<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 31, 1999 Number 0-15724
RESOURCES ACCRUED MORTGAGE INVESTORS L.P.-Series 86
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3294835
----------------------- -------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5 Cambridge Center 9th Floor, Cambridge, MA 02142
- ------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 617-234-3000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
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 and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
--------- --------
There is no public market for the Limited Partnership Units. Accordingly,
information with respect to the aggregate market value of Limited Partnership
Units held by non-affiliates of Registrant has not been supplied.
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].
Documents Incorporated by Reference
-----------------------------------
None
Exhibit Index set forth on page 48
<PAGE>
PART I
Item 1. Business.
General
Resources Accrued Mortgage Investors L.P.-Series 86 (the "Registrant") was
organized as a Delaware limited partnership on September 25, 1985. The
general partners of the Registrant are RAM Fund in Inc. (the "Investment
General Partner"), Resources Capital Corp. (the "Administrative General
Partner"), and Presidio ACP Corp. (the "Associate General Partner"). The
Administrative General Partner, the Associate General Partner and the
Investment General Partner are collectively referred to herein as the
"General Partners". The General Partners are all ultimately wholly-owned
subsidiaries of Presidio Capital Corporation, a British Virgin Islands
corporation ("Presidio"). See "Management/Employees" below.
In 1986, the Registrant sold, pursuant to a registration statement filed with
the Securities Exchange Commission, 329,994 units of limited partnership
interest (the "Units") for gross proceeds aggregating $82,501,000. Net proceeds
received by Registrant from its offering, after organization and offering costs,
were $78,582,310.
The principal business of the Registrant is and has been to invest primarily in
"zero coupon" first and junior mortgage loans ("Mortgage Loans") on properties
owned or acquired principally by privately and publicly syndicated limited
partnerships originally sponsored by affiliates of Integrated Resources, Inc.
("Integrated"), the original owner of the Investment General Partner. 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. See "Investments of Registrant" below.
Management/Employees
Registrant does not have any employees. The business of the Registrant is
managed by the General Partners, their affiliates and agents. Through November
2, 1994, the Investment General Partner and the Administrative General Partner
were wholly-owned subsidiaries of Integrated. On November 3, 1994, as a result
of the consummation of the reorganization plan relating to Integrated's
bankruptcy, indirect ownership of the Investment General Partner and the
Administrative General Partner was purchased by Presidio. Further, on February
28, 1995, the Associate General Partner replaced Z Square G Partners II as the
associate general partner of Registrant. As a result, all of the General
Partners became ultimately wholly-owned by Presidio. Presidio, in turn, is
controlled by NorthStar Capital Investment Corp., a Maryland corporation
("NorthStar").
Presidio previously retained Wexford Management LLC ("Wexford") to provide
consulting and administrative services to Presidio and its affiliates, including
the General Partners and Registrant. The agreement with Wexford expired on May
3, 1998 at which time Presidio entered into a management agreement with
NorthStar Presidio Management Company, LLC ("NorthStar Presidio"). Under the
terms of the management agreement, NorthStar Presidio provided the day-to-day
management of Presidio and its direct and indirect subsidiaries and affiliates.
On October 21, 1999, Presidio entered into a Services Agreement with AP-PCC III,
L.P. (the "Agent") pursuant to which the Agent was retained to provide asset
management and investor relation services to Registrant and other entities
affiliated with Registrant.
I-1
<PAGE>
As a result of this agreement, the Agent has the duty to direct the day to day
affairs of Registrant, including, without limitation, reviewing and analyzing
potential sale, financing or restructuring proposals regarding the Registrant's
assets, preparation of all reports, maintaining records and maintaining bank
accounts of Registrant. The Agent is not permitted, however, without the consent
of Presidio, or as otherwise required under the terms of the Limited Partnership
Agreement to, among other things, cause Registrant to sell or acquire an asset
or file for bankruptcy protection.
In order to facilitate the Agent's provision of the asset management services
and the investor relation services, effective October 25, 1999, the officers and
directors of the General Partners resigned and nominees of the Agent were
elected as the officers and directors of the General Partners. The Agent is an
affiliate of Winthrop Financial Associates, a Boston based company that provides
asset management services, investor relation services and property management
services to over 150 limited partnerships which own commercial property and
other assets. The General Partners do not believe this transaction will have a
material effect on the operations of Registrant.
Registrant has retained GF Management, Inc. to manage its motel property.
See "Current Investments-Comfort Inn, Richmond, Virginia" below.
Investments of Registrant
Registrant originally invested its net proceeds in sixteen Mortgage Loans which
aggregated $70,332,103. Registrant lost its entire investment in seven Mortgage
Loans as a result of foreclosures or discounted payoffs of senior lenders. Three
of the Mortgage Loans, 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 Four 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, Pike Creek's participation interest being paid on August
4, 1998 and Berkeley Western's participation interest being paid on August 20,
1999. Registrant continues to hold the West Palm loan and the motel property in
Richmond, Virginia which Registrant acquired title to as a result of its
foreclosure on the Southern Inns Loan. See "Current Investments" below.
a. Current Investments
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 was originally 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.
