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 March 31, 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 May 1, 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 March 31, 1998
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1998 (unaudited)
and December 31, 1997.................................. 3
Statements of Operations - for the three
months ended March 31, 1998 and
1997 (unaudited) ...................................... 4
Statement of Changes in Partners' Equity -
for the three months ended March 31,
1998 (unaudited)....................................... 5
Statements of Cash Flows - for the three
months ended March 31, 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......................... 18
Signature ......................................................... 19
<PAGE>
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 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 $ 73,349,266 $ 74,963,747
Originated insured mortgages 44,374,738 44,222,754
------------- -------------
117,724,004 119,186,501
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 16,597,390 22,609,310
Acquired insured mortgages 1,085,178 1,094,502
------------- -------------
17,682,568 23,703,812
Due from HUD 663,410 663,410
Cash and cash equivalents 10,424,587 2,721,306
Investment in affiliate 1,281,884 1,281,884
Notes receivable from affiliates and due
from affiliates 658,486 728,684
Receivables and other assets 2,297,494 2,330,128
------------- -------------
Total assets $ 150,732,433 $ 150,615,725
============= =============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 11,199,296 $ 3,517,134
Accounts payable and accrued expenses 79,905 121,331
------------ -------------
Total liabilities 11,279,201 3,638,465
------------ -------------
Partners' equity:
Limited partners' equity 139,840,169 147,475,554
General partner's deficit (1,932,792) (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 (1,717,776) (1,902,187)
Net unrealized gains on investment
in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities 3,882,381 3,562,023
------------ -------------
Total partners' equity 139,453,232 146,977,260
------------ -------------
Total liabilities and
partners' equity $150,732,433 $150,615,725
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<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
March 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Income:
Mortgage investment income $ 2,751,418 $ 3,059,346
Interest and other income 60,643 63,080
------------ ------------
2,812,061 3,122,426
------------ ------------
Expenses:
Asset management fee to
related parties 353,418 372,870
General and administrative 74,252 52,980
------------ ------------
427,670 425,850
------------ ------------
Earnings before net gains on
mortgage dispositions 2,384,391 2,696,576
Net gains on mortgage dispositions 786,108 --
------------ ------------
Net earnings $ 3,170,499 $ 2,696,576
============ ============
Net earnings allocated to:
Limited partners - 95.1% $ 3,015,145 $ 2,564,444
General partner - 4.9% 155,354 132,132
------------ ------------
$ 3,170,499 $ 2,696,576
============ ============
Net earnings per Limited Partnership
Unit - Basic
$ 0.34 $ 0.29
============ ============
</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 three months ended March 31, 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 3,015,145 155,354 -- -- -- 3,170,499
Distributions paid or accrued
of $1.21 per Unit,
including return of capital
of $0.87 per Unit (10,650,530) (548,766) -- -- -- (11,199,296)
Adjustment to net unrealized
gains on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed
Securities -- -- -- 184,411 320,358 504,769
------------- ------------- ----------- ------------- ------------ -------------
Balance, March 31, 1998 $ 139,840,169 $ (1,932,792) $ (618,750) $ (1,717,776) $ 3,882,381 $ 139,453,232
============= ============= =========== ============= ============ =============
Limited Partnership Units
outstanding - March 31, 1998 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 three months
ended March 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,170,499 $ 2,696,576
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gain on mortgage dispositions (786,108) --
Changes in assets and liabilities:
Decrease (increase) in receivables and
other assets 32,634 (107,195)
Decrease in accounts payable and accrued
expenses (41,426) (13,270)
Decrease (increase) in investment in affiliate
and notes receivable from affiliates and
due from affiliates 70,198 (35,896)
------------ ------------
Net cash provided by operating activities 2,445,797 2,540,215
------------ ------------
Cash flows from investing activities:
Proceeds from dispositions of insured mortgages 8,480,907 --
Receipt of proceeds due from HUD -- 2,558,251
Receipt of principal from scheduled payments 293,711 278,446
------------ ------------
Net cash provided by investing activities 8,774,618 2,836,697
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (3,517,134) (2,776,685)
------------ ------------
Net cash used in financing activities (3,517,134) (2,776,685)
------------ ------------
Net increase in cash and cash equivalents 7,703,281 2,600,227
Cash and cash equivalents, beginning of period 2,721,306 1,918,341
------------ ------------
Cash and cash equivalents, end of period $ 10,424,587 $ 4,518,568
============ ============
</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
March 31, 1998 and December 31, 1997 and the results of its operations for the
three months ended March 31, 1998 and 1997 and its cash flows for the three
months ended March 31, 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
<PAGE>
8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
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.
