<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
------------------
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, 1998, 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, 1998
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1998 (unaudited)
and December 31, 1997............................. 3
Statements of Operations - for the three and
nine months ended September 30, 1998 and
1997 (unaudited) ................................. 4
Statement of Changes in Partners' Equity -
for the nine months ended September 30,
1998 (unaudited).................................. 5
Statements of Cash Flows - for the nine
months ended September 30, 1998 and
1997 (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.................... 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,
1998 1997
-------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
at fair value:
Acquired insured mortgages $ 71,112,654 $ 74,963,747
Originated insured mortgages 32,919,046 44,222,754
-------------- -------------
104,031,700 119,186,501
Investment in FHA-Insured Loans, at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 5,732,553 22,609,310
Acquired insured mortgages 1,065,822 1,094,502
-------------- -------------
6,798,375 23,703,812
Due from HUD 603,496 663,410
Cash and cash equivalents 13,136,631 2,721,306
Investment in affiliate 1,266,971 1,281,884
Notes receivable from affiliates and due from affiliates 658,490 728,684
Receivables and other assets 2,068,182 2,330,128
-------------- -------------
Total assets $ 128,563,845 $ 150,615,725
============== =============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 13,142,975 $ 3,517,134
Accounts payable and accrued expenses 147,060 121,331
-------------- -------------
Total liabilities 13,290,035 3,638,465
-------------- -------------
Partners' equity:
Limited partners' equity 117,897,034 147,475,554
General partner's deficit (3,063,405) (1,539,380)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Net unrealized losses on investment in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities (1,680,156) (1,902,187)
Net unrealized gains on investment in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities 2,739,087 3,562,023
-------------- -------------
Total partners' equity 115,273,810 146,977,260
-------------- -------------
Total liabilities and partners' equity $ 128,563,845 $ 150,615,725
============== =============
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,
---------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 2,265,780 $ 2,905,720 $ 7,514,554 $ 9,025,950
Interest and other income 76,188 76,758 264,875 183,131
------------ ------------ ------------- ------------
2,341,968 2,982,478 7,779,429 9,209,081
------------ ------------ ------------- ------------
Expenses:
Asset management fee to
related parties 311,064 367,330 1,002,486 1,113,070
General and administrative 79,751 48,290 313,035 203,069
------------ ------------ ------------- ------------
390,815 415,620 1,315,521 1,316,139
Earnings before net losses on ------------ ------------ ------------- ------------
mortgage dispositions 1,951,153 2,566,858 6,463,908 7,892,942
Net gains on mortgage dispositions 223,293 20,746 659,242 20,746
------------ ------------ ------------- ------------
Net earnings $ 2,174,446 $ 2,587,604 $ 7,123,150 $ 7,913,688
============ ============ ============= ============
Net earnings allocated to:
Limited partners - 95.1% $ 2,067,898 $ 2,460,811 $ 6,774,116 $ 7,525,917
General partner - 4.9% 106,548 126,793 349,034 387,771
------------ ------------ ------------- ------------
$ 2,174,446 $ 2,587,604 $ 7,123,150 $ 7,913,688
============ ============ ============= ============
Net earnings per Limited Partnership
Unit $ 0.24 $ 0.28 $ 0.77 $ 0.85
============ ============ ============= ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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, 1998
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unrealized
Losses on Gains on
Investment Investment
in FHA-Insured in FHA-Insured
Repurchased Certificates Certificates
Limited and GNMA and GNMA Total
Limited General Partnership Mortgage-Backed Mortgage-Backed Partners'
Partner Partners Units Securities Securities Equity
-------------- ------------ ------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997 $ 147,475,554 $ (1,539,380) $ (618,750) $ (1,902,187) $ 3,562,023 $ 146,977,260
Net earnings 6,774,116 349,034 -- -- -- 7,123,150
Distributions paid
or accrued of
$4.13 per Unit,
including return
of capital of
$3.36 per Unit (36,352,636) (1,873,059) -- -- -- (38,225,695)
Adjustment to net
unrealized gains
on investment in
FHA-Insured
Certificates and
GNMA Mortgage-
Backed
Securities -- -- -- 222,031 (822,936) (600,905)
-------------- ------------ ------------ ---------------- -------------- -------------
Balance, September 30,
1998 $ 117,897,034 $ (3,063,405) $ (618,750) $ (1,680,156) $ 2,739,087 $ 115,273,810
