<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1994
------------------
Commission file number 0-15615
-----------------
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
-----------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 13-2943272
------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(301) 468-9200
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
--- ---
As of May 9, 1994, 9,576,290 depository units of limited
partnership interest were outstanding.
<PAGE>
<PAGE>2
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1994
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - March 31, 1994 and
December 31, 1993 . . . . . . . . . . . . . 3
Statements of Operations - for the three
months ended March 31, 1994 and 1993 . . . 4
Statement of Changes in Partners' Equity -
for the three months ended March 31,
1994 . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows - for the three
months ended March 31, 1994 and 1993 . . . 6
Notes to Financial Statements . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 20
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 29
Signature . . . . . . . . . . . . . . . . . . . . . . 30
<PAGE>
<PAGE>3<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
ASSETS
<CAPTION>
March 31, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
Investment in mortgages, at
fair value
Originated insured mortgages $ 122,405,567 $ --
Acquired insured mortgages 26,129,083 --
------------- ------------
Total 148,534,650 --
------------- ------------
Investment in mortgages, at
amortized cost, net of
unamortized premium and
discount:
Originated insured mortgages -- 113,074,158
Acquired insured mortgages -- 3,012,158
------------- ------------
Total --
116,086,316
------------- ------------
Mortgages held for disposition,
at lower of cost or market -- 18,955,472
Asset held for sale under
coinsurance program -- 32,103,528
Cash and cash equivalents 19,337,373 9,095,255
Investment in affiliate 1,730,087 1,730,087
Receivables and other assets
1,465,046 2,805,604
------------- ------------
Total assets $171,067,156 $180,776,262
============= ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 4,128,579 $ 2,819,518
Note payable and due to
affiliate 1,772,478 1,737,723
Accounts payable and accrued
expenses 137,061 212,428
------------- ------------
Total liabilities 6,038,118 4,769,669
------------- ------------
Partners' equity:
Limited partners' equity 176,390,062 176,783,204
General partner's deficit (796,867) (776,611)
Net unrealized losses on
investment in mortgages (10,564,157) --
------------- ------------
Total partners' equity 165,029,038 176,006,593
------------- ------------
Total liabilities and
partners' equity $171,067,156 $180,776,262
============= ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>4<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the three months ended
March 31,
----------------------------
1994 1993
------------- ------------
<S> <C> <C>
Income:
Mortgage investment income $ 3,111,373 $ 3,672,534
Interest and other income 182,971 4,952
------------- ------------
3,294,344 3,677,486
------------- ------------
Expenses:
Asset management fee to related
parties 363,183 423,570
General and administrative 195,897 110,249
Interest expense to affiliate 34,755 34,318
------------- ------------
593,835 568,137
------------- ------------
Earnings before loan loss and
gain on mortgage disposition 2,700,509 3,109,349
Loan loss (115,301) --
Gain on mortgage disposition 1,129,973 --
------------- ------------
Net earnings $ 3,715,181 $ 3,109,349
============= ============
Net earnings allocated to:
Limited partners - 95.1% $ 3,533,137 $ 2,956,991
General partner - 4.9% 182,044 152,358
------------- ------------
$ 3,715,181 $ 3,109,349
============= ============
Net earnings per Unit of
limited partnership interest $ .37 $ .31
============= ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>5<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the three months ended March 31, 1994
(Unaudited)
<CAPTION>
Net
Unrealized
Losses on Total
General Limited Investment Partners'
Partner Partners in Mortgages Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ (776,611)$176,783,204 $ -- $176,006,593
Net earnings 182,044 3,533,137 -- 3,715,181
Distributions paid or accrued,
including return of capital, of
$.41 per Unit (202,300) (3,926,279) -- (4,128,579)
Net unrealized losses on investment
in mortgages -- -- (10,564,157) (10,564,157)
------------ ------------ ------------- ------------
Balance, March 31, 1994 $ (796,867)$176,390,062 $(10,564,157) $165,029,038
============ ============ ============= ============
Limited Partnership Units outstanding -
March 31, 1994 9,576,290
=========
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>6<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the three months
ended March 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,715,181 $ 3,109,349
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Loan loss 115,301 --
Gain on mortgage disposition (1,129,973) --
Payments made and treated as an addition to
Assets Held for Sale Under Coinsurance Program -- (74,285)
Assets and liabilities:
Decrease (increase) in receivables and other assets 1,340,558 (833,194)
Increase in note payable and due to affiliate 34,755 --
Decrease in accounts payable and accrued expenses (75,367) (31,948)
------------ ------------
Net cash provided by operating activities 4,000,455 2,169,922
------------ ------------
</TABLE>
<PAGE>
<PAGE>7<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<CAPTION>
For the three months
ended March 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from investing activities:
Proceeds from disposition of Asset Held for Sale
Under Coinsurance Program 33,233,501 --
Investment in Acquired Insured Mortgages (24,374,326) --
Receipt of mortgage principal from scheduled payments 202,006 164,221
------------ ------------
Net cash provided by investing activities 9,061,181 164,221
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (2,819,518) (3,222,311)
------------ ------------
Net increase (decrease) in cash and cash equivalents 10,242,118 (888,168)
Cash and cash equivalents, beginning of period 9,095,255 2,557,009
------------ ------------
Cash and cash equivalents, end of period $ 19,337,373 $ 1,668,841
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
American Insured Mortgage Investors L.P. - Series 86 (the
Partnership) was formed under the Uniform Limited Partnership Act
of the state of Delaware on October 31, 1985. From inception
through September 6, 1991, AIM Capital Management Corp. served as
managing general partner (with a partnership interest of 4.8%),
IRI Properties Capital Corp. served as corporate general partner
(with a partnership interest of 0.1%) and Second Group Partners,
an affiliate of the former general partners, served as the
associate general partner (with a partnership interest of 0.1%).
