<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
------------------
Commission file number 1-12724
-----------------
AMERICAN INSURED MORTGAGE INVESTORS - L.P.- SERIES 88
-----------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 13-3398206
------------------------------- ------------------
(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, 8,802,091 depositary units of limited partnership
interest were outstanding.
<PAGE>2
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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) . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 20
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . . 24
Signature . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>3
PART I. FINANCIAL INFORMATION
PART 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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:
Acquired insured mortgages $ 75,519,764 $ 67,450,597
Originated insured mortgages 44,901,596 41,963,418
------------- ------------
120,421,360 109,414,015
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 30,198,385 30,302,269
Acquired insured mortgages 1,168,801 1,190,107
------------- ------------
31,367,186 31,492,376
Due from HUD 254,558 4,186,483
Cash and cash equivalents 3,693,833 5,364,255
Investment in affiliate 1,196,530 1,196,530
Notes receivable and due from
affiliates 905,411 878,508
Receivables and other assets 2,331,316 2,273,022
------------- ------------
Total assets $ 160,170,194 $154,805,189
============= ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 2,961,797 $ 4,072,471
Accounts payable and accrued expenses 219,004 226,554
------------ ------------
Total liabilities 3,180,801 4,299,025
------------ ------------
Commitments and contingencies
Partners' equity:
Limited partners' equity 159,579,724 160,824,608
General partner's deficit (915,717) (851,574)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Net unrealized losses on investment
in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities (1,055,864) (8,848,120)
------------ ------------
Total partners' equity 156,989,393 150,506,164
------------ ------------
Total liabilities and
partners' equity $160,170,194 $154,805,189
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>4
PART I. FINANCIAL INFORMATION
PART 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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 $ 3,073,789 $ 2,962,192 $ 9,402,950 $ 9,138,337
Interest and other income 101,690 179,092 653,103 655,304
------------ ------------ ------------ ------------
3,175,479 3,141,284 10,056,053 9,793,641
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 369,564 379,835 1,117,525 1,136,723
General and administrative 120,054 385,883 297,250 735,177
Interest expense to affiliate -- -- -- 71,388
Provision for settlement of
litigation -- -- -- 349,824
------------ ------------ ------------ ------------
489,618 765,718 1,414,775 2,293,112
------------ ------------ ------------ ------------
Earnings before gains (loss) on
mortgage dispositions 2,685,861 2,375,566 8,641,278 7,500,529
Mortgage dispositions:
Gains -- 864,085 2,452,221 864,085
Loss -- -- -- (42,488)
------------ ------------ ------------ ------------
Net earnings $ 2,685,861 $ 3,239,651 $ 11,093,499 $ 8,322,126
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,554,254 $ 3,080,908 $ 10,549,918 $ 7,914,342
General partner - 4.9% 131,607 158,743 543,581 407,784
------------ ------------ ------------ ------------
$ 2,685,861 $ 3,239,651 $ 11,093,499 $ 8,322,126
============ ============ ============ ============
Net earnings per weighted average
Limited Partnership
Unit outstanding $ .29 $ 0.35 $ 1.20 $ .90
============ ============ ============ ============
Weighted average Limited
Partnership Units outstanding 8,802,091 8,802,091 8,802,091 8,821,139
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>5
PART I. FINANCIAL INFORMATION
PART 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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
Repurchased Certificates
Limited and GNMA Total
General Limited Partnership Mortgage-Backed Partners'
Partner Partners Units Securities Equity
------------ ------------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ (851,574) $ 160,824,608 $ (618,750) $ (8,848,120) $ 150,506,164
Net earnings 543,581 10,549,918 -- -- 11,093,499
Distributions paid or accrued
of $1.34 per Unit,
including return of capital (607,724) (11,794,802) -- -- (12,402,526)
Adjustment to net unrealized
losses on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed
Securities -- -- -- 7,792,256 7,792,256
------------ ------------- ----------- -------------- ------------
