<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
--------------------
Commission file number 1-12704
-----------------
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) 816-2300
- -----------------------------------------------------------------
(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 November 13, 1995, 9,576,290 Depositary Units of Limited Partnership
Interest were outstanding.
<PAGE>2
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1995 (unaudited)
and December 31, 1994 . . . . . . . . . . . 3
Statements of Operations - for the
three and nine months ended September 30,
1995 and 1994 (unaudited) . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the nine months ended September 30,
1995 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the nine
months ended September 30, 1995
and 1994 (unaudited) . . . . . . . . . . . 6
Notes to Financial Statements
(unaudited) . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 15
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 18
Signature . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
-------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
at fair value:
Originated insured mortgages $ 56,918,437 $ 53,182,652
Acquired insured mortgages 40,316,525 36,919,453
-------------- -------------
97,234,962 90,102,105
Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
premium and discount:
Originated insured mortgages 68,858,588 69,162,106
Acquired insured mortgage 996,703 1,000,856
-------------- -------------
69,855,291 70,162,962
Cash and cash equivalents 2,749,127 2,833,820
Investment in affiliate 478,612 478,612
Receivables and other assets 2,364,065 2,116,387
-------------- -------------
Total assets $ 172,682,057 $ 165,693,886
============== =============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 3,121,609 $ 3,423,700
Note payable and due to affiliate 504,637 478,612
Accounts payable and accrued expenses 166,526 200,987
-------------- -------------
Total liabilities 3,792,772 4,103,299
-------------- -------------
Partners' equity:
Limited partners' equity 175,443,661 175,790,599
General partner's deficit (845,631) (827,755)
Net unrealized losses on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed Securities (5,708,745) (13,372,257)
-------------- -------------
Total partners' equity 168,889,285 161,590,587
-------------- -------------
Total liabilities and
partners' equity $ 172,682,057 $ 165,693,886
============== =============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
-------------------------------- ---------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment
income $ 3,401,518 $ 3,394,143 $ 10,443,880 $ 9,893,810
Interest and other income 32,761 59,846 87,639 325,251
------------ ------------ ------------ ------------
3,434,279 3,453,989 10,531,519 10,219,061
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 410,226 407,139 1,230,678 1,163,669
General and administrative 141,451 117,103 476,198 466,269
Interest expense to
affiliate 8,675 17,400 26,025 86,909
------------ ------------ ------------ ------------
560,352 541,642 1,732,901 1,716,847
------------ ------------ ------------ ------------
Earnings before loan loss
and gain on mortgage
disposition 2,873,927 2,912,347 8,798,618 8,502,214
Loan loss -- -- -- (115,301)
Gain on mortgage disposition -- -- -- 1,129,973
------------ ------------ ------------ ------------
Net earnings $ 2,873,927 $ 2,912,347 $ 8,798,618 $ 9,516,886
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,733,105 $ 2,769,642 $ 8,367,486 $ 9,050,559
General partner - 4.9% 140,822 142,705 431,132 466,327
------------ ------------ ------------ ------------
$ 2,873,927 $ 2,912,347 $ 8,798,618 $ 9,516,886
============ ============ ============ ============
Net earnings per Limited
Partnership Unit $ 0.28 $ 0.29 $ 0.87 $ 0.95
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the nine months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Losses on
Investment
in FHA-Insured
Certificates
and GNMA
General Limited Mortgage-Backed
Partner Partners Securities Total
------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ (827,755) $ 175,790,599 $ (13,372,257) $161,590,587
Net earnings 431,132 8,367,486 -- 8,798,618
Distributions paid or
accrued of $0.91 per
Unit (449,008) (8,714,424) -- (9,163,432)
Adjustment to net
unrealized losses on
investment in FHA-
Insured Certificates and
GNMA Mortgage-Backed
Securities -- -- 7,663,512 7,663,512
------------- ------------- --------------- ------------
Balance, September 30, 1995 $ (845,631) $ 175,443,661 $ (5,708,745) $168,889,285
============= ============= =============== ============
Limited Partnership Units
outstanding - September
30, 1995 9,576,290
=============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,798,618 $ 9,516,886
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Loan loss -- 115,301
Gain on mortgage disposition -- (1,129,973)