All of the foregoing general partners are sometimes collectively
referred to as former general partners.
Effective September 6, 1991, CRIIMI, Inc. (the General
Partner) succeeded the former general partners to become the sole
general partner of the Partnership. CRIIMI, Inc. purchased the
interests of the former managing general partner and the former
corporate general partner pursuant to the terms of the
Partnership Agreement. The Partnership purchased the interest of
the former associate general partner. CRIIMI, Inc. is a wholly-
owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI
Insured Mortgage Association, Inc., which is managed by an
adviser whose general partner is C.R.I., Inc. (CRI).
AIM Acquisition Partners, L.P. (the Advisor) serves as the
adviser of the Partnership. The general partner of the Advisor
is AIM Acquisition Corporation (AIM Acquisition). A sub-advisory
agreement exists whereby CRI/AIM Management, Inc. (the Sub-
Advisor), an affiliate of CRI, manages the Partnership's mortgage
portfolio.
The Partnership's reinvestment period expires on December
31, 1994 and the Partnership Agreement states that the
Partnership will terminate on December 31, 2020, unless
previously terminated under the provisions of the Partnership
Agreement.
The United States Congress recently repealed portions of the
Federal tax code which have had an adverse impact on tax-exempt
investors in "publicly traded partnerships." This tax code
change, effective January 1, 1994, cleared away the major
impediment standing in the way of listing the Partnership's Units
for trading on a national stock exchange. As a result, the
General Partner listed the Partnership's Units for trading on the
American Stock Exchange on January 18, 1994 in order to provide
investment liquidity as contemplated in the Partnership's
original prospectus. The Units are traded under the symbol
"AIJ."
2. BASIS OF PRESENTATION
In the opinion of the General Partner, the accompanying
unaudited financial statements contain all adjustments of a
normal recurring nature necessary to present fairly the financial
position of the Partnership as of March 31, 1994 and December 31,
1993 and the results of its operations and its cash flows for the
three months ended March 31, 1994 and 1993.
<PAGE>
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
These unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted. While the General Partner believes that the
disclosures presented are adequate to make the information not
misleading, it is suggested that these financial statements be
read in conjunction with the financial statements and the notes
to the financial statements included in the Partnership's Annual
Report filed on Form 10-K for the year ended December 31, 1993.
3. SIGNIFICANT ACCOUNTING POLICIES
Investment in Mortgages
-----------------------
In May 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). This statement requires that
investments in debt and equity securities be classified into
one of the following investment categories based upon the
circumstances under which such securities might be sold:
Held to Maturity, Available for Sale, and Trading.
Generally, certain debt securities that an enterprise has
both the ability and intent to hold to maturity should be
accounted for using the amortized cost method and all other
securities must be recorded at their fair values. This
statement is effective for fiscal years beginning after
December 15, 1993. As such, the Partnership has implemented
this statement as of January 1, 1994.
As of March 31, 1994, the weighted average remaining
term of the Partnership's Insured Mortgages was
approximately 35 years. However, the Partnership Agreement
states that the Partnership will terminate in approximately
27 years, on December 31, 2020, unless previously terminated
under the provisions of the Partnership Agreement. As the
Partnership is anticipated to terminate prior to the
weighted average remaining term of its Insured Mortgages,
the Partnership does not have the ability, at this time, to
hold its Insured Mortgages to maturity. Consequently, the
General Partner believes that the Partnership's Insured
Mortgages should be included in the Available for Sale
category. Although the Partnership's Insured Mortgages are
classified as Available for Sale for financial statement
purposes, the General Partner does not intend to voluntarily
sell such Insured Mortgages, other than those which may be
sold as a result of a default.
In connection with this classification, as of March 31,
1994, all of the Partnership's Insured Mortgages are
recorded at fair value, with the net unrealized gains or
losses on the Partnership's Investment in Mortgages reported
as a separate component of partners' equity. Subsequent
increases or decreases in the fair value of Insured
Mortgages classified as Available for Sale shall be included
as a separate component of partners' equity. Realized gains
and losses for Insured Mortgages classified as Available for
Sale will continue to be reported in earnings. The
amortized cost of the Insured Mortgages in this category is
adjusted for amortization of discounts and premiums to
maturity. Such amortization is included in mortgage
investment income. Prior to January 1, 1994, the
Partnership accounted for its Investment in Mortgages at
amortized cost.
<PAGE>
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES - Continued
Reclassification
----------------
Certain amounts in the financial statements as of
December 31, 1993 have been reclassified to conform with the
1994 presentation.
Statements of Cash Flows
------------------------
No cash payments were made for interest expense during
the three months ended March 31, 1994 and 1993.
4. INVESTMENT IN MORTGAGES
In connection with the Partnership's implementation of SFAS
115 as of January 1, 1994 (see Note 3), the Partnership's
Investment in Mortgages is recorded at fair value, as estimated
below, as of March 31, 1994. The difference between the
amortized cost and the fair value of the Insured Mortgages
represents the net unrealized losses on the Partnership's Insured
Mortgages and is reported as a separate component of partners'
equity as of March 31, 1994.
The fair value of the fully insured mortgage investments is
based on quoted market prices.
In order to determine the fair value of the coinsured
mortgage portfolio, the Partnership valued the coinsured
mortgages as though they were fully insured (in the same manner
fully insured mortgages were valued). From this amount, the
Partnership deducted five percent of the face value of the loan
and fifteen percent of the difference between the remaining face
value and the value of these loans as though they were uninsured.
These deductions are based on HUD's coinsurance limitations. The
uninsured values were based on the average of the quoted market
prices from two investment banking institutions which trade these
types of investments as part of their day-to-day activities.
