================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-15724
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RESOURCES ACCRUED MORTGAGE INVESTORS L.P.--SERIES 86
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3294835
---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
FIVE CAMBRIDGE CENTER, CAMBRIDGE, MA 02142-1493
---------------------------------------- --------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
---------------
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
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<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,951,641 $ 7,639,679
Investment in mortgage loan (net of allowance for loan
loss of $5,000,000 at December 31, 1999) -- --
Real estate - net 3,953,015 4,024,056
Other assets 264,886 165,171
----------- -----------
Total Assets $ 7,169,542 $11,828,906
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage loan payable $ 3,253,063 $ 3,327,004
Due to affiliates 508,225 460,892
Accounts payable and accrued expenses 140,747 196,854
----------- -----------
Total Liabilities 3,902,035 3,984,750
----------- -----------
Partners' Equity:
Limited partners' equity (330,004 units
issued and outstanding) 3,104,182 7,451,999
General partners' equity 163,325 392,157
----------- -----------
Total Partners' Equity 3,267,507 7,844,156
----------- -----------
Total Liabilities and Partners' Equity $ 7,169,542 $11,828,906
=========== ===========
</TABLE>
See notes to financial statements.
2 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
----------- -------------
Revenues:
Mortgage loan interest income $ -- $ 1,405,993
Operating income - real estate 1,240,810 1,180,681
Other income 618,997 140,255
Short term investment interest 136,832 155,333
----------- -----------
Total revenues 1,996,639 2,882,262
----------- -----------
Costs and Expenses:
Operating expenses - real estate 819,782 851,356
Mortgage loan interest expense 209,882 216,018
General and administrative 168,583 129,726
Depreciation expense 117,118 112,922
Mortgage servicing fee 47,333 --
Recovery of loan losses (5,000,000) (2,481,562)
----------- -----------
Total costs and expenses (3,637,302) (1,171,540)
----------- -----------
Net income $ 5,633,941 $ 4,053,802
=========== ===========
Net income attributable to:
Limited partners $ 5,352,244 $ 3,851,112
General partners 281,697 202,690
----------- -----------
$ 5,633,941 $ 4,053,802
=========== ===========
Net income per unit of limited partnership
interest (330,004 units outstanding) $ 16.22 $ 11.67
=========== ===========
See notes to consolidated financial statements.
3 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ------------
Revenues:
Mortgage loan interest income $ -- $ 1,405,993
Operating income - real estate 454,033 413,296
Other income 602,181 --
Short term investment interest 56,457 61,391
---------- -----------
Total revenues 1,112,671 1,880,680
---------- -----------
Costs and Expenses:
Operating expenses - real estate 265,395 288,317
Mortgage loan interest expense 69,311 71,842
General and administrative 66,565 32,871
Depreciation expense 38,200 37,931
Mortgage servicing fee 47,333 --
Recovery of loan losses -- (2,481,562)
---------- -----------
Total costs and expenses 486,804 (2,050,601)
---------- -----------
Net income $ 625,867 $ 3,931,281
========== ===========
Net income attributable to:
Limited partners $ 594,574 $ 3,734,717
General partners 31,293 196,564
---------- -----------
$ 625,867 $ 3,931,281
========== ===========
Net income per unit of limited partnership
interest (330,004 units outstanding) $ 1.80 $ 11.32
========== ===========
See notes to financial statements.
4 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
GENERAL LIMITED TOTAL
PARTNERS' PARTNERS' PARTNERS'
EQUITY EQUITY EQUITY
--------- ----------- ------------
<S> <C> <C> <C>
Balance - January 1, 2000 $ 392,157 $ 7,451,999 $ 7,844,156
Net income 281,697 5,352,244 5,633,941
Distributions to partners ($29.39 per
limited partnership unit) (510,529) (9,700,061) (10,210,590)
--------- ----------- ------------
Balance - September 30, 2000 $ 163,325 $ 3,104,182 $ 3,267,507
========= =========== ============
</TABLE>
See notes to financial statements.
5 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5,633,941 $ 4,053,802
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 117,118 112,922
Recovery of loan losses (5,000,000) (2,481,562)
Deferred asset management and mortgage servicing
fees, net of payments 47,333 (891,608)
Changes in assets and liabilities:
Other assets (99,715) 51,721
Accounts payable and accrued expenses (56,107) (40,473)
------------ -----------
Net cash provided by operating activities 642,570 804,802
------------ -----------
Cash Flows from Investing Activities:
Payment received on mortgage loans 5,000,000 2,481,562
Additions to real estate (46,077) (208,743)
------------ -----------
Net cash provided by investing activities 4,953,923 2,272,819
------------ -----------
Cash flow from financing Activities:
Distributions to partners (10,210,590) --
Principal payments on mortgage loan payable (73,941) (60,405)
------------ -----------
Cash used in financing activities (10,284,531) (60,405)
------------ -----------
Net (decrease) increase in cash and cash equivalents (4,688,038) 3,017,216
Cash and cash equivalents, beginning of period 7,639,679 4,639,050
------------ -----------
Cash and cash equivalents, end of period $ 2,951,641 $ 7,656,266
============ ===========
Supplementary Disclosure of Cash Flow Information:
Interest paid $ 209,882 $ 216,018
============= ===========
</TABLE>
See notes to financial statements.
