially own for purposes of Rule 13d-3 of the
Exchange Act the securities beneficially owned by DK Presidio
Investors, LLC. The business address for such persons is c/o M.H.
Davidson & Company, 885 Third Avenue, New York, New York 10022.
(4) Includes shares of PCIC beneficially owned by Stonehill Offshore
Partners Limited and Stonehill Institutional Partners, L.P. John A.
Motulsky is a managing general partner of Stonehill Partners, L.P., a
managing member of the investment advisor to Stonehill Offshore
Partners Limited and a general partner of Stonehill Institutional
Partners L.P. John A. Motulsky disclaims beneficial ownership of the
shares held by these entities. The business address for such persons is
c/o Stonehill Investment Corporation, 110 East 59th Street, New York,
New York 10022.
(5) The business address for such person is 527 Madison Avenue, 16th Floor,
New York, New York 10022.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The General Partners have, during Registrant's year ended December 31, 1998,
earned or received compensation or payments for services from or with respect to
Registrant as follows:
<TABLE>
<CAPTION>
Name of Recipient Capacity in Which Served Compensation
- ----------------- ------------------------ ------------
<S> <C> <C>
Resources Capital Corp. Servicing of Mortgage Loans $ 33,943 (1)
Resources Capital Corp. Management of Registrants' Assets $ 75,334 (2)
Resources Capital Corp. General Partner $120,673 (3)
RAM Funding, Inc. General Partner $ 2,514 (3)
Presidio AGP Corp. General Partner $ 2,514 (3)
</TABLE>
- -------------
(1) This amount represents fees (and interest) earned during 1998 by the
Administrative General Partner for servicing Mortgage Loans, which fees
equal 1/4 of 1% of the outstanding principal amount of the Mortgage
Loans.
(2) This amount represents fees (and interest) earned during 1998 by the
Administrative General Partner for managing the affairs of Registrant,
which fees equal 1/4 of 1% of the Net Asset Value per annum of
Registrant (as defined in Registrant's Partnership Agreement).
(3) The General Partners, pursuant to the Partnership Agreement, are
entitled to receive 5% of Registrant's income, loss, capital and
distributions (4.8% to the Administrative General Partner, .1% to the
Investment General Partner and .1% to the Associate General Partner)
including, without limitation, Registrant's cash flow from operations
and disposition proceeds. During 1998 Registrant made a distribution of
$336,000, $7,000 and $7,000 to the Administrative General Partner,
Investment General Partner and Associate General Partner, respectively.
In addition, for the year ended December 31, 1998, the General Partners
were allocated taxable income of $139,859, representing $134,265 to the
Administrative General Partner, $2,797 to the Investment General
Partner and $2,797 to the Associate General Partner.
In addition, certain officers and directors of the General Partners receive
compensation from the General Partners and/or their affiliates (but not from
Registrant) for services performed for various affiliated entities, which may
include services performed for Registrant.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
See Item 8, "Financial Statements and Supplementary Data."
(a)(2) Financial Statement Schedules
III. Real Estate and Accumulated Depreciation (with notes)
All other schedules have been omitted because they are inapplicable, not
required, or the information is included in the Financial Statements or Notes
thereto.
(a)(3) Exhibits:
3. Amended and Restated Certificate of Limited Partnership (incorporated
by reference to Exhibit 3B to Amendment No. 1 to the Registration
Statement on Form S-11 (No. 33-00836) dated January 28, 1986 (Such
Registration Statement, as amended, is referred to herein as the
"Registration Statement")).
4. (A) Amended and Restated Partnership Agreement of Registrant dated
as of September 25, 1985 ("Partnership Agreement")
(incorporated by Reference to Exhibit 3A to the Registration
Statement).
(B) Amendment to Partnership Agreement dated as of March 10, 1986
(incorporated by reference to Exhibit 3(a) to Post Effective
Amendment No. 1 to the Registration Statement).
(C) Amendment to Partnership Agreement dated as of April 1, 1988
(incorporated by reference to Exhibit 4(c) of Registrant's
Annual Report on Form 10-K for the period ended December 31,
1988 (hereinafter referred to as the "1988 10-K")).