<TABLE><CAPTION>
As of March 31, 1994
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Investment in Mortgages:
Originated insured mortgages $131,743,846 $122,405,567
Acquired insured mortgages 27,354,961 26,129,083
------------ ------------
$159,098,807 $148,534,650
============ ============
</TABLE>
<PAGE>
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
The following is a discussion of the Partnership's
Investment in Mortgages as of March 31, 1994 and December 31,
1993:
A. Fully Insured Originated Insured Mortgages and Acquired
Insured Mortgages
-------------------------------------------------------
The former managing general partner, on behalf of the
Partnership, had invested in eight fully insured Originated
Insured Mortgages with an aggregate amortized cost of
$69,448,190 and $69,539,851 as of March 31, 1994 and
December 31, 1993, respectively, and an aggregate face value
of $66,854,271 and $66,934,689, respectively. As of
March 31, 1994, these mortgages had an aggregate fair value
of $66,358,752.
As of March 31, 1994, the Partnership had invested in
eight fully insured Acquired Insured Mortgages with an
aggregate amortized cost of $27,354,961, face value of
$27,230,685 and fair value of $26,129,083. As of December
31, 1993, the Partnership had invested in two fully insured
Acquired Insured Mortgages with an aggregate amortized cost
of $3,012,158 and face value of $3,034,084. During the
three months ended March 31, 1994, the Partnership invested
$24,374,326 in fully insured Acquired Insured Mortgages. In
addition, as of March 31, 1994, the Partnership had
approximately $13.8 million committed for reinvestment in
fully insured Acquired Insured Mortgages. There were no
additional amounts available for reinvestment in fully
insured Acquired Insured Mortgages as of March 31, 1994.
During the three months ended March 31, 1994 and 1993,
the Partnership received $0 and $83,050, respectively, as a
result of additional cash flow from three of the Originated
Insured Mortgages in which the Partnership owns
Participations. This amount is included in mortgage
investment income in the accompanying statements of
operations.
<PAGE>
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
During the three months ended March 31, 1994, the
Partnership purchased and committed to purchase the following
fully insured Acquired Insured Mortgages:
<TABLE><CAPTION>
Net
Future Effective
Date of Purchase Commitments as of Interest
Complex Name Acquisition Price March 31, 1994 Rate
------------------------------ ----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
Acquired Insured Mortgages
--------------------------
Pleasantview Nursing Home January 1994 $ 3,324,320 $ -- 7.847%
Oakwood Garden Apts. February 1994 10,130,271 -- 7.600%
Cypress Cove February 1994 7,151,362 -- 7.209%
Brighton Manor March 1994 1,034,042 -- 7.565%
Maple Manor March 1994 1,264,331 -- 7.343%
Regency Park Apts. March 1994 1,470,000 -- 7.201%
Hickory Tree Apts. April 1994 -- 3,519,405 7.442%
Oak Grove Apts. April 1994 -- 7,111,913 7.389%
Future Commitments May 1994 -- 3,182,652 7.125%
----------- -----------
Total 1994 investment in fully
insured Acquired Insured
Mortgages and future commitments $24,374,326 $13,813,970
=========== ===========
</TABLE>
<PAGE>
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
B. Coinsured Mortgages
-------------------
As discussed in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1993, under the HUD
coinsurance program, both HUD and the coinsurance lender are
responsible for paying a portion of the insurance benefits
if a mortgagor defaults and the sale of the development
collateralizing the mortgage produces insufficient net
proceeds to repay the mortgage obligation. In such case, the
coinsurance lender will be liable to the Partnership for the
first part of such loss in an amount up to 5% of the
outstanding principal balance of the mortgage as of the date
foreclosure proceedings are instituted or the deed is
acquired in lieu of foreclosure. For any loss greater than
5% of the outstanding principal balance, the responsibility
for paying the insurance benefits will be borne on a
pro-rata basis, 85% by HUD and 15% by the coinsurance
lender.
1. Coinsured by third parties
--------------------------
As of March 31, 1994 and December 31, 1993, the former
managing general partner, on behalf of the Partnership,
had invested in seven and eight coinsured mortgages,
respectively, five of which are coinsured by
unaffiliated third party coinsurance lenders under the
HUD coinsurance program. Two of the coinsured
mortgages which are coinsured by an unaffiliated third
party are discussed below. The remaining three
coinsured mortgages which are coinsured by unaffiliated
third parties are current with respect to the payment
of principal and interest. These three coinsured
mortgages had an aggregate amortized cost of
$22,650,258 and $22,680,052, respectively, and an
aggregate face value of $21,919,263 and $21,945,884,
respectively, as of March 31, 1994 and December 31,
1993. As of March 31, 1994, such three coinsured
mortgages had an aggregate fair value of $20,527,988.
The following is a discussion of actual and potential
performance problems with respect to certain mortgage
investments coinsured by an unaffiliated third party:
The Originated Insured Mortgage on The Villas, a
405-unit apartment complex located in Lauderhill,
Florida, is coinsured by the Patrician Mortgage Company
(Patrician) and had a carrying value equal to its face
value of $15,835,388 and $15,856,842 as of March 31,
1994 and December 31, 1993, respectively. As of March
31, 1994, this mortgage was classified as Investment in
Mortgages (Available for Sale) and had a fair value of
$15,144,010. Since August 1, 1990, the mortgagor has
not made the full monthly payments of principal and
interest to Patrician. Patrician began collecting
rents from the project and continued to make the
monthly debt service payments to the Partnership
through February 1992. The Partnership and Patrician
entered into a modification agreement which provided
for reduced payments through July 1992, regular
scheduled payments from August 1992 to December 1992,
and then increased payments for a period lasting
approximately 10 years.