In 1997, the West Palm Loan, which was restructured in connection with the
bankruptcy filing made by West Palm Associates, has a principal balance of
$5,000,000, bears interest at a rate of 7% per annum and matures in February
2017. West Palm Associates is not required to make any payments of principal or
interest on the note until maturity. The current balance of the first mortgage
encumbering West Palm's property, which loan is senior to your partnership's
loan, is approximately $38,900,000. The first mortgage loan bears interest at a
rate of 9.125% per annum and matures on April 1, 2006. The first mortgage
provides for payments of interest only in the amount of $295,796 per month
through April 2001 and thereafter payments of principal and interest equal to
$329,777 per month. The scheduled principal balance at maturity of the first
mortgage loan is approximately $36,381,000. The 1998 financial statements of
West Palm disclosed that (i) West Palm has continued to sustain operating losses
since emerging from reorganization proceedings in 1997, (ii) based upon
projected cash deficits for 1999, it is questionable whether West Palm will be
able to make all of the scheduled mortgage payments and (iii) this condition
indicates that West Palm may be unable to continue as a going concern.
I-2
<PAGE>
West Palm has approached Registrant seeking to restructure the West Palm
Loan. After a series of negotiations, the current proposal provides for the loan
to be restructured so that Registrant would receive from the proceeds of a sale
of West Palm's property, after satisfaction of all prior loans, certain expenses
and closing costs, an amount equal to the first $1,200,000 of the remaining sale
proceeds, if any, plus 60% of all additional sales proceeds. The General
Partners are evaluating this proposal in light of the fact that (i) if the first
mortgage lender were to foreclose, Registrant's interest could be extinguished
and (ii) the West Palm Loan does not mature until 2017 with no required payments
prior to such date.
Comfort Inn Richmond, Virginia - Registrant originally loaned Southern
Inns Associates $4,000,000 secured by seven properties, one of which was a motel
property located in Richmond, Virginia. On April 1, 1993, Registrant acquired
title by foreclosure and assumed ownership responsibilities of the Richmond
Comfort Inn Executive Center, located in Richmond, Virginia. 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. This property is subject to a first mortgage loan
which had a principal balance of $3,327.004 as of December 31, 1999. The
interest rate on the loan is adjustable every five years with a current interest
rate of 8.5% effective through April 2002 and 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. The
lender is permitted to accelerate the note at any time on six months notice.
Registrant has not received a notice of acceleration from the lender.
Set forth below is a table showing the gross carrying value and
accumulated depreciation and federal tax basis, as of December 31, 1999, of the
motel property owned by Registrant:
Gross Carrying Accumulated Federal
Value Depreciation Rate Method Tax Basis
----- ------------ ---- ------ ---------
$4,750,179 726,123 7/40 yr. S/L $3,795,099
Set forth below is a table showing the average occupancy rate and room
rental rate at the motel property for the years ended December 31 1999, 1998 and
1997"
Year ended December 31,
1999 1998 1997
---- ---- ----
Average Occupancy Rate 57% 59% 62%
Average Room Rental Rate $56.73 $54.12 $54.88
b. Investments Recently Terminated
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 downtown Berkeley, California.
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%.
I-3
<PAGE>
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%.
In January 1993, BW Associates filed for protection under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code"). A plan of
reorganization (the "Plan") was confirmed by the Court on November 14, 1994. The
Plan entitles Registrant to certain economic benefits after Guaranty Federal is
repaid upon a sale or refinancing. Pursuant to the Plan, Guaranty Federal,
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) would 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.
On August 20, 1999, the BW Property was sold to an unaffiliated third
party for $19,500,000. In accordance with the terms of the New Note, Registrant
received $3,887,555 representing repayment of the New Note and its share of
participation in sale proceeds. Also, approximately $218,000 was held back by BW
Associates in accordance with the sale agreement for unanticipated costs related
to the sale. As a result of this transaction, Registrant has recorded a recovery
of loan losses in the amount of $2,481,562 and interest income of $1,405,993
during the year ended December 31, 1999.
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.
I-4
<PAGE>
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. 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.
See "Item 8, Financial Statements and Supplementary Data, Note 4" for additional
information relating to the Registrant's investments.
Competition
The property which secures Registrant's remaining mortgage loan and the Comfort
Inn 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 remaining Mortgage Loan.
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.
Item 2. Properties
See "Item 1. Business-Investments of Registrant-Current Investments-Comfort
Inn, Richmond, Virginia" for information relating to Registrant's motel
property.
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.
I-5
<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. On
November 17, 1999, Bighorn Associates I, LLC ("Bighorn"), a wholly owned
subsidiary of Presidio Capital Investment Company, LLC, the sole shareholder of
Presidio, commenced a tender offer to purchase units in Registrant. Upon
expiration of the tender offer in December 1999, Bighorn acquired pursuant to
the terms of the tender offer 46,766 limited partnership units for $22 per unit,
which represents approximately 15.6% of the outstanding limited partnership
units of Registrant. It is possible that Bighorn, another affiliate of Presidio,
or third parties may tender for Units in the future at prices greater than or
less than the Bighorn purchase price.
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, 2000, there were approximately 9,200 holders of Units of
Registrant (including the initial limited partner), owning an aggregate of
330,004 Units.