Changes in assets and liabilities:
Increase (decrease) in note payable and due
to affiliate 26,025 (1,257,723)
Decrease in investment in and due from
affiliate -- 1,250,087
Decrease in accounts payable and accrued
expenses (34,461) (58,240)
(Increase) decrease in receivables and
other assets (247,678) 1,139,843
------------ ------------
Net cash provided by operating activities 8,542,504 9,576,181
------------ ------------
Cash flows from investing activities:
Proceeds from disposition of Asset Held for Sale
under Coinsurance Program -- 33,233,501
Investment in acquired insured mortgages -- (39,730,658)
Receipt of principal from scheduled payments 838,326 709,148
------------ ------------
Net cash provided by (used in) investing
activities 838,326 (5,788,009)
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (9,465,523) (9,868,312)
------------ ------------
Net decrease in cash and cash equivalents (84,693) (6,080,140)
Cash and cash equivalents, beginning of period 2,833,820 9,095,255
------------ ------------
Cash and cash equivalents, end of period $ 2,749,127 $ 3,015,115
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>7
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. The Partnership's reinvestment period expired on December 31,
1994. After the expiration of the reinvestment period, the Partnership is
required (subject to the conditions set forth in the Partnership Agreement) to
distribute net proceeds from mortgage disposition to its Unitholders. The
Partnership Agreement states that the Partnership will terminate on December 31,
2020, unless previously terminated under the provisions of the Partnership
Agreement.
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. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc.
AIM Acquisition Partners L.P. (the Advisor) serves as the advisor of the
Partnership. The general partner of the Advisor is AIM Acquisition Corporation
and the limited partners include an affiliate of CRIIMI MAE (and through June
30, 1995, an affiliate of C.R.I., Inc. (CRI)). Effective September 6, 1991 and
through June 30, 1995, a sub-advisory agreement (the Sub-advisory Agreement)
existed whereby CRI/AIM Management, Inc., an affiliate of CRI, managed the
Partnership's portfolio. In connection with the transaction in which CRIIMI MAE
became a self-managed and self-administered real estate investment trust (REIT),
CRIIMI MAE Services Limited Partnership, an affiliate of CRIIMI MAE, acquired
the Sub-advisory Agreement. As a consequence of this transaction, effective
June 30, 1995, CRIIMI MAE Services Limited Partnership manages the Partnership's
portfolio. These transactions had no effect on the Partnership's financial
statements.
The Partnership's investment in mortgages includes participation
certificates evidencing a 100% undivided beneficial interest in government
insured multifamily mortgages issued or sold pursuant to Federal Housing
Administration (FHA) programs (FHA-Insured Certificates), mortgage-backed
securities guaranteed by the Government National Mortgage Association (GNMA)
(GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans (FHA-Insured
Loans). The mortgages underlying the FHA-Insured Certificates, GNMA Mortgage-
Backed Securities and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments or retirement homes.
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 September 30,
1995 and December 31, 1994 and the results of its operations for the three and
nine months ended September 30, 1995 and 1994 and its cash flows for the nine
months ended September 30, 1995 and 1994.
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
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
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,
1994.
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA
MORTGAGE-BACKED SECURITIES
The following is a discussion of the Partnership's investment in FHA-
Insured Certificates and GNMA Mortgage-Backed Securities as of September 30,
1995 and December 31, 1994:
Fully Insured GNMA Mortgage-Backed Securities
and FHA-Insured Certificates
----------------------------------------------
As of September 30, 1995 and December 31, 1994, the Partnership's
investment in fully-insured acquired insured mortgages, carried at fair
value, consisted of ten GNMA Mortgage-Backed Securities and two FHA-Insured
Certificates with an aggregate amortized cost of $41,216,195 and
$41,472,892, respectively, an aggregate face value of $41,155,821 and
$41,411,005, respectively, and an aggregate fair value of $40,316,525 and
$36,919,453, respectively. As of November 10, 1995, all of the acquired
insured mortgages, carried at fair value, were current with respect to
payment of principal and interest.
Originated Coinsured FHA-Insured Certificates
---------------------------------------------
As discussed in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1994, 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.