============== ============ ============ ================ ============== =============
Limited Partnership Units
outstanding - September 30, 1998 8,802,091
=============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,123,150 $ 7,913,688
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Net gain on mortgage dispositions (659,242) (20,746)
Changes in assets and liabilities:
Decrease (increase) in receivables and other assets 261,946 (288,032)
Increase (decrease) in accounts payable and accrued
expenses 25,729 (37,479)
Decrease in notes receivable from affiliates
and due from affiliates 70,194 139,201
------------ ------------
Net cash provided by operating activities 6,821,777 7,706,632
------------ ------------
Cash flows from investing activities:
Proceeds from dispositions of insured mortgages 30,454,553 9,574,408
Decrease in Due from HUD 59,914 50
Receipt of principal from scheduled payments 1,664,022 1,649,283
Decrease (increase) in investment in affiliate 14,913 (104,110)
------------ ------------
Net cash provided by investing activities 32,193,402 11,119,531
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (28,599,854) (11,014,183)
------------ ------------
Net cash used in financing activities (28,599,854) (11,014,183)
------------ ------------
Net increase in cash and cash equivalents 10,415,325 7,811,980
Cash and cash equivalents, beginning of period 2,721,306 1,918,341
------------ ------------
Cash and cash equivalents, end of period $ 13,136,631 $ 9,730,321
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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.
On October 5, 1998, CRIIMI MAE Inc., the parent of the General Partner,
and CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE Inc. and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for reorganization under Chapter 11 of the Bankruptcy Code. Such
bankruptcy filings could result in certain adverse effects to the Partnership
including, without limitation, the potential loss of CRIIMI MAE Inc. as a
potential source of capital, as discussed under "Liquidity and Capital
Resources", and the potential need to replace CRIIMI MAE Management Inc. as a
provider of personnel and administrative services to the Partnership.
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, 1998 and December 31, 1997 and the results of its operations for
the three and nine months ended September 30, 1998 and 1997 and its cash flows
for the nine months ended September 30, 1998 and 1997.
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, 1997.
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
New Accounting Standards
------------------------
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 a separate statement of 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 was adopted by the
Partnership January 1, 1998. For the three and nine months ended
September 30, 1998, comprehensive income was $(152,527) and $6,522,245,
respectively. For the three and nine months ended September 30, 1997,
comprehensive income was $2,822,429 and $9,308,219, respectively.
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:
<TABLE><CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities 22 22
FHA-Insured Certificates (1)(2) 4 5
Amortized Cost $ 69,173,353 $ 72,251,365
Face Value 69,403,939 72,492,904
Fair Value 71,112,654 74,963,747
(1) During January 1998, the mortgage on Northpoint Apartments was prepaid. The
Partnership received net proceeds of approximately $1.7 million and recognized a
gain of approximately $6,000 on this prepayment. A distribution of $0.19 per
Unit related to this prepayment was declared in February 1998 and was paid on
May 1, 1998.
(2) In June 1998, the Partnership received approximately $778,000 in principal
curtailment made on the mortgage on Olde Mill Apartments. These proceeds of
$0.08 per Unit were declared as part of the June 1998 distribution and were paid
in August 1998.
</TABLE>
<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
Listed below is the Partnership's aggregate investment in
fully insured originated FHA-Insured Certificates:
<TABLE><CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Number of Mortgages 0(1) 1
Amortized Cost $ 0 $ 11,296,412
Face Value 0 10,941,101
Fair Value 0 11,055,186
(1) During June 1998, the mortgage on Arbor Village was prepaid. The Partnership
received net proceeds of approximately $10.9 million and recognized a loss of
approximately $350,000 on this prepayment. A distribution of $1.18 per Unit
related to this prepayment was declared in June 1998 and was paid on August 3,
1998.
</TABLE>
As of November 1, 1998, 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, 1998,
the Partnership had received approximately $10.2 million on this
assignment including partial repayment of the outstanding principal and
accrued interest. The remainder of the proceeds, approximately $1.5
million, is included in Due from HUD and Receivables and other assets.