The mortgagor of the mortgage on The Villas was unable
to comply with the terms of the modification. As a
result, Patrician filed a foreclosure action on October
14, 1993. On November 2, 1993, the mortgagor of The
Villas filed for protection under Chapter 11 of the
<PAGE>
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
Federal Bankruptcy Code. If Patrician and the
mortgagor are unable to negotiate a settlement,
Patrician intends to litigate the case in bankruptcy
court and to subsequently acquire and dispose of the
property. As of May 12, 1994, Patrician had made
payments of principal and interest to the Partnership
due through January 1994.
The mortgagor of The Villas mortgage is also the
mortgagor of the Originated Insured Mortgage on St.
Charles Place-Phase II, a 156-unit apartment complex
located in Miramar, Florida, which is also coinsured by
Patrician. The St. Charles Place-Phase II mortgage had
a carrying value equal to its face value of $3,096,571
and $3,098,630 as of March 31, 1994 and December 31,
1993, respectively. As of March 31, 1994, this
mortgage was classified as Investment in Mortgages
(Available for Sale) and had a fair value of
$2,704,899. These amounts represent the Partnership's
approximately 45% ownership interest in the mortgage.
The remaining 55% ownership interest is held by
American Insured Mortgage Investors L.P. - Series 88
(AIM 88), an affiliated entity.
During 1993, the mortgagor of St. Charles Place-Phase
II paid its monthly principal and interest payments to
Patrician in arrears, and did not make the monthly
payment of principal and interest due to Patrician
since October 1993. However, Patrician has remitted
monthly payments of principal and interest due for
October 1993 through January 1994 to the Partnership.
As the mortgagor was unable to bring the loan current,
Patrician filed a foreclosure action on October 14,
1993. On November 2, 1993, the mortgagor of the
mortgage on St. Charles Place-Phase II filed for
protection under Chapter 11 of the Federal Bankruptcy
Code. If Patrician and the mortgagor are unable to
negotiate a settlement, Patrician intends to litigate
the case in bankruptcy court and to subsequently
acquire and dispose of the property.
The General Partner is overseeing Patrician's efforts
to complete the foreclosure actions, including the
subsequent acquisition and disposition of the above two
properties. As the coinsurance lender, Patrician is
liable to the Partnership for the outstanding principal
balance of both mortgages plus all accrued but unpaid
interest through the date of such payment. If the sale
of the properties collateralizing the mortgages
produces insufficient net proceeds to repay the
mortgage obligations to the Partnership, Patrician will
be liable to the Partnership for its share of the
deficiency. Based on the General Partner's assessment
of the collateral underlying the mortgages, including
information related to the financial condition of
Patrician, the General Partner believes the carrying
value of these assets is realizable. As a result of
Patrician's coinsurance obligation, these mortgages
were classified as Investment in Mortgages (Available
for Sale) as of March 31, 1994 and as Mortgages Held
for Disposition as of December 31, 1993. The
Partnership intends to reinvest any net disposition
proceeds from these mortgages in fully insured Acquired
Insured Mortgages, provided the net disposition
proceeds are received prior to the expiration of the
Partnership's reinvestment period on December 31, 1994.
<PAGE>
<PAGE>15
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
The General Partner intends to continue to oversee the
Partnership's interest in these mortgages to ensure
that Patrician meets its coinsurance obligations. The
General Partner's assessment of the realizability of
the carrying value of The Villas and St. Charles Place-
Phase II mortgages is based on current information, and
to the extent current conditions change or additional
information becomes available, then the General
Partner's assessment may change. However, the General
Partner does not believe that there would be a material
adverse impact on the Partnership's financial condition
or its results of operations should Patrician be unable
to comply with its full coinsurance obligation.
2. Coinsured by affiliate
----------------------
a. As of December 31, 1993, the former managing general
partner, on behalf of the Partnership, had invested in
three coinsured originated mortgages where the
coinsurance lender is Integrated Funding, Inc. (IFI).
As structured by the former managing general partner,
with respect to these mortgages, the Partnership bears
the risk of loss upon default for IFI's portion of the
coinsurance loss. In January 1994, the Partnership
disposed of one of these mortgages, One East Delaware,
which was classified as an Asset Held for Sale Under
Coinsurance Program as of December 31, 1993, as
discussed below.
<PAGE>
<PAGE>16
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
As of March 31, 1994 and December 31, 1993, the
remaining two IFI coinsured mortgages, as shown in the
table below, are classified as Investment in Mortgages
and are current with respect to the payment of principal
and interest. The General Partner believes there is
adequate collateral value underlying the mortgages.
Therefore, no loan losses, other than that described
below, were recognized on these mortgages during the
three months ended March 31, 1994 and 1993.
Additionally, as of March 31, 1994, these two mortgages
had an aggregate fair value of $17,669,918.
<TABLE><CAPTION>
Amortized Face Amortized Face
Loan Losses Recognized
Cost Value Cost Value
for the three months ended
March 31, March 31, December 31, December 31, March 31, March 31,
1994 1994 1993 1993 1994 1993
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pembrook Apartments $ 15,665,348 $ 15,044,385 $ 15,684,341 $ 15,060,875 $ -- $ --
Spring Lake Village (a) 5,048,091(a) 5,048,093 5,169,914 5,054,317 115,301(a) --
(a) In March 1994, the mortgage note was amended to reduce the mortgage interest rate from 8.75% to 7.00%. In connection
with the refinancing, the Partnership recognized a loan loss of $115,301 on the accompanying statement of operations for
the three months ended March 31, 1994, primarily representing the unamortized balance of acquisition and closing costs paid
in connection with the origination of this mortgage.
