<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, 1996
------------------
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 September 30, 1996, 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, 1996
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1996 (unaudited)
and December 31, 1995 . . . . . . . . . . . 3
Statements of Operations - for the
three and nine months ended September
30, 1996 and 1995 (unaudited) . . . . . . . 4
Statement of Changes in Partners' Equity -
for the nine months ended September 30,
1996 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the nine
months ended September 30, 1996
and 1995 (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 . . . . . . 17
Signature . . . . . . . . . . . . . . . . . . . . . . 18
<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,
1996 1995
-------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
at fair value:
Originated insured mortgages $ 55,978,890 $ 57,776,934
Acquired insured mortgages 39,275,593 41,449,297
-------------- -------------
95,254,483 99,226,231
Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
premium and discount:
Originated insured mortgages 62,297,210 62,595,492
Acquired insured mortgage 990,712 995,255
-------------- -------------
63,287,922 63,590,747
Cash and cash equivalents 2,324,148 8,774,654
Investment in affiliate 471,109 475,726
Receivables and other assets 2,960,421 2,470,604
-------------- -------------
Total assets $ 164,298,083 $ 174,537,962
============== =============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 2,920,215 $ 3,323,003
Note payable and due to affiliate 487,287 478,612
Accounts payable and accrued expenses 120,924 153,998
-------------- -------------
Total liabilities 3,528,426 3,955,613
-------------- -------------
Partners' equity:
Limited partners' equity 168,953,599 174,986,113
General partner's deficit (1,180,030) (869,206)
Unrealized losses on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed Securities (7,094,676) (3,941,092)
Unrealized gains on investment in FHA-
Insured Certificates and GNMA Mortgage-
Backed Securities 90,764 406,534
-------------- -------------
Total partners' equity 160,769,657 170,582,349
-------------- -------------
Total liabilities and
partners' equity $ 164,298,083 $ 174,537,962
============== =============
</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,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 3,226,818 $ 3,401,518 $ 10,032,741 $ 10,443,880
Interest and other income 28,147 32,761 214,583 87,639
------------ ------------ ------------ ------------
3,254,965 3,434,279 10,247,324 10,531,519
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 395,670 410,226 1,187,010 1,230,678
General and administrative 55,113 141,451 310,393 476,198
Interest expense to affiliate 8,675 8,675 26,025 26,025
------------ ------------ ------------ ------------
459,458 560,352 1,523,428 1,732,901
------------ ------------ ------------ ------------
Earnings before gain on
mortgage disposition 2,795,507 2,873,927 8,723,896 8,798,618
Gain on mortgage disposition -- -- 37,325 --
------------ ------------ ------------ ------------
Net earnings $ 2,795,507 $ 2,873,927 $ 8,761,221 $ 8,798,618
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,658,527 $ 2,733,105 $ 8,331,921 $ 8,367,486
General partner - 4.9% 136,980 140,822 429,300 431,132
------------ ------------ ------------ ------------
$ 2,795,507 $ 2,873,927 $ 8,761,221 $ 8,798,618
============ ============ ============ ============
Net earnings per Limited
Partnership Unit $ 0.28 $ 0.28 $ 0.87 $ 0.87
============ ============ ============ ============
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, 1996
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unrealized
Gains on Losses on
Investment Investment
in FHA-Insured in FHA-Insured
Certificates Certificates
and GNMA and GNMA
Mortgage- Mortgage-
General Limited Backed Backed
Partner Partners Securities Securities Total
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ (869,206) $ 174,986,113 $ 406,534 $ (3,941,092) $ 170,582,349
Net earnings 429,300 8,331,921 -- -- 8,761,221
Distributions paid or
accrued of $1.50 per
Unit (740,124) (14,364,435) -- -- (15,104,559)
Adjustment to unrealized
gains (losses) on
investment in FHA-Insured
Certificates and GNMA-
Mortgage-Backed Securities -- -- (315,770) (3,153,584) (3,469,354)
------------- ------------- ------------- ------------ ------------
Balance, September 30, 1996 $ (1,180,030) $ 168,953,599 $ 90,764 $ (7,094,676) $160,769,657
============= ============= ============= ============ ============
Limited Partnership Units outstanding -
September 30, 1996 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,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,761,221 $ 8,798,618
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gain on mortgage disposition (37,325) --
Changes in assets and liabilities:
Increase in note payable and due
to affiliate 8,675 26,025
Decrease in accounts payable and accrued expenses (33,074) (34,461)
Increase in receivables and other assets and
investment in affiliate (485,200) (247,678)
------------ ------------
Net cash provided by operating activities 8,214,297 8,542,504
------------ ------------
Cash flows from investing activities:
Proceeds from mortgage disposition 37,325 --
Receipt of principal from scheduled payments 805,219 838,326
------------ ------------
Net cash provided by investing activities 842,544 838,326
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (15,507,347) (9,465,523)
------------ ------------
Net cash used in financing activities (15,507,347) (9,465,523)
------------ ------------
Net decrease in cash and cash equivalents (6,450,506) (84,693)
Cash and cash equivalents, beginning of period 8,774,654 2,833,820
------------ ------------
Cash and cash equivalents, end of period $ 2,324,148 $ 2,749,127
============ ============
</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 was
required (subject to the conditions set forth in the Partnership Agreement) to
distribute net proceeds from mortgage dispositions 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).