Balance, September 30, 1995 $ (915,717) $159,579,724 $ (618,750) $ (1,055,864) $156,989,393
============ ============= =========== ============== ============
Limited Partnership Units
outstanding - September 30,
1995 8,802,091
=============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>6
PART I. FINANCIAL INFORMATION
PART 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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 $ 11,093,499 $ 8,322,126
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gains on mortgage dispositions (2,452,221) (864,085)
Loss on mortgage disposition -- 42,488
Payments made and treated as an addition to AHFS
and Due from HUD and income accrued on AHFS and Due
from HUD (67,180) (573,545)
Changes in assets and liabilities:
Increase in receivables and other assets (58,294) (732,924)
Decrease in accounts payable and accrued
expenses (7,550) (119,362)
(Increase) decrease in investment in affiliate and
notes receivable and due from affiliates (26,903) 1,747,895
Decrease in note payable and due to affiliate -- (1,784,688)
------------ ------------
Net cash provided by operating activities 8,481,351 6,037,905
------------ ------------
Cash flows from investing activities:
Proceeds from mortgage dispositions 9,316,015 20,589,305
Investment in acquired insured mortgages (6,640,122) (13,776,970)
Receipt of principal from scheduled payments 685,534 561,763
------------ ------------
Net cash provided by investing activities 3,361,427 7,374,098
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (13,513,200) (8,084,983)
Repurchase of Limited Partnership Units -- (618,750)
------------ ------------
Net cash used in financing activities (13,513,200) (8,703,733)
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,670,422) 4,708,270
Cash and cash equivalents, beginning of period 5,364,255 4,336,899
------------ ------------
Cash and cash equivalents, end of period $ 3,693,833 $ 9,045,169
============ ============
</TABLE>
<PAGE>7
The accompanying notes are an integral part
of these financial statements.
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
American Insured Mortgage Investors L.P. - Series 88 (the Partnership) was
formed under the Uniform Limited Partnership Act of the state of Delaware on
February 13, 1987. The Partnership's reinvestment period expires on December
31, 1996 and the Partnership Agreement states that the Partnership will
terminate on December 31, 2021, 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 consists of 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
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Basis of Presentation - Continued
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,
1994.
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES
A. Fully-insured mortgage investments
----------------------------------
As of September 30, 1995 and December 31, 1994, the Partnership's
investment in fully insured acquired insured mortgages, recorded at fair
value, consisted of 18 and 12 GNMA Mortgage-Backed Securities,
respectively, and 7 and 8 FHA-Insured Certificates, respectively. As of
September 30, 1995 and December 31, 1994, these mortgage investments had an
aggregate amortized cost of $75,548,012 and $72,138,726, respectively, an
aggregate face value of $75,732,465 and $72,256,566, respectively, and an
aggregate fair value of $75,519,764 and $67,450,597, respectively.
As of September 30, 1995 and December 31, 1994, the Partnership's
investment in fully insured originated insured mortgages, recorded at fair
value, consisted of one FHA-Insured Certificate with an amortized cost of
$11,424,569 and $11,462,535, respectively, a face value of $11,055,703 and
$11,089,493, respectively, and a fair value of $11,149,418 and $10,421,526,
respectively.
As of November 10, 1995, all of the Partnership's fully insured mortgage
investments, recorded at fair value, were current with respect to the
payment of principal and interest, except for the mortgage on Water's Edge
of New Jersey, a fully insured construction loan. The property underlying
this construction loan is a nursing home located in Trenton, New Jersey.
As of November 10, 1995, the mortgagor has made payments of interest
through January 1995 and the total delinquent interest was approximately
$760,000. The Partnership's investment in this FHA-Insured Certificate is
fully insured by the United States Department of Housing and Urban
Development (HUD). The general partner is evaluating its alternatives with
respect to this construction loan. It is not anticipated that this
delinquency will have an adverse material impact on the Partnership's
financial statements.