Registrant did not make any distributions to its partners during the year ended
December 1999. In January 2000, Registrant distributed $5,210,589 of which the
limited partners received $4,950,000 or $15 per limited partnership unit. 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.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 3,303,299 $ 3,162,173 $ 2,242,929 $ 5,764,309(2) $ 1,997,835
Net Income (Loss) $ 4,053,650(6) $ 2,514,019(5) $ (1,225,720)(4) $ 7,113,916(1) $ (6,713,010)(3)
Net Income (Loss)
Per Unit $ 11.67(6) $ 7.24(5) $ (3.53)(4) $ 20.48(1) $ (19.33)(3)
Distribution Per Unit $ - $ 20.15 $ 12.00 $ - $ -
Total Assets
Net of Reserves $ 11,828,906 $ 8,786,130 $ 13,753,749 $ 19,540,249 $ 12,565,760
Partners Equity $ 7,844,156 $ 3,790,506 $ 8,276,487 $ 13,670,679 $ 6,556,763
</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 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.
(6) Net of recovery of provision for loan losses $2,481,562 or $7.14 per Unit.
II-1
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-K and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such matters,
does not take into account the effects of any changes to the Partnership's
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
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, Pike Creek's
participation interest having been paid on August 4, 1998 and Berkeley Western's
participation being paid on August 20, 1999. Registrant lost its entire
investment in seven Mortgage Loans as a result of foreclosures or discounted
payoffs of senior lenders.
On August 20, 1999, the BW Property was sold to an unaffiliated third party. In
accordance with the terms of the New Note, Registrant received $3,887,555
representing repayment of the New Note and its share of participation in sale
proceeds. Also, approximately $218,000 was held back by the borrower in
accordance with the sale agreement for expected costs related to the sale.
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
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
II-2
<PAGE>
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).
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
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 and on August 20, 1999
Registrant was paid for this participation. 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, 1999, Registrant's working capital reserves equaled approximately
$7,608,000. Registrant may utilize its working capital reserves in the event
Registrant incurs additional expenses with respect to its motel 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 2000.
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 $247,560 to the Administrative General Partner
representing the asset management fees for the Airport Center, Southern Inns, BP
and Berkeley loans. In August 1998, the Administrative General Partner was paid
$174,298 which represented the asset management fee previously
II-3
<PAGE>
accrued for the Pike Creek Loan. In May 1999, the Administrative General Partner
was paid $891,608 representing interest on the deferred asset management fee.
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.
Registrant had $7,639,679 of cash and cash equivalents at December 31, 1999, as
compared to $4,639,050 at December 31, 1998. The $3,000,629 increase in cash and
cash equivalents at December 31, 1999 as compared to December 31, 1998 was due
to $813,248 of cash provided by operating activities and $2,187,381 of cash
provided by investing activities. Cash provided by investing activities included
$2,481,562 of repayments of mortgage loans, which was partially offset by
$210,230 of capital additions to the Comfort Inn and $83,951 of principal
repayments.
In January 2000, Registrant distributed $5,210,589 of which the limited partners
received $4,950,060 or $15.00 per Unit.
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.
On November 17, 1999, Big Horn Associates, LLC ("Big Horn"), a wholly owned
subsidiary of Presidio commenced a tender offer to purchase units in Registrant.
Subsequent to the expiration of the tender offer in December 1999. Big Horn
purchased 46,766 limited partnership units for $22 per unit, which represents
approximately 14.2% of the outstanding limited partnership units of Registrant.
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,
1999.
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.
II-4
<PAGE>
Results of Operations
1999 as compared to 1998
Registrant generated net income of $4,053,650 for the year ended December 31,
1999, as compared to net income of $2,514,019 for the year ended December 31,
1998. Revenues increased for the year ended December 31, 1999 as compared to the
prior by $141,126 year due to increases in operating income, mortgage loan
interest income, and other income partially offset by a decrease in short-term
interest income. Operating income real estate increased as a result of higher
average rental rates more than offset a decrease in average occupancy at the
Richmond Comfort Inn. Mortgage loan interest income increased as a result of
collections of $1,405,993 related to the Berkley Western loan compared to
$1,341,701 primarily from the Pine Creek loan in 1998. Other income increased
due to higher investor relation fees charged primary for unit transfers.
Short-term interest income decreased as a result of lower cash balances
available for investment.
Costs and expenses decreased by $1,398,505 for the year ended December 31, 1999
compared to the year ended December 31, 1998. The decrease is due to the
recovery of loan losses of $2,481,582 associated with the payoff of the Berkeley
Loan in the 1999. The 1998 results include $1,129,857 of recovery of loan losses
consisting of $79,025 from the Brentwood loan and approximately $1,051,000 from
the Pine Creek loan. Asset management and mortgage servicing fees decreased due
to the disposition of mortgage loans. Operating expenses - real estate increased
corresponding with the increased expenses at the Comfort Inn.
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.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Not applicable
II-5
<PAGE>
Item 8. Financial Statements and Supplementary Data
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
I N D E X
---------
Page
Number
------
Independent Auditor's Report F-1
Financial Statements - years ended
December 31, 1999, 1998 and 1997
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-24
Financial statement schedule
Schedule III
Real Estate and Accumulated Depreciation F-25
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.
