<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 March 31, 1997
------------------
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 March 31, 1997, 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 MARCH 31, 1997
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1997 (unaudited)
and December 31, 1996 . . . . . . . . . . . 3
Statements of Operations - for the
three months ended March 31, 1997
and 1996 (unaudited) . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the three months ended March 31,
1997 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the three
months ended March 31, 1997
and 1996 (unaudited) . . . . . . . . . . . 6
Notes to Financial Statements
(unaudited) . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 16
Signature . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
at fair value:
Originated insured mortgages $ 32,508,936 $ 33,076,697
Acquired insured mortgages 38,926,381 40,014,207
-------------- -------------
71,435,317 73,090,904
-------------- -------------
Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
premium and discount:
Originated insured mortgages 52,957,796 53,047,822
Acquired insured mortgage 987,508 989,128
-------------- -------------
53,945,304 54,036,950
Cash and cash equivalents 7,493,632 38,580,668
Investment in affiliate 471,109 471,109
Receivables and other assets 3,433,993 3,103,526
-------------- -------------
Total assets $ 136,779,355 $ 169,283,157
============== =============
<PAGE>4
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 7,552,279 $ 33,532,120
Note payable and due to affiliate 487,287 478,612
Accounts payable and accrued expenses 146,821 135,694
-------------- -------------
Total liabilities 8,186,387 34,146,426
-------------- -------------
Partners' equity:
Limited partners' equity 136,347,579 141,161,141
General partner's deficit (2,860,047) (2,612,029)
Unrealized gains on investment in
FHA-Insured Certificates and
GNMA Mortgage-backed Securities 82,831 103,741
Unrealized losses on investment in
FHA-Insured Certificates and
GNMA Mortgage-backed Securities (4,977,395) (3,516,122)
-------------- -------------
Total partners' equity 128,592,968 135,136,731
-------------- -------------
Total liabilities and
partners' equity $ 136,779,355 $ 169,283,157
============== =============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>5
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
March 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Income:
Mortgage investment income $ 2,581,047 $ 3,337,362
Interest and other income 257,044 130,672
------------ ------------
2,838,091 3,468,034
------------ ------------
Expenses:
Asset management fee to
related parties 247,605 395,670
General and administrative 91,112 115,658
Interest expense to
affiliate 8,675 8,675
------------ ------------
347,392 520,003
------------ ------------
Earnings before gain on mortgage
disposition 2,490,699 2,948,031
Gain on mortgage disposition -- 37,325
------------ ------------
Net earnings $ 2,490,699 $ 2,985,356
============ ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,368,655 $ 2,839,074
General partner - 4.9% 122,044 146,282
------------ ------------
$ 2,490,699 $ 2,985,356
============ ============
Net earnings per Limited
Partnership Unit $ 0.25 $ 0.30
============ ============
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
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the three months ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unrealized
Gains on Losses on
Investment Investment
General Limited in Insured in Insured
Partner Partners Mortgages Mortgages Total
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ (2,612,029) $ 141,161,141 $ 103,741 $ (3,516,122) $135,136,731
Net earnings 122,044 2,368,655 -- -- 2,490,699
Distributions paid or
accrued of $0.75 per
Unit, including return of
of capital of $0.50 per Unit (370,062) (7,182,217) -- -- (7,552,279)
Adjustment to unrealized
gains on investment in
Insured Mortgages -- -- (20,910) -- (20,910)
Adjustment to unrealized
losses on investment in
Insured Mortgages -- -- -- (1,461,273) (1,461,273)
------------- ------------- ------------- ------------ ------------
Balance, March 31, 1997 $ (2,860,047) $ 136,347,579 $ 82,831 $ (4,977,395) $128,592,968
============= ============= ============= ============ ============
Limited Partnership Units outstanding -
March 31, 1997 9,576,290
=============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>7
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 three months ended
March 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,490,699 $ 2,985,356
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 8,675
Increase (decrease) in accounts payable and accrued expenses 11,127 (33,159)
Increase in receivables and other assets (318,467) (34,359)
------------ ------------
Net cash provided by operating activities 2,192,034 2,889,188
------------ ------------
Cash flows from investing activities:
Proceeds from disposition of mortgages -- 37,325
Receipt of principal from scheduled payments 253,050 188,519
------------ ------------
Net cash provided by investing activities 253,050 225,844
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (33,532,120) (3,323,003)
------------ ------------
Net cash used in financing activities (33,532,120) (3,323,003)
------------ ------------
Net decrease in cash and cash equivalents (31,087,036) (207,971)
Cash and cash equivalents, beginning of period 38,580,668 8,774,654
------------ ------------
Cash and cash equivalents, end of period $ 7,493,632 $ 8,566,683
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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. 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).