(D) Amendment to Partnership Agreement dated as of January 23,
1989 (incorporated by reference to Exhibit 4(D) of 1988 10-K).
(E) Amendment to Partnership Agreement dated as of July 31, 1991
(incorporated by reference to Exhibit 4(E) to Registrant's
Report on Form 10-K for the fiscal year ended December 31,
1991).
10. (A) Mortgage Services Agreement between Registrant and the
Administrative General Partner (incorporated by reference to
Exhibit 10B to the Registration Statement).
(B) Agreement among the Administrative General Partner, the
Associate General Partner and Integrated Resources, Inc.
(incorporated by reference to Exhibit 10C to the Registration
Statement).
<PAGE>
(C) Agreement dated as of March 1, 1986 among Registrant, the
Administrative General Partner, the Investment General Partner
and Rosenberg and Rosenberg, P.C. (incorporated by reference
to Exhibit 10D to Post Effective No. 1 to the Registration
Statement).
(D) Amendment to Agreement dated as of June 20, 1990 among
Registrant, the Administrative General Partner, the Investment
General Partner and Rosenberg and Rosenberg, P.C.
(incorporated by reference to Exhibit 10(D) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1990).
(E) Assignment dated April 25, 1986 by MAR Corp. to Registrant of
the Amendment and Restatement of Deed of Trust and Replacement
Deed of Trust Note Second Note and Second Mortgage
(incorporated by reference to Exhibit 10(a) to Registrant's
Current Report on Form 8-K dated May 15, 1986).
(F) Replacement Deed of Trust Note dated as of December 20, 1985,
payable by Berkeley Western Associates Limited Partnership to
the order of Resources Real Estate Finance Group, Inc. in the
original principal amount of $2,250,000 (incorporated by
reference to Exhibit 10(b) to Registrant's Current Report on
Form 8-K dated May 15, 1986).
(G) Amendment and Restatement of Deed of Trust and Assignment of
Rents entered into as of February 28, 1986 between Berkeley
Western Associates Limited Partnership and Resources Real
Estate Finance Group, Inc. (incorporated by reference to
Exhibit 10(c) to Registrant's Current Report on Form 8-K dated
May 15, 1986).
(H) Assignment dated April 1, 1986 by Resources Real Estate
Finance Group, Inc., to Registrant of the Amendment and
Restatement Deed of Trust Note Second Note and Second Mortgage
(incorporated by reference to Exhibit 10(a) to Registrant's
Current Report on Form 8-K dated August 5, 1986).
(I) Deed of Trust Note dated as of April 1, 1986, payable by
Stockfield Associates Limited Partnership to the order of
Resources Real Estate Finance Group, Inc. in the original
principal amount of $4,200,000 (incorporated by reference to
Exhibit 10(b) to Registrant's Current Report on Form 8-K dated
August 5, 1986).
(J) Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing entered into as of April 1, 1986 between
Stockfield Associates Limited Partnership and Resources Real
Estate Finance Group, Inc. (incorporated by reference to
Exhibit 10(c) to Registrant's Current Report on Form 8-K dated
August 5, 1986).
(K) Mortgage Note dated December 16, 1987 in the amount of
$975,000 made by Big Valley Associates and Registrant
(incorporated by reference to Exhibit 10(a) to Registrant's
Current Report on Form 8-K dated February 10, 1988).
<PAGE>
(L) Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing between Big Valley Associates and Registrant
(incorporated by reference to Exhibit 10(b) to Registrant's
Current Report on Form 8-K dated February 10, 1988).
(M) NW Settlement Agreement, attached as an exhibit to the Third
Amended Plan of Reorganization of BP Shopping Center
Associates Limited Partnership, dated November 10, 1992,
confirmed by an Order of the U.S. Bankruptcy Court, District
of Connecticut, entered November 13, 1992 (incorporated by
reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(N) Settlement Agreement, dated as of July 27, 1993, among Boram
Corp., Pierre Property Corporation, Enmass, Inc. (successor by
merger to Gram-Brent Corp.), the Bank of New York and
Registrant incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1993.