</TABLE>
<PAGE>
<PAGE>17
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
b. Assets Held for Sale Under Coinsurance Program
----------------------------------------------
As of December 31, 1993, the former managing general
partner, on behalf of the Partnership, had invested in
one coinsured mortgage, One East Delaware, which was
accounted for as an Asset Held for Sale Under
Coinsurance Program. In January 1994, the Partnership
received net proceeds of approximately $33.2 million
from the prepayment of this mortgage and recognized a
gain of $1,129,973 in the accompanying statement of
operations for the three months ended March 31, 1994.
The Partnership has reinvested or committed to reinvest
the net disposition proceeds in fully insured Acquired
Insured Mortgages.
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per
Limited Partnership Unit basis for the three months ended March
31, 1994 and 1993 were as follows:
<TABLE><CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Quarter ended March 31, $ .41(1) $ .23
-------- --------
Total $ .41 $ .23
======== ========
(1) This amount includes approximately $.19 per Unit comprised
of: (i) $.18 per Unit representing previously undistributed
accrued interest received from the disposition of the
mortgage on One East Delaware and (ii) $.01 per Unit
representing previously undistributed accrued interest
received from two delinquent mortgages.
</TABLE>
The basis for paying distributions to Unitholders is cash
flow from operations, which is comprised of regular interest
income and principal from Insured Mortgages and gain, if any,
from mortgage dispositions. Although the Insured Mortgages yield
a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each
quarter due to (1) the fluctuating yields in the short-term money
market where the monthly mortgage payments received are
temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or
mortgage dispositions, (3) variations in the cash flow
attributable to the delinquency or default of Insured Mortgages
and the professional fees and foreclosure and acquisition costs
incurred in connection with those Insured Mortgages and (4)
variations in the Partnership's operating expenses.
<PAGE>
<PAGE>18
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. INVESTMENT IN AFFILIATE AND NOTE PAYABLE TO AFFILIATE
Effective December 31, 1991, American Insured Mortgage
Investors-Series 85, L.P. (AIM 85), an affiliated entity,
transferred a GNMA mortgage-backed security (the GNMA security)
in the amount of $4,696,548 to IFI in order to capitalize IFI
with sufficient net worth under HUD regulations. The Partnership
and AIM 88 each issued a demand note payable to AIM 85 and
recorded an investment in IFI through an affiliate (AIM Mortgage,
Inc.) at an amount proportionate to each entity's coinsured
mortgages for which IFI was the mortgagee of record as of
December 31, 1991. The Partnership accounts for its investment
in IFI under the equity method of accounting. Interest expense on
the note payable is based on an interest rate of 8% per annum.
In 1992, IFI entered into an expense reimbursement agreement
with the Partnership, AIM 85 and AIM 88 (the AIM Funds) whereby
IFI reimburses the AIM Funds for general and administrative
expenses incurred on behalf of IFI. The expense reimbursement is
allocated to the AIM Funds based on an amount proportionate to
each entity's coinsured mortgages. The expense reimbursement,
along with the Partnership's equity interest in IFI's net income
or loss, substantially equals the Partnership's interest expense
on the note payable.
In April 1994, IFI received net proceeds of approximately
$4.7 million from the prepayment of the GNMA security, which IFI
distributed to the AIM Funds. As a result, the Partnership
repaid its note payable to AIM 85. In order to capitalize IFI
with sufficient net worth under HUD regulations, AIM 88
transferred a GNMA mortgage-backed security in the amount of $2.0
million to IFI. The structure and terms of this transaction are
expected to be comparable to that described above.
<PAGE>
<PAGE>19
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES
In addition to the related party transactions described
above in Note 6, the General Partner and certain affiliated
entities, during the three months ended March 31, 1994 and 1993,
earned or received compensation or payments for services from the
Partnership as follows:
<TABLE>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
<CAPTION>
Three Months Ended
Capacity in Which
March 31,
Name of Recipient Served/Item 1994 1993
----------------- ---------------------------- ---------- ----------
<S> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution $ 202,300(2) $ 113,485
AIM Acquisition Advisor/Asset Management Fee 363,183(1) 423,570(1)
Partners, L.P.(1)
CRI Affiliate of General Partner/
Expense Reimbursement 64,909 22,627
(1) Of the amounts paid to the Advisor, the Sub-advisor,
CRI/AIM Management, Inc., earned a fee equal to
$107,037 and $124,833, or .28% of Total Invested
Assets, for the three months ended March 31, 1994 and
1993, respectively.
(2) This amount includes a special distribution as
described above in Note 5.
</TABLE>
<PAGE>
<PAGE>20
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
-------
As of March 31, 1994, the Partnership had invested in 23
Insured Mortgages with an aggregate amortized cost of
approximately $159.1 million, face value of approximately $155.0
million and fair value of approximately $148.5 million. In
addition, as of March 31, 1994, the Partnership had approximately
$13.8 million committed for reinvestment in Acquired Insured
Mortgages. There were no amounts available for reinvestment in
Acquired Insured Mortgages as of March 31, 1994.
The United States Congress recently repealed portions of the
Federal tax code which have had an adverse impact on tax-exempt
investors in "publicly traded partnerships." This tax code
change, effective January 1, 1994, cleared away the major
impediment standing in the way of listing the Partnership's Units
for trading on a national stock exchange. As a result, the
General Partner listed the Partnership's Units for trading on the
American Stock Exchange on January 18, 1994 in order to provide
investment liquidity as contemplated in the Partnership's
original prospectus. The Units are traded under the symbol
"AIJ."
Results of Operations
---------------------
Net earnings increased for the three months ended March 31,
1994 as compared to the corresponding period in 1993 primarily
due to the gain recognized from the disposition of the mortgage
on One East Delaware in January 1994.