As of September 30, 1995 and December 31, 1994, the Partnership held
investments in seven FHA-Insured Certificates secured by coinsured
mortgages. These mortgage investments were originated by the former
managing general partner. As of September 30, 1995, two of the seven FHA-
Insured Certificates secured by coinsured mortgages are coinsured by an
unaffiliated third party coinsurance lender, The Patrician Mortgage Company
(Patrician), under the HUD coinsurance program.
1. Coinsured by third party
------------------------
As of September 30, 1995, the two coinsured mortgages which are
coinsured by Patrician were delinquent with respect to the payment of
principal and interest. The following is a discussion of actual and
potential performance problems with respect to the mortgage
investments which are coinsured by Patrician.
The originated insured mortgages on The Villas and St. Charles
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA
MORTGAGE-BACKED SECURITIES - Continued
Place - Phase II are coinsured by Patrician. As of September 30,
1995 and December 31, 1994, the Partnership's investment in the
mortgage on The Villas had an amortized cost of $15,660,542 and
$15,732,782, respectively, a face value of $15,894,251 and
$15,966,491, respectively, and a fair value of $14,955,284 and
$14,012,209, respectively. As of November 10, 1995, the mortgagor has
made payments of principal and interest due on the original mortgage
through April 1995, and has made payments of principal and interest
due under a modification agreement through August 1993. Patrician is
currently litigating the case in bankruptcy court seeking to acquire
and ultimately dispose of the property.
The Partnership's investment in the mortgage on St. Charles Place-
Phase II had an amortized cost equal to its face value of $3,071,856
and $3,082,440 as of September 30, 1995 and December 31, 1994,
respectively. As of September 30, 1995 and December 31, 1994, this
mortgage had a fair value of $2,889,643 and $2,703,780,respectively.
These amounts represent the Partnership's approximate 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 affiliate of the Partnership. As of November 10, 1995, the
mortgagor has made payments of principal and interest due on the
mortgage through February 1995 to the Partnership. Patrician is
currently litigating the case in bankruptcy court in order to acquire
and ultimately dispose of the property.
The General Partner is monitoring Patrician's efforts to complete
these foreclosure actions, including the subsequent acquisition and
disposition of the above two properties. 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 the coinsurance
lender's 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.
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 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
----------------------
As of September 30, 1995 and December 31, 1994, the Partnership held
investments in five and two FHA-Insured Certificates secured by
coinsured mortgages, respectively, where the coinsurance lender is
Integrated Funding, Inc. (IFI), an affiliate of the Partnership. Two
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA
MORTGAGE-BACKED SECURITIES - Continued
of these mortgage investments were originated by the former managing
general partner. 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.
The originated insured mortgages on Carmen Drive Estates, (The
Forest), Woodbine at Lakewood Apartments and Woodland Hills Apartments
were previously coinsured by M-West Mortgage Corporation (M-West), a
third party coinsurance lender. During the fourth quarter of 1994,
the Partnership was informed that M-West was liquidating its assets
and intended to assign the mortgage servicing rights related to these
mortgages to another coinsurance lender, Whitehall Funding, Inc.
(Whitehall). The Partnership successfully contested this transfer and
obtained a court order mandating the transfer of the mortgage
servicing rights related to these three coinsured loans to IFI. This
transfer was completed during the second quarter of 1995. The
Partnership bears the risk of loss upon default for IFI's portion of
the coinsurance loss. As of September 30, 1995, receivables and other
assets, as shown on the accompanying balance sheet, includes
approximately $145,000 due from M-West with respect to these loans.
As of November 10, 1995, claims for damages against M-West and
Whitehall are still pending.
As of November 10, 1995, these five IFI coinsured mortgages, as shown
in the table below, were current with respect to the payment of
principal and interest, except for the mortgage on Spring Lake
Village, which is delinquent with respect to the August and September
1995 principal and interest payments. The General Partner is in the
process of negotiating a second modification of this mortgage. The
General Partner does not anticipate that this modification will have a
material adverse impact on the Partnership's financial statements.
The General Partner believes there is adequate collateral value
underlying these coinsured mortgages. Accordingly, no loan losses
were recognized on these mortgages during the three and nine months
ended September 30, 1995 and 1994, except as described below in
connection with a mortgage modification during the nine months ended
September 30, 1994. As of September 30, 1995 and December 31, 1994,
these five investments had an aggregate fair value of $39,073,510 and
$36,466,663, respectively.