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 months ended March 31, 1998 and
1997, comprehensive income was $3,675,268 and $522,438, 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:
<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>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities 22 22
FHA-Insured Certificates 4(1) 5
Amortized Cost $ 70,358,476 $ 72,251,365
Face Value 70,592,168 72,492,904
Fair Value 73,349,266 74,963,747
</TABLE>
(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.
Listed below is the Partnership's aggregate investment in fully
insured originated FHA-Insured Certificates:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Number of Mortgages 1 1
Amortized Cost $ 11,280,736 $ 11,296,412
Face Value 10,927,030 10,941,101
Fair Value 11,095,729 11,055,186
</TABLE>
As of May 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 March 31, 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 is currently negotiating
with HUD in
<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
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. The Partnership believes that the allowance for loan
losses of $375,000 as of March 31, 1998, is sufficient to provide for
amounts that may not be recovered from the servicer.
B. Coinsured FHA-Insured Certificates
As of March 31, 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 March 31, 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 March 31, 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>
March 31, 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) $3,710,286 $3,710,286 $3,498,159 $3,710,287 $3,710,287 $3,484,715
</TABLE>
(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 May 1, 1998, 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.
The General Partner intends to continue to oversee the
Partnership's interest in this mortgage investment in
<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
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 March 31, 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 May 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>
March 31, 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 $22,261,489 $22,261,489 $20,940,847 $22,309,235 $22,309,236 $20,873,845
Summerwind Apts.-
Phase II 7,948,411 9,361,184 8,840,003 7,959,366 9,378,179 8,809,008
----------- ----------- ----------- ----------- ----------- -----------
$30,209,900 $31,622,673 $29,780,850 $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 March 31, 1998 and December 31, 1997:
<PAGE>
12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Number of Mortgages 2(1) 3
Amortized Cost $ 16,597,390 $22,609,310
Face Value 16,421,429 22,213,954
Fair Value 16,715,742 22,428,570
</TABLE>
(1) During February 1998, the mortgage on Olmstead Park 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.
Listed below is the Partnership's aggregate investment in fully
insured acquired FHA-Insured Loans as of March 31, 1998 and December 31,
1997:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Number of Mortgages 2 2
Amortized Cost $ 1,085,178 $ 1,094,502
Face Value 1,082,545 1,091,827
Fair Value 1,104,664 1,107,188
</TABLE>
As of May 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 three months ended March 31, 1998 and
1997, the Partnership received additional interest of $69,820 and $43,232,
respectively, from of the Participations. These amounts are included in mortgage
investment income on the accompanying statements of operations.
<PAGE>
13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 March 31, 1998, Due from HUD includes approximately $603,500 related
to the assignment of Water's Edge of New Jersey, as discussed in Note 3. As of
March 31, 1998 and December 1997, Due from HUD includes approximately $59,000
and $59,000, respectively, 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 three months ended March 31, 1998 and 1997 are as follows:
1998 1997
------- -------
Quarter ended March 31, $ 1.21(1) $ 0.59(2)
======= =======
(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 in February 1998.
(2) 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.
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.