(O) Full Release of Liens and Intercreditor Agreement, dated
December 4, 1992, executed by Registrant (incorporated by
reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(P) Release, dated December 22, 1992, by The Northwestern Mutual
Life Insurance Company in favor of Registrant (incorporated by
reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(Q) Release, dated December 4, 1992, by Registrant in favor of The
Northwestern Mutual Life Insurance Company (incorporated by
reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(R) Certificate of Participation, dated December 28, 1992, issued
to Registrant (incorporated by reference to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1992).
(S) Amended and Restated Mortgage Note dated January 1, 1988 in
the amount of $3,000,000 between Research Triangle Associates
Limited Partnership and Registrant (incorporated by reference
to Exhibit 10(a) to Registrant's Current Report on Form 8-K
dated February 17, 1988).
(T) Seven Modifications of Deeds of Trust, Security Agreements and
Financing Statements dated January 1, 1988 between Research
Triangle Associates and Registrant (incorporated by reference
to Exhibit 10(b) to Registrant's Current Report on Form 8-K
dated February 17, 1988).
(U) Note dated as of January 1, 1988 between Airport Center
Associates Limited Partnership and Registrant (incorporated by
reference to Exhibit 10(a) to Registrant's Current Report on
Form 8-K dated February 17, 1988).
<PAGE>
(V) Leasehold Deed of Trust, Assignment of Rents, Security
Agreements and Fixtures dated January 1, 1988 between Airport
Center Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(b) to Registrant's
Current Report on Form 8-K dated February 17, 1988).
(W) First Amendment to Note, Leasehold Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Filing dated as of
December 26, 1990 between Airport Center Associates Limited
Partnership and Registrant (incorporated by reference to
Exhibit 10(Y) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990).
(X) Second Amendment to Note, Leasehold Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Filing, dated as of
December 29, 1992, between Airport Center Associates Limited
Partnership and Registrant (incorporated by reference to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992).
(Y) Subordination Agreement dated as of December 26, 1990 between
Airport Center Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(Z) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1990).
(Z) Subordination Agreement dated as of December 29, 1992, between
Airport Center Associates Limited Partnership and Registrant
(incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992).
(AA) Intercreditor Agreement dated as of December 26, 1990 between
Airport Center Associates Limited Partnership, Registrant and
General Electric Capital Corporation (incorporated by
reference to Exhibit 10(AA) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990).
(BB) Letter Agreement dated as of December 26, 1990 between Airport
Center Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(BB) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1990).
(CC) Termination Agreement dated December 29, 1992, between Airport
Center Associates Limited Partnership and Registrant
(incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992).
(DD) Release dated December 29, 1992, by Airport Center Associates
Limited in favor of Registrant (incorporated by reference to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992).
(EE) Release dated December 29, 1992, by Registrant in favor of
Airport Center Associates Limited (incorporated by reference
to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992).
<PAGE>
(FF) Note dated as of January 1, 1988 in the amount of $5,000,000
between Clovine Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(a) to Registrant's
Current Report on Form 8-K dated February 23, 1988).
(GG) Open-End Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing between Clovine Associates Limited Partnership
and Registrant (incorporated by reference to Exhibit 10(b) to
Registrant's Current Report on Form 8-K dated February 23,
1988).
(HH) Note dated as of February 24, 1988 in the amount of $3,030,000
made by Park Place Associates and Registrant (incorporated by
reference to Exhibit 10(a) to Registrant's Current Report on
Form 8-K dated March 9, 1988).
(II) Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing between Park Place Associates and Registrant
(incorporated by reference to Exhibit 10(b) to Registrant's
Current Report on Form 8-K dated March 9, 1988).
(JJ) Registered Note dated August 26, 1988 in the amount of
$6,045,832 made by Lenox Tower Associates Limited Partnership
and Registrant (incorporated by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K dated August 26,
1988).
(KK) Assignment of Leases and Rents between Lenox Towers Associates
and Registrant (incorporated by reference to Exhibit 10(b) to
Registrant's Current Report on Form 8-K dated August 26,
1988).