II-6
<PAGE>
To the Partners of
Resources Accrued Mortgage Investors L.P. - Series 86
Cambridge, Massachusetts
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, 1999 and
1998, and the related statements of operations, partners' equity and cash flows
for each of the three years in the period ended December 31, 1999. 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, 1999 and 1998, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999 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
March 15, 2000
New York, New York
F-1
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of an allowance
for loan losses of $5,000,000) $ - $ -
Cash and cash equivalents 7,639,679 4,639,050
Real estate - net 4,024,056 3,965,378
Other assets 165,171 181,702
------------ -----------
$ 11,828,906 $ 8,786,130
============= ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable $ 3,327,004 $ 3,410,955
Due to affiliates 460,892 1,352,500
Accounts payable and accrued expenses 196,854 232,169
------------ -----------
Total liabilities 3,984,750 4,995,624
------------ -----------
Commitments and contingencies (Notes 3, 4, 6 and 8 )
Partners' equity
Limited partners' equity (330,004 units issued
and outstanding) 7,451,999 3,601,031
General partners' equity 392,157 189,475
------------ -----------
Total partners' equity 7,844,156 3,790,506
------------ -----------
$ 11,828,906 $ 8,786,130
============ ===========
</TABLE>
F-2
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF OPERATIONS
Year ended December 31,
------------------------------------
1999 1998 1997
----------- ----------- -----------
Revenues
Operating revenue - real estate $ 1,495,153 $ 1,452,505 $ 1,570,960
Mortgage loan interest income 1,405,993 1,341,701 131,471
Short-term investment interest 247,198 337,856 424,271
Other income, principally
transfer fees 154,955 30,111 116,227
----------- ----------- -----------
3,303,299 3,162,173 2,242,929
----------- ----------- -----------
Costs and expenses
Operating expenses - real estate 1,109,422 1,012,937 929,557
Mortgage loan interest expense 286,405 293,870 309,566
General and administrative expenses 183,832 208,836 175,926
Depreciation expense 151,552 153,091 93,626
Asset management fees - 75,334 151,989
Mortgage servicing fees - 33,943 71,880
Recovery of loan losses (2,481,562) (1,129,857) (604,155)
Provision for loan losses - - 2,340,260
----------- ----------- -----------
(750,351) 648,154 3,468,649
----------- ----------- -----------
Net income (loss) $ 4,053,650 $ 2,514,019 $(1,225,720)
=========== ============ ============
Net income (loss) attributable to
Limited partners $ 3,850,968 $ 2,388,318 $(1,164,434)
General partners 202,682 125,701 (61,286)
----------- ----------- -----------
$ 4,053,650 $ 2,514,019 $(1,225,720)
=========== =========== ============
Net income (loss) per unit of limited
partnership interest (330,004 units
outstanding) $ 11.67 $ 7.24 $ (3.53)
=========== =========== ============
F-3
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
--------- ----------- -----------
Balance, January 1, 1997 $ 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
Net income - 1999 202,682 3,850,968 4,053,650
-------- ----------- -----------
Balance, December 31, 1999 $ 392,157 $ 7,451,999 $ 7,844,156
========= ============ ===========
F-4
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 4,053,650 $ 2,514,019 $ (1,225,720)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Mortgage loan interest accrued - - (131,471)
(Recovery of) provision for loan losses, net (2,481,562) (1,129,857) 1,736,105
Other items (27,656) 36,248 -
Deferred asset management and
mortgage servicing fees, net of
payments made (891,608) (490,790) (280,191)
Depreciation expense 151,552 153,091 93,626
Changes in operating assets and liabilities
Other assets 44,187 (22,397) (29,201)
Accounts payable and accrued expenses (35,315) 93,675 (36,872)
------------ ------------ -------------
Net cash provided by operating activities 813,248 1,153,989 126,276
------------ ------------ -------------
Cash flows from investing activities
Principal payments on mortgage loan payable (83,951) (84,523) (75,245)
Additions to real estate (210,230) (218,956) (262,855)
Payments received on mortgage loans 2,481,562 2,515,247 8,884,471
------------ ------------ -------------
Net cash provided by investing activities 2,187,381 2,211,768 8,546,371
------------ ------------ -------------
Cash flows from financing activities
Distributions to partners - (7,000,000) (4,168,472)
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents 3,000,629 (3,634,243) 4,504,175
Cash and cash equivalents, beginning of year 4,639,050 8,273,293 3,769,118
------------ ------------ -------------
Cash and cash equivalents, end of year $ 7,639,679 $ 4,639,050 $ 8,273,293
============ ============ ============
Supplemental disclosure of cash flow information
Interest paid $ 286,405 $ 293,870 $ 309,566
============ ============ ============
</TABLE>
F-5
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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.
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.
F-6
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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.
F-7
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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) and distributions per unit of limited partnership
interest
Net income (loss) and distributions 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.
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.
F-8
<PAGE>
CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Investment General Partner of the Partnership, RAM Funding, Inc. (the
"Investment General Partner") and the Administrative General Partner,
Resources Capital Corp. (the "Administrative General Partner") are
wholly-owned subsidiaries of Presidio Capital Corp. ("Presidio"). RAM
Funding, Inc and Resources Capital Corp. were, until November 3, 1994,
wholly-owned subsidiaries of Integrated. 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. 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. 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.