During the nine months ended September 30, 1995, the Partnership
acquired the following fully insured acquired insured mortgages and
committed to acquire acquired insured mortgages and make future advances on
the following fully insured government insured construction loans:
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
<TABLE>
<CAPTION>
Purchase Funding Effective
Date of Price/ Commitments as of Interest
Complex Name Acquisition Advance September 30, 1995 Rate
- -------------------------- ------------ ----------- ------------------ ---------
<S> <C> <C> <C> <C>
Acquired Insured Mortgages
- --------------------------
Tehama Estates January 1995 $ 1,328,768 $ -- 9.07%
Westview Apartments April 1995 1,149,323 -- 8.65%
Orchard Creek May 1995 1,297,631 -- 8.63%
Burlwood Apartments August 1995 656,900 -- 9.00%
Oak Lawn Apartments August 1995 487,700 -- 9.00%
Collin Care Center August 1995 1,719,800 -- 8.13%
Holton Manor October 1995 -- 1,047,630 8.14%
----------- ------------
Subtotal-Acquired Insured Mortgages 6,640,122 1,047,630
Construction Loans
- ------------------
Water's Edge of New Jersey March 1992 -- 796,827 9.39%
Harbor View Estates January 1993 -- 176,063 9.50%
----------- -----------
Subtotal-construction loans -- 972,890
----------- -----------
Total $ 6,640,122 $ 2,020,520
=========== ===========
</TABLE>
During June 1995, the mortgage on Gilbert Greens Apartments was
prepaid by the mortgagor. In connection with this prepayment, in June
1995, the Partnership received net prepayment proceeds of approximately
$3.0 million and recognized a financial statement gain of $143,107. The
Partnership reinvested the net proceeds in fully insured mortgage
investments.
B. Coinsured mortgage investments
------------------------------
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
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
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 three FHA-Insured Certificates secured by coinsured
mortgages. One of these coinsured mortgage investments, the mortgage on
St. Charles Place - Phase II, is coinsured by The Patrician Mortgage
Company (Patrician), an unaffiliated third party coinsurance lender under
the HUD coinsurance program. As of September 30, 1995 and December 31,
1994, the remaining two FHA-Insured Certificates are coinsured by
Integrated Funding, Inc. (IFI), an affiliate of the Partnership.
1. Coinsured by third party
------------------------
The Partnership's investment in the St. Charles Place - Phase II
mortgage had an amortized cost equal to its face value of $3,754,491
and $3,767,426, as of September 30, 1995 and December 31, 1994,
respectively, and a fair value of $3,551,739 and $3,337,126, as of
September 30, 1995 and December 31, 1994, respectively. These amounts
represent the Partnership's approximate 55% ownership interest in the
mortgage. The remaining 45% ownership interest is held by American
Insured Mortgage Investors L.P. - Series 86 (AIM 86), 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 seeking to acquire and ultimately dispose of the property.
The General Partner is monitoring Patrician's efforts to complete the
foreclosure action including the subsequent acquisition and
disposition of the property. If the sale of the property
collateralizing the mortgage produces insufficient net proceeds to
repay the mortgage obligation to the Partnership, Patrician will be
liable to the Partnership for its share of the deficiency. Based on
the General Partner's assessment of the collateral underlying the
mortgage, including information related to the financial condition of
Patrician, the General Partner believes the carrying value of this
asset is realizable. The Partnership intends to reinvest any net
disposition proceeds from the disposition of this mortgage investment
in fully insured acquired insured mortgages.
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
The General Partner intends to continue to oversee the Partnership's
interest in this mortgage investment to ensure that Patrician meets
its coinsurance obligations. The General Partner's assessment of the
realizability of the carrying value of the St. Charles Place-Phase II
mortgage is based on current information, and to the extent current
conditions change or additional information becomes available, 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 two FHA-Insured Certificates secured by coinsured
mortgages, where the coinsurance lender is IFI. These investments
were made on behalf of the Partnership 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 on these
mortgage investments.
As of September 30, 1995 and December 31, 1994, these two mortgage
investments had an aggregate fair value of $30,200,439 and
$28,204,766, respectively, and amortized costs and face values as
follows:
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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 Cumulative
September 30, September 30, December 31, December 31, Loan Losses
1995 1995 1994 1994 Recognized
------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
The Breakers at
Golf Mill $ 22,703,456 $ 22,703,456 $ 22,821,693 $ 22,821,693 $ 980,000
Summerwind Apts.-
Phase II 8,046,696 9,515,797 8,071,755 9,556,080 1,511,743
------------ ------------ ------------ ------------ -----------
$ 30,750,152 $32,219,253 $ 30,893,448 $ 32,377,773 $ 2,491,743
============ ============ ============ ============ ===========
</TABLE>
No loan losses were recognized on these coinsured mortgages during the
nine months ended September 30, 1995. As of November 10, 1995, both
mortgages were current with respect to the payment of principal and
interest.
