<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 June 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 August 8, 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 JUNE 30, 1996
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1996 (unaudited)
and December 31, 1995 . . . . . . . . . . . 3
Statements of Operations - for the three and
six months ended June 30, 1996 and
1995 (unaudited) . . . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the six months ended June 30,
1996 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the six
months ended June 30, 1996 and
1995 (unaudited) . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 16
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 19
Signature . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
BALANCE SHEETS
<TABLE>
<CAPTION>
June 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 $ 65,151,046 $ 77,918,878
Originated insured mortgages 44,377,411 45,426,757
------------- ------------
109,528,457 123,345,635
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 29,822,223 30,162,342
Acquired insured mortgages 1,145,850 1,161,339
------------- ------------
30,968,073 31,323,681
Due from HUD 3,246,743 285,330
Cash and cash equivalents 10,155,704 2,881,537
Investment in affiliate 1,189,316 1,189,316
Notes receivable from affiliates and due
from affiliates 869,353 797,687
Receivables and other assets 2,322,469 2,103,710
------------- ------------
Total assets $ 158,280,115 $161,926,896
============= ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 2,776,685 $ 2,961,797
Accounts payable and accrued expenses 200,802 159,092
------------ ------------
Total liabilities 2,977,487 3,120,889
------------ ------------
Commitments and contingencies
Partners' equity:
Limited partners' equity 158,722,902 159,332,082
General partner's deficit (959,864) (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 (3,620,506) (1,519,157)
Unrealized gains on investment in FHA-
Insured Certificates and GNMA
Mortgage-Backed Securities 1,778,846 2,540,308
------------ ------------
Total partners' equity 155,302,628 158,806,007
------------ ------------
Total liabilities and
partners' equity $158,280,115 $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 six months ended
June 30, June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 3,110,939 $ 3,263,858 $ 6,215,426 $ 6,329,161
Interest and other income 72,951 205,194 168,079 551,413
------------ ------------ ------------ ------------
3,183,890 3,469,052 6,383,505 6,880,574
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 368,820 375,063 745,407 747,961
General and administrative 103,346 78,775 162,284 177,196
------------ ------------ ------------ ------------
472,166 453,838 907,691 925,157
Earnings before gains (losses) ------------ ------------ ------------ ------------
on mortgage dispositions and
mortgage modifications 2,711,724 3,015,214 5,475,814 5,955,417
Net gains (losses) on mortgage
dispositions and mortgage modifications (378,528) 1,377,122 (377,900) 2,452,221
------------ ------------ ------------ ------------
Net earnings $ 2,333,196 $ 4,392,336 $ 5,097,914 $ 8,407,638
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,218,869 $ 4,177,112 $ 4,848,116 $ 7,995,664
General partner - 4.9% 114,327 215,224 249,798 411,974
------------ ------------ ------------ ------------
$ 2,333,196 $ 4,392,336 $ 5,097,914 $ 8,407,638
============ ============ ============ ============
Net earnings per Limited Partnership
Unit $ 0.25 $ 0.48 $ 0.55 $ 0.91
============ ============ ============ ============
</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 six months ended June 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 249,798 4,848,116 -- -- -- 5,097,914
Distributions paid or accrued
of $0.62 per Unit,
including return of capital (281,186) (5,457,296) -- -- -- (5,738,482)
Adjustment to net unrealized
gains (losses) on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed
Securities -- -- -- (761,462) (2,101,349) (2,862,811)
------------ ------------- ----------- -------------- -------------- -------------
Balance, June 30, 1996 $ (959,864) $ 158,722,902 $ (618,750) $ 1,778,846 $ (3,620,506) $ 155,302,628
============ ============= =========== ============== ============== =============
Limited Partnership Units
outstanding - June 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 six months
ended June 30
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,097,914 $ 8,407,638
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Net gain (loss) on mortgage dispositions 377,900 (2,452,221)
Payments made and treated as additions to
Due from HUD (62,584) (58,068)
Changes in assets and liabilities:
Increase in receivables and other assets (218,759) (77,845)
Increase (decrease) in accounts payable and accrued
expenses 41,710 (87,332)
(Increase) decrease in notes receivable and due from
affiliates (71,666) 9,005
------------ ------------
Net cash provided by operating activities 5,164,515 5,741,177
------------ ------------
Cash flows from investing activities:
Proceeds from dispositions of insured mortgages 8,571,748 9,316,015
Investment in acquired insured mortgages (1,036,515) (3,775,722)
Receipt of principal from scheduled payments 498,013 452,426
------------ ------------
Net cash provided by investing activities 8,033,246 5,992,719
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (5,923,594) (8,607,723)
------------ ------------
Net cash used in financing activities (5,923,594) (8,607,723)
------------ ------------
Net increase in cash and cash equivalents 7,274,167 3,126,173
Cash and cash equivalents, beginning of period 2,881,537 5,364,255
------------ ------------
Cash and cash equivalents, end of period $ 10,155,704 $ 8,490,428
============ ============
</TABLE>
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). From inception through June 30, 1995, CRIIMI MAE was managed by
an adviser 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 adviser 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, managed 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 June 30, 1996 and
December 31, 1995 and the results of its operations for the three and six months
ended June 30, 1996 and 1995 and its cash flows for the six months ended June
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>9
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 June 30, 1996 and December 31, 1995, the Partnership's
investment in fully insured acquired insured mortgages, recorded at fair
value, consisted of 20 and 19 GNMA Mortgage-Backed Securities,
respectively, and five and seven FHA-Insured Certificates, respectively.