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 1999 and 1998,
amounts paid to NorthStar Presidio for management and administrative
services amounted to $11,211 and $3,000, 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.
On October 21, 1999, Presidio entered into a new Services Agreement with
AP-PCC III, L.P. (the "Agent") pursuant to which the Agent was retained to
provide asset management and investor relation services to the Partnership
and other entities affiliated with the Partnership.
F-9
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
As a result of this agreement, the Agent has the duty to direct the day to
day affairs of the Partnership, including, without limitation, reviewing and
analyzing potential sale, financing or restructuring proposals regarding the
Partnership's assets, preparation of all reports, maintaining Partnership
records and maintaining bank accounts of the Partnership. The Agent is not
permitted, however, without the consent of Presidio, or as otherwise
required under the terms of the Limited Partnership Agreement to, among
other things, cause the Partnership to sell or acquire an asset or file for
bankruptcy protection.
In order to facilitate the Agent's provision of asset management services
and the investor relation services, effective October 25, 1999, the officers
and directors of the General Partners resigned and nominees of the Agent
were elected as the officers and directors of the General Partners. The
Agent is an affiliate of Winthrop Financial Associates, a Boston based
company that provides asset management services, investor relation services
and property management services to over 150 limited partnerships which own
commercial property and other assets. The General Partners do not believe
this transaction will have a material effect on the operations of the
Partnership.
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 and $151,989, including
accrued interest of $73,527 and $144,758 for the years ended December 31,
1998 and 1997, respectively. No asset management fee was earned for the year
ended December 31, 1999. In May 1999, the Administrative General Partner was
paid $891,608 representing the accumulated interest portion of the deferred
asset management fees.
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.
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 and $71,880, including accrued interest
of $20,378 and $42,817, for the years ended December 31, 1998, and 1997,
respectively. No mortgage servicing fee was earned for the year ended
December 31, 1999.
F-10
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
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.
Amounts due to the Administrative General Partner for asset management and
mortgage servicing fees (including accrued interest), consist of the
following:
December 31,
------------------------
1999 1998
----------- ----------
Asset management fee $ 460,892 $1,352,500
Mortgage servicing fee - -
----------- ----------
$ 460,892 $1,352,500
=========== ==========
On November 17, 1999, Big Horn Associates, LLC ("Big Horn"), a wholly-owned
subsidiary of Presidio, commenced a tender offer to purchase limited
partnership units of the Partnership. Prior to the expiration of the tender
offer in December 1999, Big Horn purchased 46,766 limited partnership units
for $22 per unit, which represents approximately 14.2% of the Partnership's
outstanding limited partnership units.
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. At
December 31, 1999, the Partnership has one outstanding mortgage loan
remaining, the West Palm loan.
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, Pike Creek
and Berkeley Western participation interests were paid to the Partnership
after the underlying properties securing the respective loans were sold.
F-11
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
The Partnership has provided for these contingencies, in some circumstances,
by establishing an allowance for loan losses on its investments.
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. A plan of reorganization filed by BW
Associates (the "Plan") was confirmed by the bankruptcy court on November
14, 1994. 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.
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 was to 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 was to be allocated pari passu, 25% to
Guaranty Federal, 44% to the Partnership, and 31% to BW Associates.
c) Any additional amounts were to 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.
F-12
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
On August 20, 1999, the property underlying the Berkeley Loan was sold to an
unaffiliated third party for $19,500,000. In accordance with the terms of
the New Note, the Partnership received $3,887,555 representing repayment of
the New Note and its share of participation in sale proceeds. Also,
approximately $218,000 was held back by BW Associates in accordance with the
sale agreement for expected costs related to the sale. As a result, the
Partnership has recorded a recovery of loan losses in the amount of
$2,481,562 and interest income of $1,405,993 during the year ended December
31, 1999.
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.
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
F-13
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
West Palm loan (continued)
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 would 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.
West Palm has approached the General Partners seeking to restructure the
Partnership's loan. After a series of negotiations, the current proposal
provides for the loan to be restructured so that the Partnership would
receive from the proceeds of a sale of West Palm's property, after
satisfaction of all prior loans, certain expenses and closing costs, an
amount equal to the first $1,200,000 of the remaining sale proceeds, if any,
plus 60% of an additional sales proceeds. The General Partners are
evaluating this proposal in light of the fact that (i) if the first mortgage
lender were to foreclose, the Partnership's interest could be extinguished
and (ii) the Partnership's loan does not mature until 2017 with no required
payments prior to such date. The main benefit to the Partnership of this
proposal is that it provides an incentive to West Palm to seek to dispose of
its property currently which could result in the Partnership receiving a
return on its investment.
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.
F-14
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Tri-State loan (continued)
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.
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.
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.
F-15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
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 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 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
F-16
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Stockfield loan (continued)
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 allowance for loan losses in the amount of $2,106,000
was provided in 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.