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, insured in whole or in part by the
federal government, are non-recourse first liens on multifamily residential
developments or retirement homes. As discussed in Note 3, certain of the FHA-
Insured Certificates are secured by co-insured mortgages.
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, 1997
and December 31, 1996 and the results of its operations and its cash flows for
the three months ended March 31, 1997 and 1996.
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,
1996.
New Accounting Standards
------------------------
In February 1997, FASB issued SFAS No. 128 "Earnings per Share" ("FAS
128"). FAS 128 changes the requirements for calculation and disclosure of
earnings per share. This statement eliminates the calculation of primary
earnings per share and requires the disclosure of basic earnings per share
and diluted earnings per share. There will be no impact to the earnings
per Unit of limited partnership interest.
During 1997 FASB issued SFAS No. 129 "Disclosure of Information about
Capital Structure" ("FAS 129"). FAS 129 continues the existing
requirements to disclose the pertinent rights and privileges of all
securities other than ordinary common stock but expands the number of
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
companies subject to portions of its requirements. The Partnership does
not anticipate an impact to its current disclosures.
3. INVESTMENT IN INSURED MORTGAGES
The following is a discussion of the Partnership's investment in FHA-
Insured Certificates and GNMA Mortgage-Backed Securities as of March 31, 1997
and December 31, 1996:
Fully Insured Originated Insured Mortgages and
Acquired Insured Mortgages
----------------------------------------------
Listed below is the Partnership's aggregate investment in Fully
Insured Mortgages as of March 31, 1997 and December 31, 1996:
<TABLE><CAPTION> March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Fully Insured Originated Insured:
Number of Mortgages 6 6
Amortized Cost $ 52,957,796 $ 53,047,822
Face Value 51,082,235 51,162,234
Fair Value 51,620,175 52,063,040
Fully Insured Acquired Insured:
Number of
GNMA Mortgage-Backed
Securities 10 10
FHA-Insured Certificates 2 2
FHA-Insured Loan 1 1
Amortized Cost $ 41,644,672 $ 41,743,903
Face Value 41,590,797 41,689,508
Fair Value 39,927,691 41,024,194
</TABLE>
As of May 1, 1997, all of the Partnership's fully insured mortgage
investments are current with respect to the payment of principal and
interest.
In addition to base interest payments from Fully Insured Originated
Insured Mortgages, the Partnership is entitled to additional interest based
on a percentage of the net cash flow from the underlying development and of
the net proceeds from the refinancing, sale or other disposition of the
underlying development (referred to as Participations). During the three
months ended March 31, 1997 and 1996, the Partnership received additional
interest of $22,119 and $20,439, respectively, from the fully insured
Participations. These amounts are included in mortgage investment income
on the accompanying statements of operations.
Originated Coinsured FHA-Insured Certificates
---------------------------------------------
As of March 31, 1997 and December 31, 1996, the Partnership, had
invested in four FHA-Insured Certificates secured by coinsured mortgages.
As of March 31, 1997 and December 31, 1996, two of the four FHA-Insured
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN INSURED MORTGAGES - Continued
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 March 31, 1997, 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 actual and potential performance
problems with respect to the mortgage investments.