6 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements, related footnotes and
discussions contained in the Resources Accrued Mortgage Investors L.P. -
Series 86 (the "Partnership") Annual Report on Form 10-K for the year ended
December 31, 1999. The financial information contained herein is unaudited.
In the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
adjustments are of a normal recurring nature. The balance sheet at December
31, 1999 was derived from audited financial statements at such date.
The results of operations for the three and nine months ended September 30,
2000 and 1999 are not necessarily indicative of the results to be expected
for the full year.
2. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
RAM Funding, Inc., the investment general partner of the Partnership,
Resources Capital Corp., the administrative general partner, and Presidio
AGP Corp., the associate general partner, (collectively "General
Partners"), are wholly-owned subsidiaries of Presidio Capital Corp.
("Presidio"). The General Partners and certain of their affiliates are
general partners in several other limited partnerships which are also
affiliated with Presidio, and which are engaged in businesses that are, or
may in the future, be in direct competition with the Partnership.
Subject to the provisions of the Agreement of Limited Partnership
("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.
In August 1997, Presidio entered into a management agreement with NorthStar
Presidio Management Company, LLC ("NorthStar Presidio"), an affiliate of
NorthStar. Under the terms of the management agreement, NorthStar Presidio
provided the day-to-day management of Presidio and its direct and indirect
subsidiaries and affiliates. For the nine months ended September 30, 1999,
reimbursable expenses due to NorthStar Presidio from the Partnership
amounted to $15,809.
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 and
is compensated by Presidio to provide asset management and investor
relations services to the Partnership and other entities affiliated with
the Partnership, which were previously provided by NorthStar Presidio.
7 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
2. 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 Partnership 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 Partnership
Agreement to, among other things, cause the Partnership to sell or acquire
an asset or file for bankruptcy.
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 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. No asset management
fee was earned for the nine months ended September 30, 2000 and 1999.
The administrative general partner is also entitled to receive a mortgage
servicing fee at an annual rate of 1/4 of 1% per annum of the principal
balance of the Partnership's mortgage loans outstanding from time to time.
Payment of the mortgage servicing fee is deferred until disposition of the
applicable mortgage loan, with interest on the amount deferred at 10% per
annum, compounded annually. Mortgage servicing fees of $47,333 and $0 were
earned for the nine months ended September 30, 2000 and 1999, respectively.
Amounts due to affiliates for asset management and mortgage servicing fees
consist of the following:
September 30, December 31,
2000 1999
------------ ------------
Asset management fee
(primarily deferred interest) $ 460,892 $ 460,892
Mortgage servicing fee 47,333 --
--------- ---------
$ 508,225 $ 460,892
========== =========
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. The General Partners collectively received
$510,529 in distributions for the nine months ended September 30, 2000. No
distributions were made in 1999.
8 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
2. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
In addition, affiliates of the General Partners hold a 5% special limited
partnership interest in West Palm Associates Limited Partnership ("West
Palm") and hold notes which are secured by a 35.7% limited partner interest
in West Palm. To the extent any amounts are paid to such affiliates on
account of the loans secured by the limited partner interests, the
Partnership is entitled to 50% of such amounts (see Note 3). The
Partnership received approximately $592,000 during the three months ended
September 30, 2000, which is included in other income.
As of September 30, 2000, affiliates of Presidio had acquired 50,675 units
of limited partnership interest of the Partnership. These units represent
15.4% of the issued and outstanding limited partnership units. During the
nine months ended September 30, 2000, affiliates of Presidio received
approximately $1,472,900 of the distributions made to the limited partners.
3. INVESTMENTS IN MORTGAGE LOAN AND ALLOWANCES FOR LOAN LOSSES
The Partnership originally invested its net proceeds in sixteen
non-recourse, zero-coupon junior mortgage loans which aggregated
$70,332,103, all of which has been satisfied. At September 30, 2000, the
Partnership holds the motel property in Richmond, Virginia, to which the
Partnership acquired title as a result of its foreclosure on the Southern
Inns Loan.
West Palm Loan
The loan to West Palm was in the original principal amount of $9,200,000.
The loan was secured by a 582-unit apartment complex located in Los
Angeles, California.
