<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, 1997
------------------
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, 1997, 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, 1997
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1997 (unaudited)
and December 31, 1996 . . . . . . . . . . . 3
Statements of Operations - for the three
and nine months ended September 30, 1997 and
1996 (unaudited) . . . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the nine months ended September 30,
1997 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the nine
months ended September 30, 1997 and
1996 (unaudited) . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 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>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
at fair value:
Acquired insured mortgages $ 74,195,233 $ 74,492,545
Originated insured mortgages 44,847,161 44,668,622
------------- -------------
119,042,394 119,161,167
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 22,640,659 29,746,073
Acquired insured mortgages 1,103,599 1,129,575
------------- -------------
23,744,258 30,875,648
Due from HUD 663,410 3,221,611
Cash and cash equivalents 9,730,321 1,918,341
Investment in affiliate 1,281,884 1,177,774
Notes receivable from affiliates and due
from affiliates 658,486 797,687
Receivables and other assets 2,690,162 2,402,130
------------- -------------
Total assets $ 157,810,915 $ 159,554,358
============= =============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 9,810,953 $ 2,776,685
Accounts payable and accrued expenses 96,005 133,484
------------ -------------
Total liabilities 9,906,958 2,910,169
------------ -------------
Partners' equity:
Limited partners' equity 148,743,784 158,381,944
General partner's deficit (1,474,035) (977,432)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Net unrealized gains (losses) on investment
in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities 1,252,958 (141,573)
------------ -------------
Total partners' equity 147,903,957 156,644,189
------------ -------------
Total liabilities and
partners' equity $157,810,915 $159,554,358
============ ============
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,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 2,905,720 $ 2,999,765 $ 9,025,950 $ 9,215,191
Interest and other income 76,758 33,748 183,131 201,827
------------ ------------ ------------ ------------
2,982,478 3,033,513 9,209,081 9,417,018
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 367,330 378,945 1,113,070 1,124,352
General and administrative 48,290 65,093 203,069 227,377
------------ ------------ ------------ ------------
415,620 444,038 1,316,139 1,351,729
Earnings before net losses on ------------ ------------ ------------ ------------
mortgage dispositions and
mortgage modifications 2,566,858 2,589,475 7,892,942 8,065,289
Net gains (losses) on mortgage
dispositions/modification 20,746 -- 20,746 (377,900)
------------ ------------ ------------ -----------
Net earnings $ 2,587,604 $ 2,589,475 $ 7,913,688 $ 7,687,389
============ ============ ============ ===========
Net earnings allocated to:
Limited partners - 95.1% $ 2,460,811 $ 2,462,591 $ 7,525,917 $ 7,310,707
General partner - 4.9% 126,793 126,884 387,771 376,682
------------ ------------ ------------ -----------
$ 2,587,604 $ 2,589,475 $ 7,913,688 $ 7,687,389
============ ============ ============ ===========
Net earnings per Limited Partnership
Unit $ 0.28 $ 0.28 $ 0.85 $ 0.83
============ ============ ============ ===========
</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, 1997
(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, 1996 $ (977,432) $ 158,381,944 $ (618,750) $ 2,099,266 $ (2,240,839) $ 156,644,189
Net earnings 387,771 7,525,917 -- -- -- 7,913,688
Distributions paid or accrued
of $1.95 per Unit,
including return of capital
of $1.09 per Unit (884,374) (17,164,077) -- -- -- (18,048,451)
Adjustment to net unrealized
gains (losses) on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed
Securities -- -- -- 679,397 715,134 1,394,531
------------ ------------- ----------- -------------- ------------ ------------
Balance, September 30, 1997 $ (1,474,035) $ 148,743,784 $ (618,750) $ 2,778,663 $ (1,525,705) $147,903,957
============ ============= =========== ============== ============ ============
Limited Partnership Units
outstanding - September 30,