Mortgage investment income decreased for the three months
ended March 31, 1994 as compared to the corresponding period in
1993. This decrease was primarily due to a decrease in total
invested assets during the three months ended March 31, 1994 as
compared to the corresponding period in 1993 attributable to the
timing of the reinvestment of net disposition proceeds.
Approximately $42.3 million of net disposition proceeds were
received in late December 1993 and January 1994 from the
disposition of the mortgages on Victoria Pointe Apartments-Phase
II and One East Delaware, of which approximately $38.2 million
was available for reinvestment. Of the amounts available for
reinvestment, approximately $24.4 million had been reinvested as
of March 31, 1994, and $13.8 million had been committed for
reinvestment.
Interest and other income increased for the three months
ended March 31, 1994 as compared to the corresponding period in
1993 primarily due to the short-term investment of net
disposition proceeds as previously discussed.
Asset management fees decreased for the three months ended
March 31, 1994 as compared to the corresponding period in 1993
primarily due to the decrease in total invested assets, as
described above.
General and administrative expenses increased for the three
months ended March 31, 1994 as compared to the corresponding
period in 1993. This increase was due primarily to an increase in
payroll reimbursements incurred in connection with the mortgage
dispositions, mortgage acquisitions, and mortgages with
performance problems, as described below. Also contributing to
the increase in general and administrative expenses was the
payment in 1994 of a one-time American Stock Exchange listing fee
of $32,500.
As of December 31, 1993, the Partnership's Insured Mortgages
were recorded at amortized cost (excluding Mortgages Held for
Disposition which were recorded at the lower of cost or market).
In connection with the Partnership's implementation of Statement
of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115) as of
January 1, 1994, the Partnership's Investment in Mortgages is
<PAGE>
<PAGE>21
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
recorded at fair value, as estimated below, as of March 31, 1994.
The difference between the amortized cost and the fair value of
the Insured Mortgages represents the net unrealized losses on the
Partnership's Insured Mortgages and is reported as a separate
component of partners' equity as of March 31, 1994.
The fair value of the fully insured mortgage investments is
based on quoted market prices.
In order to determine the fair value of the coinsured
mortgage portfolio, the Partnership valued the coinsured
mortgages as though they were fully insured (in the same manner
fully insured mortgages were valued). From this amount, the
Partnership deducted five percent of the face value of the loan
and fifteen percent of the difference between the remaining face
value and the value of these loans as though they were uninsured.
These deductions are based on HUD's coinsurance limitations. The
uninsured values were based on the average of the quoted market
prices from two investment banking institutions which trade these
types of investments as part of their day-to-day activities.
<TABLE><CAPTION>
As of March 31, 1994
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Investment in Mortgages:
Originated insured mortgages $131,743,846 $122,405,567
Acquired insured mortgages 27,354,961 26,129,083
------------ ------------
$159,098,807 $148,534,650
============ ============
</TABLE>
<PAGE>
<PAGE>22
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
The following is a discussion of the Partnership's
Investment in Mortgages as of March 31, 1994 and December 31,
1993:
A. Fully Insured Originated Insured Mortgages and Acquired
Insured Mortgages
-------------------------------------------------------
The former managing general partner, on behalf of the
Partnership, had invested in eight fully insured Originated
Insured Mortgages with an aggregate amortized cost of
$69,448,190 and $69,539,851 as of March 31, 1994 and
December 31, 1993, respectively, and an aggregate face value
of $66,854,271 and $66,934,689, respectively. As of
March 31, 1994, these mortgages had an aggregate fair value
of $66,358,752.
As of March 31, 1994, the Partnership had invested in
eight fully insured Acquired Insured Mortgages with an
aggregate amortized cost of $27,354,961, face value of
$27,230,685 and fair value of $26,129,083. As of December
31, 1993, the Partnership had invested in two fully insured
Acquired Insured Mortgages with an aggregate amortized cost
of $3,012,158 and face value of $3,034,084. During the
three months ended March 31, 1994, the Partnership invested
$24,374,326 in fully insured Acquired Insured Mortgages. In
addition, as of March 31, 1994, the Partnership had
approximately $13.8 million committed for reinvestment in
fully insured Acquired Insured Mortgages. There were no
additional amounts available for reinvestment in fully
insured Acquired Insured Mortgages as of March 31, 1994.
During the three months ended March 31, 1994 and 1993,
the Partnership received $0 and $83,050, respectively, as a
result of additional cash flow from three of the Originated
Insured Mortgages in which the Partnership owns
Participations. This amount is included in mortgage
investment income in the accompanying statements of
operations.
<PAGE>
<PAGE>23
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
During the three months ended March 31, 1994, the
Partnership purchased and committed to purchase the following
fully insured Acquired Insured Mortgages:
<TABLE><CAPTION>
Net
Future Effective
Date of Purchase Commitments as of Interest
Complex Name Acquisition Price March 31, 1994 Rate
------------------------------ ----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
Acquired Insured Mortgages
--------------------------
Pleasantview Nursing Home January 1994 $ 3,324,320 $ -- 7.847%
Oakwood Garden Apts. February 1994 10,130,271 -- 7.600%
Cypress Cove February 1994 7,151,362 -- 7.209%
Brighton Manor March 1994 1,034,042 -- 7.565%
Maple Manor March 1994 1,264,331 -- 7.343%
Regency Park Apts. March 1994 1,470,000 -- 7.201%
Hickory Tree Apts. April 1994 -- 3,519,405 7.442%
Oak Grove Apts. April 1994 -- 7,111,913 7.389%
Future Commitments May 1994 -- 3,182,652 7.125%
----------- -----------
Total 1994 investment in fully
insured Acquired Insured
Mortgages and future commitments $24,374,326 $13,813,970
=========== ===========
</TABLE>
<PAGE>
<PAGE>24
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
B. Coinsured Mortgages
-------------------
As discussed in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1993, under the HUD
coinsurance program, both HUD and the coinsurance lender are
responsible for paying a portion of the insurance benefits
if a mortgagor defaults and the sale of the development
collateralizing the mortgage produces insufficient net
proceeds to repay the mortgage obligation. In such case, the
coinsurance lender will be liable to the Partnership for the
first part of such loss in an amount up to 5% of the
outstanding principal balance of the mortgage as of the date
foreclosure proceedings are instituted or the deed is
acquired in lieu of foreclosure. For any loss greater than
5% of the outstanding principal balance, the responsibility
for paying the insurance benefits will be borne on a
pro-rata basis, 85% by HUD and 15% by the coinsurance
lender.