Listed below are the Originated Insured Mortgages co-insured by
Patrician:
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN INSURED MORTGAGES - Continued
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
--------------------------------------------- ------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
The Villas(1) $ 15,500,882 $ 15,734,591 $ 14,718,722 $ 15,528,982 $ 15,762,692 $ 14,859,882
St. Charles Place -
Phase II(2) 3,048,529 3,048,529 2,851,662 3,052,629 3,052,629 2,877,102
(1) As of May 1, 1997, the mortgagor has made payments of principal and interest due on the original mortgage through November
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.
(2) 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 May 1, 1997,
the mortgagor has made payments of principal and interest due on the mortgage through October 1995 to the Partnership.
Patrician is litigating the case in bankruptcy court while pursuing negotiations on a modification agreement with the borrower.
</TABLE>
The General Partner intends to continue to oversee the Partnership's
interest in these mortgages in an effort 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 March 31, 1997 and December 31, 1996, the Partnership held
investments in two FHA-Insured Certificates secured by coinsured
mortgages, where the coinsurance lender is Integrated Funding, Inc.
(IFI), an affiliate of the Partnership.
As of May 1, 1997, these two 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 6.75% for
1997 and will return to the previous rate of 7% for all subsequent
years. Delinquent principal and interest payments from September 1,
1996 through December 1, 1996 have been deferred with quarterly
payments to be paid out of available cash flow on the deferred amount.
No payments have been made on the deferred amount due to insufficient
cash flows. The impact of this modification will result in a decrease
in mortgage interest income for the first two years of the
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN INSURED MORTGAGES - Continued
modification commencing February 1996.
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 months ended March
31, 1997 and 1996. As of March 31, 1997 and December 31, 1996, these
two investments had an aggregate fair value of $14,938,552 and
$15,339,713, respectively.
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN INSURED MORTGAGES - Continued
<TABLE><CAPTION>
March 31, 1997 December 31, 1996
---------------------------- ---------------------------- Cumulative
Amortized Face Amortized Face Loan Losses
Cost Value Cost Value Recognized
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Woodland Apartments $ 12,145,651 $ 11,729,572 $ 12,166,667 $ 11,748,365 $ --
Spring Lake Village 4,977,655 4,922,548 5,000,233 4,933,126 115,301
</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
months ended March 31, 1997 and 1996, the Partnership received
additional interest of $0 and $67,454, respectively, from the
Participations. These amounts are included in mortgage investment
income on the accompanying statements of operations.
4. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the three months ended March 31, 1997 and 1996 are as follows:
1997 1996
--------- ---------
Quarter ended March 31, $ 0.75(1) $ 0.91(2)
========= =========
(1) This amount includes approximately $0.53 per Unit return of capital and
gain from the prepayment of the mortgage on Carmen Drive Estates. In
addition, this amount includes $.01 per Unit representing previously
undistributed accrued interest from St. Charles Place-Phase II and The
Villas.
(2) This amount includes $0.61 cents per Unit return of capital due to the
prepayment of the mortgage on Lakewood Villas, as well as $0.03 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
payment receipts are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base resulting from monthly
mortgage payments received or mortgage dispositions, (3) variations in the cash
flow attributable to the delinquency or default of Insured Mortgages and
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. DISTRIBUTIONS TO UNITHOLDERS - Continued
professional fees and foreclosure costs incurred in connection with those
Insured Mortgages and (4) variations in the Partnership's operating expenses.
5. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three
months ended March 31, 1997 and 1996, earned or received compensation or
payments for services from the Partnership as follows:
<PAGE>15
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. TRANSACTIONS WITH RELATED PARTIES - Continued
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
----------------------------------------------
For the three months
Capacity in Which ended March 31,
Name of Recipient Served/Item 1997 1996
- ----------------- -------------------------- ---------- --------
<S> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution $ 370,062 $449,008
AIM Acquisition Advisor/Asset Management Fee 247,605 395,670
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/
Management, Expense Reimbursement 15,600 20,144
Inc.
