<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, 1996
------------------
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 September 30, 1996, 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, 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 . . . . . . 18
Signature . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
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:
Acquired insured mortgages $ 73,626,070 $ 77,918,878
Originated insured mortgages 44,365,287 45,426,757
------------- ------------
117,991,357 123,345,635
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 29,784,532 30,162,342
Acquired insured mortgages 1,137,813 1,161,339
------------- ------------
30,922,345 31,323,681
Due from HUD 3,221,611 285,330
Cash and cash equivalents 1,772,450 2,881,537
Investment in affiliate 1,177,774 1,189,316
Notes receivable from affiliates and due
from affiliates 833,595 797,687
Receivables and other assets 2,398,325 2,103,710
------------- ------------
Total assets $ 158,317,457 $161,926,896
============= ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 2,776,685 $ 2,961,797
Accounts payable and accrued expenses 121,337 159,092
------------ ------------
Total liabilities 2,898,022 3,120,889
------------ ------------
Commitments and contingencies
Partners' equity:
Limited partners' equity 158,544,865 159,332,082
General partner's deficit (969,037) (928,476)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Unrealized losses on investment
in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities (3,388,856) (1,519,157)
Unrealized gains on investment in FHA-
Insured Certificates and GNMA
Mortgage-Backed Securities 1,851,213 2,540,308
------------ ------------
Total partners' equity 155,419,435 158,806,007
------------ ------------
Total liabilities and
partners' equity $158,317,457 $161,926,896
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>4
PART I. FINANCIAL INFORMATION
ITEM 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,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 2,999,765 $ 3,073,789 $ 9,215,191 $ 9,402,950
Interest and other income 33,748 101,690 201,827 653,103
------------ ------------ ------------ ------------
3,033,513 3,175,479 9,417,018 10,056,053
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 378,945 369,564 1,124,352 1,117,525
General and administrative 65,093 120,054 227,377 297,250
------------ ------------ ------------ ------------
444,038 489,618 1,351,729 1,414,775
Earnings before gains (losses) ------------ ------------ ------------ ------------
on mortgage dispositions and
mortgage modifications 2,589,475 2,685,861 8,065,289 8,641,278
Net gains (losses) on mortgage
dispositions and mortgage modifications -- -- (377,900) 2,452,221
------------ ------------ ----------- ------------
Net earnings $ 2,589,475 $ 2,685,861 $ 7,687,389 $ 11,093,499
============ ============ =========== ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,462,591 $ 2,554,254 $ 7,310,707 $ 10,549,918
General partner - 4.9% 126,884 131,607 376,682 543,581
------------ ------------ ----------- ------------
$ 2,589,475 $ 2,685,861 $ 7,687,389 $ 11,093,499
============ ============ =========== ============
Net earnings per Limited Partnership
Unit $ 0.28 $ 0.29 $ 0.83 $ 1.20
============ ============ =========== ============
</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 88
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
Repurchased Certificates Certificates
Limited and GNMA and GNMA Total
General Limited Partnership Mortgage-Backed Mortgage-Backed Partners'
Partner Partners Units Securities Securities Equity
------------ ------------- ----------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ (928,476) $ 159,332,082 $ (618,750) $ 2,540,308 $ (1,519,157) $ 158,806,007
Net earnings 376,682 7,310,707 -- -- -- 7,687,389
Distributions paid or accrued
of $0.92 per Unit,
including return of capital (417,243) (8,097,924) -- -- -- (8,515,167)
Adjustment to net unrealized
gains (losses) on investment
in FHA-Insured Certificates
and GNMA Mortgage-Backed
Securities -- -- -- (689,095) (1,869,699) (2,558,794)
------------ ------------- ----------- -------------- -------------- -------------
Balance, September 30, 1996 $ (969,037) $ 158,544,865 $ (618,750) $ 1,851,213 $ (3,388,856) $ 155,419,435
============ ============= =========== ============== ============== =============