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-17
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Information with respect to the Partnership's mortgage loans is
summarized as follows:
<TABLE>
<CAPTION>
Original Mortgage
Interest Compound Loan Maturity Amount Purchased
Description Rate % Period Date Date Advanced Interest
- ---------------------------- ------------- ---------- ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Office Buildings
Berkeley Western (c)(i) 14.50% Annual 20-Dec-85 (i) $ 2,250,000 $ 94,079
Berkely, CA
Stockfield Associates (c)(h) 14.50% Annual 1-Apr-86 (h) 4,200,000 137,142
Bakersfield, CA
Research Triangle (c)(j) 13.675% Monthly 1-Jan-88 (j) 3,000,000 -
Raleigh Durham, NC
Shopping Centers
Big Valley Associates (d)(b) 13.40% Monthly 16-Dec-87 31-Dec-99 1,305,000 -
Wilmington, DE
B.P. Associates (c)(e) 13.40% Monthly 7-Jan-88 (e) 1,900,000 -
Brentwood, TN
Residential
West Palm (c)(f)
Los Angeles, CA 7.00% Annual 16-Jun-88 1-Jul-2000 9,200,000 -
Industrial/Commercial
Tri-State (c) (g) 13.46% Monthly 22-Jun-88 30-Jun-2000 1,800,000 -
------------- -------------
Kentucky, Nebraska,
Pennsylvania
$ 23,655,000 $ 231,221
============= =============
</TABLE>
<TABLE>
<CAPTION>
Interest recognized
-------------------------
Mortgage Year ended
Placement December 31, 1998 and Write-offs, Payments
Description Fee 1999 Prior Reserves net of recoveries Received
- ------------------------------ ------------- -------------- ----------- --------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Office Buildings
Berkeley Western (c)(i)
Berkely, CA $ 137,483 $ 1,405,993 $ - $ - $ - $(3,887,555)
Stockfield Associates (c)(h)
Bakersfield, CA 254,378 - 89,000 - (4,680,520) -
Research Triangle (c)(j)
Raleigh Durham, NC 175,953 - 2,068,560 - (3,278,102) (1,966,411)
Shopping Centers
Big Valley Associates (d)(b)
Wilmington, DE 57,185 2,494,763 - - (3,856,948)
B.P. Associates (c)(e)
Brentwood, TN 111,437 - 69,693 - (777,244) (1,303,886)
Residential
West Palm (c)(f)
Los Angeles, CA 539,589 - - (5,000,000) (4,739,589) -
Industrial/Commercial
Tri-State (c) (g)
Kentucky, Nebraska,
Pennsylvania 105,572 - 3,787,627 - - (5,693,199)
------------ ------------ ----------- ------------ ------------- ------------
$ 1,381,597 $ 1,405,993 $ 8,509,643 $ (5,000,000) $ (13,475,455) $(16,707,999)
============ ============ =========== ============= ============== ============
</TABLE>
F-18
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
<TABLE>
<CAPTION>
Contractual
Carrying value Balance (a)
December 31, December 31,
-------------------- ---------------------
Description 1999 1998 1999 1998
- ------------- -------- ------- -------- --------
<S> <C> <C> <C> <C>
Office Buildings
Berkeley Western (c) (i) $ - $ - $ - $ -
Berkely, CA
Stockfield Associates (c) (h) - - - -
Bakersfield, CA
Research Triangle (c) (j) - - - -
Raleigh Durham, NC
Shopping Centers
Big Valley Associates (d) (b) - - - -
Wilmington, DE
B.P. Associates (c) (e) - - - -
Brentwood, TN
Residential
West Palm (c) (f) - - 6,070,323 5,673,199
Los Angeles, CA
Industrial/Commercial
Tri-State (c) (g)
Kentucky, Nebraska,
Pennsylvania - - - -
-------- -------- ----------- -----------
$ - $ - $ 6,070,323 $ 5,673,199
-------- -------- ----------- -----------
</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 which bore
interest at 7% and 12% per annum, respectively, plus equity participation.
(c) These loans are accounted for under the investment method.
(d) These loans are 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.
(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.
During 1999, the Partnership received $3,887,555 in satisfaction of this
loan.
(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-19
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
A summary of mortgage activity is as follows:
Investment Interest
Method Method Total
----------- ----------- ------------
Balance, January 1, 1997 $ 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 - - -
Recovery of loan loss 2,481,562 - 2,481,562
Payments received on mortgage
loans (3,887,555) - (3,887,555)
Interest recognized 1,405,993 - 1,405,993
----------- ----------- ------------
Balance, December 31, 1999 $ - $ - $ -
=========== =========== ============
F-20
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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:
December 31,
---------------------------------------
1999 1998 1997
West Palm (Unaudited) (Unaudited) (Unaudited)
--------- ----------- ----------- -----------
Real estate assets $ * $ * $ *
Total liabilities $ * $ * $ *
Rental income $ * $ * $ *
Net operating loss $ * $ * $ *
* 1999, 1998 and 1997 unaudited financial information for West Palm is not
available to the Partnership.
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
revenue and expenses of the hotel are reflected in the statements of
operations.
A summary of the Partnership's real estate is as follows:
December 31,
------------------------
1999 1998
----------- ----------
Land $ 444,700 $ 444,700
Buildings and improvements 4,305,479 4,095,249
----------- ----------
4,750,179 4,539,949
Less: accumulated depreciation (726,123) (574,571)
----------- ----------
$ 4,024,056 $3,965,378
=========== ==========
The land, building and improvements are pledged to collateralize the
mortgage loan payable (Note 6).