On July 2, 1996, West Palm filed for protection under Chapter 11 of the
United States Bankruptcy Code. Although the bankruptcy protection enabled
West Palm to avoid an imminent foreclosure, there was no assurance that
West Palm 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 had reduced its
indebtedness to $5,000,000, with interest accruing at 7% per annum and
extended the maturity date to February 2017. The Partnership was also
entitled to a participation interest in the event of a sale of the
property.
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<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENTS IN MORTGAGE LOAN AND ALLOWANCES FOR LOAN LOSS (CONTINUED)
West Palm Loan (Continued)
West Palm approached the General Partner seeking to restructure the
Partnership's loan. During the course of these negotiations, West Palm
entered into an agreement to sell its property to an unaffiliated third
party. As a condition to the entering into this agreement, the Partnership
agreed to accept a payment of $5,000,000 in full satisfaction of the West
Palm loan. During the three months ended June 30, 2000, the West Palm
property was sold and the Partnership received $5,000,000 in satisfaction
of its mortgage loan.
Berkeley Western Loan
On August 20, 1999, the property underlying the Berkeley Western loan was
sold to an unaffiliated third party. The entire carrying value of this loan
of $2,481,562 had been written off during 1990. In September 1993, the
first mortgage holder consented to the restructuring of the first mortgage
loan in the amount of $10 million, the approximate value of the property.
In conjunction with the restructuring, the Partnership received a
non-interest bearing note in the amount of $550,000 which replaced the
original loan of $2,250,000 made by the Partnership to Berkeley Western
Associates. Additionally, the Partnership would be entitled to participate
in certain economic benefits (net sale proceeds, refinancing proceeds and
distributable cash flow) upon the repayment of the restructured note to the
first mortgage holder. In accordance with the Loan Modification Agreement,
the Partnership received $3,887,555 representing repayment of the note and
its share of participation in sale proceeds.
A summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 2000 December 31, 1999
--------------------------------------- ----------------------------------------
Investment Interest Investment Interest
Method Method Total Method Method Total
----------- ---------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Opening balance $ -- $ -- $ -- $ -- $ -- $ --
Recovery of loan losses 5,000,000 -- 5,000,000 2,481,562 -- 2,481,562
Interest recognized -- -- -- 1,405,993 -- 1,405,993
Payments received on
mortgage loan (5,000,000) -- (5,000,000) (3,887,555) -- (3,887,555)
----------- ---------- ----------- ------------ ---------- ------------
Ending balance $ -- $ -- $ -- $ -- $ -- $ --
=========== ========== =========== ============ ========== ============
</TABLE>
Information with respect to the Partnership's investments in mortgage loans
is as follows:
<TABLE>
<CAPTION>
Interest Recognized Carrying Value
----------------------- Write-offs ---------------------------
September 30, 1999 and net of Payments September 30, December 31,
Description 2000 Prior Reserves Recoveries Received 2000 1999
----------- ------------- -------- ------------ ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Residential
West Palm
Los Angeles, CA $ -- $ -- $ (5,000,000) $ 260,411 $ 5,000,000 $ -- $ --
========= ========= ============ ========= =========== ========= =========
</TABLE>
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<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The Partnership holds fee title to the Richmond Comfort Inn which it
acquired upon the foreclosure of one of its original mortgage loans. A
summary of the Partnership's real estate is as follows:
September 30, December 31,
2000 1999
----------- -----------
Land $ 444,700 $ 444,700
Building and improvements 4,351,556 4,305,479
----------- -----------
4,796,256 4,750,179
Less: Accumulated depreciation (843,241) (726,123)
----------- -----------
$ 3,953,015 $ 4,024,056
=========== ===========
The land, building and improvements are pledged to collateralize the
mortgage loan payable.
6. MORTGAGE LOAN PAYABLE
In connection with the foreclosure of the Richmond Comfort Inn, the
Partnership acquired the property subject to a $4,000,000 non-recourse
promissory note secured by a first mortgage on the hotel property. The
mortgage note has a current balance of $3,253,063 at September 30, 2000.
Interest rates on the loan are adjustable every five years, with a current
interest rate of 8.5%, through April 2002. Interest is based on a 2%
premium over the Federal Home Loan Bank of Atlanta five-year Advance Rate.
The loan presently requires monthly payments of interest and principal
aggregating $31,526. The loan is currently held by GMAC Commercial Mortgage
and the lender is permitted to accelerate the note as of April 1, 1997, and
thereafter with nine 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.
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RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosure contained in this Form 10-Q 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.
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
The Partnership invested 100% of the net proceeds of its public offering in
zero coupon Junior Mortgage Loans secured by properties owned principally
by privately syndicated limited partnerships sponsored by affiliates of the
General Partners.
The Partnership originally invested its net proceeds in sixteen Mortgage
Loans, which aggregated $70,332,103. As of September 30, 2000, the
Partnership's investment consists of a hotel which it acquired through
foreclosure.