<PAGE>
14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three
months ended March 31, 1998 and 1997, have earned or received compensation or
payments for services from the Partnership as follows:
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
<TABLE>
<CAPTION>
For the
three months ended
Capacity in Which March 31,
Name of Recipient Served/Item 1998 1997
- ----------------- ---------------------------- ------- --------
<S> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution 548,766 267,580
AIM Acquisition Advisor/Asset Management Fee 353,418 372,870
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/ 19,006 16,875
Management, Inc. Expense Reimbursement
</TABLE>
(1) 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) for the three months ended March 31, 1998 and 1997,
respectively. The sub-advisor to the Partnership (the Sub-advisor) is
entitled to a fee of 0.28% 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 $104,160 and
$109,893 for the three months ended March 31, 1998 and 1997, respectively.
The Sub-advisor is an affiliate of CRIIMI MAE.
<PAGE>
15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking. These statements contain a number of risks and uncertainties as
discussed herein and in the Partnership's other reports filed with the
Securities and Exchange Commission that could cause actual results to differ
materially.
General
As of March 31, 1998, the Partnership had invested in 34 Insured Mortgages
with an aggregate amortized cost of approximately $133 million, a face value of
approximately $134 million and a fair value of approximately $136 million.
As of May 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. 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
March 31, 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 claim. In
addition, the General Partner has retained counsel in this matter and is
actively pursuing litigation. The Partnership believes that the allowance for
loan losses of $375,000 as of March 31, 1998, is sufficient to provide for
amounts that may not be recovered from the servicer.
<PAGE>
16
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 three months ended March 31, 1998 as
compared to the corresponding period in 1997 primarily due to an increase in
gains on mortgage dispositions offset by a decrease in mortgage investment
income.
Mortgage investment income decreased for the three months ended March 31,
1998 as compared to the corresponding period in 1997 primarily due to a
principal curtailment on Olde Mills Apartments and the prepayment of the
mortgage on Parkside Estates during the second and fourth quarters of 1997,
respectively. In addition, the mortgages on Northpoint Apartments and Olmstead
Park were prepaid in January and February of 1998, respectively.
Interest and other income did not change significantly for the three
months ended March 31, 1998 as compared to the corresponding period in 1997.
Net realized gains on mortgage dispositions increased for the three months
ended March 31, 1998 as compared to the corresponding period in 1997. Gains or
losses on mortgage dispositions are based on the number, carrying amounts and
proceeds of mortgage investments disposed of during the period. During the three
months ended March 31, 1998, the Partnership recognized gains on mortgage
dispositions of approximately $786,000 related to the prepayment of the
mortgages on Northpoint Apartments and Olmstead Park, as compared to no
disposition activity during the period ending March 31, 1997.
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 three 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
<PAGE>
17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
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 three months ended March 31, 1998 as compared to the corresponding period in
1997.
Net cash provided by investing activities increased for the three months
ended March 31, 1998 as compared to the corresponding period in 1997 primarily
due to the prepayment of the mortgages on Northpoint Apartments and Olmstead
Park.
Net cash used in financing activities increased for the three months ended
March 31, 1998 as compared to the corresponding period in 1997 primarily due to
an increase in distributions paid to the partners. The distribution paid for the
three months ended March 31, 1998 included a return of capital of $0.19 per Unit
for the prepayment of the mortgage on Northpoint Apartment and a return of
capital of $0.73 per Unit for the prepayment of the mortgage on Olmstead Park,
which were paid on May 1, 1998, in addition to regular cash flow. This compares
to the distribution paid during the three months ended March 31, 1997, which
consisted of $0.27 return of capital from Water's Edge of New Jersey and $0.02
not reinvested due to the expiration of the reinvestment period.
<PAGE>
18
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 1998.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
- ------------- -----------------------
27 Financial Data Schedule
<PAGE>
19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS L.P. - SERIES 88
(Registrant)
By: CRIIMI, Inc.
General Partner
May 14, 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 and is qualified in its entirety by reference to such quarterly
report on Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 10,424
<SECURITIES> 117,724
<RECEIVABLES> 22,584
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 150,732
<CURRENT-LIABILITIES> 11,279
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 139,453
<TOTAL-LIABILITY-AND-EQUITY> 150,732
<SALES> 0
<TOTAL-REVENUES> 3,598
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 428
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,170
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,170
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,170
<EPS-PRIMARY> .34
<EPS-DILUTED> 0
</TABLE>