F-21
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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, 1999, 1998 and
1997 amounted to $286,405, $293,870 and $309,566, 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,
2000 $ 99,332
2001 108,112
2002 117,668
2003 128,069
2004 139,389
Thereafter 2,734,434
------------
$ 3,327,004
============
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. 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 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-22
<PAGE>
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.
A reconciliation of net income (loss) per financial statements to the tax
basis of accounting is as follows:
Year ended December 31,
------------------------------------
1999 1998 1997
---------- ---------- ------------
Net income (loss) per financial
statements $4,053,650 $2,514,019 $(1,225,720)
Interest income recognized for
tax purposes in excess of
(less than) financial
statements (1,008,869) 371,144 271,203
Fees to affiliates recognized
for tax purposes (in excess of)
less than financial statements (315,865) (81,442) 141,213
Tax depreciation in excess of
financial statement
depreciation (45,276) (42,780) (57,622)
Provision for (recovery of) loan
losses for financial statement
purposes in excess of amounts
reported for tax purposes (2,481,562) - 1,736,105
Provision for uncollected accounts
not recognized for tax
purposes (27,656) 36,248 -
Tax write-up (write-off) of loans
previously reserved for
financial statements 3,887,555 - (32,474,044)
---------- ---------- -------------
Net income (loss) per tax basis $4,061,977 $2,797,189 $(31,608,865)
========== ========== =============
F-23
<PAGE>
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:
December 31,
------------------------
1999 1998
----------- ----------
Net assets per financial statements $ 7,844,156 $3,790,506
Interest income recognized for financial
statement purposes less than amounts
recognized for tax purposes 1,069,952 672,828
Allowance for loan losses 5,000,000 5,000,000
Syndication costs 3,918,690 3,918,690
Other asset 8,592 36,248
Due to affiliates - 315,865
Cumulative tax depreciation in excess of
financial statement depreciation (228,957) (183,681)
----------- ----------
Net assets per tax basis $17,612,433 $13,550,456
=========== ===========
F-24
<PAGE>
Schedule III
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
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 $ 3,327,004 $ 444,700 $ 3,303,821 $1,001,658 $ - $ 444,700 $4,305,479 $ 4,750,179
============ ========== ============ =========== ======== ========= =========== ============
<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 $ 726,123 N/A 4/1/93 7 - 40 YEARS
========== Straight - line
method
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
(A) RECONCILIATION OF REAL ESTATE OWNED 1997 1998 1999
---------- ------------ ----------
<S> <C> <C> <C>
Balance at beginning of year $4,058,138 $ 4,320,993 $ 4,539,949
Additions during year
Improvements 262,855 218,956 210,230
---------- ------------ ----------
Balance at end of year $4,320,993 $ 4,539,949 $ 4,750,179
=========== ============ ===========
<CAPTION>
Year ended December 31,
(B) RECONCILIATION OF ACCUMULATED DEPRECIATION 1997 1998 1999
---------- ------------ ----------
<S> <C> <C> <C>
Balance at beginning of year $ 327,854 $ 421,480 $ 574,571
Additions during year
Depreciation 93,626 153,091 151,552
---------- ------------ ----------
Balance at end of year $ 421,480 $ 574,571 $ 726,123
========== ============ ==========
</TABLE>
*Aggregate cost for federal income tax purposes is $4,750,179 at December 31,
1999.
F-25
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
II-7
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant
Registrant has no officers or directors. The Investment General Partner manages
and controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. The
officers and directors of the Administrative General Partner and the Associate
General Partner, in their respective capacities as such, do not devote any
material amount of their business time and attention to Registrant's affairs.
The names and positions held by the officers and directors of the Investment
General Partner are described below. The officers and directors of the
Administrative General Partner and the Associate General Partner are the same as
the officers and directors of the Managing General Partner.
Has Served as
Position Held with the Has Served as a Director
Name Managing General Partner or Officer Since
- ---- ------------------------ ----------------
Michael L. Ashner President and Director 10-99
David G. King, Jr. Vice President 11-97
Peter Braverman Executive Vice President 10-99
Lara K. Sweeney Vice President and Secretary 10-99
Carolyn Tiffany Vice President and Treasurer 10-99
Michael L. Ashner, age 47, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") since January 15,
1996. From June 1994 until January 1996, Mr. Ashner was a Director, President
and Co-chairman of National Property Investors, Inc., a real estate investment
company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until January
1996. In addition, since 1981 Mr. Ashner has been President of Exeter Capital
Corporation, a firm which has organized and administered real estate limited
partnerships.
David G. King, Jr., 37, has been a Vice President and Assistant
Treasurer of NorthStar Capital Investment Corp. since November 1997. He is
also a Vice President of the General Partner. For more than the previous
five years he was a Senior Vice President of Finance at Olympia & York
Companies (USA).
Peter Braverman, age 48, has been a Vice President of WFA since January
1996. From June 1995 until January 1996, Mr. Braverman was a Vice President of
NPI and NPI Management. From June 1991 until March 1994, Mr. Braverman was
President of the Braverman Group, a firm specializing in management consulting
for the real estate and construction industries. From 1988 to 1991, Mr.
Braverman was a Vice President and Assistant Secretary of Fischbach Corporation,
a publicly traded, international real estate and construction firm.