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA
MORTGAGE-BACKED SECURITIES - Continued
<TABLE>
<CAPTION>
Amortized Face Amortized Face Loan Losses Recognized
Cost Value Cost Value for the nine months ended
September 30, September 30, December 31, December 31, September September
1995 1995 1994 1994 30, 1995 30, 1994
------------- ------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pembrook Apartments $ 15,543,241 $ 14,938,000 $ 15,606,087 $ 14,992,832 $ -- $ --
Spring Lake Village 4,993,359 4,993,359 5,022,918 5,022,919 -- 115,301(a)
Carmen Drive Estates(b) 4,972,957 4,881,904 4,992,884 4,900,599 -- --
Woodbine at Lakewood
Apartments(b) 5,219,794 5,028,789 5,243,651 5,049,840 -- --
Woodland Hills
Apartments(b) 12,265,763 11,836,747 12,320,708 11,885,577 -- --
(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 nine months
ended September 30, 1994, primarily representing the unamortized balance of acquisition and closing costs paid in connection
with the origination of this mortgage.
(b) As discussed above, these mortgages were coinsured by a third party coinsurance lender as of December 31, 1994.
</TABLE>
In connection with the FHA-Insured Certificates secured by coinsured
mortgages, the Partnership has sought, in addition to base interest
payments, additional interest (commonly termed Participations) based
on a percentage of the net cash flow from the development and the net
proceeds from the refinancing, sale or other disposition of the
underlying development. All of the FHA-Insured Certificates secured
by coinsured mortgages contain such Participations. During the three
and nine months ended September 30, 1995, the Partnership received
additional interest of $0 and $76,431, respectively, from the
Participations. During the three and nine months ended September 30,
1994, the Partnership received additional interest of $0 and $7,628,
respectively, from the Participations. These amounts, if any, are
included in mortgage investment income on the accompanying statements
of operations.
4. INVESTMENT IN FHA-INSURED LOANS
-------------------------------
The Partnership's investment in fully insured FHA-Insured Loans consisted
of eight originated insured mortgages and one acquired insured mortgage as of
September 30, 1995 and December 31, 1994. As of September 30, 1995 and December
31, 1994, the eight originated insured mortgages had an aggregate amortized cost
of $68,858,588 and $69,162,106, respectively, an aggregate face value of
$66,335,270 and $66,602,806, respectively, and an aggregate fair value of
$67,290,987 and $63,422,100, respectively. As of September 30, 1995 and
December 31, 1994, the acquired insured mortgage had an amortized cost of
$996,703 and $1,000,856, respectively, a face value of $1,000,148 and
$1,004,351, respectively, and a fair value of $1,015,951 and $956,403,
respectively.
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
As of November 10, 1995, all of the FHA-Insured Loans were current with
respect to payment of principal and interest.
In addition to base interest payments, the Partnership is entitled to
Participations on certain of the FHA-Insured Loans. During the three and nine
months ended September 30, 1995, the Partnership received additional interest of
$0 and $73,357, respectively, from the Participations. During the three and
nine months ended September 30, 1994, the Partnership received additional
interest of $0 and $33,432, respectively, from the Participations. These
amounts, if any, are included in mortgage investment income on the
accompanying statements of operations.
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the three and nine months ended September 30, 1995 and 1994 are as follows:
1995 1994
--------- ---------
Quarter ended March 31, $ 0.26(1) $ 0.41(2)
Quarter ended June 30, 0.34(3) 0.29(4)
Quarter ended September 30, 0.31(1) 0.30(1)
--------- ---------
$ 0.91 $ 1.00
========= =========
(1) This amount includes approximately $0.03 per Unit representing previously
undistributed accrued interest received from two delinquent mortgages.
(2) This amount includes approximately $0.18 per Unit representing previously
undistributed accrued interest received from the disposition of the
mortgage on One East Delaware and approximately $0.01 per Unit representing
previously undistributed accrued interest received from two delinquent
mortgages.
(3) This amount includes approximately $0.08 per Unit representing previously
undistributed accrued interest received from three mortgages that were
previously coinsured by a third party coinsurance lender, as discussed in
Note 3, above, and $0.03 per Unit representing previously undistributed
interest received from two delinquent mortgages.