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-administered real estate investment trust (REIT) on June 30, 1995,
CRIIMI MAE Services Limited Partnership, an affiliate of CRIIMI MAE, acquired
the Sub-advisory Agreement. As a result of this transaction, 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,
1996 and December 31, 1995 and the results of its operations for the three and
nine months ended September 30, 1996 and 1995 and its cash flows for the nine
months ended September 30, 1996 and 1995.
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
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
Partnership's Annual Report filed on Form 10-K for the year ended December 31,
1995.
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,
1996 and December 31, 1995:
Fully Insured FHA-Insured Certificates and GNMA
Mortgage-Backed Securities
-----------------------------------------------
As of September 30, 1996 and December 31, 1995, the Partnership's
investment in fully-insured acquired insured mortgages, carried at fair
value, consisted of two FHA-Insured Certificates and ten GNMA Mortgage-
Backed Securities with an aggregate amortized cost of $40,850,570 and
$41,127,351, respectively, an aggregate face value of $40,792,281 and
$41,067,493, respectively, and an aggregate fair value of $39,275,593 and
$41,449,297, respectively. As of October 31, 1996, all of the fully
insured FHA-Insured Certificates and GNMA Mortgage-Backed Securities 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, 1995, under the United States Department of Housing
and Urban Development (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, 1996 and December 31, 1995, the former managing
general partner, on behalf of the Partnership, had invested in seven FHA-
Insured Certificates secured by coinsured mortgages. As of September 30,
1996, 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 October 31, 1996, the two originated coinsured mortgages which
are coinsured by Patrician, The Villas and St. Charles Place - Phase
II, were delinquent with respect to the payment of principal and
interest. The following is a discussion of those mortgage
investments.
As of September 30, 1996 and December 31, 1995, the Partnership's
<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
investment in the mortgage on The Villas had an amortized cost of
$15,556,467 and $15,635,379, respectively, a face value of $15,790,178
and $15,869,089, respectively, and a fair value of $14,845,280 and
$15,173,465, respectively. As of October 31, 1996, the mortgagor has
made payments of principal and interest due on the original mortgage
through October 1995, and has made payments of principal and interest
due under a modification agreement through August 1993. Patrician is
litigating the case in bankruptcy court while pursuing negotiations on
a modification agreement with the borrower.
The Partnership's investment in the mortgage on St. Charles Place-
Phase II had an amortized cost equal to its face value of $3,056,641
and $3,068,173 as of September 30, 1996 and December 31, 1995,
respectively. As of September 30, 1996 and December 31, 1995, this
mortgage had a fair value of $2,872,953 and $2,933,205, 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, an
affiliate of the Partnership. As of October 31, 1996, the mortgagor
has made payments of principal and interest due on the mortgage
through August 1995 to the Partnership. Patrician is litigating the
case in bankruptcy court while pursuing negotiations on a modification
agreement with the borrower.
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 the most recent information available, and to the extent
these 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, 1996 and December 31, 1995, the Partnership held
investments in five FHA-Insured Certificates secured by coinsured
mortgages, where the coinsurance lender is Integrated Funding, Inc.
(IFI), an affiliate of the Partnership.
As of October 31, 1996, these five IFI coinsured mortgages, as shown
in the table below, were current with respect to the payment of
principal and interest. The mortgage on Spring Lake Village, which
had been previously delinquent, had been modified a second time as of
February 1996. The interest rate on this mortgage was reduced to 6%
through December 1996, increasing to 6.75% for 1997 and 7% for all
subsequent years. The impact of this modification will result in a
decrease in mortgage interest income for the first two years of the
modification. In addition, delinquent principal and interest payments
from September 1, 1995 through December 1, 1995, have been deferred,
<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
with quarterly payments to be paid out of the mortgagors' available
cash flows. No payments have been made on the deferred amount due to
insufficient cash flows. As of September 30, 1996, $36,000 of this
deferred amount is included in Receivables and other assets.