(LL) Deed to Secure Debt and Security Agreement between Lenox
Towers Associates and Registrant (incorporated by reference to
Exhibit 10(c) to Registrant's Current Report on Form 8-K dated
August 26, 1988).
(MM) Note dated June 16, 1988 between Registrant and West Palm
Associates Limited Partnership (incorporated by reference to
Exhibit 10(a) to Registrant's Current Report on Form 8-K dated
June 22, 1988).
(NN) Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated June 16, 1988 between Registrant and West
Palm Associates Limited Partnership (incorporated by reference
to Exhibit 10(b) to Registrant's Current Report on Form 8-K
dated June 22, 1988).
(OO) Note dated June 29, 1988 between Southern Inns Associates
Limited Partnership and Registrant (incorporated by reference
to Exhibit 10(a) to Registrant's Current Report on Form 8-K
dated June 30, 1988).
<PAGE>
(PP) Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing between Southern Inns Associates Limited
Partnership and Registrant (incorporated by reference to
Exhibit 10(b) to Registrant's Current Report on Form 8-K dated
June 30, 1988). (QQ) Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing between Southern Inns Associates
Limited Partnership and Registrant (incorporated by reference
to Exhibit 10(c) to Registrant's Current Report on Form 8-K
dated June 30, 1988).
(RR) Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing between Southern Inns Associates Limited
Partnership and Registrant (incorporated by reference to
Exhibit 10(d) to Registrant's Current Report on Form 8-K dated
June 30, 1988).
(SS) Note dated as of June 22, 1988 in the amount of $1,800,000
made by Tri-State Associates Limited Partnership and
Registrant (incorporated by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K dated June 22, 1988).
(TT) Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing between Tri-State Associates Limited Partnership and
Registrant (incorporated by reference to Exhibit 10(b)(1) to
Registrant's Current Report on Form 8-K dated June 22, 1988).
(UU) Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing between Tri-State Associates Limited Partnership and
Registrant (incorporated by reference to Exhibit 10(b)(2) to
Registrant's Current Report on Form 8-K dated June 22, 1988).
(VV) Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing between Tri-State Associates Limited Partnership and
Registrant (incorporated by reference to Exhibit 10(b)(3) to
Registrant's Current Report on Form 8-K dated June 22, 1988).
(WW) Loan Acquisition and Participation Agreement dated August 1,
1995 between 800 Park Group, 600 Park Group, 500 Park Group,
400 Park Group, 200 Park Group, Teer Shareholders, and
Registrant.
(XX) Amended and Restated Note between Big Valley Associates and
Registrant dated November 21, 1996.
(YY) Amended and Restated Note between West Palm Associates Limited
Partnership and Registrant dated February 19, 1997.
(b) Reports on Form 8-K
Registrant filed the following reports on Form 8-K during the last
quarter of the fiscal year:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 29th day of March 1999.
RESOURCES ACCRUED MORTGAGE
INVESTORS L.P. - SERIES 86
By: RESOURCES CAPITAL CORP.
Administrative General Partner
Date
By: /s/ Allan B. Rothschild March 29, 1999
------------------------
Allan B. Rothschild
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant in their
capacities (with respect to The Administrative and Investment General Partners)
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dallas Lucas Director March 29, 1999
- -----------------
Dallas Lucas
/s/ Lawrence R. Schachter Senior Vice President, March 29, 1999
- ------------------------- (Principal Financial Officer
Lawrence R. Schachter and Principal Accounting Officer)
/s/ Allan B. Rothschild Director and President March 29, 1999
- ------------------------
Allan B. Rothschild
/s/ David King Director, Executive Vice March 29, 1999
- --------------- President and Assistant Treasurer
David King
</TABLE>
<PAGE>
EXHIBIT INDEX
Page
Exhibit Number
- ------- ------
3. Amended and Restated Certificate of Limited Partnership
(incorporated by reference to Exhibit 3B to Amendment No. 1
to the Registration Statement on Form S-11 (No. 33-00836)
dated January 28, 1986 (Such Registration Statement, as
amended, is referred to herein as the "Registration
Statement")).