(4) This amount includes approximately $0.04 per Unit representing previously
undistributed accrued interest received from two delinquent mortgages.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from insured mortgages. Although 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 professional fees and foreclosure costs incurred in
connection with those insured mortgages and (4) variations in the Partnership's
operating expenses.
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three and
nine months ended September 30, 1995 and 1994, earned or received compensation
or payments for services from the Partnership as follows:
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. TRANSACTIONS WITH RELATED PARTIES - Continued
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
----------------------------------------------
For the three months For the nine months
Capacity in Which ended September 30, ended September 30,
Name of Recipient Served/Item 1995 1994 1995 1994
- ----------------- -------------------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution $ 152,959 $148,025 $ 449,008 $ 493,416
AIM Acquisition Advisor/Asset Management Fee 410,226 407,139 1,230,678 1,163,669
Partners, L.P.(1)
CRI(2) Affiliate of General Partner/
Expense Reimbursement 8,091 29,702 58,659 134,795
CRIIMI MAE Affiliate of General Partner/
Management, Expense Reimbursement 10,287 -- 10,287 --
Inc. (2)
(1) Of the amounts paid to the Advisor, the Sub-advisor to the partnership (the Sub-advisor) is entitled to a fee of .28% of
Total Invested Assets. CRI/AIM Management, Inc., which through June 30, 1995 acted as the Sub-advisor, earned a fee
equal to $0 and $119,988 for the three months ended September 30, 1995 and 1994, respectively. CRI/AIM Management, Inc.
earned a fee equal to $241,800 and $342,953, for the nine months ended September 30, 1995 and 1994, respectively. As
discussed in Note 1 above, effective June 30, 1995, CRIIMI MAE Services Limited Partnership now serves as the Sub-advisor.
Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership earned a fee equal to $120,900 and $0, for the
three months ended September 30, 1995 and 1994, respectively. CRIIMI MAE Services Limited Partnership earned a fee equal
to $120,900 and $0, for the nine months ended September 30, 1995 and 1994, respectively.
(2) Prior to CRIIMI MAE becoming a self-managed and self-administered REIT, amounts were paid to CRI for reimbursement of
expenses incurred on behalf of the General Partner and the Partnership. As discussed in Note 1, the transaction in which
CRIIMI MAE became a self-managed and self-administered REIT has no impact on the payments required to be made by the
Partnership, other than that the expense reimbursement previously paid by the Partnership to CRI in connection with the
provision of services by the Sub-advisor are, effective June 30, 1995, paid to CRIIMI MAE Management, Inc., a wholly owned
subsidiary of CRIIMI MAE. The amounts paid to CRI during the three months ended September 30, 1995, represent
reimbursement of expenses incurred prior to June 30, 1995.
</TABLE>
<PAGE>15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
As of September 30, 1995, the Partnership had invested in 28 insured
mortgages, with an aggregate amortized cost of approximately $173 million, an
aggregate face value of approximately $169 million and an aggregate fair value
of approximately $166 million, as discussed below.
As of November 10, 1995, all of the fully insured FHA-Insured Certificates,
GNMA Mortgage Backed Securities and FHA-Insured loans were current with respect
to payment of principal and interest. As of November 10, 1995, three of the
seven coinsured FHA-Insured Certificates are delinquent with respect to payment
of principal and interest. As discussed in Notes 3 and 4 to the financial
statements, management does not anticipate that these delinquencies will have an
adverse material impact on the Partnership's financial statements.
Results of Operations
- ---------------------
Net earnings were substantially unchanged for the three months ended
September 30, 1995 as compared to the corresponding period in 1994. Net
earnings decreased for the nine months ended September 30, 1995 as compared to
the corresponding period in 1994 primarily due to the gain recognized on the
disposition of the insured mortgage on One East Delaware in January 1994. Also
contributing to the decrease in net earnings for the nine months ended September
30, 1995 as compared to the corresponding period in 1994 was a decrease in
interest and other income, as discussed below. Partially offsetting this
decrease was an increase in mortgage investment income, as discussed below.
Mortgage investment income increased for the nine months ended September
30, 1995 as compared to the corresponding period in 1994 due to an increase in
total invested assets during the nine months ended September 30, 1995, as
compared to the corresponding period in 1994. The increase in total invested
assets is attributable to the reinvestment of net proceeds from the disposition
of the insured mortgages on One East Delaware and Victoria Pointe Apartments-
Phase II, which were received in December 1993 and January 1994 and reinvested
during the first and second quarters of 1994. Mortgage investment income was
substantially unchanged for the three months ended September 30, 1995 as
compared to the corresponding period in 1994.