1997 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,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,913,688 $ 7,687,389
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Net (gain) loss on mortgage dispositions (20,746) 377,900
Payments made and treated as additions to Certificates
held for dispositions and Due from HUD (50) (37,452)
Changes in assets and liabilities:
Increase in receivables and other assets (288,032) (294,615)
Decrease in accounts payable and accrued
expenses (37,479) (37,755)
Decrease (increase) in notes receivable from affiliates
and due from affiliates 139,201 (35,908)
------------ ------------
Net cash provided by operating activities 7,706,582 7,659,559
------------ ------------
Cash flows from investing activities:
Proceeds from dispositions of insured mortgages 9,574,408 8,571,748
Investment in acquired insured mortgages -- (9,416,014)
Receipt of principal from scheduled payments 1,649,283 764,357
(Increase) decrease in investment in affiliate (104,110) 11,542
------------ ------------
Net cash provided by (used in) investing activities 11,119,581 (68,367)
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (11,014,183) (8,700,279)
------------ ------------
Net cash used in financing activities (11,014,183) (8,700,279)
------------ ------------
Net increase in cash and cash equivalents 7,811,980 (1,109,087)
Cash and cash equivalents, beginning of period 1,918,341 2,881,537
------------ ------------
Cash and cash equivalents, end of period $ 9,730,321 $ 1,772,450
============ ============
</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 expired on December
31, 1996 and 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).
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 and together with FHA-Insured Certificates and GNMA Mortgage-Backed
Securities, referred to herein as Insured Mortgages). The mortgages underlying
the FHA-Insured Certificates, GNMA Mortgage-Backed Securities and FHA-Insured
Loans, insured in whole or in part by the federal government, are non-recourse
first liens on multifamily residential developments or retirement homes. As
discussed in Note 3, certain of the FHA-Insured Certificates are secured by
coinsured mortgages.
2. BASIS OF PRESENTATION
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position of the Partnership as of September 30,
1997 and December 31, 1996 and the results of its operations for the three and
nine months ended September 30, 1997 and 1996 and its cash flows for the nine
months ended September 30, 1997 and 1996.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. While the General Partner believes that the disclosures
presented are adequate to make the information not misleading, these financial
statements should be read in conjunction with the financial statements and the
notes to the financial statements included in the Partnership's Annual Report
filed on Form 10-K for the year ended December 31, 1996.
New Accounting Standards
------------------------
In February 1997, FASB issued SFAS No. 128 "Earnings per Share" (FAS
128). FAS 128 changes the requirements for calculation and disclosure of
earnings per share. This statement eliminates the calculation of primary
earnings per share and requires the disclosure of basic earnings per share
and diluted earnings per share. There will be no impact to the earnings
per Unit of limited partnership interest.
During 1997 FASB issued SFAS No. 129 "Disclosure of Information about
Capital Structure" (FAS 129). FAS 129 continues the existing requirements
to disclose the pertinent rights and privileges of all securities other
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
than ordinary common stock but expands the number of companies subject to
portions of its requirements. The Partnership does not anticipate an
impact to its current disclosures.
During 1997 FASB issued SFAS No. 130 "Reporting Comprehensive Income"
(FAS 130). FAS 130 states that all items that are required to be
recognized under accounting standards as components of comprehensive income
are to be reported in either the statement of income or another statement
of comprehensive income. This would include net income as currently
reported by the Partnership adjusted for unrealized gains and losses
related to the Partnership's mortgages accounted for as "available for
sale". FAS 130 is effective beginning January 1, 1998.