HUD has disallowed approximately $1.5 million of the assignment claim.
The servicer, Greystone Servicing Corporation, Inc., is currently
negotiating with HUD in regard to collection of the disallowed portion
of the claim. In addition, the General Partner has retained counsel in
this matter and is actively pursuing litigation. On July 30, 1998, the
Partnership filed a Motion for Judgment against Greystone Servicing
Corporation, Inc. (the servicer) in the Circuit Court of Fauquier
County, Virginia. The Motion for Judgment alleges breach of contract
and negligence claims and seeks judgment for $1,653,396 plus interest,
attorneys' fees and costs. The Partnership believes that the allowance
for loan losses of $375,000 as of September 30, 1998, is sufficient to
provide for amounts that may not be recovered from the servicer.
<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
B. Coinsured FHA-Insured Certificates
----------------------------------
As of September 30, 1998 and December 31, 1997, 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, 1998 and December 31, 1997, the remaining two FHA-Insured
Certificates are coinsured by Integrated Funding, Inc. (IFI), an
affiliate of the Partnership.
1. Coinsured by third party
------------------------
As of September 30, 1998, 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.
<TABLE><CAPTION>
September 30, 1998 December 31, 1997
------------------------------------------- ------------------------------------------------
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) $ 3,710,285 $ 3,710,285 $ 3,455,256 $ 3,710,287 $ 3,710,287 $ 3,484,715
(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, 1998, the mortgagor has made payments of principal and interest
due on the mortgage through November 1995 to the Partnership. The Partnership
has made the decision to discontinue the accrual of interest income for this
mortgage as of January 1, 1998, in the best interest of its Unitholders. For the
three and nine months ended September 30, 1998 the unaccrued mortgage investment
income was approximately $80,000 and $240,000, respectively. On November 3,
1998, Patrician took title of this property via a bankruptcy court sale.
Patrician intends to dispose of the property and file a claim with HUD within
one year for any unrecovered amounts.
</TABLE>
<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
2. Coinsured by affiliate
----------------------
As of September 30, 1998 and December 31, 1997, 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, 1998, these two IFI coinsured mortgages, as
shown in the table below, were current with respect to the
payment of principal and interest.
<TABLE><CAPTION>
September 30, 1998 December 31, 1997
---------------------------------------------- --------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
The Breakers at
Golf Mill $ 22,163,459 $ 22,163,459 $ 20,738,333 $ 22,309,235 $ 22,309,236 $20,873,845
Summerwind Apts.-
Phase II 7,925,672 9,326,084 8,725,457 7,959,366 9,378,179 8,809,008
------------ ------------ ------------ ------------ ------------ -----------
$ 30,089,131 $ 31,489,543 $ 29,463,790 $ 30,268,601 $ 31,687,415 $29,682,853
============ ============ ============ ============ ============ ===========
</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, 1998 and December 31, 1997:
<TABLE>
<CAPTION> September 30, December 31,
1998 1997
-------------- ------------
<S> <C> <C>
Number of Mortgages (1)(2) 1 3
Amortized Cost $ 5,732,553 $22,609,310
Face Value 5,732,553 22,213,954
Fair Value 5,793,467 22,428,570
(1) During February 1998, the mortgage on Olmstead Park Apartments was
prepaid. The Partnership received net proceeds of approximately $6.8
million and recognized a gain of approximately $780,000 on this
prepayment. A distribution of $0.73 per Unit related to this prepayment
was declared in March 1998 and was paid on May 1, 1998.
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS
(2) During September 1998, the mortgage on Water's Edge II was prepaid. The
Partnership received net proceeds of approximately $11 million and
recognized a gain of approximately $223,000 on this prepayment. A
distribution of $1.19 per Unit related to this prepayment was declared in
September and was paid on November 2, 1998.
</TABLE>
Listed below is the Partnership's aggregate investment in
fully insured acquired FHA-Insured Loans as of September 30, 1998 and
December 31, 1997:
<TABLE><CAPTION>
September 30, December 31,
1998 1997
-------------- ------------
<S> <C> <C>
Number of Mortgages 2 2
Amortized Cost $ 1,065,822 $ 1,094,502
Face Value 1,063,274 1,091,827
Fair Value 1,079,885 1,107,188
</TABLE>
As of November 1, 1998, 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, 1998
and 1997, the Partnership received additional interest of $69,820 and $101,151,
respectively, from the Participations. 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 the disposition of fully insured and coinsured mortgage investments.