West Palm Associates Limited Partnership ("West Palm") previously
approached the General Partner seeking to restructure the Partnership's
loan. During the course of these negotiations, West Palm entered into an
agreement to sell its property to an unaffiliated third party. As a
condition to the entering into of this agreement, the Partnership agreed to
accept a payment of $5,000,000 in full satisfaction of the West Palm loan.
During the three months ended June 30, 2000, the West Palm property was
sold and the Partnership received $5,000,000 in satisfaction of its
mortgage loan.
The Partnership uses working capital reserves provided from any
undistributed cash from temporary investments plus any cash flow from the
operation of its hotel as its primary measure of liquidity. As of September
30, 2000, the Partnership's cash and cash equivalents decreased by
$4,688,038 from December 31, 1999 to $2,951,641. The decrease is due to
$10,210,590 in cash distributions to partners and $73,941 of mortgage
principal payments, which was partially offset by $642,570 of cash provided
by operating activities and $4,953,923 of cash provided by investing
activities. Cash provided by operating activities was primarily the result
of the timing of payments and receipt of cash. Cash provided by investing
activities consisted of the recovery of loan loss of $5,000,000, which was
slightly offset by $46,077 of cash used for improvements at the Richmond
Comfort Inn. The Partnership may utilize its working capital reserves in
the event the Partnership incurs additional expenses with respect to its
hotel property or to pay fees. The Partnership's cash flow from the
operations of its hotel property is anticipated to be sufficient to meet
such property's capital expenditures in the near term. The Partnership is
currently marketing the property for sale.
12 of 15
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RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Partnership's property is encumbered by a first mortgage loan which had
an outstanding principal balance of $3,253,063 at September 30, 2000.
Although this loan is not scheduled to mature until February 1, 2016, the
lender has the right to accelerate the loan at any time on nine months
prior notice. To date the Partnership has not received any such notice. If
the loan were to be accelerated, the Partnership would be required to
refinance the loan or risk losing the property through foreclosure.
Liquidity and Capital Resources (Continued)
In January and July 2000, the Partnership distributed $5,210,590 and
5,000,000 respectively, of which the Limited Partners received $9,700,061
or $29.39 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 the Partnership.
Except as discussed above, management is not aware of any other known
trends, events, commitments or uncertainties that will have a significant
impact on liquidity.
Results of Operations
Net income increased by $1,580,139 for the nine month period ended
September 30, 2000 compared with the corresponding period in the prior
year. The increase was primarily due to the recovery of a loan loss of
$5,000,000 in 2000, offset by $2,481,562 in loan recovery loss and
$1,405,993 in mortgage loan interest income in 1999. Net income decreased
by $3,305,414 for the three month period ended September 30, 2000 compared
with the corresponding period in the prior year primarily due to a recovery
of a loan loss of $2,481,562 and $1,405,993 in mortgage loan interest
income during the three months ended September 30, 1999.
Revenues decreased for the three and nine month periods ended September 30,
2000 compared with the corresponding periods in the prior year due
primarily to a decrease in mortgage loan interest income, which was
partially offset by an increase in other income and a slight increase in
operating income. There was no mortgage loan interest income for the three
and nine month periods ended September 30, 2000 as compared with the
corresponding periods due to the repayment of the Berkeley West loan (see
Item 1. Financial Statements - Note 3). Other income increased due to
payments received by the Partnership from the General Partners on the West
Palm loan (see Item 1. Financial Statements - Note 2). Short term
investment income declined as a result of lower cash balances available for
investment.
Costs and expenses, before recovery of loan losses, increased for the three
and nine month periods ended September 30, 2000 compared to the same period
in the prior year primarily due to an increase in the mortgage service fee
relating to the West Palm loan.
The recovery of loan losses increased due to the collection of the West
Palm loan offset by the collection in 1999 of the Berkeley West loan.
Inflation
Inflation and changing economic conditions could adversely affect
occupancy, rental rates and operating expenses underlying the Partnership's
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is not subject to market risk as its cash and cash
equivalents are invested in short term money market mutual fund. The
Partnership has no loans outstanding.
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RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM K-8
(a) Exhibits: 27. Financial Data Schedule
(b) Reports on Form 8-K: On August 2, 2000, the Registrant filed an Form
8-K to disclose the dismissal of its prior independent auditors.
14 of 15
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS L.P. - SERIES 86
FORM 10-Q SEPTEMBER 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RESOURCES ACCRUED MORTGAGE INVESTORS L.P.- SERIES 86
BY: Resources Capital Corp.
-----------------------------------
Administrative General Partner
BY: /S/ MICHAEL L. ASHNER
-----------------------------
Michael L. Ashner
President and Director
(Principle Executive Officer)
BY: /S/ CAROLYN B. TIFFANY
-----------------------------
Carolyn B. Tiffany
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Dated: November 14, 2000
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