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES
A. Fully Insured Mortgage Investments
----------------------------------
Listed below is the Partnership's aggregate investment in fully
insured acquired FHA-Insured Certificates and GNMA Mortgage-Backed
Securities:
<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
<TABLE><CAPTION> September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities 22 22
FHA-Insured Certificates 5 5
Amortized Cost $ 72,435,811 $ 73,722,912
Face Value 72,679,020 73,970,506
Fair Value 74,195,233 74,492,545
</TABLE>
Listed below is the Partnership's aggregate investment in fully
insured originated FHA-Insured Certificates:
<TABLE><CAPTION> September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Number of Mortgages 1 1
Amortized Cost $ 11,311,785 $ 11,356,150
Face Value 10,954,890 10,994,620
Fair Value 11,178,614 11,128,509
</TABLE>
As of November 6, 1997, all fully insured FHA-Insured Certificates and
GNMA Mortgage-Backed Securities 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 September 30, 1997, the Partnership had
received approximately $10.2 million from the assignment including partial
repayment of accrued interest. The remaining balance is approximately $1.5
million, of which $603,500 is included in Due from HUD and $897,000 is
included in Receivables and other assets. HUD has disallowed the remaining
$1.5 million balance of the assignment claim. The servicer is currently
negotiating with HUD in regard to collection of the disallowed portion of
the claim. The General Partner believes the full amount of the receivable
will be recovered from either HUD or the servicer.
B. Coinsured FHA-Insured Certificates
----------------------------------
As of September 30, 1997 and December 31, 1996, 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, 1997 and December 31,
1996, the remaining two FHA-Insured Certificates are coinsured by
Integrated Funding, Inc. (IFI), an affiliate of the Partnership.
<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
1. Coinsured by third party
------------------------
As of September 30, 1997, the originated coinsured mortgage which is
coinsured by Patrician, St. Charles Place-Phase II, was delinquent
with respect to principal and interest. The following is a discussion
of actual and potential performance problems with respect to this
mortgage investment.
<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>
September 30, 1997 December 31, 1996
--------------------------------------------- ------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
St. Charles Place -
Phase II(1) $ 3,715,630 $ 3,715,630 $ 3,550,104 $ 3,730,991 $ 3,730,991 $ 3,527,521
(1) 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, an affiliate of the Partnership. As of November 1,
1997, the mortgagor has made payments of principal and interest due on the mortgage through November 1995 to the Partnership.
Patrician is litigating the case in bankruptcy court while pursuing negotiations on a modification agreement with the borrower.
</TABLE>
The General Partner intends to continue to oversee the Partnership's
interest in 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, 1997 and December 31, 1996, the Partnership held
investments in two FHA-Insured Certificates secured by coinsured
mortgages, where the coinsurance lender is Integrated Funding Inc.
(IFI), an affiliate of the Partnership.
As of November 1, 1997, these two IFI coinsured mortgages, as shown in
the table below, were current with respect to the payment of principal
and interest.
<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>
September 30, 1997 December 31, 1996
--------------------------------------------- ------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
The Breakers at
Golf Mill $ 22,356,156 $ 22,356,157 $ 21,141,177 $ 22,492,106 $ 22,492,106 $ 21,084,011
Summerwind Apts.-
Phase II 7,970,054 9,394,813 8,977,266 8,000,581 9,442,628 8,928,581
------------ ------------ ------------ ------------ ------------ -------------
$ 30,326,210 $ 31,750,970 $ 30,118,443 $ 30,492,687 $ 31,934,734 $ 30,012,592
============ ============ ============ ============ ============ =============
</TABLE>
4. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in fully insured
originated FHA-Insured Loans as of September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION> September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Number of Mortgages(1) 3 4
Amortized Cost $ 22,640,659 $ 29,746,073
Face Value 22,243,809 29,163,152
Fair Value 22,863,465 29,712,245
(1) During August 1997, the mortgage on Parkside Estates was prepaid. The
Partnership received net proceeds of approximately $7.1 million and
recognized a gain of approximately $20,700 on this prepayment. A
distribution of $0.76 per Unit related to this prepayment was declared in
September 1997 and was paid in November 1997.