The General Partner believes there is adequate collateral value
underlying these coinsured mortgages. Accordingly, no loan losses
were recognized on these mortgages during the nine months ended
September 30, 1996 and 1995. As of September 30, 1996 and December
31, 1995, these five investments had an aggregate fair value of
$38,260,656 and $39,670,264, 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
Cost Value Cost Value
September 30, September 30, December 31, December 31,
1996 1996 1995 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Pembrook Apartments $ 15,453,490 $ 14,859,427 $ 15,521,458 $ 14,918,958
Spring Lake Village 5,023,846 4,944,739 4,984,151 4,984,151
Carmen Drive Estates 4,944,388 4,855,055 4,966,036 4,875,403
Woodbine at Lakewood
Apartments 5,185,720 4,998,623 5,211,526 5,021,478
Woodland Hills
Apartments 12,187,273 11,766,775 12,246,715 11,819,789
</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, 1996, the Partnership received
additional interest of $0 and $110,253, respectively, from the
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. 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 seven originated insured mortgages and one acquired insured mortgage as of
September 30, 1996 and December 31, 1995. As of September 30, 1996 and December
31, 1995, these eight mortgage investments had an aggregate amortized cost of
$63,287,922 and $63,590,747, respectively, an aggregate face value of
$61,037,153 and $61,305,615 respectively, and an aggregate fair value of
$61,825,594 and $63,212,800, respectively. As of October 31, 1996, all of the
FHA-Insured Loans were current with respect to payment of principal and
interest.
In December 1995, the Partnership received net proceeds of approximately
$6.2 million from the prepayment of the mortgage on Lakewood Villas, a fully
insured FHA-Insured Loan, and recognized a gain of $5,208 for the year ended
December 31, 1995. Additionally, in January 1996, the Partnership received
additional proceeds of $37,325 in connection with the final settlement of this
prepayment, which was recognized as additional gain during the nine months ended
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
September 30, 1996. The net disposition proceeds of $0.61 per unit were
distributed to Unitholders on May 1, 1996.
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, 1996, the Partnership received additional interest of
$3,817 and $144,631, respectively, from the Participations. During the three
and nine months ended September 30, 1995, the Partnership received additional
interest of $0 and $73,357, respectively, from the Participations. These
amounts, if any, are included in mortgage investment income on the accompanying
statements of operations.
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the nine months ended September 30, 1996 and 1995 are as follows:
1996 1995
--------- ---------
Quarter ended March 31, $ 0.91(1)(2) $ 0.26(2)
Quarter ended June 30, 0.30(2) 0.34(3)
Quarter ended September 30, 0.29(4) 0.31(2)
--------- ---------
$ 1.50 $ 0.91
========= =========
(1) This amount includes approximately $0.61 per Unit return of capital from
the prepayment of the mortgage on Lakewood Villas, and $0.03 per unit
representing previously undistributed accrued interest received from two
delinquent mortgages.
(2) These amounts include approximately $0.03 per Unit representing previously
undistributed accrued interest received from two delinquent mortgages.
(3) This amount includes approximately $0.11 per Unit representing previously
undistributed accrued interest received from five delinquent mortgages.
(4) This amount includes approximately $0.02 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 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 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.
6. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the nine months
ended September 30, 1996 and 1995, 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 1996 1995 1996 1995
- ----------------- ---------------------------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc.(1) General Partner/Distribution $143,091 $152,959 $ 740,124 $ 449,008
AIM Acquisition Advisor/Asset Management Fee 395,670 410,226 1,187,010 1,230,678
Partners, L.P. (2)
CRI(3) Affiliate of General Partner/
Expense Reimbursement -- 8,091 -- 58,659
CRIIMI MAE Affiliate of General Partner/
Management, Inc.(3) Expense Reimbursement 6,501 10,287 63,781 10,287
(1) The General Partner, pursuant to amendments to the Partnership Agreement, effective September 6, 1991, is entitled to receive
4.9% of the Partnership's income, loss, capital and distributions, including, without limitation the Partnership's Adjusted
Cash from Operations and Proceeds of Mortgage Prepayments, Sales or Insurance (both as defined in the Partnership Agreement).
(2) The Advisor, pursuant to the Partnership Agreement, effective October 1, 1991, is entitled to an Asset Management Fee equal to
.95% of Total Invested Assets (as defined in the Partnership Agreement). The sub-advisor to the Partnership (the Sub-advisor)
is entitled to a fee of .28% of Total Invested Assets. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited
Partnership, the Sub-advisor, earned a fee equal to $116,610 and $349,830, for the three and nine months ended September 30,
1996, respectively, and $120,900 for the three and nine months ended September 30, 1995. CRI/AIM Management, Inc., which acted
as the Sub-advisor through June 30, 1995, earned a fee equal to $241,800.