4. (A) Amended and Restated Partnership Agreement of Registrant
dated as of September 25, 1985 ("Partnership Agreement")
(incorporated by Reference to Exhibit 3A to the Registration
Statement).
(B) Amendment to Partnership Agreement dated as of March
10, 1986 (incorporated by reference to Exhibit 3(a)
to Post Effective Amendment No. 1 to the
Registration Statement).
(C) Amendment to Partnership Agreement dated as of April
1, 1988 (incorporated by reference to Exhibit 4(c)
of Registrant's Annual Report on Form 10-K for the
period ended December 31, 1988 (hereinafter referred
to as the "1988 10-K")).
(D) Amendment to Partnership Agreement dated as of
January 23, 1989 (incorporated by reference to
Exhibit 4(D) of 1988 10-K).
(E) Amendment to Partnership Agreement dated as of July
31, 1991 (incorporated by reference to Exhibit 4(E)
to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1991).
10. (A) Mortgage Services Agreement between Registrant and the
Administrative General Partner (incorporated by reference to
Exhibit 10B to the Registration Statement).
(B) Agreement among the Administrative General Partner,
the Associate General Partner and Integrated
Resources, Inc. (incorporated by reference to
Exhibit 10C to the Registration Statement).
(C) Agreement dated as of March 1, 1986 among
Registrant, the Administrative General Partner, the
Investment General Partner and Rosenberg and
Rosenberg, P.C. (incorporated by reference to
Exhibit 10D to Post Effective No. 1 to the
Registration Statement).
<PAGE>
(D) Amendment to Agreement dated as of June 20, 1990
among Registrant, the Administrative General
Partner, the Investment General Partner and
Rosenberg and Rosenberg, P.C. (incorporated by
reference to Exhibit 10(D) to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1990).
(E) Assignment dated April 25, 1986 by MAR Corp. to
Registrant of the Amendment and Restatement of Deed
of Trust and Replacement Deed of Trust Note Second
Note and Second Mortgage (incorporated by reference
to Exhibit 10(a) to Registrant's Current Report on
Form 8-K dated May 15, 1986).
(F) Replacement Deed of Trust Note dated as of December
20, 1985, payable by Berkeley Western Associates
Limited Partnership to the order of Resources Real
Estate Finance Group, Inc. in the original principal
amount of $2,250,000 (incorporated by reference to
Exhibit 10(b) to Registrant's Current Report on Form
8-K dated May 15, 1986).
(G) Amendment and Restatement of Deed of Trust and
Assignment of Rents entered into as of February 28,
1986 between Berkeley Western Associates Limited
Partnership and Resources Real Estate Finance Group,
Inc. (incorporated by reference to Exhibit 10(c) to
Registrant's Current Report on Form 8-K dated May
15, 1986).
(H) Assignment dated April 1, 1986 by Resources Real
Estate Finance Group, Inc., to Registrant of the
Amendment and Restatement Deed of Trust Note Second
Note and Second Mortgage (incorporated by reference
to Exhibit 10(a) to Registrant's Current Report on
Form 8-K dated August 5, 1986).
(I) Deed of Trust Note dated as of April 1, 1986,
payable by Stockfield Associates Limited Partnership
to the order of Resources Real Estate Finance Group,
Inc. in the original principal amount of $4,200,000
(incorporated by reference to Exhibit 10(b) to
Registrant's Current Report on Form 8-K dated August
5, 1986).
(J) Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing entered into as of
April 1, 1986 between Stockfield Associates Limited
Partnership and Resources Real Estate Finance Group,
Inc. (incorporated by reference to Exhibit 10(c) to
Registrant's Current Report on Form 8-K dated August
5, 1986).
<PAGE>
(K) Mortgage Note dated December 16, 1987 in the amount
of $975,000 made by Big Valley Associates and
Registrant (incorporated by reference to Exhibit
10(a) to Registrant's Current Report on Form 8-K
dated February 10, 1988).