</TABLE>
Listed below is the Partnership's aggregate investment in fully
insured acquired FHA-Insured Loans as of September 30, 1997 and December
31, 1996:
<TABLE><CAPTION> September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Number of Mortgages 2 2
Amortized Cost $ 1,103,599 $ 1,129,575
Face Value 1,100,881 1,126,731
Fair Value 1,159,041 1,173,057
</TABLE>
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
As of November 1, 1997, 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 from fully insured FHA-Insured Loans,
the Partnership is entitled to additional interest based on a percentage of the
net cash flow from the underlying development and of the net proceeds from the
refinancing, sale or other disposition of the underlying development (referred
to as Participations). Currently, two of the originated FHA-Insured Loans
contain Participations. During the nine months ended September 30, 1997 and
1996, the Partnership received additional interest of $101,151 and $84,947,
respectively, from two and three of the Participations, respectively. These
amounts are included in mortgage investment income on the accompanying
statements of operations.
5. DUE FROM HUD
Due from HUD consists of amounts due to the Partnership in connection with
losses incurred on the disposition of fully insured and coinsured mortgage
investments.
As of September 30, 1997, Due from HUD includes approximately $603,500
related to the assignment of the mortgage on Water's Edge of New Jersey, as
discussed in Note 3, and approximately $59,400 related to the disposition of
Hazeltine Shores. As of December 31, 1996, Due from HUD included approximately
$3.2 million related to the assignment of Water's Edge of New Jersey and
approximately $59,000 related to the disposition of Hazeltine Shores.
6. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the nine months ended September 30, 1997 and 1996 are as follows:
1997 1996
------- -------
Quarter ended March 31, $ 0.59(1) $0.32(2)
Quarter ended June 30, 0.30 0.30
Quarter ended September 30, 1.06(3) 0.30
------- -----
$ 1.95 $0.92
======= =====
(1) This amount includes approximately $0.27 per Unit return of capital from
additional proceeds received in January 1997 related to the assignment of
the mortgage on Water's Edge of New Jersey. In addition, this amount
includes $0.02 per Unit return of capital due to remaining net proceeds
from mortgage dispositions not reinvested prior to the expiration of the
reinvestment period on December 31, 1996.
(2) This amount includes approximately $0.02 per Unit representing net proceeds
from mortgage dispositions, if any, and previously undistributed accrued
interest received from delinquent mortgages.
(3) This amount includes $0.76 per Unit return of capital and gain due to
prepayment of the mortgage on Parkside Estates, as discussed in Note 4.
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS - Continued
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although 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 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 nine months
ended September 30, 1997 and 1996, 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 nine months ended
Capacity in Which September 30, September 30,
Name of Recipient Served/Item 1997 1996 1997 1996
- ----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution 480,737 136,057 884,374 417,243
AIM Acquisition Advisor/Asset Management Fee 367,330 372,945 1,113,070 124,352
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/ 20,328 25,515 50,379 60,172
Management, Inc. Expense Reimbursement
(1) The Advisor, pursuant to the Partnership Agreement, effective October 1, 1991, is entitled to an Asset Management Fee equal to
0.95% of Total Invested Assets (as defined in the Partnership Agreement) for the nine months ended September 30, 1997 and 1996,
respectively. The sub-advisor to the Partnership (the Sub-advisor) is entitled to a fee of 0.28% of Total Invested Assets. Of
the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership (the Sub-advisor) earned a fee equal to $338,046 and
$331,376 for the nine months ended September 30, 1997 and 1996, respectively. The Sub-advisor is an affiliate of CRIIMI MAE.
</TABLE>
<PAGE>16
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking. These statements contain a number of risks and uncertainties
as discussed herein and in the Partnership's other reports filed with the
Securities and Exchange Commission that could cause actual results to differ
materially.
General
- -------
As of September 30, 1997, the Partnership had invested in 36 Insured
Mortgages with an aggregate amortized cost of approximately $142 million, a face
value of approximately $142 million and a fair value of approximately $143
million.
As of November 6, 1997, 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 which has made payments through November 1995. As discussed in Note
3 to the financial statements, management does not anticipate that this
delinquency will have an adverse material impact on the Partnership's financial
statements.