Lara K. Sweeney, age 27, has been a Senior Vice President of WFA since
January 1996. Prior to joining WFA, Ms. Sweeney was an officer of NPI and NPI
Management in the asset management and investor relations departments.
Carolyn Tiffany, age 33, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. From October 1995 to present
Ms. Tiffany was a Vice President in the asset management and investor relations
departments of WFA until December 1997, at which time she became the Chief
Operating Officer of WFA.
III-1
<PAGE>
Each director and officer of the General Partners will hold office until the
next annual meeting of stockholders of the General Partners and until his
successor is elected and qualified.
One or more of the above persons are also directors or officers of a general
partner (or general partner of a general partner) of a number of limited
partnerships which either have a class of securities registered pursuant to
Section 12(g) of the Securities and Exchange Act of 1934, or are subject to the
reporting requirements of Section 15(d) of such Act.
There are no family relationships among the officers and directors of the
General Partners.
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 Administrative 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
Except as noted below, no person or group is known by the Registrant to be
the beneficial owner of more than 5% of the outstanding Units at March 1, 2000:
Number of
Name of Beneficial Owner Units owned % of Class
------------------------ ----------- ----------
Bighorn Associates I LLC(1) 46,776 14.2%
(1) The principal business address of Bighorn Associates I LLC ("Bighorn") is
527 Madison Avenue, New York, New York 10022.
(2) 46,766 units were acquired pursuant to a tender offer commenced on
November 17, 1999.
In addition to the Units owned by Bighorn, affiliates of Presidio own
2,801 Units representing less than 1% of the total outstanding units. No General
Partner or their respective officers and directors own any Units.
There exists no arrangement known to the Registrant the operation of which
may at a subsequent date result in a change in control of the Registrant.
Item 13. Certain Relationships and Related Transactions
The General Partners have, during Registrant's year ended December 31, 1999,
earned or received compensation or payments for services from or with respect to
Registrant as follows:
- --------------------------------------------------------------------------------
Name of Recipient Capacity in Which Served Compensation
- --------------------------------------------------------------------------------
Resources Capital Corp. Servicing of Mortgage Loans $ - (1)
- --------------------------------------------------------------------------------
Resources Capital Corp. Management of Registrants' $ - (2)
- --------------------------------------------------------------------------------
Resources Capital Corp. General Partner $196,060 (3)
- --------------------------------------------------------------------------------
RAM Funding, Inc. General Partner $ 4,085 (3)
- --------------------------------------------------------------------------------
Presidio AGP Corp. General Partner $ 4,085 (3)
- --------------------------------------------------------------------------------
III-2
<PAGE>
(1) This amount represents fees (and interest) earned 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. No fees were
earned during 1999.
(2) This amount represents fees (and interest) earned 9by 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). No fees were earned during 1999.
(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 Administrative General Partner) including, without
limitation, Registrant's cash flow from operations and disposition
proceeds. For the year ended December 31, 1999, the General Partners were
allocated taxable income of $204,230, representing $196,060 to the
Administrative General Partner, $4,085 to the Investment General Partner
and $4,085 to the Administrative 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.
(4) On November 17, 1999, Big Horn Associates, LLC ("Big Horn"), a wholly
owned subsidiary of Presidio, commenced a tender offer to purchase units
in Registrant. Prior to the expiration of the tender offer in December
1999, Big Horn purchased 46,766 limited partnership units for $22 per
unit, which represents approximately 14.2% of the outstanding limited
partnership units of Registrant.
III-3
<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
Administrative 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).
IV-1
<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).
(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).
IV-2
<PAGE>
(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).
(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).
IV-3
<PAGE>
(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).
(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).
IV-4
<PAGE>
(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:
Item 5 - other events, dated November 2, 1999.
IV-5
<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 28th day of March 2000.
RESOURCES ACCRUED MORTGAGE
INVESTORS L.P. - SERIES 86
By: RESOURCES CAPITAL CORP.
Administrative General Partner
Date
----
By: /s/ Michael L. Ashner March 28, 2000
-----------------------
Michael L. Ashner
President and Director
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.
Signature Title Date
--------- ----- ----
/s/ Michael L. Ashner Director and President March 28, 2000
- ----------------------------
Michael L. Ashner
/s/ Carolyn Tiffany Vice President and Treasurer March 28, 2000
- ----------------------------
Carolyn Tiffany
<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
Administrative 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).
(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).
<PAGE>
(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).
(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.
<PAGE>
(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).
(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).
<PAGE>
(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).
(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).
<PAGE>
(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).
(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).
<PAGE>
(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.
* Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from audited financial statements for the
year ended December 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000779231
<NAME> RESOURCES ACCRUED MORTGAGE INVESTORS L.P.-SERIES 86
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,639,679
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,750,179
<DEPRECIATION> (726,123)
<TOTAL-ASSETS> 11,828,906
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 7,844,156
<TOTAL-LIABILITY-AND-EQUITY> 11,828,906
<SALES> 0
<TOTAL-REVENUES> 3,056,101
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,220,588)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 286,405
<INCOME-PRETAX> 4,053,650
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,053,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,053,650
<EPS-BASIC> 11.67
<EPS-DILUTED> 11.67
</TABLE>