(L) Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing between Big Valley Associates and
Registrant (incorporated by reference to Exhibit
10(b) to Registrant's Current Report on Form 8-K
dated February 10, 1988).
(M) NW Settlement Agreement, attached as an exhibit to
the Third Amended Plan of Reorganization of BP
Shopping Center Associates Limited Partnership,
dated November 10, 1992, confirmed by an Order of
the U.S. Bankruptcy Court, District of Connecticut,
entered November 13, 1992 (incorporated by reference
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(N) Settlement Agreement, dated as of July 27, 1993,
among Boram Corp., Pierre Property Corporation,
Enmass, Inc. (successor by merger to Gram-Brent
Corp.), the Bank of New York and Registrant
incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1993.
(O) Full Release of Liens and Intercreditor Agreement,
dated December 4, 1992, executed by Registrant
(incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992).
(P) Release, dated December 22, 1992, by The
Northwestern Mutual Life Insurance Company in favor
of Registrant (incorporated by reference to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(Q) Release, dated December 4, 1992, by Registrant in
favor of The Northwestern Mutual Life Insurance
Company (incorporated by reference to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
(R) Certificate of Participation, dated December 28,
1992, issued to Registrant (incorporated by
reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992).
(S) Amended and Restated Mortgage Note dated January 1,
1988 in the amount of $3,000,000 between Research
Triangle Associates Limited Partnership and
Registrant (incorporated by reference to Exhibit
10(a) to Registrant's Current Report on Form 8-K
dated February 17, 1988).
<PAGE>
(T) Seven Modifications of Deeds of Trust, Security
Agreements and Financing Statements dated January 1,
1988 between Research Triangle Associates and
Registrant (incorporated by reference to Exhibit
10(b) to Registrant's Current Report on Form 8-K
dated February 17, 1988).
(U) Note dated as of January 1, 1988 between Airport
Center Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K dated
February 17, 1988).
(V) Leasehold Deed of Trust, Assignment of Rents,
Security Agreements and Fixtures dated January 1,
1988 between Airport Center Associates Limited
Partnership and Registrant (incorporated by
reference to Exhibit 10(b) to Registrant's Current
Report on Form 8-K dated February 17, 1988).
(W) First Amendment to Note, Leasehold Deed of Trust,
Assignment of Rents, Security Agreement and Fixture
Filing dated as of December 26, 1990 between Airport
Center Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(Y) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990).
(X) Second Amendment to Note, Leasehold Deed of Trust,
Assignment of Rents, Security Agreement and Fixture
Filing, dated as of December 29, 1992, between
Airport Center Associates Limited Partnership and
Registrant (incorporated by reference to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992).
(Y) Subordination Agreement dated as of December 26,
1990 between Airport Center Associates Limited
Partnership and Registrant (incorporated by
reference to Exhibit 10(Z) to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1990).
(Z) Subordination Agreement dated as of December 29,
1992, between Airport Center Associates Limited
Partnership and Registrant (incorporated by
reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992).
(AA) Intercreditor Agreement dated as of December 26,
1990 between Airport Center Associates Limited
Partnership, Registrant and General Electric Capital
Corporation (incorporated by reference to Exhibit
10(AA) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990).
<PAGE>
(BB) Letter Agreement dated as of December 26, 1990
between Airport Center Associates Limited
Partnership and Registrant (incorporated by
reference to Exhibit 10(BB) to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1990).
(CC) Termination Agreement dated December 29, 1992,
between Airport Center Associates Limited
Partnership and Registrant (incorporated by
reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992).
(DD) Release dated December 29, 1992, by Airport Center
Associates Limited in favor of Registrant
(incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992).
(EE) Release dated December 29, 1992, by Registrant in
favor of Airport Center Associates Limited
(incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992).
(FF) Note dated as of January 1, 1988 in the amount of
$5,000,000 between Clovine Associates Limited
Partnership and Registrant (incorporated by
reference to Exhibit 10(a) to Registrant's Current
Report on Form 8-K dated February 23, 1988).