In connection with the FHA-Insured Certificates secured by coinsured
mortgages the Partnership has sought, in addition to base interest
payments, additional interest 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 (commonly
termed Participations). All of the FHA-Insured Certificates secured
by coinsured mortgages contain such Participations. During the nine
months ended September 30, 1995 and 1994, the Partnership received
additional interest of $133,120 and $22,612, respectively, from The
Breakers at Golf Mill, one of these Participations. In conjunction
with a 1994 mortgage modification, the participation agreement was
terminated, and effective March 1, 1995, the Partnership is no longer
entitled to receive Participations with respect to The Breakers at
Golf Mill. These amounts are included in mortgage investment income
on the accompanying statements of operations.
4. INVESTMENT IN FHA-INSURED LOANS
As of September 30, 1995 and December 31, 1994, the Partnership's
investment in fully insured FHA-Insured Loans, recorded at amortized cost,
consisted of four originated insured mortgages and two acquired insured
mortgages. The four originated insured mortgages had an aggregate amortized
cost of $30,198,385 and $30,302,269, an aggregate face value of $29,332,365 and
$29,426,280, and an aggregate fair value of $29,948,293 and $28,272,394, as of
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
September 30, 1995 and December 31, 1994, respectively. The acquired insured
mortgages had an aggregate amortized cost of $1,168,801 and $1,190,107, an
aggregate face value of $1,165,750 and $1,186,936, and an aggregate fair value
of $1,205,418 and $1,205,546, as of September 30, 1995 and December 31, 1994,
respectively. As of November 10, 1995, all of the Partnership's mortgage
investments, recorded at amortized cost, were current with respect to the
payment of principal and interest.
All of the originated insured mortgages, carried at amortized cost, contain
Participations. During the nine months ended September 30, 1995 and 1994, the
Partnership received additional interest of $46,583 and $13,938, respectively,
from three and one of the Participations, respectively. During the three months
ended September 30, 1995 and 1994, the Partnership received additional interest
of $0 and $13,938, respectively, from one of the Participations. These
amounts, if any, are included in mortgage investment income on the
accompanying statements of operations.
5. DUE FROM HUD
Due from HUD consists of amounts due in connection with losses incurred on
the disposition of coinsured mortgage investments. Prior to these dispositions,
these mortgage investments were accounted for as assets held for sale under the
coinsurance program (AHFS). The following is a summary of amounts due from HUD
as of September 30, 1995 and December 31, 1994:
During 1994, the Partnership filed claims with HUD for insurance benefits
in connection with losses incurred on the sales of the properties underlying the
coinsured mortgages on Hazeltine Shores, Pinewood Park Apartments and Hamlet at
Cobb's Landing. In January 1994, the Partnership received sales proceeds of
approximately $6.6 million from the December 1993 sale of the property
underlying the coinsured mortgage on Hazeltine Shores. A claim for insurance
benefits was submitted to HUD in January 1994. In August 1994, the Partnership
received claim proceeds of approximately $3.2 million, which included accrued
interest. Additionally, during 1994, the Partnership received approximately
$457,000 from the mortgagor's trustee. The Partnership reinvested the net
disposition proceeds in acquired insured mortgages during 1994. As of September
30, 1995 and December 31, 1994, Due from HUD includes approximately $255,000 and
$202,000, respectively, related to the disposition of Hazeltine Shores, which
will be included in a supplemental claim expected to be filed with HUD during
the fourth quarter of 1995.
Pinewood Park Apartments is a 204-unit garden complex located in Kissimmee,
Florida. Beginning in mid-1991, the mortgagor was delinquent on its principal
and interest payments and subsequently defaulted. Consequently, the servicer
filed an Initial Notice of Default with HUD in April 1992 and the General
Partner initiated foreclosure proceedings in November 1992. On March 18, 1993,
the borrower filed for protection under Chapter 11 of the Federal Bankruptcy
<PAGE>15
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. DUE FROM HUD - Continued
Code. During 1994, the Partnership acquired the deed to the property from the
mortgagor in lieu of foreclosure and, in August 1994, received proceeds of
approximately $5.1 million from the sale of the property. In September 1994, a
claim for insurance benefits of approximately $3.2 million, including accrued
interest of approximately $1.7 million, was submitted to HUD. Additionally,
during 1994, the Partnership received approximately $287,000 from the mortgagor.