As of June 30, 1996 and December 31, 1995, these mortgage investments had
an aggregate amortized cost of $65,646,528 and $76,462,511, respectively,
an aggregate face value of $65,797,897 and $76,636,450, respectively, and
an aggregate fair value of $65,151,046 and $77,918,878, respectively.
As of June 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
$11,384,319 and $11,411,412, respectively, a face value of $11,019,797 and
$11,043,976, respectively, and a fair value of $11,018,383 and $11,298,584,
respectively.
As of July 31, 1996, all fully insured acquired 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 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 July 31, 1996, the Partnership had received approximately $7.6
million or 70% of the proceeds from the assignment. The General Partner
expects to receive the remainder of the proceeds, approximately $3.1
million, during the fourth quarter of 1996. The Partnership intends to
reinvest these net proceeds prior to December 31, 1996, the expiration of
the Partnership's reinvestment period. In conjunction with the assignment
of the mortgage, the Partnership recognized a loss of approximately
$204,100 in the first 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 $709,000 in
disposition proceeds, including approximately $17,400 of interest due to
the Partnership from this prepayment. The net principal proceeds received
were approximately $691,000, resulting in a gain of approximately $600
which is included on the statement of operations for the three months ended
March 31, 1996. 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 three and six months ended June 30, 1996.
<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
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 six months ended June 30, 1996, the Partnership acquired
the following fully insured mortgages and committed to purchase the
following fully insured mortgages:
<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
<TABLE>
<CAPTION>
Purchase Funding Net
Date of Price/ Commitments as of Interest
Complex Name Acquisition Advance June 30, 1996 Rate
------------ ----------- ----------- ------------------ ----------
<S> <C> <C> <C> <C>
Lorenzo Carolina Apartments June 1996 $ 1,036,515 $ -- 7.875%
Silver Lake Plaza Apartments July 1996 -- 5,340,869 7.700%
Woodcrest Townhomes July 1996 -- 3,138,026 8.125%
----------- -----------
Total $ 1,036,515 $ 8,478,895
=========== ===========
</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 June 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 June 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>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
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 $3,740,695
and $3,749,991, as of June 30, 1996 and December 31, 1995,
respectively, and a fair value of $3,530,459 and $3,583,856, as of
June 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 July 30, 1996, the mortgagor has made payments
of principal and interest due on the mortgage through June 1995 to the
Partnership. Patrician is litigating the case in bankruptcy court
while negotiating a modification agreement with the borrower.
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 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 July 31, 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 July 31, 1996, both mortgages were current with respect to the
payment of principal and interest.
As of June 30, 1996 and December 31, 1995, these two mortgage
investments had an aggregate fair value of $29,828,569 and
$30,553,317, 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
June 30, June 30, December 31, December 31, Loan Losses
1996 1996 1995 1995 Recognized(1)
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
The Breakers at
Golf Mill $ 22,578,863 $ 22,578,864 $ 22,662,648 $ 22,662,648 $ 980,000
Summerwind Apts.-
Phase II 8,019,712 9,472,840 8,037,922 9,501,784 1,511,743
------------ ------------ ------------ ------------ -----------
$ 30,598,575 $ 32,051,704 $ 30,700,570 $ 32,164,432 $ 2,491,743
============ ============ ============ ============ ===========
(1) No loan losses were recognized on these coinsured mortgages during the six months ended June 30, 1996 and 1995.
</TABLE>
4. INVESTMENT IN FHA-INSURED LOANS
As of June 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 $29,822,223 and $30,162,342, an aggregate face
value of $29,234,852 and $29,299,733, and an aggregate fair value of $29,674,588
and $30,199,166, as of June 30, 1996 and December 31, 1995, respectively. The
two acquired insured mortgages had an aggregate amortized cost of $1,145,850 and
$1,161,339, an aggregate face value of $1,142,923 and $1,158,329, and an
aggregate fair value of $1,205,685 and $1,219,590, as of June 30, 1996 and
December 31, 1995, respectively.
As of July 31, 1996, all of the Partnership's FHA Insured Loans, were
current with respect to the payment of principal and interest.
All of the FHA-Insured Loans contain Participations. During the three and
six months ended June 30, 1996, the Partnership received additional interest of
$70,562 and $84,947, respectively, from these Participations. During the three
and six months ended June 30, 1995, the Partnership received interest of $43,342
and $46,853, respectively, from these Participations. These amounts are
included in mortgage investment income on the accompanying statements of
operations.