Limited Partnership Units
outstanding - September 30,
1996 8,802,091
=============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>6
PART I. FINANCIAL INFORMATION
ITEM 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,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,687,389 $ 11,093,499
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Net loss (gain) on mortgage dispositions 377,900 (2,452,221)
Payments made and treated as additions to
Due from HUD (37,452) (67,180)
Changes in assets and liabilities:
Increase in receivables and other assets (294,615) (58,294)
Decrease in accounts payable and accrued
expenses (37,755) (7,550)
Increase in notes receivable from affiliates and
due from affiliates (35,908) (26,903)
Decrease in investment in affiliate 11,542 --
------------ ------------
Net cash provided by operating activities 7,671,101 8,481,351
------------ ------------
Cash flows from investing activities:
Proceeds from dispositions of insured mortgages 8,571,748 9,316,015
Investment in acquired insured mortgages (9,416,014) (6,640,122)
Receipt of principal from scheduled payments 764,357 685,534
------------ ------------
Net cash (used in) provided by investing activities (79,909) 3,361,427
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (8,700,279) (13,513,200)
------------ ------------
Net cash used in financing activities (8,700,279) (13,513,200)
------------ ------------
Net decrease in cash and cash equivalents (1,109,087) (1,670,422)
Cash and cash equivalents, beginning of period 2,881,537 5,364,255
------------ ------------
Cash and cash equivalents, end of period $ 1,772,450 $ 3,693,833
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>7
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). From inception through June 30, 1995, CRIIMI MAE was managed by
an advisor whose general partner is C.R.I., Inc. (CRI). However, effective June
30, 1995, CRIIMI MAE became a self-managed and self-administered real estate
investment trust (REIT) and, as a result, the advisor no longer advises 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 CRI). Effective September 6, 1991 and through June
30, 1995, a sub-advisory agreement (the Sub-advisory agreement) existed whereby
CRI/AIM Management, Inc. (the Sub-advisor), 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 REIT, 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, an affiliate
of CRIIMI MAE, 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,
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 88
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
A. Fully-insured mortgage investments
----------------------------------
As of September 30, 1996 and December 31, 1995, the Partnership's
investment in fully insured acquired insured mortgages, recorded at fair
value, consisted of five and seven FHA-Insured Certificates, respectively,
and 22 and 19 GNMA Mortgage-Backed Securities, respectively. As of
September 30, 1996 and December 31, 1995, these mortgage investments had an
aggregate amortized cost of $73,876,605 and $76,462,511, respectively, an
aggregate face value of $74,125,661 and $76,636,450, respectively, and an
aggregate fair value of $73,626,070 and $77,918,878, respectively.
As of September 30, 1996 and December 31, 1995, 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
$11,370,372 and $11,411,412, respectively, a face value of $11,007,336 and
$11,043,976, respectively, and a fair value of $11,022,530 and $11,289,584,
respectively.
As of October 31, 1996, all fully insured mortgages were current with
respect to the payment of principal and interest.
In February 1996, the General Partner instructed the servicer for the
mortgage on Water's Edge of New Jersey, a fully insured acquired
construction loan, to file a Notice of Default and an Election to Assign
the mortgage with the Department of Housing and Urban Development (HUD).
The property underlying this construction loan is a nursing home located in
Trenton, New Jersey. As of October 31, 1996, the Partnership had received
approximately $7.6 million or 70% of the proceeds from the assignment. The
remainder of the proceeds, approximately $3.1 million, is included in Due
from HUD. In conjunction with the assignment of the mortgage, the
Partnership recognized a loss of approximately $204,000 in the second
quarter of 1996.