In March 1995, the Partnership received claim proceeds of approximately $3.6
million, which included accrued interest, and recognized a gain of $1,075,099.
The Partnership reinvested the net proceeds in fully insured acquired insured
mortgages. As of September 30, 1995, no amounts are due from HUD related to
Pinewood Park Apartments. As of December 31, 1994, Due from HUD includes
approximately $2.4 million related to this claim.
The mortgage on Hamlet at Cobb's Landing converted to a permanent loan
during the first quarter of 1992. The mortgagor on this mortgage had been
delinquent on its payments to the Partnership beginning with the last quarter of
1991. As a result, the servicer filed an Initial Notice of Default with HUD in
May 1992. The General Partner initiated foreclosure proceedings in November
1992. On March 18, 1993, the borrower filed for protection under Chapter 11 of
the Federal Bankruptcy Code. During 1994, the Partnership acquired the deed to
the property from the mortgagor in lieu of foreclosure and in September 1994,
received proceeds of approximately $8.5 million from the sale of the property.
In October 1994, a claim for insurance benefits of approximately $2.3 million,
including accrued interest of approximately $2.1 million, was submitted to HUD.
Additionally, during 1994, the Partnership received approximately $685,000 from
the mortgagor. In May 1995, the Partnership received claim proceeds of
approximately $3.1 million, which included accrued interest, and recognized a
gain of $1,234,015. The Partnership reinvested the net proceeds in fully
insured acquired insured mortgages. As of September 30, 1995, no amounts are
due from HUD related to Hamlet at Cobb's Landing. As of December 31, 1994, Due
from HUD includes approximately $1.6 million related to this claim.
6. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the quarters ended September 30, 1995 and 1994 are as follows:
<PAGE>16
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS - Continued
1995 1994
------- -------
Quarter ended March 31, $0.49(1) $0.26(3)
Quarter ended June 30, 0.53(2) 0.25(4)
Quarter ended September 30, 0.32(5) 0.46(6)
----- -----
1.34 0.97
===== =====
(1) This amount includes approximately $0.15 per Unit of accrued, but
previously undistributed, interest related to the receipt of claim proceeds
from the mortgage on Pinewood Park Apartments and approximately $0.01 per
Unit representing previously undistributed accrued interest received from a
delinquent mortgage.
(2) This amount includes approximately $0.22 per Unit of accrued, but
previously undistributed, interest and capital gain related to the receipt
of claim proceeds from the mortgage on Hamlet at Cobb's Landing.
(3) This amount includes approximately $0.05 per Unit representing previously
undistributed accrued interest received from delinquent mortgages.
(4) This amount includes approximately $0.02 per Unit representing previously
undistributed accrued interest received from delinquent mortgages.
(5) This amount includes approximately $0.02 per Unit representing capital gain
from the disposition of the mortgage on Gilbert Greens Apartments.
(6) The amount includes approximately $0.22 per Unit of accrued but previously
undistributed interest received from HUD and capital gain relating to the
foreclosure and sale of the mortgage on Hazeltine Shores.
The basis for paying distributions to Unitholders is cash flow from
operations, which includes regular interest income and principal from insured
mortgages and gains, if any, from mortgage dispositions. Although the insured
mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each quarter due to (1)
the fluctuating yields in the short-term money market where the monthly mortgage
payments received are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base and monthly mortgage payments
due to monthly mortgage payments received or mortgage dispositions, (3)
variations in the cash flow attributable to the delinquency or default of
insured mortgages and professional fees and foreclosure and acquisition costs
incurred in connection with those insured mortgages and (4) variations in the
Partnership's operating expenses.
<PAGE>17
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three and
nine months ended September 30, 1995 and 1994, have earned or received
compensation or payments for services from the Partnership as follows:
<PAGE>18
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
For the For the
three months ended nine months ended
Capacity in Which September 30, September 30,
Name of Recipient Served/Item 1995 1994 1995 1994
- ----------------- ----------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc.(3) General Partner/Distributions $145,128 $208,622 $ 607,724 $440,589
AIM Acquisition Advisor/Asset Management Fee 369,564 379,835 1,117,525 1,136,723
Partners, L.P.(1)
CRI(2) Affiliate of General Partner/ 9,212 43,282 62,347 159,496
Expense Reimbursement
CRIIMI MAE Affiliate of General Partner/
Management, Inc. Expense Reimbursment 8,595 -- 8,595 --
(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 $111,950 for the three months ended September 30, 1995 and 1994, respectively. CRI/AIM Management, Inc. earned a fee equal
to $220,449 and $335,029, 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 $108,923 and $0, for the three months ended September 30, 1995 and
1994, respectively. CRIIMI MAE Services Limited Partnership earned a fee equal to $108,923 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 reimbursements 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.