1. Coinsured by third parties
--------------------------
As of March 31, 1994 and December 31, 1993, the former
managing general partner, on behalf of the Partnership,
had invested in seven and eight coinsured mortgages,
respectively, five of which are coinsured by
unaffiliated third party coinsurance lenders under the
HUD coinsurance program. Two of the coinsured
mortgages which are coinsured by an unaffiliated third
party are discussed below. The remaining three
coinsured mortgages which are coinsured by unaffiliated
third parties are current with respect to the payment
of principal and interest. These three coinsured
mortgages had an aggregate amortized cost of
$22,650,258 and $22,680,052, respectively, and an
aggregate face value of $21,919,263 and $21,945,884,
respectively, as of March 31, 1994 and December 31,
1993. As of March 31, 1994, such three coinsured
mortgages had an aggregate fair value of $20,527,988.
The following is a discussion of actual and potential
performance problems with respect to certain mortgage
investments coinsured by an unaffiliated third party:
The Originated Insured Mortgage on The Villas, a
405-unit apartment complex located in Lauderhill,
Florida, is coinsured by the Patrician Mortgage Company
(Patrician) and had a carrying value equal to its face
value of $15,835,388 and $15,856,842 as of March 31,
1994 and December 31, 1993, respectively. As of March
31, 1994, this mortgage was classified as Investment in
Mortgages (Available for Sale) and had a fair value of
$15,144,010. Since August 1, 1990, the mortgagor has
not made the full monthly payments of principal and
interest to Patrician. Patrician began collecting
rents from the project and continued to make the
monthly debt service payments to the Partnership
through February 1992. The Partnership and Patrician
entered into a modification agreement which provided
for reduced payments through July 1992, regular
scheduled payments from August 1992 to December 1992,
and then increased payments for a period lasting
approximately 10 years.
The mortgagor of the mortgage on The Villas was unable
to comply with the terms of the modification. As a
result, Patrician filed a foreclosure action on October
14, 1993. On November 2, 1993, the mortgagor of The
Villas filed for protection under Chapter 11 of the
Federal Bankruptcy Code. If Patrician and the
mortgagor are unable to negotiate a settlement,
<PAGE>
<PAGE>25
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Patrician intends to litigate the case in bankruptcy
court and to subsequently acquire and dispose of the
property. As of May 12, 1994, Patrician had made
payments of principal and interest to the Partnership
due through January 1994.
The mortgagor of The Villas mortgage is also the
mortgagor of the Originated Insured Mortgage on St.
Charles Place-Phase II, a 156-unit apartment complex
located in Miramar, Florida, which is also coinsured by
Patrician. The St. Charles Place-Phase II mortgage had
a carrying value equal to its face value of $3,096,571
and $3,098,630 as of March 31, 1994 and December 31,
1993, respectively. As of March 31, 1994, this
mortgage was classified as Investment in Mortgages
(Available for Sale) and had a fair value of
$2,704,899. These amounts represent the Partnership's
approximately 45% ownership interest in the mortgage.
The remaining 55% ownership interest is held by
American Insured Mortgage Investors L.P. - Series 88
(AIM 88), an affiliated entity.
During 1993, the mortgagor of St. Charles Place-Phase
II paid its monthly principal and interest payments to
Patrician in arrears, and did not make the monthly
payment of principal and interest due to Patrician
since October 1993. However, Patrician has remitted
monthly payments of principal and interest due for
October 1993 through January 1994 to the Partnership.
As the mortgagor was unable to bring the loan current,
Patrician filed a foreclosure action on October 14,
1993. On November 2, 1993, the mortgagor of the
mortgage on St. Charles Place-Phase II filed for
protection under Chapter 11 of the Federal Bankruptcy
Code. If Patrician and the mortgagor are unable to
negotiate a settlement, Patrician intends to litigate
the case in bankruptcy court and to subsequently
acquire and dispose of the property.
The General Partner is overseeing Patrician's efforts
to complete the foreclosure actions, including the
subsequent acquisition and disposition of the above two
properties. As the coinsurance lender, Patrician is
liable to the Partnership for the outstanding principal
balance of both mortgages plus all accrued but unpaid
interest through the date of such payment. If the sale
of the properties collateralizing the mortgages
produces insufficient net proceeds to repay the
mortgage obligations to the Partnership, Patrician will
be liable to the Partnership for its share of the
deficiency. Based on the General Partner's assessment
of the collateral underlying the mortgages, including
information related to the financial condition of
Patrician, the General Partner believes the carrying
value of these assets is realizable. As a result of
Patrician's coinsurance obligation, these mortgages
were classified as Investment in Mortgages (Available
for Sale) as of March 31, 1994 and as Mortgages Held
for Disposition as of December 31, 1993. The
Partnership intends to reinvest any net disposition
proceeds from these mortgages in fully insured Acquired
Insured Mortgages, provided the net disposition
proceeds are received prior to the expiration of the
Partnership's reinvestment period on December 31, 1994.