During March 1996, a retained yield holder in the Harbor View Estates
loan, exercised its right to purchase the participation certificate with
respect to this insured mortgage after a Notice of Default was filed with
HUD. In March 1996, the Partnership received approximately $709,100 in
disposition proceeds, including approximately $17,400 of interest due to
the Partnership from this prepayment. The net principal proceeds were
approximately $691,000, resulting in a gain of approximately $600. The net
proceeds have been reinvested in fully insured mortgages. In April 1996,
approximately $4,900 was remitted to the retained yield holder in the
Harbor View Estates mortgage in connection with the final accounting of
this disposition. This resulted in a net loss of approximately $4,000
which is included on the accompanying statement of operations for the nine
months ended September 30, 1996.
<PAGE>9
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
In June 1996, the Partnership entered into a modification agreement
with the mortgagor of Turn at Gresham. This agreement effectively lowered
the interest rate on the mortgage from 8.375% to 8% for a period until
maturity. In addition, a seven year prepayment lockout was included in the
modification, followed by a 3%, 2%, and 1% penalty in years eight, nine,
and ten, respectively. The Partnership incurred a loss of approximately
$169,600 in connection with this modification which represents the write
off of unamortized costs.
During the nine months ended September 30, 1996, the Partnership
acquired the following fully insured mortgages:
<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>
Net
Date of Purchase Interest
Complex Name Acquisition Price Rate
------------ ----------- ----------- ----------
<S> <C> <C> <C>
Lorenzo Carolina Apartments June 1996 $ 1,036,515 7.875%
Silver Lake Plaza Apartments July 1996 5,241,474 7.700%
Woodcrest Townhomes July 1996 3,138,025 8.125%
-----------
Total $ 9,416,014
===========
</TABLE>
B. 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 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 cases, 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 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, 1996 and December 31,
1995, the remaining two coinsured FHA-Insured Certificates are coinsured by
Integrated Funding, Inc. (IFI), an affiliate of the Partnership.
<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
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 $3,735,895
and $3,749,991, as of September 30, 1996 and December 31, 1995,
respectively, and a fair value of $3,528,207 and $3,583,856, as of
September 30, 1996 and December 31, 1995, 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 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 this mortgage investment in an effort 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 the most recent
information available and to the extent these 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, 1996 and December 31, 1995, 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 October 31, 1996, both of these mortgages were current with
respect to the payment of principal and interest.
As of September 30, 1996 and December 31, 1995, these two mortgage
investments had an aggregate fair value of $29,814,550 and
$30,553,317, respectively, and amortized costs and face values as
follows:
<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
<TABLE>
<CAPTION>
Amortized Face Amortized Face
Cost Value Cost Value Cumulative
September 30, September 30, December 31, December 31, Loan Losses
1996 1996 1995 1995 Recognized(1)
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
The Breakers at
Golf Mill $ 22,535,864 $ 22,535,864 $ 22,662,648 $ 22,662,648 $ 980,000
Summerwind Apts.-
Phase II 8,010,265 9,457,896 8,037,922 9,501,784 1,511,743
------------ ------------ ----------- ------------ -----------
$ 30,546,129 $ 31,993,760 $30,700,570 $ 32,164,432 $ 2,491,743
============ ============ =========== ============ ===========
(1) No loan losses were recognized on these coinsured mortgages during the nine months ended September 30, 1996 and 1995.
</TABLE>
4. INVESTMENT IN FHA-INSURED LOANS
As of September 30, 1996 and December 31, 1995, the Partnership's
investment in fully insured FHA-Insured Loans, consisted of four originated
insured mortgages and two acquired insured mortgages. The four originated
insured mortgages had an aggregate amortized cost of $29,784,532 and
$30,162,342, an aggregate face value of $29,199,371 and $29,299,733, and an
aggregate fair value of $29,661,631 and $30,199,166, as of September 30, 1996
and December 31, 1995, respectively. The two acquired insured mortgages had an
aggregate amortized cost of $1,137,813 and $1,161,339, an aggregate face value
of $1,134,927 and $1,158,329, and an aggregate fair value of $1,194,496 and
$1,219,590, as of September 30, 1996 and December 31, 1995, respectively.