(3) These amounts include special distributions as described above in Note 6.
</TABLE>
8. LITIGATION
During 1994, IFI, an affiliate of the Partnership, filed a Complaint in the
United States District Court for the District of Minnesota. The case concerned
the violation of the HUD regulatory agreement and breach of fiduciary duty by
the mortgagor of the mortgage on Hazeltine Shores. In response to this
Complaint, the mortgagor filed counterclaims against IFI and against the
<PAGE>19
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. LITIGATION - Continued
Partnership, the General Partner and CRI. A motion to dismiss the counterclaims
was granted with prejudice on July 24, 1995.
<PAGE>20
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 35 insured
mortgages with an aggregate amortized cost of approximately $153 million, an
aggregate face value of approximately $153 million and an aggregate fair value
of approximately $152 million. During the nine months ended September 30, 1995,
the Partnership acquired six GNMA Mortgage-Backed Securities for an aggregate
purchase price of $6.6 million. As of September 30, 1995, the Partnership had
committed approximately $2 million to acquire insured mortgages and to fund
future construction loan advances.
As of November 10, 1995, all of the FHA-Insured Certificates, GNMA
Mortgage-Backed Securities and FHA-Insured Loans were current with respect to
the payment of principal and interest except for the fully insured construction
loan on Waters Edge of New Jesey, for which the mortgagor had made payments
through January 1995, and the coinsured mortgage on St. Charles Place - Phase
II, for which the mortgagor had made payments through February 1995. 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 decreased for the three months ended September 30, 1995 as
compared to the corresponding period in 1994 primarily as a result of decreases
in gains on mortgage dispositions and interest and other income, as discussed
below. Partially, offsetting these decreases was a decrease in general and
administrative expenses, as discussed below. Net earnings increased for the
nine months ended September 30, 1995 as compared to the corresponding period in
1994 primarily as a result of increases in mortgage investment income and net
gains on mortgage dispositions, as discussed below, and decreases in general
and administrative expenses and the provision for settlement of litigation, as
discussed below.
Mortgage investment income increased for the three and nine months ended
September 30, 1995, as compared to the corresponding periods in 1994. These
increases were primarily due to income recognized on insured mortgages acquired
during 1994 and 1995 as a result of the disposition of the properties underlying
the mortgages on Hazeltine Shores, Pinewood Park Apartments and Hamlet at Cobb's
Landing and the reinvestment of the net proceeds related thereto.
Interest and other income decreased for the three months ended September
30, 1995 as compared to the corresponding period in 1994 primarily due to the
timing of the reinvestment of net disposition proceeds, as discussed above.
Interest and other income remained substantially unchanged for the nine months
ended September 30, 1995 as compared to the corresponding period in 1994.
General and administrative expenses decreased for the three and nine months
ended September 30, 1995 as compared to the corresponding periods in 1994. This
decrease was primarily a result of non-recurring payroll expenses and
professional fees incurred in connection with the disposition of Hazeltine
<PAGE>21
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Shores, Pinewood Park Apartments and Hamlet at Cobb's Landing during 1994. Also
contributing to the decrease was a one-time payment in 1994 for the
Partnership's initial listing on the American Stock Exchange.
Interest expense to affiliate decreased for the nine months ended September
30, 1995 as compared to the corresponding period in 1994 as a result of the
paydown of a note payable to American Insured Mortgage Investors - Series 85,
L.P., an affiliate of the Partnership, during the second quarter of 1994.
Provision for settlement of litigation decreased for the nine months ended
September 30, 1995 as compared to the corresponding period in 1994 due to the
recognition of a non-recurring provision for settlement of litigation in the
amount of $349,824 during the first quarter of 1994 related to the repurchase of
50,000 Units of limited partnership interest in accordance with the terms of the
settlement.