Interest and other income decreased for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994 primarily
due to the short-term investment in 1994 of net disposition proceeds prior to
reinvestment in acquired insured mortgages, as previously discussed.
Asset management fees increased for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994 as a result
of the increase in total invested assets, as discussed above.
General and administrative expenses increased for the three and nine months
ended September 30, 1995 as compared to the corresponding periods in 1994
primarily due to an increase in legal and professional fees related to
litigation involving the transfer of mortgage servicing rights related to three
coinsured loans, as discussed in Note 3 to the financial statements. Partially
offsetting this increase was a decrease in payroll and payroll-related expenses
incurred in connection with the mortgage dispositions, mortgage acquisitions and
mortgages with performance problems, as a result of the stabilization of the
mortgage portfolio during 1994 and the payment in 1994 of a one-time fee in
connection with the listing of the Partnership's units on the American Stock
<PAGE>16
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Exchange.
Interest expense to affiliate decreased for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994 as a result
of the paydown of the note payable to the Partnership's affiliate, American
Insured Mortgage Investors-L.P. Series 85 (AIM 85) during 1994, partially offset
by the execution of a note payable to AIM 88. The note payable to AIM 88 is in
the approximate amount of $479,000, at an annual interest rate of 7.25%, as
compared to the note payable to AIM 85 of approximately $1.7 million at an
annual interest rate of 8%. The reduction in the principal amount of the notes
reflects the reduction in the Partnership's coinsured loans since the initial
capitalization of IFI in 1991.
Gain on mortgage disposition and loan loss decreased for the nine months
ended September 30, 1995 as compared to the corresponding period in 1994. Gains
and losses on mortgage dispositions are based on the number, carrying amounts
and proceeds of mortgage investments disposed of during the period. During the
nine months ended September 30, 1994, the Partnership disposed of the mortgage
on One East Delaware and recognized a gain of approximately $1.1 million.
Additionally, during the first quarter of 1994, the mortgage on Spring Lake
Village was modified, resulting in the recognition of a loan loss of
approximately $115,000. No mortgage investments were disposed of or modified
during the nine months ended September 30, 1995.
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 during the first nine months of 1995 to
meet operating requirements.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from insured mortgages. Although 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 professional fees and foreclosure costs incurred in
connection with those insured mortgages and (4) variations in the Partnership's
operating expenses.
Net cash provided by operating activities decreased for the nine months
ended September 30, 1995 as compared to the corresponding period in 1994. This
decrease was primarily due to a decrease in receivables and other assets during
the nine months ended September 30, 1994 as a result of the receipt in January
1994 of the remaining net disposition proceeds related to the disposition of the
mortgage on Victoria Pointe Apartments - Phase II and receipt of accrued
interest related to the mortgage on One East Delaware.
Net cash provided by investing activities increased for the nine months
ended September 30, 1995 as compared to the corresponding period in 1994,
primarily due to the investment in 1994 of approximately $39.7 million in
insured mortgages, which was partially offset by the receipt in 1994 of net
disposition proceeds of approximately $33.2 million from the disposition of the
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
insured mortgage on One East Delaware. No dispositions or acquisitions occurred
during the nine months ended September 30, 1995.
Net cash used in financing activities decreased for the nine months ended
September 30, 1995 as compared to the corresponding period in 1994. This
decrease was primarily due to the 1994 distribution of accrued, but previously
undistributed, interest from the disposition of the mortgage on One East
Delaware.
<PAGE>18
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 September 30, 1995.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
---------- -----------
27 Financial Data Schedule
<PAGE>19
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
November 13, 1995 /s/ Cynthia O. Azzara
- --------------------------- -------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,749
<SECURITIES> 97,235
<RECEIVABLES> 72,219
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 172,682
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0
0
<OTHER-SE> 168,889
<TOTAL-LIABILITY-AND-EQUITY> 172,682
<SALES> 0
<TOTAL-REVENUES> 10,532
<CGS> 0
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<OTHER-EXPENSES> 1,733
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<EPS-PRIMARY> .87
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