As of October 31, 1996, all of the Partnership's FHA-Insured Loans were
current with respect to the payment of principal and interest.
In addition to base interest payments under originated insured mortgages,
the Partnership is entitled to additional interest based on a percentage of the
net cash flow from the underlying development (referred to as Participations).
All of the FHA-Insured Loans contain Participations. During the nine months
ended September 30, 1996, and September 30, 1995, the Partnership received
additional interest of $84,947 and $46,581, respectively, from these
Participations. No interest from Participations was received during the three
months ended September 30, 1996, or September 30, 1995, respectively. These
amounts, if any, are included in mortgage investment income on the accompanying
statements of operations.
5. DUE FROM HUD
As of September 30, 1996 and December 31, 1995, Due from HUD includes
approximately $59,000 and $285,000, respectively, related to the 1994
disposition of Hazeltine Shores. In addition, as of September 30, 1996, Due
from HUD includes approximately $3.1 million related to the final assignment
proceeds of Water's Edge of New Jersey, as discussed in Note 3.
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the three and nine months ended September 30, 1996 and 1995 are as follows:
1996 1995
----- -----
Quarter ended March 31, $0.32(1) $0.49(2)
Quarter ended June 30, 0.30 0.53(3)
Quarter ended September 30, 0.30 0.32(4)
----- -----
$0.92 $1.34
===== =====
(1) This amount includes approximately $0.02 per Unit representing previously
undistributed accrued interest received from delinquent mortgages.
(2) 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.
(3) 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.
(4) This amount includes approximately $0.02 per Unit representing capital gain
from the disposition of the mortgage on Gilbert Greens Apartments.
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 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.
7. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three and
nine months ended September 30, 1996 and 1995, have earned or received
compensation or payments for services from the Partnership as follows:
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES - Continued
<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 1996 1995 1996 1995
- ----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc.(1) General Partner/Distribution $ 136,057 $ 145,128 $ 417,243 $ 607,724
AIM Acquisition Advisor/Asset Management Fee 378,945 369,564 1,124,352 1,117,525
Partners, L.P.(2)
CRI(3) Affiliate of General Partner/ -- 9,212 -- 62,347
Expense Reimbursement
CRIIMI MAE Affiliate of General Partner/ 25,515 8,595 60,178 8,595
Management, Inc.(3) Expense Reimbursement
(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 is entitled to an Asset Management Fee equal to 0.95% of Total Invested
Assets (as defined in the Partnership Agreement). The Sub-advisor to the Partnership is entitled to a fee of 0.28% of Total
Invested Assets. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership, the Sub-advisor, earned a fee equal
to $111,684 and $331,376, for the three and nine months ended September 30, 1996, respectively, and $108,923 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 $220,449.
(3) Prior to June 30, 1995, these amounts were paid to CRI as reimbursement for expenses incurred prior to June 30, 1995 on
behalf of the General Partner and the Partnership. The transaction in which CRIIMI MAE became a self-administered REIT has no
impact on the payments required to be made by the Partnership, other than that the expense reimbursement previously paid by the
Partnership to CRI in connection with the provision of services by the Sub-advisor are, effective June 30, 1995, paid to 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 37 insured
mortgages with an aggregate amortized cost of approximately $150 million, an
aggregate face value of approximately $151 million and an aggregate fair value
of approximately $149 million.
As of October 31, 1996, 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 coinsured mortgage on St. Charles Place
- - Phase II, for which the mortgagor had made payments through August 1995.
Results of Operations
- ---------------------
Net earnings decreased for the nine months ended September 30, 1996 as
compared to the corresponding period in 1995 primarily as a result of a
reduction in net gains and interest and other income, as discussed below. Net
earnings decreased for the three months ended September 30, 1996 as compared to
the corresponding period in 1995 primarily due to a reduction in mortgage
interest income and other interest income.