(1) The Advisor, pursuant to the Partnership Agreement, effective October 1, 1991, is entitled to an Asset Management Fee equal to
0.75% and 0.95% of Total Invested Assets (as defined in the Partnership Agreement) for the three months ended March 31, 1997
and 1996, respectively. CRIIMI MAE Services Limited Partnership, the sub-advisor to the Partnership (the Sub-advisor) is
entitled to a fee of 0.28% of Total Invested Assets. Of the amounts paid to the Advisor, the Sub-advisor earned a fee equal to
$92,430 and $116,610, for the three months ended March 31, 1997 and 1996. The Sub-advisor is an affiliate of CRIIMI MAE.
</TABLE>
<PAGE>16
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 March 31, 1997, the Partnership had invested in 23 insured mortgages,
with an aggregate amortized cost of approximately $130 million, an aggregate
face value of approximately $128 million and an aggregate fair value of
approximately $124 million, as discussed below.
As of May 1, 1997, 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 May 1, 1997, two of the four 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 an adverse material
impact on the Partnership's financial statements.
Results of Operations
- ---------------------
Net earnings decreased for the three months ended March 31, 1997 as
compared to the corresponding period in 1996. This decrease was primarily due
to the disposition of four mortgages in November and December 1996, as discussed
below.
Mortgage investment income decreased for the three months ended March 31,
1997 as compared to the corresponding period in 1996, primarily due to the
prepayment of the mortgage on Woodbine at Lakewood Apartments in November 1996
and the mortgages on Pembrook Apartments, Carmen Drive Estates and Skyridge Club
in December 1996.
Interest and other income increased for the three months ended March 31,
1997 as compared to the corresponding period in 1996, primarily due to the
investment of proceeds received from three mortgages which prepaid in November
and early December 1996 and were distributed on February 3, 1997, as previously
discussed. The fourth mortgage prepaid in late December 1996, the proceeds
of which were distributed on May 1, 1997. This compares to the investment of
proceeds from one mortgage which prepaid in December 1995 and whose proceeds
were distributed in May 1996.
Asset management fees to related parties decreased for the three months
ended March 31, 1997 as compared to the corresponding period in 1996. As of
January 1, 1997, the asset management fee to the Advisor was reduced to 0.75%
from 0.95% of Total Invested Assets, pursuant to the Partnership Agreement dated
October 1, 1991. In addition, the asset management fee decreased due to the
disposition of four mortgages in late 1996, as discussed above.
General and administrative expenses decreased for the three months ended
March 31, 1997 as compared to the corresponding period in 1996, primarily due to
a reduction in legal-related expenses associated with the transfer to IFI of
certain coinsured mortgages in 1996.
Gain on mortgage disposition decreased for the three months ended March 31,
1997 as compared to the corresponding period in 1996, due to additional gain
recognized in the first quarter of 1996 related to the December 1995 prepayment
of the mortgage on Lakewood Villas. No mortgage investments were disposed of
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
during the three months ended March 31, 1997.
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 three months of 1997 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
payment receipts are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base resulting from 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 three months
ended March 31, 1997 as compared to the corresponding period in 1996, primarily
due to the decrease in net earnings, as discussed above. In addition,
receivables and other assets increased as a result of increases in the number of
delinquent mortgage payments from The Villas and St. Charles Place-Phase II
mortgages.
Net cash provided by investing activities increased for the three months
ended March 31, 1997 as compared to the corresponding period in 1996. This
increase is primarily due to a reduction in principal from scheduled payments in
1996 resulting from the modification of the mortgage on Springlake Village, as
discussed in Note 3. This increase was 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 three months ended
March 31, 1997 as compared to the corresponding period in 1996. This increase
was due to the distribution of return of capital and gain from the prepayment of
three mortgages during late 1996, as discussed previously.
<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 March 31, 1997.
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
May 12, 1997 /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
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,494
<SECURITIES> 71,435
<RECEIVABLES> 57,850
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 136,779
<CURRENT-LIABILITIES> 8,186
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 128,593
<TOTAL-LIABILITY-AND-EQUITY> 136,779
<SALES> 0
<TOTAL-REVENUES> 2,838
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,491
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,491
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