(3) Prior to CRIIMI MAE becoming a self-administered REIT, amounts were paid to CRI as reimbursement for expenses incurred prior to
June 30, 1995 on behalf of the General Partner and Partnership. The transaction in which CRIIMI MAE became a self-administered
REIT had 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 a wholly-owned subsidiary of CRIIMI MAE, CRIIMI MAE Management, Inc.
</TABLE>
<PAGE>15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking. These statements contain a number of risks and uncertainties
as discussed herein and in the Partnership's reports filed with the Securities
and Exchange Commission that could cause actual results to differ materially.
General
- -------
As of September 30, 1996, the Partnership had invested in 27 insured
mortgages, with an aggregate amortized cost of approximately $166 million, an
aggregate face value of approximately $162 million and an aggregate fair value
of approximately $157 million, as discussed below.
As of October 31, 1996, 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 October 31, 1996, two of the seven
coinsured FHA-Insured Certificates were delinquent with respect to payment of
principal and interest. As discussed in Note 3 to the financial statements,
management does not anticipate that these delinquencies will have a material
adverse impact on the Partnership's financial statements.
Results of Operations
- ---------------------
Net earnings decreased for the three and nine months ended September 30,
1996, as compared to the corresponding periods in 1995 primarily due to a
decrease in mortgage investment income, as discussed below. Partially
offsetting this decrease was the reduction of general and administrative
expenses, as discussed below. Also offsetting the decrease for the nine months
ended September 30, 1996, as compared to the corresponding period in 1995, was
the receipt of additional proceeds of approximately $37,000, in the first
quarter of 1996, relating to the December 1995 prepayment of the mortgage on
Lakewood Villas.
Mortgage investment income decreased for the three and nine months ended
September 30, 1996, as compared to the corresponding periods in 1995, primarily
due to the reduction in mortgage base due to the Lakewood Villas mortgage
prepayment.
Interest and other income did not change significantly for the three months
ended September 30, 1996, as compared to the corresponding period in 1995.
Interest and other income increased for the nine months ended September 30,
1996, as compared to the corresponding period in 1995 primarily due to the
temporary investment of proceeds from the Lakewood Villas mortgage prepayment
received in December 1995 and distributed in May 1996.
Asset management fees decreased for the three and nine months ended
September 30, 1996, as compared to the corresponding periods in 1995 due to the
decrease in the mortgage base.
General and administrative expenses decreased for the three and nine months
ended September 30, 1996 as compared to the corresponding periods in 1995. The
decrease for the nine months ended September 30, 1996, as compared to the
corresponding period in 1995, is primarily attributable to a decrease in legal
fees as a result of the resolution of disputed mortgage servicing rights for
three coinsured mortgages during 1995. The decrease for the three months ended
September 30, 1996, as compared to the corresponding period in 1995, is due to
<PAGE>16
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
a reduction in legal fees, as discussed above, a reduction in investor
relations service expenses as a result of a decrease in the number of registered
unitholders and a decrease in payroll and payroll-related expenses, as a result
of the stabilization of the mortgage portfolio.
Gain on mortgage disposition increased for the nine months ended September
30, 1996, due to the additional gain recognized from the Lakewood Villas
prepayment, as previously discussed. No mortgages were disposed of 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 nine months ended September
30, 1996 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 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, 1996, as compared to the corresponding period in 1995. This
decrease was primarily due to an increase in receivables and other assets
resulting from increases in delinquent mortgage payments from The Villas and St.
Charles Place-Phase II mortgages.
Net cash provided by investing activities increased slightly for the nine
months ended September 30, 1996, as compared to the corresponding period in 1995
due primarily to the receipt of proceeds from the prepayment of the mortgage on
Lakewood Villas. This increase was partially offset by a reduction in scheduled
principal payments resulting from the decrease in the mortgage base.
Net cash used in financing activities increased for the nine months ended
September 30, 1996 as compared to the corresponding period in 1995. This
increase was due to an increase in distributions to Unitholders as a result of
the prepayment of the mortgage on Lakewood Villas during the fourth quarter of
1995. The net disposition proceeds of approximately $.61 per Unit were
distributed to Unitholders on May 1, 1996.
<PAGE>17
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, 1996.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
---------- -----------
27 Financial Data Schedule
<PAGE>18
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
/s/ Cynthia O. Azzara
- --------------------------- -------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED
FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,324
<SECURITIES> 95,254
<RECEIVABLES> 66,720
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 164,298
<CURRENT-LIABILITIES> 3,528
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 160,770
<TOTAL-LIABILITY-AND-EQUITY> 164,298
<SALES> 0
<TOTAL-REVENUES> 10,285
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,524
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,761
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,761
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
</TABLE>