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 the asset base due to 1995 and 1996 mortgage
dispositions. The net proceeds from these dispositions have been reinvested in
fully insured mortgages.
Interest and other income decreased for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995 primarily
due to the timing of the reinvestment of proceeds from mortgage dispositions.
General and administrative expenses decreased for the three and nine months
ended September 30, 1996 as compared to the corresponding periods in 1995. This
decrease was primarily the result of an overaccrual of expenses in 1995.
Additionally, service fee expense decreased primarily as a result of the
reduction in the mortgage base.
For the nine months ended September 30, 1996, the Partnership incurred net
losses on mortgage dispositions of approximately $378,000. There were no
dispositions or modifications for the three months ended September 30, 1996.
In February 1996, the General Partner instructed the servicer for the
mortgage on Water's Edge of New Jersey, a fully insured construction loan, to
file a Notice of Default and an Election to Assign the mortgage with the
Department of Housing and Urban Development (HUD). The property underlying this
construction loan is a nursing home located in Trenton, New Jersey. As of
October 31, 1996, the Partnership had received approximately $7.6 million or 70%
of the proceeds from the assignment. The remainder of the proceeds,
approximately $3.1 million, is included in Due from HUD. In conjunction with
the assignment of the mortgage, the Partnership recognized a loss of
approximately $204,000 in the second quarter of 1996.
<PAGE>16
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
During March 1996, a retained yield holder in the Harbor View Estates loan,
exercised its right to purchase the participation certificate with respect to
this insured mortgage after a Notice of Default was filed with HUD. The
Partnership received net proceeds of approximately $691,000 resulting in a loss
of approximately $4,000.
In June 1996, the Partnership entered into a modification agreement with
the mortgagor of Turn at Gresham. This agreement effectively lowered the
interest rate on the mortgage from 8.375% to 8% for a period until maturity. In
addition, a seven year prepayment lockout was included in the modification,
followed by a 3%, 2%, and 1% penalty in years eight, nine, and ten,
respectively. The Partnership incurred a loss of approximately $169,600 in
connection with this modification which represents the write off of unamortized
costs.
These 1996 dispositions and modifications compare to net gains of
approximately $2.5 million for the nine months ended September 30, 1995, which
resulted from two dispositions and one modification. There were no dispositions
or modifications for the three months ended September 30, 1995. These gains are
primarily the result of the settlement of the coinsurance claims on Pinewood
Park Apartments for approximately $1.1 million and Hamlet at Cobb's Landing for
approximately $1.2 million.
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 1996 and
1995 to meet operating, investing, and financing cash 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 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.
Net cash provided by operating activities decreased for the nine months
ended September 30, 1996 as compared to the corresponding period in 1995,
primarily due to a reduction in net earnings, as discussed above. Also
contributing to this decrease in cash provided by operating activities was an
increase in receivables due to the disposition of the mortgage on Water's Edge
of New Jersey.
Net cash used in investing activities increased for the nine months ended
September 30, 1996 as compared to the corresponding period in 1995 primarily due
to an increase in investment in acquired mortgages from $6.6 million to $9.4
million.
Net cash used in financing activities decreased for the nine months ended
September 30, 1996 as compared to the corresponding period in 1995 primarily due
to a reduction in distributions paid to partners as a result of special
distributions during 1995 related to the previously undistributed accrued
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
interest received in connection with the disposition of certain coinsured
mortgages.
<PAGE>18
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, 1996.
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 88
(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> 1,772
<SECURITIES> 117,991
<RECEIVABLES> 38,554
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 158,317
<CURRENT-LIABILITIES> 2,898
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 155,419
<TOTAL-LIABILITY-AND-EQUITY> 158,317
<SALES> 0
<TOTAL-REVENUES> 9,417
<CGS> 0
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<OTHER-EXPENSES> 1,352
<LOSS-PROVISION> 378
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,687
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<EPS-PRIMARY> .83
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</TABLE>