The General Partner intends to continue to oversee the
Partnership's interest in these mortgages to ensure
that Patrician meets its coinsurance obligations. The
General Partner's assessment of the realizability of
the carrying value of The Villas and St. Charles Place-
<PAGE>
<PAGE>26
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Phase II mortgages is based on current information, and
to the extent current conditions change or additional
information becomes available, then the General
Partner's assessment may change. However, the General
Partner does not believe that there would be a material
adverse impact on the Partnership's financial condition
or its results of operations should Patrician be unable
to comply with its full coinsurance obligation.
2. Coinsured by affiliate
----------------------
a. As of December 31, 1993, the former managing general
partner, on behalf of the Partnership, had invested in
three coinsured originated mortgages where the
coinsurance lender is Integrated Funding, Inc. (IFI).
As structured by the former managing general partner,
with respect to these mortgages, the Partnership bears
the risk of loss upon default for IFI's portion of the
coinsurance loss. In January 1994, the Partnership
disposed of one of these mortgages, One East Delaware,
which was classified as an Asset Held for Sale Under
Coinsurance Program as of December 31, 1993, as
discussed below.
<PAGE>
<PAGE>27
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
As of March 31, 1994 and December 31, 1993, the
remaining two IFI coinsured mortgages, as shown in the
table below, are classified as Investment in Mortgages
and are current with respect to the payment of principal
and interest. The General Partner believes there is
adequate collateral value underlying the mortgages.
Therefore, no loan losses, other than that described
below, were recognized on these mortgages during the
three months ended March 31, 1994 and 1993.
Additionally, as of March 31, 1994, these two mortgages
had an aggregate fair value of $17,669,918.
<TABLE><CAPTION>
Amortized Face Amortized Face
Loan Losses Recognized
Cost Value Cost Value
for the three months ended
March 31, March 31, December 31, December 31, March 31, March 31,
1994 1994 1993 1993 1994 1993
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pembrook Apartments $ 15,665,348 $ 15,044,385 $ 15,684,341 $ 15,060,875 $ -- $ --
Spring Lake Village (a) 5,048,091(a) 5,048,093 5,169,914 5,054,317 115,301(a) --
(a) In March 1994, the mortgage note was amended to reduce the mortgage interest rate from 8.75% to 7.00%. In connection
with the refinancing, the Partnership recognized a loan loss of $115,301 on the accompanying statement of operations for
the three months ended March 31, 1994, primarily representing the unamortized balance of acquisition and closing costs paid
in connection with the origination of this mortgage.
</TABLE>
<PAGE>
<PAGE>28
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
b. Assets Held for Sale Under Coinsurance Program
----------------------------------------------
As of December 31, 1993, the former managing general
partner, on behalf of the Partnership, had invested in
one coinsured mortgage, One East Delaware, which was
accounted for as an Asset Held for Sale Under
Coinsurance Program. In January 1994, the Partnership
received net proceeds of approximately $33.2 million
from the prepayment of this mortgage and recognized a
gain of $1,129,973 in the accompanying statement of
operations for the three months ended March 31, 1994.
The Partnership has reinvested or committed to reinvest
the net disposition proceeds in fully insured Acquired
Insured Mortgages.
Liquidity and Capital Resources
-------------------------------
The Partnership's operating cash receipts, derived from
payments of principal and interest on Insured Mortgages, plus
cash receipts from interest on short-term investments, were
sufficient to meet operating requirements.
The basis for paying distributions to Unitholders is cash
flow from operations, which is comprised of regular interest
income and principal from Insured Mortgages and gain, if any,
from mortgage dispositions. Although the Insured Mortgages yield
a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each
quarter due to (1) the fluctuating yields in the short-term money
market where the monthly mortgage payments received are
temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or
mortgage dispositions, (3) variations in the cash flow
attributable to the delinquency or default of Insured Mortgages
and the professional fees and foreclosure and acquisition costs
incurred in connection with those Insured Mortgages and (4)
variations in the Partnership's operating expenses.
Net cash provided by operating activities increased for the
three months ended March 31, 1994 as compared to the
corresponding period in 1993. This increase was primarily due to
a decrease in receivables and other assets attributable to the
receipt in January 1994 of the remaining net disposition proceeds
related to the December 1993 disposition of the mortgage on
Victoria Pointe Apartments-Phase II. Also contributing to the
increase in net cash provided by operating activities was an
increase in interest and other income and a decrease in asset
management fees, as previously discussed. This increase was
partially offset by a decrease in mortgage investment income, as
discussed above.
Net cash provided by investing activities increased for the
three months ended March 31, 1994 as compared to the
corresponding period in 1993 due to the receipt of net
disposition proceeds of approximately $33.2 million from the
disposition of the mortgage on One East Delaware, which was
classified as an Asset Held for Sale Under Coinsurance Program as
of December 31, 1993. This increase was partially offset by the
investment of approximately $24.4 million in Acquired Insured
Mortgages.
Net cash used in financing activities decreased for the
three months ended March 31, 1994 as compared to the
corresponding period in 1993 as a result of a decrease in
distributions paid to partners. This decrease was due, in part,
to the delinquencies and subsequent cessation in 1993 of the
receipt of principal and interest from the mortgage on One East
Delaware and the delinquency in 1993 of the monthly payments by
<PAGE>
<PAGE>29
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
the mortgagor of the mortgages on The Villas and St. Charles
Place - Phase II.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended March 31, 1994.
All other items are not applicable.
<PAGE>
<PAGE>30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS L.P. - SERIES 86
(Registrant)
By: CRIIMI, Inc.
General Partner
May 12, 1994 By: /s/ Cynthia O. Azzara
---------------------- -------------------------
Date Cynthia O. Azzara
Vice President and
Chief Financial Officer
<PAGE>