As of September 30, 1998, Due from HUD includes approximately $603,500
related to the assignment 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 nine months ended September 30, 1998 and 1997 are as follows:
1998 1997
------- -------
Quarter ended March 31, $ 1.21(1) $ 0.59(4)
Quarter ended June 30, 1.50(2) 0.30
Quarter ended September 30, 1.42(3) 1.06(5)
------- -------
$ 4.13 $ 1.95
======= =======
(1) This amount includes approximately $0.19 per Unit from proceeds
received in January 1998 related to the prepayment of the mortgage on
Northpoint Apartments. In addition, this amount includes $0.73 per Unit
related to the prepayment of the mortgage on Olmstead Park Apartments
in February 1998.
(2) This amount includes approximately $1.18 per Unit from proceeds
received in September 1998 related to the prepayment of the mortgage on
Arbor Village Apartments. In addition, this amount includes $0.08 per
Unit representing a curtailment on the mortgage on Olde Mill
Apartments.
(3) This amount includes approximately $1.19 per Unit return of capital and
gain due to receipt of proceeds from the prepayment of the mortgage on
Water's Edge II in September 1998.
(4) 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.
(5) This amount includes approximately $0.76 per Unit representing return
of capital and gain due to the prepayment of the mortgage on Parkside
Estates.
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
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS - Continued
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, 1998 and 1997, have earned or received compensation
or payments for services from the Partnership as follows:
<TABLE>
<CAPTION>
For the For the
three months ended nine months ended
Capacity in Which September 30, September 30,
Name of Recipient Served/Item 1998 1997 1998 1997
- ----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution 644,006 480,737 1,873,059 884,374
AIM Acquisition Advisor/Asset Management Fee 311,064 367,330 1,002,486 1,113,070
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/ 13,777 20,328 48,752 50,379
Management, Inc. Expense Reimbursement
(1) The Advisor, pursuant to the Partnership Agreement is entitled to an
Asset Management Fee equal to .95% of Total Invested Assets (as defined
in the Partnership Agreement) for the nine months ended September 30,
1998 and 1997, respectively. The sub-advisor to the Partnership (the
Sub-advisor) is entitled to a fee of .28% of Total Invested Assets of
the Advisor's Asset Management Fee. Of the amounts paid to the Advisor,
CRIIMI MAE Services Limited Partnership (the Sub-advisor) earned a fee
equal to $295,455 and $338,046 for the nine months ended September 30,
1998 and 1997, respectively. The Sub-advisor is an affiliate of CRIIMI
MAE.
</TABLE>
<PAGE>15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
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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.
On October 5, 1998, CRIIMI MAE Inc., the parent of the General Partner,
and CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE Inc. and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for reorganization under Chapter 11 of the Bankruptcy Code. Such
bankruptcy filings could result in certain adverse effects to the Partnership
including, without limitation, the potential loss of CRIIMI MAE Inc. as a
potential source of capital, as discussed under "Liquidity and Capital
Resources", and the potential need to replace CRIIMI MAE Management Inc. as a
provider of personnel and administrative services to the Partnership.
General
- -------
As of September 30, 1998, the Partnership had invested in 32 Insured
Mortgages with an aggregate amortized cost of approximately $109.8 million, a
face value of approximately $111.4 million and a fair value of approximately
$110.9 million.
As of November 1 1998, 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.
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, 1998, the Partnership had received approximately $10.2 million on
this assignment including the outstanding principal plus partial accrued
interest. The remainder of the proceeds, approximately $1.5 million, is included
in Due from HUD and Receivables and other assets. The servicer is currently
negotiating with HUD in regard to collection of the disallowed portion of the
<PAGE>16
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
claim. In addition, the General Partner has retained counsel in this matter
and is actively pursuing litigation On July 30, 1998, the Partnership filed a
Motion for Judgment against Greystone Servicing Corporation, Inc. (the
servicer) in the Circuit Court for Fauquier County, Virginia. The Motion for
Judgment alleges breach of contract and negligence claims and seeks
judgment for $1,653,396 plus interest, attorneys' fees and costs. . The
Partnership believes that the allowance for loan losses of $375,000 as of
September 30, 1998, is sufficient to provide for amounts that may not be
recovered from the servicer.