5. DUE FROM HUD
As of June 30, 1996 and December 31, 1995, Due from HUD includes
approximately $84,000 and $285,000, respectively, related to the 1994
disposition of Hazeltine Shores, which will be included in a supplemental claim
expected to be filed with HUD during 1996. In addition, as of June 30, 1996,
Due from HUD includes approximately $3.1 million related to the final assignment
proceeds of Waters Edge, New Jersey, as discussed in Note 3.
<PAGE>14
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 six months ended June 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)
----- -----
$0.62 $1.02
===== =====
(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.
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.
7. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three and
six months ended June 30, 1996 and 1995, have earned or received compensation or
payments for services from the Partnership as follows:
<PAGE>15
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 six months ended
Capacity in Which June 30, June 30,
Name of Recipient Served/Item 1996 1995 1996 1995
- ----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc.(1) General Partner/Distribution 136,058 $ 240,369 281,186 $ 462,596
AIM Acquisition Advisor/Asset Management Fee 368,820 375,063 745,407 747,961
Partners, L.P.(2)
CRI(3) Affiliate of General Partner/ -- 29,536 -- 53,135
Expense Reimbursement
CRIIMI MAE Affiliate of General Partner/ 36,713 -- 55,587 --
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 (the Sub-advisor) is entitled to a fee of
0.28% of Total Invested Assets. CRI/AIM Management, Inc., which through June 30, 1995 acted as the Sub-advisor, earned a fee equal
to $110,545 and $220,449 for the three and six months ended June 30, 1995, respectively. Effective June 30, 1995, CRIIMI MAE
Services Limited Partnership serves as the Sub-Advisor. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership
earned a fee equal to $108,701 and $219,692, for the three and six months ended June 30, 1996, respectively.
(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. As discussed in Note 1, 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>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 June 30, 1996, the Partnership had invested in 35 insured mortgages
with an aggregate amortized cost of approximately $142 million, an aggregate
face value of approximately $143 million and an aggregate fair value of
approximately $140 million.
As of July 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 June 1995.
Results of Operations
- ---------------------
Net earnings decreased for the three and six months ended June 30, 1996 as
compared to the corresponding periods in 1995 primarily as a result of a
reduction in gains, as well as losses on mortgage dispositions and modifications
and interest and other income, as discussed below.
Mortgage investment income decreased for the three and six months ended
June 30, 1996, as compared to the corresponding periods in 1995. This decrease
was 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 six months ended June
30, 1996 as compared to the corresponding period in 1995 primarily due to the
timing of the reinvestment of proceeds from mortgage dispositions.
General and administrative expenses increased for the three months ended
June 30, 1996 as compared to the corresponding period in 1995. This increase is
primarily due to an under accrual of expenses. General and administrative
expenses decreased for the six months ended June 30, 1996 as compared to the
corresponding period in 1995. This decrease was primarily the result of a
reduction in annual report costs. Additionally, there was a reduction in legal
fees due primarily to the decrease in legal issues relating to certain mortgage
dispositions.
For the three and six months ended June 30, 1996, the Partnership incurred
net losses on mortgage dispositions of approximately $378,000.
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 July
31, 1996, the Partnership had received approximately $7.6 million or 70% of the
proceeds from the assignment. The General Partner expects to receive the
remainder of the proceeds, approximately $3.1 million, during the fourth quarter
of 1996. The Partnership intends to reinvest these net proceeds prior to
December 31, 1996, the expiration of the Partnership's reinvestment period. In
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
conjunction with the assignment of the mortgage, the Partnership recognized a
loss of approximately $204,100 in the first 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. 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 $1.4 million and $2.5 million for the three and six months ended
June 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 six 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 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.
Net cash provided by operating activities decreased for the six months
ended June 30, 1996 as compared to the corresponding period in 1995, primarily
due to a reduction in net earnings, as previously 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 provided by investing activities increased for the six months
ended June 30, 1996 as compared to the corresponding period in 1995 primarily
due to a reduction in investment in acquired mortgages from $3.8 million to $1.0
million.
Net cash used in financing activities decreased for the six months ended
June 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
<PAGE>18
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
during 1995 related to the previously undistributed accrued interest received in
connection with the disposition of certain coinsured mortgages.
<PAGE>19
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 June 30, 1996.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
- ------------- -----------------------
27 Financial Data Schedule
<PAGE>20
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
August 12, 1996 /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 JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,156
<SECURITIES> 109,528
<RECEIVABLES> 38,596
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 158,280
<CURRENT-LIABILITIES> 2,977
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 155,303
<TOTAL-LIABILITY-AND-EQUITY> 158,280
<SALES> 0
<TOTAL-REVENUES> 6,384
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 908
<LOSS-PROVISION> 378
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,098
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,098
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<EPS-PRIMARY> .55
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</TABLE>