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
September 30, 1997, the Partnership had received approximately $10.2 million
from the assignment including partial repayment of accrued interest. The
remaining balance is approximately $1.5 million, of which $603,500 is included
in Due from HUD and $897,000 is included in Receivables and other assets. HUD
has disallowed the remaining $1.5 million balance of the assignment claim. The
servicer is currently negotiating with HUD in regard to collection of the
disallowed portion of the claim. The General Partner believes the full amount
of the receivable will be recovered from either HUD or the servicer.
During August 1997, the mortgage on Parkside Estates was prepaid. The
Partnership received net proceeds of approximately $7.1 million and recognized a
gain of approximately $20,700 on this prepayment. A distribution of $0.76 per
Unit related to this prepayment was declared in September 1997 and was paid in
November 1997.
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations
- ---------------------
Net earnings increased for the nine months ended September 30, 1997 as
compared to the corresponding period in 1996 primarily due to a reduction in
losses on mortgage dispositions and modifications.
Mortgage investment income decreased for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996 primarily
due to prepayment of the mortgage on Parkside Estates, as discussed previously,
and due to normal amortization of the mortgage base.
Interest and other income increased for the three months ended September
30, 1997 as compared to the corresponding period in 1996 primarily due to the
reinvestment of proceeds from the prepayment of the mortgage on Parkside Estates
and a principal curtailment made on the mortgage on Olde Mills for approximately
$778,000. The Partnership expects to declare a distribution related to this
curtailment of $0.09 per Unit in November 1997 which will be paid in February
1998. Interest and other income did not change significantly for the nine
months ended September 30, 1997 as compared to the corresponding period in 1996.
Net losses on mortgage dispositions decreased for the three and nine months
ended September 30, 1997 as compared to the corresponding periods in 1996.
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 and nine months ended September 30, 1997, the Partnership
incurred a net gain on mortgage dispositions of approximately $20,700 related to
the prepayment of the mortgage on Parkside Estates. During the nine months
ended September 30, 1996, the Partnership incurred net losses on mortgage
dispositions and modifications of approximately $378,000 related to the
prepayment of the mortgage on Harbor View Estates, the partial settlement of the
coinsurance claim in Water's Edge of New Jersey and the modification of the
mortgage on Turn at Gresham.
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 1997 to
meet operating requirements.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although 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 costs
incurred in connection with those insured mortgages and (4) variations in the
Partnership's operating expenses.
Net cash provided by operating activities did not change significantly for
the nine months ended September 30, 1997 as compared to the corresponding period
in 1996.
Net cash provided by investing activities increased for the nine months
ended September 30, 1997 as compared to the corresponding period in 1996
<PAGE>18
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
primarily due to the expiration of the reinvestment period as of December 31,
1996. Also contributing to the increase was the receipt of disposition proceeds
from the prepayment of the mortgage on Parkside Estates, the partial payment
received on the Water's Edge of New Jersey assignment and the receipt of a
principal curtailment for approximately $778,000 from the mortgage on Olde Mill
Apartments. The Partnership expects to declare a distribution of $0.09 per Unit
in November 1997 which will be paid in February 1998 related to this
curtailment.
Net cash used in financing activities increased for the nine months ended
September 30, 1997 as compared to the corresponding period in 1996 primarily due
to an increase in distributions paid to the partners. The distribution paid for
the nine months ended September 30, 1997 included a special distribution of
$0.27 per Unit for partial payment received on the assignment of the mortgage on
Water's Edge of New Jersey, a return of capital of $0.76 per Unit for the
prepayment of the mortgage on Parkside Estates and a special distribution of
$0.02 per Unit for previously undistributed return of capital, in addition to
regular cash flow. This compares to the distribution paid during the nine
months ended September 30, 1996, which consisted of a special distribution of
$0.02 per Unit in addition to regular cash flow.
<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 September 30, 1997.
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
November 14, 1997 /s/ Cynthia O. Azzara
- ------------------ ---------------------------------
Date Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,730
<SECURITIES> 119,042
<RECEIVABLES> 29,039
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
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<TOTAL-ASSETS> 157,811
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0
0
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<OTHER-SE> 147,904
<TOTAL-LIABILITY-AND-EQUITY> 157,811
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