Results of Operations
- ---------------------
Net earnings decreased for the three and nine months ended September
30, 1998 as compared to the corresponding periods in 1997 primarily due to a
decrease in mortgage investment income partially offset by an increase in net
gains on mortgage dispositions.
Mortgage investment income decreased for the three and nine months
ended September 30, 1998 as compared to the corresponding periods in 1997
primarily due to a reduction in the mortgage base, as a result of the prepayment
of five mortgages and a principal curtailment since September 1997.
Interest and other income increased for the nine months ended September
30, 1998 as compared to the corresponding period in 1997 due to the temporary
investment of proceeds from mortgage prepayments.
Asset management fees decreased for the three and nine months ended
September 30, 1998 as compared to the corresponding periods in 1997, primarily
due to the reduction in the mortgage base, as discussed previously.
General and administrative increased for the three and nine months
ended September 30, 1998 as compared to the corresponding periods in 1997. This
increase was primarily the result of a write-off of certain losses associated
with the final disposition of the coinsurance claim on the mortgage on
Hazeltine Shores.
Net gains on mortgage dispositions increased for the three and nine
months ended September 30, 1998 as compared to the corresponding periods in
1997. During the first nine months of 1998, the Partnership recognized gains on
mortgage dispositions of approximately $1 million related to the prepayment of
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
the mortgages on Northpoint Apartments, Olmstead Park Apartments, and Water's
Edge II in September. In addition, the Partnership recognized a net loss of
approximately $350,000 on the prepayment of the mortgage on Arbor Village
in June 1998. During the first nine months of 1997, the Partnership
recognized a gain of approximately $20,700 related to the disposition of
the mortgage on Parkside Estates in the third quarter.
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 1998 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 decreased for the nine months
ended September 30, 1998 as compared to the corresponding period in 1997
primarily due to the decrease in mortgage investment income, as discussed
previously.
Net cash provided by investing activities increased for the nine months
ended September 30, 1998 as compared to the corresponding period in 1997
primarily due to an increase in disposition proceeds from prepayment of the
aforementioned mortgages.
Net cash used in financing activities increased for the nine months
ended September 30, 1998 as compared to the corresponding period in 1997
primarily due to an increase in distributions paid to the partners. The
distributions paid for the nine months ended September 30, 1998 included a total
return of capital of $2.26 per Unit for the curtailment on Olde Mill Apartments
and the prepayment of the mortgages on Northpoint Apartments, Olmstead Park
Apartments and Arbor Village in addition to regular cash flow. This compares
<PAGE>18
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
to the distributions paid during the nine months ended September 30, 1997,
which included $0.27 return of capital from Water's Edge of New Jersey, $0.02
not reinvested due to the expiration of the reinvestment period, and a
return of capital of $0.76 per Unit for the prepayment of and the mortgage on
Parkside Estates.
Other
- -----
On October 5, 1998, CRIIMI MAE Inc. the parent of the General Partner,
filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy
Code. As a debtor-in-possession, CRIIMI MAE Inc. will not be permitted to
provide any available capital to the General Partner without approval from the
bankruptcy court. This restriction on, or potential loss of the availability of
a potential capital resource could adversely affect the General Partner and the
Partnership; however, CRIIMI MAE Inc. has not historically represented a
significant source of capital for the General Partner or Partnership.
<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, 1998.
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
/s/ November 16, 1998 /s/ Cynthia O. Azzara
- ---------------------- -------------------------
Date Cynthia O. Azzara
Principal Financial and
Accounting Officer
<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, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,137
<SECURITIES> 104,032
<RECEIVABLES> 11,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
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<TOTAL-ASSETS> 128,564
<CURRENT-LIABILITIES> 13,290
<BONDS> 0
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0
<COMMON> 0
<OTHER-SE> 115,274
<TOTAL-LIABILITY-AND-EQUITY> 128,564
<SALES> 0
<TOTAL-REVENUES> 7,779
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<OTHER-EXPENSES> 656
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