(GG) Open-End Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing between Clovine
Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(b) to
Registrant's Current Report on Form 8-K dated
February 23, 1988).
(HH) Note dated as of February 24, 1988 in the amount of
$3,030,000 made by Park Place Associates and
Registrant (incorporated by reference to Exhibit
10(a) to Registrant's Current Report on Form 8-K
dated March 9, 1988).
(II) Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing between Park Place Associates and
Registrant (incorporated by reference to Exhibit
10(b) to Registrant's Current Report on Form 8-K
dated March 9, 1988).
(JJ) Registered Note dated August 26, 1988 in the amount
of $6,045,832 made by Lenox Tower Associates Limited
Partnership and Registrant (incorporated by
reference to Exhibit 10(a) to Registrant's Current
Report on Form 8-K dated August 26, 1988).
(KK) Assignment of Leases and Rents between Lenox Towers
Associates and Registrant (incorporated by reference
to Exhibit 10(b) to Registrant's Current Report on
Form 8-K dated August 26, 1988).
<PAGE>
(LL) Deed to Secure Debt and Security Agreement between
Lenox Towers Associates and Registrant (incorporated
by reference to Exhibit 10(c) to Registrant's
Current Report on Form 8-K dated August 26, 1988).
(MM) Note dated June 16, 1988 between Registrant and West
Palm Associates Limited Partnership (incorporated by
reference to Exhibit 10(a) to Registrant's Current
Report on Form 8-K dated June 22, 1988).
(NN) Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing dated June 16, 1988
between Registrant and West Palm Associates Limited
Partnership (incorporated by reference to Exhibit
10(b) to Registrant's Current Report on Form 8-K
dated June 22, 1988).
(OO) Note dated June 29, 1988 between Southern Inns
Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K dated June
30, 1988).
(PP) Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing between Southern Inns
Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(b) to
Registrant's Current Report on Form 8-K dated June
30, 1988).
(QQ) Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing between Southern Inns Associates
Limited Partnership and Registrant (incorporated by
reference to Exhibit 10(c) to Registrant's Current
Report on Form 8-K dated June 30, 1988).
(RR) Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing between Southern Inns
Associates Limited Partnership and Registrant
(incorporated by reference to Exhibit 10(d) to
Registrant's Current Report on Form 8-K dated June
30, 1988).
(SS) Note dated as of June 22, 1988 in the amount of
$1,800,000 made by Tri-State Associates Limited
Partnership and Registrant (incorporated by
reference to Exhibit 10(a) to Registrant's Current
Report on Form 8-K dated June 22, 1988).
(TT) Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing between Tri-State Associates
Limited Partnership and Registrant (incorporated by
reference to Exhibit 10(b)(1) to Registrant's
Current Report on Form 8-K dated June 22, 1988).
(UU) Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing between Tri-State Associates
Limited Partnership and Registrant (incorporated by
reference to Exhibit 10(b)(2) to Registrant's
Current Report on Form 8-K dated June 22, 1988).
<PAGE>
(VV) Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing between Tri-State Associates
Limited Partnership and Registrant (incorporated by
reference to Exhibit 10(b)(3) to Registrant's
Current Report on Form 8-K dated June 22, 1988).
(WW) Loan Acquisition and Participation Agreement dated
August 1, 1995 between 800 Park Group, 600 Park
Group, 500 Park Group, 400 Park Group, 200 Park
Group, Teer Shareholders, and Registrant.
(XX) Amended and Restated Note between Big Valley
Associates and Registrant dated November 21, 1996.
(YY) Amended and Restated Note between West Palm
Associates Limited Partnership and Registrant dated
February 19, 1997.
* Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the Financial
Statements of the December 31, 1998 Form 10-K 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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,639,050
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,820,752
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,786,130
<CURRENT-LIABILITIES> 232,169
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,790,506
<TOTAL-LIABILITY-AND-EQUITY> 8,786,130
<SALES> 0
<TOTAL-REVENUES> 3,162,173
<CGS> 0
<TOTAL-COSTS> 495,063
<OTHER-EXPENSES> 153,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,514,019
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,514,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,514,019
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