Gains on mortgage dispositions decreased for the three months ended
September 30, 1995 as compared to the corresponding period in 1994. Net gain on
mortgage dispositions increased for the nine months ended September 30, 1995 as
compared to the corresponding period in 1994. Gains or losses on mortgage
dispositions are based on the number, carrying amounts and proceeds of mortgage
investments disposed of during the period. During the three months ended
September 30, 1994, the Partnership received the coinsurance proceeds related to
the disposition of the mortgage on Hazeltine Shores and recognized a gain of
approximately $864,000. The Partnership did not dispose of any mortgages during
the three months ended September 30, 1995. During the nine months ended
September 30, 1995, the Partnership recognized aggregate gains of approximately
$2.5 million related to the settlement of the coinsurance claims on Pinewood
Park Apartments and Hamlet at Cobb's Landing and the prepayment of the mortgage
on Gilbert Greens Apartments. This compares to the recognition of the gain of
approximately $864,000 related to the disposition of Hazeltine Shores, and a
loss of approximately $42,000 in connection with the disposition of the mortgage
on Ashbury Meadows Apartments during the corresponding period in 1994.
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 cash flow from
operations, which includes regular interest income and principal from insured
mortgages and gains, if any, from mortgage dispositions. Although the insured
mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each quarter due to (1)
the fluctuating yields in the short-term money market where the monthly mortgage
payments received are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base and monthly mortgage payments
due to monthly mortgage payments received or mortgage dispositions, (3)
variations in the cash flow attributable to the delinquency or default of
<PAGE>22
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
insured mortgages and professional fees and foreclosure and acquisition costs
incurred in connection with those insured mortgages and (4) variations in the
Partnership's operating expenses.
Net cash provided by operating activities increased for the nine months
ended September 30, 1995 as compared to the corresponding period in 1994
primarily due to an increase in net earnings, as discussed above. Also
contributing to the increase was a decrease in payments made and treated as an
addition to AHFS and Due from HUD during the first three quarters of 1995, as
compared to the corresponding period in 1994, and an increase in receivables and
other assets during 1994 as a result of the disposition of the properties
underlying the coinsured mortgages on Pinewood Park Apartments, Hazeltine Shores
and Hamlet at Cobb's Landing, as discussed above.
Net cash provided by investing activities decreased for the nine months
ended September 30, 1995 as compared to the corresponding period in 1994
primarily due to a decrease in proceeds from mortgage dispositions from
approximately $20.6 million for the nine months ended September 30, 1994 to
approximately $9.3 million for the corresponding period in 1995. Partially
offsetting this decrease was a decrease in the acquisition of acquired insured
mortgages from approximately $13.8 million for the nine months ended September
30, 1994 to approximately $6.6 million for the corresponding period in 1995.
Net cash used in financing activities increased for the nine months ended
September 30, 1995 as compared to the corresponding period in 1994 primarily due
to an increase in distributions paid to partners as a result of special
distributions related to the receipt of net disposition proceeds and previously
undistributed accrued interest received in connection with the disposition of
the mortgages on Hazeltine Shores, Pinewood Park Apartments and Hamlet at Cobb's
Landing during the fourth quarter of 1994 and the first and second quarters of
1995.
<PAGE>23
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During 1994, IFI, an affiliate of the Partnership, filed a Complaint in the
United States District Court for the District of Minnesota. The case concerned
the violation of the HUD regulatory agreement and breach of fiduciary duty by
the mortgagor of the mortgage on Hazeltine Shores. In response to this
Complaint, the mortgagor filed counterclaims against IFI and against the
Partnership, the General Partner and CRI. A motion to dismiss the counterclaims
was granted with prejudice on July 24, 1995.
<PAGE>24
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FROM 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>25
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 88
(Registrant)
By:CRIIMI, Inc.
General Partner
November 13, 1995 /s/ Cynthia O. Azzara
- ------------------ ---------------------------------
Date Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
<TABLE> <S> <C>
<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> 3,694
<SECURITIES> 120,421
<RECEIVABLES> 34,858
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 160,170
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 156,989
<TOTAL-LIABILITY-AND-EQUITY> 160,170
<SALES> 0
<TOTAL-REVENUES> 12,508
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,093
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,093
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,903
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 0
</TABLE>
